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Legal Update

Brazil: STJ decides that Chamber of Arbitration lacks standing to be sued in lawsuit seeking to vacate an arbitration procedure

12 December 2017
Tauil & Chequer Legal Update

The Third Chamber of the Superior Court of Justice (STJ), while granting an appeal filed by the Brazilian Chamber of Arbitration (CAMARB), decided that it lacked standing to be sued in a lawsuit to vacate an arbitration procedure.

The lawsuit was filed in the judicial district of Belo Horizonte, Minas Gerais State, in a claim brought forward by Bm Chami Indústria e Comércio de Premoldados de Concreto – Microempresa (Bm Chami) against PUR Equipamentos Industriais Ltda. and CAMARB. The Plaintiff stated that the arbitration agreement established between the two companies was signed by a person who did not have the required powers to represent Bm Chami. Therefore, it alleges that there was no consent to the arbitration agreement, thus requiring its annulment.

In response, CAMARB argued preliminarily on its lack of standing to be sued, since it is merely the institution responsible for conducting the arbitration procedure such that all the decisions, including those relating to the continuation of the arbitration procedure, could only be attributed to the arbitrators. In view of this, CAMARB affirmed that it merely performed its normal activities, which are purely administrative in nature and according to the arbitrators' determinations, such that it could not be liable for their orders and decisions.

In spite of what was alleged by the institution, the ruling by the 4th Civil Court of the Judicial District of Belo Horizonte rejected the preliminary plea of the Defendant and upheld the Plaintiff´s request for the annulment of the arbitration procedure, determining that the Defendants pay court and attorney fees.

After the appeal filed by CAMARB before the Court of Appeals, maintaining again its lack of standing as a Defendant, an award was issued in order to reform the first-degree decision, dismissing Bm Chami's claims and determining the continuation of the arbitration procedure. That award, however, was subject to appeal before the STJ, brought by Bm Chami, ordering the return of the case back to the Court of origin for a retrial, in view of the fact that the judgment ruled on matters not dealt with in the appeal, deciding only whether the arbitration chamber had standing to be sued.

With the return of the case to the Court of Justice of the State of Minas Gerais, the appeal filed by the arbitration institution was dismissed and maintained the decision of the lower court. CAMARB subsequently filed another appeal before the STJ, maintaining once again its lack of standing to be sued on the grounds that its functional purpose was merely administrative such that it was not able to decide about the continuation or not of the arbitration procedure.

With the deciding vote of the Rapporteur Ricardo Villas Bôas Cueva, the Third Chamber of the STJ decided to uphold the Defendant’s appeal. The Court understood that the Plaintiff is an arbitration institution of essentially an administrative nature, to the extent that its actions did not constitute any act of a jurisdictional nature, with such jurisdiction being exclusive to the arbitrators involved. 

The STJ  also  took into account that the arbitrators could not appear as Defendants to the lawsuit. This affirmation was based on the interpretation that the annulment of an arbitral procedure has certain similarities with the motion to set aside a court ruling, where the inclusion of the judiciary body as Defendant is not possible. 

The decision  reinforces the understanding that the arbitration institution can not be held liable for any decision-making shortcomings related to the arbitration procedure, nor can it instate an action for the annulment of an arbitration procedure or for the annulment of a decision arising from an arbitration procedure.

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