An arbitration clause cannot be dismissed by the rules of the Consumer Protection Code (CDC), and arbitral tribunals must rule on the validity of the arbitration agreement prior to a Brazilian judicial court under the Kompetenz-Kompetenz principle.

This was the recent ruling of the Third Panel of the Brazilian Superior Court of Justice (STJ) in a special appeal (REsp 1.598.220) filed by Sonangol Hidrocarbonetos Brasil Ltda. (Sonangol) against TPG Indústria e Comércio Ltda. – Me (TPG). Sonangol prevailed,  confirming the validity of the arbitration clause entered into between the parties—and the pro-arbitration stance of the STJ.

The case involved the question of whether an arbitration agreement could be directly dismissed by Brazilian courts by an analogical application of the CDC.

In the first-level court, the arbitration agreement contained in the alleged adhesion agreement had been dismissed, as the judge determined that the economic disparity between the parties had undermined the possibility for TPG to agree on favorable contractual conditions. Furthermore, the judge stated that TPG's consent to the arbitration clause could not be presumed.

The Court of Appeals of Rio Grande do Norte had upheld the lower-court decision and applied the CDC rules (in particular, the principle of the economic disparity between a consumer and a company) to dismiss the arbitration clause executed by the parties.

However, the STJ unanimously reversed the lower court decision, stating that state courts are prevented from ruling on the effects of an arbitration agreement under the Kompetenz-Kompetenz principle set out in article 8, sole paragraph, of the Brazilian Arbitration Act, interpreting the principle to mean that any dispute on the validity of the arbitration clause must be resolved by the arbitral tribunal. The STJ said that the lower court decision is "completely contrary to the case law of this Superior Court, which interprets the rule extracted from the sole paragraph of article 8 of the Arbitration Act as binding, therefore derogating from state jurisdiction."

The STJ added that, even though the contract was based on a standard form, the agreement was entered into between two companies operating in gas energy exploration, a sector whose complexity makes it impossible to determine if there was an economic imbalance between the parties that would allow the application of the CDC rules by analogy.

Sonangol was represented by Tauil & Chequer Advogados in association with Mayer Brown.