International contracts that are performed in Brazil raise questions as to their applicability, in particular with regard to (i) the law governing the contract; and (ii) the court having jurisdiction to hear it. The answers start from the premise that an international contract may produce effects and be enforced in Brazil, under the terms of the Law of Introduction to the Rules of Brazilian Law (LINDB).
Article 9 of the LINDB provides that obligations are characterized and governed by the law of the country in which they are constituted. Paragraph 2 adds that the obligation resulting from the contract is deemed constituted in the place where the offeror resides, understood as the place where the offeror is located upon formulating the offer, which may not coincide with the offeror’s domicile. In this context, contracts entered into in the digital environment also warrant specific attention, since this is an innovation subsequent to the statutory text, so that the practical application of the law may give rise to questions.
In electronic contracting, offer and acceptance circulate by e-mail or by platform, and the parties may be located in different countries at the time of the negotiation. This hinders the application of the traditional rules on the place of contracting, since it is not possible to determine with precision the country in which the contract was constituted or the location of the offeror. Under Brazilian law, the electronic signature, governed by Provisional Measure 2,200-2/2001, as updated by Law No. 14,063/2020, addresses the authenticity, the integrity and the legal validity of the document, not the conflict of laws in space. For this reason, it is recommended that the applicable law be expressly stipulated in the contract.
Notwithstanding the principle of freedom of contract, the LINDB contains no provision expressly authorizing the choice of law by the parties. Part of the doctrine, such as Fábio Ulhoa Coelho, maintains that the rule of article 9 does not apply where the contracting parties elect the law they wish to see applied, a reading that favors private autonomy and better fits the practice of international commerce, and in particular the practice of contracts entered into digitally, which are very common nowadays.
In turn, paragraph 1 of article 9 establishes that obligations to be performed in Brazil, where they depend upon an essential form, must observe such form, the peculiarities of the foreign law being admitted only as to the extrinsic requirements of the act. In any event, the scenario is clear in the sense of permitting the enforcement of international contracts in our country. However, two provisions of the LINDB complete the picture. Article 17 denies effectiveness in Brazil to foreign laws, acts and judgments, as well as to any declarations of will, where they offend national sovereignty, public policy and good morals, whereas, on the evidentiary level, article 13 subjects the evidence of facts occurred in a foreign country to the law in force therein, prohibiting Brazilian courts from admitting evidence unknown to Brazilian law.
With regard to the choice of venue, article 25 of the Code of Civil Procedure excludes the jurisdiction of the Brazilian authority where an exclusive foreign venue selection clause exists in an international contract. Its effectiveness depends upon the raising of the clause by the defendant in the answer and upon the absence of any instance of exclusive Brazilian jurisdiction. It is also worth mentioning that the venue may not always be elected; in this regard, article 12, paragraph 1, of the LINDB and article 23 of the Code of Civil Procedure reserve to the Brazilian judge, exclusively, the actions relating to real property located in the country; the main provision of article 12 establishes national jurisdiction where the defendant is domiciled in Brazil or where the obligation is to be performed herein.
In this respect, the recent Law No. 14,879/2024 amended article 63 of the Code of Civil Procedure in order to require that the choice of venue bear a connection to the domicile or the residence of one of the parties or to the place of the obligation, failing which it shall constitute a random venue; although article 63 addresses internal jurisdiction, article 25, paragraph 2, of the same code orders the application, to the foreign venue clause, of the provision of article 63, paragraph 1, so that the repercussion upon international contracts must follow such criterion.
Another important point concerns arbitration. Law No. 9,307/1996, subsequent to the LINDB, authorizes the parties freely to choose the rules of law applicable, subject to good morals and public policy. The arbitration clause is autonomous in relation to the contract in which it is inserted. That is to say, where arbitration is elected, the discussion addressed above with regard to the aforementioned article 9 of the LINDB is overcome.
Accordingly, whenever the enforceable assets are located in Brazil, arbitration seated in the national territory is a structure that must be assessed, because it combines the freedom to choose the applicable law, ensured by specific legislation, and an enforcement instrument exempt from homologation, although it tends to generate initial costs higher than those of an action before the State courts.
It is also important to emphasize that not every contractual type admits the same freedom of structuring. For example, franchise agreements are governed by Law No. 13,966/2019, which requires that contracts producing effects exclusively within the national territory be written in Portuguese and governed by Brazilian law. In international franchising, the original drafting in Portuguese or a certified translation borne by the franchisor is admitted, and the parties are allowed to opt for the venue of one of their countries of domicile, as well as to elect an arbitration tribunal. Where an optional venue exists, a legal representative domiciled in the country of the elected venue is required, with powers to receive service of process, a requirement habitually disregarded in imported drafts.
That said, the enforcement of international contracts in Brazil warrants caution. It is advisable to ascertain whether the contractual type is subject to a special Brazilian regime; whether the dispute settlement route chosen produces an instrument enforceable in the country without a homologation stage; and whether the instrument expressly designates Brazil as the place of performance of the obligation. Subject to these reservations, the rule is that the performance of such contracts within the Brazilian sphere is admitted, work which, as may be seen, must be accompanied by specialized attorneys in order to avoid problems upon any eventual judicial review.
GTLawyers remains available to advise Brazilian and foreign clients in the drafting and performance of international contracts in Brazil.
