ARTICLES
Teresa Genta Fons (1982, Uruguay) wrote an article on “Challenges of the Law and Development Practitioner”, published in The International Lawyer, Vol 41, No. 1, 2007. She also wrote “Building Legal Systems for Global Integration: A Development Perspective for the Latin American Context”, Law and Business Review of the Americas, vol 15, p. 165-183, 2009.
Update: New Regulation on Foreign Representative Offices in China -Enforcing the validity period of Registration Certificate by Jerry Yulin Zhang (Academy Class of 1993, China)
In the past, the validity period of Registration Certificate of a representative office was required to be one year under the applicable regulations of 1983, but in practice Registration Certificates were issued with a validity period for more than one year. The Notice now stipulates that the validity period shall be one year only no matter the Certificate is obtained by applying for establishment or extension. Existing certificates of more than one year validity period shall be renewed according to the Notice when the representative offices apply for any change or extension.
Limiting the number of representatives
The Notice imposes a maximum limit of four representatives for a representative office. In the past, there is no limitation regarding the number of registered representatives. With respect to the existing representative office with more than four representatives, no additional representative can be registered.
Investigations into the illegal acts of representative offices
The competent administration for industry and commerce (“AIC”) shall conduct on-site inspection within three months after the establishment of a representative office and punish those submitting false documents for purpose of registration of the representative office. A representative office can only conduct liaison activities and no business activities with fee charging can be done according to PRC law. However, in practice, competent authorities seldom punish those which conduct illegal business activities in the past. This status quo may change since the Notice stipulates that those representative offices can be deemed as operating business without a proper business license and shall be punished according to relevant laws and regulations.
For those representative offices with Registration Certificate exceeding the validity period or conducting illegal activities such as changing its address without approval, the competent authorities shall establish credit books and conduct administration based on credit category. Through the joint efforts from the MPS, apparently SAIC will expect to obtain resources in administration of public security, particularly resources at border control which falls into the jurisdiction of the MPS, in the course of its administration of registration and operation of foreign representative offices. In practice, the Notice will tighten the government control exerted on foreign representative offices. Whether the requirement of pre-existence of the foreign entity for more than two years will apply in the future to other forms of investment (such as investment in a joint venture or wholly foreign owned entity) remains to be seen. The Notice currently only applies to registration and operation of representative offices of foreign companies.
Confirmation and Enforcement of Foreign Arbitral Awards in Brazil – by Fernando Eduardo Serec ( Academy Class of 1993, Brazil) & Antonio Marzagao Barbuto Neto (Tozzini Freire Advogados, Sao Paulo, Brazil)
Arbitral awards are enforceable in Brazil in the same manner as final and non-appealable decisions rendered by a judicial court. Enforcement occurs through the so-called Expedite Collection Procedure (“Execução”), which is designed to attach property to satisfy the money award, in which the judgment-debtor has limited grounds to challenge the merits of the decision.
“Foreign” arbitral awards, however, must be previously confirmed (or recognized) by the Brazilian Superior Court of Justice (“STJ”) before becoming legally enforceable in Brazil. All other courts are precluded from granting such recognition. Pursuant to the Brazilian Arbitration Act, foreign arbitral awards are those rendered outside the Brazilian territory.
Therefore, for purposes of assessing the award’s nationality, the mere fact that the arbitration panel issued its final decision within the Brazilian territory makes it a “domestic” arbitral award, and thus not subject to the STJ’s confirmation proceedings prior to enforcement. In other words, even awards rendered by international arbitral institutions (such as the ICC, ICDR, or LCIA) are still deemed domestic awards so long as they are actually issued in Brazil (even if all hearings were held outside Brazil).
Section 32 of the Brazilian Arbitration Act provides for the situations in which an award rendered in Brazil (domestic award) may be set aside: (a) the arbitration agreement is null and void; (b) the arbitrators lacked capacity; (c) the award fails to provide the grounds for the decision or comply with certain other formal requirements; (d) the award exceeds the scope of the arbitration agreement; (e) the award fails to decide the whole dispute submitted to arbitration; (f) the award was rendered through unfaithfulness, extortion, or corruption; (g) the award is entered after a period imposed on the arbitration has elapsed; or (h) the arbitrators fail to guarantee certain minimum procedural protections.
Foreign arbitral awards, on the other hand, may be challenged through the specific confirmation proceedings before the STJ described below.
RECOGNITION of foreign arbitral awards
The application for recognition (“homologação”) before the STJ must contain (a) the original foreign arbitral award or a certified copy thereof, duly notarized by the Brazilian Consulate and translated into Portuguese by a sworn translator in Brazil, and (b) the original agreement to arbitrate or a certified copy thereof duly translated into Portuguese by a sworn translator.
The standards regarding the recognition and enforcement of a foreign arbitral award under the Brazilian Arbitration Act are consistent with and essentially reproduce the wording of Article V of the New York Convention. Thus, according to the Brazilian Arbitration Act (Sections 38 and 39), the enforcement of a foreign arbitration award can be denied only if:
- the parties to the arbitration agreement lack capacity; (b) the arbitration agreement is invalid under the law to which the parties agreed or the law of the place where the award was rendered; (c) the respondent was not given proper notice of the appointment of the arbitrator or of the arbitration proceeding or was otherwise unable to present his/her case and was unable to exercise his/her right of defense; (d) the award exceeds the limits of the arbitration agreement;(e) the commencement of the arbitration proceeding was not in accordance with the arbitration agreement; (f) the arbitration award is not yet binding on the parties or has been annulled or suspended by a court of the place of arbitration; (g) the object of the dispute is not eligible for arbitration as a matter of Brazilian law;(h) the award violates Brazilian public policy.
Additionally, the STJ’s internal regulation authorizes that court to (a) issue preliminary injunctions during confirmation proceedings, such as freezing assets while an application for recognition is pending; and (b) grant partial recognition of foreign arbitral awards.
Recent arbitration cases decided by the STJ show significant improvements in both the timeframe and quality of the confirmation proceedings. Overall, proceedings can take from 2 to 14 months depending on whether the judgment-debtor challenges the award. However, measures can be taken during this time to safeguard the judgment-creditor’s rights until a final decision on the merits of the recognition is rendered (i.e. freezing of judgment-debtor’s assets while the application for recognition is still pending before the STJ).
- The STJ has repeatedly refused to allow challenges to the merits of foreign arbitral awards based on “public policy” grounds, which is a good sign of embracement of arbitration in Brazil. By contrast, recognition has been properly denied based on the non-compliance to formal requirements under the Brazilian Arbitration Act, such as the absence of an arbitral agreement, or the lack of proper summons to appear before the Arbitral Tribunal. In one well-known caseamong the Brazilian arbitration community, a request for recognition was denied by the STJ on the grounds that the Brazilian franchisee had not been properly summoned to appear before the Arbitral Tribunal. In another case, recognition was denied unanimously by the court predicated on the fact that an English company failed to demonstrate the existence of an arbitral agreement signed by the Brazilian buyer.
Once the foreign arbitration award is confirmed by the STJ, the judgment-creditor is entitled to enforce the now “nationalized” award in the same way as a domestic award, i.e. before a competent first instance judicial court. Although merits-review continues to be prohibited at this stage, the foreign award may still be challenged on very limited grounds by the judgment-debtor during the Expedite Collection Procedure, as discussed below.
As mentioned above, a domestic arbitral award is not subject to confirmation proceedings before the STJ, and may be directly enforced through the Expedite Collection Procedure.
Expedite collection procedure (“execução”)
Chances of judicial reexamination of an award at this point are very limited and a creditor will most likely move to enter judgment against the debtor in a straightforward fashion.
The Expedite Collection Procedure begins when the judgment-debtor is summoned by the competent court to pay the debt within 15 days under penalty of incurring an additional 10% fine over all due amounts.
The judgment-creditor is entitled to appoint which debtor’s assets should secure payment of the money judgment. These assets shall be attached if the judgment-debtor fails to comply with the court’s order in the above-mentioned deadline.
The judgment-debtor may present a challenge against the Expedite Collection Procedure within 15 days after attachment of the assets. As mentioned above, the judgment-debtor has very limited grounds to challenge a Collection Procedure based on a foreign arbitral award. A challenge may only touch procedural aspects of the Collection Procedure and is not intended to discuss the merits of the underlying award.
Upon the court’s decision on the challenge, the attached property will be appraised and taken to auction, where it will be legally disposed of. The proceeds of such disposal will be made available to the judgment-creditor, so that its credit is finally settled and the Expedite Collection Procedure is extinguished.
It is difficult to assess the precise duration of an Expedite Collection Procedure as it depends on many factors, such as on the court’s backlog and particularly on the good faith of the judgment-debtor (i.e. a possible procrastination through the filing of several groundless appeals). However, assuming that a particular judgment-debtor employs all available legal appeals and litigation tactics, it is reasonable to assume that this phase may take approximately 2 years until the attached property is finally sold and the proceeds are made available to the judgment-creditor.
Footnotes:
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3 The STJ has never denied confirmation based on the “public policy” defense, so it is difficult to establish with certainty what rules follow within this concept. They could be viewed as absolutely essential to the Rule of Law, such as fundamental due process rights. Therefore, their violation would be so egregious as to shock the conscience of the Court. The STJ has consistently rejected attempts by judgment-debtors to invoke the “public policy” argument based merely on the alleged violation of Brazilian civil law principles, such as the “defense of unperformed contract” or “exceptio non adimpleti contractus”.
4 Superior Court of Justice - SEC no. 833 (Subway Partners v. HTP High Technology Foods Corporation S.A.). In this case, Subway Partners sought to confirm an award rendered by the American Arbitration Association (AAA) in New York against its Brazilian franchisee.
5Superior Court of Justice – SEC no. 967 (Plexus Cotton Limited v. Santana Têxtil S.A.). |