Nuovo Pignone v. Petromec – Recent Decision by Brazil’s Superior Court of Justice
In a unanimous decision on May 23, 2011, Brazil's Superior Court of Justice ("STJ") held that Article 34 of Brazil's 1996 Arbitration Act adopts a "territorial criterion" in explicitly stating that all arbitral awards rendered within Brazil are domestic awards. The STJ thus held that ICC awards issued by tribunals seated locally in Brazil are domestic - and not international - awards.
The underlying dispute arose between two manufacturers of oil drilling equipment - Nuovo Pignone (an Italian subsidiary of GE Oil & Gas) and Petromec (the US arm of Brazil's Marítima Petróleo e Engenharia) - over an agreement signed in the 1990s to equip an oil platform. The platform, owned by Brazilian state oil company Petrobras, sunk in 2001, killing 11 people. Nuovo Pignone invoked the agreement's arbitration clause in 2004. A sole arbitrator heard the case under the ICC rules in Rio, under Brazilian law and in Portuguese, and issued an award in favor of the claimant, Nuovo Pignone, which brought enforcement proceedings in the Rio courts.
Petromec sought to block enforcement on the grounds that the parties' choice of ICC rules to govern the proceedings meant that the arbitration was "foreign" and that therefore under Brazil's 1988 constitution, the award first had to be ratified by the STJ before it could be enforced. Although the first-instance court in the State of Rio de Janeiro rejected its argument, Petromec filed an interlocutory appeal with the Court of Appeals of Rio, which ruled in its favor in a split decision. The Court of Appeals held that an award issued by an ICC tribunal seated in Rio qualified as a foreign arbitral award. The Court of Appeals reasoned that since the ICC is an international institution, any award issued under its rules should be deemed to be international, even if the seat of the arbitration is in Brazil. As a consequence of the Court of Appeals' ruling, ICC awards issued in Brazil would necessarily be subject to a ratification procedure with the STJ before they could be enforced.
Now, with the latest ruling by the STJ, which reversed the decision by the Rio Court of Appeals, ICC awards issued in Brazil will be considered domestic, and will not be subject to ratification by the STJ in order to be enforced.
