The Brazilian Arbitration Law (Federal Law No. 9,307/1996) enshrines, in its article 8, sole paragraph, the so-called principle of jurisdiction over jurisdiction, according to which it is up to the arbitrators to decide on their own jurisdiction (subject to subsequent analysis by the Judiciary, in the scenarios set forth for annulment of the arbitration award). The principle establishes, therefore, a limit on interference by the state judge, in view of the parties' choice of arbitration.

As a rule, interference by the Judiciary in the scope of arbitration is only authorized in extremely exceptional situations, such as: (i) when there is urgency in the prayer for relief of any of the parties and the arbitral tribunal is not yet constituted; (ii) when one of the parties resists the initiation of arbitration; (iii) when the arbitration agreement entered into is defective and therefore unenforceable; or (iv) when there is an error in the arbitration award that authorizes its annulment.

The case law of the Superior Court of Justice (STJ) has been increasingly favoring arbitration by repeatedly recognizing that the initial jurisdiction to resolve questions regarding the existence, validity, and effectiveness of the arbitration agreement is exclusively that of the arbitrators.

Conflict of Jurisdiction No. 151.130/SP: decision that gives deference to the will of the parties

In a recent decision handed down in Conflict of Jurisdiction No. 151.130/SP on May 9, 2018, Nancy Andrighi, Justice of the Second Section of the STJ, suspended a decision by the Federal Court of Appeals of the 3rd Circuit (TRF3) that exempted the Federal Government from participating in arbitration proceedings instituted by Petrobras' shareholders in the Market Arbitration Chamber - CAM Bovespa.

The arbitration proceedings were instituted by Petrobras minority shareholders against the company and the Federal Government in its capacity as the controlling shareholder in order to seek redress for losses caused to Petrobras' equity that allegedly resulted from the negative impact caused by Operation Carwash to the company in the capital markets.

In response, the Federal Government filed a lawsuit in the São Paulo Federal Court, whereby it requested that its participation in the arbitration be declared null and void, on the argument that the Federal Government, as the controlling shareholder of Petrobras, is not bound by an arbitration clause contained in the company's bylaws and therefore could not have arbitration proceedings instituted against it. The TRF3 granted the prayer for relief and ruled the Federal Government's participation in the arbitration filed by Petrobras’ minority shareholders to be null and void.

In view of the interference by the Judiciary, Petrobras' minority shareholders instituted Conflict of Jurisdiction No. 151.130/SP before the Superior Court of Justice, whereby they raised the lack of jurisdiction of the São Paulo Federal Court and the TRF3 to decide on the participation of the Federal Government in arbitration, by virtue of article 8 of the Arbitration Law, which establishes the principle of jurisdiction over jurisdiction.

In her written opinion, the reporting judge in the conflict of jurisdiction, Justice Nancy Andrighi, argued that, since there was no arbitration tribunal constituted and, consequently, a final decision on the Federal Government's participation in arbitration, interference by the Judiciary would be inappropriate at that moment since decision would offend and disregard the power and autonomy of the arbitrator's decisions.

Justice Andrighi concluded by stating that "it is the duty of the Judiciary to await the competent response by the arbitral tribunal, which will decide such matters in definitive terms." Finally, it ordered a stay in the lawsuits filed by the Federal Government, as well as suspension of the TRF3’s decision that exempted it from participating in the arbitration proceedings.

Conclusion

In a country with continental dimensions and major regional features such as Brazil, standardization of the case law of state courts in matters of arbitration has not been an easy task.

Decisions such as this, however, certainly help to crystallize the case law of Brazilian higher courts and, at the same time, strengthen the confidence of Brazilian and foreign businessmen and investors in arbitration as an efficient and secure method of dispute resolution.