Choice of Law and Choice of Forum in Brazilian International Commerce Contracts: Party Autonomy, International Jurisdiction, and Emerging Third Way

By:

Brazilian conflict of laws rules prevent the parties to an international commercial contract from making a free choice of law. The choice of forum is severely limited in the Brazilian courts under the applicable rules of international jurisdiction. Brazil’s rejection of party autonomy in commercial contract litigation is deeply rooted in the country’s history and civil law jurisprudence. Yet the country’s approach to conflict of laws also prevents Brazil from realizing its full economic potential. By forbidding choice-of-law clauses and throwing the enforceability of choice-of-forum clauses into doubt, the Brazilian conflicts rules foster legal uncertainty and generate transaction costs that must be passed on to Brazilian counterparties. This Note seeks to mitigate the commerce-chilling effect of these “Brazil costs” by providing common law lawyers with a practical guide to Brazilian conflict of laws. Brazilian statutory and decisional law will be analyzed from the perspective of a U.S. lawyer accustomed to structuring cross-border transactions under a rule of party autonomy. This Note concludes by suggesting that legal risk is best managed in commercial contracts with Brazilian parties by way of an arbitration clause, which pursuant to recently enacted arbitral legislation may now contain a choice of law and forum.