Process Number: CC150.830
This was a preliminary decision and it will be
decided by the Collective Organ of the court later in the procedure.
Issue:
The issue in this case is whether a Tribunal
shall have competence to decide the dispute over a contract that already is in
the enforcement stage in a state Court.
Facts:
The parties are the PDG Group, in one side, and
the Leal Moreira Family group, in the other. Both groups are composed by many
companies.
The parties signed several agreements to operate
jointly a construction business in the Brazilian state of Pará. In order to
achieve this purpose, the parties to the dispute created many specific purpose
companies. Nevertheless, after some problems in the project, they singed a MoU
where they kept the joint investment in only five of those specific purpose
companies, according to PDG Group. In addition, PDG alleged that it provided a
line of credit to the companies, and the Leal Moreira Group failed to comply
with that agreement.
In the other hand, Leal Moreira argues that it
is composed by different legal entities and one of those is the construction
company hired by the specific purpose entities. The specific purposes entities
failed to pay the values they agreed in the contract with one the construction
company of the Leal Moreira group, Leal Moreira Engenharia. Regarding the
arbitration clause, the Leal Moreira Group argues that the construction company
Leal Moreira Engenharia did not sign an arbitration agreement. Leal Moreira
argues that the parties signed a choice of forum clause, not the arbitration
agreement. The arbitration agreement was signed between the Construtora LM and AGRA
in the MoU. Leal Moreira Engenharia was not a party to the MoU. However, these
argument was not heard by the Minister by the time of this decision, which will
be assessed by the collegial organ of the court.
The Leal Moreira Engenharia started the enforcement
procedure of the construction contract signed with the specific purpose entities
based on the theory that the contract was an extrajudicial title. In the
enforcement procedure, the judge of the entry level court granted an attachment
of 26 million of Brazilian Reais and authorized the payment of part of this
value directly to Plaintiff (over 5 million of Brazilian Reais).
Reasoning:
First, we need to explain a little bit of
Brazilian civil procedure and enforcement. Brazil relies on the concept of
judicial and extrajudicial title, which are the two sources of rights that can
be directly subject to enforcement procedures in court.
For instance, a contract may become an
extrajudicial title if two witnesses who attested the deal sign it. Then, a
party can directly start an enforcement procedure, without needing to discuss
any merits. Nevertheless, the other party can present a defense against the
enforcement based on grounds stated in the Code of Civil Procedure. In fact,
the code allows any defense based on the merits, which means, the grounds are
almost unlimited. Generally, this defense is judicial.
In the case at hand, this procedure started as
the “execution” (the name of the enforcement procedure) of a contract as an
extrajudicial title.
Second, Brazilian law avoids conflicting
jurisdictions between two courts or a court and an arbitral tribunal. In this
sense, parties can seek a judicial determination about who is competent to
decide the case, the court or the arbitrators. In fact, this procedure should
not happen in arbitration cases, because the law follows the kompetenz-kompetenz principle, but
recently, the Superior Court of Justice started admitting this procedure in
order to decide jurisdictional issues between arbitration and judicial court.
The reasoning of the Superior Court’s Minister
was that this kind of procedure to solve the question of competence is
admissible. In this sense, parties may seek a Superior Court order when a local
judicial court state it has jurisdiction over a matter that is also submitted
to an arbitration procedure by one of the parties.
On the merits, the Minister found that the
evidence indicates that the parties had an arbitration agreement in their
contracts. Therefore, when a party to the contract and a third interested party
challenge the direct enforcement procedure started by the other side, the
arbitral tribunal must be in charge of the decision on the merits of the case. Therefore,
the judicial enforcement procedure should be suspended until the Court makes
its final decision about jurisdiction.
Holding:
The arbitral tribunal is competent to decide
the subject matter of disputes over the validity of an extrajudicial title.
Thus, the judicial proceeding must be suspended.
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