Arbitration Clause in Brazil

The Brazilian Superior Court of Justice recognized a decision given in an arbitration held in New York/USA, confirming that the insurer is submitted to the clauses of the contract signed between the insured and a third party.

Although that decision is not in connection with maritime transportation, the juridical question is the same discussed in cargo claims, that is: whether the insurer shall be submitted or not to the clauses about jurisdiction and limitation set by the insured in a contract signed with a third party.

In Brazil, the insurers have been judicially defending that the clauses inserted in maritime contracts signed by their insureds, do not apply to them. In short, the insurers allege that as they did not participate in the contract, they had no link to the limitation of values (package limitation) and/or jurisdiction, including arbitration clause.

The subrogation of the insurer is regulated by the law. This is a rule inserted in our Civil Code setting that the insurer becomes subrogated in the right to bring claims that the insured had against the party causing damage.

At this point, the Superior Court judgment is about a question defended a long time by Sammarco Law Office, bringing good perspectives to the carriers in disputes involving cargo damage.

According to the recent judgment, if the insured was contractually obliged to take the dispute to arbitration, the subrogated insurer is equally obliged to an arbitration to recover the value paid to the insured. Therefore, according to our Superior Court judgment, the insurer right is the same of the insured.

Although the decision is about arbitration clause, the Superior Court understanding allows us to conclude that the insurers are equally bound to the clauses of limitation of liability, which has been contested by the insurers based on the same argument used to refute the arbitration clause.

However, it is important to note that these clauses need to be clearly set in the contract to be valid between the insured and the carrier. The most convincing way is to have these clauses established in a written contract signed by the parties, as in a Charter Party.

If there is no written contract, usually, the contract of carriage is only represented by the Bill of Lading. At this point, there is the difficulty to make valid the jurisdiction and arbitration clauses, once the BL is not signed by the shipper and the cargo interests and insurers allege that the lack of this signature means that there was no express acceptance of those clauses, which were inserted solely by the carrier will and decision.

Our Courts have been accepting these allegations and, in most of the cases, they have been deciding that the BL clauses do not apply. If they are not valid to the cargo interests/insured, equally, they are not valid to the insurers.

To overcome this obstacle we suggest that, before delivering the original BsL, a letter is obtained from the shipper, with an express declaration agreeing with the BL clauses especially with the arbitration clause. Then, this letter-declaration must be attached to the BL.

Nowadays, in Brazil there are good Arbitration Chambers, including those specialized in questions involving maritime transport, such as CBAM – Brazilian Chamber of Maritime Law, which is headquartered in Rio de Janeiro. As a reference, TRANSPETRO (a transport company belonging to PETROBRAS) is a founding partner of CBAM
It is also important to note that in Brazil the arbitration procedure does not impede the participation of foreign arbitrators.

By: Marcus Sammarco

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