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CISG CASE PRESENTATION

Brazil 19 August 2009 Superior Court of Justice (Atecs vs. Rodrimar) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/090819b5.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20090819 (19 August 2009)

JURISDICTION: Brazil

TRIBUNAL: Superior Tribunal de Justiça

JUDGE(S): SR. Minister Fernando Goncalves, Hon. SRA. Minister Nancy Andrighi

CASE NUMBER/DOCKET NUMBER: 2008/0044435-0

CASE NAME: Atecs vs. Rodrimar

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany

BUYER'S COUNTRY: Brazil

GOODS INVOLVED: Mobile harbor crane


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 1(1)(b)

Classification of issues using UNCITRAL classification code numbers:

1B21 [Applicability of private international law of forum]

Descriptors: Unavailable

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Portuguese): CISG-Brazil database <http://www.cisg-brasil.net/doc/stj1.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

The CISG Translation Network

Superior Court of Justice 19 August 2009

Atecs Mannesmann GMBH v. Rodrimar S/A Transportes Equipamentos Industriais e Armazéns Gerais

Challenged Foreign Award ["SEC"] No. 3,035 - EX (2008/0044435-0)

Translation [*] by Pedro Martini [1]

RAPPORTEUR: JUSTICE FERNANDO GONÇALVES

CLAIMANT: ATECS MANNESMANN GMBH

COUNSEL : SÔNIA MARIA GIANNINI MARQUES DOBLER AND OTHER (S)

RESPONDENT: RODRIMAR S/A TRANSPORTES EQUIPAMENTOS INDUSTRIAIS E ARMAZÉNS GERAIS

COUNSEL: IVES GANDRA DA SILVA MARTINS AND OTHER(S)

SUMMARY OF JUDGMENT

CHALLENGED FOREIGN AWARD. STANDING TO SUE. INTEREST IN THE SUIT. CONTRACT OF SALE. MERITS OF THE ARBITRAL DECISION. ANALYSIS OF THE SUPERIOR COURT OF JUSTICE. IMPOSSIBILITY. ABSENCE OF A VIOLATION OF PUBLIC ORDER.

  1. The request for recognition may be made by any party interested in the effects of the foreign award.

  2. The merits of the foreign award may not be considered by the Superior Court of Justice, since its recognition is limited to an analysis of its formal requirements. Precedents.

  3. The request for recognition must be granted, since, absent a violation of public order, it possesses the essential and necessary requisites for this desideratum, provided by Resolution No. 9/2005 of the Superior Court of Justice [2] and by articles 38 and 39 of Law No. 9,307/96.[3]

  4. Request for recognition granted.

REPORT

THE HON. RAPPORTEUR JUSTICE:

This case concerns a request for the recognition of a foreign arbitral award ordering the payment of damages for an alleged breach of contract claimed by ATECS MANNESMANN GMBH [hereinafter "[Seller]"], successor of Mannesmann Dematic AG, rendered by a tribunal of international arbitration in 5 May 2003.

After the request, the Honorable Justice BARROS MONTEIRO ordered the service of summons to RODRIMAR S/A TRANSPORTES EQUIPAMENTOS INDUSTRIAIS E ARMAZÉNS GERAIS [hereinafter "[Buyer]"] (p. 157), which presented its statement of defense at pp. 174-209.

The [Buyer] alleges, preliminarily, res judicata, since the same foreign decision has been the object of a request for recognition before this Court - SEC No. 968-EX, Rapporteur Justice Felix Fischer - that was dismissed without prejudice since the [Seller] of that case, Gottwald Port Technology GMBH, lacked standing to sue.

It further argues that the [Seller] of the present case was not "formally or informally contemplated in the text of the decision"and, therefore, it lacks standing to request the recognition of the foreign decision.

It contests the power of attorney presented at pp. 14/15, since it does not contain the addresses and identities of [Seller]’s legal representatives.

On the merits, it alleges that the award violates national public policy since Swiss material law was not applied, as expressly chosen by the parties, but rather the "Swiss rules of law".

It further argues that the award violates arts. 49, I and 84, VIII, of the Brazilian Constitution, since the 1980 United Nations Convention on the International Sale of Goods, of which Brazil is not a Contracting State, was applied.

Finally, it alleges that the award on damages finds no basis in Brazilian law, since there was no proof of losses and, therefore, the award violates the prohibition to unjust enrichment.

The [Seller] presented its reply at pp. 319-339.

The Deputy General Federal Attorney’s Office requests the presentation of the act of succession by incorporation of Mannesmann Dematic AG by [Seller], as well as the rectification of the power of attorney (pp. 343-345).

The [Seller] presented documents at pp. 361-410, 420-460 and 478-512 and the [Buyer] at pp. 468-474.

In a new opportunity, the General Federal Attorney’s Office expressed its opinion in favor of granting the request (pp. 533-534).

It’s the report.

OPINION

THE HON. RAPPORTEUR JUSTICE:

[Seller], successor of Mannesmann Dematic AG by incorporation, presented a request for the recognition of a foreign award rendered by a tribunal of international arbitration, that ordered [Buyer] to pay damages in the amount of EUR 510,078.90, plus 5% interest per year, from 28 march 2001 until payment is complete, due to a breach of a contract for the sale of a mobile harbor crane (pp. 94-106).

The [Buyer]’s first defense is that the claim is precluded because of res judicata, cannot be accepted. As [Buyer] points out, the previous request for recognition of the foreign arbitral award - SEC 968/EX -, presented by Gottwald Port Technology GMBH, was dismissed without prejudice due to the lack of standing to sue and, as a consequence, it does not constitute substantive res judicata, but merely formal res judicata. Hence, the denial of the request due to formal defects does not bar [Seller] from presenting a new request, as long as the defect is remedied (art. 40 of Law No. 9,307/96).

On this regard:

"CIVIL PROCEDURE. PUBLIC-INTEREST CIVIL ACTION. DISMISSAL. LACK OF STANDING TO BE SUED. PRELIMINARY DEFENSE OF RES JUDICATA. REMEDY OF THE ABSENCE OF A CONDITION OF THE ACTION. NECESSITY. ART. 268, CPC. DIVERGENCE MOTION ADMITTED, BUT DENIED.

  1. – Substantive res judicata is only present when the merits are considered and decided.

  2. – The dismissal of the procedure without prejudice, due to the lack of standing to be sued, is not capable of creating substantive res judicata, but merely formal res judicata, which precludes the discussion of the issue in the same procedure, but not in another. This means that it is not possible to exclude, prima facie, the possibility of the author presenting a new action, as long as the absence of the condition of the action is remedied.

  3. – Since the procedure was dismissed due to [Buyer]’s lack of standing, [Seller] is not allowed to repeat the statement of claim in the present motion without indicating the party that has standing, due to the preclusion occurring in arts. 471 and 473 of the Code of Civil Procedure, that does not allow revisiting an issue already decided."(Divergence Motion in Special Appeal 160,850/SP, Rapporteur Justice SÁLVIO DE FIGUEIREDO TEIXEIRA, Special Court, Decision published on 29 September 2003)

Likewise, the argument regarding [Seller]’s lack of standing to sue, because it was not a party to the arbitration, cannot prosper.

The request for recognition may be made by any party interested in the effects of the foreign decision: the parties in the original procedure, their successors or third parties. As José Carlos Barbosa Moreira put it:

"Any party to whom the decision to be recognized may have effects has standing to present the request: the parties to the foreign procedure (or their successors) and even third parties who may be legally affected, pursuant the original legal system’s rules on the subjective extension of the effects of the decision and of res judicata."(Comentários ao Código de Processo Civil, vol. V, 9th ed., p. 85)

In this sense:

"FOREIGN DECISION. REQUEST FOR RECOGNITION. STANDING. REQUIREMENTS FULFILLED.

  1. Any interested party has standing to request the recognition of a foreign decision.

  2. In the present case, [Seller], Samsung Eletrônica da Amazônia Ltda., the exclusive representative of Samsung Aerospace Industries Ltda. in Brazil, has an interest in the recognition of the arbitral award rendered by the Korean Chamber of Commercial Arbitration, since the decision may be useful for the judgment of the action filed against it by the [Buyer] before the 1st Civil Court of Petropolis.

  3. [Seller] has fulfilled the necessary requirements for the recognition of the foreign decision and absent any violation to sovereignty or public policy, the request for recognition must be granted.

  4. Foreign award recognized."(SEC 1,302/KR, Rapporteur Justice PAULO GALLOTTI, Special Court, Decision published on 6 October 2008)

Furthermore, [Seller]’s procedural representation was remedied at pp. 420-424.

The allegations that the request violates Brazilian public policy, since the law expressly provided for in the contract was not applied, as well those allegations that it violates the prohibition to unjust enrichment, since there was no proof of the losses, may not be accepted.

Indeed, these issues are related to the merits of the arbitral award, which, in accordance with case law from the Federal Supreme Court ["Supremo Tribunal Federal"] and this Superior Court of Justice ["Superior Tribunal de Justiça"], may not be addressed by this Court, since the recognition of a foreign decision is restricted to a review of its formal requirements.

On this regard:

"FOREIGN ARBITRAL AWARD. JUDICIAL REVIEW. IMPOSSIBILITY OF ADDRESSING THE MERITS. FORMAL REQUIREMENTS OBSERVED. RECOGNITION. GRANTED.

  1. - The judicial review of a foreign arbitral award is limited to formal issues and the merits of the decision cannot be addressed. Precedents.

  2. - The recognition of the foreign arbitral award when all the necessary requirements of the request are met and there is no violation of national sovereignty, public order and good morals, is obligatory. Recognition granted."(SEC 760/EX, Rapporteur Justice FELIX FISCHER, Special Court, Decision published on 28 August 2006)

Once more, it is possible to quote Barbosa Moreira:

"The statement of defense may only address the authenticity of the documents, the adequacy of the decision and the observance of the recognition requirements (art. 221, caput). This means that the [Buyer] may not present any allegation related to fairness of the decision and to defects on the alien procedure, except for those that the national law considers grounds for refusal of recognition: e.g., lack of jurisdiction of the foreign judge."(p. 88)

Finally, the request for recognition deserves granting, since, besides the absence of any violation of public policy, it possesses the necessary and essential requirements to this desideratum, pursuant to Resolution No. 9/2005 of the Superior Court of Justice and arts. 38 and 39 of Law No. 9,307/96.

No legal costs, as provided by the sole paragraph of art. 1 of Resolution No. 9/2005, of the Superior Court of Justice.

Legal fees of BRL 1,000.00 (one thousand Brazilian Reais), to be paid by [Buyer].

OPINION UPON FURTHER REVIEW ["VOTO-VISTA"]

THE HON. JUSTICE NANCY ANDRIGHI:

This case concerns a request for the recognition of a foreign award, made by [Seller] and contested by [Buyer].

Suit: The request for recognition originates from a foreign arbitral award. The arbitration took place in Zurich, Switzerland, in 5 May 2003. The dispute submitted to the Arbitral Tribunal concerned an alleged breach, by [Buyer], of a contract in which it agreed to purchase a crane manufactured by the company MANNESMANN DEMATIC AG, currently dissolved by incorporation.

Considering the dissolution of MANNESMANN DEMATIC AG, the recognition of the arbitral award was requested in two opportunities. First, by the company named GOTTWALD PORT TECHNOLOGY GmbH, to whom MANESMANN had contractually assigned the credit resulting from the resolution of the dispute.

The procedure was forwarded to the Superior Court of Justice under the No. 968/CH, but the recognition was denied due to that [Seller]’s lack of standing to sue. Here is the summary of the judgment:

"FOREIGN ARBITRAL AWARD. RECOGNITION. [SELLER]’S LACK OF STANDING TO SUE. DISMISSAL WITHOUT PREJUDICE.

  1. - The recognition of the foreign award may not contemplate, nor extend to, issues, agreements or clauses that are not formally incorporated in the text of the decision in question.

    Precedents from the Supreme Federal Court.

  2. - In the case at hand, the award does not even mention the [Seller] as a party of or an interested party in the dispute.

  3. - In order to assess [Seller]’s standing to sue, it is necessary to analyze the assignment contract between [Seller] and the winning party of the arbitration. However, this is not allowed in proceedings regarding the recognition of foreign awards.

    Procedure dismissed without prejudice, due to [Seller]’s lack of standing to sue."

(Rapporteur Justice FELIX FISCHER, Special Court, decided on 30 June 2006, decision published on 25 September 2006, p. 197)

The second request for recognition is the one that is presently being decided.

This time, the [Seller] is ATECS MANNESMANN GmbH, who is the successor of MANNESMANN DEMATIC AG, not by contract of assignment of credit, but by incorporation.

The request for recognition was contested by [Buyer], who alleged: (i) [Seller]’s lack of standing to sue; (ii) violation of public policy by the arbitral award, since: (ii.1) the arbitrator has disregarded in the proceedings the substantive law chosen by the parties; (ii.2) the arbitrator has applied the Vienna Convention on Contracts for the International Sale of Goods, of which Brazil is not a Contracting State.

[Buyer] presented an Expert Statement by Prof. Selma Maria Ferreira Lemes, from Fundação Getúlio Vargas. [Seller] presented, initially a Legal Opinion and later an Expert Statement by Prof. Maristela Basso, form Universidade de São Paulo.

Opinion from the Federal Public Attorney’s Office: in favor of granting the exequatur.

Preceding opinion: theHonorable Rapporteur Justice, following the opinion from the Public Attorney’s Office, dismissed the preliminary claim of the statement of defense and voted in favor of the recognition of the award.

Reviewed the facts, I decide.

I - Defining the dispute

The dispute seeks to establish: (i) if it is possible to renew the request for recognition of a foreign award when the first request was denied due to lack of standing to sue; (ii) if it is possible to control, in proceedings of this nature, the alleged excess related to the matter submitted to arbitration, due to the application, by the Arbitral Tribunal, of substantive law different from that elected by the parties to the contract; (iii) if there is a violation of domestic public policy due to the application, by the Arbitral Tribunal, of the Vienna Convention on the International Sales of Goods, to which Switzerland acceded, but which was not ratified by Brazil.

II - Lack of standing to sue

[Buyer] argues that this request is not admissible since the company GOTTWALD PORT TECHNOLOGY GmbH has already requested the recognition of the arbitral award in SEC 968/CH. The honorable Rapporteur Justice did not accept this argument since

"The request for recognition of foreign arbitral award (…) presented by Gottwald Port Technology GMBH, was dismissed without prejudice due to the lack of standing to sue and, as a consequence, it does not constitute substantive res judicata, but merely formal res judicata".

To this argument, which by itself would be enough to dismiss [Buyer]’s argument, I add yet another: in the request presented by GOTTWALD, the instrument through which the [Seller] argued its standing to request the recognition was a contract of assignment of credit signed between it and the creditor of the award, MANNESMANN DEMATIC AG. In the decision of SEC 968/CH, the honorable Justice Felix Fischer based the denial of the request for recognition precisely due to the inadequacy of that instrument to grant GOTTWALD the lack of standing to formulate the request. Observe:

"Indeed, at pp. 51/52 it is stated that the contract for the assignment of credit was signed between the companies GOTTWALD PORT and MANNESMANN, which, however, cannot be the object of analysis in these proceedings for recognition.

(…)

In the case of the records, to assess the merits of the request for recognition of the arbitral award, it will be necessary to analyze, before that, [Seller]’s standing, which, as a consequence, makes it necessary to analyze the contract of assignment of credit signed between the companies GOTTWALD PORT and MANNESMANN, something that is not allowed in the present case.

(…)

It is important to stress that the purpose of recognition of a foreign award by Brazilian courts is that of granting the decision rendered in another country enforceable effect in Brazil. On the other hand, Brazilian courts are not allowed to address the validity of the contract of assignment signed between the foreign companies, as argued by [Seller]."

In the present proceedings, it is no longer GOTTWALD, the assignee of the credit, who requests the recognition of the award. It is the company ATECS MANNESMANN, which, as it may be seen in documents at pp. 422 to 424, incorporated the company MANNESMANN DEMATIC AG. Therefore, [Seller] became the absolute successor of the extinguished company in a way that the lack of standing is no longer an obstacle that would bar the admission of this request.

It is important to observe that [Buyer] argues, in its motion at pp. 465 to 467, that [Seller], in these proceedings, is "violating the most fundamental rules of procedural good-faith, by trying to exercise before this Court a right of which it is knowingly not the holder". The reason presented is that "the rights granted in the arbitral award rendered in favor of Mannesmann Dematic GmbH were assigned by it to Gottwald Port Technology GmbH in 12 August 2003, before the incorporation was made known in the statement of claim"(p. 465).

It is not possible to accept such argument. If in the decision of SEC 968/CH, the request for recognition of the foreign arbitral award was denied precisely because it would not be possible to analyze the alleged assignment of the rights granted in the award, it would be contradictory, now, to analyze and evaluate such assignment to reach the conclusion that it would preclude the assignment of such rights through incorporation. As a matter of coherence, the impossibility of admitting the request made by GOTTWALD leads to the possibility of admitting it, when made by [Seller].

III - The inobservance of the arbitration agreement and the application of the Vienna Convention.

[Buyer], in its statement of defense, argues that the arbitral award cannot be recognized because it was rendered outside the limits of the arbitration agreement (arts. 32, IV and 38, IV and V of Law No. 9,307/96).

The reason would be because the parties contractually chose Swiss material law and not Swiss rules of law. Swiss material law would only include the domestic law of that country. The rules of law would comprehend "not only the domestic legal framework, but also the body of rules, such as the general principles of law, public international law and even lex mercatoria"(p. 191).

In the award, the Arbitral Tribunal applied the United Nation Convention on Contracts for the International Sale of Goods to decide the dispute. That, in [Buyer]’s view is not part of Swiss material law, but of the rules of law of that country. That would entail the excess and, as a consequence, the nullity of the arbitral award.

To solve this issue, it is important to bear in mind that in the Brazilian procedure for recognition of the arbitral award, as well noted by the honorable Rapporteur, the Court is not allowed to address the merits of the award to be recognized. The deciding authority is limited to "verifying, in the arbitral award, the presence of certain requisites, intrinsic or extrinsic, considered to be sufficient for the recognition of its effects,"avoiding the recognition of decisions that are contrary to "national sovereignty, public policy and good morals"(Barbosa Moreira, Comentários ao CPC, 14th ed., vol. V, Rio de Janeiro: Forense, 2008, pp. 55 and 61).

Regarding the applicable law, the award itself addresses the issue with the following words:

"Pursuant to the arbitration clause 11 of the contract, the arbitral tribunal, i.e. the sole arbitrator, will decide ‘in accordance to this contract and, also, pursuant to Swiss material law’.

This is confirmed by the Terms, p. 11, with the following wording:

(...)

In 1 March 2000, Switzerland had already ratified the United Nation Convention on Contracts for the International Sale of Goods (CISG), which entered into force in 1 January 1988.

A reference to Swiss material law in an arbitration or in a provision of applicable law, contained in a contract for the international sale of goods, results in the fact that the CISG is applicable as part of Swiss material law, unless it is excluded by the parties (and not by virtue of article 118 of the federal law, about international law, as alleged by the [Seller])."

The award in question was rendered in English, the same language of the contract. Therefore, the defect alleged by [Buyer], related to the translation of the expression "Swiss material law", cannot have influenced the arbitrator.

The simplified analysis that may be conducted in proceedings for the recognition of a foreign decision does not allow Brazilian judicial authorities to decide, instead of the arbitrator, how the term Swiss material law must be interpreted. The inclusion of a convention incorporated by Swiss law in this concept does not constitute a violation to the limits of the arbitration clause nor to the Brazilian public policy, for recognition purposes. At least in principle, analyzing the issue in light of Brazilian law, it is clear that a treaty or a convention, when ratified by a contracting State, receives the same status of a national law of that country. There is no reason to think that it would be different in Switzerland and more than that; there is no reason to meddle with the arbitral award, in this regard.

The same is applicable to the argument that the Vienna Convention was ratified with restrictions by Germany (State where one of the parties has its place of business) and was not even ratified by Brazil (State where the other party has its place of business). By electing Swiss material law to resolve the dispute, the parties waived the application of the domestic law of their own countries in favor of a regulation of the matter by a foreign system of law. There is no restriction to this in international arbitration (art. 2(1) of Law No. 9,307/96).

Strong in such reasoning, I follow the opinion of the Rapporteur Justice in its entirety.


FOOTNOTES

* All translations should be verified by cross-checking against the original text.

1. Pedro Martini is a Brazilian legal practitioner in the field of domestic and international commercial arbitration.

2. A translation into English of Resolution No. 9/2005 of the Superior Court of Justice, coordinated by ABEArb - Brazilian Association of Arbitration Students, is available at: <http://abearb.org/arquivos/138/abearb---stj-res-final.pdf>.

3. Law 9,307/96 is the Brazilian Arbitration Law. A translation into English, coordinated by ABEArb - Brazilian Association of Arbitration Students, is available at: <http://abearb.org/arquivos/138/abearb---bal-final.pdf>. Arts. 38 and 39 are mirrors to Arts. V(1) and V(2) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention.

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