Restricted party autonomy

Brazil is an example of a country with a globalised economy where choice of law clauses arc regularly not enforced. Private international law in Brazil can be categorised as (more) rigid (than European or American conflicts of law) and it restricts the autonomy of the parties in court litigation.

The 1942 Introduction to the Civil Code (which regulates the application and interpretation of the law) contains the relevant private international law articles. Article 9 discusses the applicable law. The main rule is that the applicable law is the lex loci contractus or when the contract is concluded by correspondence, the law of the residence of the offeror. The exception is when the obligation is to be executed in Brazil, as then Brazilian law is the applicable law. Brazilian private international law differs from European and US private international law as the latter two use various points of connection to determine the applicable law to the contract (in the absence of the choice of the parties), whereas Brazilian law primarily relies on the lex loci contractus. The law is silent on what happens when the parties include a choice of law clause in their contract. The previous Introduction, which dates from 1916 stated that the lex loci contractus was the applicable law unless the parties made a different choice. It should be noted that despitethis liberal choice of words there were also many exceptions when Brazilian law would be applicable regardless of the law chosen by the parties.^[1] Yet it does mean that the general principle of party autonomy with regards to choice of law was recognised in Brazilian law prior to 1942.

The change in the new Introduction created uncertainty as to the autonomy of the parties. Some experts argue that the absence of this principle from the Introduction means that choice of law is no longer recognised because it was omitted from the legislation whilst others state that party autonomy is still possible if the concept is recognised under the lex loci contractus, and yet others have argued that the omission in the law does not mean that choice of law clauses arc not allowed because it is not expressly disallowed either. These commentators point to the continuation of the law and that the principles underlying the law stay the same unless these are expressly changed and that since choice of law was recognised in the 1916 Introduction it still stands as the 1942 law does not indicate that this has changed. The latter seems to be the minority opinion. Courts generally react with a restrictive interpretation and often do not uphold choice of law clauses. There is no real consensus as there are also cases where the choice of the parties was upheld. Courts seem to favour the application of Brazilian law and maximise the use of the public policy exception in their application of private international law. An important and pragmatic reason for falling back on Brazilian law is an overburdened judicial system that does not allow the courts much time for individual cases and of course applying the lex fori saves the court time.

The new Brazilian Civil Procedural Code allows for choice of forum clauses in international contracts but does not discuss choice of law clauses. Brazil has signed the Inter-American Convention on the Law Applicable to International Contracts, which permits the parties to choose the applicable law, but it has not ratified the convention. The law was updated in the early

Party autonomy 99 2000s yet the articles on private international law were not changed.^[2] This indicates that enlarging choice of law is currently not a priority.

Among Brazilian scholars there seems to be a consensus that private international law should be updated to expressly allow for choice of law in litigation. Restrictions on party autonomy have a negative effect on the economy as it raises contracting costs substantially. In the area of sale of goods contracts uncertainty is diminished with the 2014 entry into force of the CISG in Brazil as this raises predictability on the substance of the law although of course that does not enhance the agency of the parties to choose the applicable law. Given the restrictions placed on party autonomy in general it is not surprising that in Brazilian private international law a choice of law for non-statc rules would not be acceptable outside of arbitration.

• [1] Ibid. 2 Ibid, 78. 3 Carmen Tiburcio, ‘Private International Law in Brazil: A Brief Overview’ (2013) 1 Panorama of Brazilian Law 11, 23. 4 Ibid. 5 Dana Stringer, ‘Choice of Law and Choice of Forum in Brazilian International Commercial Contracts: Party Autonomy, International Jurisdiction and the Emerging Third Way’ (2005-2006) 44 Columbia Journal of Transnational Law 959, 973. 6 Nadia de Araujo and Fabiola I Guedes de C. Saldanha, ‘Recent Developments and Current Trends on Brazilian Private International Law Concerning International Contracts* (2013) 1 Panorama of Brazilian Law 73, 80. 7 Dana Stringer, ‘Choice of Law and Choice of Forum in Brazilian International Commercial Contracts: Party Autonomy, International Jurisdiction and the Emerging Third Way’ (2005-2006) 44 Columbia Journal of Transnational Law 959, 8 Maria Mercedes Albornoz, ‘Choice of Law in International Contracts in Latin American Systems’ (2010) 6 Journal of Private International Law 23,48. 9 For the full text see: http://www.planalto.gov.br/ccivil_03/_Ato2015-2018/2015/Lei/ L13105.htm
• [2] Lauro da Gama e Souza Jr, 'the UNIDROIT Principles of International Commercial Contracts and their Applicability in the MERCOSUR Countries’ (2012) 36 Revue Juridique Themis 375, 416. 2 Ibid, 418. 3 Dana Stringer, 'Choice of Law and Choice of Forum in Brazilian International Commercial Contracts: Party Autonomy, International Jurisdiction and the Emerging Third Way’ (2005-2006) 44 Columbia Journal of Transnational Law 959, 983. 4 See for more on this: lacyr de Aguilar Viera, 'The CISG and Party Autonomy in Brazilian International Contract Law’ (2013) 1 Panorama of Brazilian Law 173. 5 Lauro Game Jr, 'Prospects for the UNIDROIT Principles in Brazil’ (2011) 16 Uniform Law Review 613, 641 The author also discusses that in arbitration this would be different as a choice for non-state rules would be acceptable per the Brazilian Arbitration Act (Article 2: At the parties’ discretion arbitration may be in law or equity. §1 - The parties may freely choose the rules of law applicable in the arbitration, as long as their choice does not violate good morals and public policy. §2 - The parties may also stipulate that the arbitration shall be conducted under general principles of law, customs, usages and the rules of international trade.). 6 Through the Commerce Clause (Article 1, Section 8, Clause 3 of the US Constitution) Congress has power to ‘regulate commerce with foreign Nations, and among the several states, and with the Indian Tribes.’ Congress does not attempt to regulate every aspect of international commerce. Federal courts sometimes interpret the Clause restrictively although at other times their interpretation is more far-reaching. This is often depending on the current constitution of the Supreme Court. Although this seldom has effect on private international law aspects it should still be kept in mind that federal law plays a key part in international commerce (for instance, trough the ratification of conventions.)