From Brasília with love: Brazilian courts can annul foreign arbitral awards

Can a Brazilian court set aside an arbitral award rendered in New York? On 6 October 2026, the Brazilian Superior Court of Justice ("STJ") answered that question for the first time with a unanimous yes.[1] In REsp 2.224.272/SP, the STJ unsettled one of international arbitration's most comfortable assumptions: that only the courts of the seat may annul an award.

For parties who have chosen Brazilian law but a foreign seat, the map of where an award may be challenged has just been redrawn.  This article analyses the judgment and its potential implications for international arbitration.

The STJ decision

The STJ's Third Chamber (Terceira Turma) unanimously held that Brazilian courts have jurisdiction to set aside an award rendered abroad where the parties have so agreed.  Although the arbitration was seated in New York, the parties had chosen Brazilian law to govern both the underlying agreement and the arbitration (lex arbitri).  They also agreed that they could go to court in four specific situations only: (i) interim and protective measures sought before the tribunal was constituted; (ii) enforcement of any decision issued by the arbitral tribunal; (iii) an action to annul the award under Article 32 of Federal Law No. 9,307/1996 (the "Brazilian Arbitration Act"); and (iv) disputes that cannot be arbitrated under Brazilian law.  For those matters, the parties conferred exclusive jurisdiction on the São Paulo courts.  The decision therefore goes to the heart of the relationship between the seat, the law governing the arbitration, and the parties' choice of forum.

The underlying arbitration

The dispute arose from an M&A transaction in which members of a Brazilian family (the sellers) sold the controlling stake in a bank to a holding company and a corporation (the buyers).  The share purchase agreement provided for ICC arbitration seated in New York, with Brazilian law governing both the agreement (clause 9.8) and the arbitration (clause 10.6), and designated the São Paulo courts for any annulment action under Article 32 of the Brazilian Arbitration Act (the "São Paulo forum clause").

The buyers and the bank commenced arbitration against the sellers over amounts retained in escrow for liabilities that materialised after closing.  The award, rendered in New York, was in the buyers’ favour.

The proceedings before the Brazilian courts

Two actions were pursued in parallel.  The sellers brought an action before the São Paulo courts seeking annulment of the award, arguing that the award went beyond the scope of the arbitration agreement and breached the duties to give reasons and to treat the parties equally.  Separately, the buyers applied to the STJ for recognition of the award, and that application remains pending.

At first instance, the São Paulo court accepted Brazilian jurisdiction but upheld the award on the merits. On appeal, the São Paulo State Court ("TJSP") dismissed the sellers' appeal and upheld the buyers’ preliminary objection of lack of legal interest, terminating the proceedings. It reasoned that an award rendered outside Brazil is a foreign award (Article 34, sole paragraph, of the Brazilian Arbitration Act), so that judicial control over it arises only in recognition and enforcement proceedings, which in Brazil belong exclusively before the STJ, not the TJSP.[2]  According to Article 35 of the Brazilian Arbitration Act, "[i]n order to be recognised or enforced in Brazil, a foreign arbitral award is subject solely to recognition by the Superior Court of Justice".  The TJSP added that the São Paulo forum clause offended public policy by displacing the STJ's exclusive jurisdiction over foreign awards.

The matter then went to the STJ by way of a special appeal (recurso especial). The STJ is Brazil's highest court on non-constitutional questions of federal law (constitutional questions being reserved to the Federal Supreme Court (Supremo Tribunal Federal)); it hears appeals from the regional federal courts and the state courts of appeals, such as the TJSP, to ensure that federal law is interpreted consistently.

The question before the STJ, however, was not the validity of the award, but whether Brazilian courts could hear an annulment action at all, given the New York seat, the choice of Brazilian law to govern the arbitral procedure and the agreement that any annulment action would be brought in São Paulo.[3]

The STJ unanimously held that they could, in the circumstances of the case, and remitted the matter to the TJSP to determine the validity of the award.

Annulment and recognition: two different routes

The STJ first distinguished an action to annul an award from proceedings to recognise it (so that it can later be enforced).  Annulment goes to the validity of the award and, as a general rule, is brought before the Brazilian courts only where the award was made in Brazil (primary control).  Recognition asks whether a foreign award can produce effects in Brazil and takes place before the STJ (secondary control).  The two interact: recognition may be refused where the award has already been annulled by the courts of the seat.  Prior recognition by the STJ is therefore not a prerequisite for challenging an award’s validity before a competent court.

Brazilian law plainly contemplates a foreign court annulling an award before recognition is sought in Brazil.  The harder question in REsp 2.224.272/SP was the reverse: may Brazilian courts themselves annul an award rendered in a foreign-seated arbitration?

The general rule: Brazilian courts cannot annul a foreign award

 The STJ began by stating that, as a general rule, Brazilian courts cannot hear an action to annul a foreign arbitral award.  Because jurisdiction is an expression of State sovereignty, the validity of an award is reviewed by the courts of the seat, and Brazilian law determines the nationality of an award by reference to the place where it was made.[4]

The STJ also noted that the Brazilian Arbitration Act deals with foreign awards only in Chapter VI (Articles 35 to 40), on recognition and enforcement, so the annulment action under Chapter V (Articles 32 and 33) applies only to domestic awards, a reading supported by Article 38, VI, which refers to annulment by the courts of the country where the award was made.

The exception: when Brazilian courts can annul a foreign award

The STJ then recognised an exception to the general rule, based on the law governing the arbitral procedure.  It observed that Article V(1)(e) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention"), to which Brazil is a party,[5] permits recognition and enforcement to be refused where the award "has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made".

Relying on international and Brazilian authorities, the STJ clarified that the expression "under the law of which" refers to the procedural law of the arbitration, that is, the law governing the arbitral procedure, and not to the law governing the merits; the choice of Brazilian substantive law alone is therefore insufficient to found Brazilian jurisdiction.  In this case, however, Brazilian law had been chosen to govern both the arbitral procedure and the merits.

The STJ acknowledged that choosing a lex arbitri different from the law of the seat is rare but not impossible, since parties are free to make different choices for the seat, the procedural law and the substantive law.  It concluded that choosing Brazilian law to govern the arbitral procedure, even with a foreign seat, "opens the doors" of the Brazilian courts to an annulment action, as an exception to the general rule.

The São Paulo forum clause for the annulment action

 The STJ then examined the clause submitting any annulment action under Article 32 of the Brazilian Arbitration Act to the São Paulo courts.  Under Article 22, III, of the Brazilian Code of Civil Procedure, Brazilian courts have jurisdiction where the parties expressly or tacitly submit to it, so the choice of a Brazilian forum was valid under Brazilian law.

Party autonomy in this respect, however, is not unlimited.  As the rules defining the limits of a State's jurisdiction stem from national sovereignty and are matters of public policy, the parties may at most alter territorial competence, not extend Brazilian jurisdiction, and a forum clause that violates public policy, sovereignty or the rules of jurisdiction must be disregarded.  Nonetheless, the STJ in REsp 2.224.272/SP held that the São Paulo forum clause validly allocated jurisdiction for any annulment action under Article 32 of the Brazilian Arbitration Act.

Because Brazilian law governed the arbitration, and the New York Convention allows recognition to be refused where an award has been annulled in the country under whose law the arbitration was conducted, the STJ found that the São Paulo forum clause did not offend public policy, national jurisdiction or sovereignty.  It noted that the buyers, well advised in a complex transaction, had themselves agreed the seat, the lex arbitri and the São Paulo forum, and that recognition proceedings alone would not suffice, since refusal of recognition in Brazil would leave the award valid and enforceable abroad.

Does Article V(1)(e) of the New York Convention confer jurisdiction to annul an award?

Much of the STJ's reasoning rests on reading Article V(1)(e) of the New York Convention as allowing dual jurisdiction to annul an award: that of the courts of the seat and that of the courts of the country whose law governed the arbitral procedure.  Yet the New York Convention governs the recognition and enforcement of foreign awards and contains no provisions on annulment.  Article V(1)(e) merely identifies when recognition and enforcement may be refused, including where the award has not yet become binding or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.  It does not, by itself, set the jurisdictional rules of the States party to the Convention.

At most, the second limb of Article V(1)(e) of the New York Convention acknowledges that, in unusual circumstances, an award may be set aside by the courts of a country other than the one in which it was made.  It recognises that possibility; it does not confer jurisdiction.  Indeed, the words "or under the law of which" were inserted with virtually no discussion at the penultimate session of the 1958 conference, at the request of the Soviet delegate.

The Supreme Court of India confronted this point directly in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc.  It observed that the corresponding Indian provision, which reflects
Article V(1)(e), concerns grounds for refusing recognition and does not itself determine whether a State's court may annul a foreign award.[6]  Whether a national court may annul a foreign award is therefore ultimately a question for its own domestic law, read with the parties' agreement and the applicable rules of international jurisdiction.[7]

As the STJ itself recognised, Brazilian law treats annulment (for domestic awards) and recognition (for foreign awards) as distinct mechanisms.  It contains no provision allowing a foreign award to be annulled, and the New York Convention, which says nothing about annulment, cannot fill that gap. Notably, Article 38, VI, of the Brazilian Arbitration Act reproduces only the first limb of Article V(1)(e), referring to annulment by the courts of the country where the award was made, not of the country under whose law it was made.

Does the forum clause confer jurisdiction to annul the award?

The STJ's decision also rests on the São Paulo forum clause, which it held to be a valid exercise of party autonomy that did not offend public policy, given the parties’ choice of Brazilian law to govern the arbitration.  However, beyond observing that the clause would prevent the parties from bringing an annulment action in any other country, the STJ did not address what this meant for the seat: would the New York courts decline jurisdiction over any annulment action brought there?

The STJ itself recognised that the State in whose territory the arbitral tribunal is constituted has an interest in safeguarding the quality of the adjudication conducted there.  Nevertheless, it held that, because the parties had chosen São Paulo as the forum for annulment, the São Paulo courts had exclusive jurisdiction.  That holding does not bind the New York courts, which may reach a different conclusion, leaving open the possibility of parallel annulment proceedings.

A US court has refused a similar attempt to separate the seat from the annulment forum.  In Spectrum Dynamics v Chauncey Capital, the contract designated Geneva as the seat but gave the New York courts exclusive jurisdiction over matters concerning the arbitration.[8]   The Southern District of New York rejected the argument that this left post-award vacatur to New York.  Because the awards were made under Swiss procedural law, Switzerland had primary jurisdiction and the exclusive authority to annul them.[9]  A forum-selection clause could not expand the powers of a court of secondary jurisdiction, since the New York Convention "reserves the power to vacate foreign awards to courts sitting in primary jurisdiction alone" and "parties cannot confer subject-matter jurisdiction on a tribunal by way of consent".[10]  Although the seat and the law governing the arbitration coincided in Spectrum Dynamics, unlike in the Brazilian case, the decision confirms that party autonomy has limits and that the New York Convention does not confer jurisdiction to annul an award.

What does the STJ's decision mean for arbitration users?

The STJ's decision was made in very specific circumstances, with no settled international case law for comparison, which makes it harder to balance two competing principles: the State's sovereign power to review awards made in its territory and party autonomy.  Even so, the route taken by the STJ, and especially its reasoning, raises a number of questions.

The first concerns the limits of party autonomy.  Autonomy is one of the pillars of arbitration.  As the STJ recognised, parties may choose different laws for the contract (lex contractus) and for the arbitration (lex arbitri), and a seat in yet another country.  But how far does that autonomy go? Can the parties agree that a court outside the seat will have jurisdiction over specific measures, or over annulment?

If so, on what conditions? And how should the resulting overlap with the courts of the seat be resolved: does the chosen forum take priority because it was specifically agreed, or do the courts of the seat retain priority as the legal home of the arbitration?

The second question concerns the STJ's reading of Article V(1)(e) of the New York Convention as providing, in the words of Justice Villas Bôas Cueva’s concurring opinion, "two forums with jurisdiction for the annulment action" ("dois foros com jurisdição para a ação anulatória").  That reading finds some support in the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  It nevertheless sits uneasily with the general assumption in international arbitration that only the courts of the seat may annul an award.

Commentators have generally taken the view that Article V(1)(e) of the New York Convention "restricts the extent of national court review of international arbitral awards in annulment actions, limiting such review only to the courts of the seat".[11]  Gary Born, the author of that statement, has also described Article V(1)(e) as the provision "which permits courts in the arbitral seat (and only courts in the seat) to annul an award".[12]  Similarly, Gaillard explains that "the criterion relied on by courts to uphold their jurisdiction to set aside an arbitral award is usually the fact that the award was made on their territory", the "simple geographical criterion" adopted by the UNCITRAL Model Law.[13]

The idea that courts in two jurisdictions may hear an annulment action is certainly unusual, but it is not unprecedented. In England, in Hiscox v Outhwaite,[14] the House of Lords considered a case that also arose in "very unusual circumstances".[15]  The parties had chosen London as the seat of the arbitration, but the arbitrator dated and signed his award in Paris.  The House of Lords declined to infer from the London seat that the award was an English award; it held that, having been "made" in Paris, the award was a foreign award within the meaning of the New York Convention.  It nevertheless concluded that an action to set aside the award could be brought before the English courts, because the arbitration was governed by English procedural law.

The decision in Hiscox v Outhwaite was criticised for creating "serious conflicts of jurisdiction".  As Gaillard notes, "if the approach adopted by the House of Lords were also adopted by the courts of the place where the award was actually signed, the award could be the subject of a concurrent action to set it aside, and it is by no means certain that the outcome of a concurrent action would be the same as that of the action before the English courts".[16]

The same risk arises in the Brazilian case. As noted above, the STJ did not consider whether the New York courts would regard themselves as retaining jurisdiction as the courts of the seat; it treated the São Paulo courts as having exclusive jurisdiction to annul the award, and the parties as precluded from seeking annulment elsewhere, even though the award cannot be enforced in Brazil until the STJ has recognised it.

Ultimately, REsp 2.224.272/SP establishes that, in Brazil, the seat is no longer necessarily the only place where an award can be annulled.  Where the parties choose Brazilian law to govern the arbitration and expressly submit annulment to the Brazilian courts, those courts may hear the challenge, even if the award was rendered abroad.  Whether that approach withstands scrutiny, and how it will coexist with the jurisdiction of the courts of the seat, remains to be seen.  In the meantime, parties who combine a foreign seat with Brazilian law and a Brazilian forum should be aware that they may be opening the door to annulment proceedings in Brazil as well as at the seat.

This article was co-authored by members of Signature Litigation's Lusophone Arbitration desk. Signature's capabilities and experience in Brazil and Lusophone jurisdictions is unique in the London market. Members of our team are Brazilian-born, fluent in Portuguese, and/or have spent time living and working in the jurisdiction on major international cases. Our bilingual team is uniquely well-placed to advise clients on their most sensitive matters. We regularly work with Brazilian colleagues in advising clients on matters with an international dimension but also involving MPF, CADE, CGU and TCU amongst others.

[1] The decision was published on 9 October 2026.

[2] REsp 2.224.272/SP, registration No. 2025/0263858-1, Third Chamber, Rapporteur Justice Nancy Andrighi, as reported in the public record of the proceedings.

[3] REsp 2.224.272/SP (n 2).

[4]  Article 34, sole paragraph, of the Brazilian Arbitration Act, which defines a foreign award as one made outside Brazilian territory.

[5] The New York Convention was incorporated into Brazilian law through Legislative Decree No. 52/2002 and Presidential Decree No. 4,311/2002.

[6] Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc, (2012) 9 SCC 552.

[7] Similarly, in Ferrostaal AG v Bharati Shipyard Ltd, the Supreme Court of India recognised that section 48(1)(e), which corresponds to Article V(1)(e), "is only one of the defences on the basis of which recognition and enforcement of the award may be refused", and "has no relevance to the determination of the issue as to whether the national law of a country confers upon its courts, the jurisdiction to annul the awards made outside the country".  Indian courts would treat an award set aside in either of the two countries contemplated by Article V(1)(e) only "as a valid defence in the enforcement proceedings relating to a foreign award".  Ferrostaal AG v Bharati Shipyard Ltd, Judgment of the Supreme Court of India, 6 September 2012, paragraph 139.

[8] Spectrum Dynamics Medical Limited v Chauncey Capital Corp and others, SAC Case No. 300438-2018, Redacted Opinion and Order of the United States District Court for the Southern District of New York, 23 July 2024, paragraph 7.

[9] Spectrum Dynamics (n 8), paragraph 31.

[10] Spectrum Dynamics (n 8), paragraph 39.

[11] Gary B. Born, 'Chapter 11: Legal Framework for International Arbitral Proceedings (Updated February 2024)', in International Commercial Arbitration (3rd edn, 2021), as available on Kluwer Arbitration at https://www-kluwerarbitration-com.ezproxy.library.qmul.ac.uk/document/KLI-KA-Born-2021-Ch11.

[12] Gary B. Born, 'Chapter 6: International Arbitral Proceedings: Legal Framework', in International Arbitration: Law and Practice (4th edn, 2025), pp. 131-150, as available on Kluwer Arbitration at https://www-kluwerarbitration-com.ezproxy.library.qmul.ac.uk/document/kli-ka-born-ia-2025-ch06.

[13] Emmanuel Gaillard and John Savage (eds), 'Part 6: Chapter I - French Law', in Fouchard Gaillard Goldman on International Commercial Arbitration (1999), pp. 887-962, as available on Kluwer Arbitration at https://www-kluwerarbitration-com.ezproxy.library.qmul.ac.uk/document/ipn20092, paragraph 1593.

[14] Hiscox v Outhwaite (No 1) [1992] 1 AC 562 (HL).

[15] Gaillard and Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration (n 14), para 1593.

[16] Gaillard and Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration (n 14), para 1593.