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This article focuses on some of the critical legal issues faced by parties to insurance and reinsurance contracts covering Brazilian risks when resolving their disputes by way of arbitration, namely:

  • the choice of substantive law applicable to the insurance and reinsurance contracts;
  • the seat of the insurance and reinsurance arbitrations;
  • the impact of the Consumer Code and rules on contracts of adhesion when applied to insurance contracts, reinsurance contracts, and arbitration agreements;
  • confidentiality of the arbitration and how it affects the rights of insurers and reinsurers;
  • third parties to the arbitration and consolidation; and
  • subrogation into the arbitration agreement in an underlying contract.

We start by briefly describing the economic and legislative underpinnings that have given rise, slowly but surely, to insurance and reinsurance arbitration in Brazil. We then deal with each of the above critical legal issues. Finally, we review the suitability of arbitration as a means of resolving insurance and reinsurance disputes for Brazilian based risks.

Economic and legal underpinnings of the insurance market and arbitration in Brazil

The Brazilian insurance market and arbitration scene have recently experienced great transformation. The insurance market went through structural changes with the enactment of legi­s­lation regulating private pension funds in 2001,1 the opening of the ­reinsurance market in 2007 and the privatisation of IRB Re in 2013. For its part, arbitration experienced a remarkable moderni­sation brought about by the enactment of an UNCITRAL Model Law-based Arbitration Act in 1996 (declared constitutional by the Supreme Court in 2001), and the ratification of the New York Convention in 2002. The Arbitration Act was amended in 2015 to incorporate into law some of the pro-arbitration decisions handed down by the courts over the years and to promote other improvements sought by the arbitration community.

In large part, the drivers for these transformations were demands from the business community, who, in the context of ­relative economic stability and continuous growth, sought adequate and reliable tools for risk management2 and dispute resolution.3

Large investments in the energy, mining and infrastructure industries, coupled with complex regulatory environments and stringent liability regimes, inevitably led to events giving rise to claims under insurance policies (the losses). These losses mostly fell under construction/erection all-risks, environmental, employer's liability, general liability, property and business interruption policies. More recently, the economic crisis and multiple corruption probes have given rise to significant losses under surety and directors' & officers' liability policies.

Complex losses occasionally generate disputes between insureds, insurers and reinsurers. In the context of increasingly sophisticated executives and a judicial branch in crisis, parties are referring a growing number of Brazilian insurance and rein­surance disputes to arbitration. In our view, the trend is set for this to increase, which makes it ever more important for practitioners to understand the issues relevant to this type of arbitration.

The choice of substantive law applicable to insurance and reinsurance contracts

Are contracting parties free to choose the substantive law that will govern the insurance or reinsurance contract? Does the existence of an arbitration agreement impact this freedom?

Rules on choice of law

Brazilian law limits party autonomy when choosing the substantive law applicable to a contract, unless the parties agree to arbitrate, in which case there is broad scope for choice. However, in insurance and reinsurance contracts, specific industry rules and domestic public policy rules need to be taken into account.

Brazilian rules on conflict of laws (or private international law) state that a contract will be governed by the law of the place where it was entered into (lex loci celebrationis).4 For domestic contracts, the agreement is deemed entered into at the place in which the offer was made,5 whereas for international contracts, it is deemed made at the residence of the offeror.6 The majority view in the legal community is that these laws are mandatory and parties cannot contract out of them.7

Law applicable to insurance contracts

A special rule applies to insurance contracts that: cover risks located in the Brazilian territory; and are taken out by individuals residing in Brazil or companies domiciled in the country. This special rule states that the contract must be entered into in Brazil.8 The application of this rule excludes the possibility of a foreign law governing such insurance contracts, and leads to the conclusion that Brazilian law must govern them in light of the lex loci celebrationis rule.9

Further, Law Decree 73/66, which regulates insurance and reinsurance operations, provides that all operations carried out in Brazil relating to private insurance must be governed by it terms.10

On the face of it, an exception to this choice of law rule applies when an insurance dispute is to be submitted to arbitration. In this case, the parties are free to choose: the substantive law applicable to contract; the law applicable to arbitration agreement; and the procedural law of the arbitration.11

The majority of Brazilian scholars argue that parties can freely select the substantive law of any contract,12 as long as the subject matter of the dispute is arbitrable13 and the choice does not infringe public policy or customary norms.14 In principle, insurance coverage disputes meet the test of objective arbitrability set out in the Arbitration Act, such that parties could select a foreign substantive law to govern the merits of a dispute subject to arbitration.

However, there are arguments to suggest that the choice of a foreign law to govern a dispute arising under an insurance policy covering a local risk would infringe public policy. This is on the basis that choosing a foreign law to govern issues relating to the national financial system, of which insurance is an integral part, would violate Brazilian public policy.15 Arguments relating to breach of public policy must be considered seriously because it is one of the grounds to set aside an award, in the case of a domestic award,16 or resist recognition, in the case of a foreign award.17 We are unaware that this public policy point has been ruled upon, but, in practice, Brazilian insurance contracts are invariably governed by Brazilian law.

Substantive law applicable to reinsurance contracts

With reinsurance contracts, the issue of choice of law is less disputed. The general rule is that it must be governed by Brazilian law and any dispute be subject to Brazilian jurisdiction.18  An exception applies where the contract contains an arbitration agreement, in which case parties are free to choose the governing law.19

A limited number of practitioners insist that Brazilian law is mandatory in any and every circumstance where the risk is located in Brazil because of the private international law rules and principles of public policy discussed above. However, there are strong arguments suggesting the opposite. The lawmakers have not imposed limitations on choice of law in reinsurance contracts, and the regulators, who were authorised to do so by way of secondary legislation, pursuant to Complementary Law 126/2007, created the exception in the case of arbitration.20

The seat of an insurance and reinsurance arbitration

There is no dispute in relation to the parties' right to agree on the seat of arbitration outside Brazil for disputes arising out of insurance or reinsurance contracts regardless of the location of the insured risk.21

The impact of the Consumer Code and rules on contracts of adhesion on the insurance contract, reinsurance contract, and arbitration agreement

When do the Consumer Code Contract and rules on contracts of adhesion apply, and what is their impact on insurance contracts, reinsurance contracts and arbitration agreements?

Brazilian law does not differentiate a priori between consumer insurance and commercial insurance.22 Therefore, a case-by-case analysis must be carried out to decide which regime of principles and rules within Brazilian law will apply to the contract.

The applicable regime depends on whether the insurance contract is classified as a ‘special' contract governed exclusively by the Brazilian Civil Code (and secondary legislation) or a consumer contract also subject to the rules of the Consumer Code. Even where the insurance contract is held to be a ‘special' contract as defined above, it matters whether the contract was negotiated or ‘adhered'.23 Particular industry rules are also relevant to the analysis.

These distinctions are relevant because, in practice, they not only affect standards of contractual interpretation, control of abusive clauses, burden of proof, time bar and jurisdiction, but also the formal requirements of the arbitration agreements.

‘Special' contract under the Brazilian Civil Code

Like many civil law jurisdictions, Brazil adopts a general law of contract (eg, rules on contractual formation and remedies for breach of contract) and specific principles and rules are ­applicable to a category of contracts called ‘special' contracts. A ­special contract is one where the law provides for a set of rights and obli­gations that will apply compulsorily or by default to the parties' deal.24 Insurance contracts are a type of special contract ­governed by the Brazilian Civil Code and a large volume of secon­dary legislation.

Generally the only requirement for arbitration agreements in special contracts is for the arbitration agreement to be in writing.25 By signing a contract, the parties are deemed to have expressly consented to the terms of the arbitration agreement contained in it.

However, the insurance regulator imposes additional requirements of form for arbitration agreements contained in insurance policies.26 In short, the arbitration agreement must be written in bold letters and contain the signature of the insured. It must also provide that the insured agrees to resolve all disputes with the insurer by way of arbitration, whose award will have the same effect as a court judgment and that the arbitration agreement was drafted pursuant to the Brazilian Arbitration Act.

Contracts of adhesion

Special contracts can subdivided into negotiated contracts and contracts of adhesion. Under Brazilian law, a contract of ­adhesion is a standard form contract on pre-approved terms, drafted by one party, which is usually a large corporation with stronger bargaining power than the counterparty. The counterparty, in turn, must adhere to the contractual terms on a take-it-or-leave-it basis, and has little or no power to discuss or amend those contractual terms.27

Most insurance contracts are contracts of adhesion because their terms are not negotiated with the insured. The insurer provides a range of pre-drafted clauses, exceptions and endorsements and the insured chooses which of these to include in the policy. However, some are not adhesion contracts, and an investigation must be undertaken on the facts surrounding their negotiation process before a characterisation can be made.

On the one hand, there will be factual cases where an insurer offers its standard form wording on a take-it-or-leave-it basis to an individual consumer or to a small corporate policy holder, leaving only premium to be negotiated (if at all). Examples include household, travel, health and life insurance. Such policies will normally be adhesion contracts.

On the other hand, there are cases where there have been arm's length negotiations of the policy terms between the insurer and a sophisticated substantial corporate insured. The insurance policy which results from such negotiations will not be categorised as an adhesion contract (eg, certain contracts for large risks such as Jirau). A factor that will weigh against considering such agreement to be an adhesion contract is where there is no substantial inequality in bargaining power between the parties. For example, when specialists such as legal counsel, insurance or reinsurance brokers, risk teams and in-house lawyers advise the insured during the formulations and underwriting stages of its insurance programme.

The classification of a contract as one of adhesion is relevant because it attracts a contra proferentem interpretation under which any ambiguity or contradiction in the wording will be interpreted against the insurer.28

The Arbitration Act provides for additional requirements of form for arbitration agreements in contracts of adhesion.29 In order for the arbitration agreement to be binding, the adhering party must either take the initiative to commence the arbitration, or agree to its commencement in writing, either in a separate document, or by putting its signature on the actual arbitration agreement that must be in bold type. The Superior Court of Justice (STJ) handed down decisions holding that these formal requirements must be observed for the arbitration agreement to be binding.30

Additional requirements of form led to a notorious dispute regarding the validity of an arbitration agreement in an insurance policy covering a number of complex engineering risks in the construction of a major hydroelectric power plant in Brazil. In that case, the English courts31 and the Brazilian courts32 handed down clashing decisions.

Consumer contracts

A consumer contract is one where a consumer and a supplier, as defined by the Consumer Code, share a legal relationship for the sale of goods or rendering of services.33 The insurer will always fall under the definition of supplier, as insurance is expressly included in the definition of the services under the Consumer Code.34

The question is whether an insured fits the definition of consumer - which can be either an individual or a legal entity.35 The test is two-fold: the individual or entity must be the final beneficiary of the goods or services from a factual and economic viewpoint. The STJ describes the ‘factual' final beneficiary to be ‘the last [person or entity] in a supply chain [...] after whom there is no one in the transfer of a good or a service'. The ‘economic' final beneficiary is a person or entity ‘that does not use the product or service with a view to profiting, to passing it on to a third party or to onerously assign it.'36 Put another way, the product or service cannot be directly or indirectly connected to the commercial activity developed by the party who purchased the product or service.

Based on this distinction, the STJ has reaffirmed recently that not all insurance contracts are consumer contracts.37

Having an insurance contract governed by the Consumer Code affords additional legal protections to the insured claiming against an insurer, including, but not limited to:

  • longer statute of limitation (article 27);38
  • shifting the burden of proof to the insurer (article 6, VIII);39
  • interpretation of unclear contractual clauses in favour of the consumer (article 47);40
  • application of stricter rules on unfair clauses (article 51);41 and
  • the court of the consumer's domicile has jurisdiction to hear claims (article 101, I).42

The Consumer Code states that clauses providing for compulsory arbitration are void.43 The STJ has recently reaffirmed its position regarding the validity of arbitration agreements in consumer contracts, such that even if the consumer expressly agreed to the arbitration agreement at the time the contract was entered into, it will only be valid where: the consumer starts the arbitration; or after the supplier starts arbitration, the consumer consents to arbitrate.44

In other words, arbitration agreements in consumer contracts are one-sided clauses, as they bind the supplier, but do not bind the consumer.

Reinsurance contracts

Reinsurance contracts are neither special,45 consumer nor adhesion contracts. Parties have an equal standing and are free to negotiate their terms subject to Complementary Law 126/20017, the general law of contracts in the Brazilian Civil Code, and secondary legislation issued by the regulators. The requirements of form set by the regulator for arbitration agreements in insurance contracts do not apply to reinsurance contracts.

Draft Insurance Act (PLS No. 477/2013)

We note that a draft Insurance Act is before the Brazilian Congress for a vote. The Act is relevant to the discussion carried out in the sections above because it provides that all insurance contracts are of the adhesion type. Also, insurance arbitrations would have to be seated in Brazil, and governed by Brazilian substantive and procedural law.46

Confidentiality of the arbitration and how it affects the right of insurers and reinsurers

What issues of confidentiality are relevant to disputes involving insurers and reinsurers?

General rule on confidentiality in arbitration

Generally, the law applicable to the arbitration agreement governs the parties' obligations of confidentiality. In common with many national arbitration laws, the Brazilian Arbitration Act is silent on confidentiality being a general obligation of the parties.47 Therefore, if the parties wish their proceedings to be confidential, they must consider the degree of confidentiality prescribed by the applicable institutional rules, and complement them as the case may be in the arbitration agreement or terms of reference. It is worth mentioning that the Civil Procedure Code provides that procedural acts in the courts in support of the arbitration will be subject to secrecy, provided it is evidenced that the arbitration is confidential.48 Arguably, the protection does not cover proceedings to set aside domestic awards or to recognise foreign awards, such that the contents of the arbitral award could be indirectly revealed to the public. The protection granted by the Civil Procedure Code is important, but does not address a number of issues, as discussed below.

Confidentiality in arbitration with the public administration

The Brazilian Arbitration Act, as amended in 2015, provides that arbitrations with the direct and indirect public admini­stration49 are subject to the principle of publicity (ie, the duty of the admini­stration to be transparent about all of their acts).50 The Act does not specify what information needs to be disclosed, when or by whom.

The issue is relevant because many state-controlled companies buy insurance and, in the case of a dispute with their insurers, both parties may be deprived of the benefits of confidentiality. For example, many of these companies operate in a private law regime and compete in the market place such that public disclosure may harden positions, increase tensions, prevent settlements and cause collateral disputes.51

Over time, arbitral institutions will issue rules and guidelines on the matter,52 and the parties will agree on the degree of publicity they deem appropriate. Nevertheless, it does not sound reasonable to interpret the provision as requiring total and absolute publicity to each act of the arbitration.53

Confidentiality of underlying disputes in regards to the insurer and reinsurer

Confidentiality may also pose an issue, for example, to surety insurers in circumstances where an underlying dispute as to the performance of the contract (whose breach triggers a payment by insurers) is being arbitrated in confidence. It may be difficult for the insurer to assess the nature of the breach and whether it affords any coverage defences.

Further, confidentiality may be a source of tension in rein­surance contracts. In particular, when reinsurers seeking to exercise their rights under claims control or claims cooperation clauses (eg, to participate in the assessment of any loss, influence the handling of the claim or control negotiations and settlements)54 are told by their reinsured that they are bound by confidentiality obligations in the arbitration in regards to the insured. These are difficult issues to resolve.

A number of institutional rules such as the ICC and CIESP/FIESP do not provide for confidentiality as a default rule, in which case the information could be disclosed (subject to the position under the applicable law). The LCIA55 and CAM-CCBC56 provide exceptions to the rule of confidentiality in circumstances where one of the parties needs to protect a legal right. This tool would provide a solution for insurers and reinsurers. Other institutional rules such as those of AMCHAM and FGV do not provide this flexibility. In such circumstances, insurers should seek authority from the insured to disclose information to their reinsurers. Absent authority, the insurer should submit the issue to the tribunal for a decision.

Confidentiality of the insurance contract in regards to third parties

Finally, D&O policies typically contain provisions requiring the policyholder and the D&Os not to disclose information about their cover to third parties. The reason is to prevent a third party from presenting inflated or otherwise unreasonable claims due to the company's supposedly ‘deep pockets' arising from insurance protection. Insurers see in this confidentiality obligation a protection against abuse of insurance cover. If the duty is breached, the risk is arguably aggravated, with the harsh consequence of contractual rescission if the test for aggravation of the risk under Brazilian law is satisfied.57 Confidentiality of the arbitration proceeding concerning D&O coverage is, therefore, a protection against arguments that the terms of cover have been disclosed to third parties by a claim being commenced in state courts.

Third parties to the arbitration and consolidation

To what extent are the procedural mechanisms of joinder, intervention and consolidation available to insurers and reinsurers in arbitration?

The Brazilian Civil Procedure Code provides for a number of mechanisms in court proceedings allowing for the consolidation of separate claims,58 intervention of third parties,59 and joinder of third parties.60 Consent to joinder and the participation of third parties in an ongoing claim depends on the court's discretion rather than on the parties' approval.61

The purpose of these mechanisms is procedural efficiency and avoidance of contradictory decisions.62 The same aims are true in arbitration.

However, by contrast, in arbitration, consolidation and participation of third parties is only possible, generally speaking, if the parties to the arbitration have agreed.63 This is because arbitration is a contractual agreement that only binds the parties who have validly consented to it.

These are important mechanisms for insurers and rein­surers. Let's take the following three scenarios as examples, which we will come back to later when discussing the different insti­tutional rules:

  • an insurer raising a defence of material non-disclosure may want to join a broker on the basis that the broker may be liable for damages suffered by the insured;
  • a reinsurer may wish to intervene in a claim where it believes the reinsured is not defending the claim as expected under a claims-cooperation clause; or
  • a reinsured may wish to consolidate multiple claims it may have against reinsurers who disagree on allocation of losses that spread over multiple policy period.64

The Brazilian Arbitration Act is silent on these issues. In turn, the main institutional rules deal differently with each of these topics.


Regarding joinder, the ICC provides that the parties may join third parties (referred to in its rules as additional parties) to an existing arbitration before the confirmation or appointment of tribunal, unless all parties (including the additional party) agree otherwise.65 Any person against whom a request for joinder is made automatically becomes an additional party to the arbitration upon submission of that request (subject to preliminary screening by the Secretary General and any consequent decision of the ICC Court).66 The tribunal will subsequently assess whether the additional party is bound by the relevant arbitration agreement, and affirm jurisdiction over that party or remove it from the arbitration.67 Importantly, a third party may be joined to the arbitration by decision of the tribunal even if it and the other party to the dispute oppose the joinder.

Unlike the ICC, the LCIA Rules state that the third party (referred to in its rules as third person) being joined must consent to the joinder. Consent of the other party to the arbitration, however, is not required.68 Neither CAM-CCBC, AMCHAM, FGV, or CIESP/FIESP deal with joinder.

Taking the first example above, under the ICC Rules, insurers would be able to join the broker to the arbitration if they could show that the broker was bound by the arbitration agreement. Under the LCIA Rules, the broker would only be joined if it consented to being so. Finally, under the CAM-CCBC, AMCHAM, FGV, or CIESP/FIESP, joinder would be difficult considering the rules do not provide for such mechanism. At a minimum, all parties would have to agree, but even then joinder might be problematic if the tribunal or institution do not have power under the rules.


With respect to intervention, neither the ICC, LCIA, CAM- CCBC, AMCHAM, FGV, nor CIESP/FIESP rules address the issue. Institutional rules ordinarily only provide for existing parties to request the inclusion of a third party. Given the duty of confidentiality, the arbitral institution is likely to decline to acknowledge the existence or otherwise of the arbitration.

Turning to the second example above, a reinsurer would only be able to intervene in an arbitration between an insured and its reinsured if all the parties to the proceedings agreed to it.


In respect to consolidation, the ICC provides that, at the request of a party, the ICC Court may consolidate arbitrations where: the parties have agreed to consolidation; or the claims in the arbitrations are brought under the same arbitration agreement. Where the claims in the arbitrations are commenced under different arbitration agreements, the claims may be consolidated if there is a coincidence of parties, the dispute arises in relation to the same legal relationship (ie, economic transaction), and the Court finds that the arbitration agreements are compatible.69

Under the LCIA Rules, a tribunal has power to order arbi­trations to be consolidated, with the approval of the LCIA Court, where all parties have agreed to it in writing. An LCIA tribunal may also order consolidation of arbitrations commenced under the same arbitration agreement or compatible arbitration agreements between the same parties, provided a tribunal has not yet been formed by the LCIA for the other disputes, or if already formed, the tribunal is composed of the same arbitrators.

CAM-CCBC Rules provide that the President of CAM-CCBC may consolidate arbitrations, up to the signature of the terms of reference, provided an arbitration to be commenced has the same subject matter (objeto) and cause of action as an ongoing arbitration; or if two arbitrations have the same parties and cause of action, but the objeto of one is broader than that of the others.70

The AMCHAM Rules state that consolidation is possible if the parties have agreed, and in circumstances where the arbitration tribunals are comprised of the same arbitrators. The Rules of FGV and CIESP/FIESP do not provide for consolidation.

Considering the third example above, under the ICC Rules, if the dispute arises from a single reinsurance contract, then consoli­dation would be possible. However, if there were ­multiple reinsurance contracts, absent agreement between all the parties, consolidation would only be possible if the identity of rein­surers was the same. This, of course, assumes that the arbitration agreements contained in each contract are compatible. In our experience, having the same reinsurance panel in different policy periods is unlikely. The same conclusion is valid under the LCIA Rules, but not where different tribunals have already been formed. Finally, consolidation under the AMCHAM, FGV, or CIESP/FIESP would only be possible if all parties agree, but even then consider­ation must be given how to address the restrictions envisaged in the other institutional rules.

Subrogation into arbitration agreement in underlying contract

Are insurers bound by the arbitration agreements in the contracts into which they subrogate upon indemnifying the insured?

Insurance subrogation

There is some controversy in Brazil as to whether an insurer is bound by the arbitration agreement in the underlying contract into which it subrogates.

Subrogation, whether contractual under the terms of the insurance policy, or statutory under article 786 of the Brazilian Civil Code,71 amounts to the transfer (upon payment of the indemnity) of all of the insured's rights, obligations and actions against the third party causing damage to the insurer. ‘Actions' means the means by which the insured could have enforced whatever rights it had against that third party. Arbitration is one of the available actions.

In Brazil, subrogation amounts to the insurer ‘stepping into the shoes' of the insured and substituting it for the purpose of enforcing the insured's subsisting legal or contractual rights. As such, subrogation is not a source of new rights, obligations or actions. In other words, the insurer may neither be denied any benefit, action, privilege or guarantee previously pertaining to the insured; nor gain benefits, actions, privilege or guarantees not in the insured's possession.72

Arguments against subrogation into arbitration agreement

Those arguing against the insurer being bound by the arbi­tration agreement upon subrogation essentially contend that absent express consent to an arbitration agreement no one is obliged to arbitrate.

Arguments in favour of subrogation into arbitration agreement

By contrast, those who argue that the insurer is bound by the arbitration agreement state that in subrogation, the arbitration agreement is automatically transferred without the need for consent, on the basis that no new arbitration agreement is being created. The subrogee, by accepting subrogation, substitutes one of the original parties in a contract containing the arbitration agreement, as opposed to being added as a new party, so no new form of consent is required. Even if consent were necessary, that would have been expressly or impliedly given following the insurer's risk assessment and underwriting. In addition, there are multiple theories for consider­ation under which non-signatories can be bound to arbitration agreements.73

Decisions by Brazilian courts

This apparently straightforward principle of subrogation has been the source of confusion in Brazilian jurisprudence. State Court of Appeals, for many years, decided that the insurer was not bound to an arbitration agreement one of the following grounds:

  • express consent is a requirement for the validity of an arbi­tration agreement;
  • the insurer was not a party to the contract subject to subro­gation and cannot be bound by contractual terms that did not agree with; and
  • arbitration agreement is an intuitu personae contract and cannot be transferred to a third party.74

On more than one occasion, Brazilian courts have found these grounds to be without merit. The majority of the decisions, however, were not taken in the context of insurance subro­gation. For example, Brazilian courts have accepted that consent to arbitrate can be express or implied,75 and that non-signatories to an arbi­tration agreement may be bound to arbitration.76

There is one recent decision the Rio de Janeiro State Court of Appeal regarding subrogation in insurance contracts that has concluded that the insurer ‘steps into the shoes' of its insured by subrogating into a contract. The Court held that the insurer takes the legal position of the insured and becomes bound by the contractual terms previously agreed by the insured, including the arbitration agreement.77

The STJ has not yet decided the issue, but it is currently hearing an application for the recognition of a foreign award where the resisting party raises questions about the limits of insurance subrogation. The Federal Prosecution has opined in favour of recog­nition, and the judgment was suspended with a favourable vote from the reporting judge.78


The law applicable to the insurance contract of a Brazilian risk will be that of Brazil, save if the insurance is purchased outside of Brazil in the circumstances permitted in the legislation. If the insurance contract contains an arbitration agreement, in theory, it would be possible to choose a foreign law. We are aware that some argue that doing so would be in breach of public policy.

While reinsurance contracts may be governed by a foreign law if it includes an arbitration agreement, practice also shows that foreign law governed reinsurance contracts are becoming the  exception.79

Different sets of principles and rules within Brazilian law apply to an insurance contract and arbitration agreement depending on whether it has been negotiated and whether the insured fits the definition of consumer to attract the appli­cation of the Consumer Code. There is a plethora of secondary legis­lation which also applies. Reinsurance contracts are not consumer or adhesion contracts.

Regarding confidentiality, institutional rules range from providing absolute confidentiality to be silent on the topic. Insurers and reinsurers need to select the appropriate institutional rules and to provide any variation to confidentiality they may see fit based on the applicable law.

The fundamental weakness of arbitration in the context of insurance and reinsurance is that joinder and the participation of third parties are not as available as they are in the courts. There are many scenarios where an insurer or reinsurer may want to use one or more of these mechanisms. Theoretically, these problems may be addressed by drafting adequate arbi­tration agreements to cater for multi-party and multi-contract scenarios. In practice, however, despite being possible, these solutions are unrealistic save in the scenario where the insurance and reinsurance programme is being formulated for a large risk.

Subrogation into the arbitration agreement is a disputed topic in practice, but it should not be, because the theoretical basis for the proposition seems undeniable. We are likely to have guidance from the STJ on the issue soon.

Aside from the issue of joinder and third parties, arbitration is, for many reasons, the most suitable mechanism to resolve insurance and reinsurance disputes arising from large Brazilian risks.

One reason is that the Brazilian courts cannot effectively cope with the large number of pending cases with the result that disputes take many years to be resolved. The National Council of Justice estimates that it takes on average 52 months to obtain a first instance judgment, which is then subject to appeal.80 This ­scenario is likely to be commercially unacceptable to insurers and rein­surers not only because of the accrual of interest and ­monetary ­correction over the value of any indemnity payable, but also because the provisioning of the potential indemnities on the balance sheets represents a great opportunity cost.

Further, arbitration affords ample autonomy to parties. The autonomy to tailor the dispute resolution mechanism with respect to the seat of the arbitration, language, disclosure process, cross-examination and witness statements may prove extremely relevant for a fair outcome in fact sensitive cases, for example, where there are underwriting defences or coverage defences based on non-aggravation of the risk.

Our view is that the number of insurance and reinsurance arbitrations is set to increase in Brazil, and insureds, insurers, and reinsurers must be familiar with the critical legal issues that are particular to these contracts and any incorporated arbitration agreement.


1 Complementary Law n. 109/01.

2 Stiglitz, Rubén. Derecho de Seguros. 6ed. Tomo 1, Buenos Aires: La Ley, 2016, p. 1. Gaber, Max. The effect of D&O insurance on managerial risk taking. Cambridge: Intersentia, 2015, p.215.

3 Timm, Luciano et al.  International Commercial Arbitration in Brazil. Civil Procedure Review, v.1, n.2: 10-26, jul./set., 2010, p. 11.

4 Article 9 of Law Decree n. 4.657/42: In order to qualify and govern obligations, the law of the country in which they are constituted shall apply.

5 Article 435 of Law n. 10.406/02: The contract shall be deemed to have been entered into at the place where the offer was made.

6 Article 9, § 2º of Law Decree n. 4.657/42: The obligation resulting from the contract is deemed to be constituted in the place where the offeror resides.

7 Baptista, Luiz Olavo. Contratos Internacionais. São Paulo: Lex Magister, 2011, p. 50. See also Diniz, Maria Helena. Lei de Introdução ao Código Civil Brasileiro Interpretada. 11ª ed. São Paulo: Saraiva, 2005, p. 286, 287.

8 Article 19  of Complementary Law n. 126/07: They shall be exclusively celebrated in the country, except as provided in article 20 of this Complementary Law:

  I - compulsory insurance; and

  II - non-compulsory insurance entered into by persons residing in the country or by legal entities domiciled in the national territory, regardless of legal form, to cover risks in the country.

9 Complementary Law n. 126/07, CNSP Resolution no. 197/08, and SUSEP Circular no. 392 provide for circumstances and conditions in which insurance for Brazilian risks may be bought abroad. In these cases, a foreign law may govern the insurance contract.   

10 Article 1 of Law Decree 73/66: All operations of private insurance carried out in the Country will be subordinated to the present Law Decree.

11 Article 2, § 1º of Law n. 9.307/96: The parties may freely choose the rules of law that will be used in the arbitration, as long as their choice does not violate good morals and public policy.

12 De Araújo, Nadia. A Nova Lei de Arbitragem Brasileira e os Princípios Uniformes dos Contratantes Internacionais. Arbitragem - Lei Brasileira e Praxe Internacional. São Paulo: LTr, 1999, pp. 139-141. See also Carmen Tibúrcio. A Lei Aplicável às Arbitragens Internacionais. Reflexões sobre Arbitragem in memoriam do Desembargador Cláudio Vianna de Lima; Martins, Pedro Baptista (Coord.), São Paulo: LTr, 2002, pp. 92 -114. See also Carmona, Carlos Alberto. Arbitragem e Processo. Um Comentário à Lei 9.307/93. São Paulo: Atlas, 2009, p. 64. See also Carreira Alvim, José Edurado. Apontamentos sobre a Lei de Arbitragem: comentários à Lei 9.307/96. Rio de Janeiro: Forense, 2008, p.48.

13 Article 1 of Law n. 9.307/96: Those who are capable of entering into contracts may make use of arbitration to resolve conflicts regarding freely transferable property rights.

14 Article 17 of Law Decree n. 4.657/42: The laws, acts and judgments of another country, as well as any declarations of intention, will not be effective in Brazil when they offend national sovereignty, public order and morality.

       Article 2, § 1º, of Law n. 9.307/96: The parties may freely choose the rules of law that will be used in the arbitration, as long as their choice does not violate good morals and public policy.

15 Barroso, Luís Roberto. Contrato de Seguros para Riscos Localizados no Brasil. Legislação Aplicável e sua Interpretação. Revista de Direito da Procuradoria Geral da SUSESP, vol. 1, n. 1, 2002. Piza, Paulo Luiz. Notas sobre o direito brasileiro em matéria de contratação de seguros no exterior. Published by the Instituto Brasileiro de Direito do Seguro - IBDS.

16 Article 32, I of the Law no. 9.307/96.

17 Article V(2) of 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (b) The recognition or enforcement of the award would be contrary to the public policy of that country.

18 Article 38 of CNSP Resolution n. 168/07: Reinsurance contracts covering risks located in national territory shall include a clause determining the submission of any disputes to Brazilian law and jurisdiction, except in the event of an arbitration agreement, which shall comply with the legislation in force.

19 Article 38, as above.

20 Article 12 of Complementary Law n. 126/07: The insurance regulatory body shall establish the guidelines for reinsurance, retrocession and reinsurance brokerage operations and for the performance of the representative offices of the admitted reinsurers, subject to the provisions of this Complementary Law. Single paragraph: The insurance regulatory body may establish: I - mandatory clauses of contractual instruments relating to reinsurance and retrocession operations.

21 Article 2, § 1º of Law n. 9.307/96 affords broad party autonomy to tailor the arbitration to the intention of the parties, including the selection of the seat abroad. Article 38 of CNSP Resolution no. 168 of 2007 allows the parties to reinsurance contracts to agree to arbitrate; hence it incorporates that mentioned ample party autonomy.

22 English differentiated consumer and commercial insurance by enacting the Consumer Insurance Act 2012 and Insurance Act 2015.

23 Forgioni, Paula. Contratos Empresariais. Teoria Geral e Aplicação. 2ed. São Paulo, Revista dos Tribunais, 2016, pp. 46-48, 65-66.

24 Da Silva Pereira, Caio Mario. Instituições de Direito Civil. Contratos. Vol III. 20ªed. São Paulo: Forense, 2016, p. 54. Ulhoa Coelho, Fabio. Curso de Direito Civil. 4ed. São Paulo: Saraiva, 2010, pp.66-69.

25 Article 4 of Law n. 9.307/96: An arbitration clause is an agreement by which the parties to a contract undertake to submit to arbitration any disputes that might arise with respect to that contract. § 1º An arbitration clause will be in writing, and it may be inserted into the contract itself or into a separate document to which it refers.

26 Article 44 of SUSEP Circular n. 256/04.

27 Article 54 of the Consumer Code defines a contract of adhesion. Although the Consumer Code applies only to consumer contractual relationships, Brazilian law does not address the definition of contracts of adhesion in other codes or norms. Hence, the courts have relied on the definition from the Consumer Code to deal with contract of adhesion in commercial contractual relationships. "Article 54 - Adhesion contract is one in which the clauses have been approved by the competent authority or established unilaterally by the supplier of products or services, without the consumer being able to discuss or substantially modify its content.

28 Article 423 of Law n. 10.406/02: When there are ambiguous or contradictory clauses in the contract of adhesion, the interpretation most favourable to the adherent must be adopted.

29 Article 4, § 2º of the Law no. 9.307/96: In adhesion contracts, an arbitration clause will only be valid if the adhering party takes the initiative to file an arbitration request or if it expressly agrees with its commencement, as long as it is in an attached written document or in boldface type, with a signature or special approval for that clause

30 CZ6 Empreeemdimento Comerciais Ltda vs Davdson Roberto de Faria Meira Junior. Superior Court of Justice. Resp no. 16941-RJ. See also General Electric do Brasil S.A. vs Tecnimed Paramedics Eletromedicina Ltda. Superior Court of Justice. Resp n. 1.015.194-RS.

31 Sulamerica CIA Nacional de Seguros S.A. and others v Enesa Engenharia S.A. and others [2012] EWCA Civ 638.

32 Energia Sustentável do Brasil S.A. v Sul América Companhia Nacional de Seguros S A. São Paulo Court of Appeal. Interlocutory Appeal No. 0304979-49.2011.8.26.0000.

33 Law no. 8.078/90.

34 Article 3 of the Law no. 8.078/90: Supplier is any natural or legal person, public or private, national or foreign, as well as depersonalized entities, which carry out production, assembly, creation, construction, transformation, import, export, distribution or sale of products or services. § 2º -Service is any activity rendered in the consumer market, in exchange of payment, including those of a banking, financial, credit and security nature, except for those arising from labour relations.

35 Vivendas Comercio Veiculos Ltda v Allianz Seguros S.A. Superior Court of Justice. REsp 1.352.419-SP. 

36 EletroPaulo Metroplolitana Eletricidade de São Paulo S.A vs Ernesto Valdemar Morais. Superior Court of Justice.  AREsp 164.164. See also: Yara Ongaratto e Companhia Ltda vs Itaú Seguros S.A. Superior Court of Justice. REsp no. 1.176.019-RS. In this case, the court reasoned that a transport company that buys insurance to cover risks relating to the cargo of a third-party cannot be defined as a consumer. However, if this transport company buys insurance to cover risks relating to its fleet of trucks or damages caused by third-parties, the transporting company falls within the legal definition of consumer.

37 Vivendas Comercio de Veiculos Ltda v Allianz Seguros S.A. Superior Court of Justice. REsp 1.352.419-SP. "There is a consumer relationship in a corporate insurance if the legal entity enters [into the agreement] aiming to safeguard its own assets (personal benefit), without incorporating it to the products or services it offers, even if that is to protect the supplies it uses in its commercial activity, because it will be the final beneficiary of the insurance services. A different situation would be if the insurance were contracted to cover risks of clients, event in which [the insurance] would be part of the services rendered by the legal entity, which would configure an intermediary consumption, not protected by the Consumer Code."

38 Article 27 of the Law n. 8.078/90: It prescribes in five years the claim for damages caused by defective product or service, as provided in Section II of this Chapter, and the time begins to count from the moment on which the consumer became aware of the damage and of who caused it.

39 Article 6, VIII of the Law n. 8.078/90: Facilitation to present his or her case, including the reversal of the burden of proof, in his or her favour, in the litigation, when, at the discretion of the judge, the allegation is probable or when the consumer is a weaker party, according to the ordinary rules of experience.

40 Article 47 of the Law n. 8.078/90: Contractual clause will be interpreted in a more favourable way to the consumer.

41 Article 51 of the Law n. 8.078/90: It provides for several circumstances in which contractual clauses will be held null and void.

42 Article 101, I of the Law n. 8.078/90:  In cases of civil liability of the supplier of products and services, without prejudice to the provisions of Chapters I and II of this title, the following norms shall be observed: I - the lawsuit can be filed at the courts at the place where the claimant resides.

43 Article 51 of the Law n. 8.078/90: The following clauses relating to the supply of products or services are null and void: VII - clauses determining the compulsory use of arbitration.

44 José Benedito dos Santos vs MRV Serviçosde Engenharia Ltda. Superior Court of Justice. REsp no. 1.189.050-SP.

45 Some argue that a reinsurance contract is a type of insurance contract, and therefore also a "special" contract.

46 Article 66 of the Projeto de Lei no Senado n. 477/03. Alternative dispute resolution mechanisms shall not be agreed by adhesion to standard-form clauses, it will demand a signed instrument by the parties, and it will take place in Brazil, subject to the procedure and rules of Brazilian law.

47 Article 13, § 6º of the Law n. 9.307/96: In the performance of their duties, the arbitrators shall proceed with impartiality, independence, competence, diligence and discretion.

48 Article 189, IV of the Law no. 13.105/15: The procedural acts are public, but the following cases will be processed in secrecy: IV - the ones dealing with arbitration, including enforcement of the arbitral letter, provided that the confidentiality agreed in the arbitration is proved before the court.

49 The Brazilian Federal public administration is divided into direct and indirect administration, per Law Decree 200/67. Put simply, the direct public administration includes the President´s Office, ministries and special secretariats. The indirect public administration is composed of organisations that, with their own legal personality, carry out State functions including agencies, foundations, state-owned and mixed-capital enterprises. 

50 Bandeira de Mello, Celso Antônio. Curso de Direito Administrativo. 31ed. São Paulo: Malheiros, 2014, p. 117.

51 Born, Gary. International Arbitration: Law and Practice. 2nd ed. Alphen: Kluwer: 2016, p. 13

52 The CAM-CCBC´s rules, for example, determine that in arbitrations involving the direct public administration: (i) the parties shall address in the terms of reference which information and documents should be made public; (ii) the tribunal shall decide requests of confidentiality; (iii) the institution can make available on its website (as it does) the name of the parties and date on which the arbitration commenced; and (iv) only parties and their representatives can attend hearings.   

53 Carmona, Carlos Alberto. Arbitragem e Administração Pública - primeiras reflexões sobre a arbitragem envolvendo a administração pública. Revista Brasileira de Arbitragem. No.51. Alphen: Kluwer: 2016, p 20.

54 Burns, Andrew and Edelman QC, Colin. The Law of Reinsurance. 2ed. Oxford: Oxford University Press, 2013, pp. 117-128.

55 Article 30.1 of the LCIA Arbitration Rules:  The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.

56 Article 14.1 of the CAM-CCBC Arbitration Rules: The arbitration proceedings are confidential, except for the situations provided for in statute or by express agreement of the parties or in light of the need to protect the right of a party involved in the arbitration.

57 Article 768 of the Law n. 10.406/02: The insured will lose the right to cover of the loss if he or she intentionally aggravates the risk under the policy.

58 Article 55 of the Law n. 13.105/15: Two or more actions are connected when they deal with the same claims or cause of action. § 1º:  The related lawsuits shall be brought together for a joint decision, unless one of them has already been decided.

59 Article 119 of the Law n. 13.105/15: If a case between two or more persons is pending, the third party who has a legal interest in the outcome of the case may intervene in the proceedings to assist one of the parties.

60 Article 125 of the Law n. 13.105/15: Any party is allowed to request the joinder of: II - those who are obliged by law or by contract, to indemnify, in reimbursement claims, the damage of the party that did not succeed in the court proceedings.

61 Alvim, Arruda. Manual de Direito Processual Civil: Teoria Geral do Processo e Processo de Conhecimento. 17ª ed. São Paulo: RT, 2017, p.481, 482.

62 Neves, Daniel Amorim Assumpcão. Manual de Direito Processual Civil. 8 ed. São Paulo: Jus Podium. 2016, p. 267

63 Borne, Gary. International Arbitration: Law and Practice 2eded. Alphen: Kluwer: 2016, p. 228.

64 ONeill, P.T. and Woloniecki, J.W. The Law of Reinsurance. 2ed, London: Thompson, 2004, p.792.

65 Article 7(1) of the ICC Arbitration Rules: A party wishing to join an additional party to the arbitration shall submit its request for arbitration against the additional party (the "Request for Joinder") to the Secretariat. The date on which the Request for Joinder is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of arbitration against the additional party. Any such joinder shall be subject to the provisions of Articles 6(3)-6(7) and 9. No additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. The Secretariat may fix a time limit for the submission of a Request for Joinder.

66 ICC Rules Article 6(3): If any party against which a claim has been made does not submit an Answer, or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement or concerning whether all of the claims made in the arbitration may be determined together in a single arbitration, the arbitration shall proceed and any question of jurisdiction or of whether the claims may be determined together in that arbitration shall be decided directly by the arbitral tribunal, unless the Secretary General refers the matter to the Court for its decision pursuant to Article 6(4).

Article 6(4): In all cases referred to the Court under Article 6(3), the Court shall decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist. In particular:

  (i) where there are more than two parties to the arbitration, the arbitration shall proceed between those of the parties, including any additional parties joined pursuant to Article 7, with respect to which the Court is prima facie satisfied that an arbitration agreement under the Rules that binds them all may exist; and

  (ii) where claims pursuant to Article 9 are made under more than one arbitration agreement, the arbitration shall proceed as to those claims with respect to which the Court is prima facie satisfied (a) that the arbitration agreements under which those claims are made may be compatible, and (b) that all parties to the arbitration may have agreed that those claims can be determined together in a single arbitration.

  The Court's decision pursuant to Article 6(4) is without prejudice to the admissibility or merits of any party's plea or pleas.

67 Fry, Jason and Greenberg, Simon and Mazza, Francesca. The Secretariat's Guide to ICC Arbitration. Paris, ICC Publication 729, 2012, p. 94.

68 Turner, Peter and Mohatashami, Reza. A Guide to the LCIA Arbitration Rules. 1ª ed.Oxford, Oxford University Press, 2009, p. 148.

69 Article 10 of the ICC Arbitration Rules. 

70 Article 4.20 of the CAM-CCCB Arbitration Rules: If a request for the commencement of an Arbitration is submitted and has the same purpose or same cause of action as an arbitration currently proceeding at the CAM/CCBC or if the same parties and causes of action are present in two arbitrations, but the subject matter of one, because it is broader, includes that of the others, the President of the CAM/CCBC can, upon request of the parties, up to the time the Terms of Reference are signed, order joinder of the proceedings.

LCIA Rules. Article 21.1 (x) to order, with the approval of the LCIA Court, the consolidation of the arbitration with one or more other arbitrations subject to the LCIA Rules commenced under the same arbitration agreement or any compatible arbitration agreement(s) between the same disputing parties, provided that no arbitral tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such tribunal(s) is(are) composed of the same arbitrators; and

71 Article 786 of the Law n. 10.406/02:  Upon payment of the indemnification, the insurer is subrogated, up to the amount of the indemnification paid, in rights and actions that the insured has against the person who has caused the damage.

72 Chubb do Brasil Companhia de Seguros v Yassuda Seguros S.A. Superior Court of Justice. REsp n. 982.492-SP. See also: Daniel Jun Kuwatomi Takematsu v Porto Seguro de Seguros Gerais. Superior Court of Justice. AgRg no Agravo em REsp n. 598.619-SP. See also: Santa Cruz Seguros S.A. v Itaipark Estacionamento Ltda. Superior Court of Justice. REsp 174.353-RJ.

73 See Brekoulakis, Stavros. Third Party in International Commercial Arbitration. 1ª ed. Oxford: Oxford University Press, 2010.

74 Itaú Seguros S/A v Aliança Navegação e Logística Ltda. Court of Appeal of São Paulo. Apelação n. 0000254-21.2010.8.26.0002. Alstom Power Sweden AB v Itaú Seguros S.A. Court of Appeal of São Paulo. Agravo de Instrumento no. 1.257.807-7. Unibanco AIG Seguros e Previdência S.A. v Panalpina Ltda. Court of Appeal of São Paulo. Apelação n. 990.09.373821-0.

75 Marcelo Katsumi Imaizumi e outro v Jin Jin Franchising - Eireli. Court of Appeal of São Paulo. Apelação no. 4022778-88.2013.8.26.0405. GP Capital Partners V e outros v Fernando Correa Soares e outros. Court of Appeal of São Paulo. Apelação n. 0035404-55.2013.8.26.0100.  See also GP Capital Partners V e outros v Fernando Correa Soares e outros. Court of Appeal of São Paulo. Apelação n. 0035404-55.2013.8.26.0100. 

76 Trelleborg do Brasil Ltda. e outra v Anel Empreendimentos Participações e Agropecuária Ltda. Court of Appeal of São Paulo. Apelação n. 267.450-4/6-00 (in this case, the court applied the group of companies theory to bind the non-signatory to arbitration). See also: Haakon Lorentzen e outros v Hugo Pedro de Figueiredo. Superior Court of Justice. Resp n. 1.569.422-RJ. 

77 ACE Seguros S/A vs Man Diesel e Turbo do Brasil Ltda.  Rio de Janeiro Court of Appeal. Apelação Cível nº 0160745-58.2014.8.19.0001.

78 The Superior Court of Justice is expected to decide the issue for the first time in the SEC no. 14.930-US.

79 Underwriting guidelines of reinsurance companies provide for Brazilian law to apply. Also, there are many complex issues that arise if the contract of insurance and reinsurance are not back to back to back as regards the applicable law, as could be seen in Wasa v Lexington [2010] 1 AC 180 and Vesta v Butcher [1989] 1 AC 852.

80 Conselho Nacional de Justiça (CNJ). Relatório Justiça em Números. Brazil, 2016

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