In a decision issued in September 2016, the Superior Tribunal of Justice (STJ) – the highest court for non-constitutional matters, with responsibility for harmonizing interpretation of federal laws by the state and regional federal courts of appeal – analyzed (among other matters) the validity of arbitration clauses in franchise agreements in Brazil, in Special Appeal no. 1.602.076-SP.

In the original suit, the franchisee sued to terminate the franchise agreement and to obtain refund of the payments made to the franchisor, plus application of a fine.

In its preliminary (procedural) arguments, the franchisor argued the incompetence of the judiciary to hear the case because of the arbitration clause included in the agreement. The lower court rejected this argument, and the franchisor submitted an interlocutory appeal to the state appellate court, which overturned that decision and held the arbitration clause to be valid, with consequent dismissal of the case without prejudice, due to absolute incompetence of the state courts.

The plaintiff/franchisee then filed a special appeal to the STJ, which decided the arbitration clause is null due to absence of the legal requirements for validity established in Article 4, § 2, of Law 9,307/1996 (Arbitration Law). That article establishes that arbitration clauses in adhesion contracts are only effective if the adherent takes the initiative to file for arbitration, or expressly consents to participate.

Although the majority doctrine from legal scholars and jurisprudence from the courts take the position that franchise agreements, by their nature, are not subject to the Consumer Defense Code (Law 8,078/990), which was corroborated in the decision in question, the appellate panel’s holding was based on subjection of franchise agreements to the Arbitration Law, because they are adhesion contracts. In other words, their texts are determined unilaterally by the franchisor, with no possibility of negotiation between the parties. In this respect, the decision followed the position that all adhesion contracts, even those that do not involve relations between consumers and suppliers, must observe the provision of the Arbitration Law, including franchise agreements, since the function of that article is to benefit the economically weaker party, to avoid imposition of arbitration as a mechanism to resolve disputes.

In her voting opinion, the reporting judge observed the priority of the arbitral tribunal to decide on its own competence, including the validity of the arbitration clause. However, she stressed that this rule has exceptions, to better fit situations in gray areas. Hence, the decision held that the courts can nullify arbitration clauses when this involves a perceived disadvantage for the weaker party to an adhesion contract.

The STJ’s decision is important by corroborating the position that franchise agreements under Brazilian law are not subject to the rules governing consumer relations, but are still considered to be adhesion contracts, and as such are subject to the limits of the Arbitration Law regarding validity of arbitration clauses.

For further information, contact the author:

Paula Mena Barreto
T: +55 21 3262 3028