Can I freely choose the governing law for an international contract?

In Brazil, party autonomy for choice of law is limited. Article 9 of LINDB provides that obligations are governed by the law of the country where they were formed. However, in contracts with arbitration clauses, the Arbitration Act (Law No. 9,307/96) expressly allows choice of governing law. STJ case law has evolved toward accepting choice of law in arm-length international contracts.

What is the CISG and when does it apply in Brazil?

The CISG (United Nations Convention on Contracts for the International Sale of Goods) is the primary uniform law instrument in international trade. In force in Brazil since April 1, 2014 (Decree No. 8,327/2014), it automatically applies to sales contracts between parties established in different signatory countries, unless expressly excluded by the parties.

What is the difference between arbitration and mediation in international contracts?

Arbitration produces a binding and enforceable award, regulated in Brazil by Law No. 9,307/96. Mediation seeks consensual agreement between parties, with the mediator having no decisional power. In complex international contracts, escalation clauses are common: mandatory mediation as a preliminary step, followed by arbitration if no agreement is reached.

How do I enforce a foreign arbitral award in Brazil?

Foreign arbitral awards must be recognized by the STJ to be enforceable in Brazil, per Article 35 of the Arbitration Act and the 1958 New York Convention (Decree No. 4,311/2002). The STJ reviews formal requirements (jurisdiction, due process, public order) without reexamining the merits. Average recognition takes 6 to 12 months.

International Contracts: Applicable Law and Arbitration

Executive Summary

International contracts — those with a foreign element (parties in different countries, cross-border performance, international subject matter) — require special attention to governing law, competent jurisdiction, and dispute resolution mechanisms. In Brazil, the regulatory framework includes LINDB (Decree-Law No. 4,657/1942), the CISG, the Arbitration Act (Law No. 9,307/1996), and Incoterms 2020. This guide covers essential clauses, governing law, dispute mechanisms, and enforcement of foreign judgments.

Our international law and business law teams assist with drafting and reviewing international contracts.

Governing Law: The Brazilian Framework

LINDB — general rule

Article 9 of LINDB establishes the main rule: obligations are governed by the law of the country where they were formed. For contractual obligations, the obligation is deemed formed at the location of the offeror’s residence (Article 9, Section 2).

Party autonomy

The question of party autonomy in choosing governing law is among the most debated in Brazilian private international law:

Traditional position: Article 9 of LINDB is a mandatory rule that does not allow the parties to choose governing law
Modern position: in arm’s-length international contracts (without a weaker party), party autonomy should be respected, per STJ trends
In arbitration: Law No. 9,307/96, Article 2, expressly allows parties to choose applicable rules of law, including foreign law

Limits to autonomy

Even when accepted, the choice of law cannot:

Violate Brazilian public order (Article 17, LINDB)
Override mandatory application rules (lois de police) — e.g., labor, consumer, antitrust law
Prejudice third parties acting in good faith

The CISG — Vienna Sales Convention

What it is

The United Nations Convention on Contracts for the International Sale of Goods (CISG, Vienna, 1980) is the most widely adopted treaty in international trade, with 97 Contracting States. In Brazil, it has been in force since April 1, 2014, via Decree No. 8,327/2014.

When it applies

The CISG automatically applies to contracts for the sale of goods when:

The parties are established in different Contracting States (Article 1(1)(a)), or
The rules of private international law lead to the application of the law of a Contracting State (Article 1(1)(b))

What it does NOT cover

The CISG does not apply to:

Consumer sales (personal, family, or household use)
Sales by auction or execution
Stocks, shares, and currency
Ships, vessels, and aircraft
Electricity
Tort liability
Questions of contract validity or property

Opting out of the CISG

Parties may exclude the CISG in whole or in part through an express contractual clause: “This contract shall be governed by the laws of [country], excluding the CISG.” The exclusion must be unequivocal — mere reference to the law of a Contracting State does not exclude the CISG.

Practical aspects

The CISG provides rules on contract formation (offer and acceptance), seller’s obligations (delivery, conformity), buyer’s obligations (payment, taking delivery), remedies (avoidance, price reduction, damages), and transfer of risk. It fills gaps with its general principles (Article 7(2)) and, subsidiarily, with the applicable law under private international law.

Incoterms 2020

The International Commercial Terms (Incoterms), published by the International Chamber of Commerce (ICC), define buyer and seller responsibilities in international goods transactions.

The 11 Incoterms 2020

Group	Term	Summary
E	EXW	Ex Works — buyer’s risk from the factory
F	FCA, FAS, FOB	Main carriage not paid by seller
C	CFR, CIF, CPT, CIP	Main carriage paid by seller
D	DAP, DPU, DDP	Delivery at destination — seller’s risk to destination

Most used Incoterms in Brazil

FOB (Free on Board): seller delivers on board the vessel at the port of shipment; most used in Brazilian maritime exports
CIF (Cost, Insurance and Freight): seller pays freight and insurance to destination port; basis for customs value calculation in Brazilian imports
FCA (Free Carrier): seller delivers to the carrier nominated by the buyer; flexible for multimodal transport
DDP (Delivered Duty Paid): seller assumes all risks and costs to final destination, including import duties

Practical considerations

Incoterms are not law — they are contractual terms incorporated by reference. They must be expressly cited in the contract (“FOB Santos, Incoterms 2020”). They do not regulate transfer of property, only risk and transport costs.

Essential Clauses in International Contracts

1. Governing law clause

Defines which legal system governs the contract. Example: “This Agreement shall be governed by and construed in accordance with the laws of Brazil.”

2. Jurisdiction or arbitration clause

Defines the competent forum for dispute resolution. May be a judicial court (choice of forum clause) or an arbitral tribunal (arbitration clause).

3. Language clause

In bilingual contracts, defines which version prevails in case of discrepancy.

4. Currency and exchange clause

Defines the payment currency, conversion date, and which party bears exchange rate risk.

5. Force majeure clause

Defines extraordinary events that exclude liability. Should be detailed — generic clauses are frequently challenged.

6. Confidentiality clause (NDA)

Protects sensitive information exchanged during and after the contract term.

7. Hardship clause

Allows renegotiation when unforeseen circumstances substantially alter the contractual balance. Distinct from force majeure, which renders performance impossible.

International Arbitration

Brazilian Arbitration Act

Law No. 9,307/1996, amended by Law No. 13,129/2015, is one of the most modern arbitration statutes in Latin America. Key features:

Arbitral awards have the force of judicial enforcement titles (Article 31)
No appeal to the judiciary on the merits
Allows choice of applicable rules, including non-state law (lex mercatoria, UNIDROIT Principles)
Allows arbitration in law or equity

Major arbitration institutions

ICC (International Chamber of Commerce, Paris): most widely used globally
CAM-CCBC (Market Arbitration Chamber, São Paulo): leading institution in Brazil
CIESP/FIESP: tradition in industrial and commercial disputes
LCIA (London Court of International Arbitration)
SIAC (Singapore International Arbitration Centre)

Model arbitration clause

The arbitration clause should be clear and complete:

“Any dispute arising out of this contract shall be resolved by arbitration administered by the ICC in accordance with its Arbitration Rules in force. The arbitral tribunal shall consist of three arbitrators. The seat of arbitration shall be São Paulo, Brazil. The language of arbitration shall be English. The law governing the merits shall be Brazilian law.”

Arbitration costs

International arbitration involves significant costs: institutional fees, arbitrator fees, expert and attorney costs. At the ICC, disputes of US$ 1 million generate administrative costs of approximately US$ 50-80 thousand. The advantage is speed (12-18 months vs. 5-10 years in court) and global enforceability.

Enforcement of Foreign Judgments and Awards

Foreign court judgments

Must be recognized by the STJ (Article 105, I, “i”, Federal Constitution; Articles 960-965, CPC/2015). Requirements: finality, valid service, apostille/consular authentication, sworn translation, no offense to public order.

Foreign arbitral awards

Regulated by the 1958 New York Convention, ratified by Brazil in 2002 (Decree No. 4,311/2002). Also recognized by the STJ, with a stronger presumption of validity than court judgments. The STJ rarely refuses recognition of foreign arbitral awards.

The 1958 New York Convention

The primary instrument for enforcing arbitral awards, ratified by 172 countries. Grounds for refusal are limited (Article V): incapacity of parties, lack of notification, scope exceeded, irregular tribunal composition, award not yet binding, or contrary to public order.

UNIDROIT Principles and Lex Mercatoria

UNIDROIT Principles

The UNIDROIT Principles of International Commercial Contracts (latest edition: 2016) are soft law that parties may elect as governing rules in arbitration. They cover formation, validity, interpretation, content, performance, and termination of contracts.

Lex Mercatoria

The body of international trade customs and practices recognized as a normative source in arbitration. Includes Incoterms, UCP 600 (documentary credits), UNIDROIT Principles, and consolidated sectoral practices.

Applicable Legislation

LINDB (Decree-Law No. 4,657/1942): governing law, qualification of obligations
Law No. 9,307/1996: Arbitration Act (amended by Law No. 13,129/2015)
CISG (Decree No. 8,327/2014): Vienna Convention on international sale of goods
1958 New York Convention (Decree No. 4,311/2002): enforcement of arbitral awards
CPC/2015, Articles 960-965: recognition of foreign judgments
Incoterms 2020: ICC international commercial terms

Next Steps

If your company negotiates, drafts, or enforces international contracts, contact our international law and business law teams. We offer assistance with contract drafting, choice of law, arbitration clauses, and enforcement of foreign judgments.

For international trade, international taxation, or document validation matters in the contractual context, explore our specialized guides.

This article is for informational purposes only and does not constitute legal advice. Each case has specific circumstances that should be analyzed by a qualified attorney.