Everything you need to know about recognition of contracts concluded abroad

International trade has expanded more and more, and with this, entering into contracts between companies in different countries has become a common practice. 

However, when a dispute arises out of such contracts, the issue of recognition can become a problem.

The recognition of a contract made abroad is the legal validation of the agreement in different jurisdictions. It is essential to ensure that the parties involved can enjoy the rights and obligations provided for in the contract, regardless of the country in which they are located.

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Author: Gustavo Tenório Campos Semaan

Difference between International contracts celebrated abroad and those celebrated in Brazil

The difference between contracts celebrated abroad by Brazilians and foreign contracts celebrated in Brazil is related to the place where the contract was celebrated and where it will be executed, as well as the nationality of the parties involved.

When a Brazilian enters into a contract abroad, it may be governed by the laws of the country in which it was entered into, as long as it complies with Brazilian law and the rules of international law.

If there is a conflict between Brazilian laws and the laws of the country where the contract was made, Brazilian rules may prevail, especially if the contract has effects within the national territory.

When a foreigner enters into a contract in Brazil, the laws that govern the contract will be those of the Brazilian legal system. This contract may be executed within the national territory, but the recognition and homologation of the foreign agreement may be necessary in some cases, depending on the laws of the country of origin.

The importance of recognizing a foreign contract in Brazil

It’s always important to recognize a foreign contract in Brazil because it guarantees the validity and effectiveness of this agreement in the national territory. Without recognition, the contract cannot be enforced or collected in the country, which can generate losses for the parties involved.

With the recognition of the foreign contract, the Brazilian Judiciary guarantees that the agreement was made by the laws and regulations of the country of origin, as well as verifies that the agreement is not contrary to Brazilian law.

This ensures greater legal security for the parties involved since it avoids the possibility that a contract entered illegally or fraudulently is executed in the country.

In addition, the foreign contract is also important to promote commercial relations between the countries. With this, companies can have more security to enter into international agreements, which can contribute to the economic development of the country.

The main conventions governing the Recognition of International Contracts

International conventions are agreements established between countries with the aim of harmonizing and standardizing the rules governing different areas of law. 

The three main conventions we have are:

• Vienna Convention on Contracts for the International Sale of Goods;
• The Hague Convention on the Law Applicable to Contracts for the International Sale of Goods;
• New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards;
• Vienna Convention on the Law of Treaties.

The Vienna Convention on Contracts for the International Sale of Goods defines the obligations and responsibilities of the parties to contracts for the sale of goods and establishes clear rules for the resolution of disputes arising from these agreements.

The Hague Convention on the Law Applicable to Contracts for the International Sale of Goods determines which law is to be used in contracts for the international sale of goods and establishes the rules for choosing the applicable law when there is a conflict between different legislations.

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Vienna Convention on the Law of Treaties deal with important rules for the recognition and validation of international contracts in different countries.

Who can request Recognition of an agreement made abroad

Any person or company that has entered into a contract abroad and wants to perform it in Brazil can request the recognition of this agreement.

This includes companies that have entered into contracts to supply products or services with foreign partners and individuals who have made agreements to provide services abroad, among others.

To request recognition of a foreign contract, it’s necessary that the interested party seeks legal counsel specialized in international law and initiates legal proceedings before the Brazilian Judiciary.

It’s important to present documents that prove the existence and validity of the contract, in addition to demonstrating that the agreement was made by the laws of the country of origin.

Steps for the Recognition of a foreign contract in Brazil

The recognition of a foreign contract in Brazil is done through a legal process that aims to give validity to an agreement made between foreign parties. 

This recognition is important because it allows the contract to be executed and charged within Brazilian territory.

The steps in the recognition of a foreign contract in Brazil include:

• The first step is to file a request for recognition of the contract with the Brazilian Judiciary. This application must contain information such as the parties involved, the subject matter of the contract, the clauses agreed upon, the applicable law, and proof that the contract is valid and was made by the laws of the country of origin;
• In the second step, The judge in charge of the case will review the request and verify that all necessary information has been provided;
• After reviewing the request, the judge will publish a notice stating that the contract has been submitted and give a time limit for the parties to express themselves if they wish to contest the recognition of the agreement;
• If there is no challenge by the parties involved, the judge will schedule an evidentiary hearing to gather more information and clarification about the contract; 
• In the end, after reviewing all the information presented, the judge will make a final decision on the recognition of the foreign contract. If the contract is recognized, the parties will be able to enforce and collect on it in Brazil.

Since in some cases this process can be complex and time-consuming, it’s important to count on the assistance of a specialized international law firm, such as Koetz Advocacia, to conduct this process.

How to resolve disputes over foreign contracts

When disputes related to international contracts occur, there are generally two possibilities to solve them: the first is to resort to national courts, while the second is to use international dispute resolution mechanisms, such as arbitration.

In the case of national courts, the competence to adjudicate disputes will depend on the jurisdiction rules of the countries involved. Generally, the courts of the country in which the contract was signed, or the courts of the country in which the breach of contract occurred, will have jurisdiction to hear the dispute. However, this may vary depending on local laws and the provisions of the contract itself.

International arbitration is an increasingly popular option for resolving disputes arising from international contracts. 

In this case, the parties involved choose one or more arbitrators to judge the dispute, in a more flexible and less formal process than national courts. 

The decisions made by an international arbitral tribunal are recognized in many countries, facilitating the resolution of transnational disputes.

In short, it is important to carefully analyze the options available for resolving disputes arising from international contracts, taking into account the jurisdictional rules of the countries involved and the particularities of the contract itself.