Cross-Border Contracts Between Brazil and Your Country

When you sign a contract with a Brazilian company or individual, you’re not just agreeing to terms—you’re entering a legal framework that spans two different legal systems. This guide explains how to protect yourself through proper contract structure, governing law selection, and dispute resolution mechanisms. See also arbitration and mediation in Brazil for dispute resolution options, or international arbitration for cross-border enforcement.

Why Governing Law Matters

A contract between an American investor and a Brazilian supplier needs a “governing law” clause that specifies which country’s laws apply if things go wrong. Under Article 9 of the Lei de Introdução às Normas do Direito Brasileiro (LINDB), this is not optional — it’s the difference between enforcing your contract through courts in São Paulo or New York.

“The single most expensive mistake in cross-border contracting with Brazil is omitting an arbitration clause. Without one, you are committing to 5+ years of Portuguese-language litigation in a system that was not designed for international commercial disputes. An ICC or UNCITRAL clause costs nothing to include and can save millions in enforcement costs.” — Zachariah Zagol, Founding Partner, OAB/SP 351.356

Key principle: The law you choose determines:

• How courts interpret ambiguous terms
• What remedies you can pursue (damages, specific performance, injunctions)
• Limitation periods (how long you have to sue)
• Currency and exchange rate handling
• What counts as a valid contract modification

Most cross-border deals choose either:

1. Brazilian law (if the obligation happens in Brazil or involves Brazilian assets)
2. English law (neutral, internationally recognized)
3. New York law (preferred by US investors, most familiar)
4. Neutral arbitration rules (ICC or UNCITRAL)

Drafting for Multiple Languages

Brazilian contracts are legally valid in Portuguese, English, or Spanish—but mismatches between versions create disputes. If your contract says “the Portuguese version controls,” any ambiguity will be resolved by a Portuguese-speaking judge or arbitrator, which favors the Brazilian party.

Best practice:

• Use a single authoritative language (typically English for international deals)
• Have a certified translation, but state clearly: “The English version is the authoritative version”
• Avoid idioms and colloquialisms that don’t translate
• Define key terms in a glossary to prevent translation disputes

Dispute Resolution: Litigation vs. Arbitration

Litigation (Brazilian Courts)

If you sue in Brazil, your case goes through Poder Judiciário (state or federal court). Here’s what to expect:

• Timeline: 3–5 years for a first instance decision, potentially 2–3 more years on appeal
• Language: Portuguese mandatory in pleadings and oral argument
• Jurisdiction: Federal courts handle federal questions (Central Bank regulations, cross-border trade) and contracts exceeding 75 UFIR (~R$1,500). State courts handle smaller disputes.
• Enforcement: A Brazilian judgment is valid there, but enforcing it in your country requires exequatur (homologation) through that country’s courts

Drawback: Brazilian judges often lack expertise in cross-border commercial disputes; trials are slower than US litigation.

Arbitration (Preferred for Cross-Border Deals)

Arbitration means both parties agree to submit disputes to private arbitrators instead of courts. Brazil is a signatory to the New York Convention (1958), ratified via Decree 4.311/2002, meaning Brazilian courts will enforce foreign arbitration awards almost automatically. The STJ has consistently upheld this enforcement framework in its jurisprudence.

Advantages:

• Speed: Award issued in 18–24 months vs. 5+ years in court
• Privacy: Proceedings are confidential; disputes don’t become public record
• Expertise: You choose arbitrators with Brazil law + your industry expertise
• Enforcement: A foreign arbitration award is enforced in Brazil with minimal review; a Brazilian court judgment is hard to enforce abroad

Popular arbitration institutions for Brazil:

• ICC (International Chamber of Commerce) – neutral, expensive (~€50K–100K fees)
• UNCITRAL (United Nations) – rules-based, cheaper
• CAM-CCBC (Brazilian Chamber for Arbitration) – Brazil-based, growing credibility
• LCIA (London) – English law disputes, Europe-focused

"Any dispute arising out of this Agreement
shall be settled by arbitration under UNCITRAL
Rules, with one arbitrator, in English, seated
in São Paulo, Brazil, with enforcement under
the New York Convention (1958)."

Currency & Exchange Rate Clauses

Brazil has a floating exchange rate; the Brazilian Real (BRL) fluctuates against the US Dollar daily. If your contract prices goods in BRL but you’re based in the US, exchange volatility can wipe out your margin—or bankrupt a Brazilian supplier.

Three approaches:

1. Currency Lock: “All payments in USD; buyer bears exchange risk”

   • Protects seller, may make you less competitive

2. Hard Currency Pricing: “Price is USD 100,000; equivalent in BRL at Central Bank rate on invoice date”

   • Neutral, requires Central Bank rate definition

3. Escalation Clause: “If BRL weakens >10% against USD, price adjusts by 50% of excess movement”

   • Complex, requires monthly tracking, common in long-term contracts

Brazil’s regulations: The Central Bank (Banco Central do Brasil) publishes the official exchange rate (taxa de câmbio) daily. Most contracts reference “the Central Bank quotation on [date]” to avoid disputes.

Common Mistakes Foreigners Make

1. Assuming English is universal

   • Brazilian courts require Portuguese contracts; an English contract may be treated as a preliminary agreement until translated and notarized
   • Fix: Have all governing documents translated by a certified translator and notarized at a cartório (notary)

2. Picking English law for a Brazil-only deal

   • If the contract involves only Brazilian assets or services, Brazilian courts may ignore your English law choice and apply Brazilian law anyway
   • Fix: Use English law + arbitration in London/ICC, or accept Brazilian law for Brazil-only deals

3. Forgetting about CISG

   • The UN Convention on Contracts for the International Sale of Goods (CISG) automatically applies to cross-border sales of goods unless you explicitly opt out
   • CISG has different rules on warranties, risk of loss, and remedy periods than either US or Brazilian law
   • Fix: Include a clause: “The UN CISG is excluded from this Agreement”

4. Not addressing local law barriers

   • Some goods/services require local licensing or regulatory approval in Brazil that your contract ignores
   • Example: Financial services require Central Bank authorization; healthcare products need ANVISA approval
   • Fix: Include a “Compliance” clause requiring each party to obtain necessary regulatory approvals

5. Ignoring correspondent lawyer costs

   • Enforcing a contract in Brazil means hiring a local lawyer (~R$5K–20K+ per dispute)
   • Fix: Include an “attorney’s fees” clause so the prevailing party recovers legal costs

Enforcement Across Jurisdictions

Enforcing a Brazilian Contract in the US

If a Brazilian company breaches and ignores a US judgment, you can attempt exequatur (homologation of foreign judgment). The Superior Court of Justice (STJ) in Brasilia must recognize your judgment as valid under Brazilian law, following procedures established by CNJ Resolution 9/2005. Success requires:

• The US court had jurisdiction over the defendant
• The judgment is final (no appeals pending)
• It doesn’t violate ordre public (Brazilian public policy)
• It was properly served on the defendant

Timeline: 1–2 years. Cost: R$5K–15K.

Enforcing a Judgment from Brazil in the US

Easier path: Enforce arbitration awards (New York Convention is bilateral). A Brazilian arbitration award is recognized by US courts almost automatically; they rarely refuse.

For a Brazilian court judgment: You petition a US federal court for “recognition of foreign judgment.” Success is likely if the judgment is final and the Brazilian court had proper jurisdiction. However, federal courts have discretion—recalcitrant debtors can fight this for years.

Better strategy: Include arbitration in your contract from day one.

“Brazil’s accession to the CISG caught many foreign companies off guard. If your cross-border sale of goods contract does not explicitly exclude the CISG, it applies by default — and its rules on warranties, risk of loss, and remedies differ materially from both UCC and Brazilian Civil Code provisions. A single sentence opting out prevents costly surprises.” — Zachariah Zagol, Founding Partner, OAB/SP 351.356

Special Clauses for Brazil Cross-Border Deals

Choice of Law, Not Jurisdiction

Always separate these:

• Governing law: “This Agreement is governed by English law”
• Jurisdiction: “Disputes shall be resolved through ICC arbitration in São Paulo”

Force Majeure (Força Maior)

Brazilian law recognizes força maior as an excuse for non-performance if an unforeseeable, extraordinary event (war, natural disaster, pandemics) makes performance impossible. However, Brazilian courts interpret this narrowly—economic hardship doesn’t qualify.

Define force majeure events explicitly:

"Force Majeure includes: acts of God, war, terrorism,
government action, epidemic, and strikes—but NOT:
currency fluctuations, changes in law, or increased costs."

Hardship Clause (Unusual in Brazil)

Brazil has weak “hardship” doctrine (unlike German/Italian law with Geschäftsgrundlage). If your costs skyrocket due to inflation or exchange rates, you can’t ask a Brazilian judge to rewrite the deal. Include an escalation clause instead if cost risk is a concern.

Why ZS Advogados

At ZS Advogados, we combine deep expertise in both Brazilian law and international practice. Our founding partner, Zachariah Zagol, is an American who became the first American-born lawyer to pass the OAB—and he’s navigated cross-border deals from both sides. We’ve structured hundreds of contracts for US, European, and Asian investors entering Brazil.

We don’t just translate contracts; we rethink them for Brazilian enforcement. We know which arbitration institutions Brazilian courts respect, how judges interpret governing law clauses, and where exchange clauses will hold up. We draft dispute resolution strategy from day one—not after a breach happens.

Our approach: Every cross-border contract gets a “Brazilian enforceability audit”—we identify risks, suggest jurisdictional choices, and test your dispute resolution pathway before you sign. That’s how we protect your investment from day one.