Amendment to Brazil’s Civil Procedure Code limits forum-selection clause

Bill No. 1,803/2023, introduced by Congressman Rafael Prudente (Brazilian Democratic Movement – MDB, Federal District), was signed into law by President Lula da Silva on June 4, 2024. This bill amends paragraph 1 and adds paragraph 5 to Article 63 of the Civil Procedure Code, as follows:

The bill, proposed in April 2023, explicitly aims to limit forum selection “[…] to prevent the abuse of this right, ensuring relevance to the parties’ domicile or the location of the obligation, preventing it from becoming a tool for selecting the most favorable courts and undermining the jurisdiction in which they operate.”

The bill’s justification document states that limiting private autonomy and contractual freedom was necessary because “[…] random and unjustified venue selection could harm the entity in that location, overburdening courts unrelated to the case at hand.”

Parties can still select the jurisdiction in a contract. Such a clause allows deviation from the legal rule that determines jurisdiction based on value and location, enabling parties to select a venue for resolving contractual disputes through a written contractual instrument.

While the previous version of Article 63 of the Civil Procedure Code already mentioned the possibility of the forum-selection clause being deemed abusive and, therefore, ineffective, the law did not establish specific criteria or instances for determining abuse.

The legislative innovation, effective since June 5, 2024, expressly limits the scope of forum selection. Under the new law, contracting parties must confine their choices to jurisdictions relevant to the domicile or residence of one of the parties or the location of the obligation, except for consumer agreements when it benefits the consumer. The new law does not include intertemporal law rules, and when addressing the “location of the obligation,” it does not clarify whether this includes the jurisdiction where the contract was formed and/or where it is enforceable.

These issues will undoubtedly require discussion and judicial interpretation.

In addition to the aforementioned limitation, the legislation stipulates that filing a lawsuit in an arbitrary court, meaning one without ties to the domicile or residence of the parties or the legal transaction in question, can be deemed ineffective by the judge and constitutes an abusive practice allowing the court to decline its jurisdiction ex officio.

The new law partially reflects a stance that has been gaining some judicial support. Even before the new law’s enactment, the Brazilian Federal District Court of Justice (TJDFT) had been ruling against certain forum-selection clauses on the grounds that this prerogative could not be arbitrarily exercised without relevance to the obligations in question and the chosen jurisdiction, as it would constitute an abuse of power and violate the principle of the natural judge (e.g., TJDFT, 3^rd Civil Panel, Case 0730366430228070000, Appellate Judge Roberto Freitas Filho, j. November 17, 2022, DJe November 30, 2022).

To learn more about this topic, please contact Mattos Filho’s Litigation & Arbitration practice area.