The validity of arbitration clauses in franchise agreements is a contentious matter in Brazil linked to the question of whether franchise agreements can be characterized as adhesion contracts. The case law analysed in this article indicates that Brazilian courts take different views depending on the facts of each specific case. This affects not just the validity of the arbitration clause, but also whether a court or arbitral tribunal is competent to determine the validity of such clause.

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International Journal of Franchising Law
Volume 16 – Issue 1 – 2018
© Claerhout Publishing Ltd.
1
THE VALIDITY OF ARBITRATION
CLAUSES IN FRANCHISE
AGREEMENTS IN BRAZIL
Paula Mena Barreto, Campos Mello Advogados, Rio de Janeiro, Brazil
The validity of arbitration clauses in franchise agreements is a contentious matter in Brazil
linked to the question of whether franchise agreements can be characterized as adhesion
contracts. The case law analysed in this article indicates that Brazilian courts take different
views depending on the facts of each specific case. This affects not just the validity of the
arbitration clause, but also whether a court or arbitral tribunal is competent to determine the
validity of such clause.
The validity of arbitration clauses in franchise
agreements has been a subject of controversy in
Brazil, especially following a decision in Special
Appeal no. 1.602.076-SP, issued in September of
2016 by the Superior Tribunal of Justice – the
country’s highest court for non-constitutional
matters, with responsibility for harmonizing
interpretation of federal laws by the state and regional
federal courts of appeal.
In the original case, the franchisee litigated to
terminate the franchise agreement and to obtain a
refund of the payments made to the franchisor, as well
as damages for the franchisor’s failure to deliver the
required franchise disclosure document and various
contractual breaches.
In the trial court, the franchisor argued that the case
should be dismissed because of the arbitration clause
included in the agreement. The court rejected this
argument. The franchisor submitted an interlocutory
appeal to the state appellate court, which overturned
that decision and held the arbitration clause to be
valid. This resulted in the dismissal of the case on the
grounds that the courts did not have jurisdiction.
“The validity of arbitration
clauses in franchise agreements
has been a subject of controversy
in Brazil …”

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International Journal of Franchising Law
Volume 16 – Issue 1 – 2018
© Claerhout Publishing Ltd.
2
The plaintiff/franchisee then filed a special appeal to
the Superior Tribunal of Justice (“STJ”), which
decided the arbitration clause was void due to the
failure to meet the requirements for validity set out in
Article 4, § 2, of Law 9,307/1996 (“Arbitration
Law”). That article provides that arbitration clauses
in adhesion contracts are only effective if the adherent
takes the initiative to file for arbitration or expressly
consents to participate in it in accordance with the
formalities stipulated therein.
This decision involves the discussion around the
classification of franchise agreements as adhesion
contracts. An adhesion contract can be defined as a
document in which one party imposes on the other a
series of clauses formulated in advance that are not
subject to negotiation. The Brazilian Civil Code does
not have a specific definition for adhesion contracts,
but it establishes two provisions governing this type
of agreement, stating that it is necessary to adopt the
interpretation most favorable to the adherent in case
of ambiguous or contradictory clauses. Moreover, any
provisions establishing waiver by the adherent of
rights arising out of the nature of the transaction will
be considered null and void.
In addition to the Brazilian Civil Code, the Brazilian
Consumer Defense Code (Law 8,078/90) expressly
defines adhesion contracts as those with clauses that
have been approved by the competent authorities or
established unilaterally by the supplier of the
products or services, where the consumer is not
allowed to negotiate or modify the contract. The
Consumer Defense Code also establishes specific
rules for such types of agreements, but these rules
solely apply to agreements between suppliers and end
consumers.
The question of whether or not an agreement between
two companies is subject to the Consumer Defense
Code is also often controversial in Brazil. The
majority of legal scholars and case law takes the
position that franchise agreements, by their nature,
are not subject to the Consumer Defense Code and
this position was also confirmed in the decision in
question.
The STJ in the case mentioned above took the
position that all adhesion contracts, even those that do
not involve relations between consumers and
suppliers, are subject to article 4, § 2, of the
Arbitration Law. That provision is tantamount to a
statement of public policy the purpose of which is to
prevent the weaker party from being forced to submit
to arbitration.
The majority of STJ case law is that arbitral tribunals
generally have the primary authority to take
jurisdiction to hear the cases that are submitted to
arbitration and to decide on their own jurisdiction and
the validity of arbitration clauses (competence-
competence principle). However, the STJ in this case
held that courts can nullify arbitration clauses if they
perceive a disadvantage for the weaker party in an
adhesion contract.
This decision was important because it confirmed that
franchise agreements under Brazilian law are not
deemed to be consumer contracts but may still
considered adhesion contracts. However, franchisors
that negotiate franchise agreements with franchisees
that have substantial resources can allege that their
agreements are not adhesion contracts, so arbitration
clauses contained in them should be valid.
Notwithstanding the relevant decision of the STJ, it is
possible to find other decisions involving franchise
agreements that were issued by the Tribunal accepting
the competence of the arbitrators to judge the validity
of the arbitration clause, with no possibility of
pursuing rights in the state courts.
“… franchise agreements under
Brazilian law are not deemed to
be consumer contracts but may
still considered adhesion
contracts.”

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International Journal of Franchising Law
Volume 16 – Issue 1 – 2018
© Claerhout Publishing Ltd.
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In one recent case, the STJ, in a decision by the
reporting judge of the panel assigned to the case,
acting alone, recognized the incompetence of the state
court to adjudicate a case on the grounds that the
arbitration clause of the franchise agreement was
valid and must be observed (Appeal for Certiorari in
Special Appeal no. 1231744). Since no appeal was
filed against this decision, there was no judgment of
the Special Appeal by the panel of the STJ.
In the original case, the franchisee litigated to
terminate the franchise agreement and claimed
damages for contractual breaches by the franchisor.
The franchisee argued that the arbitration clause in
the agreement was invalid because of non-compliance
with the principles of good faith and transparency. In
the trial court, the judge dismissed the case,
recognizing the competence of the arbitrators to judge
the case in view of the arbitration clause. The
plaintiff/franchisee filed an appeal and the state
appellate court overturned that decision and held the
arbitration clause to be valid. The franchisee then
filed a special appeal to the STJ, which decided in
favor of dismissal of the case on the grounds that the
courts did not have jurisdiction to judge the case,
since the arbitration clause was valid.
It is important to note that this case involves the
discussion related to the competence to determine the
validity of the arbitration clause, but also confirmed
the validity of the arbitration clause in the franchise
agreement despite the previous decision holding that
franchise agreements are in fact adhesion contracts.
These decisions lead to the conclusion that the
characterization of adhesion contracts and therefore
the validity of the arbitration clauses in cased judged
by the STJ will depend on the specific case. If the
franchisee participated in negotiating the franchise
agreement to a significant extent, this will be an
important argument not to classify it as an adhesion
contract.
“If the franchisee participated
in negotiating the franchise
agreement to a significant extent,
this will be an important
argument not to classify it
as an adhesion contract.”
Paula Mena Barreto
Paula Mena Barreto is a partner in the Rio de Janeiro
office of Campos Mello Advogados. She advises
clients on IP related issues, including IP transactions
(drafting, negotiating and registering agreements
involving intellectual property, transfer of technology
and franchising) and legal due diligence for
evaluation of IP assets. Paula further advises clients
on strategies for IP protection, with extensive
experience in trademarks, copyrights and software.
Paula is also highly experienced in media rights,
privacy, data protection and advertising law