We come back to article 90 of the Brazilian Civil Procedure Code (article 24 of the new code) and the operation in Brazil as lis abili pendens of cases brought before foreign courts. It has implications both to pending disputes (which will not operate as lis alibi pendens and thus will not bar a Brazilian court of adjudicating in the same matter) and enforcement proceedings. Or so says the Superior Court of Justice (ED&F Man Commodity Advisers Limited v. S.A Fluxo-Comércio e Assessoria Internacional).
ED&F requested the ratification of a London’s court award of damages in the amount of 22mi US dollars against Fluxo, a Brazilian company. Among other things, Fluxo argued that ED&F was filing for the ratification of that same award in other foreign courts, an act of disloyalty. Furthermore, Fluxo had a counter-claim against ED&F and argued that this should be set-off against any claim ED&F might have.
The relationship between claimant and defendant was governed by the terms of a "Customer Agreement" dated 1st February 2005. Defendants traded sugar futures and options on the Intercontinental Exchange in New York and on the London International Financial Futures and Options Exchange in London.
By late 2007 the New York Exchange board had become concerned as to the defendant's exposure because the latter had adopted a substantial short position in regard to a 2008 sugar contract at the Intercontinental Exchange.
The Exchange considered defendant to be short by 80,000 lots and thus in excess of its permitted limits, and issued a directive to its clearing members to collect an additional 20% margin on the defendants' positions. For the claimant this meant an instruction to reduce position with the company to no more than 8,000 futures equivalent contracts by January 2008 to be accomplished by some reduction each day until the specified levels were achieved.
Fluxo and brokers at the New York Exchange failed to agree on a coordinated reduction. Ultimately, the claimant began to liquidate Fluxo's open short positions from January until April 2008. For the claimant the loss occasioned to Fluxo's accounted to $22m incl. commission and interest.
The SCJ found no reason not to ratify the award, but one still awaits Fluxo’s appeal to be heard in that regard. This comes as no surprise. The SCJ’s role in the ratification proceeding in Brazil is mostly that of a formality checker. Should an enforcement of the foreign award be necessary, the Brazilian Constitution accords jurisdiction to federal trial courts (article 109, X). But the Court’s understanding of the dimension of the lis alibi pendens principle certainly emerges as a relevant point, as it allows parties to go global on the enforcement proceedings.
SEC 6.079/EX, Rel. Ministra MARIA THEREZA DE ASSIS MOURA, CORTE ESPECIAL, julgado em 15/10/2014, DJe 28/10/2014, in Portuguese here.
High Court of Justice Queen's Bench Division Commercial Court (Mr Justice David Steel) on 11th February 2010  EWHC 212 (Comm), here.