Brazilian new franchising law – changes to international franchising
Brazil has just published a new franchising law.
The most relevant changes when it comes to international franchises interested in Brazil are as follows:
1) The mandatory use of Brazilian law has been removed. Future franchising agreements in Brazil may select any applicable law. This is a consequence of an express provision in the act that allows for the use of arbitration. When arbitration is used, the parties are thus able to elect the applicable law.
2) International franchising agreements may be bilingual, provided that a sworn translation to Portuguese is provided.
3) The ability to use a “choice of forum” clause has been specifically included in the law. This has two important consequences:
a) it may, indirectly, result in the selection of a different applicable law (for example, if the courts in the US determine that US law shall be applicable to the agreement);
b) it makes clear that the choice of forum is permitted. This was a contentious topic.
The parties must keep a representative in the jurisdiction listed in the agreement. So, if the parties choose France as the forum, the Brazilian party must keep a representative in France for the duration of the agreement.
Finally, please notice that Brazilian rules on intellectual property (specially regarding taxation and ownership of registration) cannot be circumvented, even if the parties choose a different jurisdiction to conduct legal procedures.
Overall, I believe the new rules will help attract international franchises to Brazil.