BRAZIL Law and Practice Contributed by: Thiago Fernandes Chebatt and Luiz Eugênio Araújo Müller Filho, Müller Chebatt Advogados
simpler, enforcement decisions can be co-ordinated, and releases can be executed more cleanly, provided registries accept the filings and the documentation clearly defines authority and thresholds. If security is held directly by individual lenders, secondary transfers may require updates across registries and corporate records to preserve opposability and priority, which can add friction and closing risk. In practice, lenders address limitations through clear agency mechanics, borrower undertakings to co-operate with perfection updates, and, where necessary, a fronting or parallel- security arrangement that preserves operational effi - ciency without compromising priority. The objective is to ensure that assignments and enforcement remain executable in real time, not only theoretically valid on paper. 6. Enforcement 6.1 Enforcement of Collateral by Non-Bank Secured Lenders A secured private credit lender can enforce upon a contractual event of default, but the available path - ways depend on the nature of the enforceable title and on the specific collateral instrument. Some structures allow faster, more streamlined remedies, while others require judicial execution and are therefore exposed to defensive litigation and interim relief. If the borrower or a key guarantor enters judicial reorganisation, the statutory stay and the concentration of disputes in the restructuring forum can restrict or delay individual enforcement, especially where the debtor argues that assets are essential to operations. For that reason, Brazilian private credit structures often emphasise pre-enforcement controls – cash-flow routing, trig - gers and governance covenants – so that the lender can stabilise value and negotiate from a position of strength before terminal enforcement becomes the only option. 6.2 Foreign Law and Jurisdiction Foreign governing law and forum clauses are widely used in sophisticated financings involving Brazilian borrowers, but enforcement against Brazilian assets remains anchored in Brazilian collateral law and reg - istry practice. It is common for the main credit agree - ment to be governed by New York or English law while
security documents are governed by Brazilian law, reflecting the need to perfect and enforce locally. Even when the merits dispute is resolved abroad, effective relief typically requires local procedural steps, particu - larly for attachments, injunctions and the realisation of Brazilian collateral. Waivers of immunity are mainly relevant in sovereign or quasi-sovereign settings and should be drafted carefully, with the understanding that mandatory protections may apply to certain pub - lic assets. In practice, lenders treat governing law as a dispute-resolution choice, while designing security and cash controls to function under Brazilian execu - tion realities. 6.3 Foreign Court Judgments Foreign court judgments and arbitral awards can be enforced in Brazil, but they generally require a rec - ognition proceeding before local execution. The rec - ognition process focuses on procedural regularity and public policy rather than revisiting the merits, but it still adds time and can become contested. As a result, lenders often combine foreign-law documenta - tion with Brazilian-law collateral instruments and seek interim measures that are actionable locally when time is critical. Arbitration is frequently chosen for contrac - tual disputes, while collateral realisation is pursued through the mechanisms available under Brazilian law. This split approach reflects a practical view: speed and leverage often come from cash controls and per - fected security, not from a distant merits judgment alone. 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights Several issues can limit a foreign lender’s enforce - ment effectiveness in Brazil. Documentary formalities, corporate authority and perfection steps are common litigation targets, and registry defects can undermine priority or opposability. Insolvency proceedings can centralise disputes and impose a stay, and courts may restrict collateral enforcement where assets are characterised as essential for business continuity. FX and tax compliance defects can also complicate remittances and claims calculation, creating additional dispute surfaces. Finally, the risk of parallel proceed - ings and interlocutory injunctions can extend timelines even in otherwise strong cases. The best mitigation is to harden the package at closing – authority evidence,
25 CHAMBERS.COM
Powered by FlippingBook