Brazil - Market Insights

Contract governance and litigation assessment as a business strategy in Brazil

Brazil is often introduced to foreign investors through superlatives: the largest economy in Latin America; a consumer market of more than 200 million people; a key player in energy transition, agribusiness, infrastructure and digital services. What rarely appears in the first slide of an investment deck is another superlative that matters just as much: doing business inevitably exposes companies to disputes, and Brazil has one of the largest and most congested court systems in the world.

Any company entering into the Brazilian market, perhaps partnering with Brazilian counterparties or structuring deals that might lead to disputes in Brazil, will inevitably interact with this judicial machinery. Doing so without being prepared for the dynamics of dispute resolution in Brazil exposes companies to significant operational and financial risks.

This chapter examines the challenges companies may face when navigating Brazil’s litigation landscape and explains how they can better prepare to operate — and succeed — in this context. It highlights two essential pillars for doing so: continuous contract governance and litigation risk assessment. Together, these enable a process capable of anticipating conflicts, managing exposure and strategically shaping the outcome of potential disputes.

A judicial system of continental proportions

To grasp the scale of litigation in Brazil, it is essential to understand the structure through which disputes circulate.

At its core, the system is divided into two main branches: state courts (present in all 27 states and responsible for most civil and commercial disputes between private parties) and federal courts (which handle cases involving federal agencies, regulatory bodies and public entities). Labour, electoral and military matters are heard by specialised courts.

Hierarchically, first-instance courts are reviewed by Courts of Appeal, and above them sit the superior courts. In civil and commercial matters, the Superior Court of Justice (STJ) ensures the uniform interpretation of federal law, while the Federal Supreme Court (STF) serves as the country’s constitutional court.

The result is a vast, multilayered judicial ecosystem in which a single commercial dispute may pass through several procedural stages and ascend through multiple levels of review. For companies unfamiliar with this architecture, it is easy to underestimate how long that journey may take.

Numbers that matter

According to the 2024 Justice in Numbers report published by the National Council of Justice (CNJ), the Brazilian judiciary handles more than 80 million ongoing cases, with close to 40 million new lawsuits filed annually.

When compared with Europe, the disparity is striking. While European Union courts receive around four new cases per 100 inhabitants, Brazil receives more than 18. The gap in pending cases is even greater: 2.58 per 100 inhabitants in the EU versus 37.93 in Brazil, a difference of nearly fifteenfold. Judicial Capacity is also under pressure. In the EU, there are about 145 pending cases per judge. In Brazil, that number jumps to 4,300 cases per judge, almost 30 times higher, which illustrates a structural overload that makes dispute resolution considerably slower than in comparable jurisdictions.

A typical civil lawsuit in Brazil takes, on average, about two years and nine months to reach a final decision on the merits, and may require another year and a half if the case is appealed to a superior court. Even after obtaining a favourable judgment, creditors may spend five to six years locating assets and overcoming procedural formalities required for effective execution.

Arbitration offers a faster route — lasting on average 19 months (Arbitration in Numbers Report, 2023, by Selma Ferreira Lemes), but it does not fully shield parties from the courts. Enforcement of awards, setting-aside proceedings and interim measures still require judicial intervention, meaning companies may “exit” arbitration only to “enter” the judicial queue at a later stage.

A litigious culture that resists public initiatives

In the past decade, Brazil has implemented procedural reforms aimed at redirecting disputes away from the courts or resolving them earlier.

The 2015 Civil Procedure Code marked a major shift toward consensual dispute resolution by introducing mandatory conciliation hearings at the outset of most civil lawsuits, aimed at promoting early dialogue and encouraging settlement before disputes escalate.

The Code also strengthened pre-suit evidence production. Under Article 381, parties may request key documents or expert findings before filing a claim, both to clarify factual uncertainties that could facilitate settlement and to assess whether litigation is actually advisable.

Despite these initiatives, however, CNJ data shows that 2024 saw the highest number of new case filings in the country’s history, indicating that Brazil still operates within a deeply ingrained culture of litigiosity. In this context, disputes occupy a large, slow-moving ecosystem, and any business strategy that ignores this reality is built on fragile ground.

Preparing before the conflict — the two pillars of a strategy

Given Brazil’s litigation ecosystem, companies operating in the country must prioritise dispute prevention and early positioning long before any conflict reaches a courtroom or arbitral tribunal.

Parties often assume that a well-drafted contract is the primary shield against disputes. In practice, drafting is only the first chapter. In long-term or high-complexity projects, what truly determines outcomes is how the contract’s performance is monitored, managed and documented over time.

Contract governance — what happens after the signing

Disputes rarely arise from a single event; they emerge gradually, as deadlines are missed, quality standards are not met, and external events distort the original contractual balance. By the time a case reaches court, the parties’ relationship has usually already deteriorated. Emotions are high, trust is gone, and the appetite for negotiation is minimal. At the same time, many companies arrive with a strong desire to win, but with weak documentary support for their narrative, leaving them vulnerable even when the merits of the case appear to favour them.

The “bad” news is that Brazilian courts place enormous weight on documentary evidence. Emails, meeting minutes, notices, progress reports, audit trails and records of operational decisions become crucial years later, when disputes reach the judiciary. A contract that is perfect on signing day but poorly managed during execution will rarely protect a company in a dispute.

The common view that disputes follow a simple path — contract, breach, lawsuit — is misleading. Between the first signs of non-performance and a formal dispute, there is a wide “middle field” in which conflicts can be managed, litigation can be prevented, and evidence can be produced. It is precisely in this grey area that contract governance and risk assessment intersect and reinforce one another.

Effective contract governance in Brazil should involve:

• systematic monitoring of obligations, milestones and deliverables;
• maintenance of a clear and organised communication trail with the counterparty;
• proactive documentation of deviations, approvals and operation decisions; and
• internal escalation mechanisms to identify early signs of breach and trigger negotiation strategies.

It is often in these early crisis moments — missed deadlines, change orders, renegotiation requests — that the best opportunities arise to engage the counterparty, adjust obligations, reallocate risks or redefine timelines. When these opportunities are missed, parties tend to shift quickly from frustration to litigation, with limited room for dialogue.

That is why legal involvement throughout contract performance — not only at the drafting stage — is fundamental. Legal teams should participate in the routine monitoring of key contracts, helping business units to identify risks, map negotiation opportunities and document decisions.

Litigation assessment — choosing the right moment and the right battle

Alongside monitoring contract performance, a second essential pillar of effective contract governance is the continuous assessment of litigation risk. Its purpose is to ensure that a company understands — in real time — when to renegotiate, when to escalate, when to litigate and, just as importantly, when not to.

When problems arise, determining whether to pursue another negotiation round is rarely straightforward. Weighing timing, evidence, costs and business impact requires a continuous risk assessment that integrates legal analysis with economic considerations. Such an assessment must constantly ask:

• If we file a claim, what are the realistic chances of success?
• Which factual and documentary elements are needed to support our position — and do we already have them?
• How have Brazilian courts or arbitral tribunals decided similar disputes?
• What are the downside risks (counterclaims, reputational issues)?
• What are the costs involved (court fees, expert evidence, bonds, appeal deposits, legal fees, internal costs)?

Rather than initiating litigation impulsively — and entering a judicial system that is slow and congested — this structured evaluation allows companies to prevent disputes and more strategically decide when escalation to arbitration or court is worth the investment.

Conclusion

Operating in Brazil is entirely feasible — and often highly profitable — when companies understand how the country’s legal and judicial dynamics shape their business outcomes. In such a complex and congested system, litigation is not always the right path; preventing disputes or resolving them early is often the smarter choice.

Embedding legal teams in contract governance and continuous litigation-risk assessment enables companies to manage tensions early, negotiate from a position of strength and approach any future claim better prepared. Businesses that treat these practices as core strategic planning tend to avoid groundless litigation and are better positioned to grow in Brazil.