SAO PAULO, Feb 3 (Reuters)- Netherlands-based Paper Excellence BV has won an arbitration case against Brazilian group J&F Investimentos SA to complete the acquisition of paper mill Eldorado Brasil Celulose SA, two sources with knowledge of the matter said on Wednesday.

The arbitration decision demands that Paper Excellence frees up collateral owned by J&F before closing the deal, the people said.

The dispute over Eldorado began in September 2018, when billionaire brothers Joesley and Wesley Batista, owners of Eldorado and behemoth meatpacker JBS SA JBSS3.SA, canceled the sale to Paper Excellence.

J&F Investimentos SA, a holding company owned by the Batista brothers, had agreed to sell flagship asset Eldorado to unlisted Paper Excellence in September 2017 for 15 billion reais ($2.8 billion), and agreed to receive the full price within a year.

J&F had argued Paper Excellence did not comply with conditions to close the deal. Paper Excellence went to court, and the court sent the decision to arbitration.

Paper Excellence, controlled by Indonesia's Jackson Wijaya, had accused J&F of creating hurdles to avoid completing the deal because pulp prices rose after the deal was signed.

($1 = 5.4410 reais)

Reporting by Tatiana Bautzer, writing by Sabrina Valle Editing by Sonya Hepinstall