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Category: Public and regulatory law

Regulation of the use of cannabis for medicinal purposes is a subject widely debated and developed in European and North American countries. In Brazil, however, the debates are still at an embryonic stage. We will try to point out in this text some of the current challenges encountered by those wishing to commercially exploit the production of cannabis for medicinal purposes.

Classification as prohibited substance and Anvisa’s oversight

The regulation of narcotics and psychotropic substances in Brazil, including cannabis, can be found at several levels. Brazil is a signatory to and internalized the two major international treaties of the UN on the subject: the Single Convention on Narcotic Drugs of 1961 and the Convention on Psychotropic Substances of 1971. In general, the signatories of these conventions undertake to collaborate to combat the production and trafficking of narcotic and psychotropic substances, each country being responsible for issuing its own regulations on the subject in accordance with the principles of the conventions.

At the national level, the provisions set forth in the Federal Constitution and in Law No. 11,343/2006, of August 23, 2006, widely known as the Drug Law, should be highlighted. The Constitution treats drug trafficking as a public security issue to be tackled by police authorities, and the Drug Law establishes measures to prevent drug use and regulates the unauthorized production and illicit trafficking of narcotic and psychotropic substances.

Regarding the cultivation of cannabis, the Drug Law strictly prohibits the planting, cultivation, harvesting, and exploitation of plants and substrates from which drugs can be extracted or produced. However, the same legislation establishes exceptions, regarding the possibility of cultivation for medical and scientific purposes, under specific supervision and with the authorization of the Federal Government.

Cannabis is currently classified as banned by the National Agency for Sanitary Surveillance - Anvisa, through SVS/MS Ordinance No. 344, of May 12, 1998, but access to it may be permitted for medical and scientific purposes. Cannabidiol (CBD) and Tetrahydrocannabinol (THC) are currently the only cannabis extracts permitted by the sanitary surveillance agency for individuals only and subject to specific regulations. This permission is the result of numerous lawsuits brought by parents of children and also by adults with severe medical conditions for which these substances are the only remedy that achieves positive treatment results.

Regarding the regulation of the use of cannabis for medicinal purposes, Anvisa, in turn, has not indicated a firm position on the subject. Its regulatory agenda varies according to the composition of its internal departments. Over a period of time, the organization has positioned itself in favor of regulation of cannabis for medicinal purposes, publicly advocated by the president at the time, but no concrete measures have been taken. Currently, the organization does not prioritize regulation of cannabis for medicinal purposes, and the potential for issuance of new standards does not appear to be on the horizon.

Legislative and judicial slowness

In the legislative context, there are three bills presented before the National Congress (numbers 10,549/2018, 7,270/2014, and 7,187/2014) whose intention is to regulate cannabis for recreational and/or medicinal purposes, but none of them has been submitted for a vote. In different ways and at different levels, these bills seek to remove the unlawful nature of cannabis and, consequently, the development of any recreational, business, and/or medicinal activities related to the plant.

The subject is also debated within the scope of the Federal Supreme Court (STF), in the Direct Action of Unconstitutionality No. 5,708, in which political parties and various civil rights organizations are petitioning the court to establish a time limit for Anvisa to regulate the medicinal use of cannabis, among other requests.

Importation and commercial activity

Anvisa is also the agency responsible for regulating and authorizing the importation of cannabis. The specific regulation provides that entities wishing to import cannabis for research purposes must register with the Integrated Foreign Trade System (Siscomex), regulated by the Brazilian Internal Revenue Service, and obtain an import license.

In addition to this license, Anvisa will be responsible for issuing a specific import authorization exclusively for education, research, and laboratory analysis entities, as established by the agency in Resolution No. 11, of March 6, 2013. Such activities must be expressly stated in the contract or bylaws and in the entity's registry with the Federal Revenue Service. Market players seeking to establish themselves in Brazil should perform one or more of these activities in order to conduct their business in Brazil in relation to medicinal cannabis.

Since the current regulations do not deal with cannabis for medicinal purposes in a thorough manner, entities cannot conduct research and develop business in a free manner to ensure the development of medicinal cannabis as a commercial product.

General overview

The medical cannabis sector in Brazil faces a series of challenges and obstacles, for which no solution was offered by the regulators or by the Legislative and Judiciary branches. There is enormous uncertainty among market players regarding the possibility of developing their businesses in the medicinal cannabis sector in Brazil, which hampers and will likely continue to hamper investments by domestic and foreign players in the sector.

Category: Litigation

In force since September 5, Ordinance No. 1,189/2018, issued by the Ministry of Justice, establishes new rules and improves those rules that were already in force for the process of creating parental advisory ratings for audiovisual materials, which includes television products, movies, and other materials related to the video market, electronic games, and applications, among others.

The Ministry issued recommendations regarding limitations on access by certain age groups to audiovisual materials containing three thematic niches - "sex", "drugs”, and "violence”, and whether the scenes are more or less explicit mitigates or aggravates the rating.[1]If the product is shown in movie theaters or made available on the video market, the Ministry of Justice must rate the material in advance, that is, before it reaches the market. On the other hand, television stations may rate their materials through the aforementioned rating in advance, by the Minister of Justice, or through self-rating, which is carried out by the broadcaster itself and then submitted for validation by the Ministry.

In general, the first procedure is more advantageous since the deadline set forth for a review by the Ministry of Justice is lower: 30 days, as compared to 60 days for reviewing the self-rating. This avoids some disturbances, such as changes in the issuer’s time slot due to a recommendation by the Ministry of Justice after reviewing the self-rating.

One of the innovations brought about by the ordinance relates to the presentation of programming calls. Based on its article 4, item III and paragraph 3, programming calls displayed during commercials must be accompanied by the parental advisory rating of the material advertised, that is, only materials with a rating equal or inferior to the material that is being displayed may be presented.

Another innovation is the possibility of express authorization by parents or guardians for the admission of minors into public spectacles. According to article 7, in events classified as not recommended for children under 18 years of age, teenagers aged 16 years or above shall be allowed access provided that they present the specific authorization from parents or a responsible person. Children and teenagers aged 10 years and over shall be allowed access to events that are classified as not recommended for children under 16, 14, and 12 years of age, under the same conditions. However, children under the age of 10 may only access and remain in events when accompanied by their parents or a guardian.

The process of parental advisory rating is different from censorship, as it does not represent an imposition by the Ministry of Justice invading the private and individual sphere of citizens' choice on what to watch or consume, nor even prohibit television broadcasters from choosing which programming to broadcast on their channels.

The regulations are educational and informative and aim to protect the physical and mental integrity of children and teenagers, as clarified by the very text of the sole paragraph of article 6 of the ordinance: "family power is exercised by the possibility of choice of the contents". It is, in fact, prior information offered to civil society to decide on what content their nuclear families should have access, especially in order to protect children and teenagers in accordance with the Statute of the Child and Teenager (“Estatuto da Criança e do Adolescente” or just “ECA”) and the Brazilian Federal Constitution. It is important to make it clear that the provisions of the ordinance on parent advisory ratings do not apply to sports competitions, electoral programs and advertisements, advertisements and advertising in general, and journalistic programs.

Moreover, the topic was the subject of Direct Suit of Unconstitutionality No. 2.404/DF, filed by the Brazilian Labor Party (Partido Trabalhista Brasileiro or PTB) and by which objection was raised regarding article 254 of ECA on the grounds that the act of "transmitting, through radio or television, a show at a time other than that authorized or without notice of its rating” constituted an administrative infraction.

The Federal Supreme Court (STF) was of the position that the expression "at a time other than that which is permitted" is unconstitutional, considering that the Brazilian Federal Constitution (article 21, item XVI) provided that the Federal Government's competence to carry out ratings has indicative effects, as the name itself suggests, and "it is incumbent on the public authority, by federal law, only to report on the nature of public entertainment and spectacles." In summary, the Court considered unconstitutional the sanctioning nature applicable to article 254, emphasizing that the rating is informative and not mandatory.[2]Therefore, it is essential to reinforce the informative and indicative nature of the rating of audiovisual materials referred to in the ordinance of the Ministry of Justice, since it deals with the issue in a didactic manner and preserves the individual sphere and the right of parents and guardians to choose the programming that they deem appropriate for their children and wards.

The new ordinance also addresses the matters involving visual arts, such as artistic and cultural ensembles, historical and artistic performances, which were the subject of discussion by the media after the cases of La Bête and Queermuseu, about which there was no provision in former Ordinance No. 368/2014. Article 53 of Ordinance No. 1,189/2018 establishes the creation of a working group to prepare a specific guide regarding visual arts, especially for museums and art exhibitions, within 90 days. It is hoped that the Brazilian Advisory Rating System for exhibitions and visual arts events will be as didactic, simple, and pragmatic as the system for audiovisual materials. Everyone has much to gain from these initiatives by the Executive Branch.

[1] For more information regarding the Brazilian advisory rating system, please access the Practical Guide for Advisory Ratings, produced by the Ministry of Justice (available at the following link: http://www.justica.gov.br/seus-direitos/classificacao/guia-pratico. Accessed on September 17, 2018).

[2] For more information regarding ADI 2.404/DF, visit the STF’s website (http://portal.stf.jus.br/processos/detalhe.asp?incidente=1902202. Accessed on September 17, 2018).

Category: Litigation

The Supreme Court of Justice (STJ) recently took a position on a controversial subject that is the subject of doubts and uncertainties: whether the appropriate appeal against decisions rendered with respect to execution and enforcement of judgment is an interlocutory appeal or an appeal.

Unlike in the systematic framework of the Code of Civil Procedure of 1973 (CPC/73),^[1] the Code of Civil Procedure of 2015 (CPC/2015) introduced via its article 1,015 specific scenarios allowing for the filing of an interlocutory appeal, whose exhaustive interpretation is still under discussion in Brazil’s courts of appeal. The purpose of this text is to discuss the sole paragraph of the aforementioned article, which provides for the filing of an interlocutory appeal against interlocutory decisions rendered in the enforcement and liquidation of judgment phase, as well as in the execution and probate process.

With the provision for the free filing of an interlocutory appeal to challenge interlocutory decisions rendered in the execution and enforcement phase, and here in parallel with paragraph 3 of article 475-M^[2] of the CPC/73, which provided that an interlocutory appeal would lie against decisions that resolved an objection to execution of judgment, except those objections that called for extinguishment, subject to appeal, the - CPC/2015 did not expressly determine what the appropriate appeal against a decision that resolves objections to execution of judgment, whether an interlocutory appeal or an appeal.

In addition to this question, the split understanding of the courts on the subject, possibly influenced by the provisions of the CPC/73, finally appears to have achieved a unified guideline from the STJ.

In the judgment on Special Appeal No. 1.698.344/MG, the written opinion of which was prepared by Justice Luis Felipe Salomão, the Fourth Panel of the STJ amended a decision handed down by the Minas Gerais Court of Appeals to hear an appeal filed against a decision that accepted an objection to execution of judgment. In this sense, it established that decisions that partially accept or reject the objection presented are subject to an interlocutory appeal, as the procedure for execution or enforcement of judgment shall continue.

According to the interpretative logic of the CPC/2015, read in the appellate decision published on August 1 of this year, article 1,015 expressly states that an interlocutory appeal lies against interlocutory decisions, while article 1,009 governs the submission of appeals against judgments. In this sense, it is important to question the nature of decisions rendered in the execution and enforcement of judgments. For judgments, the ruling emphasizes that in the current procedural system, there are two criteria set forth in paragraph 1 of article 203^[3] of the CPC/2015: (i) content equivalent to one of the situations provided for in articles 485 or 489; and (ii) closure of the pre-trial phase, the trial phase, or execution phase. An interlocutory decision, in turn, is any pronouncement of a decision-making nature that does not fall under paragraph 1, as provided for in paragraph 2 of article 203 of the CPC/2015.

Thus, emphasizing that "if the execution is extinguished, it shall be a judgment, as per the aforementioned article 203, paragraph 1, final part; otherwise, it shall be an interlocutory decision, as per article 203, paragraph 2, CPC/2015,” the Fourth Panel concluded that “the execution shall be extinguished whenever the judgment debtor obtains, by any means, total suppression of the debt (article 924 CPC/2015), which shall occur with the recognition that there is no obligation to be demanded, whether because the debt has been discharged or because it is acknowledged that it does not exist or has been extinguished", as is thus subject to appeal.

Along these lines, the STJ settled an understanding that, for decisions that partially accept the objection or dismiss it, it shall be necessary to file an interlocutory appeal, as they do not entail extinguishment of the execution phase in progress and, therefore, are decisions of an interlocutory nature. In turn, decisions that extinguish the execution phase must be challenged by means of an appeal.

The STJ's understanding on the subject, based on the procedural logic of the CPC/2015, brings greater certainty to the filing of appeals against decisions rendered in execution proceedings and greatly contributes to avoiding an inadequate pathway for challenging decisions resulting in reduction of harm to parties.

^[1]   Article 522 of the CPC/73 allowed the party to file an interlocutory appeal against any and all decisions likely to cause damage that is serious and difficult to repair, as well as in the event of denial of certiorari to an appeal and with respect to its effects.

^[2]  “Article 475-M. The objection shall not have supersedeas effect, and the judge may assign such effect to the extent that its grounds are relevant and the continuation of the execution is manifestly liable to cause damage that is serious or difficult or uncertain to repair. Paragraph 3. Decision that resolve the objection are subject to appeal by means of an interlocutory appeal, except when it implies extinguishment of the execution, in which case an appeal shall lie."

^[3]  “Article 203. The judge's pronouncements shall consist of judgments, interlocutory decisions, and bench orders. Paragraph 1. Subject to the express provisions of special procedures, a judgment is the pronouncement by which the judge, with a basis on articles 485 and 487, terminates the trial phase of the common proceeding, as well as extinguishes the execution."

Category: Labor and employment

The Federal Supreme Court (STF) recognized by a majority of votes (7 to 4)^[1] the lawfulness of outsourcing companies’ core business activity.

The decision by the STF was handed down with recognized general repercussion in Allegation Breach of a Basic Precept (ADPF) No. 324 and Extraordinary Appeal (RE) No. 958252, actions in which the legality of outsourcing and the constitutionality of Supreme Court Precedent No. 331 (TST) were discussed, which prohibited outsourcing of a core business activity.

These actions were filed before the Outsourcing Law (signed along with the Labor Reform, Law No. 13,467/2017), which entered into force on November 11 of last year.

The Reform reinforced the permission to outsource companies’ core activity by including in the Outsourcing Law article 2: "The provision of services to third parties shall mean the transfer done by the customer of the performance of any of its activities, including its main activity, to a private legal entity providing services that has economic capacity compatible with their performance."

Thus, the great issue discussed before the STF concerns the legality of the outsourcing carried out before the Labor Reform came into force, when only the dictates of the TST's Precedent No. 331 were applied.

In analyzing the case, most justices on the STF defended the position that perpetuation of the illegality of outsourcing of core activity, as enshrined in Precedent No. 331 of the TST, would violate the constitutional principles of free initiative and free competition. The justices also took into account the violation of the constitutional principle of legal certainty, since there was no law governing the matter.

In this sense, the following theory of general repercussion was set: "Outsourcing is lawful, as is any other form of division of labor between different legal entities, regardless of the corporate purpose of the companies involved, therein maintaining the secondary liability of the contracting party."

For the time being, the written opinion has not yet been published, and the STF has not yet formally ruled on the modulation of its effects. However, since it has general repercussion, the decision has binding effect and applies immediately to all cases pending before the Labor Courts. It is estimated that the decision will "unlock" almost 4,000 stayed appeals that deal with this issue and await a judgment before the STF.

The question now is whether or not there will be modulation of the effects of that decision. The modulation of the effects of decisions handed down by the STF is more commonly discussed in tax matters, in which there is a conflict between Law No. 9,868/99, which provides for the prosecution and judgment of direct suits of unconstitutionality and actions for a declaration of constitutionality, and the Civil Procedure Code of 2015 (CPC).

While article 27 of Law No. 9,868/99 requires a qualified quorum^[2] (a majority of 2/3 of the members), the CPC has no provision in this regard. Some scholars maintain that the silence of the CPC in this regard should not be understood as agreement with Law No. 9,868/99, but rather as a sign that the previous law has been overcome and that, now, a qualified quorum is unnecessary in this matter.

The truth is that although the Supreme Court has discussed this issue many times, there is no clear and objective decision to date regarding the quorum needed to modulate the effects of a decision on the constitutionality of laws or normative acts.

One indicator is that justices Roberto Barroso, Celso de Mello, and Gilmar Mendes argued in the past that the quorum required for these cases is an absolute majority, but the debate became moot after seven votes against modulation.^[3] Justices Gilmar Mendes, Rosa Weber, and Luiz Fux also defended the absolute majority quorum.^[4] At that time, however, the issue was not decided because the petition for modulation was made based on Law No. 9,868/99, which would prevent it from being set aside.

While the publication of the appellate decision is awaited and an analysis of the modulation of effects is pending, the recommendation is that companies move to review their past and possible impacts of the STF’s decision on their day to day. Companies should check whether there are decisions recognizing employment relationships based only on the argument that a core activity was performed that may be reversed at a higher level of appeal, for example.

Another positive impact concerns the possibility of re-discussion of Consent Orders (TAC) signed with the Public Prosecutor's Office that provide for the impossibility of outsourcing core activities.

Therefore, even if the decision applies only to those cases that have not yet reached a final and unappealable decision, that does not mean that companies are prevented from making use of it. Pending modulation of the effects of the decision, the recommendation is that companies conduct a critical analysis of their labor liabilities in search of opportunities.

[1] Affirming the decision were Justices Luiz Fux, Luís Roberto Barroso, Alexandre de Mores, Dias Toffoli, Gilmar Mendes, Celso de Mello, and Cármen Lúcia. Justices Edson Fachin, Rosa Weber, Ricardo Lewandowski, and Marcus Aurelius dissented.

[2] "Article 27. In declaring the unconstitutionality of a law or a normative act, and in view of the reasons of legal certainty or exceptional social interest, the Federal Supreme Court may, by a two-thirds majority of its members, restrict the effects of that declaration or decide that it has only effect as of its final and unappealable decision or some other time that may be set."

[3] RE Judgment 723.651, which discussed the application of the IPI in the importation of vehicles for own use.

 [4] Judgment of the motion for clarification in RE 377.457, which dealt with the Cofins exemption.

Category: Real estate

In a decision on September 19, the São Paulo Court of Appeals (TJ-SP) maintained the repeal of an injunction that had suspended the right of filing in the city. The licensing processes of projects registered with the Municipal Government (PM-SP) under the old law continue their normal proceeding.

The injunction had been granted in February of this year, in the context of a Direct Action of Unconstitutionality (ADIn), filed by the Public Prosecutor’s Office of the State of São Paulo (MP-SP), by its attorney general, to declare the incompatibility of the so-called “filing right" with the Constitution of the State of São Paulo’s. In accordance with article 162 of Municipal Law No. 16,402/16 (São Paulo Land Use and Occupancy Act), this mechanism ensures the application of the legislation in force on the date of filing of the licensing procedure upon the city government, even if supervening laws change the rules applicable to the land.

Although the motivation of the ADIN was based on a specific case of a business located in a special zone of environmental protection (Zepam) and, therefore, with more restrictive rules, the effects of the injunction were applied indiscriminately to all the licensing proceedings whose licensing had been filed under the old Zoning Law, regardless of the stage of their implementation. In other words, projects still at an early stage, with no decision handed down, were affected likewise to those that were already in an advanced stage of construction to comply with execution permits issued, thus causing great insecurity for the real estate sector and the city government, which suspended the processing of all cases from then on.

On May 16, by a majority of votes (17 against 7), the Special Commission of the TJ-SP amended the preliminary ruling, thus re-establishing the right of filing and allowing the resumption of of the PM-SP´s review of the licensing processes.

Against this decision, in order to remedy alleged obscurity, contradictions, or omissions, the Public Prosecutor's Office filed a motion for clarification, which was rejected in a decision by the TJ-SP on September 19, thus maintaining the repeal of the injunction and, likewise, the normal course of licensing processes before the PM-SP.

A judgment on the merits is still pending and is expected in 2018. The expectation of the market is that the content of the decision will be maintained and has as positive indicators the last decisions and their reasoning.

Category: Labor and employment

Article 507-A of the Consolidated Labor Laws (CLT), included by the Labor Reform (Law No. 13,467/2017), stipulated that, for employees whose remuneration exceeds twice the ceiling of the General Social Security Regime (RGPS), it will be possible to enter into arbitration agreements, provided that it is per their own initiative or their express agreement, under the terms established in Law No. 9,307/1996 (Arbitration Law).

With this, arbitration which, according to article 114, paragraph 1, of the Federal Constitution (CFRB), was accepted by labor courts only in the case of collective bargaining disputes, was also accepted in individual claims by employees.

This change has led already established arbitration chambers, such as the American Chamber of Commerce (Amcham), to open up space for labor arbitration, and has created several new chambers around Brazil to deal specifically with the matter, with its own rules and specificities.

Like judicial claims, arbitration is a form of autonomous resolution, by which a third party is appointed to settle the dispute between the parties. The difference, however, lies in the fact that, in judicial claims, appointment of the third-party results from the law, while in arbitration the choice is made by joint appointment by the parties.

In addition, the arbitration proceeding provides the parties with several advantages not envisaged in a lawsuit, such as the fact that it: (i) is usually faster; (ii) is more specialized (the parties choose one or more arbitrators specializing in the issues of the claim they wish to discuss, such as a discussion involving stock options); and (iii) is endowed with confidentiality (confidentiality can be attributed thereto if the parties so agree).

Regarding the issue of procedural costs, arbitration may prove to be more advantageous since, although it tends to be more expensive compared to judicial claims, the Labor Reform has also introduced reciprocal fees for loss of suit in labor procedure, a factor that considerably affects the amounts involved.

Arbitration can be agreed upon in two ways:

1. By an arbitration agreement: signed on the basis of the will of the parties, which stipulate that, in the event of a conflict between them, they will be assisted by an arbitral tribunal, and not by the Judiciary. With the existence of an arbitration agreement, a negative assumption is created, so that if one of the parties files a lawsuit despite having previously entered into an arbitration agreement with the other party, the latter may raise the existence of such a negative assumption, which will lead to termination of the proceeding without a resolution on the merits (article 337 of the Code of Civil Procedure), unless it is demonstrated that consent in the agreement was defective, which would imply its annulment.

1. Arbitration agreement: After the occurrence of the conflict, arbitration is submitted to one or more arbitrators.

When the arbitration proceeding is initiated, it is necessary to observe all the rules of the arbitration itself, namely the guidelines of Law No. 9,907/96, such as confirmation of the capacity of the persons involved, the subject of arbitration (alienable property rights), among others.

Among the precautions to ensure that the validity of the labor arbitration is not later questioned, it is also recommended that there be a document pursuant to which the employee takes the initiative to initiate the arbitration procedure or manifests his express agreement with such a measure.

At the end of the arbitration proceeding, the arbitrator(s) shall issue an arbitral award, which shall constitute a judicially enforceable instrument, being unappealable and subject to fulfillment sua sponte or executed with the competent court.

Before the Labor Reform, the case law of the courts of appeal did not allow the use of arbitration proceedings in individual disputes, in that regard invoking, among other arguments, the fact that the rights of the workers are inalienable and, therefore, incompatible with arbitration. However, when the matter is reviewed under a constitutional approach, there is no legal prohibition on carrying out arbitration in the labor sphere in individual disputes, not least because arbitration is authorized in an infraconstitutional manner.

Thus, although expressly authorized by law, the use of arbitration in individual dispute by employees who receive remuneration higher than twice the maximum limit of the RGPS is a relatively new proceeding, which may even encounter some resistance on the part of the labor courts. However, it is already a reality and does not find any obstacle of a constitutional and/or infraconstitutional nature. Thus, if the procedure is followed correctly and if the peculiarities related to the Arbitration Law are observed, arbitration awards must have their validity recognized by the Labor Courts.