Publications

Category: Tax

The right to a tax offset recommends reflection on the rules issued by the legislator that shape such offsets. Among the rules, special mention should be made of section 170-A of the National Tax Code (CTN), introduced by Complementary Law No. 104/2001 (LC 104/01). The provision was promulgated in a context of a great proliferation of tax lawsuits as a result of notorious governmental tax collection and questionable requirements of constitutionality and legality. Since federal tax offsetting had been introduced into the legal system in the 1990s without much regulation, taxpayers interpreted the institute in such a way as to petition the Judiciary for preliminary injunctions seeking the immediate recovery of improperly collected taxes, which often was granted. However, since provisional nature is inherent to preliminary injunctions, some decisions were subsequently overturned, thus generating legal uncertainty not only for taxpayers but also for the public administration. The objective of section 170-A of the CTN was to provide greater legal certainty to tax offsets, thus only admitting them when the right becomes determinate and enforceable,^[1] which usually occurs at the time of the final and unappealable judicial decision.

Extraordinary appeal with recognized general repercussion and special repetitive appeal Since the promulgation of Constitutional Amendment No. 45/2004 (EC 45/04), Brazil’s legislature has been expressing its intention to grant to litigants in court a more efficient Judiciary, thereby introducing fundamental guarantees such as the reasonable duration of the proceeding, speed, and, essentially, greater legal certainty in decisions. It was exactly in this scenario that the institute of "general repercussion" emerged as a new admissibility requirement for extraordinary appeals. Subsequently, various changes introduced into the legal system sought to favor the standardization of judicial decisions, such as Law No. 11,418/2006, which introduced sections 543-A, 543-B, and 543-C into the 1973 Code of Civil Procedure (CPC 73). The first two of these regulated appeals subject to general repercussion and the latter was promulgated to create appeals submitted to the so-called "repetitive" appeals system under the purview of the Superior Court of Justice (STJ). With the promulgation of the 2015 Code of Civil Procedure (CPC 15), there was an even greater need for respect and uniformity of case law in order to maintain it stable, complete, and consistent,^[2] including with the improvement of the systems of general repercussion and repetitive appeals and the creation of other procedural forms of judicial relief/adjudication.^[3] The intention to give more force to the precedents led to the inclusion, within the scenarios for granting provisional relief, of the so-called relief of evidence, which is independent of the urgency of the prayer for relief (the so-called periculum in mora), in cases where there are recognized repetitive appeals or binding precedents.^[4] As Justice Rosa Weber pointed out in her opinion issued in the decision on habeas corpus No. 152.752/PR, "the consistency and coherence of judicial development of Law are virtues of the normative system as virtues of the Rule of Law. State institutions should protect citizens from unnecessary uncertainties about their rights." All this is in line with the constitutional principles of equality, reasonable duration of proceedings, and legal certainty. One notes, accordingly, that, since the promulgation of EC 45/04, the legislator has been endowing the procedural system with mechanisms capable of making the provision of judicial relief more effective and timely, thus enabling the party to be able to give effect to the substantive law pled and granted by the Judiciary. This occurs from the establishment of fundamental guarantees, such as the speed of proceedings and reasonable duration of the proceeding (EC 45/04), to the enactment of a norm that establishes the list of decisions that present, to a certain extent, binding effect (section 927 of the CPC/15), in order to standardize case law, always favoring legal certainty. In this context, the question is: how does one interpret section 170-A of the CTN when there is a theory established in an extraordinary appeal with general repercussion recognized by the Federal Supreme Court (STF) or in a special repetitive appeal by the STJ, in order to avoid having taxpayers who were diligent in filing a lawsuit seeking recognition of their subjective rights to a credit remain in an unfavorable situation with respect to taxpayers who did not file a lawsuit?

Systematic interpretation by the legal system and Carf When we consider taxation as an exception to the fundamental right of property recognized by the Federal Constitution (CF 88), if there is a theory settled by higher courts that a certain tax is not due or that a certain calculation basis is not applied, it is necessary that its effects be felt on the practical level as quickly as possible, including, if necessary, with respect to the recognition of a subjective right to a credit. In these cases, there is no reason to postpone the legitimate enjoyment of a determinate and enforceable credit. It is unreasonable to allow a taxpayer who has brought a legal action to await a final and unappealable decision favorable to its claim to administratively seek an offset when there is already a favorable theory settled by the higher courts. It is therefore necessary that both the Judiciary and the tax administration systematically interpret the legal system seeking to privilege equality and legal certainty among taxpayers. The Administrative Council of Tax Appeals (Carf) itself already recognizes the force of precedents in binding its decisions on the findings of higher courts in the framework of repetitive appeals (section 62, paragraph 2, of the Carf Internal Rules). In addition, both the STF and the STJ have already recognized the need for a systematic interpretation of the legal system in order to achieve greater harmonization of rules.^[5] Such an interpretation does not represent the repeal of the limit established by section 170-A of the CTN, but rather, according to a certain factual scenario under examination, consideration of the provision in conjunction with the other norms and guarantees provided by the legal system, to give greater effectiveness, reliability, and predictability in the provision of judicial relief. In this sense, two decisions issued merit emphasis, one in the judicial sphere and the other in the administrative sphere. In 2017, the 5th Federal Court of São Paulo granted provisional relief of evidence to assure the taxpayer its right to immediately offset amounts unduly collected by the Tax Administration,^[6] precisely based on an understanding issued via binding restatement by the STJ. More recently, Carf’s 4th Chamber of the 2nd Ordinary Panel, in a judgment on Administrative Proceeding No. 10880.906342/2008-96,^[7] unanimously granted partial relief to a voluntary appeal filed by a taxpayer to process a petition for offset lodged before a final and unappealable judicial decision favorable to reimbursement of amounts paid in excess by way of PIS and Cofins. The reporting judge based his understanding precisely on a systematic interpretation of section 170-A of the CTN, considering the factual peculiarities presented and the understanding established by the STF in the decision on Extraordinary Appeal RE No. 357.950/RS, thus ruling out, in this case, an in-depth and isolated reading of the provision. Therefore, although this is an incipient debate within the judicial and administrative courts, the subject invites us to further reflect on the interpretation and scope of section 170-A of the CTN, especially when, considering the peculiarities of each case, it opens up space to interpret it in conjunction with other rules and constitutional and procedural principles provided for in our legal system, with a focus on the right to tax offsetting, speed of procedure, legal certainty, and the decongestion of Justice.

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1.  Explanatory Memorandum No. 820, of October 6, 1999, signed by the then Minister of Finance, Pedro Malan.

2.  Section 926.  The courts of appeal must standardize their case law and keep it stable, complete, and consistent.

3.  Such as, for example, the Ancillary Proceeding for Resolution of Repetitive Demands provided for in section 976 of the CPC/15.

4.  Section 311.  The relief of evidence shall be granted, regardless of the demonstration of danger of harm or risk to the useful result of the proceeding, when: (...).

II - the allegations can in fact be verified only in a documentary manner and there is a theory established in a judgment on repetitive cases or in a binding precedent;

5. Direct Suit of Unconstitutionality - ADI No. 2.650/DF and Appeal per Internal Rules in an Interlocutory Appeal in the context of a Special Appeal - AgRg no Ag em REsp No. 2011/0176982.

6.  Provisional Execution of Judgment No. 5007628-70.2017.4.03.6100, federal substitute judge Tiago Bitencourt de David, decision issued on July 14, 2017.

7.  https://www.conjur.com.br/2018-abr-24/seguindo-stf-carf-autoriza-compensacao-antes-transito-julgado

Category: Infrastructure and energy

Since the Social Security Reform failed, the Federal Government announced that it will prioritize institutional micro-reforms. One of them is the new framework for regulatory agencies, the subject of Senate Bill (PLS) No. 52/2013.

The new framework was presented in 2013 in the Senate, where it has already passed and is now in the Chamber of Deputies waiting for a conclusive opinion by the Special Committee. From the legislative point of view, PLS 52/2013 amends several specific laws, each referring to a specific regulatory agency, in addition to Law No. 9,986/2000, which provides for the management of human resources within these bodies. In essence, the bill incorporates guidelines from the Organization for Economic Cooperation and Development (OECD) into the national regulatory environment, thereby homogenizing rules on governance, management, and procedures applicable to regulatory agencies. It also provides a special discipline for conflicts between authorities (for example, in addressing Cade's jurisdiction versus that of agencies).

If approved, the new law will reconfigure nothing less than ten agencies at the federal level: Aneel, Anatel, ANP, ANTT, Antaq, and Anac are on the list. They are bodies directly related to the Brazil's structural investment agenda. Not only do they exercise regulation and supervision over concessions, but they also decide on tariff revisions and corporate changes in the concessionaires' control groups, also giving technical opinions on the feasibility of new bidding notices or the renegotiation of existing ones in complex processes such as early extensions in the transport and logistics sectors. Regulatory agencies even affect the liquidity and certainty of users' rights. Hence the indisputable relevance of matter.

In terms of governance, PLS 52/2013 has concerns similar to those of the State-Owned Companies Law (Law No. 13,303/2016). In order to mitigate the risk of patronage, as well as political and market influence, members of the governing boards of the agencies become subject to thus far unprecedented requirements and restrictions. As an example, they may not have participated in the decision-making structure of a political party or labor union linked to the organization of an electoral campaign in the last three years. Those who hold a position in a trade union organization are also disqualified. Likewise, individuals who have maintained in the last year one of the following bonds with a company that conducts activities regulated by the respective agency: (a) direct participation as a shareholder or partner; (b) director, officer or member of an audit committee; and (c) employee, even if with a suspended employment contract, including with its holding company, or employee of a pension fund foundation of which the company or its holding company is a sponsor or funder.

Although the indication of the members of the governing boards remains under the competence of the President of Brazil, subject to the confirmation of the Senate, this choice would now be preceded by a public pre-selection process from a three-name list to be formulated by a selection committee. Once appointed, the members of the agency's governing bodies would serve for a term of five years, without renewal (except in the case of completing an unfinished previous term of office, for a period not exceeding two years). The stability of the mandate was reinforced by PLS 52/2013: the members of the governing boards can only be exonerated in the case of a final judicial order or as a result of administrative disciplinary proceedings.

A point that merits reflection is the lack of a planned and simultaneous beginning for the mandates. In the model projected, each member of the governing boards of the same regulatory agency enters at a different time from the other, in accordance with the convenience or need to fill in vacancies. The five years are considered only as a period of stability, and not as a cycle for regulatory policy conducted by the agency. This is not the best practice. The formation of a governing board with no homogeneity of thought and values, at least initially, about the regulatory actions to be applied in the long term jeopardizes the political and decision-making unity of the agency, as well as its predictability, values ​​that should be more important for regulated companies than the resonance of their particular desires.

The initial version of PLS ​​52/2013 established the negotiation and conclusion of a management contract between the agencies and ministries to which they were bound, pursuant to paragraph 8 of article 37 of the Federal Constitution. With the management contract, agencies would receive, as consideration for the expansion of their autonomy, an instrument for performance, goals, and objectives, which would allow for their objective evaluation. This rule was replaced by a provision for a strategic plan and an annual plan, which, however, lack the nature of a contract. Although the plans also subsidize external control over the agencies, doubts remain about its binding force and the actual effectiveness of goals that agencies unilaterally plan and set for themselves. In view of the agencies' limited experience in management contracts, despite the content of Decree No. 2,487/1998, PLS 52/2013 missed the opportunity to encourage the execution of these instruments.

Administrative procedures within the agencies will have common rules. All normative acts published, for example, should be preceded by regulatory impact analysis (AIR), a public consultation, and a public hearing. It emphasizes, on the one hand, a technical methodology in the formation of decisions and, on the other, social transparency and participation in the construction of rulemaking acts. There was, however, no provision of parameters for each agency to issue internal regulations that establish administrative procedures in a more concrete and systematic manner. It would be advisable, for example, to ensure that regulated parties receive regulatory guidance within reasonable deadlines.

In the exercise of their duties, it will be the responsibility of the agencies to oversee and monitor the market practices of participants in the regulated sectors in order to assist Cade in overseeing compliance with antitrust laws. In addition, PLS 52/2013 provided for mutual cooperation between federal regulatory agencies and similar agencies in states and municipalities, also authorizing inter-governmental delegation of non-regulatory activities through a cooperation agreement. The principle of cooperation between authorities is thus honored, but incompletely: for example, in the examination of concessions, the interaction of regulatory agencies with the Federal Court of Accounts (TCU) is simply neglected.

Almost 20 years after the emergence of regulatory agencies in Brazil, the new framework tries to grant greater freedom of regulatory action, introducing possible advances in terms of autonomy and transparency of decisions. There is a great deal to be further developed, especially with regards to procedural security, predictability, conflict of jurisdiction, and technical quality of regulatory decisions.

Category: Banking, insurance and finance

On March 29, the Central Bank of Brazil published Public Notice No. 64/2018, containing a proposed resolution to regulate the conditions and limits on credit transactions with related parties by financial institutions and leasing companies.

For a long time, a generic rule prohibited financial institutions from granting credit to related parties. More recently, however, in the process that culminated in the enactment of Law No. 13,506/17, an amendment to article 34 of Law No. 4,595/64 created several new exceptions to this rule, although the principle prohibiting the granting of credit to related parties still prevails. The proposal for a resolution commented on in this article regulates the provisions of article 34 of Law No. 4,595/64, as amended by Law No. 13,506/17.

With regard to the definition of related parties, the proposal for a resolution does not innovate, but merely repeats the text of the law. However, there are several aspects of interest regarding: (i) the definition of credit transactions; (ii) the definition of conditions compatible with the market; and (iii) the limits for transactions with related parties. Each of these items is analyzed separately below.

Definition of credit transactions. Historically, the concept of credit transactions was restricted to lending, financing, and security discount transactions, so much so that there was a need for a later rule "clarifying" that the same restrictions for credit transactions with related parties would also be applicable in the case of guarantee transactions. Now, in the proposal submitted for public consultation, the role of credit transactions appears not only broader (including, for example, transactions with post-paid payment instruments) but also covering "other transactions or contracts with credit-like characteristics." That is, instead of adopting a strictly formal conceptualization, the regulator also considered the function and the essence of the instrument. This seems to us to be very positive, since it is an exception to a prohibitive rule.

Conditions compatible with the market. The Central Bank of Brazil determines that credit transactions with related parties must comply with the same standard adopted for transactions with unrelated parties, that is, they must be contracted under conditions (interest, term, guarantees, etc.) substantially similar to those prevailing for similar transactions with unrelated parties, including when collateral is required (e.g. if the institution requires collateral from a customer with a given risk rating and if the related party that qualifies with such risk requires collateral).

Limits. In addition to normal market conditions, such transactions may not exceed certain limits. Thus, there is an overall limit (10% of the institution's adjusted equity) applicable to the total balance of such transactions and there are individual limits (i.e. a maximum risk exposure to a single borrower) of 1% of PLA for individuals and 5% for legal entities, both of which are calculated on the date the loan is granted.

The Central Bank of Brazil will receive comments and suggestions until April 13.

Category: Labor and employment

Law No. 9,656/98 assures ex-employees dismissed without cause or for retirement the right to remain in the health plan offered by their former employers. For this, it is necessary that the workers expressly manifest their will and have contributed monthly to the cost of the plan during the term of their employment.

Upon opting to remain in the health plan after termination, the employee must, in addition to necessarily assuming the full cost of the plan, submit to the provider’s conditions and rules. At that moment, a new legal relationship of a civil nature begins between the worker and the provider over which the former employer will have no interference.

However, it has been common for former employees to file lawsuits in the Labor Courts seeking to have the burden of the changes implemented by the health plan provider in the post-employment contract fall on former employers, which includes, for example, issues related to readjustment of monthly fees.

This procedure is not only wrong from the point of view of civil liability, since the former employer as a rule has no control over the changes implemented by the health plan providers, but also violates the limits of the jurisdiction of the Labor Courts. This is because the controversy arising between the parties does not relate to the conditions of the contract of employment, which has been terminated for all purposes. It, in fact, has a direct connection with the conditions for the provision of medical care and therefore relates to the relationship between the health care provider and the former employee.

This was the position recently adopted by the Superior Court of Justice (STJ) in its decision on Special Appeal No. 1.695.986 (published on March 6, 2018). When analyzing the conflict of jurisdiction raised in the case that discussed an increase in post-employment monthly health insurance payments, in the form of self-management, the Superior Court defined the jurisdiction of the common courts to hear and adjudicate the demand, in summary, on the basis that the right under discussion stems from a relationship between the provider and the former employee.

Category: Labor and employment

The Federal Attorney General’s Office (AGU) opined that Law No. 13,467/2017 (the Labor Reform) was constitutional as regards its amendments to articles 578, 579, and 582 of the Consolidated Labor Laws.

Subjected to various criticisms, the new wording of these articles has profoundly changed the dynamics of the annual contribution of workers and employers to unions. Previously obligatory, the contribution became optional and came to depend on the express authorization of those interested in paying it to the union.

Among the criticisms presented, we highlight the controversy over the constitutionality of this change. Based on the argument that, because of its tax nature, the union contribution could only have been amended by a complementary law (and not by an ordinary law, such as the Labor Reform), various suits were filed by unions in the Labor Courts.

The plea, often granted at the outset, is the incidental declaration of unconstitutionality of the Labor Reform in this regard and an order that the contribution must continue to be collected.

In addition to these individual actions, at least 14 Direct Suits of Unconstitutionality (ADI) were filed with the Federal Supreme Court (STF) to debate the matter.

In one of them, ADI No. 5.887, filed by the Federation of Trade Union Entities of Brazil's Court Officials, the AGU was in favor of altering the union contribution through an ordinary law.

As one of its arguments, the AGU reminded that the STF, upon analyzing similar issues, has already settled the understanding that complementary law is dispensable to establish the triggering event, calculation basis, and responsible taxpayer. It cited the issue instituted in favor of Sebrae by Law No. 8,029/1990, ruled constitutional by the Court.

In fact, the STF’s precedents have established that, although they have the nature of a tax, contributions may be subject to ordinary law because they are not taxes per se. And this has already occurred even in relation to funds destined to trade unions.

Law No. 9,615/1998 (Pelé Law), for example, provided that sports practice organizations pass on to the National Federation of Professional Soccer Athletes, a second-level trade union entity, a percentage of the funds related to athlete transfers. The constitutionality of this obligation was ratified in various decisions after being questioned by many soccer clubs.

More than this, the union contribution itself modified by the Labor Reform has undergone alterations imposed by other ordinary laws. It was thanks to Ordinary Law No. 11,648/2008 that trade union confederations raised their fortunes, having started to benefit from part of the funds collected with union contributions. The same trade union confederations today affirm that the amendment of the Labor Reform would only be valid if implemented via a complementary law.

In addition to trade union confederations, attorneys (including those who argue for the unconstitutionality of the Labor Reform) have also benefited in regards to the union contribution. It was Ordinary Law No. 8,906/1994, the OAB Statute, that removed the obligation of making the union contribution from this professional category.

In this scenario, despite the criticisms and the understanding of the Labor Courts, important precedents on changes or institutions of contributions must be taken into account, also for unions, through ordinary law.

And the opinion of the AGU may contribute to having the STF maintain its settled position and ratify the constitutionality of the Labor Reform by making the union contribution voluntary.

Category: Labor and employment

The rapid expansion of social networks has provoked important debates about the consequences and limits of freedom of expression. With the popularization of the use of smartphones, networks like Facebook, Twitter, Instagram, WhatsApp, Snapchat, and many others popped up and grown exponentially throughout the world and also in Brazil. Surveys indicate that about 130 million Brazilians were active users of some social network in 2017, placing the country in fourth place in the world, behind only China, India, and the United States (and next to Indonesia). The same surveys reveal that Brazil is the third country in the world in number of active users on Facebook and the second in active users of Instagram. Despite some restrictions on the use of social networks, such as blocking racist comments or inappropriate scenes, the ease of use of these tools allows users to freely express their thoughts and opinions on a wide variety of subjects and in a variety of ways. The face-to-face distance between network members, however, creates a false sense of protection and causes people to manifest their thoughts and ideas more freely. The fact is that this often-unthinking use of social networks to publicly express opinions about issues related to their own employment can have negative impacts on labor relations. Article 482 of the Consolidated Labor Laws provides for the possibility of dismissal of an employee for just cause when that employee has committed an act considered harmful to the honor or good name of the employer or superiors, and it is up to the employer to review these statements to take the appropriate measures. Our courts of labor appeals have increasingly received labor claims containing petitions to overturn dismissals for cause arising from acts allegedly harmful to the employer's honor committed by employees. In analyzing the decisions handed down, it appears that there is no majority position in the labor courts, and the judges have conducted detailed analysis of the evidence and facts presented by the parties. In order not to run the risk that the labor courts will find that dismissal was not for just cause, the employer has two paths to follow. The first is the preparation of a code of conduct or a policy for procedures to be respected by employees. It should set out boundaries on the use of social networks for work-related issues, thereby requiring employees' confidentiality on certain subjects, and emphasize that the employer does not accept publication of social commentary on working conditions that exposes specific issues on the work environment, or comments about the company or co-workers. Along those lines, as a second path, the employer will be given the option of analyzing employees’ conduct in the same way that labor judges themselves would do it, thereby considering that dismissal for just cause to be the maximum penalty to be applied to the employee, with consequences that will mark employees’ entire professional life. If the employer adopts this measure without robust evidence that the posts on the social network constituted an act harmful to the company’s reputation, just cause may be reversed in court. The employer should therefore analyze the materiality and authorship of statements on social networks to confirm whether the employee is the author of the postings that cause damage to the company's image or, if not, if they made comments that corroborated the harmful postings. Cases in which employees only "like" the posting of other users, without expressly stating their opinion contrary to the company, have ended in reversal of just cause in the Labor Courts and in judgments entered against the employer to pay the severance and incidentals. Another point to be analyzed concerns the seriousness of the act committed by employees and the proportionality of the penalty applied by the employer. Posts where there is no objective injury to the employer's honor may lead to a finding of dismissal without just cause. In such cases, the employer must apply other administrative penalties to the employee in proportion to the conduct adopted. Subliminal messages, therefore, are not enough to give rise to the application of just cause. Dismissals for just cause with less potential for reversal when challenged by employees in the Labor Courts have been cases in which employees directly attack the honor or good reputation of the employer or their superior, with complaints about working conditions, associating them with slave labor, for example, or vulgar words directed against the company or against hierarchical superiors. It is also important to check the publicity given to employees' statement. In cases of private postings, which are hidden from the general public, damage to the image or good reputation of the employer would not be found. On the other hand, injury is clear when employees make postings public and link them to other employees or companies. Finally, employer must observe immediacy in the application of dismissal for just cause, since delay in punishment is interpreted as tacit pardon and, consequently, as acceptance that there was no harm or damage to the company’s honor or image. In sum, in response to potentially negative messages passed on by their employees on various social networks, employers must analyze in detail whether all the above elements are present, and whether statements go beyond the limits of freedom of expression and constitute an injury or offense to the company’s honor and good reputation.