Publications

Category: Environmental

The Strategic Environmental Assessment (AAE) has been causing concern among companies for some time. This is because, although this study is not legally required for environmental licensing of potentially polluting activities, the absence of the AAE has been viewed by some environmental agencies as an obstacle for the issuance of environmental licenses.

The Ministry of the Environment (MMA) defines AAEs as "an environmental policy instrument whose purpose is helping decision-makers in advance with the process of identifying and evaluating impacts and effects, thereby maximizing the positive ones and minimizing the negative ones, which a given strategic decision, regarding the implementation of a policy, plan, or program, could trigger for the environment or the sustainability of the use of natural resources, at whatever level of planning." While discussions of the concept, importance, and (in)dispensability of AAEs have advanced in recent years, it is no exaggeration to state that we still face a scenario of legal uncertainty on the issue. The scarce regulations on the study in question create a certain nebulousness due to the absence of a coherent legal framework. How can one demand a particular study if the law does not even clarify in what situations it should be required? How can one demand from entrepreneurs a macro-assessment of the environmental aspects of an entire region not necessarily related to the specific activity that they will carry out? In order to resolve this situation of uncertainty and to enable a proper environment for the effective sustainable development, it is crucial that the subject matter be explored in more depth. In order to shed light on the topic, the Federal Attorney General's Office (AGU), through the Specialized Federal Prosecutor's Office within the Brazilian Institute of the Environment and Renewable Natural Resources (PFE-IBAMA), issued Opinion No. 00007/2017/COJUD/PFE IBAMA SEDE/PGF/AGU. The Attorney General stated, among other arguments, the following: “We emphasize that the AAE serves as support for government planning (PPP), and does not bind it nor the environmental licensing (...). The assessment of the cumulative and synergistic impacts of a licensed object is entirely possible within the environmental licensing. The measurement of cumulative and synergistic impacts is not exclusive to the AAE. This same function is present in the Environmental Impact Study (EIA), as clearly provisioned in the Conama Resolution 01/86, but is also present in other types of impact studies, since these must contextualize the environmental impacts caused, therein analyzing how the impacts of the licensed object behave in the environment, entailing, therefore a cumulativeness and synergy assessment, in proportion to their impacts. (...) What is argued herein is that an ecologically balanced environment is not adrift without the prevision of an AAE." It may be noted that the AGU considers an AAE to be a supporting and optional instrument. Thus, requiring it in the context of environmental licensing proceedings is unnecessary. According to the PFE-IBAMA, in addition to the fact that the assessment is not required by law and is directed only at non-binding orientation of public policies, its essential content (for example, the measurement of cumulative and synergistic environmental impacts) is already included in other environmental studies focused specifically on the environmental licensing of activities and undertakings, such as the Environmental Impact Study and the corresponding Environmental Impact Report (EIA/RIMA). In view of the aforementioned legislative disorientation, Draft Law No. 3,729/2004 (the proposed General Environmental Licensing Law, still under analysis by Congress) contains a chapter on AAEs and clarifies that: “Article 39: (...) Paragraph 2: The AAE cannot be demanded as a requirement for environmental licensing and not having one shall not constitute an obstacle to or hinder the licensing process." The same draft law clarifies that AAEs “shall be carried out by the agencies responsible for the formulation and planning of government policies, plans, and programs" (Article 38, sole paragraph), that is, by the Government. Although there are different understandings in Brazil, we note that currently there is a tendency in Brazil to consider AAEs to be studies attributable to the government authorities, which should guide them as a tool in decision-making for government policies, plans, and programs. AAE, therefore, are instruments that should be used even before – for the creation of – the policies. The environmental licensing, on the other hand, consists of an instrument to implement the already existing policies. Therefore, it is reasonable to argue that the duty to prepare an AAE cannot be transferred to individuals and legal entities under private law in the context of administrative environmental licensing processes. Positions to the contrary may stimulate masked arbitrariness under a false mantle of administrative discretion, thereby fostering the already acute legal uncertainty that plagues Brazil’s Environmental Law.

Category: Tax

Advance on and reimbursement of procedural expenses

Disbursement of procedural expenses is handled by our legal system from two distinct chronological perspectives: advance (a priori, such that the act may be carried out) and reimbursement (a posteriori, with the outcome of the proceeding, according to the logic of loss of suit).

As a general rule, the parties must advance payment of expenses related to acts performed or required in the proceeding (article 82 of the Code of Civil Procedure). Thus, the plaintiff who files a suit for collection and, in this context, requests the production of expert evidence, must deposit the expert’s fees. Under this same logic, expenses with contracting for a certain guarantee, because it is a requirement for filing a motion to stay execution, must be initially assumed by the taxpayer.

At the end of the proceeding, as guidelines for reimbursement of procedural expenses, two principles are identified: that of loss of suit and that of causality.

From the rulemaking point of view, we see that the Code of Civil Procedure more explicitly addresses the reference point of loss of suit, according to which the unsuccessful party must compensate the winner for procedural expenses advanced (article 82, Paragraph 2). According to this same principle, in the event of reciprocal loss of suit (each party being partly winner and loser), the procedural expenses shall be distributed proportionally (article 86).

Specifically regarding the execution process, the content of article 776 of the Code of Civil Procedure, according to which "the judgment creditor shall reimburse the judgment debtor for the damages suffered by it when the judgment, which has become final and unappealable, declares that the obligation that gave rise to the execution was wholly or partially invalid."

Also in the Law on Tax Enforcement (Law No. 6.830/80), guidelines may be found in this regard, specifically relating to the responsibility of the Public Treasury for reimbursement of procedural expenses if it is unsuccessful in the end (article 39, sole paragraph).

Another principle is that of causality. Although there is an important zone of confluence between the principles of loss of suit and causality (in many cases, the losing party is also the party that gave rise to the demand and the costs involved), they should not be confused with each other.

The logic of causality helps to explain the duty to reimburse procedural costs (or payment of fees) on the part of the party who, although not exactly losing from the perspective of substantive law, has given cause to the procedural legal relationship and the resulting costs.

A paradigmatic situation relating to the subject of taxes should help one to perceive the distinction between loss of suit and causality. This paradigm is a tax execution to collect on a tax debt that was created as a result of an error in the filling out the Declaration of Federal Tax Debts and Credits (DCTF) by the taxpayer itself. Once the error has been found, the tax execution will have to be extinguished, with a recognition that the collection is undue, that is, with a "loss in the suit" by the Public Treasury.

However, the case law of the Superior Court of Justice (STJ), including in the context of a Special Appeal Representative of the Controversy, established that in such cases, in order to determine liability for the costs of the proceeding, it is important to investigate who caused the undue collection. If the taxpayer has filed for a rectification of the DCTF before the tax execution is filed, but the Tax Authorities, due to omission or inefficiency, failed to process it, the Tax Authorities are charged with improper filing of suit; if the evidence demonstrates that the error in filling out the DCTF submitted by the taxpayer is discovered after the filing of the tax execution, the taxpayer shall be considered the cause of the undue filing of suit and, therefore, liability for the costs of the proceeding (Special Appeal REsp 1111002/SP).

The notion of causality is the result of a construction created by case law, which ends up tempering the principle of loss of suit to the particularities of the individual case. That notwithstanding, the current Code of Civil Procedure innovates in relation to the subject by bringing in, timidly but expressly, a reference to this principle in the event of extinction of the suit due to supervening mootness (article 85, paragraph 10, of the Code of Civil Procedure). In this case, the costs of the proceeding will be borne by the party that gave rise to the filing of the suit, regardless of whether it is a plaintiff or a defendant, winner or loser from the point of view of the underlying substantive legal relationship.

May the costs of the guarantee be treated as procedural expenses for reimbursement purposes?

The technique used by the legislator in drafting article 84 of the Code of Civil Procedure is not the best, because it raises doubts, at least at a first glance at the matter, on the exemplary or exhaustive nature of the list provided therein (only procedural costs, travel expenses, and remuneration of the expert witness and per diem of witnesses are listed).

However, a systematic interpretation ends up showing that the term "procedural expenses" has a much broader scope. It is sufficient to note that Section III of Chapter II, Title I, of Book III of the Code is entitled "Expenses, attorneys’ fees, and fines" and brings in, in its Article 95, detailed provisions on experts’ fees, which are not listed in the list of expenses of article 84.

Article 98 of the Code of Civil Procedure, which deals with the gratuitousness of the Judiciary, also provides indications that the list set forth in article 84 is merely exemplary. This is because, according to the aforementioned article 98, the gratuitousness of the Judiciary is directed to the party with "insufficient resources to pay costs, procedural expenses, and attorneys’ fees." In its first paragraph, the text brings in precisely a list of costs of the proceeding subject to gratuitousness, addressing, beside the fees, a new list of procedural expenses that covers items not contemplated in article 84, such as postage stamps, expenses with publication in the official press, expenses with DNA examination, remuneration of the interpreter or translator appointed, the deposits provided for by law for lodging appeals or bringing suits, among others.

This provision mentions, among procedural expenses, "the deposits provided for by law for lodging appeals, for bringing suits, and to carry out other procedural acts inherent in the exercise of a full defense and adversarial proceedings." A guarantee offered as a requirement for filing a stay on a tax execution is similar in nature, since it is a requirement, established by law, to enable one to carry out a procedural act inherent in a full defense and adversarial proceedings (article 16, paragraph 1, of Law No. 6,830/80).

Therefore, costs with the guarantee presented as a precondition for filing a stay of the tax execution are unequivocal procedural expenses, which can be repaid, at the end, by the Public Treasury, if it is due (broadly speaking, if it is decided in the light of the principles of loss of suit and causality, that the latter will be liable for reimbursing procedural expenses).

Category: Infrastructure and energy

The National Electric Energy Agency (ANEEL) recently concluded Public Hearing No. 37/2017, which sought support for the proposed alteration of the power limit for minigeration distributed from a water source, as provided in Normative Resolution (REN) No. 482/2012.

REN 482/2012 established the legal framework for distributed generation in Brazil and created the Electric Energy Compensation System. It allows a consuming unit to receive credits from the local distributor for the surplus energy it produces based on renewable sources, qualified cogeneration, or hydroelectric sources. This credit can be used to offset future debits in the energy consumption account.

Despite industry criticisms that the amendment in question should be made within a broader review of the regulatory framework of the Electric Energy Compensation System, the public hearing resulted in the publication of Normative Resolution No. 786, of October 17, 2017.

The changes introduced by REN 786/2017 are summarized in amendment 2 of article 2 of REN 482/2012, in order to: (i) increase the installed capacity of power plants from renewable sources to between 75 kW and 5 MW, differentiation between hydroelectric sources and other renewable sources, connected in the distribution network through facilities of consuming units; (ii) prohibit classification as microgeneration or as distributed minigeration of generating plants that have already been registered, granted, licensed, or authorized, or have entered into commercial operation or have their electric energy accounted for under the CCEE or committed directly with a concessionaire or permission holder of electric power distribution, and it is up to the distributor to identify these cases; and (iii) ensure that the foregoing prohibition does not apply to projects that have filed a request for access prior to the publication of this regulation, pursuant to Section 3.7 of Module 3 of Prodist (Procedures for Distribution of Electric Power in the National Electric System).

Considering only the proposal to change the limits imposed on hydroelectric power plants in order to standardize them with other renewable sources, it is important to say, first, that the concept of a power plant in the form of distributed mini-installed capacity was originally characterized by installed generation capacity of greater than 100 kW and less than or equal to 1 MW for hydroelectric sources. However, REN 687, of November 24, 2015, extended the power range to 75 kW up to 3 MW for hydroelectric sources. The same resolution also sought to ensure legal certainty by providing for a revision of REN 482/2012 by December 31, 2019, the main reason for the criticisms presented at the public hearing.

The proposed regulatory change followed the legislative change implemented by Federal Law No. 13,360/2016, which amended article 8 of Federal Law No. 9,074/1995 by increasing from 3 MW to 5 MW the power limit of concessions, permissions, or authorization, a scenario that would require mere notice to the Ministry of Mines and Energy and Aneel.

However, despite the legislative effort to facilitate the development of electric power generation projects of up to 5 MW, reinforced by Federal Law No. 13,360/2016, popular participation in Public Hearing No. 37/2017 pointed to the need to maintain regulatory stability. Of the 91 contributions received from 51 stakeholders, private individuals, and public entities, 50 of them emphasized this topic, trying to avoid having a change in the potential of admitted hydroelectric power be characterized as urgent. The idea was to await the broader reform of the Electric Energy Compensation System, scheduled for 2019.

In reviewing the contributions presented at the public hearing, Distribution Services Oversight Board - SRD/Aneel concluded, as expressed in Technical Note No. 0098/2017-SRD/Aneel, of September 6, 2017, that: (i) despite the need for mere registration of a generation project of up to 5 MW established by the new wording of Federal Law No. 9,074/1995, the Electric Energy Compensation System created by REN 482/2012 would not be bound to the power limit defined for waiving a grant; (ii) raising the hydroelectric distributed minigeration limit does not require distributors to adapt their systems to accommodate such plants or reduce their market; and (iii) it is necessary to create transition rules for existing or registered power plants or those that have had their energy accounted for in CCEE or committed to distributors that are not entitled to fit within the systematic framework brought in by REN 786/2017.

Other issues that went outside of the topic of the public hearings were disregarded, totaling 37% of the contributions submitted to ANEEL.

In short, the priority given to meeting specific demand by changing the power dedicated to distributed minigeneration has gone beyond the expectations of some industry participants and interested parties as regards the moment and form of implementation. They preferred for this change be made in the context of a broader reform of the regulatory framework of the Electric Energy Compensation System. Broadly speaking, however, the change pleased many participants engaged in distributed generation projects.

Category: Tax

Since the Federal Police launched Operation Zelotes in 2015, which unveiled corruption cases in the Administrative Tax Appeals Board (CARF), the body has undergone several institutional changes, such as a change in its directors, changes in internal rules, reduction in number of panels, among other measures that sought to reformulate the body's procedure for deciding cases.

Even with all the changes made in favor of technical improvement in CARF, the manner of conducting proceedings and some of the procedures provided have been questioned. A significant increase in lawsuits requesting a stay of judgments in administrative proceedings and modification of decisions on the grounds of procedural errors was experienced.

This becomes very clear when analyzing the numbers. The number of applications for writs of mandamus filed in 2014 against CARF's acts was insignificant. However, in 2016, after the restructuring of the agency, approximately 150 applications for writs of mandamus were filed to challenge a variety of administrative acts. And from January to August of this year, there have been more than 180 applications for writs of mandamus.

The president's casting vote and the lack of parity between representatives of the Tax Authority and taxpayers in the composition of the panels are the points most often raised in hundreds of suits filed.

According to the taxpayers’ arguments, there is a breakdown of equal treatment under the law in the decisions since the casting vote is given to the chief judge of the panel, who is, by legal determination, always a representative of the Tax Authority. Supported by an empirical survey by the Tax Studies Center of the Getúlio Vargas Foundation on CARF's decisions issued until June 2016, taxpayers demonstrate that almost 100% of tax assessments are upheld by the Superior Chamber of Tax Appeals when the so-called casting vote comes onto the scene, thus evidencing that the director representing the Tax Authority almost always stands against the taxpayer. Faced with relevant questioning on the part of the taxpayers, the Brazilian Bar Association (OAB) filed Direct Action of Unconstitutionality No. 5,731 in order for the Federal Supreme Court to rule definitively on the constitutionality or lack thereof of the casting vote. The suit is still awaiting a decision, but it already reflects a possible need to change CARF's recent internal rules, which have clearly caused distortions in the decisions. Regarding this same issue, the Federal Public Prosecutor's Office submitted a brief favorable to the taxpayer seeking the granting of an injunction in writ of mandamus No. 1002344-58.2017.4.01.3400. This may reinforce the need for reform of CARF's internal rules of procedure. Failure to comply with the parity between the directors representing the Tax Authority and the taxpayers, provided for in article 23 of the CARF's internal rules, is also the subject of controversy. The absence of directors representing taxpayers in CARF makes the composition of some groups unequal. In the Judiciary, taxpayers argue for the observance of articles 18 and 24 of CARF's internal rules, which provide for the appointment of alternates in cases of vacancy, impediment, interruption of office, leave, or absence of a director. On this point, it is known that the Judiciary has already granted preliminary injunctions favorable to taxpayers, ordering a stay of CARF's judgments in which there is no composition of parity until an alternate representing the taxpayers is summoned. Regarding this issue, the confederations, which are responsible for nominations to CARF to fill the vacancies of directors representing taxpayers, suggest that the recent decision to bar CARF's directors from having the right to practice law has diminished the number of professionals interested in serving at the body. In conclusion, it is found that the Judiciary is exercising true oversight over the legality of the administrative acts, guaranteeing the effective application of the principles that guide the public administration and guarantee to taxpayers legal certainty in decisions on their tax claims. The current scenario, of constant interventions by the Judiciary in CARF’s decisions, suggests the need for changes in that administrative body. With the stay of judgments and reforms of decisions, CARF loses its strength and still more cases pending judgment accumulate, contrary to the Tax Authority's interest in collection.

Category: Capital markets

Just as Uber and AirBnB have shockingly transformed the transportation and hospitality markets, with costs and practices never before offered, the same is now envisaged for business financing options. Although it is a historically conservative area, as it deals directly with individual savings, the market has increasingly sought alternative, simplified, and cheap financing solutions.

In this context, crowdfunding arose. In Brazil, crowdfunding was recently regulated by the Brazilian Securities Commission (CVM) through Ruling No. 588/17. It is a simplified form of access to the capital markets for small companies, not listed on the stock exchange, through the issuance and public distribution of securities via an electronic investment platform. CVM has eliminated the need for prior registration and, thereby, exempted the issuer from various formalities and distribution costs.

However, the biggest crowdfunding revolution has to do with other aspects: the potential for penetration into a much wider investor market and the risk that this investment might pose to investors.

Unlike offers made by private equity or venture capital funds (through FIPs), where only the most sophisticated investors are admitted, crowdfunding can reach investors through very easy to use electronic platforms, retail investors in general, including small, non-sophisticated investors who do not participate in the universe of public offerings in Brazil.

As far as investment risk is concerned, crowdfunding enables non-sophisticated investors to contribute resources to developments that are still very premature, where there are many uncertainties about their viability and success. If, on the one hand, it creates an opportunity for return at multiples more attractive than other traditional forms of investment, on the other hand, there is also the real risk of total loss of the capital invested.

As a measure to mitigate this risk of capital loss, CVM has set the maximum amount of investment by an unsophisticated individual investor to only R$ 10,000 in several crowdfunding offers carried out per calendar year.

While it is recognized that this limitation is intended to protect small investors, it can be argued that it also inhibits product development and possibly risk mitigation itself. After all, if individual investors could make a bigger investment, they would be able to diversify their portfolio among various smaller companies (with different projects, entrepreneurs, and industry sectors), thus reducing the risk of total loss of the consolidated investment.

By limiting investment to only R$ 10,000, CVM induces concentration into one or a few ventures, possibly reducing the interest of investors with this profile in allocating part of their capital in startups and similar projects.

There is, therefore, doubt about crowdfunding's real ability to expand its market penetration, with the risk that it may become a simplified tool for more sophisticated investors traditionally accustomed to the universe of venture capital and private equity and for whom the limit of R$ 10,000 does not apply. It is an issue that will only be answered with the passage of time and the consolidation of the product in our market.

This problem has been observed in more developed markets such as the United Kingdom and the United States of America, where crowdfunding has served as a platform for more sophisticated players.

Category: Tax

Created in 1959 by Law No. 3,692, Sudene's purpose was, since its inception, to implement an auspicious Northeast Region development plan, aiming to reduce regional and social inequalities, which was also worth mentioning in article 3, III of the 1988 Federal Constitution: "The fundamental objectives of the Federative Republic of Brazil are: (...) III - to eradicate poverty and substandard living conditions and to reduce social and regional inequalities.”

In 1998, Law No. 9,690 changed the area of ​​coverage of Sudene to also include within the concept of the "Northeast Region" the Jequitinhonha Valley and the North of the State of Espírito Santo.

After three years, Provisional Presidential Decree No. 2,156/2001 extinguished Sudene and created Adene with the same nature as a federal autonomous entity, giving again a new format to the so-called "Northeast Region" and including in the priority area the State of Espírito Santo and the Mucuri valley, in the State of Minas Gerais, among other municipalities.

Six years later, in a new response by the legislator, Complementary Law No. 125/2007 extinguished Adene and created Nova Sudene, once again changing the area to receive priority treatment, called by law the "Northeast Region."

Nova Sudene's area of ​​activity is different from all others, as the Municipality of Governador Lindenberg only became part of the Regional Development Plan with Provisional Presidential Decree No. 2,156/2001, remaining in the Nova Sudene configuration, in addition to several new municipalities of the State of Minas Gerais that were incorporated.

It is important to clarify that all reports that grant benefits after the termination of Sudene were issued by their Inventories, that is, not only the reports prepared for the companies located in the south of the State of Espírito Santo, but also all those issued to beneficiary companies located in the Northeast Region, which followed a similar form and procedure and were promulgated by the same competent authority.

The Inventory was created by the Ministry of National Integration when Adene still existed. Therefore, Sudene and Adene never coexisted. It was the Inventory that issued all reports for grants for Adene. The agency itself has never even questioned the competence of Sudene’s Inventory to issue reports, which were issued on the basis of the two provisional presidential decrees, in particular on article 1, paragraph 4, of Provisional Presidential Decree No. 2,199-14/2001, already transcribed above, and articles 1, 2, 3, I, and 11, paragraph 2, of Provisional Presidential Decree No. 2,156-5/2001, which are from exactly the same day.

The activity of interpretation presupposes differentiating prescriptive statements conveyed by laws from the concept of a legal norm. To interpret is nothing more than to extract or construct the content, meaning, and scope of legal norms based on the contact of the interpreter with the legal texts.

There can never be a consideration or interpretation of a legal rule decoupled from the other rules that are part of the legal system. In a certain sense, there cannot be any interpretation that is not systematic. It is positive law here and now, or considered at a given historical moment, taken fully into account, respecting its hierarchical structure of principles and rules.

A systematic analysis shows that Sudene, Adene, and Nova Sudene succeeded in time without overlapping functions, since in reality they had the same nature as an autonomous entity of the federal government.

Whether called an authority or agency, the primary purpose of these governmental entities has always been to promote the sustainable development of the Northeast Region. All of them fulfilled the constitutional design provided for in article 3, item III, to eradicate poverty and marginalization and reduce regional and social inequalities, as well as the provisions of articles 170, VII, 151, I, and 43 of the Federal Constitution.

It is important to note that the physical area of ​​the nine states that make up the Northeast Region of Brazil was never confused with the legal design of the area covered by these entities, ever since Sudene was created. The change in name of these entities is absolutely irrelevant. What has always been sought was "to study and propose guidelines for the development" of a special DNA, greater than those nine states of the federation.

Over time, at the initiative of the legislature, Sudene has grown or shrank in size in accordance with the need to protect human beings in the course of developing its action plan.

The Northeast Region development fund, of an accounting nature, created by article 3 of Provisional Presidential Decree No. 2,156/2001 and to be managed by Adene, with the purpose of securing funds for investments in the priority region, established that at least 3% of the funds ​obtained should be applied in the State of Espírito Santo without any indication of a restriction on geographic location, whether in the municipalities in the north or in the south.

It is impossible to contemplate a regional development agency without the existence of a source of financial resources to support it. One thing is tied to the other. It is in function of a development plan that a fund of resources is created.

In turn, article 2 of article 11 of Provisional Presidential Decree No. 2,146/2001 stated that "Adene's area of ​​activity is defined in article 2 of this Provisional Presidential Decree," which included, without restriction, all the municipalities of the State of Espírito Santo.

With that being the case, how could article 1 of Provisional Presidential Decree No. 2,199/2001 be interpreted in such a way that only the municipalities located in the area of ​​the extinct Sudene, namely those in the northern region of Espírito Santo, obtain the tax benefit of up to 75% of the income tax and additional non-refundable amounts, calculated over operating surplus?

The entities, regardless of their given name, only succeeded each other in time, with constant and normal mutations in the area considered as deserving of priority treatment, in the terms advocated by the Federal Constitution.

With Provisional Presidential Decree No. 2,146/2001, once again, the semantic content of the word Northeast Region was changed. And by logical imposition it was no longer possible to issue grants of incentives for an area (that of the extinct Sudene) that was in disharmony with the area considered, under the current legislation, as a priority and legitimate part of a regional development plan.

Therefore, it would be illegal not to issue grants of incentives establishing for tax benefits for companies located in the southern region of the State of Espírito Santo in order to prove compliance with the requirements established by law, since the activity of the Administration is bound.

The incentive modality treated here is the basis for the promotion of areas chosen by the legislator as lacking a development plan in order to combat social and regional imbalances, and this kind of benefit is only granted to companies that prove they meet predetermined conditions.

But that is not all. In addition to the above conditions, there is still a series of onerous conditions established to be respected by the companies after the concession, such as: (i) prohibition on distribution to partners of the value of the tax that is no longer collected due to reduction or exemption; and (ii) the need for the company to establish a capital reserve, which can only be used to absorb losses or to increase capital stock.

In addition, the benefits have a certain term of validity. These are, therefore, exemptions that impose requirements granted for a certain period of time.

Even if one were to insist on the allegation that the reports issued under Adene are invalid, they could no longer be subject to revocation or annulment years after their receipt by beneficiaries. This is because the STF's own Precedent 473 does not apply to the case in the manner intended by the adverse party, since, as seen, it has had legal consequences in the sphere of bona fide third parties who assumed bilateral obligations with the state, and these subjective rights must be respected.

Moreover, since it is a benefit that comes with requirements, revocation and annulment are forbidden by reason of preclusion of the possibility for the Administration to choose one or another interpretation, even if such behavior is the measure that seems to the Administration to be the most convenient and timely discretion.

On the other hand, even if it could be considered an error on the part of the Administration, that is, that the interpretation initially adopted was not the best or the most appropriate one, it is already well known that an error of law cannot serve as grounds for annulment of administrative acts (articles 145, 146, and 149 of the National Tax Code - CTN), which, in this case, are linked. Positive law is assumed to be known to the Administration.

One must insist, in the name of the great principle of legal certainty affirmed in article 2 of Law 9,784/99: even if the reports were rife with illegality, it would be forbidden for the Administration to cancel them, thereby imposing the duty to abide by them. Whoever cancels grants of incentives for benefits that also impose requirements three years after they were enjoyed may end up doing so at the end of the total period of enjoyment of the incentive, with retroactive imposition of interest, monetary correction, and fines. The legal certainty and good faith of the beneficiaries would be compromised. Under such conditions, no company would assume requirements for benefits and live with the element of surprise in the event of future cancellation.

The annulment of the grants of incentives also implies an offense against articles 178 and 179 of the CTN, given that it is an incentive (a) for a certain period of time and (b) granted under conditions that impose requirements.

The impossibility of invalidating the grants of incentives for conditional benefits and for a certain period ensures the very survival of this kind of incentive, thereby protecting, by way of indirect consequence, the public interest.