Publications

Category: Litigation

Sanctioned in August, Law No. 14,195/21 (Business Environment Act) brings expectation of debureaucratization for Brazilian companies and incentive to investments in Brasil. The text is the result of the conversion of Provisional Measure No. 1,040/21, edited by the federal government to improve the position currently occupied by the country - 124th place - in the Doing Business ranking of the World Bank.

Among the legislative changes of a corporate nature introduced by law, the most commented measure is the facilitation of the procedure for opening companies. One of the most relevant aspects of the legal text refers to the possibility of automatic issuance of operating licenses and permits (without human analysis) for medium risk activities, provided that the entrepreneur, partner or legal guardian of the company^[1] sign a term of science and responsibility.

Risk classification will consider specific state, district, and municipal laws. In the absence of legal rule, the definition will be based on the classification of the National Network for the Simplification of Registration and Legalization of Companies and Businesses (Redesim).^[2] In addition, the Business Environment Act provides for the waiver of firm recognition in acts filed in the commercial boards^[3] and prohibits, in the process of registering entrepreneurs carried out by Redesim, request data or information that is already in the federal government database.^[4]

The Business Environment Act also amends important aspects of Law No. 6,404/76 (Law of The S/A). The first amendment refers to the provision of plural voting for one or more classes of shares to allow non-majority shareholders to control the company.^[5] Such provision does not, however, apply to companies controlled directly or indirectly by the public authorities, public undertakings and mixed-economy companies and their subsidiaries. There was also increased protection for minority shareholders.

Through paragraphs I and II of paragraph 1 of Article 124 of the S/A Law, the new law changed the minimum deadlines for the convening of the general meeting of shareholders, which become:

• in the case of a closed company, 8 days in advance for the first call and 5 days in advance for the second call; and
• in the case of a publicly opened company, 21 days in advance for the first call and 8 days in advance for the second call.

Art. 124, paragraph 5, inc. I, it also provides that the Brazilian Securities and Exchange Commission (CVM) may, in a letter or at the request of any shareholder, and after hearing the company, determine the postponement of the general meeting for up to 30 days if the information provided is insufficient for resolution.

With the inclusion of item X in Article 122 of the S/A Law, it will be up to the general meeting of shareholders to decide on the conclusion of transactions with related parties, the disposal or contribution of assets to another company, if the value of the transaction corresponds to more than 50% of the value of the total assets of the company indicated in the last approved balance sheet.

In relation to publicly held companies, paragraphs 3⁰ and 4⁰ article 138 of the S/A Act, prohibiting the accumulation of the positions of chairman of the board of directors and the position of Chief Executive Officer or Chief Executive Officer of the Company^[6] and enabling CVM to exceptionalthis rule for publicly held companies with "smaller" companies, based on the terms of its regulations.

In addition, the Business Environment Act inserted paragraph 2⁰ article 140 of the S/A Law, through which it made it mandatory for publicly held companies to participate independent directors, in the terms and deadlines to be defined by cvm. This rule was already observed as a good practice of corporate governance but became legally enforceable under the new law.

In an attempt to boost tax collection, the original text sent to sanction the President of the Republic provided for the extinction of simple societies in the Brazilian legal system – a topic of intense debate in the legal community. However, the provision was vetoed^[7] by the President of the Republic, a decision celebrated by several entities – especially those linked to liberal professionals.

Despite this veto, the president sanctioned the extinction of individual limited liability company (Eireli), which was expected, given that, even before the creation of the single-person limited company format, established by the Federal Law No. 13,874/19 (Economic Freedom Law)^[8], the Eireli format was already in disuse.

The new law should not be fully capable of producing immediate practical effects, since certain aspects depend on specific regulations and ordinances of the responsible bodies. In any case, the text represents an important step towards the resumption of economic activity in Brazil, fostering entrepreneurship by promoting the debureaucratization of procedures and incorporating values introduced by the Economic Freedom Act of 2019.

^[1] Art. 6a, Caput and §1 of Law No. 11,598/07.

^[2] Art. 5a, Caput law no. 11,598/07.

^[3] Art. 63 of Law No. 8,934/94.

^[4] Art. 11-A of Law No. 11,598/07.

^[5] Art. 16 c/c 110-A of Law No. 6,404/76.

^[6] This forecast will only take effect within 360 days of 08/27/2021.

^[7]According to the veto message, the device contradicts public interests by profound changes in the corporate regime, subjecting a significant portion of the economically active population to unwanted tax reflexes in municipal laws and adaptation costs.

^[8] Civil Code: "Art. 1,052. In the limited company, the liability of each partner is restricted to the value of their shares, but all are jointly and severally liable for the payment of the share capital.

• 1 - The limited company may consist of one (1) or more persons."

Category: Labor and employment

The Minister of the Supreme Federal Court (STF) Gilmar Mendes dismissed an extraordinary appeal (1160361), on September 14, to reform the decision given by the Labor Court for the execution of a company, without it having participated in the phase of knowledge of the action.

The process included the company in the passive pole for alleged formation of an economic group, only in the labor execution phase. According to the company's defense, it did not have the opportunity to participate in the knowledge phase, which would have impaired the production of evidence, in addition to confronting the guarantee of constitutional principles – such as due process, contradictory and broad defense – and violating the article. 5, II, XXXV, LIV and LV, of the Federal Constitution (CF).

Despite the argument of the defense, the Superior Labor Court (TST) held that there is no affront to the constitutional articles relied on, justifying that the cancellation of Summary 205^[1] that court would supposedly allow the inclusion of third parties in the execution phase.

Faced with the negative decision, the company brought an extraordinary appeal to the Supreme Court, which was accepted on the basis of Article 97 of the CF^[2] and in Binding Summary 10 of the Supreme Court.

In his decision, Minister Gilmar Mendes founded that, with the 2015 Code of Civil Procedure (CPC), "deserves to revisit the jurisprudential guidance of the the quo in the sense of the feasibility of promoting execution in the face of execution that did not integrate the procedural relationship in the knowledge phase, only because it integrates the same economic group for labor purposes".

For Minister Gilmar Mendes, even with the cancellation of Summary 205 of the TST, according to Article 513, §5 of the CPC, the company, even belonging to the same economic group, could only participate in the execution phase and suffer constriction of assets and block of values, if it had participated in all moments of the process,  since the article expressly provides that compliance with the judgment cannot be promoted if the guarantor, co-obliged or responsible has not participated in the knowledge phase.

According to the Supreme Court, following the plenary reservation clause, the TST could not disregard Article 513, §5, of the CPC, but declare it unconstitutional or respect it.

The theme is also addressed in the Fundamental Precept Non-Compliance (ADPF) No. 488, through which the National Transport Confederation (CNT) questions acts carried out by courts and judges of work that include individuals or legal entities only in the execution phase, without them having participated in the phase of knowledge – a situation similar to that of the 1160361.

At ADPF, still in procedure in the Supreme Court, the CNT maintains that the inclusion in the knowledge phase, in addition to not being provided for in the legal system, restricts the principles of contradictory, broad defense and due process, harming those who seek to prove that they do not participate in economic groups.

This is because the procedural and recursive characteristics of the labor execution phase restrict the right of defense, especially in the higher courts, such as the TST, because in them only constitutional matters can be discussed, which affects the interest of the party who did not participate in the knowledge phase of the process.

Some Regional Labor Courts (TRT) have rejected the defendant's insertion not included in the judicial title in the passive pole of action based on the aforementioned violations.^[3] However, it is noted that there is still great resistance from TRTs and the TST itself, which makes clear the legal uncertainty for the whole business community. However, although the recent Supreme Court decision was delivered in a monocratic manner, the positioning should impact labor executions substantially.

^[1] Summary no. 205 of the TST. ECONOMIC GROUP. EXECUTION. SOLIDARITY (cancelled) - Res. 121/2003, DJ 19, 20 and 21.11.2003. The sympathetic person, a member of the economic group, who did not participate in the procedural relationship as claimed and who, therefore, is not included in the judicial enforcement order as a debtor, cannot be a taxable person in the execution.

^[2] Art. 97. Only by the vote of the absolute majority of its members or members of the respective special body may the courts declare the unconstitutionality of law or normative act of the Public Power.

^[3] ECONOMIC GROUP. SINGLE EMPLOYER. INCLUSION OF A COMPANY THAT WAS NOT INCLUDED IN THE EXECUTIVE ORDER. IMPOSSIBILITY. A company that is part of an economic group that did not participate in the knowledge phase and was therefore not the judicial executive title cannot be held responsible for the payment of labor claims, under penalty of affront to the constitutional principles of due process and broad defense. The thesis of the single employer or dual responsibility - according to which all members of the economic group are employers - gives guarantees to the worker, but does not authorize the subversion of constitutional guarantees inherent in the conduct of the judicial process. This is because the "single employer" derives from the construction of the doctrine that did not intend, with the use of this expression, to disregard the individuality of each of the companies that are members of the economic group, but only to give them solidarity for the effects of the employment relationship. (TRT-12 - AP: 00025178720105120027 SC 0002517-87.2010.5.12.0027, Rapporteur: HELIO BASTIDA LOPES, SECRETARIAT OF THE 2A CLASS, Publication Date: 11/03/2016)

Category: Environmental

The growing concern about climate change and the intensification of discussions on the subject are increasingly impacting the country, both in the proposition of new standards involving environmental issues and in the enforcement of existing provisions. In addition, there is a constant demand for strengthening environmental by stakeholders, mainly with regard to the disclosure of information relating to the impacts of companies’ activities on climate issues.

According to the report United in Science 2021, published by the World Meteorological Organization (WMO), the period between 2011 and 2020 was considered the warmest ever to be disclosed in the reports. The Secretary-General of the United Nations (UN) also recently emphasized the urgent need to reduce air emissions and actions to protect world population from the negative effects of climate change. This increases the pressure on the various sectors of society to strengthen their sustainable policies in order to reduce the global risks that such changes may provoke. Such idea is even more relevant considering the rise of initiatives related to the adoption of concrete measures derived from ESG policies (environmental, social and governance).

In 2020, for example, there was the proposition of Bill No. 3,961/20 (PL), which, if approved, would place Brazil in a state of climate emergency, until the situation is circumvented and actions to reduce the impact of human activity on climate are no longer urgent.

Among the devices proposed in the PL, the following stand out:

• prohibition of relocation by the Brazilian government, during the emergency situation, of budgetary resources intended for environmental protection, the fight against deforestation and the reversal of climate change for other purposes;
• preparation of the National Plan for Response to Climate Emergency; and
• conclusion of the complete transition to a sustainable and carbon-neutral socio-environmental economy model by 2050.

The PL is in progress before the Chamber of Deputies and currently awaits the opinion of the rapporteur in the Committee on Environment and Sustainable Development, which will be decisive for the evolution of discussions on the subject in the house.

Although the PL is a very relevant innovation regarding climate change, the theme is already regulated, at the federal level, by Federal Law No. 12,187/09 (National Climate Change Policy - PNMC) and Federal Decree No. 7,390/10. Both provisions regulate Brazil's commitment to the United Nations Framework Convention on Climate Change to reduce greenhouse gas emissions. However, although it has been an important step towards regulating climate issues, the PNMC still demands additional standardization for effective structuring of climate governance. It is necessary to establish instruments for the country to implement mitigation and adaptation actions and means for their enforcement as provided for in Nationally Determined Contributions (NDCs).

Also at the federal level, the Central Bank of Brazil (BCB) has recently published several acts that detail and strengthen existing regulations on the management and disclosure of climate risks applicable to financial institutions. One example is Resolution of the National Monetary Council (CMN) No. 4,943/21, which sets forth obligations for financial institutions to identify, measure, evaluate, monitor, report, control and mitigate the adverse effects of climate change relating to their activities. To implement such climate risk management measures,^[1] institutions should adopt, in summary, mechanisms to identify and monitor the risks arising from their products, services, activities or processes, as well as their suppliers and controlled entities.

Another interesting innovation brought by the resolution is the obligation to identify, in a timely manner, possible political, legal, regulatory, technological or market changes, including significant changes in consumption preferences, which may significantly affect the climate risk incurred by the institution, and to inform which procedures can be adopted to mitigate it.

BCB Resolution No. 139/21, in turn, provides for the disclosure of the Social, Environmental and Climate Risks and Opportunities Report, allowing the investor to analyze, in an integrated manner, and based on the same criteria, risks and business opportunities offered by each institution.

Regulations on the subject may be considered incipient, but we have seen very innovative decisions by the courts, which have been incorporating legal guidelines related to climate issues into their decisions. An example is the recent decision rendered in the context of a public civil action^[2] filed by institutions and associations representing the residents of the Municipality of Nova Seival^[3], in the State of Rio Grande do Sul. The Court determined, on August 31, 2021, that the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA) shall include analyses related to climate change in the Reference Terms (TRs)^[4] that support the environmental licensing procedure of thermal power plants located in the state of Rio Grande do Sul.

In the referred case, the associations discuss the validity of the environmental licensing of a project involving the construction of the largest thermal power plant in the state, based on allegations that the federal environmental agency responsible for licensing, IBAMA, would have failed to provide the necessary publicity to public hearings that would be held as a requirement for issuance of the environmental license of the enterprise, and that there were gaps in the Environmental Impact Study (EIA) and its Environmental Impact Report (RIMA) (together EIA/RIMA) presented by the entrepreneur to support the environmental licensing. These flaws, in the associations' view, should be addressed in so that the licensing process could progress. Amongst the gaps pointed out by the authors of the action, we highlight the absence of a Health Impact Assessment (HIA) and information on the contribution of greenhouse gas emissions arising from the operation of the plant, as well as an analysis of its impact regarding the achievement of the Brazilian goals undertaken in the Paris Agreement.^[5]

Based on the technical opinions submitted by the associations, the Court stated that the activity would present relevant risks to the environment and to the region’s community. Thus, based on provisions of the PNMC and State Law No. 13,594/10, which created the Gaucho Policy on Climate Change, the judge determined that the TRs involving environmental licensing of thermal power plants include guidelines on climate change, mainly with regard to the need of conducting a strategic environmental assessment, in accordance with art. 9 of the state law in question, and the inclusion of an analysis of the risks posed to human health.

Thus, even if there is still a long way to go, the progressive increase in initiatives is noticeable, including judicial claims, regarding climate risks and their respective management. They are mainly driven by the growing discussion on the subject and the eagerness for the incorporation of ESG criteria in the corporate and regulatory spheres.

^[1] CMN Resolution No. 4943/2021 defines climate risk, in its transition risk and physical risk aspects, as:

"I. Climate risk of transition: the possibility of losses to the institution caused by events associated with the transition process to a low-carbon economy, in which greenhouse gas emissions are reduced or compensated and the natural mechanisms for capturing these gases are preserved; and

II - Physical climatic risk: possibility of occurrence of losses to the institution caused by events associated with frequent and severe weather or long-term environmental changes, which may be related to changes in weather patterns."

^[2] Public Civil Action No. 5030786-95.2021.4.04.7100/RS, filed before the 9th Federal Court of Porto Alegre - Judicial Section of Rio Grande do Sul.

^[3] The institutions and associations are: Gaucho Association for the Protection of the Natural Environment (Agapan); Gaucho Institute of Environmental Studies (Ingá); Preserve Institute; Cooperativa Agroecológica Nacional Terra e Vida Ltda. (Coonaterra-Bionatur); and Center for Popular Education and Agroecology (Ceppa).

^[4] The TR is the document issued by the licensing authority, in which methodological guidelines are indicated to orientate the preparation of the EIA/Rima. The EIA/Rima is necessary to evaluate the environmental feasibility of projects with significant polluting potential. We highlight the need to include in the EIA/RIMA the indication of which measures will be implemented to eliminate, mitigate or compensate for the negative impacts arising from the operation of the enterprise.

^[5] All signatory countries to the agreement have assumed the obligation to submit NDCs, which can be defined briefly as voluntary commitments to collaborate with the global goal of reducing atmospheric emissions to mitigate the effects of climate change. The Brazilian government presented its new NDCs by 2020 and has committed to reducing domestic greenhouse gas emissions by 37% by 2025 and by 43% by 2030, in addition to neutralizing them by 2060. More recently, during the Climate Leaders Summit, Brazil indicated that climate neutrality would be achieved by 2050.

Category: Tax

Since the general repercussion became a requirement for admission of extraordinary appeals in the Supreme Court (STF), this type of appeal has been paving the way for questions of great national interest to reach the Court and affect a significant number of interested parties.

The introduction of the requirement also highlighted the role of the Supreme Court as a constitutional court. It happens that, once the general repercussion of a matter is recognized, the analysis of the theme of the judgment of the specific process suffers a shift. First of all, the Supreme Court takes the decision on the constitutional subject of general repercussion without limiting itself to the grounds set out in the apeal. The court may receive contributions from representative entities (amici curiae) with notorious knowledge on the subject and, after, apply the understanding to solve the individual process.

This new model of trials related to topics of great interest bears similarity with abstract and concentrated control of constitutionality. Only after the end of this phase, the solution will be applied to the specific case that allowed the arrival of the matter to the Supreme Court.

The underlying effects of decisions given under this system are binding for all courts. After the court of second degree applies the decision, will not be accepted an extraordinary appeal, being possible the handling of complaint against the decision of the court of 2nd degree (provided that exhausted the ordinary instance) that does not apply the position established by the Supreme Court in the general repercussion.

It is even possible to see an important change related to the constitutionality control exercised by the Supreme Court in recent years. Decisions given in the trial of subjective processes, but according to the regime of general repercussion, begin to have an effect similar to those originated from abstract and concentrated control.

This new way of looking at the role of the constitutional court stems from the attribution of the so-called transcendent effect to supreme court decisions in control of diffuse constitutionality, especially when marked by abstractivization.

The manifestations of the Supreme Court are of interest to the entire collective and significantly impact in society, which is why the effects are usually considered in decisions.

The Supreme Court does not act in an airtight manner or even without considering the events that occurred in society – although it is frequent to try to refute this statement – especially because, when interpreting the constitutional provisions applicable to the cases under its assessment, the conceptions that prevail at that time are taken as premises.

However, claiming the influence of extralegal factors in the application of law requires some care, otherwise the Judiciary takes on a typical function of the Legislative Power.

In relation to the control of constitutionality of laws that create or modify the rule of a tax, the argument that the declaration of unconstitutionality may have a relevant impact on public accounts and compromise the federative person's ability to continue activities of interest to the population is often raised (sometimes even hidden).

This extralegal argument cannot serve as a reference for the exercise of constitutionality control, much less as a justification for recognizing the validity of a law that creates or modifies the legislation of a tax.

With the edition of the Code of Civil Procedure (CPC) of 2015, article 927, § 3, was introduced, which contains a wording similar to article 27 of Law No. 9,868/99, which authorizes the Supreme Court and other higher courts to modulate the effects of their decisions, provided that there is a modification of its case law or in trial of repetitive appeals. The justification for modulating the effects should be social interest and legal certainty.

The point of attention is the existence of an understanding with broad scope and whose modification may affect a significant number of legal relations. For this reason, the effects of the decision are allowed to be calibrated, with the establishment of a specific moment from which the interpretation conferred should be observed.

The possibility of changing the interpretation of legal provisions is the result of the very dynamics of the rule of law and reflects the changes, in various ways, that occur in society and influence the applicators of law.

The search for legal certainty requires that acts consolidated and concluded in the past in line with the prevailing orientation at that moment must be protected and shielded against revision or reform based on supervenient interpretation.

Due to a scenario marked by changes in interpretation, legal certainty as a value to be achieved presupposes the establishment of beacons and criteria that protect the administered who act in moderation, following guidelines provided by the Administration itself or even precedents emanating from the Judiciary.

It cannot be accepted that a predominant interpretation in a given period is used as a basis for the revision and/or reform of an act performed many years earlier, when the orientation was different. This is the concept of legal certainty which we advocate and on the basis of which we believe that the modulation of the effects of decisions amending dominant case law should be based.

The consequence of the modification of the dominant case-law is seen, by positive law itself, as a factor authorising the limitation of its effects. And what would that be? The disregard of many legal acts implemented under the then dominant orientation, forcing the return to the previous situation. In the case of the tax liability, it is the possibility of repaying amounts paid improperly or even the collection of amounts not paid in due course.

By authorising the effects of the decision to be limited and avoided the consequences of the undoing of acts carried out in accordance with the guidance of the higher courts, law recognises that, exceptionally, extralegal factors may be invoked as the basis for a given decision.

The alternative requirement to allow the modulation of the effects of decisions is the social interest. Once again, the consequences of the decision for society may be used as a reason for limiting the effects of the judicial pronouncement.

The argument often invoked as the basis for requests for limitation of the effects of a decision that recognizes the unconstitutionality of the device that creates or modifies the rule of a particular tax – harmful impact on the public coffers – cannot be accepted, if solely taken. Social interest is not confused with the interest of the tax administration.

The assumptions that lead to consider possible effects of the decision in society as an extralegal justification to limit the effects of the decision are put by law and should be observed.

As this is an exception accepted by law, it is essential that the modulation of the effects of judicial decision-making on the basis of extralegal grounds be adopted sparingly. It should only occur when the authorizer requirements are present.

Category: Tax

With the publication of Decrees Nos. 47,767/21 and 47,768/21 on September 21, the State of Rio de Janeiro regulated, respectively, Laws Nos. 9,214/21 and 9,289/21, which define special tax treatment for thermoelectric projects in its territory.

Law No. 9,214/21, regulated by Decree No. 47,767/2021, establishes the following tax treatments:

• ICMS deferral on the following transactions carried out by the project owner or by companies that may be formally hired or subcontracted to build the power plants:
  • Import of machinery, equipment, parts, pieces, and accessories for the installation of the venture, provided that they are imported and cleared through Rio de Janeiro's ports and airports;
  • Internal acquisition of machinery, equipment, parts, pieces, and accessories intended for the installation of the venture;
  • Interstate acquisition of machinery, equipment, parts, pieces, and accessories intended for the installation of the venture, with regard to the tax rate differential.
• Exemption from ICMS on imports of natural gas, even if liquefied, to be used in its thermoelectric power generation process.

In turn, Law No. 9,289/21, regulated by Decree No. 47,768/2021, grants:

• ICMS deferral in the successive internal operations with natural gas produced in the state to be consumed in thermoelectric power plants to the time when the electric power leaves that establishment;
• Deferral of the ICMS tax on services rendered for the transportation of natural gas produced in the state to be consumed in thermoelectric power plants to the time when the electric power leaves that establishment; and
• Exemption from the collection of the deferred tax in the event of interstate transactions with electricity.

The special tax treatments will be in force for the term of the energy auction contract expired by the applicant or by December 31, 2032, whichever occurs first.

The decrees establish that taxpayers wishing to adhere to the special tax treatment must file a request for classification with the State Treasury Department (Sefaz).

In order to apply for this tax treatment, the company or consortium must prove that it has won an energy auction held in 2021 or, in the specific case of Decree No. 47,767/21, prove that it has obtained a prior environmental license for the power plant project already installed or to be installed in the state.

Companies must support the application with all documents and information listed in the exhibits to the decrees (which include negative clearance certificates, investment forecasts, income statements, among other documents), as well as additional documents demonstrating the good standing of the company/consortium, in accordance with the requirements set forth in article 9 of Decree No. 47,201/20.

As a condition for using the special tax treatment under Laws Nos. 9,214/2021 and 9,289/2021, the decrees state that companies and consortia must commit to investing at least 2% of the variable cost relating to natural gas, calculated each year, in power generation projects using renewable sources or, optionally, in energy conservation projects or studies on the energy sector, in accordance with the specifications set forth in the laws and provided they are in the interest of the State of Rio de Janeiro.

These investments must be made in projects expressly indicated by the State Bureau of Economic Development, Energy, and International Relations (Sedeeri) or in other projects presented by the company/consortium previously approved by the bureau.

The use of funds will be monitored and inspected by Sefaz, which may require proof of investments made and the appropriate documents in determining the amounts invested.

Specifically in relation to Decree No. 47,767/21, it is hereby established that:

• once the application for classification is granted, an accession instrument will be signed between the company and the state, which will confirm the right to enjoy the benefits provided for in the decrees; and
• if the application is denied, the applicant company may, within 30 days, appeal to the State Bureau of Finance, who shall have 45 days to render an unappealable decision on the matter.

Sefaz will annually publish information related to the decrees, including the taxpayers benefited by the tax incentives.

The decrees prohibit the adoption of special tax treatment for taxpayers who:

• have an irregular tax registration with the state of Rio de Janeiro;
• have a debt with the state treasury, except when the enforceability is suspended;
• hold a stake or have a partner that holds a stake in a company with debt registered in the Outstanding Debt of Rio de Janeiro or with a state registration canceled or suspended due to tax irregularity, except when the enforceability is suspended;
• are in an irregular situation or in breach of tax debt installment payments;
• are in breach of the environmental good standing certificate or do not have one;
• are not in good standing with the FGTS or do not have a Labor Clearance Certificate (CNDT);
• are registered in the Registry of Employers who have submitted workers to conditions analogous to slave labor.

The decrees further establish that taxpayers that fail to comply with the conditions will lose their right to the special tax treatment, in which case they will have to collect the ICMS due for the transactions they would carry out and reverse any credits generated during the transaction.

Category: Infrastructure and energy

With the progress of vaccination and gradual reopening of borders, the aviation sector is beginning to show signs of recovery. In Brazil, the federal government's plan to grant the operation of federal airports to the private sector is following the originally planned schedule. The National Civil Aviation Agency (Anac) approved on September 21 the drafts of the notice and concession contract for the 7th round of airport concessions. The documents will be available for public consultation between September 23 and November 8, 2021, during which time the company and regulated agents may send contributions through a specific electronic form, available on Anac's official website. The date for the public hearing has not yet been released.

Following the same model adopted in the 5th and 6th rounds, the government opted to grant the airports in blocks. This division aims to group together loss-making and surplus-generating airports, improving the attractiveness of the assets to maximize revenue and prevent airports with low traffic and profitability from being left without bidders. Sixteen airports located in the North, Southeast, and Center-West regions will be part of the 7th round. The division will be in three blocks, headed by the airports of Congonhas/SP, Santos Dumont/RJ, and Belém/PA.

The SP/MS/PA block will be composed of the airports of Congonhas/SP, Campo de Marte/SP, Campo Grande/MS, Ponta Porã/MS, Santarém/PA, Marabá/PA, Parauapebas/PA, and Altamira/PA. The minimum initial contribution provided for in the current draft is R$ 487 million. The RJ/MG block will be composed of the airports of Santos Dumont/RJ, Jacarepaguá/RJ, Montes Claros/MG, Uberlândia/MG, and Uberaba/MG, and the minimum initial contribution is R$ 355.2 million. The North block will be composed of the airports of Belém/PA and Macapá/AP, and the minimum contribution currently stipulated is R$ 55.5 million. It is expected that approximately R$ 8.8 billion will be invested over the 30-year concession period.

In addition to the initial contribution to be paid within 15 calendar days from the signing of the concession contract, the winning bidders will also pay variable contributions. These amounts will correspond to the annual amount in Brazilian Reais resulting from the application of a tax rate on the total gross revenue of the concessionaire (and any wholly owned subsidiaries) earned in the year prior to the payment. The first variable contribution will be due as of the fifth full year of the concession, with the following percentages being applied:

RJ/MG Block

North Block

SP/MS/PA Block

Brazilian or foreign legal entities, supplementary pension entities, and investment funds, alone or in a consortium, may participate in the bidding. It is forbidden for a legal entity (or its subsidiaries and parent companies) to participate in more than one consortium to submit a bid for the same block.

The possibility of hiring an expert witness, a new feature introduced during Round 6, was retained. Thus, the bidder that does not have the technical experience required by the call notice shall submit a commitment to hire an expert witness confirming that, if declared the winner, it will demonstrate its qualification through an expert witness contract to be signed with an airport operator that meets the requirements of the call notice. For technical qualification purposes, evidence will be required that the airport operator has processed, in at least one of the last five years:

• 5 million passengers for the RJ/MG and SP/MS/PA blocks; and
• 1 million passengers for the North block.

Congonhas and Santos Dumont airports are among the main Brazilian airports. The location of both in the country's two largest economic hubs raises the federal government's expectation of tax revenue.

Although the pandemic has drastically affected aviation and boosted the use of videoconferencing platforms to avoid travel, Congonhas and Santos Dumont remain attractive assets with the potential to generate intense competition among investors.