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Category: Litigation

Although it has been recognized in Brazil’s legal system for many years, the institute of the procedural legal deal (NJP) had its adoption formalized and systematized only with the new Code of Civil Procedure (Federal Law No. 13,105/15 - CPC).

From the perspective of autonomy of will, the head paragraph of article 190 of the CPC expressly provides, in the causes that deal with rights that admit voluntary settlement, that it is lawful for the parties to stipulate changes in the procedure, to adjust it to the specificities of the dispute, and to agree on burdens, powers, prerogatives, and procedural duties, in a preparatory or incidental manner.

In the words of Fredie Didier Junior,^[1] the NJP is "the voluntary legal fact, which grants factual support for the litigant to be granted the power to regulate, within the limits set in the legal system itself, certain procedural legal situations or change the procedure". Adriana Buchmann affirms the NJP as "instrument of instruments" inasmuch as it is a kind of "agreement entered into in the midst of discord, but not as an equation of it, but with the sole need to organize the terms in which the deal will take place".

From the moment it is entered into, provided it is lawful, precise, and determined, regardless of any judicial approval, the NJP already produces its due effects. In fact, in the NJP, "the judicial evaluation takes place after the case dealt with has been consummated, and is not presented as a requirement for its improvement, but only to verify its legality".^[2]

As an instrument resulting from the autonomy of the parties' will, the NJP is not subject to the judge's assessment of suitability. So much so that the sole paragraph of article 190 of the CPC provides that the terms of the NJP will only have their application prevented "in cases of nullity or misuse in an adhesion contract or where any party is in a clear situation of vulnerability". The interference of the Judiciary, according to the CPC, would only be possible in these scenarios.

Recently, the Superior Court of Appeals (STJ) reinforced this understanding upon deciding REsp No. 1,810,444/SP, decided by the 4th Panel with Justice Luis Felipe Salomão drafting the opinion. It was established that, "when the exclusive prerogatives and interests of the parties are at stake, it will be up to the judge to interfere only to supervise their legality". And concluding: "if, however, in some way, the convention entails restriction or conditioning on the judge’s legal situation, it is intuitive that the deal will only be validly consummated if the judge himself acquiesces".

The STJ denied relief to the special appeal brought, on the grounds that the subject matter of the NJP transcended the limits for which the concept was conceived. In that case, the parties agreed that if a certain debt were to be in default, "the creditor would be authorized to obtain an injunction freezing the debtor party's financial assets, 'on an ex parte and without the need to post a bond".

The 4th Panel of the STJ, maintaining an understanding of the Court of Appeals of the State of São Paulo (TJSP), denied relief to the special appeal because it found that the subject matter of the NJP was deferral of the adversarial process to a moment after the analysis and assessment of the interim remedy of freeze if assets, which, at least in this case, sounded like a direct affront to the powers and acts inherent to the magistrate , among them the general power of discretion.

Highlighting the case of a transaction involving the adversarial process does not make one of the parties vulnerable, which will necessarily require a case-by-case assessment of the situation under discussion, the judgment established that "every time suppression of the adversarial process leads to an inequality of weapons in the case, the procedural deal, or the clause that provides for such a situation, should be considered invalid".

As can be seen, the STJ has not completely ruled out the possibility for the parties signing an NJP that aims to discuss aspects related to the adversarial process. For the High Court, provided that "the transaction about the adversarial process does not make one of the parties vulnerable, given the peculiarities of the case, it is possible to recognize its validity". Given what was decided in REsp No. 1,810,444/SP, the vulnerability or lack thereof of one of the parties should require prior and targeted analysis.

There are other decisions that have been discussing the limits and guidelines of NJPs. The TJSP, for example, on some occasions, has already rejected the possibility for the parties to establish NJPs that have the purpose of agreeing on:

• clauses electing foreign jurisdictions (AI No. 2094625-02.2017.8.26.0000^[3] and 2127099-89.2018.8.26.0000);^[4]
• service of process by delivery of a letter with acknowledgement of receipt at the defendant's address, without the need for a personal signature of the defendant (AI No. 2281669-96.2019.8.26.0000);^[5]
• judicial seal (AI No. 2030704-64.2020.8.26.0000);^[6] and
• percentage of attorneys' fees in litigation (AI No. 2096891-20.2021.8.26.0000).^[7]

Are the above cases found within the scenarios in which the judiciary should interfere in NJPs? Or rather, would the subject matters of these transactions be, in fact, based on the premise established in the sole paragraph of article 190 of the CPC and corroborated by the STJ in REsp No. 1,810,444/SP, interfering in some way with the powers inherent to the judge or, still, contributing to a possible and inapposite vulnerability of one of the parties? The answer to these questions is unknown, since the case law has not yet presented a settled position on the guidelines for NJPs.

^[1] DIDIER JR., Fredie. Civil Procedural Law Course: general part and the cognizance process. 20 ed. Salvador: JusPodivm, 2018, p. 439.

^[2] THEODORO JR., Humberto. Course of civil procedural law. v. 1. 59. ed. (2. Reimp.) rev., current. and expanded, Rio de Janeiro: Forense, 2018, p. 502.

^[3] TJ/SP, Interlocutory Appeal No. 2094625-02.2017.8.26.0000, Opinion drafted by Appellate Judge Hélio Nogueira, 22nd Chamber of Private Law, decided on September 21, 2017, DJe October 6, 2017.

^[4] TJ/SP, Interlocutory Appeal No. 2127099-89.2018.8.26.0000, Opinion drafted by Appellate Judge Jairo Brazil Fontes Oliveira, 15th Chamber of Private Law, decided on October 6, 2020, DJe October 7, 2020.

^[5] TJ/SP, Interlocutory Appeal No. 2281669-96.2019.8.26.0000, Opinion drafted by Appellate Judge Almeida Sampaio, 25th Chamber of Private Law, decided on January 28, 2021, DJe February 2, 2021.

^[6] TJ/SP, Interlocutory Appeal No. 2030704-64.2020.8.26.0000, Opinion drafted by Appellate Judge Cesar Ciampolini, 1st Chamber Reserved for Business Law, decided on August 20, 2020, DJe August 20, 2020.

^[7] TJ/SP, Interlocutory Appeal No. 2096891-20.2021.8.26.0000, Opinion drafted by Appellate Judge Ana Lucia Romanhole Martucci, 33rd Chamber of Private Law, j. May 18, 2021, DJe May 18, 2021.

Category: Tax

Since the promulgation of the Federal Constitution of 1988 (CF/88), a widely discussed topic has been the selectivity applicable to the Tax on Circulation of Goods and Services (ICMS). Amid wide-ranging debates regarding tax reform and changes in the constitutional tax system – including a proposal that aims to end the selectivity of the consumption tax – the question of the scope of selectivity for the ICMS has not yet been settled.

The CF/88 adopted the selectivity technique for the ICMS and for the Tax on Industrialized Products (IPI). However, the constitutional text used different expressions when dealing with the application of this technique for each tax, providing that the IPI "may be selective, depending on the essentiality of the product" (art. 153, paragraph 3, I) and the ICMS "may be selective, depending on the essentiality of the goods and services" (article 155, paragraph 2, III).

In both cases, the criterion selected by the framers of the Constitution to guide the implementation of selectivity by political entities was essentiality, that is, essential products should be taxed in a less burdensome manner, while less essential (superfluous) products will be subject to more burdensome taxation.

Analyzing the constitutional text, the main question is: when using the word "may", the CF/88 would have conferred on the state legislature the power to adopt selectivity in the setting of ICMS rates? If so, what would be the reach of this option?

This important controversy is being reviewed by the Federal Supreme Court (STF) in Extraordinary Appeal (RE) No. 714.139, Topic 745 of the General Repercussion.

In the specific case, the taxpayer requires recognition of the unconstitutionality of the rate of 25% levied on the supply of electricity and the provision of communication services, instituted by the state of Santa Catarina (SC), where the general rate is 17%. In other words, electricity and communication services are taxed with a much higher burden than general taxation, applying the same level adopted for products expressly considered superfluous by the legislation (weapons, ammunition, perfumes, cigarettes, etc.).^[1]

This practice is not restricted to Santa Catarina. Other states rely on the argument that selectivity is an optional technique for the ICMS and set up increased rates for products that are clearly essential.

The recurring taxpayer in Topic 745 maintains the unconstitutionality of the legislation of Santa Catarina that uses the onerous rate applicable to superfluous products to also tax electricity and communication services, in violation of the selectivity imposed by the CF/88. In the taxpayer's view, even if the adoption of selectivity is optional for the ICMS, once differentiated rates are established (to the detriment of a single rate), essentiality is a mandatory criterion to be followed by the states. Based on this same argument, the laws of various states that impose exorbitant rates on essential items are questioned in the judiciary. The states argue that, in the case of ICMS, the CF/88 gave the state legislatures the power to choose whether or not to follow the technique of selectivity when setting rates.

The Federal Attorney General's Office presented an opinion in favor of partial granting of relief to the appeal, agreeing that the legislation of Santa Catarina is incompatible with the principle of selectivity due to essentiality when providing rates higher than the general rate for electricity and communication services. It also recommended modulating the effects of the decision.

Thus far, Justice Marco Aurélio (reporting judge), Justice Alexandre de Moraes (who inaugurated a dissenting opinion), Justice Dias Toffoli, and Justice Carmen Lucia (who concurred with the reporting jdge) voted. The judgment was suspended due to request for a review of the record by Justice Gilmar Mendes and should be resumed soon.

The reporting judge, Justice Marco Aurelio, ruled unconstitutional the legislation of Santa Catarina that set the rate of 25% for electricity and communication services as he considered them a clearly essential good and service, ordering the levy of the general rate of 17%. In the Justice's view, "the option to use the method does not mean that there is no essential nucleus in the precept to be preserved" such that "once selectivity is adopted, the criterion may be nothing other than essentiality". From the moment the state legislature began to encompass differentiated rates for the ICMS, the gradation of the rates must necessarily be determined by the essentiality.

Justice Alexandre de Moraes voted to partially grant relief to the appeal and rejected only the application of the 25% tax rate on the communication services. With regard to electricity, the Justice considered the state legislation to have "applied the principle of selectivity of the ICMS (...) together with the principle of contributory capacity by establishing extra-taxation effects for it" by setting the 12% rate for classes in which consumption is considered essential, disincentivizing rampant consumption and energy waste.

The higher levels of more significant and relevant energy consumption, however, do not reflect waste, but industrial, commercial, and productive use, reinforcing and not subtracting from its essentiality.

The vote of Justice Marco Aurelio, with Justice Dias Toffoli and Justice Carmen Lucia concurring, reflected the unquestionable essentiality of electricity and communication services, which became even more evident during the pandemic.

Of course, in the middle of the application of selectivity, the principle of contributory capacity and extra-taxation are contemplated to some extent, because superfluous products purchased by the more affluent classes are taxed more heavily. However, one cannot rely on these other precepts of the CF/88 to allow electricity and other essential products to be taxed at levels equivalent, and sometimes higher, to those of obviously superfluous products such as weapons, cosmetics, cigarettes, alcoholic beverages, among others.

Despite concurring with the reporting judge on the merits, Justice Dias Toffoli proposed softening the effects of the decision so that it is effective only as of the beginning of the next fiscal year, leaving out lawsuits filed up to the eve of publication of the judgment on the merits.

This discussion is not only relevant for electricity and communication services. States often institute heavy taxation for other clearly essential products, ignoring the CF/88.

In this sense, Justice Marco Aurelio himself, when presenting justifications that confirm the essentiality of electricity and communication services (justifications that are even expendable), brings to light Law No. 7,883/89, which deals with limitations on the right to strike. This law, in article 10, subsection I, considers as essential services or activities "water treatment and supply, production and distribution of electricity, gas and fuels", in addition to other activities listed in the other subsections.

Fuels are an example of products often taxed at very high levels. The state of Amazonas, for example, applies the rate of 25% for operations with natural gas, gasoline, and fuel alcohol, in the same point that includes jewelry, luxury cars, weapons, ammunition and other superfluous goods. Several other examples can be found in the laws of all states.

Taxpayers should be aware of the outcome of this important case and evaluate their strategy for seeking judicial measures to avoid the unconstitutional levying of increased ICMS rates for the products stated, especially considering the possibility of softening the effects of any final decision by the Federal Supreme Court.

^[1] In relation to the supply of electricity, in addition to the general rate of 25%, the state of Santa Catarina established a more beneficial treatment for some specific situations.

Category: Tax

"The ignorant affirm, the wise doubt, the sensible reflect", said the Greek philosopher Aristotle, stating that it fits well to the context of recent tax disputes reviewed by the Federal Supreme Court (STF) and deserves to be remembered because of the decision handed down in the record of Declaratory Action of Constitutionality (ADC) No. 49. ADC 49 reaffirms the settled case law of the higher courts: mere displacement of goods from one to another establishment of the same taxpayer is not a taxable event for the ICMS (ARE No. 1,255,885/MS – Topic 1,099, ARE No. 1,213,482/RS-AgR, Precedent of STJ No. 166, REsp No. 1,704,133/DF-AgInt, REsp No. 1,125,133/SP – Topic 259, among others).

In issuing its decision, the Federal Supreme Court ruled that the levying of the tax presupposes transfer of ownership of the asset, with its collection in the event of displacement of the goods between establishments of the same legal entity being undue, whether in internal operations or in interstate operations.[1] To this end, it was established that the movement of goods must be legal (and not merely physical), which presupposes an actual act of trade, for which the goal is profit and the transfer of possession or ownership contributes.

From this perspective, in the context of ADC 49, unconstitutionality was declared of articles 11, paragraph 3, II, 12, I, in the section "even if to another establishment of the same holder", and 13, paragraph 4, of Complementary Law No. 87/96.[2]

If this is a well-known and settled position in case law, what differentiates the judgment in ADC 49 from the other cases reviewed by the higher courts?

In this regard, it should be recalled that the decision handed down in a declaratory action of constitutionality does not present itself as a mere precedent. This is because, for the first time, the High Court reviewed the matter under the system of concentrated control, which, consequently, guarantees the erga omnes effect of the judgment. The recent understanding stated by the Federal Supreme Court binds not only the parties involved in the course of or in other cases in which the matter is discussed, but also all ICMS taxpayers (even without a legal action). In this sense, the immediate consequence of this new judgment is the setting aside of the rule declared unconstitutional from the Brazilian legal system.

Another question posed is: what are the actual impacts of ADC 49 on goods transfer operations between the same holder's establishments? The question takes into account the debates regarding the write-off of ICMS debt, the emptying of certain special ICMS regimes/tax benefits, and the autonomy of establishments. Let's take a closer look at each of these points.

With regard to the first, the question pertains to the need to reverse the credit arising from these transactions, since tax is not levied on the exit of the goods under transfer. This inquiry stems from an interpretation of the constitutional text itself, or better stated, from the assertion that exemption or non-levy will result in the annulment of the credit for prior transactions – article 155, paragraph 2, II, 'b'.[3]

Despite the risk of the absence of any express ruling on the subject, there seem to be arguments to contend that the transfer of goods between establishments of the same taxpayer is nothing more than a physical exit, and does not show itself to be a "circulation operation" of the product in the economic chain. It doesn't even constitute a "non-levy of the ICMS", since the constitutional rule providing for reversal in cases such as this presupposes that there would be the closure of the chain of taxation of the product (which does not occur in the case of an exit transfer, considering that the next operation in the shipment would be subject to the levying of ICMS).

This conclusion reinforces the fact that Complementary Law No. 87/96 (article 21, paragraph 3)[4] ensures that exemption or non-taxation in the prior stage of the chain does not prevent the use of the ICMS credit resulting from subsequent transactions, subject to tax, with the same goods.

Thus, there seems to be arguments to contend that reversal of credit – in the case of transfer of goods – would violate the fundamental principle of non-cumulation, since it imposes on taxpayers full payment of the tax without the possibility of a credit, due to the simple physical movement of the good.

Another major debate involves the possible losses that the Federal Supreme Court’s decision may bring about for the ICMS tax incentives conditioned on the payment of the tax at the time of the transfer. Regarding this second point, the discussion derives from the fact that various States grant tax benefits whose effectiveness does not dispense with the prominence the ICMS has in the exit of goods to be transferred to establishments of the same taxpayer.

Despite the peculiarities of each case, upon a first analysis, we believe it is possible to argue that the beneficiaries of these differentiated tax treatments could continue to benefit from these tax incentives. Therefore, there seem to be two legal grounds that foster this possibility:

• Normative and/or granting acts of ICMS benefits are specific standards and, as such, should prevail over the general standards; and
• Compliance with the requirements established by Complementary Law 160/17 and ICMS AgreementNo. 190/2017 should ensure the constitutionality of the ICMS benefits, per the terms reintroduced into the legal system.

Finally, another important point of discussion concerns the repercussions on the validity of the precept of autonomy of establishments in the face of the declaration of the unconstitutionality of article 11, paragraph 3, II, of Complementary Law No. 87/96. We believe there are grounds for contending that, once the article expressly providing for this autonomy was declared unconstitutional, the possibility to concentrate ICMS debts and credits in the parent establishment of the legal entity (or in another establishment) would arise. However, despite this possibility, the Public Administration could claim that:

• ADC 49 does not set aside the rule of independence of establishments, whereas other rules of the aforementioned supplementary law were not affected by the decision – in particular articles 17 and 25;[5] and
• regardless of the alleged absence of the principle of autonomy of establishments, the fundamental principles of the federative pact and the tax order are still in effect, which would set aside the duty of the state to accept ICMS credits related to payments made in other states.

Given this context, it is clear that the position established by the Federal Supreme Court in ADC 49, in addition to reiterating settled case law, has led to the confrontation of possible new judicial obstacles, if the Federal Supreme Court does not clarify the scope of its decision – in the context of motions for clarification pending judgment – from an integrated analysis of the Brazilian tax system.

For now, taxpayers must wait patiently for the final deliberation on the matter, in order to mitigate some of the discussions raised above, by examining the scope of the decision regarding autonomy of establishments and possible moderation of effects. Alternatively, they can implement complex restructurings that, to a large extent, tend to increase the tax burden on their operations and which, in the event of a favorable judgment on the motion for clarification, should be revised and amended.

^[1] Headnotes of the judgment handed down in the record of ADC 49: CONSTITUTIONAL AND TAX LAW. DECLARATORY ACTION OF CONSTITUTIONALITY. ICMS. PHYSICAL DISPLACEMENT OF GOODS FROM ONE ESTABLISHMENT TO ANOTHER OF THE SAME OWNERSHIP. NO TAXABLE EVENT. PRECEDENTS OF THE COURT. NEED FOR LEGAL OPERATION WITH TRANSFER OF POSSESSION AND OWNERSHIP OF PROPERTY. SUIT DISMISSED. 1. While the law under analysis provides that the ICMS tax is subject to the departure of goods to an establishment located in another State, belonging to the same holder, the Judiciary has an understanding in favor of non-levying, a situation that exemplifies, immediately, clear legal uncertainty in the tax area. Therefore, the requirements provided for by Law No. 9,868/1999 for the processing and judgment of this ADC are fulfilled. 2. The displacement of goods between establishments of the same holder does not constitute a fact that triggers the levying of the ICMS, even if it is interstate circulation. Precedents. 3. The case of tax levy is a legal transaction carried out by a trader that entails circulation of goods and transmission of ownership to the final consumer. 4. Declaratory action dismissed, declaring the unconstitutionality of articles 11, paragraph 3, II, 12, I, in the section "even if to another establishment of the same holder", and 13, Paragraph4, of The Federal Supplementary Law No. 87, of September 13, 1996.

^[2] For didactic purposes, see what each of the above-mentioned legal provisions establishes:

Article 11. The place of operation or supply, for the purposes of collecting the tax and defining the responsible establishment, is: [...] Paragraph3 - For the purpose of this Supplementary Law, an establishment is the place, private or public, built or not, owned or belonging to third parties, where individuals or legal entities perform their activities on a temporary or permanent basis, as well as where goods are stored, also observing the following: [...] II - each establishment of the same holder is autonomous; [...]

Article 12. The triggering event of the tax is considered to be the moment of: I - the departure of goods from the taxpayer's establishment, even if to another establishment of the same holder; [...]

Article 13. The basis for calculating the tax is: [...] Paragraph 4 - At the exit of the goods to an establishment located in another State, belonging to the same holder, the basis for calculating the tax is: I - the amount corresponding to the most recent entry of the goods; II - the cost of the goods produced, thus understood as sum of the cost of raw material, secondary material, labor and packaging; III - in the case of non-industrialised goods, their current price on the wholesale market of the sending establishment. [...]

^[3] Article 155. [...] Paragraph 2 - The tax provided for in subsection II shall comply with the following: I. it shall be non-cumulative, offsetting what is due in each operation relating to the movement of goods or services with the amount charged in the previous ones by the same or another State or the Federal District; II. exemption or non-levying, unless otherwise determined by law: (a) it shall not entail credit for offsetting with the amount due in the following transactions or services; (b) it shall result in cancellation of the claim relating to prior transactions; [...]

^[4] Art. 21. The taxable person shall perform reversal of the tax for which he has been credited whenever the service is received or the goods enter into the establishment: [...] Paragraph 3 - The non-crediting or reversal referred to in paragraph 3 of article 20 and the head paragraph of this article do not prevent the use of the same credits in subsequent transactions, subject to tax, with the same goods.

^[5] Article 17. Where the freight amount, charged by establishment belonging to the same holder of the goods or by another establishment of a venture that maintains a relationship of interdependence with it, exceeds the normal price levels in force on the local market for similar service, contained in tables drawn up by the competent bodies, the excess value shall be made part of the price of the goods.

Sole paragraph. Two companies shall be considered interdependent when:

I - one of them, by itself, its partners, or shareholders, and their spouses or minor children, holds more than fifty percent of the other's capital;

II - the same person is part of both, as director, or partner with management functions, even if exercised under another denomination;

III - one of them leases or transfers to the other, in any way, a vehicle intended for the carriage of goods.

Article 25. For the purposes of the application of article 24, the debts and credits must be calculated for each establishment, offsetting the credit and debt balances between the establishments of the same taxable person located in the State.

Paragraph 1 - Credit balances accumulated from the date of publication of this Complementary Law by establishments that carry out transactions and services dealt with in subsection II of article 3 and its sole paragraph may be, in the proportion that these exits represent of the total of the exits performed by the establishment:

I - imputed by the taxable person to any establishment of his in the State;

II - if there is a remaining balance, transferred by the taxable person to other taxpayers of the same State, by issuing by the competent authority a document that recognizes the claim.

Paragraph 2 - State law may, in other cases of credit balances accumulated from the enactment of this Complementary Law, allow:

I - are imputed by the taxable person to any establishment of his in the State;

II - are transferred, under the conditions it defines, to other taxpayers of the same State.

Category: Tax

Leonardo Martins, Carolina Stephanie Borges de Amorim and Pedro de Lima Souza Alves

The Federal Supreme Court (STF) recently reaffirmed its position in relation to the unconstitutionality of the institution of a fire safety fee by the states. The decision on the subject was handed down in the judgment on a motion to resolve a divergence in the record of Extraordinary Appeal No. 1.179.245/MT.

As shown in the opinion of the Justice Carmen Lucia, the Federal Supreme Court ruled that "the public service of fire fighting and prevention cannot be taxed as a fee because it is a general and indivisible service related to public safety".

The judgment, which refers to the fee charged by Mato Grosso, follows the line of decisions established on previous occasions by the Federal Supreme Court, with an emphasis on the decisions issued in Extraordinary Appeal No. 643.247/RG and in direct actions of unconstitutionality No. 2,424/EC and 2,908/SE, in which the Federal Supreme Court found in favor of:

• the impossibility of institution of a fee aimed at the prevention of fires by municipalities;
• the exclusivity of the tax as a fee suited to pay for public security activities; and
• that the annual fire safety fee would have as a triggering fact the provision of a general and indivisible essential activity by the Fire Department, being of generic utility and to be funded by the revenue from

The position of the Federal Supreme Court has been replicated by the country's circuit courts. The Court of Appeals of Mato Grosso, for example, maintained in limine injunctive relief regarding a direct action of state unconstitutionality in order to suspend the collection of the Fire Safety Fee (Tacin) since January of 2020.

Despite the understanding in the case law, many states still require the annual fire safety fee for the Fire Department. This is the case, for example, of the State of Rio de Janeiro, where the fee is calculated based on the square footage of residential and non-residential properties, as provided for in Decree No. 3,856/80.

Category: Litigation

The Federal Supreme Federal Court (STF) convened en banc concluded last month the trial of Direct Action of Unconstitutionality (ADI) No. 4,296/DF, which debated the (un)constitutionality of provisions^[1] of Law No. 12,016/09 (the Application for Mandamus Law).

Among the provisions submitted for the Court's review in the ADI filed in 2009 by the Federal Board of the Brazilian Bar Association (CFOAB),^[2] attention is paid, in procedural matters, to article 22, paragraph 2, according to which urgent relief, in a collective application for mandamus, may only be granted after hearing the judicial representative of the legal entity under public law, which must be ruled on within 72 hours.

Article 22, paragraph 2, was declared unconstitutional by the majority of the Federal Supreme Court. The Court found that, among other grounds, the provision in question restricts the general power of the magistrate's discretion and the constitutional principle of irremovable jurisdiction, provided for in article 5, subsection XXXV, of the Federal Constitution of 1988 (CF).

The debate submitted to the Supreme Court is old and subject to divergence. On the one hand, there are those who contend, in the legal scholarship^[3] and case law,^[4] non-relativization of the provisions of article 22, paragraph 2. Whereas the collective applications for mandamus aim at protecting transindividual liquidated and certain rights that have been violated or threat of an illegal or abusive act by a public authority or by those who exercise a public function, the understanding prevails that the intention of the legislator was to guarantee the public power awareness of the size of the claim contained in the collective action and the repercussions that may be caused to the administrative organization if the urgent relief is granted. Thus, the requirement of a  prior hearing of the government authority has as a background preservation of the public interest.

From the point of view of procedural law, the declaration of unconstitutionality of article 22, paragraph  2, by the Federal Supreme Court should be considered a step forward, since the institute of provisional urgent relief is respected.

Although at issue is a collective application for mandamus, there is no way to ignore the system envisaged, especially in the Code of Civil Procedure of 2015, which valued the the paradigmatic system of democratic constitutional process, valuing the aforementioned constitutional principles of the effectiveness of relief and the reasonable duration of the proceeding.

The exercise of the adversarial process – the right of the party to be aware of all acts and terms of the proceedings, to influence the content of the judicial decision, and enable cooperation between the parties and the judge – may and must be postponed in exceptional circumstances, where the requirements laid down in article 300 of the CPC are met: the likelihood of success on the merits and the danger of damage or risk to a useful outcome of the proceedings (e.g., cases seeking the supply of medicines by the State and beds for hospitals).

It is still relevant to state that the decision by the STF values the general power of discretion of the magistrate, provided for in articles 297 and 301, of the CPC,^[7] as well as the constitutional principle of separation of powers (article 2 of the CF), since it removes the obligation of the public representative in view of the analysis and granting of urgent relief in favor of the plaintiff.

The result of the STF’s judgment is another demonstration that care is needed in indistinct and unthinking application of legal concepts linked to the administrative legal system, especially regarding the prevalence of the public interest over the private.^[8] Because, as Justice Alexandre de Moraes pointed out in the judgment on ADI No. 4,296/DF, litigating against the Treasury is a battle similar to that fought between David and Goliath – in practice, even if urgent relief is granted without the hearing the representative of the legal entity governed by public law, the public authorities have at its disposal instruments of its own to seek suspension of the judicial relief (for example, suspension in limine relief).

In line with the majority understanding of the STF, it is expected that the state courts will review the current position and allow the granting of urgent relief in collective applications for mandamus when the urgency of the concrete case so determines.

The recognition of the unconstitutionality of article 22, paragraph 2, of the Application for Mandamus Law should mean overcoming the prior understanding, so that the summons of the representative of the public power to rule on the request for urgent relief is understood as an exception, when it does not compromise the safeguarding of the collective right of the plaintiff, respecting the independence of the judiciary.

^[1] Article 1, paragraph 2; article 7, subsection III and paragraph 2; article 22, paragraph 2; article 23; and article 25.

^[2] Among the provisions examined by the Federal Supreme Court, the following were declared unconstitutional, by a majority: Article 7, paragraph 2 (which provides for the granting of an in limine relief with the objective of "clearing tax credits, the delivery of merchandise and goods from abroad, the reclassification or equalization of public servants, and the granting of an increase or extension of advantages or payment of any kind"; and article 22, paragraph 2, dealt with in this article.

^[3] "The requirement that the granting of in limine relief in a collective application for mandamus be preceded by a hearing of the government authority (Law No. 12,016, article 22, paragraph 2) is justified by the public interest, expanded, in kind, by the broad repercussion that the relief may provoke, by the very nature of collective rights, for the exercise of the functions of the Public Power." (GOMES JÚNIOR, Luiz Manoel. Comments on the new Application for Mandamus Law. 4th Ed. São Paulo: RT, 2015, p. 268). Similarly: "Collective applications for mandamus follow the same procedure as individual applications for mandamus, except that the relief may only be granted after the hearing of the judicial representative of the legal entity governed by the relevant public law, which must be ruled on within 72 hours .... This is a repetition of what was already contained in article 2, Law 8,437, of June 30, 1992." (MEIRELLES, Hely Lopes; WALD, Arnoldo; MENDES, Gilmar Ferreira. Applications for mandamus and constitutional actions. São Paulo, Malheiros, 2019, p. 144).

^[4] TJMG, Interlocutory Appeal No. 1.0024.13.129103-1/001, opinion drafted by Appellate Judge Vanessa Verdolim Hudson Andrade, 1st Civil Chamber, decided on April 15, 2014; TJSP; Interlocutory Appeal No. 2141910-88.2017.8.26.0000, opinion drafted by Appellate Judge Osvaldo de Oliveira, 12th Chamber of Public Law; decided on February 14, 2018; TJSP, Interlocutory Appeal No. 2157344-83.2018.8.26.0000, opinion drafted by Appellate Judge Ferraz de Arruda, 13th Chamber of Public Law, decided onNovember 28, 2018; TJRS, Interlocutory Appeal No. 70080999584, opinion drafted by Appellate Judge Marcelo Bandeira Pereira, Twenty-First Civil Chamber, j. 3.29.2019.

^[5] "The rule, in fact, is that all interested parties – and this includes, nor could it be otherwise, the Public Power – be heard in court in advance. In this sense, nothing is more coherent than for the legislature to, considering the subjective extent that the collective application for mandamus has the ability to reach, choose to establish the prior adversarial process prescribed in the provision under examination. What cannot occur, however, under penalty of aggression against the 'constitutional model of civil procedural law', is that the legal requirement end up making it impossible to grant relief in natura to the application, including in its collective form, intended since the enactment of the Federal Constitution. So much so that broadly it is a majority understanding in legal scholarship that the representative of the public power alone should be ordered to rule on the request for an in limine relief if such an relief does not compromise the safeguarding of the right of the plaintiff, that is, in those cases where, necessarily, the Periculum in Mora (the danger of ineffectiveness of the measure) is not as intense. However, as the establishment of this prior adversarial process must be necessary and systematically set aside, giving rise to the constitutional greatness of the institute." (BUENO, Cassio Scarpinella. The New Application for Mandamus Law, 2nd ed., São Paulo: Saraiva, 2010, pp. 182/183). Emphasis added.

^[6] THEODORO JUNIOR, Humberto. Course on civil procedural law. 56 rev. ed., current. and expanded. Rio de Janeiro: Forensics, 2015. v. I. p. 616.

^[7] GAIO JÚNIOR, Antônio Pereira. Institutions of civil procedural law. 2nd Ed. Belo Horizonte: Del Rey, 2013. p. 661. In addition, the scholar points out, in an express mention of the Code of Civil Procedure of 1973, that: "we were already saying at that time of the repealed Code that the existence of such power is justified with a central argument that, for the legislature, it would be impossible to predict and provide for, completely and exhaustively, all feasible forms of danger and possible solutions thereof. This time, it will be up to the magistrate, when prompted, to undertake the task of determining, in the face of the specific case, the measures necessary to cope with situations of law worthy of relief." Emphasis added.

^[8] "The theory that the interest of society (primary public interest) could be sacrificed is no longer well accepted to meet purely state interests (secondary public interest), especially those of a budgetary nature: in the Democratic State of Law the guidelines outlined in the Constitution motivate and lead the performance of the Public Power, which is why often the public interest is only truly met upon true satisfaction or restoration of a particular right." (BARROSO, Luis Roberto. The Contemporary State, Fundamental Rights, and the Redefinition of Supremacy of the Public Interest, Rio de Janeiro: Lumen Iuris, 2007, pp. 8-9.

Category: Tecnology

The Madrid Agreement of 1981 and the Madrid Protocol of 1989 are the legal bases of the current international trademark registration system operated by the World Intellectual Property Organization (WIPO). This system was designed to simplify, cheapen and accelerate the process of trademark registration in the various signatory countries – which are now more than 120 – simultaneously.

Applications for registration are filed at the regional or national office of the signatory country (in the case of Brazil, the PTO), which holds the conference of documents submitted by the applicants. The application is then sent to the WiPO International Secretariat, which decides on the conformity of the application. If confirmed, the application becomes an international application and is sent to the signatory countries selected by the applicant for the application to be reviewed on the basis of the local legislation of each country.

The Madrid Protocol entered into force in Brazil in October 2019. One year after the beginning of its validity, 109 international trademark applications were registered made by Brazilian users and 7,896 requests made abroad and received by the PTO for compliance analysis. Currently, the members and signatory countries of the Madrid Protocol represent more than 80% of global trade (to learn more about the Treaty of Madrid, click here).

Federal Deputies Julio Lopes (PP/RJ) and Paulo Abi-Ackel (PSDB/MG) presented Bill No. 10,920/18, with the aim of amending Law No. 9,279/96 (Industrial Property Law, LPI) to reduce bureaucracy and give isonomic treatment to nationals and foreigners, in view of Brazil's then imminent agreement to the Madrid Protocol.

On June 17, the plenary of the House of Representatives approved Urgent Request No. 1,325/21 presented by Deputy Efraim Filho (DEM/PB) to expedite the processing of the bill, which has already been analyzed by the Commission for Economic Development, Industry, Trade and Services (CDEICS) and should now proceed to analysis by the Constitution and Justice and Citizenship Commission (CCJC).

The purpose of this article is to present the main changes in the LPI suggested by the deputies authors of the bill and the suggestions proposed by Deputy Efraim Filho, who was the rapporteur of the opinion on the bill in CDEICS, in addition to evaluating the relevance of the project in the field of intellectual property in Brazil.

Inclusion of Paragraphs 5 and 6 of Art. 128

Pursuant to Paragraph 1 of Article 128 of the LPI, persons under private law may apply for trademark registration only for activities that they perform effectively and lawfully. The exercise of the activities is demonstrated by means of the person's own declaration at the time of the application. The new Paragraph 5 suggests granting a deadline for submitting the "declaration of activity" when it cannot be submitted at the time of filing.

The new Paragraph 6 of Article 128, in turn, expressly intends to include in lpi the possibility of co-ownership of trademarks (provided for in the Madrid Agreement).

In the opinion of the rapporteur, Mr Efraim Filho, the legislative change is unnecessary, because the PTO itself is working to implement these changes internally in the administrative sphere.

Inclusion of Art. 143-A

Article 143 of LPI deals with the expiry of the registration due to the disuse of the mark, that is, the extinction of the trademark registration due to its non-use. The purpose is to prevent the accumulation of trademarks and unused, preventing the competitiveness of the market from becoming more organic. Currently, for the PTO to assess the expiry of a trademark, the application must be made by any person with legitimate interest. The PL includes art. 143-A in LPI to create more hypotheses of extinction of the marks by expiry, requiring the proprietor to submit a declaration of use of the mark during the sixth and tenth year of validity of the registration.

According to the opinion of CDEICS, however, creating this condition would result in another step to be overcome when renewing the marks and another for charging fees, which goes against the very purpose of the bill.

Inclusion of Art. 146-A

This new article would serve to extend the provisions related to the hypotheses of extinction and expiry of trademark registrations to international records derived from the Madrid Protocol.

The Opinion of the CDEICS, however, points out that the Madrid Protocol does not interfere with the causes of extinction and expiry provided by the LPI (there are exceptions for specific cases), which led to the conclusion that there is no need for this legal change.

Amendment of art. 158 (caput) and §§ 1 and 2 and inclusion of §§ 3 and 4

The current article 158 of lpi provides for the publication of applications for registration of trademarks for submission of opposition. The modification suggested by the draft law aims to determine that the application be published in Portuguese. The following paragraphs, in short, provide that, if the application for registration is made in a foreign language, the applicant must provide a simple translation into the Portuguese. For the justification presented, it is not reasonable to impose on the PTO the cost and responsibility of carrying out the translation of foreign applications.

Nevertheless, Mr Efraim Filho understood that, depending on the principle of reciprocity in international relations, the deposit may be made in English, French or Spanish and the PTO will be responsible for the translation into the Portuguese.

Inclusion of §§ 1 and 2 to art. 160

Article 160 of the LPI deals with the examination to be done by the PTO on the granting or rejection of the trademark registration application, after the deadline for submitting opposition to the application for registration. The bill included two paragraphs to Article 160 to provide for the automatic approval of the application for registration if it is not analyzed within 18 months by the PTO counted from the filing of the application.

Paragraph 2 provides that the period of §1 may be reduced if a shorter term is granted to foreigners by means of an international agreement or convention.

The amendment is refuted in the opinion of the CDEICS, for which the average for analysis of applications for registration by the PTO is eight months, and any differences in deadlines between parallel systems and equally accessible to nationals and foreigners do not constitute discriminatory treatment.

Inclusion of the sole paragraph to Art. 217

Article 217 establishes the obligation for the trademark owner in Brazil domiciled abroad to constitute and maintain qualified and domiciled attorney in Brazil, with powers to represent him judicially and administratively, including to receive citations.

While the draft law includes a single paragraph that gives 60 days after filing the application for registration for the foreign applicant to submit to the PTO the power of attorney of his representative in Brazil, the opinion of cdeics understands that such proposition is incompatible with the Madrid Protocol, because the filing of the application for registration is made by the office of the member country (in Brazil , the PTO), and it is unnecessary to maintain a legal representative in the country for which protection is intended.

Nevertheless, it is notorious the difficulty of quoting representatives of foreign trademark holders, which is why Mr Efraim Filho proposed to introduce the sole paragraph to Art. 217 with another wording. The objective is to require the constitution of a prosecutor in Brazil only in cases where there is notification of the PTO on ongoing legal claims, which will lead to the notification of the trademark holder via WIPO, so that she may constitute a proxy in 20 working days.

Repeal of Art. 135

Article 135 states that the assignment of a trademark shall encompass all registrations and requests on behalf of the transferor of the same or similar marks, relating to the same product or service, under penalty of cancellation of registration or filing of the application.

The bill intends to repeal this provision because it believes that, with the accession to the Madrid Protocol, foreigners could perform the assignment of trademark without the restrictions defined in art. 135 and that, because it is a voluntary act, the assignment of the trademark should not be regulated by law, as it is analyzed from the commercial point of view by the parties before it is carried out.

The proposal is rejected by the opinion of the CDEICS, which states that the rule of assignment of trademarks would apply to national and foreign registrations, without distinction, according to the pto.

Conclusion

Brazil's adhering to the Madrid Protocol was a major advance on trademark registrations, facilitating the registration process both by foreign companies wishing to have their trademarks registered in Brazil and by Brazilian companies wishing to obtain registrations abroad.

In principle, the proposed amendments to the LPI do not seem necessary to us in that there is no incompatibility between the provisions of the LPI and the Madrid Protocol, nod.

Below is a complete list of articles with the suggestions proposed by the bill and its CDEICS substitute.