Publications

Category: Environmental

The growing concern with good business practices and social and environmental responsibility, especially of the younger generations, has guided decision-making for sustainable investment. The esteem of "responsible" businesses drives the adoption of good environmental, social, and corporate governance practices.

The principles of ESG constitute a set of criteria adopted by investors to evaluate a company's interaction with the environment and society, and the observance of high standards of corporate governance. These factors allow investors to have a holistic view of the main risks and opportunities of the company in which they intend to invest, as well as its contribution to sustainable development.

Among the practices that may be adopted by companies, the following stand out:

• Measures to preserve the environment, such as adequate waste management, the search for energy efficiency, reduction of emissions of pollutant gases, and encouragement of sustainable use of genetic resources from biodiversity;

• Social responsibility measures, such as the enforcement of labor rights and safety at work, the promotion of well-being in the workplace, attracting and retaining talent, encouraging diversity, responsible marketing, and concern for human rights and community impacts; and

• Improvement in corporate governance practices, such as the creation of more diverse boards, delimitation of the responsibility of directors and shareholders, respect for the law, adoption of ethical values in conducting business, promotion of anti-corruption practices, and transparency in the rendering of accounts.

The concept of ESG was outlined over time, while social and environmental issues gained importance in conducting business. The efforts culminated in the creation of the Principles for Responsible Investment - PRI ) in 2006 - an initiative of the United Nations (UN) and investors to integrate environmental, social, and corporate governance issues in the conduct of sustainable investments.

In the environmental sphere, especially after climatic and ecological events and with the pressure of the various stakeholders involved, legislation and regulations were promoted to make environmental responsibility an essential issue within companies. In this manner, companies started to create mechanisms to anticipate new regulations, decreasing the cost and increasing the efficiency of their business chain.

Companies that comply with ESG principles are more resilient and demonstrate greater ability to manage business in times of crisis and in the long term, becoming more attractive to investors. For this very reason, the topic gained even more importance during the crisis caused by the covid-19 (coronavirus) pandemic.

There is a growing movement towards adopting good environmental, social, and corporate governance practices in business management, as companies see in the initiative the possibility of reducing costs, mitigating risks, and creating new opportunities. In addition to the various benefits already mentioned, the adoption of ESG principles is associated also with reduction in regulatory and legal interventions, giving a competitive edge to companies that implement such practices and drive other companies to join the "new normal".

The trend towards the adoption of ESG criteria in business chains and the significant movement of business leaders and policies in relation to the issue demonstrate that the "new normal" is to invest in resilient companies capable of adapting to change and supporting sustainable development. More than results in efficiency for companies, the dissemination of ESG practices represents an achievement in terms of protecting the environment and society.

Category: Infrastructure and energy

The Federal Court of Appeals for the 1st Circuit (TRF1) unanimously decided to maintain the ban on the use of flavoring and additives in tobacco products. The decision was reached on October 20, in a case for which the opinion was drafted by Federal Appellate Judge Daniele Maranhão.

This ban is provided for in article 6 of Board of Directors Resolution (RDC) No. 14/2012 and is based on the public policy of promotion of health exercised by the National Health Surveillance Agency (Anvisa), since the use of flavor and aroma additives in tobacco products sometimes attracts the consumption of tobacco products.

Due to the Incidental Proceeding of Assumption of Jurisdiction (IAC), the decision by the TRF1 has obtained binding force, such that the judges and the bodies of the TRF1 will have to decide in the same manner on the subject, that is, in compliance with RDC No. 14/2012.

Since the publication of RDC No. 14/2012, the subject has generated heated debate between the tobacco industry and Anvisa. As an example, in 2018, the National Confederation of Industry (CNI) proposed Direct Action of Unconstitutionality (ADI) No. 4,874 to question the legality of the prohibition established by RDC No. 14/2012. The decision by the Federal Supreme Court (STF) was contrary to the CNI and in favor of the legality of the RDC.

The decision by the TRF1 strengthens the independence of Anvisa in its technical decisions made in the context of RDCs.

Category: Real estate

According to article 51 of Federal Law No. 8,245/91 (the Tenancy Law), tenants of non-residential real estate will have the right to renew the contract, for an equal term, provided that, cumulatively, the contract is in writing and for a fixed term, the minimum term of the contract to be renewed or the sum of the uninterrupted terms of the contracts is five years, and the tenant is conducting its business, in the same branch, for a minimum term of three years.

If, on the one hand, the requirements for filing an action for renewal are clear, the wording "for an equal term" included in the article gives rise to different interpretations regarding what exactly the expression refers to: (i) the five-year term required for the tenant to have the right to renewal; (ii) the sum of the terms of all contracts entered into by the parties or, further, (iii) the term of the last contract formalized in the course of the legal relationship.

The issue also provokes discussions regarding the existence of maximum and minimum periods for which a lease contract may be renewed. After all, renewal actions, although intended to guarantee the rights of lessees, such as the maintenance of the goodwill, cannot become a way to perpetuate lease agreements, restricting the property rights of the lessor.

In addressing the matter, the case law - with precedents from the Superior Court of Appeals (STJ) - established that lease agreements must be renewed for five years, which is both a maximum and a minimum term. The five-year period is reasonable for renewal of contracts, which may be requested again by tenants at the end of this time period, since the law does not limit this possibility.

According to the STJ, allowing renewal for longer periods could go against the purpose of this system, considering the sensitive changes in the economic environment and the other factors that influence the parties' decision regarding the renewal of the contract. Shorter deadlines, in turn, could overwhelm the Judiciary disproportionately. In other words, if the lease was renewed for only one year, for example, the tenant would have to file semi-yearly suits for renewal, which would create procedural turmoil, since the suits would fully overlap.

Moreover, it is an argument within the majority position that the Tenancy Law, by providing that the tenant will have the right to renew the contract 'for an equal period', is referring to the minimum period required by law for renewal of the lease, five years, and not the period of the last contract entered into by the parties.

It is therefore concluded that renewal of non-residential leases will be for a period of five years. This understanding is reardless of the term of the last contract formalized in the course of the legal relationship, which may have completed the five-year period necessary to file the lawsuit, and is maintained even if the lease exceeds five years, with no renewal for longer periods.

Category: Tecnology

The entry into force of the General Data Protection Law (Law No. 13,709/18 - LGPD), on September 18 of this year, had impacts on various sectors of society. By regulating practices related to the processing of personal data in Brazil, the LGPD has established new process management requirements for the public and private sectors.

Much of the private sector has expressed difficulties in meeting obligations imposed by law, and the reality of the public sector does not seem very different: the adequacy initiatives are still timid and there are concerns about the understanding of the new legal framework brought about by the LGPD.

This issue becomes even more troubling in the courts and administrative bodies, which should be prepared not only to fulfil their obligations, but also to decide on and demand proper enforcement of the rights under the LGPD.

Privacy policies and the 7 errors game

Among the obligations related to the processing of personal data that the public sector needs to comply with is the adoption of measures guaranteeing data subjects "clear and updated information on the legal provision, purpose, procedures, and practices used to carry out these activities, in easily accessible vehicles, preferably on their websites", in compliance with the principles of transparency and free access to information on the LGPD.

This information should be provided in a manner that is easy, clear, and accessible by the public sector, especially as privacy policies on their websites. The LGPD itself lists what information and requirements must be stated in these documents.

The appointment of the “responsible person" and the provision of the respective contact information are also requirements of the LGPD for those who process personal data. The responsible person's role is to act as a data protection focal point, with competence to report to the National Data Protection Authority (ANPD), guide other employees on the subject, and receive complaints from users.

However, the mere availability of such information is not sufficient to comply with the law: its content must necessarily reflect the concepts of the LGPD and, consequently, highlight the measures adopted throughout the adaptation project. In practice, the privacy policies ultimately demonstrate how each organization has done its "homework" to comply with the LGPD.

When the legislation became mandatory, it was expected, among other measures, that such information would start to be made available on websites. In practice, however, few public bodies have fulfilled this obligation. Fewer still are those who have done so in a correct and satisfactory manner.

The National Telecommunications Agency (Anatel), for example, has published a specific page on personal data processing on its website with misconceptions regarding the cases of processing. The agency stated that all processing of personal data carried out by Anatel would be based on consent, which was said to be "the only legal basis for the LGPD".[1] The law, however, provides for ten cases for processing of non-sensitive data, including consent, and eight cases for processing of sensitive data. The website was subsequently updated and the text adjusted, however, there is a lack of clearer information on how the data processing is performed by Anatel. And it is a fact of concern, above all, that Anatel has still made the mistake of publishing a guideline so far from the model of the law.

The privacy policy disclosed by the Court of Appeals of the Federal District and Territories (TJ-DF) is another example of misapplication of concepts of the LGPD. The document, published on September 8 through Resolution No 9/20, mistakenly defines the terms "controller" and "operator"[2] and does not present the information it should, such as the rights of the data subject and the channel of contact with the person in charge.

A similar mistake occurs in Ordinance No. 68/20, which governs the application of the LGPD within Rio Grande do Sul Public Prosecutor's Office and defines its members, public servants, and interns as personal data operators of the institution.

Fortunately, there are exceptions. This is the case of the São Paulo Court of Appeals (TJ-SP), which has developed a specific webpage for LGPD related subjects and on it it released the organizational structure of its adaptation project. The TJ-SP went further still and implemented new procedural categories in its computerized system with the aim of improving statistical studies on the judicialization of matters involving the LGPD, according to CG Notice No. 663/20.

Along the same line, the National Council of Justice (CNJ) sought to guide the bodies of the Judiciary with the publication of a recommendation on initial measures for compliance with the LGPD.

LGPD arrives at the courts. Now what?

Although organizations are not yet fully compliant with provisions of the LGPD, the issue of data protection is on the rise in society. The application of the law has already become the subject of lawsuits questioning the purpose and security of personal data processing.

In the last month, some of these lawsuits have been highlighted in the media, such as the first public lawsuit based on the LGPD, filed by the Federal Prosecutor's Office for the Federal District to question possible improper marketing and sale of personal data by a website. The suit, though, has been extinguished, as the judge found that the plaintiff had no procedural interest, since the website in question was under maintenance.

Along the same line, a student from Pernambuco went to court to question why he was forced to provide his biometric data to recharge an electronic bus ticket. The suit is in progress before the Court of Appeals of Pernambuco (TJ-PE).

The principles of the LGPD were also cited in a court judgment ordering a construction company to pay R$ 10,000 for sharing personal data of its client with third parties outside the contractual relationship, which caused unwanted contacts with this client by financial institutions, consortiums, and other companies.

These cases illustrate that the rights and obligations of the LGPD are now enforceable in court, despite the postponement of sanctions under the LGPD to August 1, 2021.[3] The Judiciary is now exercising more active control and examination of cases related to data protection, which until then had been carried out by consumer protection agencies, which examined cyber-security issues on the basis of the sparse and industry-specific laws and regulations on data protection still in force, such as the Consumer Protection Code and the Brazilian Civil Rights Framework for the Internet.

In this scenario, two concerns arise. The first related to the late structuring of the ANPD, a unified and organized regulatory authority for the purpose of personal data protection, whose executive board members the Federal Senate recently approved.[4] In addition to the challenge with quickly structuring the ANPD, it is also expected that the authority will quickly fulfill its pedagogical role of guiding and coordinating application of the law, including in relation to the government sector, in order to avoid conceptual errors such as those pointed out earlier in this article.

Without the ANPD and its guidelines, government agencies and entities from other sectors would assume the role of enforcers of application of the LGPD and begin to impose sanctions measures which may have a high degree of arbitrariness and legal uncertainty.

The second concern relates to the misconceptions committed by the public sector already addressed. They show how little preparation some agencies have doing their "homework" and question how they will deal with these issues. This applies especially to courts and administrative bodies, whose obligations also include instructing magistrates in order to properly decide how to apply the LGPD. After all, if the public sector is not prepared to fulfil its obligations, would it be ready to demand application of the rights provided for in the LGPD?

Conclusion

In general, the public sector has been slow to adapt to the terms of the LGPD, even in the face of the various impacts that its entrance into force has brought about for society. The situation is even more delicate for the courts and administrative agencies. While they needed to demonstrate the implementation of the obligations under the LGPD, they began to exercise, in part, the role of monitoring and guaranteeing the rights of the holders of personal data.

These obscure points should guide discussions during and even after implementation of compliance rules in the public sector, especially until the ANPD begins its work, since it is tasked with providing guidance and determining many requirements on the application of the LGPD.

Nevertheless, it must be recognized that there are good initiatives taking place in the public sector, such as the TJ-SP, which has shown ability in fulfilling its obligations, and the CNJ, which took the initiative in guiding the bodies of the Judiciary.

At this moment, it is expected that the public sector will adopt a mediation posture and stimulate the settlement between the parties in the event of disputes related to the protection of personal data, exactly because of the novelty of the law and in line with the guidelines to be issued by the ANPD.

[1] "Consent. The basis of the LGPD is consent, i.e. authorization from the data subject must be sought before processing takes place. And this consent must be received explicitly and unequivocally." Excerpt of text published in September 23, 2020, on Anatel's website. <https://www.anatel.gov.br/institucional/component/content/article/104-home-institucional/2666-portal-da-anatel-tem-pagina-sobre-tratamento-de-dados-pessoais>

[2] Resolution No. 9/2020. “Article 5. At the Court, the Controller and the Operators are respectively the Chief Judge of the Court, assisted by the Information Security and Personal Data Protection Management Committee - CGSI, and the public servants and employees who carry out personal data processing activities at the institution or third parties, in similar contracts and instruments signed with the Court.

Paragraph 1. The Deputy Chief Judges and the Ombudsman of the Judiciary shall be the Deputy Controllers.

Paragraph 2. The Committee shall be formed by a technical and multidisciplinary team, which shall perform legal, information, and technology security, internal and external communications, human resources, document and strategic management functions."

[3] Articles 52, 53, and 54 of the LGPD, which deal with administrative sanctions under the law, will enter into on August 1, 2021, in the manner set forth in Law No. 14,010/2020.

[4] On October 20, 2020, the Senate approved via a floor vote the five names nominated to sit on the ANPD’s Executive Board. The candidates were indicated in the publication of the extra edition of the Official Gazette of the Federal Government on October 15, 2020.

Category: Tax

ME Ordinance No. 340, published on October 9, regulated the functioning of the Judicial Delegations of the Special Bureau of the Federal Revenue Service of Brazil. The DRJs, as they are known, are the bodies responsible for judging federal administrative tax proceedings at the first instance. Until then, the composition and functioning of the DRJs were regulated by MF Ordinance No. 341/11, established by the former Ministry of Finance.

The greatest innovation brought about by the new ME Ordinance No. 340/20 was the creation of appellate chambers, adjudicatory bodies competent to examine, at the appellate level, disputes regarding small amounts (cases of up to 60 minimum wages), guaranteeing a two levels of review (even if done by a body composed exclusively of tax auditors). These chambers fulfill, to this end, the mandate of article 23 of Law No. 13,988/20, which began to direct judgments of small value cases to handed by a DRJ joint committee, without further access to the Administrative Tax Appeals Board (Carf). It can therefore be said that the ordinance created a "second instance within the first instance."

ME Ordinance No. 340/20 also brought about the possibility of remote judgments by DRJs. At the discretion of the chairman of the panel, judgements may take place remotely, by means of videoconference or, even, in a virtual manner, via the scheduling of an agenda and a defined deadline for the judges to post their votes. The obligation of exclusively in-person judgments refers only to cases with amounts at issue above R$ 2 million, to those that assign tax liability to a third party, or to those that have given rise to a criminal referral.

The expansion of non-presential judgments reflects the general trend in the post-covid-19 environment and, in fact, allows greater speed in the review of the facts. However, the virtualization of judgments by the DRJ could also have led to greater participation by the parties in the proceedings. Unlike judgments by the Carf, the DRJs’ sessions continue to take place "behind closed doors", with participation limited to the judges themselves.

In this scenario, the characteristics of the virtual environment would meet, without greater costs, a long-standing demand from taxpayers for oral argument and/or remote monitoring of the DRJ's judgment sessions.

Another point of attention in MF Ordinance No. 340/20 is maintenance of the tie-breaking criterion by the vote of the judge presiding over the adjudicatory panel. This criterion, which was already present in the previous Ordinance, goes against article 28 of Law No. 1388/20, which established that ties in the judgment of administrative proceedings for calculating and demanding tax debts would be resolved in favor of the taxpayer.

Although article  28 of Law No. 13,988/20 makes direct reference only to the tie-breaking of judgments within the Carf (article 25, paragraph 9, of Decree 70,235/72), the rule reflects a choice by the legislator to give preference to the essence of article 112, II, of the CTN, which imposes the principle that doubts are resolved in favor of taxpayers.

Doubt as to the establishment and levying of tax debts, at any stage of the judgment (which certainly includes the DRJ), should culminate in dismissal of the tax debt, at risk of continuing with a levy that does not respect the constitutional principles of legality and sanctionable conduct and the very concept of tax provided for in article 3 of the CTN.

The provisions introduced by ME Ordinance No. 340/20 will take effect on November 3 of this year, the date on which the standard will enter into force, and will expressly revoke the text of MF Ordinance No. 341/11.

Category: Litigation

Article 97, subsection IV, of Law No. 11,101/05 (the Business Bankruptcy and Judicial Reorganization Law - LRF) provides that any creditor may file for bankruptcy for businessmen and business companies, in compliance with the requirements set out in article 94.

However, in cases involving tax debts, the Superior Court of Appeals (STJ) has settled case law to the effect that the Tax Authority does not have standing to file for bankruptcy for companies and/or businessmen. According to the STJ, the Tax Authority has no interest in bringing such a claim, given that (i) article 187 of the National Tax Code (CTN) states that the judicial collection of a tax debt is not subject to bankruptcy, judicial reorganization, creditors’ arrangement, inventory, or small-estate probate; and (ii) articles 5, 29, and 31 of Law 6,830/80 (LEF) provide that tax debts must not necessarily be submitted to bankruptcy proceedings, with the tax authorities having their own means for collection of the amount recorded as outstanding debt, i.e., tax enforcement.[1]

In addition, the STJ also believes that granting standing to bring suit to the Tax Authority to petition for bankruptcy of companies and/or businessmen would make it impossible to overcome the company's economic and financial crisis situation, at odds with the principle of preservation of the company.[2]

Nevertheless, in an extended judgment held in August of this year, the 1^st Chamber of Business Law of the São Paulo State Court of Appeals (TJ-SP), by majority vote, granted the appeal so as to annul the trial judgment and order the regular continuation of the petition for bankruptcy filed by the Federal Government, represented by the Attorney’s Office for the Federal Tax Authority, against a company engaged in the trade and distribution of food products.[3]

The judgment in question, handed down by the 1^st Court of the Judicial District of Rancharia/SP, had denied the complaint and extinguished the case without a resolution of the merits because it found that the Tax Authority had no procedural interest, according to the settled case law of the STJ.

The 1^st Chamber of Business Law of the TJ-SP, for its part, held that with the entry into force of the LRF, a new interpretation should be given to the possibility of filing for bankruptcy by the Tax Authority in certain situations. In this context, it emphasized that, in the case at hand, the petition for bankruptcy is not based on article 94, subsection I of the LRF[4] - whose more restrictive understanding should prevail - but on article 94, subsection II, since the Tax Authority, although it filed for a tax foreclosure, has not located sufficient assets of the debtor to satisfy the debt. Having exhausted the means to obtain its credit, it would not be possible to withdraw from the public body the possibility of filing for bankruptcy of the debtor.

Additionally, the 1^st Chamber of Business Law of the TJ-SP found that the Tax Authority is not subject to the formal competition of creditors, as it can continue to use tax enforcement to seek satisfaction of its debt. On the other hand, it is subject to the substantive competition of creditors, since it submits itself to the queue for payments.

With respect to the principle of preservation of the company, the understanding expressed was that "in the circumstances described above, i.e., in the cases of frustrated tax execution and inertia of the debtor in satisfying the tax debt, there is no way to invoke the principle of preservation of the company, in a generic manner, so as to justify any lack of interest of the Tax Authority in the petition for bankruptcy. Not least because, if there is the purpose of protecting the interest of the national economy, one must also consider the need to exclude from the market those companies that are not able to participate in a healthy way in free competition (one of the principles of the economic order, article 170, IV, CF).”

Despite the evident intention expressed by the 1^st Chamber of Business Law of the TJ-SP to seek to ensure fairer competition among business companies, some argue that the understanding that the Tax Authority can petition for bankruptcy of companies that frustrate tax executions may further harm the interest of the national economy for the following reasons:

• Contrary to the prevailing understanding of the STJ, the understanding of the 1^st Chamber of Business Law of the TJ-SP may generate some legal uncertainty. Various creditors of companies that have debts with the tax authorities will run the risk of having their claims included in bankruptcy proceedings granted exclusively on the initiative of the Tax Authority, although the latter may use various legal means to obtain satisfaction of their claims, through applications for compulsory adjudication, attachment of the debtor's income, and redirection of tax enforcement to the company's partners, among others. Due to the well-founded fear of its creditors, the company may suffer a reduction in its line of credit or even lose strategic business partnerships, running the risk of insolvency;

• The precedent in question may create, for attorneys acting on behalf of the Tax Authority, an obligation to file for bankruptcy for all companies with large tax debts, considering that, unlike lawyers representing private individuals, the objective is to satisfy the tax debt, regardless of the strategy and the path to be followed to do so. Thus, the understanding of the 1^st Chamber of Business Law of TJ-SP may, in the last case, prevent companies that have effective conditions from being able to recover economically and socially, since the tax authorities will certainly not conduct a more detailed analysis of which companies should or should not continue to operate in the market;

• Even in the event that there are no assets of the debtor that can be seized in the tax foreclosure, the petition for bankruptcy will not necessarily allow the tax authorities to receive the amounts due to them more effectively. In such a scenario, the maximum that the Tax Authority can obtain is the opening of an invitation to competition of creditors, who will compete among themselves to satisfy their claim, under the terms of article 83 of the LRF;

• The joint interpretation of articles 94 and 95 of the LRF makes it possible to conclude that the legislator did not intend to extend to the Tax Authority the possibility of filing for bankruptcy of the debtor. This is because article 95 is clear in providing that debtors may file for, within the time limit for contesting the petition for bankruptcy, a petition for judicial reorganization to demonstrate their interest in making payment on their debts compatible with continuity of their activities. When the tax authorities are the creditor applying for bankruptcy, such a defense would have no practical effect, since the tax authorities are not subject to judicial reorganization. In other words, in the scenario discussed herein, debtors would be deprived of the prerogative expressly provided for in the LRF, which should not be allowed in the legal system.

The position detailed above is not intended to encourage the non-payment of tax debts by companies, but to demonstrate that the tax authorities do not need to resort to such a drastic measure, which greatly affects the national economy, in order to obtain satisfaction of debts, since they enjoy various legal privileges in that regard.

The conclusion is that, although unique to date, the understanding adopted by the TJ-SP may generate a number of legal and economic consequences. It remains now to be seen whether this understanding will remain isolated or whether there will be a real change in the rules of the game.

[1] STJ, REsp 363.206/MG, Opinion drafted by Justice Humberto Martins, Second Panel, decided on May 4, 2020; STJ, REsp 164.389/MG, opinion drafted by Justice Sálvio de Figueiredo Teixeira, Third Panel, decided on August 16, 2004; and STJ, REsp 287.824/MG, opinion drafted by Justice Francisco Falcão, First Panel, decided on February 20, 2006.

[2]STJ, REsp 363.206/MG, opinion drafted by Justice Humberto Martins, Second Panel, decided on May 4, 2010.

[3]TJ-SP, Civil Appeal No. 1001975-61.2019.8.26.0491, opinion drafted by Appellate Judge Alexandre Lazzarini, 1st Chamber of Business Law, decided on July 16, 2020.

[4] Article 94. The bankruptcy of the debtor shall be decreed:

1. - without any relevant reason of law, when, at maturity, a liquidated obligation materialized in an enforceable instrument or instruments is unpaid, the sum of which exceeds the equivalent of forty (40) minimum wages on the date of the petition for bankruptcy; (...)