Publications

Category: Infrastructure and energy

On April 8, the Executive Branch published two executive orders to alleviate the impacts of the covid-19 crisis on the electricity sector. MP 949 opens an extraordinary credit of R$ 900 million in favor of the Ministry of Mines and Energy (MME). MP 950, on the other hand, provides for temporary emergency measures for the sector to tackle the state of public calamity resulting from the coronavirus pandemic, recognized by Legislative Decree No. 6/20.

The funds from MP 949 are allocated to the Energy Development Account (CDE) to cover the rate discounts provided for in Law No. 12,212/10. They refer to the rate for the supply of electricity to final consumers who are members of the Low Income Residential Subclass, introduced by MP 950.

MP 950 amends some laws concerning the electrical sector. Law 12,212/10 now contains article 1-A so as to provide that, from April 1 to June 30, 2020, a 100% discount will be given for the portion of electricity consumption less than or equal to 220 kWh/month for final consumers belonging to the Low Income Residential Subclass. For the portion of electricity consumption exceeding 220 kWh/month there will be no discount.

Article 13 of Law No. 10,438/02 comes into force with a new item, which includes among the CDE's objectives the promotion of funds exclusively by means of a rate charge and permission for the amortization of financial transactions linked to measures to confront the impacts of the state of public calamity in the electricity sector, recognized as provided for in article 65 of Complementary Law No. 101/2000, to assist electricity distributors.

The same article 13 of Law No. 10,438/02 is amended in its paragraph 1, which now also includes the items paragraph 1-D and paragraph 1-E. The first item authorizes the Federal Government to allocate to the CDE funds limited to R$ 900 million to cover the rate discounts provided for in article 1-A of Law No. 12,212/10. The second item indicates that the Executive Branch may establish conditions and requirements for structuring the financial operations and for making available and collecting the funds. The objective is to allow the amortization of financial operations linked to measures to confront the impacts of the state of public calamity on the electricity sector.

MP 950/2020 also establishes, in its article 4, that the consumers of the regulated market environment who exercise the options provided for in paragraph 5 of article 26 of Law No. 9,427/96 and in articles 15 and 16 of Law No. 9,774/95 must pay (by means of a rate charged in proportion to the consumption of electricity) the remaining costs of such measures. This charge will be regulated by the Executive Branch and may be moved by the Electric Energy Trading Chamber (CCEE).

The executive orders seek to mitigate the effects of the coronavirus pandemic and preserve the sustainability of the electricity sector, given the drop in revenue for distributors caused by the increase in consumer defaults and decrease in consumption of electricity.

Category: Litigation

The world has been facing various challenges in the fight against the new coronavirus (the cause of  covid-19), which has resulted in different preventive measures in an attempt to mitigate the proliferation of the virus. One of the main ones is the removal of employees from the workplace and the implementation of work from home policies (remote work). In this scenario, companies need to adapt quickly to the physical absence of people and find remote solutions for the continuity of business. Considering the importance, necessity (and even the fast pace of certain projects) and the impossibility of holding face-to-face meetings, many companies have sought to confirm the legal validity of electronically signed documents.

In Brazil, Provisional Measure No. 2,200-2, of August 24, 2001 (MP 2200)[1] guarantees the validity and effectiveness of documents signed electronically through certification processes provided for by the Brazilian Public Keys Infrastructure (ICP-Brasil). Article 10, paragraph 2, of MP 2200 also allows the use of other means of proving the authorship and integrity of electronic documents, including those using certificates not issued in accordance with ICP-Brasil, provided that this is agreed upon between the parties and that these certificates are expressly accepted by them as valid.[2]

Brazilian case law has recognized the legal validity and the possibility of registration of electronic documents produced pursuant to MP 2200.[3] Going further, the Superior Court of Justice (STJ) has already recognized the enforceability of a contract signed electronically by means of a digital certificate without the signature of witnesses. The Court found that the authenticity of the parties' signatures conferred by the certification body, as a disinterested and trustworthy third party, would make up for this absence.[4] However, although there is precedent issued by a higher court, some judges insist on denying the enforceability of electronic documents without the signature of witnesses because of the absence of an essential element[5] (as required under article 784, subsection III, of the Code of Civil Procedure).[6]

Therefore, a more conservative approach recommends that, even in contracts signed electronically, two witnesses should sign the contract (also in electronic form) in order to avoid challenges regarding the enforceability of the contract. Witnesses must be civilly competent and have no financial interest in the agreement between the parties.

Thus, it is concluded that contracts signed electronically in accordance with MP 2200 are endowed with legal validity and qualify as extrajudicially enforceable instruments, in the same way as contracts physically signed by the parties, provided that they do not refer to legal transactions for which the law explicitly requires a public instrument/deed. This is the case, for example, of contracts that seek to transfer in rem rights in real estate.

In the event that the parties choose to use mechanisms not certified by ICP-Brasil, however, it is recommended that the document expressly state the form of signature adopted and that the parties recognize it as fully valid and effective.

Electronically signed documents are widely accepted in the judiciary as documentary evidence, either because they have legal validity under the law (as described above) or because judicial proceedings themselves are on their way to being fully digital. This is what is stated in article 441 of the Code of Civil Procedure[7], which admits the use of electronic documents as evidence, and Law No. 11,419/06, which provides for the digitalization of judicial proceedings.

It is important to emphasize that the considerations of this article are valid only from a Brazilian law perspective and, therefore, if the document involves the jurisdiction of other countries (as in international M&A transactions), the legal validity of the electronic signature should be confirmed and certified by professionals qualified in the applicable jurisdictions.

[1] MP 2200 had its effectiveness deferred by Constitutional Amendment No. 32/2001 and remains in force and fully applicable until (i) it is expressly revoked or (ii) there is a definitive resolution by the Brazilian Congress on the matter.

[2] Item 13 on the following webpage https://www.iti.gov.br/perguntas-frequentes/41-perguntas-frequentes/112-sobre-certificacao-digital.

[3] STF, REsp No. 1.495.920/DF, opinion drafted by Justice Paulo de Tarso Sanseverino, decided on June 7, 2018.

STF, Motion for In Limine Injunctive Relief in ADI No. 5.108/DF, opinion drafted by Justice Dias Toffoli, decided on April 20, 2016.

TJSP, Appeal No. 0002493-07.2011.8.26.0699, opinion drafted by Appellate Judge J. Martins, decided on February 13, 2014.

TJPR, Interlocutory Appeal No. 937059-8, opinion drafted by Appellate Judge Jurandyr Souza Junior, decided on July 23, 2012.

[4] STJ, REsp No. 1.495.920/DF, opinion drafted by Justice Paulo de Tarso Sanseverino, decided on May 15, 2018.

[5] TJSP, Appeal No. 1011898-10.2016.8.26.0009, opinion drafted by Appellate Judge Tasso Duarte de Melo, decided on November 13, 2019.

[6] Article 784. Extrajudicially enforceable instruments are: (...) III - the private document signed by the debtor and by two (2) witnesses.

[7] Article 441. Electronic documents produced and kept in compliance with the specific laws and regulations shall be accepted.

Category: Public and regulatory law

Federal Decree No. 10,314/20, published on April 7, implemented a significant update of the procedures applicable to donations from individuals to the Federal Government, especially at a time when the government needs goods and services to support the fight against the covid-19 pandemic. This regulatory update included a new rule in Federal Decree No. 9,764/19 that authorizes the Federal Government to reduce or even eliminate the time limit for acceptance or expression of interest in the donation, at the initiative of private individuals, of objects necessary for emergency or calamitous situations.

Originally, Federal Decree No. 9,764/19 dealt only with donations free of conditions (i.e., that do not generate, for the donee, restrictions or obligations linked to the good or service donated). However, because of the changes introduced by Federal Decree No. 10,314/2020, it now also regulates donations with conditions and other topics that we will describe below.

The conditions that may be assumed by the Government are restrictions on the donated good or service or mandatory or prohibitory obligations in favor of the donor, the donee, third parties, or the public interest. Financial contributions to the donor are prohibited by Federal Decree No. 9,764/19, of course, because they are incompatible with the concept of a donation (free by nature).

Donation without conditions, if at the initiative of the Federal Government, must necessarily occur via public call and is conditioned on the inexistence of goods or services available in the digital platform reuse.gov.br (technological solution of the Ministry of Economy that offers, to the Federal Government, goods and services made available by the government agencies themselves or donated by private parties).

The Ministry of Economy is responsible for publishing the public call notice on its website. The notice must contain the characteristics, rules, and conditions applicable to the donation sought by the Federal Government, including a draft of the donation agreement, among other information. Following this, interested private parties must submit their proposals in a public session. In the end, the proposals most suited to the interests of the Federal Government will be selected, according to the criteria in the call notice. In the event of a tie, the proposals will be chosen by lot. More than one proposal may be accepted by the Government if there is sufficient demand for the desired good or service.

In the new system of donations to the Federal Government introduced by Federal Decree No. 10,314/20, there is no provision for donations with conditions via public call. This is the right decision because it is not reasonable, from the perspective of public managers, to fix beforehand the conditions linked to the donation desired, bearing in mind that there is always the possibility (even if theoretical) of receiving this donation free of conditions (or with less onerous conditions). Thus, it is incumbent on the private individual interested in the public call to assess whether to propose a donation with conditions and what they will be, if this is the approach chosen by the offeror.

On the other hand, donation at the initiative of the private individual, with or without conditions, must occur through expression of interest submitted through the digital platform reuse.gov.br. The event should contain information relevant to the donation (description of the goods and services donated and any conditions, their market value, specifications, and quantity, among other data). Private parties may or may not indicate the donee(s) (entities of the Federal Government) to whom their donation is intended. The information submitted by the private party will then be reviewed by the Central Purchasing Department of the Ministry of Economy.

In the case of donations free of conditions, if approved, the Central Purchasing Office will publish the announcement of the donation, which will be available for ten days on the platform reuse.gov.br. Within this period, it will be up to the donee(s) to decide whether or not to accept the donation. If private party has chosen not to indicate specific donees in its expression of interest, any interested entities or bodies may apply to receive the donation.

Proposals for donations free of conditions submitted by private parties through the platform reuse.gov.br which have the same subject matter as public calls with an open deadline for submission of proposals will be received by the Central Purchasing Department as proposals for these calls, if the registration rules have been met.

On the other hand, in the case of donations with conditions at the initiative of the private party, after the approval of the Central Purchasing Department and the availability of the announcement of the donation on the platform reuse.gov.br, other interested donors may submit proposals for related donations within ten days. Without prejudice, during this period, the donee(s) may also accept or not accept the donation, under the terms proposed by the private party. Alternatively, interested agencies and entities may apply to receive the donation if it has not been directed to specific donees by the donor. However, if other proposals for donations are submitted within this period, it will be up to the interested donee(s) to evaluate and select the proposal(s) most advantageous to the Government (i.e. with the least conditions).

Once these procedures have been overcome and the final approval of the donee(s) has been obtained, the donation at the initiative of the private party (with or without conditions) will then be formalized through an agreement between the private party and the Government. For donations of goods, this agreement will take the form of an instrument of donation, if there are no conditions. If there are conditions, it will be a donation contract. In the case of donations of services, the arrangement should always be formalized by means of an adhesion or accession instrument.

The regulation of the procedures applicable to donations with conditions to the direct Federal Government, federal agencies, and federal foundations is, without a doubt, the main innovation introduced in Federal Decree No. 9,764/19 with the recent promulgation of Federal Decree No. 10,314/20. However, there are other rules introduced in Federal Decree No. 9,764/19 that also deserve attention.

One of them is the prohibition on receiving donations that generate future obligations from direct contracting of the private party for the supply of goods, inputs, and parts of an exclusive brand or services due to unenforceability of bidding. This prohibition is intended to prevent the donation from directing future contracts of the Government in favor of the private party, which would artificially create a situation of unfeasibility of competition and subversion of the duty to follow public procurement guidelines.

Another relevant rule is the prohibition on receiving donations capable of generating additional expenses for the Government, whether present or future, certain or potential, such as expenses arising from its secondary liability, recovery of assets, or other circumstances that make the donation uneconomical. This same logic is found in another related rule introduced by Federal Decree No. 10,314/20: the prohibition on receiving donations with conditions disproportionate to the good or service offered in a donation to such an extent that it becomes disadvantageous to the Government.

Federal Decree No. 10,314/20 also introduced a provision to prohibit individuals who have made a donation free of conditions to the Federal Government from using the donated goods or services for advertising purposes. Exceptions are made for the possibilities, after the delivery of the goods or the beginning of the rendering of services, of mentioning the donation on the donor's website and mentioning the donor by name on the website of the agency or entity that donates to the Federal Government. If the private party is interested in obtaining advertising advantages as a result of the donation, this intention should be formalized in the donation proposal as a condition associated with the donated good or service.

It was also established that the non-performance or delay in the fulfillment of the condition (if any) by the Federal Government will cause reversal of the donation. In practice, all donations made by individuals will be subject, regardless of an express provision in the instrument or contract formalizing the donation, to a reversal provision. Breach of the condition, therefore, will result in the return of the donated asset to the equity of the donor, according to article 547 of the Civil Code (or interruption of the service provided to the donee, by analogical interpretation of this provision).

Measures such as those described above were already being adopted in response to the pandemic even before the recent promulgation of Federal Decree No. 10,314/20. The Ministry of Economy, for example, had already published, in March, public call notices to receive donations of goods such as gloves, masks, sanitizer, and equipment to support the telework of public servants.

However, under the prior wording of Federal Decree No. 9,764/19, the Federal Government was not authorized, for example, to receive donations with conditions (often necessary or desirable by private parties, for practical reasons, or other issues) or to speed up procedures for the receipt of urgently needed goods and services (such as those intended to combat the pandemic).

Now, with the updates made to its wording, Federal Decree No. 9,764/19 now provides more comprehensive, safe, and effective legal instruments to coordinate and execute the fight against the coronavirus pandemic through donations from private parties to the direct Federal Government, federal agencies, and federal foundations. This is a commendable effort that, in addition to meeting Brazil’s needs in the current state of public calamity, institutes more modern, practical, and sophisticated regulations on this issue.

Category: Public and regulatory law

A recurring topic in times of the coronavirus has been the repercussions of the covid-19 pandemic on the most varied types of contracts: commercial, labor, financial, real estate, consumer, etc. Various authors have produced robust summaries of the legal, doctrinal, and case law treatment of the widest range of institutes involved in remedying the effects of the outbreak on the underlying contractual relationships, among which are unforeseeable circumstances and force majeure, excessive burdensomeness, undue hardship, and the theory of unpredictability.

With regard to administrative contracts, requests for economic and financial rebalancing, which are based on numerous regulations spread throughout the Constitution, ordinary legislation, and the regulations of specific infrastructure sectors, should gain particular strength. Constitutionally, for example, the "effective conditions of the proposal" are guaranteed to those who enter into contracts with the public authorities (article 37, XXI). At the legal level, the maintenance of the balance in proportion to the risks, burdens, and compensation stipulated by the parties to the administrative contract is manifested in the General Public Procurement Law (Law 8,666/93, article 65, II, "d"; paragraphs 5 and 6), in the Concessions Law (Law 8,987/95, article 9, paragraphs 2 and 4), in the Public-Private Partnerships Law (Law 11,079/04, article 4, VI, and article 5, III), among others. The institute is also subject to treatment by industry, with regulations by different agencies, such as the port sector (according to ANTAQ Resolution 3,220/14), the road sector (according to ANTT Resolution 5,850/19), or the airport sector (according to ANAC Resolution 528/19).

As a rule, the economic and financial balance of administrative contracts may be restored by application of various methodologies, one of the most common being that of construction of a marginal cash flow (which runs parallel to the financial equation structuring the contract and intended to neutralize the effects of supervening and specific events) via the use of several instruments, such as (i) increase or reduction of the financial values of the contract (such as the rate charged for the availability of the service); (ii) modification of contractual obligations (such as projected investments); (iii) extension or reduction of the term of the contract; or (iv) payment of compensation for amounts exceeding the original calculation of the instrument.

It is against this backdrop of regulatory means aimed at achieving a predetermined end (restoration of the economic and financial balance of the contract), that the current pandemic, considering the administrative measures proposed to contain it, the effects of social isolation, and the economic crisis that will follow, seems to impose new challenges on the infrastructure sector.

This is because the coronavirus outbreak, it seems, on the one hand, differs from all the pandemics faced in the recent past and, on the other, could lead to a global economic crisis with unique characteristics, possibly distinct from the last great shock faced by capitalism in 2008.

Initially, this epidemic differs from other health crises that have struck the world in the recent past for a number of reasons: (i) it is a new virus, about which there is very little information and, therefore, a lot of uncertainty; (ii) its capacity for spreading is exponential, with a lethality rate (not yet completely mapped) that is significant; and (iii) for which there are still no concrete prospects for the emergence of a vaccine or drug with sufficient effectiveness and scale.

The sum of these factors paints a disturbing picture for Brazilian policies. It cannot be overlooked that such a formula could result in much more than public health crises. One of the fields most affected by the outbreak will be the economic ecosystem, whose fate is viscerally linked to the resolution of the humanitarian tragedy. In terms of public services, it seems certain that processes of economic and financial rebalancing will proliferate in the coming months and years, seeking to restore the conditions necessary for providers to sustainably maintain their activities without impacts on the population that needs them.

In a scenario such as the one described, what will be the feasibility of restoring the balance by increasing the rates charged for the public service provided, which will affect a poor population with runaway unemployment and explosive informality? The risk of demand for this new cash flow will have reached levels that are potentially unprecedented in Brazil.

The same goes for the possibility of extending contract terms. The combination of aggregate demand weakened by the recession and supply compromised by the pandemic suggests that resumption of the economic cycle may take place in a less steep curve than has been seen in previous recoveries. There is no guarantee, therefore, that operation of the activity for an additional period of time, given the time restrictions on the extensions contained in the instruments themselves and in the call for bids that gave rise to them, will be able to balance contractual relations and maintain the hygiene of the services provided.

What, then, about the alternative of compensation for restoring the balance? Global efforts to remedy the effects of the covid-19 outbreak, involving the application of trillions of dollars to expand social safety nets, implementation of basic income plans, rescue of industries especially affected, and promotion of investments (combined, in Brazil, with a public budget already under stress), make it unlikely that the Brazilian State will be able to cope with all the requests that will be directed to it.

There is still the possibility of abolishing compulsory investments or rescheduling the investments planned, which we have already addressed in another article. If, on the one hand, the crisis may make certain investments economically irrecoverable, or even useless for the maintenance of contractually defined service levels, on the other hand, the cancellation of investments, from a macroeconomic perspective, will have an impact on the resumption of aggregate demand, thus backfeeding the effects of the crisis.

Finally, there is room for a reduction in the grant amounts still due. The measure has a limited impact, since most contracts stipulate as a condition for their execution fixed concessions paid in the first years of the concession or even before it is entered into. In turn, variable grants, invariably linked to the concessionaire's revenues, usually represent insufficient percentages to allow effective aid to cash flows severely compromised by the sharp drop in demand. All help is welcome, but along with the impacts on revenue, especially when the Government already counted on these funds in some way, it does not seem that an allowance or exemption from payment of the grant will bring effective conditions for continuity of the provision of essential services.

In the face of all this, the deep gravity and emergence of the scenario envisioned, with a myriad of actors simultaneously making demands on the public power for their survival, it will be imperative that the Brazilian State competently exercise its role as planner, adopting a clear strategy of intervention and incentives for the Brazilian economy, coordinating the corresponding instruments and prudently employing scarce public resources, so that the eventual impacts for the providers of essential public services (as long as not properly addressed in the risk matrix of the respective contracts) are mitigated and the population can continue to benefit from them ,even after the end of the quarantine, for many years.

Category: Labor and employment

Aiming to regulate the granting of loans to employers in order to enable the payment of the payroll for their employees, on April 3, the federal government published Executive Order No. 944/20 ("MP 944"), which launches the Emergency Job Support Program.

Considered to be another way to tackle the state of public calamity caused by the covid-19 pandemic, the program encompasses business companies and cooperatives, with the exception of credit companies with annual gross revenues exceeding R$ 360 thousand and equal to or less than R$ 10 million in 2019.

For two months, employers will be granted credit to cover the entirety of their payroll, limited to an amount equivalent to up to twice the minimum wage per employee.

With low interest rate (3.75% per year), 36 months for payment, and an initial grace period of six months, the measure aims to relieve employers of part of the costs with payroll. MP 944 requires employers to provide truthful information and not to use the funds granted for purposes other than the payment of their employees.

In addition to economic and financial consequences, the measure has important labor impacts. In order to preserve employment relationships, it guarantees stability to the employees by linking the granting of the loan to the company's obligation not to terminate, without cause, the employment agreements of all employees during the period between the date the line of credit is taken out and 60 days after receiving the last installment.

Failure by employers to meet any of the obligations will cause the debt to mature immediately.

MP 944 does not provide for the possibility of indemnities for the period of stability. This leads to the conclusion that any termination before the end of the period may give rise, in addition to early maturity of the obligation, to a claim for reinstatement of employment by employees who have been terminated.

Category: Labor and employment

Executive Order No. 936 (MP 926/20), published on April 1, instituted the Emergency Program for Maintenance of Employment and Income, with the objective of reducing the social impact of the public calamity declared after the covid-19 pandemic.

One of the measures brought in by MP 936/20 is the federal government's supplementation of the income of workers in the private sector, through the payment of the Emergency Benefit for Preservation of Employment and Income, in the cases of proportional reduction of work hours and salary or temporary suspension of the employment contract.

Employees who have received the emergency benefit will have temporary job security for as long as the reduction in work hours and salary, or suspension of employment, lasts, and for the same period after the reestablishment of work hours or resumption of the employment contract.

As an example, employees who have their work hours and salary reduced for three months cannot be dismissed without cause during the reduction period and the following three months, totaling a guarantee of six months.

The temporary employment guarantee does not apply to employees who resign or are dismissed for cause due to the commission of any of the serious forms of conduct described in article 482 of the Consolidated Labor Laws (CLT).

In the event of dismissal without cause during the period of stability, the employer must pay severance pay and compensation for the remaining period of the guarantee, in the following percentages of the salary to which the employee would be entitled:

• 50%: reductions in work hours and wages of 25% or more and less than 50%;

• 75%: reductions in work hours and wages of 50% or more and less than 75%; or

• 100%: reductions in work hours and wages of more than 75% or temporary suspension of the employment contract.

The provisional guarantee is initially aimed at maintaining existing jobs, since the increase in the unemployment rate is one of the inevitable repercussions of the coronavirus crisis in the Brazilian market.

The government estimates that layoffs could reach 12 million people without the measures provided for in MP 936/20, while, as a result of the emergency program instituted, the official estimate is that this number will be reduced to 3.2 million workers.

Moreover, the protection against dismissal without cause is a true counterpart to the sacrifice of the worker. After all, the proportional reduction of work hours and salary or temporary suspension of the employment contract, even with the receipt of the Emergency Benefit for Preservation of Employment and Income, will lead to a reduction in remuneration, which may prevent employees from honoring their personal commitments.

The government's objective with the payment of compensation in lieu of the provisional guarantee period is also to inhibit the unrestricted use of proportional reduction in work hours and salary and temporary suspension of employment contracts, since there will be considerable costs with dismissing employees who are fit within these two scenarios.

On the other hand, the setting of percentages that limit the replacement compensation by MP 936/20 may be seen as a way to prevent companies from feeling discouraged from adopting the measures instituted in the government's emergency program, unlike the other provisional employment guarantees, such as those arising from workplace accidents or those to which pregnant employees are entitled: both guarantee employees full payment of the remuneration that would be due.

Considering the economic impacts of the coronavirus and the uncertainties regarding the normalization of activities in Brazil, it is likely that imposition of a single form of compensation would lead companies to lose interest in implementing even the most moderate alternatives provided for in MP 936/20, due to fear of receiving such an aggressive penalty.

With the relaxing of the compensation according to the percentages of the reduction in salary and work hours or temporary suspension of employment contracts, companies may structure their contingency plan according to their capacity to bear the consequences of any dismissal without cause during the course of the provisional guarantee period.

It is important to mention that the CLT, in paragraph 3 of article 611-A, already established the need to provide for the protection of employees against dismissal without cause during the term of the collective bargaining agreement when a provision is agreed upon that reduces salary or work hours. However, in the event of a reduction in work hours and salary through collective bargaining, with the supplementation of salary through the receipt of the Emergency Benefit for Preservation of Employment and Income, the provisional guarantee provided for in MP 936/20 should be observed, as it is a more specific and more beneficial rule for the worker, which extends the protection ensured in the CLT for the same period of time after the term of the collective bargaining agreement.