Publications

Category: Environmental

The practice of environmental law attorneys, whether advisory or focused on litigation, has been gaining prominence in times of growing interest and intense media coverage of events that cause impacts on the environment. Influenced by this trend, law firms themselves have begun to assess the sustainability of their internal structures and policies.

The concept of sustainability began to spread in the 1970s and 1980s and was coined by the World Commission on Environment and Development as being that which "meets current needs without compromising the ability of future generations to meet their own needs."^[1] Currently, when sustainability is mentioned, social, environmental, and economic issues are on the agenda, in a model that is translated well in the Sustainable Development Goals (SDGs) of Agenda 2030, adopted during the 2015 Sustainable Development Summit. In all, the document contains 169 goals distributed among 17 objectives in the social, environmental, and economic spheres. It is difficult, therefore, to address environmental aspects in isolation when dealing with initiatives considered sustainable without considering a holistic view of the natural and human environments.

According to the Sustainable Law Practice Guide of the Community Advocacy and Social Responsibility Committee of Cesa (Centro de Estudos das Sociedades de Advogados [“Center for Law Firm Studies”]), “[p]er the terms of the ISO 26000 Standard, in order to be sustainable it is necessary to incorporate into the management of an enterprise a set of practices that simultaneously aim at good economic performance of the enterprise, improvement of society, and conservation of environmental balance. The fundamental step for an organization to achieve this condition is to have socially responsible management."^[2] Thus, when one talks about the environment and the practice of law, one should address the issue within this broader context.

Law firms have been adopting sustainability and/or social responsibility policies and projects, important elements in the environmental and social pillars of sustainable development. In practice, it is common for firms to promote social responsibility actions such as donations to Campanha do Agasalho [the “Clothing Campaign”], promotion of events on Children's Day, participation in events that encourage reading and donating blood, and partnerships with different institutions. Another trend that has gained strength in recent years is the promotion of a culture based on values and practices connected with the social pillar of sustainability. There is a growing connection between the activity of the practice of law and the social measures present in SDG Nº 5, which deals with gender equality. At Machado Meyer, there are debate groups on ethnic and racial diversity (ID.Afro) and on LGBT issues (#1igualdade [“#1equality”]), as well as a mentoring group for women, another volunteer group, and areas of the firm focused on handling pro bono cases. In 2019, the firm had three female partners and four male partners on its executive board, in addition to a male CEO, which demonstrates gender diversity in the area of governance.

With regard to practices aimed at the environment, four major actions in favor of sustainability were carried out at Machado Meyer in 2019. The firm has replaced all its plastic cups and cutlery with glass and metal items. Each employee received a sustainable cup with the stamp “Menos um Lixo” [“1 Less Trash”], a 100% Brazilian product, helping to reduce the "emission of pollutant gases in long-distance transportation"^[3] and prioritizing local production and economy. Policies were also adopted to encourage the use of less polluting means of transportation, such as bicycles, and policies to reduce the use of paper in folders, through the scanning of files. In addition, the Green Team group was created and now meets monthly to discuss sustainable actions to be adopted in the workplace.

Public and private policies reflect today's society and concern for sustainability. In the corporate world, this issue has increasingly gained the status of a competitive advantage^[4] in a society that lives with scarcity of natural resources and is trying to reverse this situation. According to the Brazilian Code of Corporate Governance - Public Companies (in Portuguese, Código Brasileiro de Governança Corporativa – Companhias Abertas”), "corporate governance seeks greater security of investments made and greater social responsibility on the part of the company"^[5] and this is increasingly a trend.

The main law firms in Brazil have demonstrated that the adoption of sustainable practices as a differentiating feature is not limited only to the corporate clients of these firms - both are seeking to meet the demands of society and “meet the three bases of sustainability in strategy and management"^[6] to obtain better results.

^[1] United Nations. https://sustainabledevelopment.un.org/content/documents/5987our-common-future.pdf

^[2] Cesa, Sustainable Law Practice Guide. https://probono.org.br/wp-content/uploads/2019/06/Guia-da-Advocacia-Sustent%C3%A1vel-Baixa-WEB.pdf

^[3] https://www.menos1lixo.com.br/o-copo

^[4] IBGC. Brazilian Corporate Governance Code - Public Companies. https://www.legiscompliance.com.br/images/pdf/ibgc_codigo_brasileiro_de_governanca_corporativa_companhias_abertas.pdf

^[5] MARQUES, Letícia Yumi; Zapater, Tiago. “Prática do Direito Ambiental na Defesa dos Interesses de Empresas Privadas” [“Practice of Environmental Law in the Defense of the Interests of Private Companies”]. Chapter “Direito Ambiental, Governança Corporativa e a Atuação da CVM” ["Environmental Law, Corporate Governance, and the Actions of the CVM”] by Roberta Leonhardt, Eliana Chimenti, Alessandra de Souza, and André Castilho. São Paulo: Letras Jurídicas 2019.

^[6] IBGC. Brazilian Corporate Governance Code - Public Companies. https://www.legiscompliance.com.br/images/pdf/ibgc_codigo_brasileiro_de_governanca_corporativa_companhias_abertas.pdf

Category: Labor and employment

The government sent to the National Congress, on November 26th, Bill No. 6,159/19, which aims to change the rules for filling quotas reserved for people with disabilities, established by Law No. 8,213/91.

The objective of the change is to make it easier for some sectors and companies that face difficulties in doing so, due to their location and the nature of the services provided. The bill does not, however, propose changes in the percentage to be considered for the fulfilment of the quota: 2% to 5% for companies with 100 or more employees, depending on the total number of staff members.

The first change suggested is to allow the same employee to be computed for the purposes of compliance with both the quota for hiring apprentices, provided for in the Consolidated Labor Laws (CLT), and the quota for people with disabilities, if they meet the two conditions simultaneously, which was previously forbidden in the laws and regulations.

Doubling the computation for the hiring of people with severe disabilities has also been proposed. This is one of the controversial items of the bill, since, although it encourages the hiring of people who have more difficulty in entering the job market, it may reduce the quota for some companies by half and generally reduce the supply of opportunities to people with disabilities.

The bill also proposes that not only regular employees, but also temporary and outsourced workers be included in the calculation basis for the quota. Thus, outsourcing companies remove from their calculation basis employees made available to the recipients of services.

Another proposal in the bill is exclusion of positions that require the exercise of a dangerous activity from the basis for calculating the quota of persons with disabilities, as well as those positions for which the activities restrict or prevent the exercise of the role by such persons or for which the work hours are less than 26 hours per week.

Bill 6,159/19 also aims to facilitate compliance with the quota by allowing for the obligation to hire people with disabilities to be replaced with the payment of a monthly contribution, in the amount of two minimum wages, to the Ministry of Economy's Program for Physical and Professional Rehabilitation, Prevention, and Reduction of Accidents at Work.

This provision will certainly be the subject of a broad debate in the Chamber of Deputies, since it goes against the guidelines for inclusion of persons with disability, substituting the idea of engagement in hiring with that of payment in cash.

The bill also provides for the possibility of offsetting the surplus hiring of one company against the shortage of another, which has not yet been regulated by the laws and regulations.

The expectation is that Bill 6,159/19, if approved, even partially, will facilitate compliance by companies with the hiring quota for people with disabilities. The difficulties encountered by companies in complying with this provision of law are known and legitimate, and are often related to the level of training of professionals or to accessibility infrastructure issues in different regions of Brazil. The measure also has the potential to increase competition among professionals with disabilities, as the jobs available to them are usually quite limited.

Category: Banking, insurance and finance

Instruction 612/2019 of the Brazilian Securities and Exchange Commission (CVM) will enter into force in September of this year and bring in new obligations related to cyber security for securities market brokers.

Although it is becoming increasingly important, the subject is not exactly new in terms of financial regulations. Institutions authorized to operate by the Central Bank of Brazil (BCB), including brokerage houses and distributors, have already been subject to National Monetary Council (CMN) Resolution No. 4658/2018 since April of 2018.

The subject has also been widely explored for years via self-regulation, with the creation of parameters and good practices, especially through Anbima's guides and research,[1] which served as a basis for even state regulators to develop their standards. In addition, Law No. 13,709/2018 (the General Data Protection Law), in force as of August of this year, brings in various obligations related to the security of client data processing for activities of any nature.

As some recent incidents of data leakage at large companies in Brazil show, however, this issue is still critical. The dissemination of cases involving financial institutions after CMN Resolution 4,658 came into effect also showed that this sector is not immune to cyber attacks, despite the current regulatory framework.

Therefore, the new rule issued by the CVM introduces a series of additional obligations for brokerage firms in relation to CMN Resolution 4,658, without breaking with its logic or creating incompatibilities with the standards and practices in force.

The main changes involve a more detailed approach by the regulator. While CMN Resolution 4,658 is less thorough and gives institutions ample room to define their policies and models according to their own needs, ICVM 612 opted to detail the regulation of some points, defining minimum content for certain items of the policies established.

For example, while CMN Resolution 4,658 provides that it is incumbent on the institution to define what relevant incidents are without imposing specific content,[2] ICVM 612 requires that incidents affecting critical processes or sensitive information, as well as those with a significant impact on clients, must necessarily be on the list of incidents defined as relevant by the institution.[3]

A similar fact occurs with the classification of data. CMN Resolution 4,658 requires it to be done, but does not specify the content thereof.[4] In turn, ICVM 612 determines that, as a minimum, registration data and information that allow identification of client transactions are considered sensitive.[5]

The obligations in addition to CMN Resolution 4,658 created by ICVM 612 may be reviewed in the comparative table below:

* The articles in this column refer to the numbering of ICVM 505 as amended by ICVM 612.

[1] In this regard, see ANBIMA's Cyber Security Guide, published for the first time in 2016 and edited 2017, available at https://www.anbima.com.br/data/files/F5/62/AB/91/FBC206101703E9F5A8A80AC2/Guia-de-Ciberseguranca-ANBIMA.pdf. In addition, it is also interesting to review the research that has been conducted by the association on this subject since 2017: https://www.anbima.com.br/data/files/E4/93/9C/7E/156306101703E9F5A8A80AC2/GT%20Ciberseguran_a-Pesquisa%202017_ANBIMA.pdf.

[2] As per article, subsection V, item “d”.

[3] As per article 35-D, paragraph 4, included in ICVM 505.

[4] Cf. article 3, V, “c”.

[5] Cf. article 35-E, sole paragraph, included in ICVM 505.

Category: Banking, insurance and finance

The Central Bank of Brazil (Bacen) announced in February the launch of the Instant Payment System - PIX (SPI), which will allow the transfer of funds in real time between people and/or companies starting in November. In this article, we review the main concepts of this new type of service, which promises to transform the dynamics of the financial system in Brazil.

Evolution of the system

The sending or receiving of funds and payment of products and services are essential to the proper functioning and economic development of a country. These activities in the financial system are directly related to the Brazilian Payment System (SPB), regulated by the National Monetary Council (CMN), Bacen, and the Brazilian Securities and Exchange Commission. The SPB is a set of rules, procedures, and institutions that encompasses the entities and systems related to the processing and settlement of fund transfer operations, foreign currency transactions, or financial assets and securities (the SPB includes the entities operating Financial Market Infrastructure - IMF and the payment arrangements and institutions).

The SPB we know today has undergone various regulatory and technological updates to meet the needs of the market and to shape the dynamics and speed of the economy. In 2002, in order to significantly reduce risks and keep the Brazilian financial system among the most modern in the world, Bacen developed the "new SPB." At the time, among other changes, the Electronic Transfer of Available Funds (TED) was introduced as an option to send funds from one bank to another.[2]

Years later, in 2013, the regulatory framework applicable to payment arrangements and payment institutions was established, through the enactment of Law No. 12,865/13, which set forth the principles and concepts applicable to payment arrangements, payment institutions, and payment accounts.

Now, with the SPI, Bacen aims not only to meet the objectives mentioned above, but also to foster financial inclusion and competitiveness in the Brazilian financial system and encourage the digitization of retail payments (one of the most efficient of the SFN pillars of the BC# Agenda).

Characteristics of the SPI

Instant payments are electronic funds transfers in which the transmission of the payment order and the availability of funds to the receiving user occur in real time.[3] The service will be available 24 hours per day, seven days per week, and every day of the year.

The SPI will be operated through infrastructure developed and offered by Bacen itself, the PIX platform, which will encompass all institutions interested in providing this service (payment institutions and banks, among others) and will be available to users start in November of 2020.

Considering these characteristics, Bacen issued Circular No. 3,985/20, which governs the methods and criteria for participation in the arrangement for instant payments and in the SPI, as well as the criteria for direct access to the Transactional Account Identifiers Directory (DICT), further detailed below.

Principal concepts

In addition to the concept of instant payment discussed above, Circular No. 3,985/20 established a series of basic concepts regarding the SPI’s regulations. Among them, the following stand out:

• Instant payment arrangement: this is the new arrangement established to govern the provision of payment services related to instant payment transactions;

• Instant payment account - IP account: this is the account to be maintained in Bacen by participants (banks and payment institutions) for purposes of settlement within the SPI;

• Transactional account: this is the account held by an end user (customer) at a payment service provider (such as a bank or payment institution) and used to make or receive an instant payment. It may be a cash deposit account, a savings deposit account, or a prepaid payment account; and

• Instant Payment System - SPI: this is the centralized infrastructure for the settlement of instant payments where transactions between participants with an IP account will occur.

Participation modalities - instant payments arrangement

According to the provisions of Circular No. 3,985/20, the arrangement of instantaneous payments allows for two methods of participation:

• 1. payment service provider maintaining a transactional account: a bank or payment institution offering an end-user transactional account, including payment institutions not subject to authorization by Bacen; and

• 2. government entity: an agency of the direct administration that participates in the arrangement of instant payments exclusively to make or receive payments per se.

Obligation to participate - instant payments arrangement

Participation in the instant payments arrangement is mandatory for financial institutions and payment institutions authorized to operate by Bacen with more than 500,000 active customer accounts, considering cash deposit, savings deposit, and prepaid payment accounts.

According to the explanatory memorandum of Circular No. 3,985/20, the mandatory participation of larger institutions that focus on and operate in retail (offering transactional accounts to their clients) was on purpose. In this manner, the risk of non-adherence by institutions relevant to this market and the creation of various closed payment arrangements is mitigated,[5] which would represent inefficiencies and unnecessary costs, contrary to the real purpose of Bacen's plan. With the adoption of this criterion, Bacen was able to obligatorily incorporate into the new system a set of institutions that aggregates more than 90% of the total number of active accounts in the methods already mentioned.

Types of participation – SPI

The SPI allows the following methods of participation:

• 1. direct: is characterized by the direct connection of the participating institution to the SPI and the ownership of an IP account; and

• 2. indirect:[6] the participating institution has neither a direct connection to the SPI nor an IP account, and its participation occurs through a direct participant of the SPI, responsible for registering the indirect participant in the system and acting as a settler in the SPI for instant payments related thereto.

The methods were established in accordance with item 5 of Communiqué No. 32,927, of December 21, 2018, which disclosed the fundamental requirements for the SPI ecosystem. According to this item, the ecosystem must have a flexible and open structure for participation in order to foster the market and the emergence of new services. For this reason, Bacen allowed participation in both a direct and indirect manner.[7]

Obligation of participation – SPI

Participation in the SPI is compulsory for participants in the instant payment arrangement, for the purposes of the settlement dealt with in Circular No. 3,985/20,[8] and optional for clearing houses and providers of clearing and settlement services, exclusively for the purposes of settlement of private transactions for the provision of liquidity carried out between participants in the SPI within the infrastructure.

It now remains to be seen how the new system will be implemented and how it will unfold, as well as the benefits and regulatory impacts of its use. Once again, Bacen demonstrates proactivity, encouragement of innovation, and interest in market growth and development. The institutions win, with the structuring of a competitive and profitable market, and the users, with the possibility of using a more agile, simple, and less costly system.

For more information on the SPI, access: www.bcb.gov.br/estabilidadefinanceira/pagamentosinstantaneos.

[1] https://www.bcb.gov.br/estabilidadefinanceira/spb

[2] The function was launched as an option to perform a transfer of under the DOC - Credit Document modality.

[3] When a transfer is performed, the funds transferred are deposited into the recipient user's account in real time (within a maximum of 10 seconds from the time of transfer).

[4] Subsection VI of Article 2 of Circular No 3,985/20.

[5] According to Bacen Circular No. 3,682/13, a closed payment arrangement is one in which the management of electronic money or, cumulatively, the management of an account, the issuance, and the accreditation of a payment instrument are carried out: (a) by only one payment institution or financial institution, the legal entity of which is the same as the institution of the arrangement; (b) by a payment institution or financial institution controlling the institution of the arrangement or controlled by it; or (c) by a payment institution or financial institution that has the same controller as the institution of the arrangement.

[6] The following are prohibited: (i) participation in the indirect method for commercial banks, multiple banks with a commercial portfolio, savings banks, and clearing and settlement houses and service providers; and (ii) participation in the direct method for payment institutions that do not have authorization to operate granted by Bacen.

[7]Vote 32/2020-BCB, of February 12, 2020 - Explanatory Memorandum of Circular No. 3,985/20.

[8] According to Circular No. 3,895/20, instant payment transactions involving different institutions participating in the arrangement must be settled through the SPI whenever they involve transfer between IP accounts of different direct participants in the SPI. Furthermore, if different participants in the arrangement use the settlement service of the same direct participant in the SPI, the settlement of instant payment transactions between these different participants must be performed in the systems of the direct participant itself, without using the SPI.

Category: Real estate

After the historical slowdown of the Brazilian economy and the brake imposed on all segments of the real estate market for a record amount of time, the expected recovery in the sector has been showing some concrete signs since the second half of 2019. Growth has been experienced in several sectors (logistics, retail, commercial, and residential), reflecting current economic policy, approval of labor and social security reforms, and signs that the government will proceed with tax reform. The decrease in unemployment and inflation, the maintenance of interest rates at a record low level, the increased faith in the economy, and the evident improvement in credit conditions also contribute to optimism, all ideal ingredients for the resumption of the real estate market starting in 2020.

The exponential increase in the number of residential developments in some cities in Brazil is directly related to the low interest rates on real estate financing and the decrease in the unemployment rate. Caixa Econômica, for example, announced that it will launch financing with fixed interest rates and without adjustment for inflation in March of this year. The reduction in interest rates is a natural fertilizer for real estate funds, which have shown impressive capital funding power (in number of transactions and volume of funds), also attracting more conservative investors because they are less volatile than stock portfolios. The current restriction on the acquisition of real estate by pension funds (which have always been major investors in this market) also contributes to a greater interest in real estate funds.

The heating up of the economy leads to a greater search for locations in the logistics sector (spaces in commercial and industrial warehouses), retail and office spaces, and this means that real estate fund portfolios continue to be filled with assets with good income performance. While, in 2018, the market for high-end commercial spaces in São Paulo closed with a vacancy rate of around 18%, today it stands at approximately 15% and, in some regions considered premium, it has reached less than 10%, according to market consultants.

These positive indicators have an immediate impact on the type of activity that the market demands. The demand for appraisals and discussions involving the structuring of collateral and credit risk is decreasing. On the other hand, there has been an increase in the search for legal advice in structuring new business opportunities throughout the development process of ventures, with a special focus on meeting changes in the population's mindset, which seeks new forms of housing, leisure, and work in a increasingly shared economy.

There has also been an increase in transactions to expand real estate fund portfolios and new capital funding, as well as a growing interest on the part of clients in bringing properties into good standing for future transactions or new investments. It is not by chance that institutional investors in Brazil have begun to bet that the sectors with the best performance in 2020 will be retail and e-commerce, followed by the real estate market.

Another important and expected change, which will certainly bring positive results for the real estate market, is the flexibility of the rules regarding foreign investment in Brazilian companies that invest in agribusiness. The matter is not settled and still faces strong resistance. Even so, it is possible that some change will happen in this area in 2020 and that foreigners will return to invest in the acquisition and leasing of rural properties in Brazil with greater legal certainty, although subject to limitations.

All this expectation of growth must be monitored, but with caution and long-term vision. It requires aggregated knowledge and a complete view of the pros and cons of each bet and new development, especially those projects that requirement a large investment in infrastructure, sustainability, technology, and urban mobility.

A new cycle of growth in the real estate market has already begun, with repercussions in all sectors of the economy due to its high capacity for job creation. This new cycle of ours will have more cautious players, who are better prepared and capable of fueling more sustainable growth in the market.

Category: Competition

After a turbulent period, due to lack of a quorum at the Administrative Court, the Administrative Council for Economic Defense (Cade) begins its work in 2020 with four new commissioners on the tribunal and renewed energy at the Superintendency General, following the reappointment of the superintendent in October.

This year a more diversified performance by the agency is expected, increasingly closer to the other actors involved in promoting the current economic agenda in strategic sectors and that goes beyond the traditional functions of investigation of violations of the economic order and review of mergers.

Cade's actions in regulated sectors should gain more relevance in the face of joint action projects with other agencies. In the financial sector, for example, Cade and the Central Bank of Brazil have been holding discussions on fintechs, the implementation of open banking, and the adoption of regulatory sandboxes to promote innovations in the financial system and foster competition in the banking market. In the aviation sector, the agency should act on the revision of the rules on distribution of time slots at airports.

Cade has expressed growing concern about the possible anti-competitive effects of conduct related to practices and fees charged at public ports. In the telecommunications sector, the agency publicly expressed its intent to participate in the discussions on the auction of 5th generation mobile telephony.

It is also possible that Cade will reinforce its direct action in promoting competition in regulated sectors, a move that began in 2019 with the signing of cease and desist consents to close investigations against Petrobras. At the time, the company committed to sell refineries and assets related to the natural gas market, in addition to taking over ancillary commitments to solve problems in the gas market.

With regard to the prosecution of anticompetitive conduct, Cade intends to publish in the coming months a penalty guide to spell out the criteria for determining the penalties applied in the trial of administrative proceedings. The measure takes place in the context of discussions at the Administrative Court on a lack of uniformity and robustness in the decisions of the agency and on the need to take into account the advantage gained by offenders in setting parameters for fines for formation of a cartel.

Cade should also intensify and improve investigations of unilateral conduct, especially in the financial sector, where several practices related to means of payment are already in the agency's sights. The same should happen in relation to the issue of cartels in public bids, thanks to the consolidation of institutional partnerships with state public prosecution services and the use of artificial intelligence tools to search for evidence of anticompetitive activities in public procurement databases.

It is also expected that CADE will more effectively encourage private suits in the Judiciary for damages for competitive violations. In November of 2019 the agency issued an ordinance regulating the procedures  provided for in a resolution published in 2018, for interested third parties to access documents and information contained in administrative cases,

In mergers, Cade will play an important role in review the competitive effects of transactions that occur in the federal government's privatization program in the coming years. The agency has sought to increase and empower its staff to maintain speed in review of cases.

In line with the actions of international antitrust agencies, Cade has devoted much attention to transactions between companies operating in digital markets, whose competitive risks tend not to be identified and measured by traditional analytical tools. In general, the parts of these transactions do not meet the legal reporting requirement. Given the growing relevance of the digital economy and the need to form a critical mass to define its policy of action and intervention in highly dynamic markets, it is possible that CADE will require reporting of some of these transactions in the coming years, exercising an option provided for in the Competition Law that has thus far been used sparingly.