Publications

Category: Banking, insurance and finance

Legal entities and investment funds incorporated in Brazil have until August 15 to submit a report to the Central Bank of Brazil, detailing investments in their quotas and/or shares held by foreign investors on December 31 of the previous fiscal year, or the outstanding short-term trade debts owed to non-residents on the same date, in the following situations:

(a) legal entities must submit this report when, on December 31, 2018, they had a net worth equivalent to or in excess of one hundred million US dollars (USD 100,000,000.00), and, simultaneously, any direct ownership held by non-resident investors in their capital stock, regardless of the amount;

(b) legal entities must submit a report with respect to their current liabilities with non-resident lenders by means of debt instruments when, on December 31, 2018, they had an outstanding balance in short-term trade debts (due within 360 days) equivalent to or in excess of ten million US dollars (USD 10,000,000.00), regardless of any foreign equity ownership in their capital stock; and

(c) investment funds must submit a report when, on December 31, 2018, they had a net worth equivalent to or in excess of one hundred million US dollars (USD 100,000,000.00) and, simultaneously, quotas directly held by non-resident investors, regardless of the amount.

The reporting obligation mentioned above does not apply to the following persons and administrative bodies:

• individuals;

• direct administrative bodies of federal, state, Federal District, and municipal governments;

• legal entities who are debtors in the transfer of foreign loans granted by institutions headquartered in Brazil; and

• nonprofit entities maintained by the contributions of non-residents.

The report must be electronically submitted to the Central Bank through the website www.bcb.gov.br until August 15, 2019, at 6 PM.

The manual containing detailed information on the content and requirements of the report is available on the same website.

Those responsible for this report must store the supporting documentation for five (5) years, counted as of the base date of the report, available for submission to the Central Bank upon request.

Failure to submit the report, or submitting a report that does not comply with the applicable regulations, subjects the violator to a fine of up to two hundred and fifty thousand Brazilian Reais (R$250,000.00), pursuant to article 60 of BCB Circular No. 3,857, of November 14, 2017.

Held annually, the Census of Foreign Capital in Brazil aims to compile statistics of the external sector, especially the International Investment Position, in order to support the formulation of the economic policy and activities of economic researchers and international agencies. Results are scheduled to be released later this year, on November 25.

(BCB Circular No. 3,795, of June 16, 2016, Law No. 13,506, of November 13, 2017; and BCB Circular No. 3,857, of November 14, 2017).

Category: M&A and private equity

Resolution No. 241 of the Superior Council of the Labor Judiciary (CSJT), in force since June 6, amends some of the rules of Resolution No. 185, bringing in important changes in the use of the Electronic Judicial Procedure (PJe).

For the practice of labor law, there are some changes, such as the possibility of submitting an answer, counterclaim, and documents accompanying them under seal, without the magistrate being able to order them excluded, and the obligation to use the PJe-Calc tool to submit calculations of judgment debt.

The changes were provided for by law, respectively, in paragraphs 4 and 6 of article 22 of the new resolution. In the past, it was possible to file an answer, counterclaim, and documents in a confidential manner, provided that the parties supported the confidentiality based on the scenarios set forth in article 770, head paragraph, of the CLT (Consolidated Labor Laws) and articles 189 or 773 of the CPC (Code of Civil Procedure).

The first opportunity in positive law to file the briefs in question under seal arose with Resolution No. 94/13 of the same council. However, the change made by Resolution No. 185 created a paradox: either the documents were filed without confidentiality, exposing the theory in defense before the hearing, which changes the practice observed at the time of physical proceedings and relativizes the provision of article 847, head paragraph, of the CLT, or the briefs were presented under seal, delivering them for the subjective review of the magistrate.

In this subjectivity, of course, there are appellate decisions that modify the striking of documents ordered by trial judges and also those that uphold them.

Setting aside the decision by the trial court that ordered the striking of the answer and documents presented by the company, the judgment handed down in the record of case No. 0000622-18.2018.5.21.0009, of the authorship of appellate judge Ronaldo Medeiros de Souza, of the 2nd Panel of the Court of Appeals for the 21st Circuit, addressed in detail the topic of confidentiality:

"Law No. 11,419/2006, which provides for the computerization of judicial proceedings, promoted a radical change in the way the procedural acts are performed, so that, today, we are improving the electronic mechanisms and changing the procedural legislation order to ensure greater compatibility between the two.

However, it is the PJe-JT System and its peculiar rules that are subject to labor procedural legislation, not the other way around. In this sense, article  847, head paragraph, of the CLT indicates that the opportune time for the presentation of the answer in a labor claim is after the first attempt at settlement has been frustrated, being an option of the party, to do so orally or, per the terms of the sole Paragraph of the legal provision in question, to present it in writing via the electronic judicial proceeding system before the hearing.

As the respondent has pointed out well, the fact that it submits its defense in advance through the PJe-JT System does not imply that the opposing party must have access to it before the appropriate procedural moment, i.e., after the first attempt at settlement. The logic that presides over this system is, as the respondent said, to "foster and preserve good dialogue in negotiation, delaying the adversarial nature of the process" (675).

Interestingly, the same court has a decision in the entirely opposite direction, ratifying the exclusion of the answer and its documents, as seen in the headnotes below:

HEADNOTES

Answer. Confidential nature. Non-receipt. Curtailment of defense. Nullity cured. Absence of prejudice. Ripe Cause. Decision on the request. The filing of the answer under seal does not impose an obstacle on the Court blocking its review, still more so when the time limit set by it for it to be presented is observed. Moreover, the scenario at bar does not challenge the application of the provisions of paragraph 2, of article 9, of TRT21 Act No. 634/2013, since, at the time of the filing of said briefs, the first hearing had not yet taken place. However, even rejecting the answer, the trial court did not declare default, and validated all the evidence submitted by the defendant, in addition to, during the course of the pre-trial phase, granting it full exercise of the right of defense, such that the suit was duly instructed, in such a manner that it is not possible to declare the nullity, due to application of the provisions set forth in article 794 and 796, a, of the CLT. (TRT-21 - ROPS: 00002731520185210009, Date of Decision: November 6, 2018, Date of Publication: November 9, 2018. Opinion drafted by: Ricardo Luís Espíndola Borges)

Thus, Resolution No. 241 of the CSJT comes in good time to end the debate regarding the use of the “confidentiality" option in filing the answer, counterclaim, and documents. The magistrates are expected to accept the content of the resolution, which, we should agree, did nothing more than ensure compliance with the head paragraph of article 847 of the CLT for lawsuits proceeding via electronic means.

The other important novelty brought about by Resolution No. 241 of the CSJT was the mandatory use of PJe-Calc, a tool developed to standardize the presentation of calculations in labor suits. This is a very complete solution that, although considered "didactic" and "intuitive" by its creators, has a complex instruction manual and several videos explaining its operation. Perhaps for this reason compulsory use was delayed until January of 2020.

Resolution No. 241 of the CSJT, therefore, brings the PJe closer to the labor practice, making technology work for the practice of law, and not vice versa, as it is not uncommon to find situations where practices affecting physical proceedings are hampered by the characteristics and functionalities of the electronic procedure.

Category: Tecnology

On July 9th, law No. 13,853/2019, which amended Law No. 13,709/18 (the General Data Protection Law - LGPD) was published in the Official Gazette. The main changes are summarized below:

Data Protection Officer: this may be an individual or a legal entity, contrary to what was established in the original text of the LGPD, according to which this role could only be exercised by an individual. In addition, operators must also appoint a person in charge, as defined in article 5 of the LGPD. However, article 41 of the LGPD has not been modified and continues to provide that only the controller should appoint the person in charge. The text submitted for presidential approval provided that the scenarios in which the operator should appoint the responsible party would be regulated by the National Data Protection Authority (ANPD). As this section was vetoed by the President of Brazil, it is not clear when the operator should appoint a responsible party.

Health sector: with respect to the legal framework for the processing of personal data, including sensitive data, wording has been added providing that health services or health authorities, in addition to health professionals, may also process personal data in order to safeguard the health of the data subject. Regarding the prohibition of shared usage of sensitive data among controllers of sensitive health data seeking an economic advantage, the wording added cites as an exception health and pharmaceutical assistance services – conducted in the interests of the data subjects in order to allow data portability and financial and administrative transactions resulting from the use and rendering of health services. Also, very relevant wording has been added for health plans, prohibiting the operators of these plans from processing personal data to manage risks in the acceptance and exclusion of beneficiaries.

Rights of data subjects: The old wording of the LGPD provided that the data controller must report any correction, elimination, anonymization, or blocking of data to the processing agents with whom they shared it, for them to perform the same procedure. According to the addition made to the original wording, the responsible party is not required to carry out such reporting in cases in which it is proved impossible or involves disproportionate effort. Regarding the right to review decisions made on the basis of automated data processing, the original wording provided for the review to be done by an individual. Presidential Decree No. 869/18 had excluded the need for review by an individual, and the new wording maintained this exclusion.

Data processing by Public Authorities: with regard to the shared usage of personal data by Public Authorities, items were added to the first paragraph of article 26 in order to provide that Public Authorities may transfer personal data included in databases to which it has access in the following cases: when required by law; when the transfer is supported by contracts, agreements, or similar instruments; or if the purpose is the prevention of fraud and irregularities, protection of the safety and integrity of the data subject, with any treatment for other purposes being prohibited.

Penalties: In cases of violation of the LGPD, the provision for penalties applicable to entities and public bodies listed in paragraph 3 of article 52 was excluded. In addition, a paragraph was also added to provide that the amount collected via penalties applied be allocated to the Fund for the Defense of Diffuse Rights, provided for in the Public Civil Action Law and the law that created the Federal Governing Council of the Fund for the Defense of Diffuse Rights. Lastly, paragraph 7 was added to article 52, providing that individual data leaks could be the subject of direct reconciliation between controller and data subject, and only in the absence of an agreement may the controller be subject to the penalties provided for in the LGPD.

The National Data Protection Authority (ANPD): the ANPD was created, initially as a part of the executive branch overseen by the President of Brazil. Its legal nature as a body of the federal public administration must be reassessed after a period of two years. Various duties, assigned to the ANPD, were also added, such as preparing guidelines for the National Policy for the Protection of Personal Data and Privacy; executing settlements with processing agents to eliminate irregularities, legal uncertainty or litigious situations; promulgating simplified and differentiated standards, guidelines, and procedures (including deadlines) for micro and small businesses, as well as business initiatives of an incremental or disruptive nature that declare themselves to be startups or innovation companies, to guarantee their adaptation; and ensure that data processing for the elderly is carried out in a simple, clear, and accessible manner.

Click here to see our table providing a complete comparison of the original wording of the LGPD, Presidential Decree 869/18, and Law No. 13,853/19:

Category: Infrastructure and energy

Competition law experts and businesspersons are following with apprehension the end of the term of office of the commissioners on the Administrative Tribunal of the Administrative Council for Economic Defense (Cade).

TheTribunal, which is composed of six commissioners and a chairperson, has been operating with only six members since January of this year, following the resignation of commissioner Cristiane Alkmin Junqueira Schmidt, who left office before the end of her term in order to assume the position of Secretary of Finance of the State of Goiás.

With the end of the term of office of three other commissioners this month (Polyanna Ferreira Silva Vilanova, João Paulo de Resende, and Paulo Burnier da Silveira, on the 8^th, 14^th, and 16^th, respectively), CADE’s Tribunal will not have the minimum seating quorum of four members as of July 17^th. The Competition Law (12,259/11) provides that in such case all legal  deadlines shall be suspended.

In view of this imminent issue, and without a forecast for when new commissioners will fill the vacancies, Cade sped up the pace of sessions even scheduling  extraordinary judgment session, and tried large cases that had been under review for a long time, such as those involving Google, Petrobras, and the subway cartel.

Another issue that gives rise to concern relates to the merger review procedure. According to Cade’s internal rules, the review of transactions by the Cade Superintendence-General is not suspended in the event of lack of quorum on the AdministrativeTribunal. If a transaction is approved by the Superintendence-General, its closing may only occur 15 days after the publication of the decision, provided that during this waiting period there is no regulatory agency / third party appeal or request for review by one of the Tribunal members. Merging parties that close the deal during the waiting period are subject to gun jumping penalties, including fine of R$ 60 thousand to R$ 60 million, among other measures.

However, the 15-day waiting period is also suspended when the Tribunal has no minimum quorum. Thus, merging parties will be unable to close deals before at least one new commissioner take office.

The Brazilian president indicated in May two candidates for the position of commissioners (the economist Leonardo Bandeira Rezende and Vinicius Klein, attorney-general of the state of Paraná). They still need to be confirmed by the Committee of Economic Affairs of the Senate and approved by the plenary session of the House before taking office. It is expected that the quorum issue will be solved by the first week of August.

Category: Infrastructure and energy

The evolution of the Brazilian economy in recent years has brought new challenges to those responsible for the management of closed private pension entities (EFPCs), governed by Complementary Law No. 109/2001 (LC 109) and by Law No. 6,404/1976 (the Brazilian Corporations Law). Unlike companies that have the purpose of obtaining profit for their shareholders and other stakeholders involved, however, EFPCs aim at the management of funds for the payment of pension benefits to their beneficiaries.

The adoption of bad management practices and the commission of illegal acts have been closely monitored by stakeholders since the wave of investigative proceedings inaugurated with Operation Car Wash and related matters. In the context of the liability of these managers for the actions performed in the management of entities and companies, we observed an increase in the number of civil liability actions against these agents seeking to obtain compensation for damages caused to these organizations.

This increased vigilance, coupled with a positive evolution of corporate governance of entities and companies, with the adoption of good practices for compliance, ethics, and management, ushered in a new era in relation to the liability of professional managers in conducting business, investments, and relations with civil society in general.

It is therefore appropriate to analyze the main aspects and limits applicable to these managers when committing acts that bring about damages to the entities or companies managed. In this article, we will briefly discuss the differences and similarities in the civil liability rules applicable to EFPCs and companies, by comparing the provisions of LC 109 and the Brazilian Corporations Law.

LC 109, which should be read in conjunction with Resolution No. 4,661/2018, delimits the scope of civil liability of directors and officers of EFPCs in its article 63. The provision states that directors and officers^[1] shall be liable for any damages or losses they cause, whether by action or omission. In addition, articles 35 and 39 establish a duty to inform the regulatory bodies regarding the executive officer responsible for the application of the entity's resources and order that the other members of the executive board be jointly and severally liable with said officer for the damages and losses to which they contributed.

In the Brazilian Corporations Law, civil liability is delimited by article 158. It establishes that the director or officer must repair the damages that they cause when they act out of fault or willful misconduct and/or violate the law or the company's by-laws. Paragraph 1 of the article establishes the joint liability of the other directors or officers only in the case of collusion, negligence, or contribution to the act generating the damage, granting them the possibility of withdrawal of joint and several liability when they unequivocally express an opinions contrary to the decision or harmful act committed.

In addition, the establishment of joint and several liability, according to paragraph 2 of the article, is independent of the duties assigned to each of the directors or officers, all of which must contribute to the fulfillment of the duties imposed by the law.

This establishment of joint and several liability independently of the functions assigned in the bylaws is removed in the case of directors and officers of publicly-held companies, as set forth in paragraph 3 of the provision. The directors and officers will also be jointly and severally liable with their predecessors if they note the commission of illicit and/or harmful acts by the old management and fail to report this to the general meeting of the company.

The civil liability of managers of EFPCs and companies will always depend on proof of the wrongful act, the existence of intent or guilt, and proof of the causal link between such act and the loss actually suffered by the entity or company. This analysis must be done on a case-by-case basis, since it is necessary to conduct factual adjustment to each of the above-cited requirements.

In conducting this exercise in comparison, it is possible to observe that there are several similar elements in LC 109 and the Brazilian Corporations Law for the civil liability of directors and officers. The great difference lies in the establishment of joint and several liability among them: while in LC 109 it is imputed without exemplification of the elements that could remove it, in the Brazilian Corporations Law this possibility is clearly expounded, either in the case of a vote to the contrary or in the obligations to report to the competent organs when any unlawful act is noted.

Despite this difference, the same elements mitigating joint and several liability contained in the Brazilian Corporations Law apply mutatis mutandis to the directors and officers subject to LC 109. The core of the fiduciary duties of management (diligence, loyalty, good faith, and information, among others) is applicable to all members of the management in Brazil. Therefore, it is necessary to adopt the same criteria of good practices, compliance, and ethics in both EFPCs and companies.

The conceptual difference in civil liability within the context of EFPCs and the companies is that directors and officers of entities, because they manage funds from third parties in order to guarantee retirement rights, should be even more careful in conducting their activities. In turn, the directors and officers of companies, whose objective is profit, always act with the intention of obtaining pecuniary advantages for their shareholders, although also they must shroud themselves with various precautions. Of course, this directly influences the actions of these two types of managers, as well as the elements establishing their civil liability.

^[1] They are also civilly liable for the damages caused by proxyholders with management powers, members of statutory boards {boards set up in the bylaws}, officers {administrators, managers} of promoters or incorporators {sponsors or assignors}, actuaries, independent auditors, management assessors, and other professionals providing technical services to the entity.

Category: Litigation

On May 14, the Fourth Panel of the Superior Court of Justice (STJ) reaffirmed its understanding that the presence of the same parties is not necessary to give rise to lis pendens in collective actions in which a party with extraordinary standing appears due to procedural substitution.

The ruling was handed down in the judgment of Special Appeal No. 1.726.147/SP, which originated in the public civil action filed by the Brazilian Institute for the Defense of Citizenship (Prodec) against Banco Nossa Caixa S/A (currently Banco do Brasil), which sought the inflationary purges referring to the Bresser and Verão economic plans.

Prodec filed an appeal against the trial judgment that dismissed the case without prejudice, on the ground that it had no standing to litigate the case, "since the defense of the interests of certain groups of persons may only be conducted by consumer protection associations when this is in the interest of the community, as a whole." In summary, Prodec argued that public civil actions also lend themselves to defending individual and homogeneous rights, noting that "millions of people who were the defendant’s consumers have been harmed, and hundreds of registrations of beneficiaries will be carried out in due time in the execution of judgment phase."

In its response to the appeal, the financial institution pointed out the existence of two other similar suits pending, seeking relief for the same interests (the rights of consumers affected by the economic plans at that time), in violation of article 485, V, and article 337, paragraphs 1 and 2, of the Code of Civil Procedure.^[1] This allegation was not accepted. The São Paulo State Court of Appeals (TJ-SP) ruled out lis pendens based on its understanding that the suits were filed by different legal entities and that, therefore, there would be no risk of duplicate relief.

The leading case on the subject before the STJ was the ordinary appeal in writ of mandamus (RMS) No. 24.196/ES,^[2] the opinion of which was written by Minister Felix Fischer and decided by the Fifth Panel of the STJ on February 18, 2008. On that occasion, it was ruled that "the subjective aspect of lis pendens in collective actions must be seen from the perspective of the beneficiaries affected by the effects of the decision, and not by a simple examination of the parties that appear as plaintiffs in the claims." The understanding was reiterated by Minister Eliana Calmon, who drafted the opinion in REsp 1.168.391/SC and others judgments that succeeded it.^[3]

For the Ministers of the Fourth Panel, in collective actions related to procedural substitution by parties with extraordinary standing –  in that case, Prodec –, it is not necessary the presence of the same parties to give rise to lis pendens. In line with the STJ's understanding in other judgments, the judge must eminently observe the identity of the potential beneficiaries of the outcome of decisions.

Thus, the issue regarding establishing lis pendens, even when there is no identity of parties, has been settled by the STJ. The Court's consolidated understanding seems to us to be correct, since standing in collective actions must be analyzed from the viewpoint of the beneficiaries of the decision, rather than simply by examining the form of identification of the parties (which is typical of lis pendens in suits of a private nature). This is especially relevant in view of the nature of collective actions, namely the protection of diffuse and collective rights, of an indivisible nature, and homogeneous individual rights, in order to safeguard the interest of an entire community.

The decision by the STJ applies both to suits filed by civic associations and those brought by the Public Prosecutor's Office, entities and bodies of the Public Administration, and by the other entities with standing provided for in article 5 of Federal Law No. 7,347/1985 (the Public Civil Actions Law). This is a step forward that contributes greatly to promoting the discussion in the procedural sphere; to avoiding, in the name of procedural economy and speed, the uncoordinated filing of collective actions with a view to safeguarding the same legal interest and unnecessary movement of the judicial machinery, which is already so overloaded, in an inefficient and ineffective manner.

^[1] “Article 485. The judge shall not decide the merits when he: (...) V - recognizes the existence of estoppel, lis pendens, or res judicata;"
"Article 337. It is incumbent upon the defendant, before discussing the merits, to argue: (...) Paragraph 1. Lis pendens or res judicata is found when an action previously filed is reproduced. Paragraph 2. An action is identical to another when it has the same parties, the same cause of action, and the same prayer for relief.”

^[2] RMS 24.196/ES, Opinion drafted by Minister Felix Fischer, Fifth Panel, decided on December 13, 2007, published in the Gazette of the Judiciary on February 18, 2008, p. 46

^[3] REsp 1168391/SC, Opinion drafted by Justice Eliana Calmon, Second Panel, Decided on May 20, 20110, published in the Electronic Gazette of the Judiciary on May 31, 2010. In this same sense: REsp 427.140/RO, Opinion drafted by Justice José Delgado, Appellate opinion drafted by Justice Luiz Fux, First Panel, decided on May 20, 2003, published in the Gazette of the Judiciary on August 25, 2003, p. 263; REsp 1168391/SC, Opinion drafted by Justice Eliana Calmon, Second Panel, Decided on May 20, 20110, published in the Electronic Gazette of the Judiciary on May 31, 2010; REsp 925.278/RJ, Opinion drafted by Justice Arnaldo Esteves Lima, Fifth Panel, Decided on June 19, 2008, published in the Electronic Gazette of the Judiciary on September 8, 2008