Publications

Category: Litigation

The 3rd Panel of the Superior Court of Justice (STJ) affirmed, in a non-unanimous decision, that judicial reorganization plans approved by the majority of the creditors of a company undergoing judicial restructuring may suppress secured or unsecured guarantees, even without the express consent of the creditor who holds the guarantee.

The issue was raised in the judgment of Special Appeal no. 1,700,487/MT, which was reported by Justice Ricardo Vilas Bôas Cueva. The origin of the case was the judicial reorganization of Ariel Automóveis Várzea Grande Ltda. (Ariel)[1], in which the bank Banco Industrial e Comercial S.A., an unsecured creditor of the debtor, filed an appeal against the decision that ratified the judicial reorganization plan approved by the majority of Ariel’s creditors. The bank argued that the terms of the approved plan violated articles 49, paragraph 1,[2] 50, paragraph 1[3] and 59[4] of the Brazilian Bankruptcy Law (Law no. 11,101 of 2005, the “LRF”), by providing for the debtor’s release from all secured and fiduciary guarantees held against the debtor and third party co-obligors.

Prior to the pronouncement by the STJ, the Second Chamber of Private Law of the Court of Appeals of the State of Mato Grosso had found that "although the approval of the judicial reorganization plan entails a novation of the debts submitted to the plan, the existing secured or fiduciary guarantees are, as a rule, preserved"[5] and, consequently, declared the approved plan to be null and void.

On the one hand, the case involves the interpretation of articles 49, paragraph 1, 50, paragraph 1, 56, paragraph 3,[6] and 59 of the LRF, which, combined, expressly prohibit the suppression or replacement of any secured or fiduciary guarantee (unless, of course, there is an express agreement on the part of the creditor who holds the guarantee). On the other hand, there are those who argue that, in light of the provisions of article 49, paragraph 2[7] of the LRF and based on the majority principle and the principle of par condicio creditorum (which requires equal treatment of creditors of the same class), it would be possible for such guarantees to be released by the judicial reorganization plan, provided that the plan is approved by the majority of the debtor’s creditors during the general creditors’ meeting.

In other words, the STJ debated whether the will of the majority of the debtor’s creditors may override the legal requirement for release of a guarantee – i.e. express consent from the creditor who holds the guarantee.

The leading case on the subject was Special Appeal no. 1.532.943/MT,[8] which was decided by the 3rd Panel of the STJ on September 13, 2016. In that case, the majority of the 3rd Panel followed the Rapporteur’s (Justice Marco Aurélio Belizze) vote and found that the judicial reorganization plan that provides for the suppression or replacement of guarantees binds all creditors (including those absent and even those who voted against approval of the plan), provided that it is duly approved by the majority of the creditors present at the general creditors’ meeting.

In his opinion,[9] the Rapporteur acknowledged the protection granted to guarantees by the Bankruptcy Law, but affirmed that the LRF (especially in its article 49, paragraph 2) allows the judicial reorganization plan to alter the guarantees held by the debtor’s creditors.

It was found that, “even if a given creditor has chosen not to attend the meeting, or, though present, abstained from voting or voted against the approval of the plan (totally or partially), they are still bound by its terms." In other words, the majority of the 3rd Panel of the STJ found that the suppression of secured or fiduciary guarantees held by the debtors’ creditors binds the guarantee holders, as long as it was approved by the majority of the debtor’s creditors.

For the Justices in the 3rd Panel, there is no violation of the provisions of article 50, paragraph 1, of the LRF, because the guarantee holders can be considered to have consented to the suppression and/or replacement of their guarantees since such creditors are duly represented by their respective class during the general creditor meeting. Thus, for the Court, the will of the majority of each of the classes of creditors may be interpreted as an expression of the will of all of the creditors within each class – even those who are absent in the general creditor meeting or who vote against the approval of the plan.

The discussion was brought to the 2nd Section of the STJ after a motion for clarification was filed against the 3rd Panel’s decision, on the grounds that the decision handed down was contradictory with the existing case law of the STJ on the issue[10]. However, the 2nd Section found that the earlier precedents did not discuss the same legal issue and, therefore, the award rendered in Special Appeal no. 1.532.943/MT was upheld.

In the recent case of Special Appeal no. 1.700.487/MT, the 3rd Panel re-examined the possibility of suppression of guarantees by the judicial reorganization plan approved in the creditors’ meeting and the majority of the Justices followed the opinion issued by Justice Marco Aurélio Belizze, who reaffirmed that the plan duly approved the majority of creditors binds all creditors equally, given the risk that the selective application of the plan to some creditors but not to others could render its observance unfeasible and impede the debtor’s restructuring.

On the other hand, the Rapporteur of the appeal, accompanied by Justice Nancy Andrighi, contended that the novation that occurs as a result of the approval of the plan should only extend to the creditors who voted for its approval, without any reservation.

The issue, therefore, is not settled before the STJ and there is still dissent among the Justices of the 2nd Section regarding the possibility of extending the provisions of the plan that alter even secured and fiduciary guarantees held by creditors who did not participate in the general creditors meeting or who voted against approval of the plan.

The Court’s interpretation in favor of the preservation of the company vis-à-vis the preservation of creditors’ guarantees has been widely criticized not only because it contradicts express provisions of the LRF, but also because it voids the protection offered by secured and fiduciary guarantees whenever the debtor becomes insolvent and shields itself using judicial reorganization proceedings. As Justice Ricardo Villas Bôas Cueva noted in this case, "this scenario of uncertainty regarding the possibility of recovering debts that results from the weakening of guarantees is disastrous for Brazil's economy."

[1] Lawsuit no. 1512-10.2015.811.0002, in progress before the 4th Civil Court of the Municipality of Várzea Grande in the State of Mato Grosso.

[2] Article 49. All debts that exist on the date of the application, even if not yet overdue, are subject to the judicial reorganization.

Paragraph 1. The creditors of the debtor in judicial reorganization retain their rights and privileges against co-obligors and guarantors.

[3] Article 50. The following, among others, are means of judicial reorganization, subject to the legislation applicable in each case:

[...]

Paragraph 1. In the sale of property that is subject to a secured guarantee, suppression of the guarantee or its replacement will only be accepted with the express approval of the creditor holding the respective guarantee.

[4] Article 59. The judicial reorganization plan implies a novation of the credits that existed prior to the application for judicial reorganization and binds the debtor and all creditors subject to it, without prejudice to the guarantees and observing the provisions of paragraph 1 of article 50 of this Law.

[5] Appeal no. 0018190-72.2016.8.11.0000, before the Second Chamber of Private Law of the Court of Appeals of the State of Mato Grosso. Rapporteur: Appellate Judge Sebastião de Moraes Filho, judged on October 5, 2016.

[6] Article 56. If any creditor objects to the judicial reorganization plan, the judge shall convene a general meeting of creditors to deliberate on the reorganization plan.

[...]

Paragraph 3. The term of the judicial reorganization plan may be altered during the general creditors’ meeting, provided that there is express agreement by the debtor and that rights of absent creditors are not harmed.

[7] Article 49. All debts that exist on the date of the application, even if not yet overdue, are subject to the judicial reorganization.

[...]

Paragraph 2. Obligations constituted prior to the judicial reorganization shall observe the conditions originally contracted by the parties or defined by law, including with respect to charges, unless otherwise provided in the judicial reorganization plan.

[8] The appeal also originated from a judicial reorganization before the 4th Civil Court of the Municipality of Várzea Grande in the State of Mato Grosso  - the judicial reorganization of Dibox Distribuição de Produtos Alimentícios Broker Ltda., Andorra Logística e Transportes Ltda., and Exectis Administração e Participações S/A (Case No. 0012909-37.2017.8.11.0002).

[9] It should be noted that, in his dissenting opinion, Justice João Otávio de Noronha concluded that, under the LRF, it is not possible to admit the suppression of all secured and fiduciary guarantees by the judicial reorganization plan, without the guarantee holder’s express consent.

[10] In this sense, see (i) Special Appeal no. 1.326.888/RS. Rapporteur: Justice Luis Felipe Salomão, 4th Panel of the STJ. Judged on April 8, 2014 and published in the Official Gazette on May 5, 2014; and (ii) repetitive Special Appeal no. 1.333.349/SP. Rapporteur: Justice Luis Felipe Salomão, 2nd Section of the STJ. Published in the Official Gazette on February 2, 2015.

Category: Litigation

The text of The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Service Convention) was promulgated on March 21 through Decree no. 9,734/2019. Signed in The Hague on November 15, 1965, the Hague Service Convention was originally signed by six states and is now in force in 73 countries. With the enactment of Decree no. 9,734/2019, the Convention will come into effect in Brazil on June 1, 2019.

The Convention was overseen by the Hague Conference on Private International Law, one of the oldest organizations in the area of private international law, which was convened for the first time in 1893 and consolidated as a permanent intergovernmental organization in 1955. Today, the Conference has more than 75 signatory states,^[1] including Brazil, and is responsible for the harmonization of different legal systems, which it does by encouraging the administering international conventions and soft law instruments and encouraging their incorporation by its members.

The primary objective of the Hague Service Convention is to ensure speed and efficiency in the circulation of judicial and extrajudicial documents (in civil and commercial matters), with the desire to simplify the process of serving documents abroad to parties who reside in its signatory States.

Although Brazil already has already incorporated some international conventions on the matter of serving parties abroad – such as the Inter-American Convention on Letters Rogatory, inter alia – the fact is that the enactment of the Convention considerably expands the network of countries with which Brazil now has simplified mutual judicial assistance. With the entry into effect of the Convention, on June 1, 2019, the provisions of the text will become part of the framework of existing international agreements in Brazil. With regard to those States that do not have cooperation agreements with Brazil on the matter, the process of serving judicial and extrajudicial documents shall continue to occur through diplomatic channels, in accordance with Interministerial Ordinance MRE/MJ no. 501/2012.

WHAT CHANGES WITH THE ENACTMENT OF THE HAGUE SERVICE CONVENTION?

As of June 1, 2019, the process of transmitting judicial and extrajudicial documents between signatory States of the Convention will be done through a Request, Certificate and Summary Form, an instrument created to replace letters rogatory under the Convention.

The process of analyzing of the request for service should be simplified by the Convention, which now exempts the sender from any requirement of legalization of the relevant documents or other equivalent formality (article 3 of the convention) and provides that each signatory State should designate a so-called Central Authority (article 2 of the convention), which is nothing more than the governmental body that will centralize the country’s international legal cooperation efforts. In the case of Brazil, the Central Authority will be the Ministry of Justice and Public Security. Communication between the Central Authorities of the signatory States will eliminate the need involving the Ministry of Foreign Affairs in the process of reviewing requests for cooperation (a requirement of cooperation through diplomatic channels), thus making processing and enforcement of the requests faster.

Brazil has made reservations to the original text of the convention, which is why its application in Brazil will be subject to some peculiarities. In the first place, the process of summoning and notifying residents of the signatory States may not be carried out via post mail, diplomatic or consular agents, or even by judicial authorities and other competent authorities in that State. Secondly, the documents to be served must be translated into Portuguese and the Request, Certificate, and Summary Form must be signed by the competent judge or Central Authority of the requesting State.

ADVANCES DEMAND REGULATION

The Convention is an important step in the evolution of international procedural law and in the promotion of transnational trade relations, as it provides tools to simplify and expedite judicial and extrajudicial proceedings involving parties from different countries. Its impact and effectiveness will depend, however, on how the Brazilian government regulates the internal procedures within the Ministry of Justice and Public Security related to the summons and notification process (i.e. how the Convention will be implemented and enforced by the Central Authority).

^[1] See the full list of signatory States at: https://www.hcch.net/en/instruments/conventions/status-table/?cid=17

Category: Tax

The natural gas market is gaining more and more relevance in Brazil as a way to diversify the country's energy sources. To foster the development of the sector, changes in legislation and regulations have been discussed, especially since 2016, when the Ministry of Mines and Energy launched the Gas to Grow (Gás para Crescer) initiative, with the participation of the entire natural gas market and some government bodies.

The development of the market, however, depends on the success of public calls for the purchase and sale of natural gas, which will allow the integration of new agents and the diversification of a highly monopolized sector. Tax obstacles, mainly related to the ICMS tax, and other challenges, however, make difficult the advance of public calls and the development of the sector.

The ICMS is a tax whose competence is assigned to the states and the Federal District, and complementary law defines the structural aspects of the tax. An analysis of state legislation with respect to natural gas points to complexity, unevenness, and uncertainty as characteristic elements.

Among the points of unevenness that represent tax challenges, the following stand out: the diversity of rates applicable to natural gas; the difference of tax burden due to special tax regimes; and the difference in the treatment of non-cumulative credits.

As for the diversity of ICMS rates, there is a large disparity between the states in relation to intrastate transactions involving natural gas, which vary from 12% up to 25%. This is because some states have internalized ICMS Agreement No. 18/1996, which provides for reduction of the ICMS tax basis so that the effective tax burden results in 12%. However, some states did not adhere to the agreement, applying the general internal rate (ranging from 17% to 18%) for natural gas transactions. There is also the state of Amazonas, which adopts a 25% rate for natural gas transactions.

In addition, it should be noted that some states establish additional rates for internal transactions, which usually correspond to 1% or 2% of the ICMS tax basis.

Many states also have unclear legislation regarding the application of tax benefits to imports of natural gas or liquefied natural gas, creating legal uncertainty for importers.

An additional point of dissimilarity concerns the existence of different special regimes for the taxation of natural gas. Some states have introduced tax benefits or differentiated regimes in the supply of natural gas to thermoelectric plants (PPTs) in relation to certain industries or import operations, in order to neutralize points of redundant taxation. This is the case, for example, of the granting of internal outputs of natural gas for electricity generation, which favors the development of PPTs in some states where it is applied, while others have no plans to solve the problem.

Also in relation to tax benefits, some states instituted obligatory payment of a percentage over the economic advantage obtained with the tax benefit to the State Tax Equilibrium Fund (FEEF), accentuating the discrepancy in treatment.

Another relevant aspect is the divergence in the treatment of non-cumulative ICMS credits. There is a lack of clarity and uniformity in the legislation that defines the treatment of credits in transactions benefiting, for example, from the reduction in the calculation basis or other special regimes. There are states that allow the maintenance of credits recorded, while others require the reversal of these credits, burdening the natural gas value chain and making it less competitive compared to other energy grids.

Finally, the assignment of responsibility for tax substitution in state legislation is an ingredient that reinforces the complexity of the system. The asymmetry between the various state laws obviously creates complexity, increases compliance costs and distortions in the chain, and often aggravates the cost itself of operations. Standardization and rationality are essential for proper development of the market.

The viability of many transactions is also dependent on regulations regarding compliance with ancillary obligations, especially those related to transport through gas pipelines. They are simple measures that should not change tax collection. Their implementation gains complexity because of our tax system, but they are essential for us to take this step forward.

Category: Tax

Normative Instruction No. 1,888/2019 (IN 1,888), which establishes and disciplines the provision of information related to cryptoasset transactions, shows the concern of the Brazilian Federal Revenue Service (RFB) with providing transparency in transactions with virtual currencies. Although it represents an increase in compliance costs for companies operating in this market, the measure may give more credibility to the industry and help attract new players.

RFB's effort to publish a specific regulation on this matter confirms what the market and industry experts already knew: the volume of cryptoasset transactions has taken off in recent years and still has strong growth potential. In fact, the explanatory memorandum accompanying RFB’s Public Consultation No. 6/2018 on the subject already showed an estimated movement of R$ 18 to 45 billion in bitcoin transactions only in 2018.

Although bitcoin is the best known of the "virtual currencies," it is already possible to identify in an avalanche of new “altcoins” and other types of cryptoassets in the market. Aware of this new trend, the RFB was concerned with giving cryptoassets a comprehensive definition, rather than just using the term "virtual currencies," and deeming them as equivalent to financial assets, as it had been doing in the most recent editions of the Individuals Income Tax Questions and Answers.

According to IN 1,888, a cryptoasset is " the digital representation of value denominated in its own unit of account, the price of which may be expressed in local or foreign sovereign currency, transacted electronically using encryption and distributed recording technologies, which may be used as a form of investment, an instrument for the transfer of funds or access to services, and which does not constitute legal tender."

The broad definition adopted by the RFB suggests that tax authorities will seek to impose the obligations brought in by IN 1,888 on all kinds of transactions or investments involving encryption, including the so-called security and utility tokens, and not just crypto-coins. For this reason, we also believe that one cannot rule out the possibility that, in the future, the RFB will require transactions with fictitious virtual game currencies, or even credits used in certain applications, be reported on the basis of the new rule.

“The broad definition adopted by the RFB suggests that tax authorities will seek to impose the obligations brought in by IN 1,888 on all kinds of transactions or investments involving encryption, including so-called security and utility tokens, and not just crypto-coins.”

Following the effort to broaden the scope of persons required to provide information, the RFB also defined the concept of a cryptoasset exchange. According to IN 1,888, a cryptoasset exchange is “a legal entity, even if non-financial, that offers services relating to transactions performed with cryptoassets, including brokering, trading, or custody, and which may accept any means of payment, including other cryptoassets."

The RFB further clarifies that the concept of brokerage of cryptoasset transactions includes "the provision of environments for the execution of cryptoasset purchase and sale transactions carried out among the users of its services."

As explained below, the classification of a legal entity as a cryptoasset exchange is important because IN 1,888 imposes rigid obligations to these entities, including the control of their clients and the transactions they execute. On the other hand, the above definition refers only to legal entities that provide services related to transactions performed with cryptoassets, and does not cover entities that only accept or use cryptoassets as a payment method. Thus, companies that merely exchange their products or services for bitcoins, for example, should not be subject to the obligations imposed on exchanges.

In the same sense, IN 1,888 also does not refer expressly to companies that provide platforms for users to exchange products or services for cryptoassets, without the cryptoassets themselves being bought and sold for cash. Thus, in principle, marketplaces hosting vendors that accept cryptoassets as a form of payment would not qualify as exchanges.

After establishing the definitions above, the RFB required individuals or legal entities that carry out transactions involving cryptoassets to provide, on their own account or through a proxy, the information required by IN 1,888 in relation to transactions exceeding the monthly volume of R$ 30 thousand. These transactions include the purchase and sale, barter, donation, and even the "withdrawal" or "deposit" of cryptoassets in an exchange. These individuals and legal entities must report, among other information, the date, type, value, and persons involved in the transaction, the cryptoassets used, and the address of the sender's and the recipient's wallet.

These users, however, are only required to provide the above information in the event of transactions without the involvement of an exchange or of transactions involving a foreign cryptoasset exchange. In the case of cryptoasset transactions in a Brazilian exchange, the obligation to provide the information on the transactions is transferred to the exchange, and not the individual users or legal entities mentioned above.

In turn, exchanges domiciled in Brazil are obliged to provide the same information on the transactions carried out by their users. In both cases (delivery by users or by the exchanges), the frequency is monthly.

In addition, by the end of January of each year, exchanges must report the balances of fiduciary currency and cryptoassets held by their users as of December 31 of the preceding year, as well as the acquisition cost of each of these cryptoassets, if disclosed by the user. These rules seem to aim at controlling the capital gains earned by users in transactions with cryptoassets, which, according to the position adopted by the RFB, are subject to the imposition of income tax.

The entities covered by the RFB's definition of a cryptoasset exchange will need to maintain computerized management systems in order to be able to generate all the information required by IN 1,888 in a timely manner to meet the deadlines established. Likewise, these exchanges must be prepared to guide their users in relation to the new procedures required by the RFB.

Delay, omission, inaccuracy, or incorrectness in the delivery of the information requested by the RFB subjects the declarant to fines ranging from R$ 100.00 to 3% of the value of the transactions to which they refer, depending on the qualification of the declarant and the type of infraction.

From a reading of IN 1,888, it is possible to predict that the RFB will require the reporting of any and all relevant transactions involving digital assets. In fact, IN 1,888 is part of an effort by the RFB already felt in other sectors, such as the management of investment funds, which aim at increasing the transparency and reliability of transactions that, in the view of tax authorities, have a high potential to facilitate or cover illicit conduct. This effort is aligned with an international tendency to demand greater transparency of financial institutions and similar organizations regarding the transactions carried out by their clients.

Thus, despite increasing compliance costs, IN 1,888 may ensure the credibility of cryptoasset operators who meet its requirements. From this point of view, the RFB's new measure has the potential to attract sectors that have hitherto been resistant to the use of cryptoassets, as may be the case with institutional investors and financial institutions.

Category: Environmental

The beginning of 2019 was marked by important normative changes in safety of dams, mainly mining dams, in order to tighten federal and state regulations.

At the federal level, the main regulatory change was Resolution No. 4 of the National Mining Agency (ANM), of February 15, 2019, which established precautionary regulatory measures to ensure the stability of mining dams, notably those built or raised by the method referred to as "upstream"^[1] or by a method declared as unknown.

At the state level, the highlight was the normative update in Minas Gerais, historically relevant for mining activity. As an example, the following were approved: (i) State Law No. 23,291/2019, which instituted the State Policy on Dam Safety (PESB-MG); and (ii) Semad/Feam Joint Resolution No. 2,765/2019, which was soon thereafter repealed by (iii) Semad/Feam Joint Resolution No. 2,784/2019, promulgated to regulate some aspects of PESB-MG and ANM Resolution No. 4/2019.

Article 13 of the PESB-MG prohibited the granting of an environmental license for the operation or expansion of dams intended for the accumulation or final or temporary disposal of tailings or industrial or mining waste that use the upstream method. Thus, mining laws and regulations reinforced the prohibition on using the method of upstream construction or raising of mining dams provided for in ANM Resolution No. 4/2019. Article 13 of the PESB-MG was regulated by Semad/Feam Joint Resolution No. 2,784/19, which established deadlines for rendering inoperative all dams containing mining tailings that use the upstream method, regardless of whether they are already inactive or remain in operation.

ANM Resolution No. 4/2019 had already established the deadline of August 15, 2019, for the preparation of a technical plan for decommissioning or rendering inoperative dams built or upgraded by the upstream or an unknown method, which should be decommissioned or rendered inoperative by August 15, 2021.^[2] The Semad/Feam Joint Resolution set longer deadlines: dams for mining tailings that use or used the upstream damming method should be rendered inoperative within a maximum of three years from the date of publication of the PESB-MG (February 26, 2019).

The resolution also establishes that developers who opt to maintain the activity can migrate to the alternative technology of accumulation or disposal of tailings, observing the same time frame of three years. Finally, the text defines the time frame of 90 days, also counted from the publication of the PESB-MG (February 26, 2019), for developers to present a schedule for the execution of the removal. It is expected that the agencies involved will clarify the apparent conflict in time frame between the resolution approved by the ANM and the rules issued in the state of Minas Gerais.

The legislative changes sought to stiffen, in general terms, the process of licensing and inspection of dams. The PESB-MG, for example, has established the three-phase licensing system and has provided the possibility of simplified procedures/unification of environmental licenses covering different phases of the development. It also determined that the licenses should be issued based on an Environmental Impact Assessment and its respective Environmental Impact Report (EIA/RIMA).

Also with regard to environmental licensing, there is an imposition provided for more rigid and specific restrictions on licenses for accidents and disasters. Thus, already in the stage of issuing the preliminary license, the developer must present a guarantee to ensure social and environmental recovery in the event of loss and deactivation of a dam, as well as prepare technical studies related to the prevention of risks linked to dam break. In the installation license phase, it is mandatory to prepare an Emergency Action Plan (PAE), which should already include a provision for the installation of an audible warning system or another more effective technological solution. Finally, the granting of an operating license will be conditioned on, among other issues, the approval of the PAE and on the proof of implementation of the environmental guarantee with the updating due.

The normative updating of dams also responded to a greater concern of residents and working populations in the Self-rescue Zone (ZAS), defined by the PESB-MG as the portion of the valley downstream from the dam where there is no time for intervention by the competent authorities in an emergency situation. This concern is highlighted by ANM Resolution No. 4/2019, which prohibited the maintenance or construction in a ZAS (regardless of the construction method adopted for the dam) of (i) any permanent or temporary installation, construction, or service, including human presence; and (ii) a barrier to store liquid effluent immediately downstream from a mining dam that may interfere with its safety. The deadline of August 15, 2019, was set for deactivation, decommissioning, and shutdown of facilities, works, and services, and August 15, 2020, for barriers. In addition, automated siren actuation systems were required in ZASs, in a safe location and provided with a fail-safe mode in case of breakage of the structure.

In the same sense, the PESB-MG forbade the granting of an environmental license for the construction, installation, expansion, or raising of a dam in cases where the rupture scenario assessments identify a community in the ZAS.

The mining laws and regulations also provided for mandatory public hearings with the participation of the local community and authorities to discuss the environmental and socioeconomic consequences of the construction and operation of dams. It determined also that the PAE should be submitted for a review by the competent agency or authority. Furthermore, the content of the PAE, especially with regard to the procedures to be adopted in emergency situations, should be disclosed in public meetings to be held in places accessible to the populations located downstream from the dam, which should be reported in advance and encourage participation in the preventive actions provided for in the plan.

Important changes were also made to the system for monitoring and independent oversight of mining dams. Firstly, ANM Resolution No. 4/2019 determined that by February 15, 2020, monitoring systems with full-time monitoring should be installed for mining dams with high Associated Potential Damage (APD) contemplated by the National Dam Safety Policy (Law No. 12,334/10 - PNSB).

In turn, PESB-MG established the frequency of technical safety audits, under the responsibility of the developer, by a technical team of independent professionals, experts in dam safety, previously accredited before the competent body or entity of the State Environmental and Water Resources System (Sisema). For dams with high potential for environmental damage, yearly frequency was established; for average potential, every two years; and low potential, every three years.

Regardless of the technical audit, the competent body or entity may alternatively or cumulatively order new audits, suspend or reduce dam activities, and deactivate the dam in the event of risks identified in the monitoring of the safety of the structures. In the case of dams using the upstream damming method, developers must conduct a semi-annual technical safety audit of the dam until its removal is carried out, in accordance with the terms of Semad/Feam Joint Resolution No. 2,784/19.

Finally, the PESB-MG provides for stricter rules for the liability of managers and legal representatives of developments, since it expressly subjects the chief executive officer, officers, directors, members of the board or technical body, auditors, consultants, agents, or representatives of legal entities to the penalties provided for in article 16 of Law No. 7,772/80, without prejudice to other administrative, civil, and criminal penalties.

All of these normative changes in mining activity, especially in Minas Gerais, create obligations for developers that require new financial contributions and redefinition of strategies. Oversight has become even more rigid, with restrictions on construction and a more rigorous and detailed environmental licensing process. In this new context, the mining sector should have specialized technical support to ensure the safety of its activities from a legal and social and environmental point of view.

^[1] Joint Semad/Feam Resolution No. 2,784/19, article 2, item IV: "upstream method: constructive methodology of dams in which the construction material is placed upstream from the axis of the initial dam.

^[2] Decommissioning or rendering inoperative dams consists of changing its characteristics until it no longer operates as a sediment or tailings containment structure.

Category: Competition

For 25 years, the Administrative Council for Economic Defense (Cade) was a great unknown among the population. This was due, in large part, to the market environment in Brazil, characterized by a history of state intervention and the fact that practically all the (few) decisions by the agency were revised or revoked in court.

This scenario changed when Law No. 8,884/1994 came into force: Cade gained institutional relevance and intensified its activities, starting to review important M&A transactions and to investigate more anticompetitive practices, notably cartels. This was the first step to effectively structure antitrust policy in Brazil. Thereafter, major cases put Cade’s name in the media: the creation of Ambev, the purchase of Kolynos by Colgate, and the merger between Nestlé and Garoto, among other transactions.

In the first decade of the 2000s (long before Operation Carwash), Cade fostered whistleblowing in Brazil, by structuring a solid leniency program that became an important tool in the fight against cartels, which began to be punished with greater rigor.

Cade's intense activities and reputation, not only at national level but also in the international antitrust community, led, as early as 2004, to a debate on the need for reform of the law then in force. The objective was to improve the institutional environment and enable the implementation of an even more vigorous antitrust policy, especially through a suspensive merger control regime.

Law No. 12,529/2011, which replaced Law No. 8,884/1994 and entered into force in 2012, enabled Cade to intervene in market structures, facilitating the prohibition of transactions that generated high market power (from 2012 to 2018, eight transactions were blocked under the new law, the same number of transactions blocked during the life of Law No. 8,884/1994). The change also unified departments, consolidating the functions of investigation and decision within a same agency, and giving greater speed to reviews of acts of concentration. In subsequent years, cartel investigations were driven not only by the signing of leniency agreements but also by new incentives for signing settlement agreements.

Three times Cade was considered the best antitrust agency in the Americas by Global Competition Review (GCR) and, more recently, accepted as a permanent member on the Competition Committee of the Organization for Economic Cooperation and Development (OECD).

The advances made by Cade in the last 25 years have clearly increased its challenges: shortening the duration of investigations of antitrust violations; increasing transparency as to the methodology used to calculate fines in cartel cases; enhancement of its settlement and leniency policy (especially after the cases involving Operation Carwash) to secure deterrence effects; and the formation of a critical mass for the review of practices adopted by dominant companies in order to guide the market on the legality of certain commercial strategies.