Publications

Category: Labor and employment

Federal Decree No. 9,571/2018 has been drawing the attention of companies by assuming effective legal rules on liability for the chain of production. The decree stipulates the guidelines on human rights to be adopted by Brazilian and multinational companies of all sizes, in the context of their whole operation.

The regulation deserves attention in labor matters, since current norms and case law are based on the principles of promoting human rights and the dignity of the person for the protection of the worker, such as issues related to safety and occupational medicine, although there is divergence as to the existence of rules effectively based on a law governing corporate liability for the chain of production, as the decree presupposes.

In general, the text seeks to promote human rights in the business environment in compliance with the norms established in the Federal Constitution, infra-constitutional norms, and international conventions to which Brazil is a signatory.

The decree also proposes that companies adopt various measures to contribute to the defense of human rights, among which the following stand out:

1. monitor respect for human rights in the chain of production linked to the company;
2. adopt procedures to evaluate respect for human rights in the chain of production;
3. identify the risks of impact and violation of human rights in the context of their operations;
4. implement human rights education activities for all employees and partners; and
5. provides courses, lectures, and evaluations to all employees and partners.

By directing companies to monitor their entire operation, including the chain of production, the decree stipulates that, necessarily, companies should be concerned with the defense of human rights not only within the scope of activities of their employees, but also in relation to all workers who contribute to the preparation of the product or provide it with a service, such as suppliers of raw materials or inputs.

Until then, the justification used by the bodies of control, notably the Labor Prosecutor’s Office, to impute corporate liability for the chain of production was based on principles, encompassing the Federal Constitution, international conventions, the Civil Code, and the Consumer Defense Code, among others. Since the publication of the decree, it is envisaged that, although companies may voluntarily comply with the guidelines provided, the Labor Prosecutor’s Office will begin to use it as a legal basis, and no longer a principle, for imputing liability for the chain of production.

Although the imputation of this liability based on a federal decree is questionable, companies must protect themselves and comply with the guidelines therein, since if the chain of production is not monitored and measures to control suppliers are not adopted, inevitably the company will be liable.

The decree alludes to the liability of companies for the chain of production in the provisions related (i) to the duty to monitor and respect human rights; (ii) identification of risks of impact and violation of human rights in the context of its operations; (iii) adoption of procedures to evaluate respect for human rights in the chain of production; and (iv) adoption of measures to prevent and remedy human rights violations in the chain of production.

To avoid imputation of liability, it is advisable to adopt some measures not only to highlight the company's concern with social responsibility, but also to strengthen its image in the market, especially in the current context of prominence of the compliance culture. Among them are the following:

1. prepare a check list of the requirements to be fulfilled in contracting with suppliers;
2. revise agreements for the provision of services with suppliers; and
3. revise the current code of conduct to implement guidelines suggested by the decree.

As part of this effort to adopt measures to defend human rights and eliminate risks of violation, whether within the company or in the chain of production, we recommend not only preparing or revising internal policies (codes of conduct), but also investing in education on the subject (courses and training) and in supervision (mapping and auditing of partners).

Category: Intellectual property

With the adequacy season to the Brazilian  Personal Data Protection Law (Law No. 13,709/2018), aka LGPD, opened and reinforced by the creation of the National Data Protection Authority (or ANPD, Presidential Decree No. 869/2018), managers and organizations are being bombarded with risk analysis, recommendations, market solutions, and a multitude of information and cross-cutting discussions that, although relevant, may be of little use or even disrupt them, if they do not have the right mindset and travel plan.

Click here to acess the ebook that we prepared to help you to develop action plans that give attention to relevant environments of influence.

Category: Tax

The system of precedents established by the Brazilian Procedure Code published in 2015 (CPC/2015) is based on the premise that trials of given instruments will have a binding effect on the Judiciary and that, solely for this reason, decisions that do not follow the understanding of such precedents will be challenged by a special lawsuit named “Reclamação”. Decisions with binding effects resulting from: i) trials held by the Federal Supreme Court (STF) in concentrated control of constitutionality; ii) stare decisis (“súmula vinculante”) issued by STF (here, also binding on the Administration, not just for the Judiciary); iii) trials in incidents for assumption of jurisdiction or resolution of repetitive claims; and iv) trials of extraordinary or special repetitive appeals by the STF or the Superior Court of Justice (STJ), respectively.

The CPC/2015 establishes that (i) the publication of the stare decisis by the STF and the STJ and (ii) decisions issued by a special body of the courts must be observed by the trial and lower courts. However, these decisions have reduced binding force at the option of the lawmakers, which is why we believe that their relevance is greater in the persuasion of trial in lower courts.

Precedents with binding force in the system of the CPC/2015 therefore emerge from the fact that the decision was rendered in a trial of a certain instrument, and there is no specific discipline regarding the content that effectively binds the bodies of the Judiciary. Is it the majority opinion? Is it the theory set out in the conclusion of the trial? Is it the briefs leading to the understanding that prevailed? These inquiries are not adequately established by the CPC/2015.

At least in relation to decisions resulting from the trials of extraordinary or special repetitive appeals, it is possible to conclude that the matter analyzed has a binding effect (article 1,039). This is despite the fact that 1,038, paragraph 3, of the CPC/2015, states that the decision published shall comprise a review of the relevant grounds of the matter debated.

Although this rule is specific to the binding effect of decisions rendered in repetitive appeals, which establishes similarity with the binding precedents, since there is only one extract indicating, in a summarized form, the understanding that must be followed, we believe that the system established by the CPC/2015 did not give that much prestige to the briefs for the decisions.

Thus, by rendering a decision that, according to CPC/2015, will assume a binding nature for the Judiciary as a whole, the Court will act, in an indirect way, as if it were a legislator. This situation occurs because the summary of the theory decided will be similar to any section of a given law that should be interpreted by the judge when applying the law at the moment of deciding a specific case.

For this, the discussions raised after the trial of Theory of General Repercussion 69. Upon concluding the trial of Extraordinary Appeal 574.706-PR, on March 15, 2017, the STF ruled that “the ICMS tax cannot be included in the calculation basis of PIS and Cofins contributions." Many inquiries regarding the scope of the theory ruled could be resolved if the CPC/2015 provided that, upon conclusion of a decision whose decision would be binding, the panel would not only ruled the summary of the precedent, but also indicate the reasons guiding the interpretation of the statement of law in an additional chapter of the decision that contemplates the analysis of the relevant grounds accepted by the majority, the so-called average opinion or vote.

Such a procedure would prevent the issues raised from the interpretation of the binding precedent from remaining on the agenda of the courts.

Therefore, we believe that the system of precedents designed by the CPC/2015 will fail in its objective of giving priority and promoting legal certainty and stability of case law if the issue pointed out in this article is not fixed.

And the harmful effect of the current system is verified empirically, since, once a theory is ruled in a trial of an instrument with binding effect, the precedent has been applied without distinction. In addition, in the cases of misinterpretation done in conjunction with the reasons of the trial rendered, the supposed objective of re-discussing that subject already decided and whose decision is qualified by binding force is invoked as a ground to not assess the merits of the special or extraordinary appeals.

Therefore, that the system of precedents of the CPC/2015, as mentioned above, results in a mere mechanism for managing cases that deal with similar matters and one more argument to be used by so-called "defensive case law" as an obstacle to hearing appeals.

Category: Infrastructure and energy

In a letter sent to Cade, ANP analyzes measures necessary to promote competition in the natural gas market and advocates for the implementation of a gas release program to ensure a smooth transition.

The natural gas market in Brazil is undergoing significant but still timid progress towards greater openness to competition. Initiatives like the public call for bids of TBG are viewed favorably, scheduled for this month of February, and the public call for purchase of natural gas promoted by some significant distributors are being received by players in the industry.

Following the publication of Decree No. 9,616/2018, in the last weeks of the government of former President Michel Temer, the year 2019 has already begun with another important sign for the market. In early January, the National Petroleum, Natural Gas and Biofuels Agency (ANP) released a technical note sent in 2018 to the Administrative Council for Economic Defense (Cade) addressing competitiveness in the Brazilian natural gas market, currently marked by a monopoly, and suggesting that the body take action on the topic.

The letter sent to Cade is another of the actions in which the agency has invested to promote competition in the natural gas industry and that evidences the increasing activism of the ANP in advancing an agenda in favor of opening to competition. Technical Note No. 14/2018-SIM addresses the market power exercised by Petrobras in the end-to-end natural gas industry, describing the dynamics present in the different segments (exploration and production, outflow, processing, import, transportation, and marketing and distribution), and proposes measures deemed necessary to promote competition in the industry.

Although the Gás para Crescer [Gas to Grow] initiative did not receive the support necessary in the National Congress, the respective debate at least served for the agency to find a favorable environment for advancing discussions on the topic and preparing the technical note sent to Cade. The document was designed with a competitive approach, and the agency even took care to adopt the same analysis tools as the antitrust authority, raising issues such as barriers to entry, economies of scale, new bidders, and guarantee of equal access.

In the first part of the document, the ANP outlines the performance of Petrobras in the current scenario, confronting public interest and economic efficiency. In the next section, it analyzes some actions that it considers necessary to promote competition in the industry. In the context of Petrobras strategic decision to sell part of its assets in the gas sector and the potential for opening it represents, the agency's proposals include guaranteeing third-parties equal access to essential facilities (infrastructures), de-verticalization of natural monopolies in transportation, and in the distribution and implementation of measures that make feasible new natural gas offers and price competition among new suppliers.

Regarding the application of the principle of free access, the regulatory agency advocates for obligatory access for third parties (market players who do not own gas pipelines) to infrastructures considered essential: gas pipelines, Natural Gas Processing Units (UPGNs), and the LNG terminals, always on a non-discriminatory and transparent basis and compatible with the undeniable preference of the owner. Considering that regulations should not impose a mere restriction, but rather optimize the use of assets by different agents in order to avoid a monopoly scenario.

For the de-verticalization of natural monopolies in transport and distribution, the agency proposes effective separation and independence of transport players in relation to the other activities in the chain, along the lines of the European experience. It also proposes, in relation to distribution, to eliminate non-public commercial transactions between related parties to serve a captive market, which would limit or curb self-dealing practices and promote the full disclosure of contracts for the sale of gas to distributors.

Regarding the implementation of measures to enable new offers and competition through price, ANP stresses the importance of introducing competition and deconcentrating the gas supply through gas release programs. Other recommendations explored by the agency are a limitation on the monopoly player’s participation in the market, restriction on re-contracting of the entire volume of natural gas from Bolivia via Gasbol, and prohibition on shareholding participation of shippers in the voting capital of transporters.

The technical note is rich in references to European models, drawing on the experience of Directive 2009/73/EC of the European Union, which gave rise to the three independence models adopted by European countries for the transport segment, and the experience of the British with the programs of mandatory sale of natural gas, the so-called gas release. Designed to overcome the lack of equal access to gas supply or transport capacity, this type of regulation was successfully introduced in the United Kingdom in the 1990s to boost competition in the natural gas industry and has since been adopted in different countries and regions as a transitional measure to address well-established monopolies or oligopolies in the natural gas market.

According to the ANP, the measures aim to achieve in the long run a single and paramount objective: to move towards liberalization of the captive market in a progressive and planned manner, promoting competition through transparent and fair-trade transactions until producers can sell gas directly to final consumers at competitive and fair prices. Only with more supply and an effectively competitive and deconcentrated market would it be possible to generate more benefits for the captive market.

With no major advances in the legislative sphere, in the face of the paralysis of the progress of Bill 6,407/2013 (the Gas Bill) in the Chamber of Deputies, or any other significant legal development to date, the ANP’s activism is more than expected, finding even a receptive industry, which hopes that all this awakening of regulatory and cooperative activity with other agencies may intensify, so that at least in the administrative sphere progress is being made. The release of the technical note renews the confidence of the sector, which provides for greater regulatory and competitive activity under the Cade-ANP Cooperation Agreement for the refining and especially natural gas markets.

Category: Infrastructure and energy

A draft legislative decree (PDC) is pending before the National Congress which scope is to eliminate the provision for mandatory registration as “support facilities for water transport” of FSRUs (Floating Storage and Regasification Units – i.e., gas vessels) with Antaq (the National Agency of Waterway Transport).

PDC No. 1,091/2018, proposed by Representative Hugo Leal (PSD-RJ), considers such registration rule to be illegal and contrary to the principles governing water transportation in Brazil. Because of that, the PDC-RJ seeks to halt the effects of paragraph 3 of article 2 of Antaq Normative Resolution No. 13/2016, which provides for the registration of waterway support facilities before the agency, among which FSRUs are included:

“Article 2.

I - Floating installations anchored in Brazilian jurisdictional waters, including interior waterways, in a geo-referenced position, duly ratified by the Brazilian Navy, not connected to an onshore installation, used for reception, storage, and transfer of solid, liquid, and gaseous bulk cargoes;

(...)

Paragraph 3. An exception is made for the provisions of item I of the head paragraph, with regard to the prohibition on connection to a terminal located on land, in the case of vessels adapted for regasification bottoming operation while bottomed/moored, even when located within the limits of the Organized Port."

Based on the interpretation of this rule, foreign-flagged FSRUs registered as waterway support facilities would not need to comply with the chartering rules governed by Law No. 9,432/1997. This is because, in practice, such infrastructure would be used as port support facilities and not as vessels, which would lead to the conclusion that their operation would not be restricted to Brazilian shipping companies (EBN).

Through PDC 1,091/18, Representative Hugo Leal argues that "the repeal of paragraph 3 of article 2 of Resolution No. 13/16 is necessary to restore competitiveness in the sector and legal certainty in operations, preventing the opening of the market for foreign shipping companies without any investment in Brazil."

The representative also argues that Law No. 9,432/18, upon listing vessels that would not be subject to its provisions (article 1) did not include FSRUs and that, if such exclusion were intended, it should have been expressly referred to in a formal law. For this reason, Antaq was said to have exceeded its regulatory power by passing the resolution challenged, thus violating the principles of public interest, reasonableness, and proportionality.

However, representative Hugo Leal's argument is built on an assumption that, after a more accurate analysis, cannot be sustained: that foreign-flagged FSRUs would be released from the EBN chartering rules only if they were explicitly listed among the vessels excluded from the scope of Law No. 9,432/97.^[1]

The focus of the discussion, in fact, should not be on whether or not FSRUs are subject to the terms of Law No. 9,432/97, but rather on the activities they carry out. Attention should be paid to the fact that FSRUs used for receiving, storing, and/or re-gasifying LNG, when connected to land facilities, do not engage in any type of navigation, and are anchored for long periods of time (even decades).

The rule that requires the chartering of foreign-flagged vessels by EBNs, on the other hand, is provided for in article 7 of Law No. 9,432/97, which applies to the transportation of goods in coastal shipping and inland navigation through national waterways, as well as port support and maritime support navigation.^[2]

There is no doubt that FSRUs connected to port infrastructures do not carry out the navigation activities listed in Law No. 9,432/97 (maritime support, port support, coastal shipping and deep sea navigation).^[3] Thus, even if the FSRUs are not considered excluded from the scope of Law No. 9,432/97, the fact that they do not carry out shipping activities would eliminate, by itself, the requirement for FSRUs flying a foreign flag to be chartered by an EBN, since it would not be subject to the terms of article 7 of Law No. 9,432/97.

Antaq’s management has already expressed, in specific cases, the understanding that FSRU does not perform shipping activity, and therefore would not be subject to the chartering rules provided for under Law No. 9,432/97, and could be registered as a port facility under Resolution No. 13/16.

Therefore, the intended revocation of paragraph 3 of article 2 of Resolution No. 13/16 would not have the effect of automatically achieving the objectives allegedly targeted by representative Hugo Leal. This is because, even if the FSRU registration framework is terminated under the aegis of Resolution No. 13/16, the argument that Law No. 9,432/97 would not in any way impose the need for an FSRU flying a foreign flag to be chartered by an EBN for domestic waterway operations, does not lose force. Quite to the contrary, the repeal of this provision would only create a loophole with respect to the regulation of these vessels by Antaq, thus aggravating the legal uncertainty which PDC No. 1,091/18 allegedly seeks to eliminate.

It is also possible to deconstruct the argument that the measure taken by Antaq through Resolution No. 13/16 is an overstepping of the regulatory power of the agency and should be preceded by a formal law. In creating Antaq, Law No. 10,233/2001 attributed to the agency the power to regulate waterway transport and the use of federal waterway infrastructure.^[4] Thus, whether or not Antaq has delegated mandate by law to regulate the sector (as done by Resolution No. 13/16) cannot be questioned.

In respect to the need for a formal law for such regulations, applicable law does not establish that classification of water transport support facilities (the subject matter of Resolution No. 13/16) should be regulated by law. Thus, there is no obstacle to regulation of the matter by Antaq. Along these lines, the majority administrative law doctrine recognizes that the administration has ample leeway to regulate when it is granted legal competence, and should not only act as a mere "mechanical arm" of the law, per the words of Professor Carlos Ari Sundfeld, in verbis:^[5]

"As the legal mooring of the contemporary Administration is carried out, along with the formal law, by various other sources and mechanisms, the viability of the Rule of Law is not compromised due to the mere fact that the administration exercises broad creative competences by legal authorization."

The measure adopted by Antaq in considering FSRUs as support facilities, contrary to what is argued in PDC No. 1,091/18, complies with applicable legal and constitutional principles. This is because, by reducing the cost and bureaucracy required for natural gas import and regasification projects, it creates an environment of incentives for such projects and (i) promotes economic and social development; (ii) guarantees the national supply of natural gas (and, consequently, the supply of electricity); (iii) promotes free competition among market players, providing a more efficient end-user service; (iv) it does not harm the national naval industry, since there are no FSRUs built by national shipyards; (v) it does not contravene the principles of reasonableness and proportionality, since the analysis of these issues was carried out by Antaq in preparing the resolution and deciding on related matters (as set forth above), and there is no justification in the PDC that demonstrates a breach of these principles; and (vi) serves the prevailing public interest for the various reasons set out in this paragraph.

^[1] Warships and state ships not employed in commercial activity, sport and recreational craft, tourism vessels, fishing vessels, and research vessels.

^[2]“Article 7. Foreign vessels may only participate in the transportation of goods in coastal shipping and inland navigation through national waterways, as well as in port support navigation and maritime support navigation, when chartered by Brazilian shipping companies, in compliance with the provisions of articles 9 and 10."

^[3] As defined in article 2 of Law No. 9,432/97.

^[4] Law No. 10,233/2011, articles 20 and 23, I and V

^[5] Sundfeld, Carlos Ari. Direito Administrativo para Céticos [“Administrative Law for Skeptics”]. Malheiros, 2014, 2nd edition. São Paulo

Category: Labor and employment

The Superior Labor Court (TST) granted relief to an appeal filed by a company seeking to recognize as valid a collective bargaining agreement that authorized the use of an alternative system for controlling work hours, in which the employee only records overtime and not the other points of the workday. The decision was rendered on October 9 as part of Case No. 0002016-02.2011.5.03.0011.

Many companies have in the past adopted time card control by exception (system in which only overtime is recorded) due to the practicality of information management, since the system minimizes effort and reduces the work of checking data and accounting for hours and overtime.

In the case under review, the Regional Court of Labor Appeals (TRT) of the 3rd Region had considered invalid a collective norm authorizing the recording of the workday via exception on the grounds that such a system contravened the provisions of article 74, § 2, of the Consolidated Labor Laws (CLT), which mandates the recording by the employer of the hours of entry and exit of employees.

Modifying the decision that had been handed down by the TRT, the TST acknowledged that the form of marking the workday is not a part of the list of inalienable rights of workers, which is why there is no obstacle to negotiating so as to rule out the application of article 74, § 2, of the CLT in order to serve the interests of the negotiating parties.

Invoking the terms of article 7, XXVI, of the Federal Constitution (CF), the TST stated that the Labor Courts have a constitutional duty to encourage and guarantee compliance with decisions reached via collective mutual agreement. Therefore, if collective entities (companies and trade unions) act on an equal footing and with parity of arms in the context of collective bargaining, legitimate working conditions are agreed upon when the legal limits are respected, as is the case with the system of institution of alternative workday controls.

The TST also underscored the understanding of the Federal Supreme Court (STF) regarding the controversy about the Jurisprudential Guideline No. 270 of the Individual Disputes Secretariat 1 (which sets forth the Voluntary Resignation Incentive Program), in which collective autonomy of will is given precedence as a form of overcoming conflict that plays a very important political and social function,” and “the systematic invalidation of collective bargaining agreements should not be viewed favorably on the basis of a logic that limits the autonomy of the will exclusively applicable to individual employment relationships" (Extraordinary Appeal No. 590.415 – Published on 05/29/2015).

The decision handed down by the TST not only represents an important precedent for companies that have used alternative controls of working hours in the past but also reinforces the legitimacy of similar negotiations in the future, including in light of the provisions of article 611-A, item X, of the CLT, recently introduced by the Labor Reform.

This article establishes the collective norms that prevail over the law regarding the modality of registration of working hours, exactly the case submitted to the TST for review, since the decision recognized the validity of a collective agreement that instituted control by exception to the detriment of the provisions of article 74, § 2, of the CLT (which provides for the annotation of hours of entry and exit).