Category: Litigation

The reforms promoted in the Expropriation Act (Decree-Law 3,365/41) by the Federal Law 13,867/19 have brought significant changes to public expropriations, especially in relation to the negotiation process between the private and the Public Administration, as we have already dealt with in article published on this portal.

The new provisions allowed the use of mediation or arbitration to define indemnity amounts and conduct negotiations. To this end, the specific conditions of the rule must be observed,^[1] as well as the provisions of applicable federal laws.^[2] These changes were long awaited as a way to reduce the initiation of disputes.

The process of extrajudicial negotiation, either through mediation or through arbitration, is swifter and more efficient. Despite criticism from some scholars about the evaluation criteria – it is argued that it would be potentially harmful to the population because the amount of compensation is not ratified by Judiciary – there are several ways to ensure that public expropriation through out-of-court means occurs in a way that is more beneficial to the expropriated.

For this purpose, it is necessary that expropriation be analyzed from the legal and social point of view, considering the public interest and the importance of that eviction – the gains generated for the community or even the need to vacate the area to ensure the safety of the population – and the right to private property, constitutionally guaranteed.

Considering that the eviction for public utility is inevitable, even if it interferes in some way in the right to property, there are ways to ensure a fair, fast and economically advantageous indemnity process for the resident forced to vacate the property, placing it at the center of the negotiation, to avoid having even greater losses.

One way to ensure isonomy in trading is related to the methodology of real estate valuation. Often, the areas and venous values of real estate are outdated in the official documents issued by the municipal government. In these cases, it is possible to elaborate a specific evaluation methodology, using the real area of the property and the standards of the Brazilian Association of Technical Standards (ABNT) for valuation purposes. This evaluation methodology helps mitigate the effects of informality in which a large part of the population is located.

Another way is to plan well-defined stages and flows of negotiation, making the process of extrajudicial expropriation faster than lawsuits. It is not new the large number of demands in progress in the Judiciary and the slowness of payments made with writ of payments to public authorities (precatórios).

Not by chance, the stimulus to consensual conflict resolution is one of the principles brought by the 2015 Code of Civil Procedure.^[3] While the judicial expropriation process can last for years until the due indemnity is paid, out-of-court negotiation can be completed in a few months when well defined and organized.

The speed of the expropriation process is important considering that it avoids causing more damage to the expropriated, while offering an efficient and resolving solution to public expropriation. This, of course, when the process is allied to a compensation based on fair criteria.

The use of alternative methods of negotiation and dispute resolution to solve situations involving expropriation, therefore, proves to be quite advantageous, and can generate benefits to both the expropriator and the expropriated.

^[1] "Art. 10-A. The public authority shall notify the owner and offer him compensation.

• 1 - The notification dealing with the caput of this article shall contain:

I - copy of the act of declaration of public utility;

II - plan or description of the goods and their confrontations;

III - value of the offer;

IV - information that the deadline for accepting or rejecting the offer is 15 (fifteen) days and that silence will be considered rejection;

V - (VETTED).

• 2 - Accepts the offer and made the payment, will be drawn up agreement, which will be a skilled title for the transcription in the registration of real estate.
• 3 - After the offer, or after the period without manifestation, the government will proceed in the form of the arts. 11 and following of this Decree-Law."

"Art. 10-B. After the option for mediation or arbitration, the individual shall indicate one of the bodies or institutions specialized in mediation or arbitration previously registered by the body responsible for expropriation.

• 1 - Mediation shall follow the rules of Law No. 13,140 of June 26, 2015, and, in the alternative, the regulations of the body or institution responsible.
• 2 - The mediation chamber created by the government may be elected pursuant to Article 32 of Law No. 13,140 of June 26, 2015.
• 3 (VETTED).
• 4 - Arbitration shall follow the rules of Law No. 9,307 of September 23, 1996, and, in the alternative, the regulations of the body or institution responsible.
• 5 (VETTED)."

^[2] Law 13.140/15, which provides for mediation between individuals as a means of resolving disputes and on the self-composition of conflicts within the public administration, and Law 9.307/96, which provides for arbitration.

^[3] "Art. 3- Threat or right-to-injury shall not be excluded from the judicial assessment.

• 1 - Arbitration is permitted in the form of law.
• 2 - The State shall promote, whenever possible, the consensual settlement of conflicts.
• 3 - Conciliation, mediation and other methods of consensual settlement of conflicts shall be encouraged by judges, lawyers, public defenders and members of the Public Prosecutor's Office, including in the course of the judicial proceedings."

Category: Compliance, investigations and corporate governance

The Federal Government published on July 12 the Decree 11,129/22, which regulates the Anti-Corruption Law and replaces the former Decree 8,420/15. The new decree brought innovations on relevant topics introduced by the Anti-Corruption Law. But, after all, what changes in practice for companies in terms of civil and administrative accountability for acts against public administration?

Verification and accountability

Decree 11.129/22 consolidates other sparse rules that dealt with the investigation and accountability in cases of corruption, such as instructions, ordinances and manuals of the Office of the Comptroller General (CGU) and Attorney General’s Office (AGU), presenting more detailed provisions.

First, the guidelines related to the Preliminary Investigation and the Administrative Proceeding for Accountability (PAR) stand out. The investigative measures available at preliminary investigation are now expressly provided for in the new decree. Productions of evidence previously restricted to the committee responsible for conducting the PAR are available within the framework of preliminary investigation, with emphasis on:

• precautionary suspension of the effects of the act or the proceedings under investigation;
• search and seizure requests;
• requests for banking information on the movement of public resources, although confidential; and
• requests of tax information.

Decree 11.129/22 also changes the deadline for the conclusion of investigations, which was previously 60 days extendable for another 60, to 180 days extendable, without specifying time and no longer having as a requirement the need for any kind of justification for the extension.

Sanctions

In relation to sanctions, there are also relevant changes in relation to the criteria and percentages of calculation of the fine. In the new decree, the percentages of sum or reduction of the fine now show a gradation in the percentage with no minimum value.

Before, for example, the percentage of reduction of fine for legal entities who had and applied an compliance program aligned with the instructions of the respective regulatory decrees was "1% up to 4%". Decree 11.129/22 provides that the reduction of fines for an integrity program becomes "up to 5%" which, in practice, allows a reduction of any amount. In the old decree, if the evaluation of the compliance program allowed a reduction of 0.8% it would not be applied, because the minimum was 1%.

The new standard brings a stricter approach to illicit public procurement.

Before, the calculation of the fine was based on calculation percentages related to contracts ranging from R$ 1.5 million to R$ 1 billion.

In practical terms, the scale of percentage of fines related to illicit in public contracts was calculated considering contracts with amounts above R$ 1.5 million. Now, this calculation will be done considering contracts starting at R$ 500,000, as follows:

- 1% in the case of contracts with value between R$ 500,000 and R$ 1.5 million;

- 2% in the case of contracts with value above R$ 1.5 million up to R$ 10 million;

- 3% in the case of contracts with value above R$ 10 million up to R$ 50 million;

- 4% in the case of contracts with value above R$ 50 million up to R$ 250 million;

- 5% in the case of contracts with value above R$ 250 million.

Leniency Agreement

There are also changes in multiple provisions on the Leniency Agreement, with the introduction of more conditions for legal entities when concluding an agreement, including, expressly, the duty to fully redress the damage caused and the amounts corresponding to the undue income or unjust enrichment.

Decree 11.129/22 also brought responsibility for monitoring the obligations of adoption, implementation and improvement of the integrity program under the leniency agreement for the CGU. It is worth noting that this monitoring can be carried out directly or indirectly by the CGU, that is, there is also the possibility of hiring an independent third-party monitor by the legal entity.

Whatever the scenario, supervision and evaluation will be responsibility, directly or indirectly, of the CGU, which can waive the monitoring depending on the characteristics of the harmful act, the remediation measures adopted by the legal entity and the public interest.

In order to establish a technical investigation aligned with the provisions of the Anti-Corruption Law itself, the new decree includes, as one of the conditions for concluding the Leniency Agreement, that the legal entity admits its objective responsibility for the harmful acts, replacing the previous wording that dealt with the admission of participation in the violation.

The limitation period in the Leniency Agreement is now interrupted when the Memorandum of Understandings (MoU) is signed. In practice, a longer negotiation period is granted, since the negotiation of the agreement should be closed within 180 days, starting from the date of signature of the MoU, and no longer from the presentation of the proposal, as it was in the old decree.

In addition, by Decree 11.129/22, the Leniency Agreement may contain a clause on the possibility of using an uncontroversial portion of compensation for damage to compensate other amounts in other sanctioning or accountability proceedings, relating to the same facts. This means that due amounts can be compensated in other processes that reference the same facts. There is, however, no specification whether it includes state or municipal processes in this list of possibilities.

Compliance program

 
With regard to the legal entity compliance program, the recommendations listed in the paragraphs of Art. 57 bring some innovations in relation to the previous decree, such as:

• the express mention of the allocation of adequate resources for the operation of the program;
• the inclusion, in addition to periodic training, of periodic communications; and
• risk-based due diligence, especially related to the hiring of third parties, hiring and supervising politically exposed persons, and conducting and supervising sponsorships and donations.

In addition, the final provisions mention a simplified assessment of the compliance program in the case of very small and small businesses. The regulation will be the responsibility of the CGU.

Category: Infrastructure and energy

The revised administrative infractions and fines set out by the Mining Code came into effect last August resulting in penalties and fines that  could reach R$ 1 billion.

Among the various measures adopted after the disasters that occurred in 2015 and 2019 in Mariana and Brumadinho,  in Minas Gerais, the Brazilian Congress  issued the Law 14,066 in 2020 that modified the National Policy for Dam Safety and the Mining Code, imposing new obligations on miners and giving more visibility to environmental liabilities in mining.

To regulate such changes, the Decree 10,965/22, published at the beginning of this year, also modified the rules for penalties and fines set out by the Mining Code Regulation (Decree 9,406/18).

Such changes, like others already set out by the environmental legislation on mining, were triggered, among other factors, as a result of the perception that, historically, part of the miners ignored the rules imposed on their mining activities because they considered the value of the imposed penalties and fines modest ones, as well as there was until very recently a perception of reduced law enforcement.

One of the most significant changes brought by Decree 10,965/22 is related to the revision of the administrative infractions and fines that came into force last August 2022. In the past regulation, the i failure to comply with most of the obligations resulted in the penalty of a simple warning and/or fines ranging from R$ 300 to R$ 3 thousand. Only on extreme cases the one that breached the law was punished with the forfeiture of its mining title.

Now, the penalties and fines should be applied more severely with amounts ranging from R$ 2 thousand to R$ 1 billion. In the case of non observation of the  obligations set out by the appliable regulatory legislation, depending on the severity of the violation, in addition to the penalties of warning, fine and/or forfeiture of the mining title, the regulation provides the possibility of seizing goods, ores and equipment or temporary suspension - total or partial - of the mining related activities.

As a result of the new decree, the penalties and fines take into consideration not only the type and severity of the damage caused by the violation committed and the aggravating and mitigating circumstances - such as the recurrent acts. They also consider a very debatable subjective element: the economic capacity of the one that is in breach of the law.

Regardless the possibility of imposing a double  fine in the event of a recidivist of the one that is in breach of the law, two other new sanctions are worthy attention. It is applicable to:

• practice of mining activities, processing or storage of ores or tailings that result in serious damages to the population and the environment; and
• degradation of the public property and its water and environmental resources due to a mining dam leakage or rupture.

Such infractions can now result, in the last case, in the forfeiture of the mining title, without prejudice to the imposition of fines and civil and criminal liability of the infringing miner.

Causing damage and losses to third parties due to the practice of mining and failure to submit to the National Mining Agency a report of the activities performed annually in the established period were also included in the list of administrative infractions. . It is evident, therefore, the legislator's concern in restraining the conducts of the one that is in breach of the law  and whose acts may degrade and impact the environment.

The parameters, criteria and procedures for the imposition of the aforementioned penalties on agents of the mining sector shall be further regulated by a resolution to be published by the National Mining Agency.

As a first step, it was included as a priority in the last regulatory agenda approved by the National Mining Agency the requirement to regulate the administrative sanctioning process of the agency.

Additionally to these changes, aiming to result on greater awareness and accountability of  mining companies, the decree also regulated certain obligations for the exercise of mining activities that cover more than the recovery, mitigation, and compensation of the environmental impacts resulting from mining activities.

It becomes mandatory to act to prevent other impacts, including those related to the welfare of the communities involved in or otherwise impacted by the activities of research, mining, processing, transportation, commercialization of ores or the use or storage of sterile and tailings.

In accordance with international best practices, it was explicitly established the responsibility for the welfare of the communities around the mine and for the preservation of the health and safety of those who are directly related to mining activities.

In order to prevent environmental disasters, the mining entrepreneur should prepare and implement a contingency plan^[1], in addition to the obligation of recovering areas that may be in some way degraded as a result of its activities.

The recovery of areas due to mine closure and decommissioning of facilities - including any dams or similar infrastructure - includes the obligation to create a destination for future use of the area.

It is also required to monitor the tailings and sterile disposal systems  following the geotechnical stability of the mined areas, according to the specific closure plan approved by the competent authorities - which include the National Mining Agency (ANM) and the environmental governmental body responsible for licensing the mine.

^[1] Contingency plan that must be integrated to the city's Contingency Plan for Protection and Civil Defense, if any, according to art. 5, §2 of Decree 10.965/22.

Category: Compliance, investigations and corporate governance

In the wake of the recent publication of the Decree 11,129/22, which amended the regulation of the Anti-Corruption Law, on 25 July, the Office of the Comptroller General ( (CGU) published the Normative Ordinance CGU 19/22, which brought specific rules on summary judgment in the context of administrative accountability proceedings (PAR) determined or avocados by the CGU.

According to the CGU, summary judgment is a negotiating sanctioning instrument, whose main objective is to stimulate the culture of integrity in the private sector, promoting express accountability for harmful acts committed against the Public Administration.

Summary judgment has certain requirements and, if accepted by the authority, may grant benefits to the legal entity that triggers it.

The request for summary judgment proposed by the legal entity must include the admission of objective responsibility for the practice of the harmful acts investigated, accompanied by evidence and detailed reporting of what is known.

In addition, the request for anticipation must contain the following commitments:

• repay the caused damage;
• lose the undue advantage (when it is possible to estimate);
• pay the fine of Art. 6 of the Anti-Corruption Law;
• respond to requests for information;
• do not file administrative appeals;
• waive the submission of a written defense;
• waive the right to file lawsuits relating to the PAR; and
• include suggestion on how and how to pay financial obligations (there is the possibility of proposing the installment payment).

At the federal level, the CGU, in a discretionary manner, may reject or agree to the request made by the legal entity. If the return is positive, the authority will prepare a final report, recommending the summary judgment, which will proceed to the final decision of the Minister of the CGU, preceded by legal manifestation of the legal advice department of the CGU.

Summary judgment can only be used for PARs already instituted and still pending final judgment. The degrees of benefit in the amount applied to the fine vary depending on the time the legal entity submits its proposal.

In this way, the following mitigations in the calculation of the fine can be applied:

• Before the beginning of the PAR (in the context of preliminary investigation) – mitigation of 4.5%
• Before the presentation of the written defense - attenuation of 3.5%
• Before the closing statements – attenuation of 2.5%
• After the closing statements - 1.5% mitigation

Summary judgment has characteristics very similar to those provided for in the leniency agreement – such as admission of strict liability, delivery of evidence and detailed reporting of what is known to the company, in addition to some differences highlighted below:

Given these two possibilities, it is important that the legal entity subject to some preliminary investigation or a PAR examines, according to the specific case, what is the most advantageous way: leniency agreement, summary judgment or follow the procedural flow of the PAR.

This reflection is necessary because, considering that Article 25, II, that of Decree 11.129/22 imposes a limit of three times the value of the advantage obtained to the fine imposed, in a hypothetical PAR scenario in which the fine calculated exceeds this limit, the mitigation of the summary judgment may be to make it innocuous. This is because even without the incidence of the reduction of the summary judgment, the fine would have already reached its maximum. In this case, opting for summary judgment or normal flow, the fine imposed would be the same – the amount of three times the advantage given.

In this scenario, in addition to the non-application of mitigating factors, the summary judgment would prevent the legal entity from, in the administrative sphere of the PAR and in potential judicial sphere, to discuss the facts and present its defense, since the summary judgment imposes the commitment not to appeal and give up related lawsuits.

These considerations and reflections are extremely relevant for legal entities involved in PARs in progress, because the normative ordinance established a deadline of 60 days for legal entities to make proposals for summary judgments in PARs already established and not yet judged. Considering that the normative ordinance comes into force on August 1, 2022, the deadline for the proposal, in these specific cases, expires on September 30, 2022.

Category: Labor and employment

Whether good or bad, fact is that one of the biggest legacies of the covid-19 pandemic was telework, and it definitely came to stay. Several companies have adopted the telework as a rule, allowing your employees to work from home or anywhere else that has a good internet connection.

What most of these companies do not see – and does not do so out of ignorance – is that the multiplicity of service locations leads to a multitude of places where their employees can process them. So, what was supposed to be a benefit can become a nightmare from a legal point of view.

Imagine a company with a nomadic employee, who over the course of a year travels the entire Brazilian coast, and at the end of the contract, decides to sue. Where will he distribute this action? And if the company has the entire staff of employees adept at the anywhere office, how can it promote the defense of its interests considering the continental size of our country?

In a first view – and considering the general rule that it is competent to judge a labor complaint the Labor court of the place where the employee provides his services – one might think that the options would be numerous, but recent decisions^[1] of the courts addressing the issue of digital nomads have put this rule in check.

Given the multiplicity of places of service provision and the freedom granted to the employee, the courts have understood that the jurisdiction to adjudicate a labor complaint proposed by an adept collaborator of the anywhere office is the company's headquarters.

The reasons listed by the decisions revolve mostly around the right of defense of companies, which can be limited in case there is unpredictability about the place where the labor complaint will be proposed. In addition, the example of the agent or commercial traveler is "borrowed", since the nomadic employee can work in several locations, but without necessarily living in any of them.

We understand that some hiring precautions can help prevent a number of labor complaints related to supporters of the anywhere office:

Fixing the place of the company's headquarters as a competent forum to judge the labor lawsuit in the employment contract is one of them, even better if the worker in question has a higher education degree and receives a salary equal to or twice the maximum limit of the benefits of the General Social Security System.

The establishment of a remote work policy in which it is made clear that issues related to the employment contract will be discussed at the company's headquarters will also strengthen the arguments before the Labor Court in case there is discussion as to where a labor complaint should be handled.

There is an understanding that the place of discussion of labor demands cannot be determined by the employer and the employee for fear that  may be impaired. It is the so-called "prohibition of the forumclause", that is, the impossibility of establishing this place in contract or otherwise. Thus, even if the necessary precautions were adopted, there would still be a risk of concluding that this adjustment did not exist.

However, we believe that the proposed measures will bring greater legal certainty to companies and, at the very least, facilitate the discussion of this issue in the courts, which need to adapt to new forms of work.

The adaptation of labor laws to new social phenomena is necessary, and the suggested measures seek precisely to combine the best of both worlds: grant the employee freedom of choice on where to work and, on the other hand, to give legal certainty to companies, who will be able to concentrate their demands on the place of their headquarters, without having to mobilize people and financial resources to meet labor complaints spread throughout a country as large as Brazil.

^[1] RO: 0100647-28.2019.5.01.0246

RT: 1000924-87.2020.5.02.0009

RR: 0000426-03.2017.5.20.0012

Category: Tax

It is a fundamental guideline of the National Tax Code that taxes are not intended to punish any unlawful act:

"Art. 3º Tributo is any payment of the compulsory pecuniary, in currency or the value of which can be expressed therein, which does not constitute a penalty for an unlawful act, instituted by law and charged through fully linked administrative activity."

Taxes, therefore, cannot serve as an instrument to penalize those who break the laws. Charges, as a kind of tax, are included in this rule.

Thus, it surprised the recent decision of the plenary of the Supreme Court (STF) in direct actions of unconstitutionality ADI 4,785, ADI 4,786 and ADI 4,787.

In this brief article, we will deal only with the possibility of justifying, based on incidents that occurred in a given economic segment, the collection of charges without equivalence with the cost (even if estimated/approximated) of the service to be funded.

This is because, no more than three years ago, the same plenary of the Supreme Court ruled on the impossibility of the charges for the police power being charged at levels higher than the cost of the state service to be remunerated.

At that time, when we had the opportunity to represent the entity author of the action, more specifically in the judgment of the ADI 6,211/AP, the plenary of the Supreme Court ruled that the collection arising from the charges by the police power cannot be disconnected from the cost of state activity to be funded.

About this trial, the very website of the Supreme Court reported:

"The Supreme Federal Court (STF) declared unconstitutional provisions of the state Law 2.388/2018 of Amapá, which instituted a fee on exploitation activity and use of water resources (TFRH). By a majority of votes, the Plenary, in the session of Wednesday (4), upheld the Direct Action of Unconstitutionality (ADI) 6211, filed by the Brazilian Association of Independent Producers of Electric Energy.

Consideration

The vote of the rapporteur, Minister Marco Aurelio, prevailed in the trial. According to him, the rate, unlike the tax, has a counter-provision, that is, it must be tied to the effective or potential execution of a specific public service or, as in this case, to the regular exercise of police power. On the basis of calculating the rate, it should therefore be observed a correlation between costs and benefits, in compliance with the principle of proportionality.

For the minister, in the case of Amapá, where the rate is calculated according to the volume of water resources used by the taxpayer, the data show the lack of proportionality between the cost of state activity that justifies the rate and the amount to be spent by individuals for the benefit of the public entity. The amount collected, he said, is ten times the annual budget of the state's environment management secretariat. 'Nothing justifies a fee whose total collection exceeds the cost of state activity that allows it to exist,' he said.

Collecting character

The rapporteur noted that the very wording of the law demonstrates the eminently collecting nature of the tax instituted, by providing for the contribution of the proceeds of the collection for the promotion of municipal initiatives related to the state policy of water resources and to increase the so-called water resources fund. 'It was admitted that a substantial portion of the collected is not even directed to the cost of expenses related to the control and supervision of exploration activities to the use of water resources,' he said.

Minister Edson Fachin was partially defeated, who considered articles 2, 3 and 5 of the standard constitutional, which, in his view, only provide for the exercise of police power and explain their form of exercise or performance."

Nothing more appropriate and settled, since, unlike the taxes that are the primary source for the maintenance of state entities, the charges are signage/referable/counter-paymental taxes, which require that their collection is intended to cover the cost of the service to be funded.

Given the relevance, we transcribe excerpts from some of the votes cast in the ADI 6,211/AP trial:

• Excerpts from the vote given by Minister Marco Aurélio Mello:

"There is different understanding as to what is alleged in the first piece regarding the constitutional hygiene of the attacked act in the material sense, taking into account the principle of proportionality, which translates into the verification of the appropriate equivalence between the required value of the taxpayer and the costs alusing the exercise of police power to justify the imposition of the tax.

Pay attention to the provisions of Article 145, item II, of the Federal Constitution, to reveal the notion of fee, the requirement of which is guided by the principle of retributivity.

(...)

It is stated that the fee has a counterproductive and sinalagmatic character: by tied to the effective or potential execution of a specific and divisible public service, or, as is the case, to the regular exercise of police power, the value of the tax must reflect, within the limits of the reasonable, the cost of the state activity from which it takes place. According to Hugo de Brito Machado, 'nothing justifies a fee whose total collection in a given period exceeds the cost of state activity that allows him to exist', it should be observed, in determining the basis of calculation, 'even if by approximation and with a certain margin of agency', correlation between costs and benefits, under penalty of having mischaracterized the nature of the tax (MACHADO,  Hugo de Brito. Tax Law Course. São Paulo: Malheiros, 2018. p. 443)

In view of the need to keep, in the definition of the amounts to be charged, intimate relationship with the fulfillment of the activity that gives it opportunity, verified difficulty or even impossibility of determining precisely the cost alusive to state activity, it is feasible for the Public Administration to establish an approximate amount, proportional, which is the adoption of the basis of own calculation of tax,  in the form of Article 145, § 2, of the Major Law.

There is almost ten times the budget annually allocated to the Secretary of State for the Environment, the body entrusted, in the form of Article 3 of the Diploma wholesale, to 'plan, organize, direct, coordinate, implement, control and evaluate sectoral actions related to the use of water resources' and to 'record, control and monitor the exploitation and use of water resources'. From the analysis of the budget pieces for the years 2018 and 2019, the resources allocated to the Secretariat comprised, respectively, 8.3 million and 10.5 million reais – reaching the average of only 9.4 million reais annually."

• Excerpt from the vote given by Minister Luis Roberto Barroso:

"Here, what is verified is that the claim of collection with this fee, as in the case of Pará, exceeds the budget of several Secretariats of State. The disproportionality seems evident. It is not that it exceeds the budget of the Secretariat in charge of supervision, it exceeds the budget of several departments added together. I think this mischaracterizes the rate character as a linked tax proportional to the activity performed."

• Excerpt from the vote given by Minister Rosa Weber:

"Furthermore, the financial data estimated by the author and not challenged by the Governor or the State Legislative Assembly seem to indicate that there is no correlation between the value of the fee and the cost of the police power to justify its imposition. There is no need for there to be an exact correspondence in the fees with the cost of the service provided or made available to the taxpayer or the police power exercised, but minimal proportionality and reasonableness are necessary, and no gifts are made.

• Excerpt from the vote delivered by Minister Luiz Fux:

"Mr President, I say that there is no revelation of equivalence between the costs of state activity and the taxpayer's ability to pay. This parameter used effectively generated a confiscatory effect."

• Excerpts from the vote given by Minister Ricardo Lewandowski:

"Once the question of jurisdiction is overcome, I recall that the fee, as a counter-provision to an activity of the Public Power, may not exceed the reasonable equivalence ratio that must permeate the actual cost of state action and the value that the State may require of each taxpayer, considered, for that purpose, the relevant elements to the rates and calculation basis set by law. In other words, if the quantification of the rate exceeds the cost of the service made available to the taxpayer, thus constituting a situation of excessive costlyness, it will be demonstrated, in my view, offence to the fundamental prohibitive clause of non-confiscation, provided for in Art. 150, IV, of the CF/88:

(...)

The technical context reveals, therefore, disproportion and lack of correlation (referibility) between the facts generating the tax, the amounts to be collected and the cost of the inspection services provided by SEMA (calculated according to the volume of production, in accordance with article 6, of the contested legislation), so that, in the dimension of the cost/benefit, applicable to the fees,  violation of the principle of contributory capacity (Art. 145, § 2, CF/88) is also envisaged."

• Excerpt from the vote of Minister Dias Toffoli:

"Although the law may avail itself of the volume of water resources used to establish the value of THE TFRH – because, in the case, the larger this volume, the greater the exercise of the supervisory power by the Public Administration – it has to respect proportionality and reasonableness. In this sense, the amount actually charged under the fee cannot be strayed from the cost of state activity that is sought to pay."

It is out of doubt that it would be virtually impossible to have accuracy in the parity between the cost of the service to be funded and the amount to be collected with the charge.

This practical difficulty, however, cannot serve as a justification to allow the lack of equivalence – even if reasonably approximate – between the amount collected with the charge and the cost of state activity to be remunerated, under penalty of turning it into a true tax.

It happens that, although everything that has been commented on above reflects the decision of the Plenary of the Supreme Court on the charges for the police power, it seems, something caused some Justices of the Supreme Court to radically change their minds.

In the support of the votes cast by the Justices in the trial of the recent ADI 4,785, ADI 4,786 and ADI 4,787, with the exception of the Attorney General of the Republic, who expressly said to have changed their minds on the subject, the Justices who voted for the possibility of the charges for police power exceed the cost of the state service to be remunerated did not clear they made the reason for the change of understanding.

Apparently, one of the determining factors for Justices to validate the collection of charges on trial in those three direct actions of unconstitutionality was the occurrence of environmental incidents.

This can be drawn from the synthesis of the votes verbalized in the plenary session of 01/08/2022 – the judgment has not yet been formalized – especially Justices Edson Fachin, Luiz Fux and Carmen Lucia.

The Justices of the Supreme Court relied on the occurrence of environmental incidents to justify the collection of charges by the police power at strange levels and far from the cost of state service to be funded.

It happens that, as posted in Article 3 of the National Tax Code, tax is not the appropriate legal instrument for sanctioning any unlawful act.

From the judgment of ADI 4.785, ADI 4.786 and ADI 4.787 then the question arises: what exactly is the understanding of the plenary of the Supreme Court on the possibility of the charges for the police power being charged at higher levels – and sometimes even much higher – at the estimated cost of the public service to be remunerated?

With the jurisprudential scenario we have today, the answer to this question is unclear. There is great uncertainty for the applicators of the right on what is, after all, the understanding of the plenary of the Supreme Court in relation to the subject.

If you've ever considered it, for example, in ADI 6,211/AP, the unconstitutional charge for supplanting by more than ten times the total amount of the annual budget of the state entity that would carry out the police power funded by the fee, now, in ADI 4,785, ADI 4,786 and ADI 4,787, understood that there would be no harm in which the charges were charged in amounts significantly higher than the cost of the service to be cost.

Several possible questions emerge:

• Did the Justices of the Supreme Court understand that only mining charges could be collected at higher levels than the cost of the inspection activity due to the incidents that occurred?
• Did Justices consider the equivalence between the amount collected from the charges for the police power and the cost of the public service to be remunerated as an insurmountable constitutional beacon?
• How and what can be done so that other states and the various municipalities do not go through similar legislation so as to create charges with the same feature, to the point of making the constitutional tax system even more conflictive?
• Is the difference between the judgment of ADI 4,785, ADI 4,786 and ADI 4,787 and previous judgments on police charges, is there a probative question of the lack of equivalence between the cost of state service and the amount to be collected?

Questions like these urgently need answers from the plenary of the Supreme Court. It is expected, therefore, that Justices will re-consider the issue, whether in the context of a motion to clarify decision to be opposed in these three direct actions of unconstitutionality or in a forthcoming seat on the subject, because, worse than the sudden change of jurisprudential orientation of the maximum court of a country, is to leave the jurisdictions to the taste of doubt.

After all, all that is sought with direct actions of unconstitutionality is legal certainty to know the ratio decidendi plenary of the Supreme Court on the subject in judgment.

Category: Capital markets

To better understand the main international regulations regarding ESG (Environment, Social and Governance) issues, the Brazilian Securities and Exchange Commission (CVM) published last May 26 the study The ESG agenda and the capital market - An analysis of ongoing initiatives, challenges, and opportunities for further reflection by the CVM.

Prepared by Assessoria de Análise Econômica e Gestão de Riscos (ASA), in collaboration with the Brazilian Institute of Corporate Governance (IBGC), the publication also aims to analyze the main mandatory or voluntary disclosure standards for ESG factors, and whether there is a more adequate and internationally accepted standard.

As part of the CVM Regulatory Agenda 2022, the study incorporates the regulatory priorities for this year, focusing on the relationship between the topic of sustainability, in its various forms, the capital market, and ESG issues.

In the study, the CVM indicates the existence of a global trend toward taking advantage of existing standards of disclosure. In addition, the agency highlights the risks and analyzes the disclosure of ESG factors in the Brazilian securities market.

In November of 2021, the CVM conducted a survey to understand the level of knowledge and interest of the investing public on ESG issues and their influence on investment choices (64% of the participants confirmed they already use ESG criteria in their decision-making process).

The agency also promulgated CVM Resolution 59/21, which expanded the set of ESG information that must be disclosed in the reference forms of publicly traded companies, demonstrating alignment with international initiatives.

The CVM has also been concerned with analyzing the interactions of some Brazilian public companies with securities market regulators in Australia, Canada, the United States, and the United Kingdom, who have contributed data on their regulations, guides, policies, overviews, and transparency standards used.

In this regard, we note a leading role for jurisdictions in the European Union and the United Kingdom, where regulations regarding ESG are already more robust, focusing not only on disciplining and standardizing the information disclosed and access to ESG information by regulators, but also on encouraging sustainable investment.

The regulatory benchmarking presented in the study leads to some conclusions, such as the noticeable increase in market interest in social responsibility policies, the growing demand for more consistent, comparable, and useful information for investment decisions, and the risks of greenwashing (the creation of a false appearance of sustainability through speeches, advertisements, and publicity campaigns that highlight supposedly ecologically/environmentally responsible and green practices) and potential penalties and sanctions applicable to irregularities related to the disclosure of ESG practices (which can already be observed, albeit at an incipient level, in some jurisdictions).

The CVM initiative highlights the importance of integrating ESG factors with the capital market, taking into account that non-financial risks are increasingly being considered by investors in their decision-making processes, due to the global perception of their economic and financial impacts.

The study supports the view that ESG issues have become sufficiently relevant to merit special attention from regulators in various jurisdictions, who are already promoting regulatory changes aimed at:

• standardizing and disseminating access to information on ESG issues, in order to promote standardized and comparable disclosures to inform the public's investment decisions;
• punishing and curbing disclosure irregularities on ESG topics (as in the case of greenwashing); and
• fostering corporate sector adherence to ESG practices and inducing investment in sustainable sectors.

Category: Environmental

After more than a decade of waiting, the new regulation of the Brazilian carbon market was enacted last May by Federal Decree No.11,075/22, which establishes the procedures for the drafting of the Sectoral Plans for Mitigation of Climate Change, institutes the National System for the Reduction of Greenhouse Gas Emissions (Sinare) and amends Decree 11,003/22 (which institutes the Federal Strategy for the Incentive of Sustainable Use of Biogas and Biomethane).

The decree is part of the discussions on the consolidation of a low-carbon economy initiated by Federal Law No.12.187/09, which instituted the National Policy on Climate Change (PNMC).

According to the PNMC, it would be up to the Executive Branch to establish the Sectoral Plans for Mitigation of Climate Change, in order to meet the gradual goals for the reduction of greenhouse gas emissions, which was disclosed during the Global Carbon Market – Decarbonization & Green Investments Congress, held in mid-May by Banco do Brasil and Petrobras, with support from the Ministry of the Environment and the Central Bank. The event was attended by representatives of the most diverse sectors of the economy and authorities involved in the matter.

In general terms, the decree does not present details on the regulation of the carbon markets and still does not offer the necessary legal security. The document addresses the matter in a very superficial way, through generic concepts and devices or very similar to those already in existence, especially with regard to Bill No. 2,148/15, which is advanced proceedings in the House of Representatives.

Main aspects of the decree

The new decree defines what would be the Sectoral Plans for Mitigation of Climate Change , which should be understood as the sectoral instruments of governmental planning for the achievement of climate goals. This definition highlights the relevance of sectoral instruments for the establishment of climate goals.

In the approved text, it is noted that the decree does not bring any forecast on  the definition of climate goals or any direction in relation to their establishment, but only the procedures for the drafting of the sectoral plans.

Proposals to reduce greenhouse gas emissions may be submitted by sectoral agents (members of the sectors of generation and distribution of electric power, urban public transport and interstate cargo and passengers transport modal systems, manufacturing and durable consumer goods, fine and basic chemical industries, pulp and paper industry, mining industry, construction industry, health services and agriculture).

The competence for proposing the Sectoral Plans for Mitigation of Climate Change, however, will fall to the Ministry of the Environment, the Ministry of Economy and related sectoral ministries, if any. The plans will be approved by the Inter-ministerial Committee on Climate Change and Green Growth, established according to Decree No. 10,845/21.

This is a measure of implementation of a "baseline-and-trade" systematic for the carbon market, in which performance goals will be set for each economic sector.

The absence of climate goals may indicate some flexibility regarding the carbon reduction goals since sectoral instruments will enable the discussion and establishment of such goals with the participation of sectoral agents.

The decree also enabled differentiated treatment for sectoral agents, according to the category of the company and/or rural properties and their characteristics (such as billing, emission levels, characteristics of the economic sector and region of location), a measure that reflects the different realities of a continental country such as Brazil.

Sector agents will have a period of 180 days – extendable for an equal period – to submit their propositions for the establishment of greenhouse gas emissions reduction curves.

The long-term goal of climate neutrality agreed in the United Nations Framework Convention on Climate Change, through Nationally Determined Contributions (NDC) – a commitment assumed by Brazilin order to collaborate with the objective of limiting the increase of global temperature must be observed. To this end, a goal was set to be achieved by the public sector, in various spheres, and by the private sector.

There is no provision in the decree regarding the establishment of a sectoral mitigation plan if no sectoral instrument is signed. The hypothesis was left open and it is not known what may happen if such instruments are not signed.

Despite the lack of predictability, some sectors have already signed a protocol of intentions to collaborate in the drafting of Sectoral Plans for Mitigation of Climate Change.

In addition to providing the procedures for the drafting of such plans, the decree instituted Sinare, whose purpose is to serve as a single data center for the registration of emissions, removals, reductions and compensation of greenhouse gases and acts of trade, transfers, transactions and retirement of certified emission reduction credits.

The institution of a single central registry is extremely relevant to the extent that it will concentrate all transactions in the Brazilian carbon market, which can help preventing greenwashing practices.

The decree provides that the emission reductions and removals registered in Sinare that are added to the goals established for sector agents will be recognized as certified emission reduction credits, if they meet the system's certification standard.

Carbon credit comprises the financial, environmental, transferable and representative asset of reduction or removal of one ton of carbon dioxide equivalent, which has been recognized and issued as credit in the voluntary or regulated market.

Carbon footprints of products, processes and activities, carbon from native vegetation, soil carbon, blue carbon (captured by coastal ecosystems) and carbon stock units may also be registered in Sinare, without the need to generate certified emission reduction credits.

With the enactment of the decree, a step– albeit small – has been takens towards the implementation of an effective carbon market in Brazil. Despite the fact that the decree is broad and does not define specific goals for the reduction of greenhouse gas emissions or the methodology for Sinare’s operation, there was progress, considering the establishment of relevant aspects for the beginning of the maturing of a regulated carbon market.

The long-awaited legal security on the matter, however, will only come with the enactment of a specific law on the matter. This is what is sought with Bill No. 2.148/15 and others that arose over time and were attached to it. The regulation of the aspects that remain open in the decree – such as the operationalization of the implemented system – will also be essential.

It is necessary to closely monitor the next steps of the regulation of decarbonization in Brazil – which is beginning to move forward – and hope that sustainable development can be achieved, with the necessary balance for the protection of future generations.

Category: Environmental

Federal Decree 11,080/22 entered into force on May 24, 2022, amending provisions set forth in Federal Decree 6,514/08, one of the most relevant environmental regulatory instruments currently in force. Among other aspects, the decree establishes administrative sanctions for activities deemed harmful on the environment and the federal administrative process to investigate such violations.

Some changes aimed solely at the standardization of Federal Decree 6,514/08, thus they did not substantially alter its content. This is the case of Article 10, Par. 6, and Article 20, Par. 1, which did not modify obligations set forth therein by Federal Decree 6,686/08, related to imposition of fines and the period sanctions are considered as valid, respectively.

Other amendments, however, significantly altered the Decree’s provisions, especially related to administrative processes for the investigation of environmental violations; the environmental conciliation hearing; and the possibility of converting the fine into services of preservation, improvement and recovery of environmental quality, in addition to some environmental sanctions.

The following table presents amendments introduced by Federal Decree 11,080/22 and its comparison to the original provisions outlined in Federal Decree 6,514/08.

It is possible to observe that Federal Decree 11,080/22 implemented several new provisions that directly impact the progress of administrative processes established to investigate environmental violations in the federal sphere. Therefore, it is expected that federal environmental authorities are going to adapt to these new provisions in the coming months.

Category: Tax

Hiring bonuses, also called sign-on bonuses, or in the sports arena, key money, is an amount that can be paid when hiring new professionals.

The purpose of this payment is to attract highly qualified and already positioned professionals, compensating them for the discomforts and uncertainties that naturally arise when changing companies. It is also a way to compensate them for benefits that they give up when they accept the new employment contract (for example, benefits due in the event of unjustified dismissal, job stability).

The nature of this bonus for social security contribution purposes is still controverted. Historically, the Administrative Board of Tax Appeals (Carf) has found that such amounts are directly related to the provision of services, regardless of whether they are paid only at the time of hiring, and therefore should be subject to social security contributions.

In such precedents,^[1] the Carf has expressed the understanding that hiring bonuses represent an advance payment for future provision of services. To reinforce its position, the agency highlighted the existence of provisions that set forth a minimum time in employment, under penalty of return of the amount received, in whole or in part.

On the taxpayers' side, we believe there are arguments to contend that the amounts in question cannot be included in the taxable salary, the calculation basis for such payments, because, in addition to not being paid on a regular basis, they have the nature of compensation.

Article 195, I, "a" of the Federal Constitution,^[2] when dealing with social contributions (and social security contributions) levied on payments made to employees, established as the taxable event (and calculation basis) the payment of "payroll and other employment income paid or credited, for any reason, due to services rendered under an employment relationship.”

In summary, based on this accrual rule, the Federal Government is authorized to institute contributions on payroll or labor income paid to employees. As provided for in article 110 of the CTN,^[3] it is necessary to identify the scope of the concepts attributed to the terms "payroll" and “employment income", in order to identify the field of action of the Federal Government in requiring social (and social security) contributions.

When searching for the semantic limits of these terms, it is possible to identify that the word "salary" is directly linked to the payment for services rendered through an employment relationship. It seems clear that the word was used to refer to the remuneration of the category of workers made up of employees.

Therefore, in our view, payments that may be subject to social security contributions (according to the constitutional rule of tax accrual) is the one referring to employees' salaries, whose nature is that of consideration for services rendered under an employment arrangement. The concept does not include the sums given to employees that are used for provision of services.

Therefore, we believe social security contributions can only be levied on the remuneration paid habitually and for rendering of services. Neither requirement, it seems to us, would be met in the case of payment of a hiring bonus.

There is no habitualness, since the amount, although it can be paid in installments, is paid only at the time of hiring. Nor do the amounts arise from the provision of services, since they are agreed upon before the employment contract even begins.

Not only does the hiring bonus not meet the requirements to be considered as taxable salary, but it also has a clear nature of compensation, since it aims at compensating the benefits that the professional gave up when changing jobs.

Thus, in our understanding, it is possible to conclude that the amounts paid as hiring bonuses should not be included in the calculation basis of social security contributions simply because such payments, besides being occasional, have a remunerative/compensatory nature, and are not within the scope of social security contributions.

Recently, there have been precedents from Carf for the non-levying of social security contributions on hiring bonuses,^[4] in line with the arguments set out above and in favor of taxpayers.

Some of these precedents^[5] are formed due to the application of article 19-E of Law 10,522/02, included by Law 13,988/20, and according to which, in the event of a tie vote between the board members representing the taxpayer and the board members representing the Tax Authorities, the result must be favorable to the taxpayer.

This tie-breaking rule in Carf is being challenged, however, in the Federal Supreme Court (STF) in three direct actions of unconstitutionality regarding article 19-E of Law 10,522 (ADIs 6,415, 6,399, and 6,403).

The matter, therefore, is still controverted. However, even if it is not possible to rule out the risk of questioning and assessments by the Brazilian Internal Revenue Service, one cannot fail to consider that taxpayers have good arguments to contend for the non-levying of social security contributions, reinforced by the most recent precedents of the Carf.

^[1] Appellate Decisions 9202-005.156, 9202-008.525, 9202-008.600, 9202-010.167, 9202-008.179

^[2] Article 195. Social security shall be financed by the whole society, directly and indirectly, according to the law, through funds coming from the budgets of the Federal Government, the States, the Federal District, and the Municipalities, and the following social contributions:

I - employers, companies, and entities equated to them in the form of the law, levied on:

a) payroll and other income from work paid or credited, in any way, to the individual who works for them, even without an employment relationship;

^[3] Article 110. The tax law cannot alter the definition, the content, and the reach of institutes, concepts, and forms of private law, used expressly or implicitly by the Federal Constitution, by the Constitutions of the States, or by the Organic Laws of the Federal District or of the Municipalities, to define or limit tax accrual.

^[4] Appellate Decisions 9202007.637 and 9202-008.044

^[5] Appellate Decisions 9202-009.762 and 9202-009.762

Category: Litigation

The Brazilian Securities and Exchange Commission (CVM) released on last June 28 its Risk-Based Supervision Report for the fiscal year of 2021. In the document, CVM points out the supervision actions carried out to treat risks and events considered priority by the Risk Management Committee, according to the Biennial Risk-Based Supervision Plan 2021-2022. In addition, the report discloses the expectations of the technical areas for 2022 on the risk levels of each event.

The four risks prioritized in the Biennial Plan 2021-2022 are:

• relevant information not disclosed to the market;
• transactions with related parties;
• marginal market; and
• tests of impairment and asset valuation.

With respect to the first two matters listed above, the following items of the report stand out:

• Relevant information not disclosed to the market: the supervision actions were developed following the provisions of the Biennial Plan 2021-2022, which provides for the clarification request to the management institution in cases in which the technical area responsible for identifying the occurrence of atypical fluctuation in prices, volume or quantity of securities. Considering that this monitoring was constantly carried out by B3 and notices were sent in 100% of the suspected cases, the risk was reassessed and will no longer be considered as a priority in the 2022 financial year.

• Transactions with related parties: the Biennial Plan 2021-2022 focused on the analysis of the adequacy of disclosure to the market and the availability to shareholders of the information required by Brazilian Law and other applicable rules. In cases in which CVM identified the need for additional due diligence, specific investigations were carried out on the issuers. The goal established in the Biennial Plan 2021-2022 was the opening of proceedings to analyze eight companies per year, selected according to criteria of nature and relevance of transactions.

In 2021, the Superintendence of Business Relations (SEP) met the target, having initiated nine lawsuits, out of which eight are still ongoing. B3 also conducted consistency tests on transaction information with related parties disclosed in the Reference Form and other communications as provided for in CVM Instruction No. 480/09 (revoked by Resolution No. 80/2022). Some divergences were identified and B3 interacted with the companies to obtain clarification. The risk should remain in the same category in 2022.

In relation to the Biennial Plan 2021-2022, the report concluded that all risks and respective events remained stable, with no level increase in comparison with the forecast. In addition, according to the report, CVM arranged 100% of the planned actions for the year, demonstrating its commitment to the integrity and development of the capital markets in Brazil.

The matter highlighted above, more related to corporate practice, are recurrent in the analysis of CVM over the years. In relation the disclosure of relevant information to the market, it is known that insider trading has the function of protecting the capital markets and the reliability of the information, considering the obvious asymmetry between the insider (person who acts and knows the company) and the regular investor. In addition, CVM has greatly evolved in the practices and techniques of investigation of this type of illicit.

In relation to transactions with related parties, in addition to the evident interest of the market and investors in being aware of this type of transaction given its potential to divert social interest and create situations of conflict of interest, it is important to highlight the recent change promoted in the Corporations Law by Law 14.195/21, known as the Business Environment Act.

Under the new rule, the resolution on transactions with related parties whose value exceeds 50% of the total assets of the company indicated in the last approved balance sheet shall be submitted to prior approval by the general shareholders’ meeting .

According to Marcelo Barbosa, the president of CVM during the evaluated period, the work carried out by CVM is an important part of the regulator's management system: "Based on a structured process of identification, analysis and risk assessment, CVM defines the priority actions of supervising the conduct of market participants to achieve the desired results in an increasingly dynamic and complex regulatory environment".^[1]

^[1] For more information on the topic, please visit: CVM publishes Risk-Based Supervision Report 2021

Category: Litigation

The service of a legal entity at an old address is not valid when the change of address has already been communicated to the Board of Trade, even if the change has not been reported on the company's own website. The decision was recently issued by the Superior Court of Justice (STJ) in the Special Appeal (Recurso Especial) No. 1,976,741/RJ.

In the case, the defendant argued the invalidity of its summons, based on the argument that the service letter had been delivered to its old address, which, although outdated, was still mentioned in the company’s website as the location of its headquarters.

At the time of the service of process, the change of address had already been informed to the Board of Trade by means of the filing the corresponding corporate act. STJ’s decision also mentions that the letter of summons would have been received by a person not related to the defendant and not by a representative of the defendant.

Based on these two reasons, the defendant claimed the nullity of the service of process during the enforcement of judgment phase, since it had been considered in default.

In response, the plaintiff claimed that:

• the service of process had been effected at the address publicly declared by the legal entity;
• the legal entity could not benefit from its behavior of not altering the address in its website, which would be worsened by the defendant having appeared on the lawsuit during the enforcement of judgement phase; and
• there was no evidence that the person who received the service of process would not be an employee of the defendant.

The State Court of Rio de Janeiro understood that the service of process delivered at the at the address informed in the defendant’s website was valid, although old, on the grounds that there would be an obligation of the legal entity to ensure the updating of the information of the website, by providing the correct address to customers and business partners.

By failing to update the address on the website, the legal entity was supposed to bear the burden of this negligence, and not intend to annul an entire process that was already in the phase of enforcing the lower court decision .

The understanding of the Court of Rio de Janeiro, however, was modified by the Superior Court. The judgment delivered by the court highlighted the importance and formalities required by law for the completion of the service of process and the importance of the right to be heard of both parties to exercise the right to a broad and effective defense.

In the case at hand, the service of process was supposed to follow the provisions of the Code of Civil Procedure of 1973 (CPC/73), which determined, among other rules, that the service would be valid if the letter was delivered to the person with general management and representation powers or to an employee responsible for receiving correspondence and mails.

Considering that it is normally difficult for the legal entity to be served by receiving a letter directly by one of its employees or a person with representation powers, case law was accepting the so-called appearance theory.^[1]

In summary, according to this understanding, the service of process made in a commercial establishment or at the headquarters of the legal entity would be valid when received by a person who appeared to have powers to do so and/or by a person whose receipt would reasonably indicate that the legal entity would become effectively aware of the claim.

The incidence of the appearance theory, however, requires two essential elements: the delivery of the service of process at the address of the legal entity and the receipt by an employee of the legal entity.

In the case, the Superior Court disregarded the application of the appearance theory, as the service of process was delivered to an old address of the legal entity and no link between the legal entity and the person who received the letter was demonstrated (it could have been a doorman of the commercial building). In this respect, none of the requirements of the appearance theory would have been met: the letter was not delivered to the address of the registered entity and was the letter was not received by an official, as the connection with the legal entity was not demonstrated.

Moreover, the Judgment of the Supreme Court pointed out that, once the change in the address of the legal entity was registered in the Board of Trade, the new address would already be in the public domain and it could have been verified by the plaintiff. This procedure is exactly what should have been done by the plaintiff: according to Article 319, item II, of the Brazilian Civil Procedure Code, the burden of informing the correct address of the defendant to enable its service of process and other procedural communications is the plaintiff.

The decision of the Supreme Court also objected the argument of the Court of Justice of the State of Rio de Janeiro that the legal entity would have an obligation to provide its correct address in its website to "customers and business partners". To this end, it was understood by the Superior Court that the case is not a contractual matter, which would require out-of-court notifications, but a summons in a lawsuit. The Decision also referred to Law 11.419/06, amended by the recent Law 14.195/21, known as the Business Environment Law, which imposed the service of process by electronic means.

Although the new legislation allows the service of process by email – which is mandatory for all legal entities, except for micro companies and small businesses – the law is clear in determining that the legal entity itself shall indicate an e-mail address in a system of "judicial database, according to the regulation of the National Council of Justice (CNJ)".

It is not, therefore, any e-mail address, but that informed by the legal entity for this purpose, with the aim of safeguarding the formalities of the act of service.

Because of the above arguments, STJ concluded that an address indicated in the website cannot be presumed as valid:  there is no legislation requiring the legal entity to keep the address updated on its website. The court also pointed out that the address of the legal entity was updated and correct in the Board of Trade.

This decision is relevant because it reinforces the understanding that it is the plaintiff’s responsibility to indicate the defendant's address of service of process as accurately as possible. In the case of service of process of legal entities, the plaintiff shall verify the available databases, such as the Board of Trade and the Federal Revenue Service, to ensure the validity of the service of the legal entity, without which the process would be null and void in full.

^[1] For example, AgInt on AREsp n° 476.491/RJ, rel. Min. Marco Buzz, Fourth Class, judged on November 12, 2019.

Category: Restructuring and insolvency

Since the entry into force of Law 11,101/05 (LRF), which regulates in-court and out-of-court reorganizations and bankruptcies, the scope of its article 49, paragraph 3, has generated intense debate.

The provision excluded from the effects of judicial reorganization creditors with a credit secured by security interest in assets, establishing that "the rights over the property and the contractual conditions shall control."

The rule is part of an effort by the legislator to encourage reduction of the cost of credit in Brazil, but it raises questions. Although some issues have already been overcome by case law, such as the non-subjection of credits guaranteed by security interest in receivables,^[1] on which the Superior Court of Appeals (STJ) has established a consensus, other issues continue to be the subject of controversy.

Does the bankruptcy-exempt receivable persist when the assets subject to security interest belong to a third party?

This new issue in the courts involves classification and value of claims with a security interest. The question is whether these claims should be considered, first of all, bankruptcy-exempt claims in relation to the debtors in possession that are not the holders of the assets and, if so, whether they should be entirely bankruptcy-exempt or listed as bankruptcy-exempt up to the limit of the value of the asset pledged as security interest on the date of the judicial reorganization, as is the case with bankruptcy claims with a security interest.

The first point we have already had the opportunity to discuss in an article in this portal. The second issue was recently addressed by the São Paulo State Court of Appeals (TJSP)^[2] during review of appeals filed in the context of the judicial reorganization of the Atvos Group, one of the largest sugar and ethanol groups in Brazil.

Two appellate decisions by the 1st Reserved Chamber of Business Law of the TJSP have established that the assets must be appraised, for the purposes of defining the limit of the bankruptcy-exempt extent of the claim guaranteed by security interest, at the time of execution of the security interest.

The debtors argued that the classification of the claim should be based on the value of the security interest at the date of the filing for judicial reorganization, to avoid distortions in the list of creditors.

For the creditors, on the other hand, the claim should be fully classified as non-business claim, since the value of the asset given as guarantee should only be ascertained at the time of its execution. Should there be any remaining balance, it would be qualified later in a delayed registration.

In the judgment, with Appellate Judge Alexandre Lazzarini serving as reporting judge, the creditors' theory was accepted by the panel. It was defined that "only after the execution of the asset that was subject to security interest will any remaining balance be ascertained for later registration in the reorganization as an unsecured claim."

For the adjudicatory chamber, any devaluation of the security interest does not change the nature of the claim. The panel pointed out that the LRF does not make any reservations in this regard. Therefore, even if there is a reduction in the value of the secured asset at a certain point in time, the difference does not automatically become a non-exempt claim.

The court also pointed out that, if the theory of the debtors in possession were accepted, there would be a weakening of the system of security interests, which would create legal uncertainty and increase the risk in the granting of loans, which would reflect on the interest charged by financial institutions and cause losses to all stakeholders.

The debtors' theory would encounter yet another obstacle to its approval. According to the court, it would "completely change the scenario outlined by the parties when they entered into the financing agreement," going against the principle of pacta sunt servanda, which establishes that contracts are binding, and that of good faith, especially since the security interest would have been essential for the granting of the financing and judicial reorganization does not exempt companies in crisis from fulfilling their contractual obligations.

The decision of the TJSP in the in-court reorganization of the Atvos Group seems appropriate to us, since the asset that is subject to security interest, regardless of its value at the time of the in-court reorganization, secures the debt, and the amount obtained in its execution should be fully used in the amortization of the claim.

To find otherwise would mean to authorize the creation of an undue limitation on the security interest originally contracted, which would benefit, without any legal grounds, the debtor/guarantor of the security interest, in addition to opposing the provisions of article 49, paragraph 3, of the LRF.

The TJSP's position is in line with the STJ's understanding that the remaining balance found after the consolidation of the ownership of the asset given as security and its sale must be qualified in the judicial reorganization.^[3]

For the national credit market, these decisions are important, because they reinforce the institutes of fiduciary assignment and security interest, which are widely used as guarantees for financing, especially because they reduce the risks for lenders in the event of debtor default.

^[1] STJ, Special Appeal 1629470/MS, Second Section, opinion drafted by Justice Maria Isabel Gallotti, decided on November 30, 2021; STJ, Internal Interlocutory Appeal in Conflict of Jurisdiction 145.379/SP, Second Section, opinion drafted by Justice Moura Ribeiro, decided on December 13, 2017.

^[2] Interlocutory Appeals 2174315-41.2021.8.26.0000 and 2281729-35.2020.8.26.0000 

^[3] STJ, Conflict of Jurisdiction 128.194/GO, Second Section, opinion drafted by Justice Raúl ARAÚJO, decided on June 28, 2017.

Category: Tax

The Federal Supreme Court (STF) began, on May 6 of this year, in a virtual plenary session, the long-awaited judgment of two extraordinary appeals with general repercussion concerning the limits of the temporal effects of res judicata in tax matters.

In Extraordinary Appeal (RE) 949.297 (Topic 881), of the authorship of Justice Edson Fachin, one discusses whether the decision isued by the STF in concentrated and abstract control of constitutionality would be^[1] apt to cease the temporal effectiveness of res judicata previously obtained by the taxpayer or the Public Treasury to the contrary.

The specific case refers to the situation of a taxpayer that obtained a final and unappealable court decision in its favor in a separate lawsuit, to stop paying the Social Contribution on Net Profit (CSLL), under the argument that the law that created^[2] the tax was formally unconstitutional. Later, however, in the judgment of Direct Unconstitutionality Action (ADI) 15/DF, the STF declared the constitutionality of the law, validating the collection by the National Treasury.

In summary, the Treasury argues that the res judicata obtained by taxpayers in this situation does not prevail for future taxable events, i.e., those occurring after the STF's decision to the contrary in ADI 15/DF.

The Treasury claims that, since this is a relationship of successive treatment (which is renewed at each taxable event of the tax liability), the prevalence of such individual decisions would go against the normative force of the Federal Constitution, as declared by the STF, and the principles of equality and free competition. This is because, due to the binding effect and general effectiveness of the STF's decisions, the other taxpayers who have no res judicata of their own (the majority) would continue to be subject to the tax requirement.

In RE 955.227 (Topic 885), for which the reporting judge was Justice Roberto Barroso, the STF's decisions handed down in extraordinary appeals (diffuse control of constitutionality) are being examined to determine whether they can cause the res judicata on a tax relationship to cease to have effect in the future when the decision is based on the constitutionality or unconstitutionality of the tax.

This concrete case also deals with the CSLL requirement, but exclusively from the perspective of diffuse control of constitutionality. The National Treasury defends suspension of the effects of res judicata for taxable events occurring after "repeated decisions" of the STF that declared the unconstitutionality of the levy and were issued in extraordinary appeals without recognized general repercussion (before the very existence of the system) and before the judgment of ADI 15/DF.

In both appeals, the Justices must also decide whether the temporal efficacy of the res judicata is automatically broken as of the advent of a decision issued by the STF in the scope of control of constitutionality that is contrary to the meaning of the individual judgment,^[3] regardless of an action for vacatur.

Although there are STF decisions that uphold the res judicata formed by decisions that go against the prevailing supervening case law of the Court itself, the votes cast in Extraordinary Appeals 949.297 and 955.227 adopt the position that the interruption of the temporal effects of the res judicata is constitutional in successive tax legal relations when the STF decides otherwise in extraordinary appeals with general repercussion or through the concentrated control of constitutionality.

Although the judgment of the appeals was interrupted by a request for review of the record by Justice Alexandre de Moraes on May 12,^[4] the Supreme Court is in the process of establishing a theory of significant legal and economic repercussion, whose criteria may reactivate the levying of tax requirements set aside by final and unappealable decisions in countless other tax disputes, in a true "domino effect".

In RE 949.297, Justice Fachin (reporting justice) voted for automatic breaking of the effects of res judicata by the effectiveness of STF decisions in concentrated and abstract control of constitutionality (ADI, ADO, ADC, and ADPF). The filing of an autonomous action for vacatur would therefore be unnecessary.

For the Justice, abstract constitutional decisions of the STF can change the legal status of a continuous tax relationship, but only in relation to future taxable events, occurring as of publication of the minutes of the judgment. In other words, even if the legal and tax relationship between the taxpayer and the State has been stabilized by prior res judicata, the new legal rule established by a STF precedent would be immediately and automatically effective, overriding any final and unappealable decision to the contrary.

The reporting judge made an express proviso as to the:

1. impossibility of retroactivity of case law, prohibiting extension of the legal effects emanating from the decision on constitutionality to facts of the past; and
2. need to observe the rules of non-retroactivity and anteriority (annual, ninety day enactment period, and ninety day notice period, depending on the tax). The date of publication of the act of judgment of the STF decision must be equivalent to the first day of effectiveness of the new rule. The opinion also indicates that the effects of this understanding should be subject to softening.

The theory proposed by the opinion was as follows:

"The temporal efficacy of substantive res judicata derived from a tax relation of continuous treatment has as a condition subsequent that it is implemented with the publication of the minutes of a subsequent judgment held in an abstract and concentrated control of constitutionality by the Federal Supreme Court, when the commands of the decision are opposed, observing the constitutional rules of non-retroactivity, annual anteriority, and the ninety day effectiveness or ninety day notice requirement, according to the type of tax in question.

Justice Barroso concurred with Justice Fachin's conclusions for automatic termination of the effects of res judicata upon a decision by the STF in a concentrated control of constitutionality. In addition, however, his opinion expressly attributed this same limiting efficacy of res judicata to decisions rendered by the STF in extraordinary appeals with recognized general repercussion (diffuse control of constitutionality), based on the theory of constitutional change of article 52, X, of the Federal Constitution

According to the traditional understanding (based on the literalness of article 52, X), for a decision by the STF rendered in diffuse control of constitutionality (in an incidental manner in the judgment of an extraordinary appeal) to have binding effect and general effects, it is necessary that the Federal Senate issue a resolution to suspend the execution, in whole or in part, of the law declared unconstitutional.

The decisions handed down in concentrated control (ADI, ADO, ADC, and ADPF), in turn, due to article 102, paragraph 2, of the Constitution, are already endowed with such attributes, regardless of the intervention of the Senate.

For Justice Barroso, due to the evolution of the general repercussion system in our legal system, the Senate’s resolution, provided for in article 52, X, of the Constitution, would serve only to publicize the STF's decision, but not to restrict its effects. In other words, both the STF's decisions handed down in concentrated control and those handed down in diffuse control should produce the same legal effects.

Supported by this reasoning, Justice Barroso proposes the establishment of the following theory:

“1. The decisions of the STF in incidental control of constitutionality, prior to the institution of the general repercussion system, do not automatically impact on the res judicata formed, even in successive tax legal relations. 2. On the other hand, the decisions handed down in direct actions or in decisions with general repercussion automatically interrupt the temporal effects of final and unappealable decisions in the aforementioned relations, respecting the principle of non-retroactivity, annual anteriority, and ninety day effectiveness, or ninety day notice, depending on the nature of the tax.”

Justice Gilmar Mendes, despite also finding for automatic break of final and unappealable decisions with regard to future events, due to the STF's decisions handed down both in concentrated and diffuse control with general repercussion, diverged from the reporting judge of this trend, believing that it is unnecessary to observe tax anteriority to reestablish a tax.

The Justice also discusses the case of an action for vacatur provided for in the civil procedural legislation to establish the understanding that it would be possible to propose such a measure, based on the STF’s decision, to also vacate the res judicata in relation to past taxable events.

Before the request for review of the record, Justice Rosa Weber and Dias Toffoli^[5] followed Justice Edson Fachin's opinion. With that, the partial result in RE 949.297 is:

• four votes for automatic termination of the effects of res judicata, regardless of an action for vacatur, observing the rules of anteriority/retroactivity, as of the STF decision rendered in ADI, ADC, ADO, and ADPF, for future taxable events (subsequent to the STF’s decision);
• one vote for:
  • automatic termination of the effects of the res judicata in relation to future taxable events, regardless of an action for vacatur, without observing the rules of anteriority/retroactivity; and
  • for the possibility of an action for vacatur in relation to past taxable events, in order to reverse the res judicata based on the STF's decision in a concentrated control of constitutionality or general repercussion.

In RE 955.227 in turn, Justice Barroso, opening the opinion as reporting judge, replicated the understanding expressed in RE 949.297, focusing on the constitutional change of article 52, X, of the Constitution and the attribution of the same legal effects typical of decisions in ADCs, ADI, ADO, and ADPF to the decisions of extraordinary appeals with general repercussion.

In the end, the Justice rejected the Federal Government's claim in the case, proposing, however, the same theory of general repercussion suggested in Topic 881, already pointing out the need for softening of the effects of the decision, which was fully accompanied by Justices Dias Toffoli and Rosa Weber.

In both judgments, Justice Barroso stated that the criterion to be defined by the STF also applies to successive tax legal relations in which there is a final and unappealable decision favorable to the Public Treasury. The proviso is relevant, for example, for taxpayers who have a final and unappealable decision against them on issues decided against the Treasury, such as the exclusion of the ICMS from the PIS and Cofins tax bases.

In RE 955.227, before Justice Alexandre de Moraes' request for examination of the case record, only Justice Gilmar Mendes' vote was cast, also to the same effect as the vote cast in Topic 881, that is, admitting the filing of an action for vacatur for the purpose of undoing a res judicata contrary to the STF's decision in a concentrated control of constitutionality or general repercussion for taxable events occurring prior to the STF's decision.

With this, there are currently three votes in RE 955.227 for automatic suspension of the temporal effects of the res judicata in relation to future taxable events, regardless of an action for vacatur, observing the rules of anteriority/retroactivity, also in the event of a res judicata contrary to the STF’s decision rendered under the general repercussion system.

As of the closing date of this article, the judgment was not expected to resume. The votes of Justices Alexandre de Moraes, Cármen Lucia, Luiz Fux, Ricardo Lewandowski, Nunes Marques, and André Mendonça are expected.

In addition to the dispute regarding the CSLL, which already has the potential to generate billion-dollar financial impact, the outcome of topics 881 and 885 will affect other highly relevant tax disputes. This is the case of the levy of social security contributions on the constitutional one third vacation bonus, for which many taxpayers obtained a final and unappealable favorable decision, based on the understanding of the Superior Court of Appeals, before the Federal Supreme Court declared the constitutionality of the levy in the judgment of RE 1072485, with general repercussion (Topic 985).

As soon as the judgment of RE 955.227 and RE 949.297 is resumed by the STF, our comments will be updated, with an analysis of the theories established and their impacts.

^[1] Under the terms of Law 9,868/1999, the exercise of concentrated and abstract control of constitutionality is the exclusive competence of the STF and must occur within the scope of a Direct Action of Unconstitutionality (ADI), a Direct Action of Unconstitutionality by Omission (ADO), a Declaratory Action of Constitutionality (ADC), and an Argument of Noncompliance with a Fundamental Precept (ADPF).

^[2] Law No. 7,689/88.

^[3] "Individual judgment" herein is treated as synonymous with a judgment rendered in a proceeding of the nature of subjective (and not strict) liability, which includes claims filed with joinder of plaintiffs and collective claims, filed to defend the right of a category or class.

^[4] There is no forecast for its return to the agenda. 

^[5] This with the proviso that, in the case of constitutionality of the CSLL, the res judicata obtained by the taxpayers lost their effectiveness only after 90 days had elapsed from the date of publication of the minutes of the judgment on the merits of ADI 15/DF, in observance of the principle of anteriority.

Category: Succession planning

Many are the concerns and arrangements that involve estate and succession planning, mostly related to the moments after death. However, a very important document, whose effects precede the death of its subscriber, has gained prominence in discussions about planning: the living will.

Originating in the United States, the document is nothing more than a declaration in which the person indicates the care and treatment he or she wishes or does not wish to receive, in the event of incurable/terminal illness.

Most legal scholars consider the expression "living will" to be incorrect, since it is not exactly a will, the provisions of which are fulfilled after the individual's death. The declaration is actually a set of directions for making decisions while still alive, which is why the correct reference would be "advance directive" or "vital or biological declaration".

Although the practice is gaining prominence, there is still no specific legislation on the subject in Brazil, therefore vital declarations are based on the constitutional principles of human dignity, private autonomy, and the prohibition on inhumane treatment (article 1, subsection II and III, and article 5, II, III, VI, VIII, and X, of the Federal Constitution).

In addition, the Federal Board of Medicine created, in 2012, Resolution 1,995/12, which deals with advance directives of the patient's will, indicating that it is a "(...) set of wishes, previously and expressly manifested by the patient, regarding care and treatment that he wants, or does not want, to receive at the time he is unable to express his will freely and autonomously."

Among the provisions contained in the declaration, it is possible to indicate the desire (or not) for the use of life-prolonging devices, blood transfusion, amputation, resuscitation, hemodialysis, and even the destination of the body itself (cremation/burial) and organ donation.

In addition, the resolution expressly states that the provisions contained in the vital declaration will be linked to the patient's medical chart and medical records and will take precedence over the wishes of family members, demonstrating the effectiveness of the document's preparation to ensure that the declarant's will is satisfied.

The living will, in addition to indicating the treatments to which the person wishes or does not wish to be submitted, may contain a designation of a "health care proxy", a person trusted by the declarant who will make any decisions and ensure that his will is observed.

The document, therefore, is a means of making the individual's will effective in extreme situations, in which he will probably not be able to express his wishes regarding the treatments he would or would not like to undergo. In addition, it saves close family members from making difficult decisions and carrying the weight of their consequences.

It is important to emphasize that euthanasia is forbidden by our legal system and is an unlawful act defined in the Penal Code. Thus, if the vital declaration contains a mandate to use techniques that actively and intentionally accelerate the person's death, it is possible that the document will be considered null and void.

On the other hand, provisions consistent with orthothanasia are allowed in a living will. This makes it possible for the person to determine that they do not wish to employ artificial techniques to prolong their life, but only to use palliative measures, a choice that aims to avoid perpetuating the patient's suffering, both physical and psychological.

It is also possible for the declarant to choose to transfer this decision to a trusted physician, who must certify the irreversibility of the health condition.

There are no formalities for preparation of the document, but it is recommended that it be done by means of a public deed, for greater legal security.

As an important mechanism to ensure a dignified death, living wills are a way to meet the wishes and desires of the person making the declaration, in addition to avoiding conflicts between family members and doctors, allowing an individual's passing to take place under the terms he defines, as long as they do not infringe on the legislation in force.

Sources:

GONÇALVES, Carlos R. Direito civil brasileiro v 7 – direito das sucessões [“Brazilian civil law v 7 - succession law”]. Editora Saraiva, 2021.

TARTUCE, Flávio. Direito Civil - Direito das Sucessões [“Civil Law - Succession Law”] - Vol. 6. Grupo GEN, 2021.

LÔBO, Paulo Luiz N. Direito Civil Volume 6 - Sucessões [“Civil Law Volume 6 - Successions”]. Editora Saraiva, 2022.

Category: Labor and employment

One of the most important issues related to collective labor law is the stability of those who are engaged in class representation, which covers not only employees linked to labor unions, but also those who are part of cooperatives.

Although the corporatist movement has its origins in the Industrial Revolution, it was only introduced in Brazil around the 1900s. The first law on the subject appeared in 1907, with Decree 1,637/1907, which regulated both labor unions and cooperatives.

The regulation of labor unions evolved over the years and, in 1943, was included in the Consolidated Labor Laws (CLT), whose provisions related to the topic aimed not only to regulate and thoroughly provide for the rules of labor union organization, but also to protect union employees, in order to guarantee the right to claim by workers.

As one of the measures (Article 543, paragraph 3, of the CLT), the dismissal of unionized employees is prohibited as of the moment of registration of their candidacy for a position of direction or representation of a union entity until one year after the end of their term of office.

Cooperatives, in turn, remained outside the CLT and were subject to few legislative changes in the following years. It was only in 1971, almost 30 years after the CLT came into effect, that Law 5,764/71 (Cooperative Law) was enacted, definitively bringing cooperativism into the Brazilian legal system. Article 55 of the law conferred to the officers of these companies the same guarantees assured to labor union leaders by article 543 of the CLT, among them, stability.

Although the wording of the law leaves no doubt regarding the prohibition on dismissal of officers of a cooperative, stating that the only requirement is that the cooperative be a cooperative set up by the officers themselves, the issue is quite controversial and has been widely discussed in the labor courts.

As already established by legal scholarship and case law, the purpose of the stability granted to union leaders is precisely to guarantee the effectiveness of union representation. This means enabling workers to run for and be elected freely by their peers to represent a category, in order to claim better working conditions without suffering any kind of retaliation from employers.

It so happens, however, that this premise cannot be applied indiscriminately to the officers of cooperatives of any kind, since not all of them are created with the same purpose of protecting and developing the category, like with labor unions.

According to the Anuário do Cooperativismo Brasileiro [“Yearbook of Brazilian Cooperativism”] published in 2021, Brazil had 4,868 cooperatives in 2020, of which only 685 were in the labor and employment segment, whose purpose is to promote courses for professional improvement and help workers relocate and search for vacancies.

In other words, only 14% of the existing cooperatives in 2020 had the purpose of promoting better conditions for the category. The other almost 86% were destined for the consumption of goods and services, transportation, and other activities unrelated to the protection of workers.

Thus, recognition of the stability of any and all cooperative officers indistinctly, without concern for the nature and purpose of the cooperative to which they are linked, completely distorts the objective of the rule, encouraging the fraudulent creation of entities solely and exclusively with the purpose of obtaining stability for their officers.

The issue is subject to divergence among courts. If previously the Labor Court's case law adopted, in its majority, a more conservative position on the granting of stability to cooperative leaders based solely on article 55 of Law 5,764/71, today there is a growing body of case law that recognizes the need for a more careful analysis of the institution's objectives before endorsing the stability of the officers. A recent decision issued by the 4th Panel of the Superior Labor Court was precisely to this effect.

In the case, the stability of an officer elected to a consumer cooperative was at issue. The Court of Appeals for the 17th Circuit had already rejected the request for recognition of stability of the former employee in view of the fact that the cooperative aimed to retail construction materials in general so that its members could get better prices on products. In other words, the actions of the entity's officers, including the plaintiff, were not intended to defend or represent the interests of the members of the professional category. Therefore, there was no justification for recognizing stability.

With the same understanding, the 4th Panel of the TST upheld the dismissal of the claim. According to the decision drafted by Justice Caputo Bastos, the "right to stability is not a personal guarantee of the cooperative officer or results from the mere fact that he occupies this position, but a prerogative granted to the professional category, so that the officer is able to defend the interests of the member workers.

Although some decisions have recognized stability on the argument that article 55 of the Cooperative Law does not restrict the stability to a certain type of cooperative, the law cannot be applied indistinctly, without any kind of interpretation, especially when we are facing a norm that establishes a restriction on a right legally provided for.

This is precisely the case with the rules that confer stability on certain types of employees. They restrict the employer's directive power, conferred by article 2 of the CLT, as well as the principle of economic freedom, preventing the company from exercising a basic prerogative of the employment relationship: contractual termination without cause.

This restriction is admitted in view of the fact that stability is usually granted in specific situations, in which the employee is in a position of extreme vulnerability in relation to the employer.

For this reason, it is vital that the Judiciary exercise moderation when analyzing the issue so that the stability granted to cooperative officers in an unrestricted manner does not end up violating the employer's directive power and trivializing the purpose of the rule, discrediting the legitimate holders of the right.