Category: White-Collar Crime

The Superior Court of Justice (STJ) opened a crucial criminal precedent by granting, via habeas corpus, the withdrawal of the freezing of the defendant's assets because of the unreasonable delay in the criminal proceeding (three years between the freezing of the assets and the pressing of charges). The Court's decision was handed down on March 22, at the judgment of the Ordinary Appeal in Habeas Corpus 147.043/SP.

The decision is relevant because, in recent years, it has expanded the legal hypotheses for the decree of provisional remedies for indefinite periods. There is also a disproportion of the amounts of the restrictions, no differentiation between licit and illicit assets, and even vagueness about the kind of the measure imposed, which is often called "unavailability" of assets.

The abusive constriction of assets can cause immeasurable damage to the accused, who must face the criminal process without the resources affected by the provisional remedy. To withdraw the freezing, it is necessary to prove the absence of just cause for criminal prosecution what is an apparent inversion of the burden of proof.

In the case in question, the habeas corpus originates from a criminal proceeding derived from Operation Brazilian Cost, a splitting of Operation Lava Jato underway in the Federal Court of São Paulo/SP. The criminal proceeding investigates the existence of a criminal organization involving public officials and people linked to a company responsible for the development and management of consigned credit control software, with payment of bribes to public officials and political party.

In an ordinary appeal in habeas corpus, the defense claimed, in summary:

- the existence of an excess of time of the criminal case, since it had been ready for follow-up for more than a year, and there was not even a forecast for the beginning of the criminal trial, since the Court did not even decided about the receipt of the accusation offered two years ago; and

- that the central point of the original claim and ordinary appeal was not the maintenance of the freezing of the appellant's assets per se (which has lasted for almost five years), but the excess of time for the formation of guilt that could legitimize the provisional remedy.

STJ precedents

The STJ’s precedents are firm in the sense of not accepting the request for withdrawal of property remedies with the use of habeas corpus. The Court holds that "the determination of freezing of assets (...) does not characterize current or near constraint on his freedom of locomotion, for which reason the writ is not the appropriate way to address the issue. (AgRg in HC 508.036/SC, reporting justice Jorge Mussi, Fifth Panel, judged on 05/28/2019, DJe 04/06/2019)

In addition, the Court has established a precedent that "the procedural deadlines do not have the characteristics of fatality and non-extendability, making it essential to reason the excess of time, not considering the mere arithmetic sum of the deadlines for procedural acts (precedents)" (RHC 88.588/MS, reporting minister Felix Fischer, Fifth Class, judged on 14/11/2017, DJe 22/11/2017).

In the judgment of the Ordinary Appeal in Habeas Corpus 147.043/SP, the dissenting vote of the minister, Rogerio Schietti Cruz, emphasized the need to observe precedents and respect the case law of the STJ.

The minister said that the correct way to address the issue is to request restitution to the judge and, of this rejection, as Article 593, II, of the Code of Criminal Procedure, the appeal. If the situation is teratological, a writ of mandamus may be filed and, in the STJ, an appeal in a writ of mandamus against a decision denying it at its origin.

However, the other ministers that made up the panel understood that the controversy of the ordinary appeal was whether there is excess in the formation of guilt and that, consequently, the issue would affect the maintenance or not of precautionary measures.

The rapporteur's vote

In his vote, the rapporteur emphasizes the premise that "the guarantee of reasonable duration of the process prevails both for judicial proceedings and for pre-procedural investigation, and should be based not only on the arithmetic criterion of time but also on the nuances of prosecution.

The rapporteur also pointed out the need to ensure isonomic treatment among the accused, even in habeas corpus, considering that, previously, the regional Court had already granted the withdrawal to a codefendant in a writ of mandamus for the delay in the progress of investigations.

The illegal constraint in the present case would be configured, therefore, in face of the abusive use of the property provisional remedy, which directly violated the guarantee of the reasonable duration of the process, foreseen in article 5, subsection LXXVIII, of the Federal Constitution of 1988, according to which "everyone, in the judicial and administrative sphere, is assured a reasonable duration of the process and the means that guarantee the celerity of its proceedings".

Furthermore, article 131, item I, of the Code of Criminal Procedure states that when the freeze is determined during the course of an investigation, it must be withdrawn if the charges are not pressed within 60 days. In the case in question, the restriction had already lasted for more than five years, and the charges had not even been accepted. Therefore, the norm could be used as a parameter to assess the reasonableness of the length of the process.

Thus, although habeas corpus is a constitutional remedy aimed at guaranteeing the right of locomotion, its use must be admitted in cases where the excessive delay in the formation of guilt can cause harm to the constitutionally guaranteed right of the accused.

Although there is no definition in the legal system on what is understood by the reasonability of the duration of the process, the constriction of the accused's property cannot persist indefinitely in time, when there is not even a forecast for the end of the case and, in this case, for the very receipt of the charges.

Category: Compliance, investigations and corporate governance

With the enactment of Law 12.846/13 (Anti-Corruption Law or Brazilian Clean Company Act) and its Regulatory Decree 8.420/15, the responsibility to combat corruption ceased to be a majority public attribution and began to be shared with private sector companies, which became allied in this process by developing more upstanding corporate environments.

As a way of seeking an environment of greater collaboration between the public and private spheres in the fight against corruption and encouraging the implementation of integrity programs, the so-called anti-corruption stamps have emerged.

Normally granted by entities of the Public Administration, the stamps recognize the adoption of integrity measures by legal entities, highlighting them for their good corporate practices of compliance.

By publicly recognizing these good practices, the Public Administration encourages preventive action of companies in relation to integrity, showing that the fight against corruption can no longer occur only by sanctioning means.

The use of positive and preventive corporate governance tools in companies fosters a more healthy corporate performance and brings benefits to the business and society as a whole.

In addition to being able to gain public recognition, a compliance program well implemented, aligned with best market practices and Brazilian anti-corruption legislation, it helps the legal entity to protect itself from risks arising from breach of integrity, mitigating risks inherent to the interaction with the Public Administration.

A compliance program  can also promote an ethical culture capable of being spread to the entire company, in addition to the third parties with whom it relates. In financial terms, the program can be a mechanism to reduce economic losses resulting, for example, from internal fraud or, even more serious, harmful acts committed against the Public Administration, which can lead to financial sanctions and reputational damages.

It is also worth noting the positive image value that the recognition of compliance initiatives can generate for legal entities and the brand itself, as an important asset for attracting clients and businesses, increased credibility in the relationship with the Public Administration and other stakeholders, such as partners and other third parties aligned with company values.

Considering the benefits of preventive action in the sphere of corporate integrity, initiatives have emerged to create regional anti-corruption stamps. In early 2022, the Supervision, Governance, Transparency and Control Committee of the Legislative Chamber of the Federal District (Comissão de Fiscalização, Governança, Transparência e Controle da Câmara Legislativa do Distrito Federal) approved the Projeto de Lei (“PL” - Draft Bill) 1.237/20, which creates an anti-corruption stamp for companies that adopt integrity programs. If approved, the PL may be one of the first local laws to create such a stamp.

At the state level, there is the PL 47/18, pending in state of Espírito Santo, which suggests the creation of an anti-corruption stamp to be granted to legal entities governed by private law that adopt good conduct practices in the state. Espírito Santo is known as one of the first states to regulate the Anti-Corruption Law and was recognized and well evaluated by organizations such as Transparency International for its anti-corruption initiatives.

In the municipal sphere, PL 722/17 of the city of São Paulo stands out, which presents a proposal for a stamp valid for two years and subject to renewal. The criterion for granting and renewing this stamp is the submission of a profile report and a compliance report to the competent body. These materials are similar to those introduced by the Office of the Comptroller General (CGU) in the evaluation of a company's integrity program as part of an Administrative Liability Proceeding (PAR) or Leniency Agreement, based on the legal basis of the recommendations contained in the items of Article 42 of Regulatory Decree 8.420/15.

Other capitals also have similar initiatives, such as PL 68/19 in Recife, which suggests the creation of an anti-corruption stamp designed to attest to the quality and integrity of companies installed in the municipality, and PL 2.741/20, in Porto Velho, which suggests the adoption of an anti-corruption stamp for companies that adopt integrity programs.

In addition to legislative proposals not yet in force, there are already options in the Brazilian market for companies that want to obtain public recognition of their efforts in the fight against corruption.

In 2010, the CGU, in a joint initiative with the Ethos Institute of Business and Social Responsibility, created the Pro-Ethics Company. The initiative was restructured in 2014 to adapt to the changes brought about by the Anti-Corruption Law. In addition to the expansion of the number of participants, the dissemination around the companies positively evaluated increased, with the granting of a specific stamp that can be used by them.

With this restructuring, the Pro-Ethics Company began to stand out in the market, receiving even international recognitions from the OAS (Organization of American States), The Organization for Economic Cooperation and Development (OECD) and the United Nations Office on Drugs and Crime (UNODC). The program was also awarded in the 14th edition of "Compliance & Ethics Award", award Society of Corporate Compliance & Ethics (SCCE).

The evaluation of the Pro-Ethics Company is documentary and follows a pre-established regulation, in which there are criteria for registration and guidance on filling out a Profile Analysis form and an evaluation questionnaire. Although the analysis is documentary, the judging committee, composed of public and private sector entities recognized in the business environment, can, for example, conduct tests to evaluate the whistleblower channel and conduct an electronic research with the company's employees to assess the perception about the application of the integrity program. The maximum rating is 100. To be approved and included in the list of Pro-Ethics Companies, the company must receive at least 70 points.

There are also other federal initiatives related to specific branches of business, such as Infra+Integrity Promotion Stamp, for the infrastructure sector, and the More Integrity Stamp, for agribusiness companies and agribusiness worker-owned companies. These initiatives also undergo documentary evaluations, according to a predetermined regulation and with their own criteria.

The Infra+Integrity Promotion Stamp, for example, requests the completion of a form on the compliance program, the submission of proof of signature of the Business Pact for Integrity and Against Corruption (promoted by the Ethos Institute), among other requirements contained in Ordinance 127/21 of the Ministry of Infrastructure. There are also social responsibility requirements, such as proof of "nothing on record" from the Dirty List of Slave Or Slave Labor, and negative criminal and negative certificates of environmental debts.

The More Integrity Stamp follows the ESG trend and provides for the joint evaluation of three dimensions – anti-corruption, labor and sustainability – also with specific documentary requirements to be presented by the participating legal entities. A brand use manual guides the awarded company through the visual identity of the three stamps to be used by positively evaluated companies:

• Green Stamp – First Award;
• Yellow Stamp – Renewal;
• More Integrity Stamp – Special Version, for companies and agribusiness worker-owned companies awarded with the More Integrity Of MAPA Stamp and the Pro-Ethics Company Stamp.

Although these stamps, for the most part, recognize only the existence of integrity practices in a documentary manner, without evaluation on site or an analysis of the effectiveness of such initiatives, the requirements for their granting are detailed and oriented to contribute to the installation of effective compliance mechanisms for legal entities.

Considering the technical stringent and robustness of ISO standards, companies can also opt for certification in specific ISOs related to integrity, especially ISO 37001, anti-bribery management, and the latest ISO 37301, compliance management.

In the always positive exercise of implementing good practices, companies that aim to recognize their compliance initiatives must first of all understand what their day-to-day needs are. This can be done, for example, by conducting a gap analysis, which helps to decide which type of recognition available is the most appropriate for the business, without losing sight of the possibilities that may arise in the market or even by legislative initiative.

It is important to note that an anti-corruption stamp is only a consequence of the controls and policies previously implemented in the company as part of effective integrity practices, whose main objective is to implement or improve a compliance program so that the company reaps the rewards of effective actions and not merely pro forma.

Formal recognition can be facilitated after the company has mapped and addressed its specific risks, improved its internal controls and initiatives, and adequately appropriated its internal structure of compliance and its operation for a possible evaluation. The reputational benefit of obtaining the anti-corruption stamp after this effort will be driven by the effective benefit that a robust compliance program can go into business.

Category: Litigation

The evidence production phase plays a key role in a lawsuit, and may be decisive for its success – or not. The current Code of Civil Procedure (CPC) introduced the early production of evidence as an autonomous claim. Therefore, the production of evidence will no longer be a procedure phase, or an injunction plead, but a litigation claim, which expanded – and greatly – its suitability.

What previously required the proof of urgency can now be filed with the certainty that evidence will be produced but not analyzed by the judge. As a result, the involved amount will not be related to the economic benefits expected by the Plaintiff which will reduce the payment of judicial costs and, except in cases of resistance by the defendant, lawyers’ fees do not apply. Moreover, art. 382, §4, of CPC does not allow the parties to file a defense or an appeal, except in case of total dismissal of the early evidence claim.

In accordance with the Article 381 of the CPC, the filing of the lawsuit to be suitable requires the demonstration that the evidence is needed to:

• prevent certain facts from becoming impossible or very difficult to be verified;
• enable an alternative dispute resolution; or
• avoid or justify the assessment of future claims.

Except for the first hypothesis, which is still related to the urgency requirement, the others can be claimed with greater flexibility.

In addition to facilitate the production of evidence, the new Code of Civil Procedure was even more generous in trying to forbid any kind of defense or appeal to reduce the number of disputes and, as in other articles of the new CPC, to stimulate alternative dispute resolution methods and the autonomy of the parties.

As a result, in theory, the party can avoid the knowledge phase of the lawsuit and move straight to the production of different types of evidence (cumulation is allowed). This wide range of scenarios in which the early production claim is suitable is combined with the restriction of eventual defense or appeal and the lower risk regarding the payment of judicial costs and lawyers’ fees, which reduces the financial exposure of filing such type of claim.

Despite the legal provisions mentioned above, case law has already reduced some attractive points of the demand, mainly to prevent abuses and ensure due compliance with principles of civil procedural law.

Effects on the corporate context

In corporate law, the early production of evidence claim has benefited mainly minority shareholders and started to be used as an instrument to access information of the company and to exercise the right of supervision. This is so because the claim can be filed only with a short description of the context involved, based on the Article 381 of the CPC. Therefore, minority shareholders gained a judicial means of requesting the disclosure of documents regarding the company without incurring in significant costs. In this case, it would not be necessary to effectively litigate against the company, the other partners or the managers.

Furthermore, considering that the power to determine the delivery of a specific document is exclusive of the judicial courts, the advance production of evidence may be used for the minority shareholders to disassociate from an arbitration clause. This hypothesis, however, is discussed by scholars.

In case law it is already possible to identify lawsuits regarding the early production of evidence filed by minorities to obtain:

• accounting and financial information of the company, even to determine the calculation of amounts due in cases such as withdrawal
• documents related to corporate transactions; and
• contracts in general, including those related to strategic issues or related parties, for example.

Therefore, it is perceived the use of the early production of evidence lawsuit by minority partners to obtain access to sensitive information about the company, corporate transactions, including in relation to valuation, and investigation of unfair competition.

Due to the increased use of the early production of evidence lawsuit, doctrine and case law began to modify the understanding towards Article 382, §4º, of the CPC, which prevented, completely, the presentation of defense or appeal, except when the early production of evidence is totally rejected.

Therefore, for example, is already allowed defense on procedural issues or the filing of an appeal, including the arguments related to:

• interest in court pleading;
• possibility of access to confidential documents; or
• legitimacy for a certain party to be able or not to require the submission of a certain document or the production of any evidence.

This modification of the legal provision ensures the application of principles of civil procedural law such as broad defense and contradictory – principles that were even enhanced in the current CPC, by means of hearing the parties after any new document be attached to the case or after a judge’s decision on a subject not yet addressed by the parties.

In addition to procedural defenses, in the corporate context, it is also necessary to determine the extent and scope of the right of supervision and access to information by minority shareholders.

Although the right of supervision is an essential right of the shareholder, pursuant to Article 109, III of the Law 6,404/76, it is neither unlimited nor unrestricted and must be exercised in the form of the law. The same reasoning applies to other corporate types, especially to limited companies.

It is undeniable that the duty to supervise – as well as any other right – cannot be exercised in an abusive manner or to impair the progress of social business and the management of the company.

In addition, it should be recognized that many documents and data that minorities intend to access can be strategic for the company, subject to confidentiality obligations or even related to business secrets or competitive sensitive information.

In cases such as these, the judge is expected be reasonable when evaluating in a balanced way the right of supervision of minority shareholders, the merits of the request and the impacts on the company, including in relation to the confidentiality of documents presented in the lawsuit.

Another concern is with the equal treatment of the shareholders. When not all shareholders are parties to the demand, could the management disclose information to the shareholders who have filed such a measure or should it guarantee the same access to the others?

Case-law required the demonstration, by the plaintiff, of the suitability of the measure, its interest in court pleading and, finally, its legitimacy for such a claim, which will only be analyzed after the judge's assessment of procedural issues related.

On the one hand, the relevance of the early evidence lawsuit to the legal system is undeniable, on the other hand, it is also undeniable that the easing of requirements should not be used as a loophole for abuses. In the corporate context, this has even more relevance, to preserve the conduct of the corporate businesses. It is expected that the measure could be an additional tool for minority shareholders without reverting into an abusive practice.

Category: Labor and employment

The deputy chief judge of the Superior Labor Court (TST), Justice Dora Maria da Costa, recognized, on May 20, the general repercussion of extraordinary appeals RE 1387795 (filed in the record of Labor Action 0010252-81.2015.5.03.0146) and RE 1387794 (filed in the record of Labor Action 0010023-24.2015.5.03.0146), both represented by the law firm Machado Meyer.^[1]

The issue is possible violation of the right to due process of law, the adversarial process, and a full defense, as well as of the principle of legality, when companies are included in the as defendants in labor proceedings in the execution phase, due to alleged joint and several liability with the principal debtor.

On May 24, the Justice clarified that, while the Federal Supreme Court (STF) has not analyzed the controversy over the existence of general repercussion and whether the Labor Courts have violated the principles cited, the decision to suspend proceedings that deal with the issue will be incumbent on each reporting judge for the corresponding appeal within the TST and the TRTs.

In any case, with the Justice's decision, all the cases that reach the deputy chief judge's scrutiny will be put on hold, as in the cases that gave rise to the aforementioned decision, highlighted above.

Understand the case

In the case under discussion, the company that filed the Extraordinary Appeals in question was surprised by its inclusion in as a defendant in the claim when the case was already in the execution phase, after the bankruptcy of the principal debtor company was found.

At the time, the Regional Court of Labor Appeals for the 3rd Circuit (Minas Gerais) upheld the decision handed down by the Judge of the Labor Court of Nanuque, which recognized the existence of an economic group between the judgment debtor company and the main debtor, on the understanding that there was coordination between the companies, and ordered the inclusion of the former as a defendant and its summons to pay.

The TST did not accept the appeals initially filed by the company. However, when reviewing the extraordinary appeal, the deputy chief judge of the TST recognized that the matter under discussion is extremely controversial and must be decided by the STF.

The decision that guarantees suspension of the proceedings in the enforcement phase in which companies are included as defendant without having the right to an adequate defense in the fact-finding phase is of utmost importance. One of the reasons is the need to guarantee the effectiveness and correct application of the provisions of article 2 of the CLT and its respective paragraphs, if the STF decides that it is impossible to include companies at such a late stage in the labor proceeding.

It is not difficult to understand the great injustice that companies included in the execution phase face, because at this stage of the proceeding it is impossible to discuss whether there was a legitimate formation of an economic group. This is because, for procedural reasons, once the fact-finding phase of the lawsuit has been exhausted, companies can only discuss, in the execution phase, the amounts they will be forced to pay or any direct and literal constitutional violations that do not permeate the analysis of the infra-constitutional legislation.

It is important to ponder that, although the effectiveness of judicial relief is an important constitutional principle, one cannot, under the pretext of allowing the worker the execution of his judgment debt claim, accept that this claim be borne by a company that should never have been party to the dispute. The risk is that it also violates the constitutional right that everyone has to not be deprived of his property without due process of law (article 5, subsection LIV, of the Federal Constitution).

To understand the impossibility of including in the execution phase a company that did not participate in the fact-finding phase does not mean, in any way, it is impossible to enforce a decision, but to prevent a company that should not be liable for a debt from bearing it. It is nothing more than the application of several basic constitutional precepts and guarantees, especially the principle of the adversarial process, the principle of a full defense, and due process of law.

As well acknowledged in the decision by Justice Dora, the issue has already reached the STF through Motion to Resolve a Breach of a Fundamental Precept (ADPF) 488 and 951, which deal precisely with the unconstitutionality of including in the labor execution phase a company belonging to an economic group that did not take part in the case and is not included in the enforcement order, since this violates the fundamental guarantees of due process of law, a full defense, and an adversarial proceeding.

Although the ADPFs mentioned are still awaiting judgment, there is a good chance that the Supreme Court will decide that it is impossible to include a company that did not participate in the fact-finding phase in the execution proceeding.

This is because, on September 14, 2021, STF Justice Gilmar Mendes granted relief to an extraordinary appeal (ARE 116036) to modify the decision by the Labor Court for execution against a company in a similar situation.

The decision, in our opinion, is correct, because it guarantees application of what the law provides. According to paragraph 5, of article 513, of the Code of Civil Procedure, execution of judgment cannot be filed against the guarantor, co-obligor, or co-responsible party who did not participate in the fact-finding phase. It is incumbent on the Labor Court, therefore, to apply the law or declare the unconstitutionality of the provision.

However, the TST has failed to apply the legal provision, without having previously declared its unconstitutionality, which violates the provision that such a matter must be resolved by the court en banc (Federal Constitution, article 97). The TST's position also violates the STF's Binding Precedent 10, according to which the en banc jurisdiction rule (Federal Constitution, article 97) is violated by decisions of a single body of the appellate court which, despite not expressly declaring the unconstitutionality of a law or normative act of the Government, prevents its application, in whole or in part.

Other justices of the STF have already taken a position that it is not possible to execute the judgment against the party that did not participate in the fact-finding phase, as in the in limine decisions issued by Justice Nunes Marques in Constitutional Complaints 51.756 and 51.682, both handled by Machado Meyer.

Some plaintiffs' lawyers point out that it is difficult to include, in the fact-finding phase, all the companies that may be liable for the labor debt. However, this argument is not justified. It is the worker who determines the formation of the defendants in the claim.

If, on the one hand, no one is obliged to litigate against anyone they don't want to, on the other hand, it is unreasonable to think that the same worker who indicated which companies he was interested in including as a defendant in the lawsuit, could, in execution, indicate companies other than those that were part of the fact-finding phase so that they could respond for a judgment debt of which they were not even aware.

If the STF confirms the impossibility of including a company in the execution phase, it will bring about legal certainty and encouragement for companies and investors, who end up having difficulties in or even impediments to defending themselves extensively not only regarding their liability (if in fact they belong to the principal debtor's economic group), but also regarding the prayers for relief made by the worker, which are often not defended in a correct manner by the insolvent debtor.

The decision would also prevent expansion of the concept of economic group that has been promoted by the Labor Courts by finding that mere corporate and investment operations are sufficient to establish an economic group, without observing the correct corporate definition of the term.

In other words, the STF's decision can bring about legal security with a definitive solution for the issue and can certainly contribute to promotion of investments. The effect would be especially positive for the M&A and private equity market, where transactions are often incorrectly interpreted by the labor courts.

^[1] The leading cases selected by Justice Dora to represent the controversy were: case 10023-24.2015.5.03.0146, in which the 05/20 decision was issued, and case 10252-81.2015.5.03.0146, covers the same discussion and is being handled by the law firm Machado Meyer.

Category: Capital markets

Alessandra de Souza Pinto, Clarissa Freitas, Rafael Costa Silva and Tathiana Litter Bussab

The board of the Brazilian Securities and Exchange Commission (CVM), unanimously, acquitted the defendants in the context of a sanctioning administrative proceeding initiated to determine the responsibility of members of the board of directors for breach of the diligence duty , provided for in article 153 of Law 6,404/76 (Corporation Law).

The trial, which occurred in May, had its origins in complaints filed before the exchange commissionby a minority shareholder of the company.

The accusation was formulated for alleged failure to comply with the aforementioned fiduciary duty in monitoring of the terms and conditions of the trademark license agreement entered into with vehicle of the company's controlling shareholders (license agreement).

Prior to the establishment of the sanctioning administrative proceeding, the use of the trademarks had already been analyzed by the technical area of CVM, in a process initiated to verify any violation of the fiduciary duties that should be observed by the company's managers during the licensing of the trademark.

Although, at the time, no elements were identified to support the initiation of a sanctioning proceeding, the technical area of CVM found the existence of an inconsistent information in the company's reference form. According to the document, the licensing agreement was commutative and had been negotiated under "market" conditions, without describing the procedure adopted by the company's management to reach this conclusion.

After further investigation arising from minority shareholder complaints, the technical area of CVM understood that the directors would not have observed their diligence duty. It was pointed out the insufficient periodic review of the licensing agreement, which, besides of having economic relevance, directly benefited the company's controlling shareholders and had not been approved by the other shareholders, different treatment from that given to other contracts entered into by the company.

The term of the indictment stated that:

• it was responsibility of the directors to make efforts to monitor the terms of the contract on a routine and continuous basis;
• the defendants, by choosing not to analyse alleged existing warning signs, neglected the responsibility to investigate, comprised in the diligence duty; and
• the decision not to amend the licensing agreement and the consequent maintenance of the payment of royalties was taken without the necessary analyses having been carried out, as attested by the lack of evidence of sufficient discussions and studies on the subject.

For diverging from the arguments presented by the technical area, the reporter director of the sanctioning administrative proceeding voted for the acquittal of the defendants in relation to the accusation of breach of the duty of care. He did not identify any omission in the monitoring of the license agreement by the company's directors.

The reporter director considered that the accusation did not provide elements that evidenced that the information used by the company's board of directors was insufficient to guide the decisions regarding the licensing agreement. Thus, the duty to "inform one another", which is considered one of the underduties of the diligence duty, had also not been violated by the directors.

After analyzing the facts, the CVM board followed the vote of the reporter director of the sanctioning administrative proceeding and decided, unanimously, for the acquittal of all the defendants.

Category: Corporate

In a rare procedure, two former directors of a publicly-held company in the oil and gas sector reversed CVM's decision issued in the administrative proceeding CVM RJ 2014-3225, which had considered both of them guilty for the use of privileged information (insider trading) and applied a fine of almost R$ 800,000.

Insider trading

The illegal conduct known as insider trading is based in four elements:

• existence of relevant information not disclosed to the market;
• privileged access to relevant information by the insider, that is, someone who is aware of the company's business;
• use of relevant information for securities trading; and
• purpose of obtaining an unfair advantage for itself or for third parties.

Insider trading is an illegal conduct because of the impact it may have on the functioning of the capital markets and on the pricing of traded securities, considering the asymmetry of information between those who know the company (such as officers, directors and others) and investors. The prohibition, therefore, is justified to preserve the credibility of the capital markets.

It is often difficult to identify and produce evidence of such illegal conduct, especially in cases of the so-called secondary insiders, which are people who receive information from the primary insiders, those who have direct contact with inside information.

Due to the difficulty in producing evidence, the use of signs and clues as evidence by the CVM is already peaceful. However, such signs and clues shall not be mere indications, but a strong trace of the illegal conduct. To support the accused conviction, such sign shall be robust:

"It is necessary to differentiate the evidence from the a strong indication. The mere sign does not authorize the conviction. These signs, when represented by multiple, firm, convergent and serious evidence authorize a robust and well-based conclusion about the fact that is to be proven".^[1]

Thus, the evidence of the unlawful act may be based on a set of sings capable of leading the judge to reasonable and robust conviction about the fact under analysis. That is, there should be no doubt about the culpability of the agent, under penalty of discharge: "It is required, however, that such indications be convergent and univocal. The existence of sufficient counterindications to inspire doubt in the judges should lead to acquittal, in honor of the principle of the presumption of innocence."^[2]

The administrative proceeding

The administrative proceeding was initiated by the Superintendence of Market Relations and Intermediaries (SMI). The purpose was to investigate the possible use of insider information by publicly-held company directors in the trading of shares prior to the disclosure of material facts related to the absence of oil and gas in oil wells held by the company abroad in July and September 2013.

The conduct would represent a violation of Article 155, §4, of Law 6,404/76^[3] and article 13, §1°, of CVM Instruction 358/02,^[4] (revoked and replaces by CVM Resolution 44/21). Both articles deal with the prohibition of using privileged confidential information not disclosed to the market.

The charges, in short, were:^[5]

• First director – sale of 300,000 shares for R$ 633,289.00, on July 7, 2013, and repurchase for R$ 513,719.00 one week after the disclosure of the first material fact, on July 19, 2013; and sale of 350,000 shares, on September 5, 2013, for R$ 563,260.00, before the drop in the value of the shares on September 10, 2013, due to the disclosure of the second material fact on September 9, 2013. The transaction would have saved R$ 228,280.00.

• Second director – sale of 500,000 shares on July 17 and 18, 2013 for R$ 1,049,204.00 (before the material fact of July 19, 2013) and sale of 52,600 shares on September 6, 2013 for R$ 80,478.00 (before the material fact of September 9, 2013), which would have saved R$ 181,400.60.

In the trial by CVM, at first, the rapporteur established that the absence of commercial value of oil wells held by the company abroad would be a relevant information, demonstrating the first element of the insider trading.

Having established the first requirement, in relation to the first accused, the rapporteur highlighted that the transactions were performed on a sporadic basis and in an urgent scenario, in which the sales order were transmitted establishing the repurchase intent. Considering the existence of "serious, robust and convergent evidence", the accused was convicted by CVM.

In relation to the second accused, in the first transaction, the rapporteur considered as decisive evidence for the conviction, the performance of the transaction on a sporadic basis and the transcript of the conversation between the accused and the employees of the intermediary of the negotiation, in which the accused reveals to be aware that the company would be preparing a material fact with bad news for the market about the exploitation of the well. As far as the second transaction, the rapporteur considered that there was no sufficient evidence towards the accused’s knowledge of such material. Therefore, in relation to such charge, the accused was found not guilty.

Against the CVM's decision, both directors filed an appeal to the National Financial System Appeals Council - CRSFN (case 10372.000123/2017-22), which unanimously dismissed the appeal and upheld the CVM's decision.

The judicial lawsuit

Then, the former directors filed an annulment lawsuit against CVM and the CRSFN before the Federal Justice, claiming, in summary, that:

• there was no negotiation based on insider information;
• when they issued the order to sell the shares, the information related to the wells did not exist;
• the plaintiffs were profoundly experts in the oil and gas sector, in which the company operated, and therefore their ability to analyze public information in the sector would be superior in relation to the average investor;
• historically, the company's share price was declining and, for such reason, there was public information to support the directors' decision;
• the leakage of information would not have been demonstrated; and
• CVM would not have appreciated all the facts and evidence, having focused primarily on the telephone recordings.

The judge of the 32^nd Federal Court of Rio de Janeiro dismissed the claim of lack of standing to be sued raised by both CVM and the Federal Union, because he understood that there were conducts attributed to both defendants (CVM and CRSFN), that is, the conviction decision by CVM and the maintenance of such decision by CRSFN. In addition, the judge dismissed the claim of lack of interest to act by the plaintiffs raised by the defendants due to the payment of the fines. The judge found that the plaintiffs had interest in the lawsuit, in view of the intention of obtaining the reimbursement of the debt.

On the merits, the judge established that the subject was mainly related to the strength of the evidence relating to the prior knowledge – or not – of an insider information by the plaintiffs. In this regard, the judge considered that the analysis of the evidence is attributed to the judge. Therefore, according to the sentence, no way to prevent the wide review of evidence and its value by the Judiciary.

Having established the premise above, the decision reinforced the need to demonstrate the four elements for the characterization of the insider trading: the existence of material information not disclosed to the market, the privileged access to it, the use of such information for negotiation and the purpose of obtaining advantage. For the directors (plaintiffs of the lawsuit), access to inside information could only be presumed in the case of primary insider which would not be the case for the plaintiffs at the time.

Considering the timeline of the events, the court considered that it would not be reasonable to assume that the plaintiffs would have had access to insider information before the company's officers and key management. Also, it would not be reasonable to presume the certainty of the directors in relation to the decision to sell the shares, in view of the uncertain nature of the data available regarding the oil wells.

Similarly, the court considered that the expertise of the plaintiffs in the oil and gas industry and the fact that they did not sell all of their shares would be signs that they would have superior analytical capacity than the average investor and that there was uncertainty with respect to the information.

In addition to the elements above, the court had a different view towards the telephone recordings focusing on their elements of uncertainty and insecurity. Such records had been considered as decisive by CVM.

In summary, the court understood that the signs available were favorable to the plaintiffs and that there was no sufficient evidence of the illegal conduct. Thus, the sentenced annulled the administrative lawsuit and the fines. This is a rare decision in which the judicial courts reverted a decision issued by CVM and confirmed by the CRSFN. An appeal was filed against of the sentence.

^[1] CVM PAS 22/94, j. 15/04/2004.

^[2] Vote of director Norma Parente in PAS CVM 06/95, of 05/05/2005

^[3] "Art. 155, §4. Any officer who may receive any confidential information not yet revealed to the public shall not make use of such information to obtain any advantages for himself or for third parties by purchasing or selling securities."

^[4] "Art. 13, §1. The same prohibition [of trading with securities] applies to anyone who is aware of information regarding a material act or fact, knowing that it is information not yet disclosed to the market, especially those who have a commercial, professional or reliable relationship with the company, such as independent auditors, securities analysts, consultants and institutions that are part of the distribution system, which are responsible for verifying the disclosure of information before trading with securities issued by or referenced to the company."

^[5] The administrative proceeding was filed against other defendants, who were acquitted by the CVM. This article will discuss the charges against the directors found guilty by CVM.

Category: Litigation

In times of "overinformation" and an increasingly digital society, where a quick acess in a search site can lead to any content anywhere in the world, discussions involving the right to be forgotten – i.e., the withdrawal of personal information from websites and mass media – and its (in)compatibility with the right to freedom of the press are increasingly complex.

The discussions gained emphasis on the world legal stage in 2014, with an important precedent set by the Court of Justice of the European Union (EU) in a case involving the right of a person to have his name excluded from searches made through websites that related him to journalistic articles that, although reporting true facts, would be causing damage to his personal life.^[1]

According to this precedent, the European Court has recognised the right of an individual to have his personal data erased from the Internet.^[2]

In Brazil, due to the absence of specific legislation, the debate on the right to be forgotten has been outlined by the Higher Courts.

In December 2021, the Third Panel of the Superior Court of Justice (STJ) concluded the trial of Special Appeal 1,961,581/MS, under the rapporteurship of Minister Nancy Andrighi. The case had as background the suitability or not, based on the institute of the right to be forgotten, of imposing on mass media the obligation to exclude journalistic articles about the practice of crime from which the defendant was subsequently acquitted.

Applying the understanding signed by the Supreme Federal Court (STF) in a trial in February 2021 (Theme 786), it was understood that the right to be forgotten, because it is incompatible with the Brazilian legal system, does not justify the imposition of the obligation to exclude articles published in the media, provided that the facts in them do not go beyond the limits of the right to freedom of the press.

The STJ granted the special appeal for considering that the right to freedom of the press provided for in Article 220, §1, of the Brazilian Federal Constitution was not exercised with abuse. For the rapporteur minister, although the press is not absolutely linked to the disclosure of uncontroversial facts, there must be a diligent and careful action both in the investigation and in the disclosure itself, in order to meet, at least, the requirement of verisimilitude.

Not only that but in addition to meeting the requirements of veracity and relevance, according to which the media must provide information relevant to social interaction, journalistic activity is committed to safeguarding the rights of personality, that is, it cannot, under any circumstances, be exercised with the objective of "defaming, insulting or slandering".

For the ministers of the Third Panel of the STJ, the right to freedom of the press is the rule and can only be mitigated when the content conveyed is untrue, not relevant to social interaction and/ or violates the rights of the personality of the individual subject of the news. In this sense, despite the fact that the defendant was subsequently acquitted of the crime for which he was accused, there was no doubt about the veracity and public interest of the information disclosed at the time (2009) by the applicant, as it was in fact related to the criminal sphere. Furthermore, the defendant did not claim at any time that the news was intended to offend his honor.

From this trial, the Third Panel of the STJ updated the position of that Court, based on the understanding of the STF, because, in previous judgments, the Fourth and Sixth Panels had already granted validity to the right to be forgotten, conceptualizing it as "(...) right not to be remembered against his will, specifically with regard to discreditable facts, of a criminal nature, in which he was involved, but latter acquitted."^[3]

For the Higher Courts, therefore, the preponderant factor for favoring or not the right to be forgotten is the fact that the exercise of the right to freedom of the press has been considered legitimate or illegitimate, depending on whether or not the rights of the party's personality are violated.

It should also be highlighted that the approaches of the Third Panel of the STJ and the STF differ from that adopted by the Court of Justice of the EU, which in itself demonstrates the complexity of the issue and indicates that discussions involving the right to oblivion will continue to be brought to Brazilian Courts, despite the legal incompatibility pointed out by the STF between this right and the Brazilian Federal Constitution.

In any case, it is unquestionable the advance of the theme in the Brazilian Judiciary and its relevance in our society, to the extent that, regardless of the fact that the right to freedom of the press is not considered absolute, it must prevail whenever exercised with respect to the principles of ethics and good faith. What remains now is to follow how the Legislative Branch will behave in the face of the changes that occur at all times in the information society, increasingly dynamic, and whether these changes will force our higher courts to review the application of the institute of the right to be forgotten.

^[1] The news linked to the name of the plaintiff concerned the real estate auction due to non-payment of taxes.

^[2] Conjur site - Right to erase data and the decision of the European court in the Case of Google Spain

^[3] Habeas Corpus 256,210/SP, Minister Rapporteur Rogerio Schietti Cruz, Sixth Panel, judged on 3.12.2013; EDcl on REsp 1121199/SP, Minister Rapporteur Luis Felipe Salomão, Fourth Panel, judged on 27.3.2014.

Category: Tax

In a unanimous judgment, the 1st Section of the Superior Court of Justice (STJ) granted the claim of the National Treasury to reaffirm its position regarding the possibility of maintaining the seizure of bank deposits via the BACENJUD system even though the taxpayer subsequently is enrolled on a program to pay such tax credit executed in installments.

The decision was taken in Repetitive Theme 1.012/STJ, and the following thesis was fixed as a general orientation:

The seizure of financial assets of the taxpayer in the BACENJUD system, in case of enrollment on a tax installment program, will be:

• lifted if the concession to the program was granted prior to constriction; and

• the seizure is maintained if the concession to the program occurs at a time post-constriction, subject, in this case, the exceptional possibility of replacing the amounts with bank bail letter or insurance guarantee, in view of the peculiarity of the specific case, by irrefutable proof of the need to apply the principle of least onerosity.

The rapporteur, Minister Mauro Campbell Marques, stressed that the jurisprudence of the STJ is firm in the sense that the enrollment on ta tax installment program will have effects to suspend the enforceability of the tax credit (Article 151, VI, ctn), without extinguishing the obligation.

Such circumstance, according to the Minister, legitimates the maintenance of the preexisting constriction incident on the debtor's assets, until the debt is fully paid. The possibility of the tax authority shall be ensured to resume tax enforcement in the event of non-compliance with the payments on the tax program.

Despite the position of the Supreme Court regarding the maintenance of seizure in case of adhering to the installment at a time after constriction, it is important to highlight that the taxpayer was assured the possibility of replacing the amounts pledged by guarantee insurance or bank bail letter, when it is shown that such amounts may compromise the regular activity of the taxpayer,  attention to the principle of lesser burden.

In such cases, it will be up to the taxpayer to effectively demonstrate the serious damage caused by constriction as a main ground to authorize its replacement.

It would be important for the Supreme Court to examine the progressive and proportional release of the value of the seizure, adjusting it to exclude the exact size of the portion of the debt already paid. This is because, maintaining the full blocking of the amounts until the end of the installment, there will be excess guarantee, causing serious damage to the taxpayer, especially in the chances of long-term installments programs.

Like what minister Napoleon Nunes Maia Filho defended^[1] at the time of the STJ, "the execution must be processed in a calibrated manner, to achieve the purpose of the execution process, that is, the satisfaction of the credit, with the minimum sacrifice of the debtor (...) there is no reasonableness or common sense of equity in the orientation that accepts restrictions superior to the needs of satisfaction of the tax credit. The excess of guarantee is something that does not have the allowance of law and of the shallowest common sense of Justice".

Therefore, once the gradual payment of the installments was verified as a result of the conclusion of the installment payment agreement, the debtor should be assured of the proportional release of the constricted amounts, in order to maintain the equivalence between the tax debt and the guarantee of execution.

Because it is a judgment submitted to the rite of repetitive appeals, the understanding signed by the Supreme Court in the judgment of Repetitive Theme 1.012/STJ should be followed in cases dealing with an identical issue.

^[1] REsp n. 1.266.318/RN, rapporteur Minister Napoleon Nunes Maia Filho, First Class, judged on 12/7/2017, DJe of 12/14/2017.

Category: Banking, insurance and finance

Legal entities and investment funds incorporated in Brazil must submit a report to the Central Bank of Brazil detailing investments in their quotas and/or shares held by foreign investors, or the outstanding short-term trade debts owed to non-residents, on December 31, 2021, in the following situations:

(a) legal entities must submit this report when, on December 31, 2021, they had a net worth equivalent to or over USD 100 million and, simultaneously, any direct ownership held by non-resident investors in their capital stock, regardless of the amount;

(b) legal entities must submit a report with respect to their current liabilities with non-resident lenders by means of debt instruments when, on December 31, 2021, they had an outstanding balance in short-term trade debts (due within 360 days) equivalent to or over USD 10 million, regardless of any foreign equity ownership in their capital stock; and

(c) investment funds must submit a report when, on December 31, 2021, they had a net worth equivalent to or over USD 100 million and, simultaneously, quotas directly held by non-resident investors, regardless of the amount.

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

• individuals;

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

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

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

The report must be electronically submitted to the Central Bank through the website www.bcb.gov.br between July 1, 2022, and 6 PM on August 15, 2022.

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

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

Failure to submit the report, or submitting a report that does not comply with the applicable regulations, subjects the violator to a fine of up to BRL 250,000 under article 66 of BCB Resolution No. 131, of August 20, 2021.

The Census of Foreign Capital in Brazil aims to compile statistics on the external sector, especially the International Investment Position, to subsidize the development of the economic policy and support the activities of the economic researchers and international agencies.

(BCB Circular No. 3,795/16, Law No. 13,506/17 and BCB Resolution No. 131/21.)

Category: Tax

Taxpayers were surprised earlier this year by an important decision of the Superior Court of Justice (STJ) in the case file of Special Appeal 1.826.124/SC. The 1st Class of the Court unanimously recognized the possibility of customs review even after the customs clearance has been submitted to verification procedures (i.e., having gone through inspection channels that require more detained analysis of imported goods). The decision is in line with what has been strongly defended by taxpayers, especially in cases relating to the tax classification of products.

In order to understand the discussion and why the Position of the Supreme Court is relevant to all those who import goods, it is important to recall some concepts.

The import customs tax procedure consists of four phases: declaration processing, customs verification, customs clearance and customs review.

At the customs verification, the tax auditor identifies the importer, checks the goods and the correction of information relating to nature, tax classification, quantification and value, in addition to confirming compliance with all obligations, tax and customs (or requesting changes), in order to perform the customs clearance of the goods.

Through an automated system, imports are subjected to channels – such as in the distribution of a lawsuit to the judge – in which there will be more or less detailing of information and requests from the authorities.

This procedure may be automatic, when the goods are directed to the green channel, or it will be conditioned to the document verification (yellow channel), added to the physical verification of the goods (red channel) or the initiation of special customs control procedure (gray channel), to verify evidences of fraud in the import operation.

Especially in situations where the goods are directed to the red channel, it is common that technical reports to support discussions related to the tax classification of goods are requested.

This is because, once the import has been submitted to that channel, the tax authority is required to carefully analyze all the information and elements to confirm that the imported good is consistent with that reported in the import documents. After this procedure, the goods can be released - customs cleared.

Even after all this procedure and regardless of the chosen channel and the analysis carried out for the release of a particular good, Article 638 of the Customs Regulation provides for customs revision procedure.

In nutshell, it allows the authorities to, within five years from the import (statute of limitation period), recheck the regularity of the payment of taxes, the proper use of tax benefits and the accuracy of the information provided by the importer in the import declaration.

The legal controversy lies in this possibility of customs review itself.

Taxpayers argue that there is no need for customs review over cases that have already passed through the yellow, red and gray verification channels, because on these occasions the goods were thoroughly analyzed by the tax auditors themselves in relation to payment, information declared, nature of the goods – including analysis by experts specialized in the imported goods.

The customs review, therefore, would imply the express approval of the taxpayer's correctness, with the final customs clearance.

The taxpayers' argument is even stronger in relation to the red and grey channels, in which the analysis for the purposes of clearing the goods requires the physical analysis by the the customs inspector, who confirmed, after reviewing  the process and the imported goods, that the customs clearance could occur as it was declared by the importer..

In cases where such an analysis has already taken place with tax authorities implementing the customs review, taxpayers believe that,  the legal criterion originally adopted has changed, the effect of which, to the limit, could only be applied for future operations.

Taxpayers base their understanding on articles of the National Tax Code, which impose limits on the performance of the inspection. Moreover, said articles, due to their scope, could be perfectly applicable to cases of customs review.

More specifically, taxpayers make use of the following:

• article 100, that restricts the applicability of retroactive effects when there is a change of legal criterion;
• Article 149, which identifies the situations in which a tax assessment can be reviewed by the auditor (highlighting the situation in which the fact was not known or was not proven at the time of the previous accordance – error of fact); and
• article 24 of the Law on Introduction to the Rules of Brazilian Law (LINDB), which foresees the invalidation of legal situations fully constituted with base in subsequent change of general orientation – common in the scenarios of customs review, which occurs after the taxpayer has carried out numerous import processes, including discussions with the inspection about its correction.

This understanding of the taxpayers, for a long time, was accepted by the STJ^[1] and the Administrative Council of Tax Appeals (Carf),^[2] whose jurisprudence established the impossibility of changing the legal criterion and the following application of retroactive effects of said “new position” to the customs clearance completed.

In other words, both the administrative courts and the STJ agreed that the previous analysis carried out by the inspection (e.g. red channel) confirmed the correction of imports, which is why it would no longer be possible to demand from the importer a new change in imports and the payment of differences in taxes.

Nevertheless, this jurisprudence has been altered in recent years, culminating in the of the Special Appeal 1,826,124/SC.

The appeal was based on an lawsuit filed by a taxpayer that was importing the goods before the Regional Court of the 4th Region.

The judgment of the Regional Court was in the sense that the possibility of customs review was restricted to the hypothesis of customs clearance performed through the green channel – when the goods are automatically cleared, without any verification.

As the decision was favorable to the taxpayer, the National Treasury appealed and the matter proceeded for consideration by the STJ.

The First Chamber of the STJ, responsible for re-analyzing the case, considered that the legislation governing the matter does not bind the tax authorities' right to review the regularity of the payment of taxes to a certain type of customs verification channel to which the goods have been submitted.

This understanding is aligned with the one already signed in the Second Panel of the Court, in the judgment of Special Appeal 1.201.845/RJ, in which it was decided that the first opportunity (customs verification) does not hinders the second (customs review) - which arises after customs clearance - in which the tax auditorwill revisit all acts practiced in the first procedure.

In this case, ministers adopted the premise that the Customs verification requires expedited analysis, because the goods are deposited on behalf of the taxpayer (with the burden of paying for surcharges) and, in addition, its permanence hinders the activities of the tax auditor, who needs to attend other customs clearances in the queue. Thus, it is legitimate that the inspection can review these acts practiced quickly (subject to the green channel).

In the case under discussion, the existence of Technical or Expert’s reports was not mentioned. The First Chamber of STF supported the decision on prior cases and the legislation only.

However, in that particular case, the situation differs from that discussed in the process analyzed by the First Chamber more recently. This is because, in the Special Appeal 1.201.845/RJ, the discussion concerns the beginning of the statute of limitation period, when the inspection does not make any requirement five days after the end of the customs verification. In such case, authorities only performed the analysis afterwards, based on the fact that through "examination in its Laboratory of Analysis, disputed the classification attributed at the time by the Appellant, considering as correct another classification".

The specific case examined at that time, therefore, differs greatly from what happens with many taxpayers, who, after carrying out extensive work with the customs supervision – red channel – to confirm the regularity of the tax classification of their products, are targeted with future audit procedure.

Although the Judgment of the Supreme Court was not subject to the Repetitive Cases systematic, the decision has the potential to negatively impact the processes that are already under discussion, especially in the judicial sphere.

In the administrative sphere, although currently the case law is not favorable to the taxpayer, the Special Appeal case mentioned above was judged before the extinction of the quality vote (therefore, it could have a different conclusion nowadays). Under CARF (second instance of the administrative court), the prevailing understanding so far is unfavorable to taxpayers.

For a better understanding of the situation: in the Administrative Proceeding 10314.732822/2013-04, judged by the Superior Chamber of Tax Appeals (CSRF), the decision was that customs clearance does not represent the hard confirmation of the taxes due or approval of the inspection, since this only occurs with the customs review (express approval) or with the course of the satute of limitation period (tacit approval). For this reason, customs clearance would not be cvered with sufficient legal value to be defined as a "legal criterion". However, in the case, the appeal was dismissed by a vote of quality (reason why nowadays it could have a different approach).

On the other hand, recently, the discussion has gained a chapter under CARF. In the trial of the Administrative Proceeding 10909.003996/2007-10, the 1st Panel of the 4th Chamber of the 3rd Section canceled a tax assessment aimed at the collection of taxes as a result of tax reclassification, on the grounds that the customs review is improper in the case of goods cleared through the red channel, where, by legal obligation, the responsible tax auditor shall confirm the composition and tax classification of the goods.

The result was a pro-taxpayer tiebreaker due to the extinction of the quality vote.

As the precedent of the STJ is not binding, for the processes that are still in discussion in CARF there is still a chance of the jurisprudence being reversed in favor of taxpayers.

However, the decision shows, once again, that the courts do not always adopt the same reasoning, leaving taxpayers at the mercy of discrepant decisions, without being sure how the outcome of their case will be, even if confirmed by the authorities themselves at a previous time.

^[1] REsp 1112702/SP, Rel. Minister LUIZ FUX, FIRST CLASS, judged on 10/20/2009, DJe 06/11/2009 – g.n.

REsp 1079383/SP, Rel. Minister Eliana Calmon, Second Class, judged on 18/06/2009, DJe 01/07/2009

Ag 918.833/DF, Rel. Min. José Delgado, First Class, DJ. 11.03.2008

[2] Process No. 12719.000127/2005-34, Appeal 344.510, Judgment 3102-00.684, 3rd Section, 1st Chamber, 2nd Ordinary Class, Session: 26.05.2010.

Process No. 10814.005331/2003-76, Appeal 139,812, Judgment 3202-00.023, 3rd Section, 2nd Chamber, 2nd Ordinary Class, Session: 14.08.2009.

Process No. 12466.004542/2002-33, Appeal 127,930, Judgment 301-30,892, 3rd Council of Taxpayers, 1st Chamber, Session: 01.12.2003

Category: Aviation and shipping

Fabio Falkenburger, Marina Estrella, Pedro Amim, Vitor Barbosa and Julia Souza Torres

Immediately after approval by the Federal Court of Auditors (TCU), the National Civil Aviation Agency (Anac) published, on June 6, the the notice to bid and concession agreement of the 7th round of airport concession, in addition to scheduling the public auction for August 18.

Clarifications about the documents may be requested from June 8 to 27, through an electronic form provided by Anac.

15 airports shall be conceded in three different blocks. The highlight is the Block SP/MS/PA/MG, which contains Congonhas Airport. Pursuant to Anac newsletter, the airports to be granted in the 7th round correspond to 15.8% of the domestic movement of passengers. The format of the concession of airports in three blocks and their minimum initial contributions and estimated values of contracts are:

• The General Aviation Block will be composed of the airports of Campo de Marte/SP and Jacarepaguá/RJ. The minimum bid (initial contribution) is R$ 141.4 million and the estimated value for the contract is R$ 1.7 billion.

• Block Norte II will be composed of the airports of Belém/PA and Macapá/AP. The minimum bid (initial contribution) is R$ 56.9 million and the estimated value for the entire contract is R$ 1.9 billion.

• The BLOCK SP/MS/PA/MG will be composed of Congonhas/SP, Campo Grande/MS, Ponta Porã/MS, Corumbá/MS, Santarém/PA, Marabá/PA, Parauapebas/PA, Altamira/PA, Montes Claros/MG, Uberlândia/MG and Uberaba/MG. The minimum bid (initial contribution) is R$ 740.1 million and the estimated value for the entire contract is R$ 11.6 billion.

The concession term will be of 30 years for all blocks. Extensions will only be admitted in extraordinary situations and for only another five years.

The notice to bit allows the participation of Brazilian or foreign legal entities, supplementary pension entities and investment funds, alone or in consortium. However, it does not allow the participation of a legal entity or its subsidiaries and controllers in more than one consortium to submit a proposal for the same block. Furthermore, airlines companies will not be allowed to participate in the concession, except as consortium members with less than 2%, considering the sum of their holdings.

As in the other rounds of airport concessions, the notice requires that the participant bidding alone or, if in a consortium, one of the members of this, is an airport operator that has operated an airport with the following minimum movements, in at least one of the last five years:

• For the General Aviation Block, 200,000 passengers or, alternatively, 17,000 aircraft movements (landings and takeoffs).

• To Block North II, 1 million passengers.

• For Block SP/MS/PA/MG, 5 million passengers.

As in the previous round, it shall be allowed to hire a technical assistant if the winning bidder does not meet the technical qualifications (airport operation qualification) required by ANAC. In other words, it will be possible to fill the qualifications requirements with the hiring of an airport operator to assist in the operational management of the block. To do so, it will be necessary to present a commitment to contract such a technical assistance, which shall be presented among the bidding documents. The technical assistant must meet the criterion of movement of passengers and aircraft listed above.

Originally Santos Dumont/RJ airport would be granted in the 7th concession round, however, amid political controversies and reformulations in the configuration of the concession, the airport will be conceded in the 8th round, scheduled for 2023, in the same block of Galeão /RJ airport.

Despite the absence of one of the ‘crown jewels’, the news of the confirmation of the 7th round is received by the market with much relief and enthusiasm. After all, the pace of concessions is maintained in a key segment for the recovery of the aviation sector, which seeks to reach pre-pandemic operating levels. Congonhas' presence in the package raises expectations around the round, which is likely to have fierce competition and generate high revenue for the government.

Category: Litigation

A controversy surrounding the rules of citrus production recently reached the Supreme Court (STF) through the Direct Action of Unconstitutionality (ADI) 7.045, filed by the Brazilian Democratic Movement Party (MDB). The action questioned the constitutionality of the requirement to produce citrus seedlings with substrate that does not contain soil,^[1] established in Article 28 of the Normative Instruction 48/13 (IN 48/13), the Ministry of Agriculture, Livestock and Supply (Map).

The court did not analyzed the merits of the ADI since Minister Carmen Lucia, rapporteur of the action, in December 2021, pointed out procedural defects and denied continuation, a decision that passed in judgment in February this year.

By the weight of this culture in the country's economy - Brazil is a world leader in the production and export of oranges and concentrated juice – it is worth making a brief history of the facts that serve as a context for the formulation of Article 28 of IN 48/13 and to evaluate whether the norm established by it hurts the Constitution.

The State of São Paulo concentrates the largest production of orange and orange juice in the world^[2]. It develops excellent work in the area of research and development,^[3] vital activity for the modernization of the sector and its adaptation to the growing regulatory requirements, both internally and externally. These requirements are expressed, for example, in state^[4] certification requeriments  of independent bodies.

Particularly in the citrus industry, there is an increasing demand for the quality of products and the way they are produced, in addition to the concern about the impacts on the environment and the way the social benefits of this activity are distributed.

Some of these issues were already somewhat present in the late 1990s when there was a change of technology in the installation and production of seedling nurseries and citrus seeds. The measure aimed to prevent the spread of diseases that impacted citrus production in the country and that could endanger the environment, and consumer health and impact the economy.

Until 1997, the production of seedlings for citrus planting in the state of São Paulo occurred in the open, which facilitated the spread of diseases, especially those whose contamination occurs directly through the soil.^[5] With Ordinance CATI-7/1998,^[6] the marketing and transport of rootstocks and citrus seedlings produced in this environment were prohibited, which contributed to containing the spread of diseases and pests.

Currently, all the production of citrus nurseries in São Paulo follows state and federal legislation on the subject and seeks to align with the technological and scientific advances achieved in the area.

Article 28 of IN 48/13 is part of this context. But, at the disposal that "the production of citrus seedlings will be allowed only with the use of a substrate that does not contain soil", is he in front of the Constitution?

At the federal level, Article 1 of the Law 10.711/03 establishes that the national system of seeds and seedlings, "established in accordance with this law and its regulation", "aims to ensure the identity and quality of the material of multiplication and plant reproduction produced, marketed and used throughout the national territory".

That is, there is an express legal authorization of regulation for infralegal acts. The same interpretation may be given to Article 23, Caput, and §4, which conditions the certification process of seeds and seedlings and production to compliance with "the relevant standards and standards".

In addition, Article 2 of the Federal Decree 10,586/20, which regulates Federal Law 10.711/03, establishes that the Map is responsible for "the edition of the complementary acts and norms provided for in this Decree".

Article 54, which states that the "seedling production process comprises the production of propagating material and the production of seedlings in the nursery or in vitro propagation unit, in accordance with the provisions of a complementary standard, shall also be noted, and is finalized with the issuance of the sales invoice by the producer", and Article 102, which provides that "commercial operations of export and import of propagating material shall be carried out in accordance with the provisions of this Decree and complimentary standard".

It is concluded, therefore, that the provisions of IN 48/2013 followed the federal legislation on the matter, before the express authorization for the Map to regulate the production of seedlings and seeds.

From the point of view of the Constitution, the Supreme Court has a consolidated understanding that the "constitutional text of 1988 is clear when authorizing state intervention in the economy, through regulation and regulation of economic sectors", provided that in accordance with the principles of the economic order.^[7]

For all this, it does not seem possible to affirm that Article 28 of IN 48/2013 violates Federal Law 10.711/03 or the Constitution and, therefore, would not fit the questioning under ADI 7045.

^[1] In 2017, the deadline for producers to meet this standard ended.

^[2] This concentration brings us a relevant data: for every five glasses of orange juice consumed in the world, three were produced in the country. Information on the citrus industry and the orange market can be found on the website of the National Association of Citrus Juice Exporters (CitrusBR). Available in: https:// https://citrusbr.com/estatisticas/. Access: 3.4.2021.

^[3] See the agronomic institute (IAC), which maintains in Cordeirópolis, interior of the state, the Sylvio Moreira Citrus Center, and also several partnerships with various associations and foundations.

^[4] In this scenario, the newly created "Seal More Integrity" Award, through Ordinance 402 of February 23, 2022, of mapa, is highlighted, aimed at rewarding companies and agribusiness cooperatives that develop good practices of integrity, ethics, social responsibility and environmental sustainability.

^[5] For example, the Phytophthora (Nicotianae Phytophthora, which is the common cause of rot of the foot and root, and Phytophthora Palmivora, which causes brown fruit rot, as well as root rot in poorly drained soils with high groundwater). Information available at: https://citrusbr.com/noticias/greening-prejudica-manejo-de-patogeno-na-florida/. Access: 2.4.2022. And nematodes, organisms of varying sizes and abundant in soil and water. Information available at: https://maissoja.com.br/o-que-sao-nematoides/. Access: 2.4.2022.

^[6] SÃO PAULO (State). Ordinance CATI 7, of February 10, 1998. Official Gazette of the State, Executive Branch, São Paulo, 13 Feb. 1998. Section 1.

^[7] "(...) the constitutional text of 1988 is clear when authorizing state intervention in the economy, through the regulation and regulation of economic sectors. However, the exercise of such prerogative must be adjusted to the principles and foundations of the Economic Order, in accordance with Art. 170 of the Constitution. Thus, the faculty granted to the State to create norms of state intervention in the economy (...) does not authorize the violation of the principle of free enterprise, the foundation of the Republic (art. 1) and the Economic Order (art. 170, caput) - (RE 422.941 - Rel. E. Ministro Carlos Velloso DJ 24.03.2006).

Category: Tax

Defined as the "word of the year" of 2021 by Collins Dictionary, the NFT, acronym for the term Non-Fungible Token (or, in Portuguese, ”token não fungível”), has increased the attention from entrepreneurs and investors in recent years.

According to Cointelegraph Research,^[1] NFT sales grew from USD 41 million in 2018 to USD 2.5 billion in the first half of 2021, a 60-fold increase in just three and a half years. According to Reuters news agency, sales of NFT have reached nearly USD 25 billion in 2021.

The Blockchain User Behavior Report, a Dapp Radar platform, reveals that Brazil ended 2021 in world’s 3rd place in ranking of adoption of non-fungible tokens and market share of collectibles. Considering all NFT applications, Brazil finished in world’s 6^th place, only behind the UK, Philippines, Russia, USA and China.

Numerous concepts exist for NFT, which are challenging even for information technology experts. In any case, a non-exhaustive definition may be proposed: it is a unique digital certificate that serves to register, through =blockchain technology^[2], the property, or related rights, of an asset, such as a work of art or a collectible item, belonging to the real or even virtual world.

Based on this definition, three relevant aspects of NFTs can be learnt:

• NFTs are protected by blockchain, in which each block of the chain confirms the previous block veracity, ensuring integrity of all transactions performed, turning NFT into a permanent and reliable record (or certificate) of a right for those who hold it;
• they are unique, unfungible, and therefore irreplaceable;
• they represent a right over something that already exists in real or even virtual world.

Notwithstanding its economic relevance, some challenges may arise in relation to the tax treatment applicable to NFTs.

This is because real world and the Brazilian tax law don't necessarily evolve at the same rate. There are examples that prove this misstep, as is the discussion that started in the 1990s regarding the taxation of software transactions. The discussion took different steps and, only in 2021, the Brazilian Supreme Court ruled that software licensing represents an “to do” obligation, which is decisive for the ISS taxation on this type of obligation.

Although NFT still lacks regulation, Bill 4,207/20, of Senator Soraya Thronicke (PSL / MS), seeks to define NFTs as "intangible virtual assets (tokens) representing, in digital format, goods, services or one or more rights, which may be issued, registered, retained, transacted or transferred through a shared electronic device, which makes it possible to identify the holder of the virtual asset, and that do not qualify as securities listed in Art. 2 of Law No. 6,385,  of 7 December 1976".

As Bill 4,207/20 still lacks approval, NFT also lacks a legal definition.

The Brazilian Tax Authorities (RFB) however obliges those who operate with cryptoassets to report their operations (as per Normative Instruction No. 1,888/19). Penalties for those who do not provide this information may be applied, such as a 3% fine on the value of the transaction, for legal entities (with a 70% reduction for Simples Nacional), or 1,5% in the case of individuals.

According to Normative Instruction No. 1,888/2019, a cryptoasset is defined as "the digital form of value defined in its own unit of account, in local or foreign currency. Transactions of cryptoassets are made electronically using encryption and contributed records technologies, which can be used as a form of investment, instrument of transfer of values or access to services, and which does not constitute a legal currency".

While there is no specific standard on the subject, taxation should follow existing ones in the Brazilian legislation. A first possible approach considers that NFT should be taxed considering its own form. Although authors disagree that NFT qualifies as cryptoasset according to definition provided in IN 1.888/19, RFB qualifies NFTs as cryptoassets.

In RFB’s Questions & Answers (Q&A) of 2022, tax authorities clarified that although cryptoassets should not be deemed as legal currency under the current Brazilian regulatory framework, "they may be treated as assets subject to capital gain and must be declared at the acquisition cost in the Assets and Rights section of the Individual Income Tax Return (DIRF)” in cases where the acquisition cost of each cryptoasset is equal to or greater than BLR 5,000.00.

NFT were one of the cryptoassets listed by RFB in its Q&A. According to RFB, for DIRF’s filling purposes, code 10 should be selected for NFT, which discrimination should contain type, quantity and where it is custodiated.

In other words, according to RFB, NFT is cryptoasset, should not be deemed as a legal currency, and should be subject to the calculation of capital gain in the disposal of assets. RFB also clarified that "monthly gains higher than BRL 35,000.00 resulting from cryptoassets sales should be taxed as capital gains at progressive rates, and the collection of income tax must be made until the last working day of the month following the transaction (code 4600 should be selected for this purpose). The exemption for disposals of up to R$ 35,000.00 per month must observe the totality of cryptoassets sold in Brazil or abroad, regardless of their type (Bitcoin, altcoins, stablecoins, NFTs, among others)".

To the extent RFB’s understanding of NFT would prevail, then no taxation on consumption should be applied. This is because the São Paulo State Treasury Office has issued the State Rulling No. 22.841/20, providing that cryptoassets are not goods and, therefore, should not subject to the State Tax (ICMS).

In any case, NFT is a permanent record that extend rights to its owners. Depending on what is established in between the parties in an NFT negotiation, these may be property rights or not. This is because many argue that the taxation of NFT should not follow the form of NFT (as a single digital certificate), but the content itself underlying the NFT, observing the existing rules transactions involving this content. As an example, the artist will consider existing rules applicable to taxation on work of art sales.

The possibilities for the legal relationship created by NFT however are not limited to the transfer of a property. NFTs may represent the admission of an event, where taxation would observe the existing ones to sales of tickets. As an example, Super Bowl has sold it’s 2022's commemorative league tickets tied to NFTs.

For companies, other issues should be further analyzed, including whether the revenues arising from NFT sales are part of company’s activities or not, which will impact the corresponding taxation.

As we can see, in addition to the challenges related to the comprehension of this new technology, the analysis of the taxation applicable to NFTs also brings interesting developments. It is expected, however, that discussions will not last for 20 years, likewise those related to taxation of software licensing.

^[1] Independent digital media platform covering a broad spectrum of news about technology, blockchain, crypto assets and emerging fintech trends.

^[2] Created in 1991, the blockchain gained notoriety in 2009 with Satoshi Nakamoto, by implementing the bitcoin. Renata Barros Souto Maior Baião defined this technology as the "set of technologies that make up a data structure organized as a triple entry accounting. This essentially means that the records of this data contains the following elements: a) an entry that corresponds to an output; (b) an exit; (c) a validation layer created by the network, which ensures the output". Reference: Cadernos Jurídicos, São Paulo, year 21, nº 53, p. 154, January-March/2020.

Category: White-Collar Crime

The Federal Supreme Court (STF) en banc is expected to consider in April the constitutionality of article 50 of the Criminal Offenses Law (LCP)^[1] and, depending on the decision, there will be important and immediate repercussions on gambling in Brazil, which activity may no longer be considered a criminal offense.

The Public Prosecutor's Office of Rio Grande do Sul filed an extraordinary appeal with the STF arguing that the criminalization of gambling does not violate any fundamental precept and rightly aims to punish conduct typified as harmful by criminal law. The case originated in a decision handed down by the Criminal Appeals Panel of the Special Criminal Courts of Rio Grande do Sul, which held that the conduct described in article 50 did not meet the elements of a crime because it went against constitutional precepts such as free enterprise, fundamental freedoms, and the principle of proportionality.

The issue is one of general repercussion. If the unconstitutionality of article 50 of the LCP is recognized, the door will be open for the legalization of gambling in Brazil, regardless of the regulations proposed by the Legislative Branch through Bill 442/91 (PL 442/91).

Recently approved by the House of Representatives, PL 442/91 seeks to transform the exploitation of games of chance into a corporate economic activity, subject to inspection by federal public agencies and tax collection. The text approved joins proposals on legalizing the operation of casinos, bingo, gambling, and other games of chance to others that aim to obtain revenue from initiatives linked to the cultural sector.^[2]

The games and betting expressly authorized in PL 442/91 are: casinos, bingo games, videobingo games, online games, jogo do bicho, and turf betting. Regarding operators, the text defines "gambling and betting operator" to be the legal entity licensed by the government to operate games. The "gaming and betting agent", on the other hand, is the individual in charge of mediating or conducting the betting processes or the dynamics of the games.

The gaming and betting operator will have a complex corporate structure, with specific rules that, if not complied with, can generate more serious punishments than those currently imposed on gambling, considered only a misdemeanor. Avoidance of the regulations will be considered a crime subject to ordinary procedural rules, liable to imprisonment, and all the subjective criminal complexity that permeates corporate structures.

Also according to the bill, games and betting are private economic activities regulated by the Federal Government and subject to the constitutional protection of free enterprise, the Consumer Protection Code (CDC), and the General Data Protection Law (LGPD). Gaming and betting operators will have to submit to a series of criteria and obligations:

• be organized as corporations;
• have a minimum amount of capital stock, depending on the activity they intend to conduct;^[3]
• comply with "fair gaming" guarantees, including with regard to publicizing the activity and establishments; and
• be subject to the control and express approval of the Ministry of Economy,^[4] which may request the information and documents it deems necessary to clarify the operation, including "origin of the funds" and "reputation of those involved".

Operators must also be subject to the guidelines on money laundering and prevention of financing of terrorism, by implementing and maintaining a policy capable of preventing practices of this type, including a risk profile classification of players and bettors and reporting suspicious transactions to the Financial Activities Control Board (Coaf).

Gaming and betting agents cannot be people previously convicted of administrative misconduct, a bankruptcy crime, tax evasion, corruption, graft, embezzlement, a crime against the popular economy, the public faith, property, or the Brazilian Financial System, or any other criminal conviction that prohibits, even temporarily, access to public office, by a final and unappealable judicial decision.^[5]

Regarding penalties, PL 442/91 establishes that simple non-compliance with legal rules can constitute an administrative infraction and a crime punishable by imprisonment from two to four years. Anyone who defrauds the result of a game or bet, or even pays a prize in violation of the law, can also be convicted of a crime and subject to imprisonment from four to seven years and a fine.

It is worth remembering that, in the Brazilian legal system, criminal liability of legal entities is restricted to crimes against the environment, such that the conduct listed in the bill is aimed at punishing individuals. The agent of games and betting emerges as the main subject exposed criminally, but one must also consider the criminal exposure traditionally linked to members of any corporate organization, including with regard to tax crimes that violate the tax collection system imposed by PL 442/91.

The liberalization of gambling in Brazil through this bill still depends on Senate and presidential approval.

^[1]RE n. 966177/RS had its general repercussion recognized in 2016 and corresponds to Topic 924.

^[2] To wit: PL 442/91, which proposes revocation of the legal provisions that mention the practice of gambling; PL 73/2021, which provides for the Federal Government's financial support to the states, Federal District, and municipalities to guarantee emergency actions aimed at the culture sector; and PL 1518/2021, which promotes the institution of a national policy to foster the culture sector.

^[3] The required capital stock varies according to the activity to be conducted, with a minimum of R$10 million for bingo operators and a maximum of R$100 million for casinos.

^[4] The bill provides that corporate acts such as changes in corporate purpose or capital, mergers, splits, or takeovers will require the express approval of the Ministry of Economy, and that the entrance of a qualified shareholder or an increase in qualified shareholding equal to or greater than 15% must be reported.

4 The bill has wording regarding impediments very similar to cases of ineligibility to occupy management positions in corporations (article 147, paragraph 1, of Law No. 6,404/76)

Category: Tax

A recurrent and still controversial topic in the scope of the Administrative Tax Appeals Board (Carf) is the application of an isolated fine of 50% for non-payment of Corporate Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL) advances, cumulated with an ex-officio fine of 75%.

The discussion regarding the possibility of simultaneous charging of fines in IRPJ and CSLL assessments is based on the provisions of article 44, subsections I and II, of Law 9,430/96, as amended by Law 11,488/07. This legislative change divides the discussion into two periods.

For taxable events prior to 2007, that is, occurring before the legislative change, the understanding was consolidated by ruling out the cumulative collection of the fines. Only the requirement for the ex officio fine was maintained. This position is already settled, and was even the subject of Carf Precedent 105, approved in 2014. However, for the taxable events that occurred after 2007, the debate continues.

Those who argue for the possibility of accumulation allege that the change brought about by Law 11,488/07 differentiated the calculation bases for the two fines (the 50% fine is now calculated on the monthly payment, while the 75% fine is calculated on the entirety of the unpaid tax), solving the original problem of identity of bases that would prevent double payment. Also, in a finalistic argument to justify the double penalty, they argue that maintaining the penalty is essential to prevent the harmful taxpayer behavior of evading payment of the estimates.

On the other hand, those who argue for the impossibility of accumulation affirm that, in the annual form for calculation of the IRPJ and CSLL, the monthly estimates, by their very name, are mere provisional anticipation of the eventual amount due when the taxable event occurs, that is, on December 31 of each calendar year. In this sense, non-payment of the estimate is a "passing" offense, a preparatory act for the act of reducing the IRPJ or CSLL at the end of the year, while non-payment of the estimate is only the means of execution for non-payment of the annual amounts. The basis for this reasoning is the penal principle of consonance or absorption, in which penalty as a means is absorbed by the penalty as an end in itself, not resisting the application of two penalties. Furthermore, penalizing the taxpayer for the same conduct with a 75% fine^[1] and a 50% fine would be excessive, exceeding the reasonableness and proportionality required.

The current scenario of the Carf is one of uncertainty, with decisions being made in both directions, and often in tie votes (resolved by the provisions of article 19-E of Law 10,522/02, in favor of the taxpayer).

The situation is aggravated by the current distribution of jurisdiction for deciding the issue in the Superior Chamber of Tax Appeals (CSRF), i.e. the highest judgment bodies in the federal administrative sphere. Although this is traditionally a matter for the bodies of the 1st Section only, responsible, according to article 2, subsections I, II, and VI, of the Internal Rules of the Carf (Ricarf) for administrative proceedings that deal with IRPJ, CSLL, and related penalties, by force of Carf Ordinance 15,081/20, this competence was provisionally extended to the 3rd Panel of the CSRF, responsible, in principle, for judgments on contributions to PIS and Cofins, IPI, customs, and IOF, among others. Therefore, at present, depending on the date of filing of the appeal, the same issue can be examined by one of the two superior judgment bodies: 1st or by the 3rd Panel of the CSRF.

In a historical analysis, taxpayers who had their claim reviewed by the 1st Panel had better luck, with a decision declaring the impossibility of simultaneous levy, regardless of the year of the taxable event, due to the rule of article 19-E of Law 10,522/02 (see appellate decision 9101-005.986).

The 3rd Panel of the CSRF, on the other hand, reviewing the same issue under this provisional jurisdiction, has been deciding by majority vote in favor of the possibility of maintaining the simultaneous collection for triggering events after 2007 (see appellate decision 9303-012.015).

However, the 1st Panel of the CSRF seems to be changing its position, aligning itself with the understanding of the 3rd Panel of the CSRF. In the April 2022 session, by majority vote, the 1st Panel dismissed a taxpayer's special appeal and upheld the levy of the fines concurrently. What seems to have been decisive for reversal of the discussion was the change in the composition of the body, with the entry of alternate board member Gustavo Guimarães Fonseca, who expressed his position in favor of maintaining the collection of fines concurrently.

This change in case law, in our view, makes visible the legal insecurity emanating from the body and the instability of the case law formed.

In the judicial sphere, the Second Panel of the Superior Court of Appeals (STJ) has ruled that the principle of consolidation must be applied in situations of concomitance of the payment of an isolated fine and an ex-officio fine for failure to pay the tax ascertained at the end of the fiscal year and for failure to advance it in the form estimated,^[2] since the more serious offense encompasses the lesser one.

The understanding brought in by the Second Panel of the STJ goes against the position adopted by part of the Carf judges when they limited the application of Carf Precedent 105 to taxable events occurring before 2007.

The Federal Supreme Court, in turn, has no appeals endowed with general repercussion that discuss identical theories, but, based on the fact that the concomitant imposition of these fines results in payment of a penalty of more than 100% of the tax, in line with prior decisions of the Supreme Court,^{[3] [4]} we would have the payment ruled out due to recognition of its confiscatory nature.

Although they are not mandatory for Carf's panels, according to article 62, paragraph 1, subsection II, letter "b", of Annex II of the Ricarf, these decisions signal the normative interpretation by the highest judicial bodies and should be considered to be determining precedents for the correct outcome of the case. The expectation is that Carf will rethink its position and rule out the payment of cumulative fines, consolidating a scenario that respects the boundaries of our legal system for the application of penalties.

^[1] Without considering the existence of fraud or deceit, which can increase the fine by 150%.

^[2] AgRg no REsp 1.499.389/PB, opinion drafted by Justice Mauro Campbell Marques, Second Panel, DJe 9/28/2015; REsp 1.496.354/PR, opinion drafted by Justice Humberto Martins, Second Panel, DJe 3/24/2015.

AgInt no AREsp 11603525/RJ, opinion drafted by Justice Francisco Falcão, Second Panel, Dje 11/25/20020

^[3] A.g Reg no RE 833.106/GO

^[4] Recently, the general repercussion was recognized in Topic 1.195 in order to review the constitutional issue regarding the "possibility of setting a punitive tax fine, not qualified, in an amount greater than 100% of the tax owed.”

Category: Capital markets

Among the innovations brought about by Executive Order 1,103 (MP 1,103/22), which deals with general rules applicable to the securitization of receivables and the issuance of receivables certificates, among other topics, one of the most relevant is the possibility of establishing a fiduciary arrangement in operations whose receivables are linked to the payment of any type of securities.

Published on March 15 by the federal government, the executive order establishes in the sole paragraph of its article 17 that "securitization operations are considered to be the issuance and placement of securities^[1] with investors, whose payment is primarily conditioned on the receipt of funds from the receivables that back it.

Until then, the possibility of establishing a fiduciary arrangement was restricted to operations involving Real Estate Receivables Certificates (CRIs) or Agribusiness Receivables Certificates (CRAs), as provided for in articles 9 of Law 9,514/97 and 39 of Law 11,076/04, respectively. Article 24 of the new executive order, however, extends the possibility of establishing a fiduciary arrangement to operations whose receivables are linked to securities of any kind:

"Article 24. The securitization company may institute a fiduciary arrangement over the receivables and over the goods and rights that are subject to the collateral agreed in favor of the payment of the Receivables Certificates or of other rights and securities representative of securitization operations^[2] and, if any, of the compliance with obligations assumed by the grantor of the receivables."

Article 25 and paragraph 7 of article 21 determine that the fiduciary arrangement will be instituted by unilateral declaration of the securitizing company, when signing the securitization consent or the instrument of issuance of the securities in question. Both the securitization consent and the instrument of issuance must be registered with an entity authorized by the Central Bank of Brazil or the Securities and Exchange Commission of Brazil, which are responsible for exercising the activity of registration or centralized deposit of financial assets and securities, according to Law 12,810/13.

Once the fiduciary arrangement is established, article 26 of MP 1,103/22 determines that the receivables linked to it will be subject to the following rules:

• they will constitute separate equity, which should not be mixed with the company's common equity or with other separate equity of the securitizing company resulting from the creation of a fiduciary arrangement in other securities issuances;
• they will be kept separate from the common equity and other separate equity of the securitizing company until full amortization of the issuance to which they are allocated is completed;
• they will be destined exclusively for the liquidation of the securities to which they are allocated and for payment of management costs and related tax obligations, observing the procedures established in the issuance documents;
• they will not answer before the creditors of the securitizing company for any obligation;
• they will not be subject to the creation of collateral by any of the creditors of the securitizing company, whatever priority they might have; and
• they will only be liable for the obligations inherent to the securities to which they are linked.

The new rule is not entirely new to the market. Something similar to the fiduciary arrangement was already being done in operations that did not involve real estate receivables - CRIs or CRAs - through some legal rules. An example are financial debentures, regulated by Resolution 2,686/00, of the Brazilian Monetary Council. In these operations, a fiduciary assignment was usually constituted over the financial receivables linked to the issuance, to protect the investor against creditors of the securitization company. These mechanisms, however, brought about a series of operational complications, complexity in the structuring of documentation, and an increase in costs with registration in notaries of deeds and documents of the collateral, especially in the case of revolving receivables.

By making possible a greater standardization in the structuring of operations with different securities, providing a reduction in costs and greater legal security for investors in relation to the shielding of the linked receivables against creditors and other obligations of the securitization company, PM 1,103/22 contributes to strengthening the securitization industry in Brazil.

The rule entered into force on the date of its published, but still needs to be converted into law by the Brazilian Congress. Its term of duration is 60 days, extendable automatically for the same period, if the vote is not completed within the deadline stipulated.

^[1] Emphasis added

^[2] idem