Category: Labor and employment

The use of algorithms by companies to achieve a certain result has become increasingly common. This is the case of Facebook's algorithm, for example, which is one of the best known for defining what will be displayed in each user's feed. Little has been discussed, however, regarding the liability of companies and the consequences of the use of algorithms.

Recently, the Section Specialized in Individual Disputes (Subsection II) of the Court of Labor Appeals for the 1st Circuit granted the performance of an expert examination in the source code of an application to determine the existence or lack thereof of an employment relationship between the company and the driver for the application.

The intention is to identify the artificial intelligence data that influence the employment relationship, such as the distribution of calls, the definition of values of services, the preterition and/or preference of some workers as a result of the ratings provided by consumers, and even possible application of sanctions, such as blocking of the worker himself.

Although the result of the expert report is not yet available, the mere granting of the plaintiff's request is enough for some reflections on the impact of algorithms on the employment relationship, this time as the very evidence of the employment relationship.

According to the judge drafting the appellate decision that granted the performance of the expert examination, one could not fail to consider information deposited in technological instruments with rigorous records, to the detriment of other more "weak" means of proof, such as oral evidence, in view of the fallibility of human memory, and the variability of perception of the facts, which allows for various different narratives about the same reality.

In other words, although the legislation provides that there is no hierarchy among forms of evidence, one of the grounds that supported authorization of the expert opinion refers to the alleged robustness of the expert evidence in detriment of the others. However, when it comes to algorithms, this premise could easily be disproved.

The purpose of the algorithm is dissociated from the purpose of the Labor Courts, which is why it is possible that the number of hours the driver was logged on does not correspond to the number of hours he was actually working, for example.

In addition, we cannot forget that, in order to obtain data by the algorithm, it is essential to have a person responsible for defining the structure of the basis on which the data will be stored and a person responsible for supplying it, even based on virtual sensors. This means that algorithms are easily manipulated, since they necessarily involve human participation, whether for the definition of applicable guidelines or for the organization, development, and governance of information, such that they also present fallibility.

That is where the second discussion on the subject comes in: the liability of developers and companies. By accepting as a means of proof an expert examination done on algorithms as though it were something absolutely automated and safe, the Labor Courts themselves create a distance between programmers who build algorithmic systems and companies.

The distance created by the Labor Courts weaken the very accountability of programmers, who tend not to feel morally and legally responsible for the negative effects of the algorithm, among them the use of biased databases that may originate even in data collection, triggering the problem of algorithmic discrimination, for example. For this reason, the Labor Prosecutor's Office has set up a group against algorithmic discrimination in order to investigate companies that use biased algorithms. It is called machine bias or algorithm bias.

Although the distance between programmers and companies may denote an apparent absence of liability of these professionals, every employee, like every individual, is subject to the general rule of civil liability provided for in article 927 of the Civil Code, according to which those who, through an unlawful act, cause damage to another are obliged to repair it.

The company itself may also be held liable, as controller of the data subjects' personal data, pursuant to article 42 of Law No. 13,709/18 (LGPD), according to which the controller who, due to the exercise of personal data processing activity, causes to another person property damage, non-economic, individual or collective, in violation of personal data protection legislation, is obliged to repair it.

Thus, it will be incumbent on the companies to take the precautions necessary to avoid this liability, including in relation to the programmers, who make the algorithmic system as fallible as testimonial evidence, for example.

To this end, it is important that the creation of innovation areas in companies be accompanied by the execution of specific employment contracts with these professionals, with express provisions relating to cases of employee liability, as well as the creation of their own internal policies that must be observed for this purpose.

This means that, with the implementation of innovation areas to optimize the business model of companies, certain labor precautions are required, the observance of which can even prevent the liability of companies and programmers for the algorithmic system used, which, more often than not, may go unnoticed in internal policies.

Category: Competition

The General Superintendence of the Administrative Council of Economic Defense (Cade) established a new understanding in a recent decision, in line with two other precedents from the end of last year, regarding the turnover calculation applicable to economic groups when assessing whether a transaction is subject to mandatory merger filing with Cade.

According to the Brazilian Competition Law (Law No. 12,529/11), transactions that entail an economic concentration with effects in Brazil must be subject to Cade’s review and prior approval when one of the economic groups involved in the transaction has registered annual gross turnover or volume of sales in Brazil of at least BRL 750 million in the year before the transaction, and another group involved in the transaction has registered annual gross turnover or volume of sale in Brazil of at least BRL 75 million in the same period. The parties shall follow the criteria provided by Cade’s Resolution No. 02/2012 in order to identify which companies shall be considered as part of their economic groups.

In such context, it is important to determine when is the right moment to identify the companies of an economic group and, as a second step, calculate their turnover in the previous year. Should it be on the last day of the year before the transaction? On the transaction agreement signing date? Sometime before closing the transaction?

In the past, the turnover of an economic group was calculated based on its composition at the end of the year before the transaction. A few years ago, Cade’s General Superintendence had reviewed its interpretation and started to consider the composition of the economic group on the date of the transaction, i.e., the signing date of the agreement to be potentially notified to Cade. However, Cade’s General Superintendence has recently stated that the date of submission of the transaction to Cade is the relevant moment to be considered in order to identify the composition of the economic groups to then calculate their turnover.

Whereas, under the applicable rules, the notification may be submitted at any time before closing, it is necessary to be aware of situations in which the turnover threshold in the previous year is not met at signing but may be met before closing - either by the increase in turnover of companies that were already part of the economic group, or by the acquisition of new companies.

For instance, in a transaction between Group A and Group B with the signing in October 2021, both groups will consider their turnover on December 31, 2020. If Group A met the turnover of BRL 750 million, but Group B did not meet the turnover of BRL 75 million that year, the submission of the transaction to Cade is not required. However, if closing occurs only in February 2022, it is recommended to additionally check the economic groups’ turnover in 2021. If, throughout 2021, the companies that were part of Group B in 2020 increased their turnover or the parent of such group bought a new company whose turnover, added to the other companies of the group, reaches the threshold of BRL 75 million, the merger filing will be considered mandatory by Cade, according to the current understanding.

Thus, although the understanding of Cade’s General Superintendence may be questioned or even reviewed in future cases, it is recommended to carry out the assessment of the need to submit the transaction to Cade’s review both at signing and sometime before closing, if such measures do not take place simultaneously or in a short period of time.

Category: Infrastructure and energy

The Brazilian mining sector has undergoing several changes in recent years. These are changes that seek to bring more dynamism and legal certainty to the sector, filling old gaps related to mining practice and addressing social and environmental issues in a more responsible way, with clearer standards and in line with international best practices. The goal is to make the Brazilian mining market more attractive to new investors and the development of new projects, with more tools to enable the fundraising needed to do so.

Significant changes were introduced with the creation of the National Mining Agency (ANM) in 2017 and the replacement of the old mining code regulation in 2018, through Decree No. 9,406/18, which brought stricter rules on mine closure and accountability in relation to dams and recovery of degraded areas, as well as new rules on the term of mineral exploration authorizations,  encouraging the economic use of mining waste and the introduction of public offerings and electronic auctions for the areas availability procedures.

The rules of supervision and safety of dams also underwent relevant changes, among them the criteria of risk assessment, the guidelines for the elaboration of the flood map and the deadlines for presentation of the map based on the classification of the Associated Potential Damage (DPA) of each dam.

Several rules have already been enacted and others still need to be enacted to increase supervision and requirements on dam safety. Among those already enacted, we have Law No. 14,066/20, which amended the National Dam Safety Policy and ANM Resolutions No. 32/20, 51/20 and 56/21, which provide for safety and supervision of tailings dams and conformity and operational assessment of the Emergency Action Plan for Mining Dams (PAEBM).

In the same vein, RESOLUTIONS ANM No. 59/21 and 71/21 deal with technical cooperation agreements between the ANM, states, federal district and municipalities for mutual cooperation in the performance of actions and activities complementary to the supervision of mining activity provided for by the new mining code.

All this revised legal framework follows the efforts of the federal government released by the Ministry of Mines and Energy under the Mining and Development Program published in September 2020. One of the program's goals is to improve parameters for dam safety, observing points such as regulation, control, supervision, monitoring and responsibilities.

In compliance with Law No. 13,848/19 on management, organization, decision-making and social control of regulatory agencies, ANM disclosed its regulatory agenda^[1] with the topics it understands as priorities and has been periodically disclosing the progress of these regulations.

ANM's 2020-2021 Regulatory Agenda was divided into six thematic axes:

• Transverse
• Sustainability
• Mineral research
• Production
• Mineral water
• Financial Compensation for the Exploration of Mineral Resources (CFEM)

Axis 1 – Transversal comprises themes that are a recurring target of questioning the ANM and are intrinsically related to the development of mining activity, such as conflicts arising from mining, availability of areas, guarantees for financing purposes and alternative means for conflict resolution.

The analysis of mediation, conciliation and administrative arbitration as alternative means for conflict resolution stemming from mining activity is in the preliminary phase of ANM studies. The idea is to make up a specific body of the ANM to assist in the resolution of conflicts in accordance with article 2 item XIV and Article 17 of Law No. 13,575/17. These are issues such as conflicts of mining blockades, dismemberment and overlap of areas, conflicts between holders of mining rights and illegal prospectors, quilombolas, indigenous, environmental agencies and other agents with conflicting interests.

On the other hand, the project of collaterals for financing, one of the most relevant of Axis 1 and even of the mineral sector, aims to regulate Articles 43 and 44 of Decree No. 9,406/18. The objective is to reduce transactional costs for private agents and for the administrative activity of the ANM, favoring the autonomy of the parties in the negotiation, contracting and structuring of fundraising operations. The project is in the advanced stage. Preliminary studies and public consultation on the draft resolution have already been completed. However, in February of this year, the Specialized Federal Prosecutor's Office with the National Mining Agency (PFE/ANM) delivered an opinion limiting the issue of the title in the initial research phase, which again delayed the publication of the resolution.

With regard to Axis 2 – Sustainability, the projects being discussed refer to the mine closure plan (which was completed and transformed into ANM Resolution No. 68/21), as well as financial guarantees to cover risks of mining activities – which is still in the intermediate phase, seeking contributions and subsidies for a new normative act. There is a third project that refers to the use of waste pile and tailings and is a matter of great relevance for mining. The public consultation ended in January 2021, and has already had the project forwarded to the General Secretariat of the ANM for PFE /ANM to prepare the final opinion before the completion of the process by the collegiate board of ANM and consequent publication.

Axis 3 - Mineral Research presents two projects, one focused on the system of certification of resources and reserves and the other to the standardization of criteria for application and evaluation of aerophotogrammetry products. The latter (still in the initial phase) aims to standardize the receipt of information obtained from Drones and regulate the use of such devices. The project that discusses the system of certification of resources and reserves is in advanced stage. The draft resolution was presented and the opinion issued by PFE/ANM, leaving only to make the final adjustments of the draft and forward it to the board of directors of the ANM for final deliberation.

Axis 4 - Production has several projects. One of the most relevant is what discusses certification in dams. The project is advanced and is divided into two steps. The first was completed by publishing ANM Resolution No. 56/21 (which amended Resolution 51/20 to (i) determine that the technical responsible for issuing the Declaration of Conformity and Operability of the PAEBM should be different from the technical responsible for the preparation of the PAEBM and (ii) dispose of the study of hypothetical ruptures in force of the dam). The second stage plans to consolidate in a single regulation the legislation today applicable to the safety of dams – which includes Ordinance DNPM No. 70,389/17, ANM Resolution No. 13/19, ANM Resolution No. 32/20, ANM Resolution No. 40/20, ANM Resolution No. 51/20 and ANM Resolution No. 56/21. In addition, it is also expected to include the regulation of innovations brought by Law No. 14,066/20, which changed the requirements for the certification of dams.

One of the several projects of Axis 5 – Mineral Water deals with the telemetry system for monitoring mineral water mining, an important tool to help manage the information of this resource. The public consultation to receive contributions to specify the application of telemetry was closed on August 17 of this year.

Finally, Axis 6 - Supervision and CFEM presents four projects: the regulation of Law No. 13,540/17, which provides for CFEM; the inclusion of new substances in the reference value system; economic and fiscal information of the CFEM; and the national register of the first purchaser of mineral goods from the artisanal mining permit regime.

The draft regulation of Law No. 13,540/17 waits for pfe/anm to express itself and issue its opinion. The project aimed at the inclusion of new substances in the reference value system is at the initial level. It has been impacted by the departure of some team members, and is expected to be included in the 2022 and 2023 regulatory agenda.

The project that deals with the economic and fiscal information of the CFEM is with the collegiate board of ANM for evaluation and approval of the opening of public consultation on new standard. The team responsible for the project has been working on the development of an electronic system focused on the declaration of economic and fiscal information of the CFEM.

The project referring to the national register of first acquirer of mineral goods from the mining permit scheme is in advanced stage and already has draft resolution. The public consultation process was closed in June this year, and the contributions report is in the final stages.

^[1] In September 2020, an extraordinary review of the Regulatory Agenda 20-21 was carried out, inserting new themes and changing the schedule of some of the projects already foreseen by the agenda.

Category: Restructuring and insolvency

One of the pillars of every company in judicial reorganization is the search for the best and most efficient means of recovery, in order to achieve both the approval of the reorganization plan by creditors and its organized implementation, consistent with its economic and financial planning and maximum valuation of assets and activities.

One of the most traditional means available to support a company in judicial reorganization is precisely the sale of assets, a process that has undergone profound and important changes in its regulation stemming from the enactment of Law No. 14,112/20, which changed the Law on Recovery of Companies and Bankruptcies (Law No. 11.101/05 – LRF).

The first and important step taken by the legislator was to create, through the reform carried out by Law No. 14,112/20, the legal definition of an isolated production unit (UPI), which includes assets, rights or assets of any nature, tangible or intangible, isolated or jointly considered, including equity interests. Prior to the recent reform, the LRF did not clearly establish which assets could qualify as UPI. In practice, operations of this nature ended up covering the most diverse forms and types of assets.

The legislator was very keen to include in this modality the complete disposal of the debtor (art. 50, item xviii of the LRF), further expanding the range of possibilities to promote the recovery and satisfaction of creditors. However, the article in question states that non-submitted or non-acceding creditors must be guaranteed conditions at least equivalent to those they would have in bankruptcy. At this point, it is also worth mentioning the new provision of the LRF that authorizes the Treasury to request the convolation of the judicial recovery in bankruptcy, when it finds emptying of the debtor's assets or in cases of non-compliance with special tax installments during the judicial recovery process.

In the event of bankruptcy by substantial liquidation of the company, the disposals carried out shall be preserved and considered effective, so as not to harm the third acquirer in good faith. The proceeds of these disposals, on the other hand, should be blocked, with the consequent return to the debtor of the amounts already distributed to any creditors, which will be available to the court.

It is also noteworthy the innovation of making the sales process of UPI and branches more flexible, which no longer needs to be implemented necessarily through auction, trading or presentation of closed proposals. This made the process faster and more objective, benefiting the parties involved. Law No. 14.112/20 has expressly allowed the conduct of the process of selling assets through electronic auction (face-to-face or hybrid) and through competitive process promoted by specialized agent and of unblemily reputed reputation (in addition to any other modalities approved by the LRF). Thus, the procedure was adapted to the new reality of social distancing imposed by the pandemic of covid-19, without affecting the efficiency of the process.

The reform of the LRF also sought to bring greater legal certainty to the process of selling assets and, thus, to promote this means of recovery, by indicating that, provided that the sale of an asset by the recoverer observes the provisions of § 1 of art. 141 and art. 142, this asset will be free of any burden and there will be no succession of the acquirer in the debtor's obligations,  including, but not exclusively, those of an environmental, regulatory, administrative, criminal, anti-corruption, tax and labor nature.

In other words, the investor will be exempt from the liability and risks of succession of the recoverer in some way linked to the asset, which aims not only to increase the interest of creditors in general but, consequently, to increase the price and value the acquisition of the asset.

In any of the means permitted by the LRF, however, the Public Prosecutor's Office and public treasury shall be subpoenaed, electronicly, in accordance with current legislation and respect ing the respective functional prerogatives, under penalty of nullity. It will be interesting to follow the position adopted by the Public Treasury in the analysis of the disposal of an asset that is directly linked to a certain tax liability and/or is the subject of attachment or offered as collateral in tax liabilities.

It is not yet clear whether the previous analysis made by the Public Treasury may delay and even derail the completion of the disposal of assets, if it itself questions the disposal, coming to consider it an act of asset emptying and even, in the future, a fraud to execution, pursuant to Article 185 of the National Tax Code.^[1]

In the case of the liquidation of assets in bankruptcy situations, pursuant to Article 143 of the LRF, the right of creditors and the Public Prosecutor's Office to challenge the sale process has been preserved. If the measure is based on in the sale value of the good, only the challenges of the creditors accompanied by a firm offer of the contestor or third party for the acquisition of the good, respecting the terms of the notice, at present value higher than the value of sale, and of a deposit equivalent to 10% of the value offered will be processed.

In conclusion, the LRF, reformed by Law No. 14,112/20, brought important changes in the rules of disposal of assets in order to stimulate its realization, especially by creating a more famous and more flexible procedure and endowed with the necessary legal certainty.

^[1] Art. 185. The disposal or burden of assets or rents, or its beginning, by a taxable person in debt to the Public Treasury, is presumed fraudulent by a tax credit regularly entered as active debt.

Category: Real estate

The rise of the dollar and the growing demand for commodities led to a significant increase in the General Market Price Index (IGP-M), an index calculated by the Brazilian Institute of Economics (Ibre) of Getulio Vargas Foundation (FGV). Although the Brazilian Lease Law does not determine which index should be used for adjust the lease agreements rental, IGP-M is traditionally used.

This significant increase in the IGP-M has triggered several discussions about the rightness of its application in lease relations and led tenants and landlords to negotiate the adoption of other indices, such as the Amplified Consumer Price Index (IPCA) – calculated by the Brazilian Institute of Geography and Statistics (IBGE) to "measure the inflation of a set of products and services in the retail market, referring to the personal consumption of families".

The IGP-M is measured monthly and seeks to stipulate the "variation in the prices of goods and services, as well as raw materials used in agricultural, industrial and construction production". It results from a weighted arithmetic average of three other indices:

• 60% of the Wholesale Price Index (IPA-M), which records the variation in prices in inter-business transactions between agricultural and industrial producers, such as commodities, and is especially impacted by the exchange rate;
• 30% of the Consumer Price Index (IPC-M), which registers the daily price variation of a fixed set of goods and services, reflecting the oscillations on the purchasing power of families; and
• 10% of the National Construction Cost Index (INCC-M), which measures the evolution of housing construction costs and is also impacted by the price of commodities, such as steel and cement.

Choosing IGP-M as an index for calculating the annual adjustment of rent values goes back to the hyperinflation period – before the Plano Real was implemented. At the time, the controlled exchange rate was adopted and the linking of the IGP-M to the exchange rate variation prevented the value of rents from being eroded.

The option for the IGP-M is also related to the fact that its disclosure is made in a cumulative and periodic manner in three distinct moments: previous projections of the first and second periods of ten days and final index. The first disclosure is based on information from the period from the 21^st to the 30^th day of the month preceding the reference month, while the second comprises the period of 21^st day of the prior month and the 10^th day of the reference month. The third disclosure is the value of the final index. Thus, the way of disclosure of the index offers another advantage: the assurance of greater predictability and transparency for contractors.

With the adoption of the Plano Real in 1994, the IGP-M and the IPCA began to reach similar levels, so that there were no risks to the maintenance to keep the IGP-M as the readjustment index of rental leases. However, when the variable exchange rates took place in 1999, the IGP-M index grown up fast, becoming, in general, higher than IPCA. Although, at times, the IGP-M reaches annual variations lower than the IPCA – including negative variations, such as in 2017, the year in which the IGP-M was -0.52%, while the IPCA was calculated at 2.95% – this change occurs in periods of a drop in the parameters used to calculate the IGP-M – negative exchange rate and/or reduction in commodities prices – which do not directly affect the calculation of the IPCA.

The calculation of the IGP-M is directly affected by the situation of the foreign market. Currently, with the rise in the price of the dollar, tied to the increase in demands for commodities there was a significant increasing in the IPA-M and, consequently, in the IGP-M (until July 2021 it accumulate over than 36.8% in the last 12 months). On the other hand, the IPCA reached the level of 9.38% during the same period.

Considering the current scenario, five bills of law (PL) were filed in the House of Representatives trying to solve the crisis. They are:

• PL no. 1,255/21, authored by congresswoman Renata Abreu (Podemos/SP), which aims to establish the maximum adjustment not superior to twice the annual IPCA;
• PL no. 1,447/21, authored by the congressman Aureo Ribeiro (Solidariedade/RJ), which intends to determine the IPCA as an index of adjustment for all lease agreements of urban properties, allowing the adoption of other lower indexes, except if a superior is expressly approved by the tenant, also prohibiting the adjustment until 12/31/2022;
• PL no. 1,538/21, authored by the congressman Carlos Veras (PT/PE), who aims to create a specific law establishing the IPCA as an index for residential leases of urban and non-residential property, provided that tenants are classified as micro-enterprises, small-sized companies, individual entrepreneurs or liberal professionals, including the possibility of judicialization review of the contractual for whose adjustment, as of March/2020,has occurred by the IGP-M;
• PL no. 2,554/21, authored by the congressman Cleber Verde (Republicanos/MA), to determine that the adjustment index cannot be higher than the arithmetic average obtained between the IGP-M and the IPCA; and
• PL no. 1,026/21, authored by the congressman Vinícius Carvalho (Republicanos/SP), which proposes that the adjustment index may not be higher than the IPCA, unless the collection of higher value is expressly authorized by the tenant.

Currently, the projects are attached to Bill of Law No. 1,026/21, which is being processed as a matter of urgency and awaits for the vote in the plenary of the House of Representatives. The projects received, on 06/14/2021, the opinion of the Constitution and Justice and Citizenship Commission, which, despite "recognizing good intention", voted to reject all of them, understanding that the effects resulting from the approval would be contrary to those intended.

In addition to the initiative in the House of Representatives, the Social Democratic Party (PSD) filed, on 07/21/2021, the Argument for Breach of Fundamental Precept (ADPF) No. 869. The ADPF intends that, according to the interpretation of Article 317 of the Civil Code and Articles 17 and 18 of the Brazilian Lease Law based on the Constitution, the adjustment of residential or non-residential lease contracts should occur through the application of the IPCA, replacing the IGP-M, even if contractually chosen. In a supplementary manner, the ADPF requires the application of the IPCA to readjust residential and non-residential lease contracts during the coronavirus pandemic, claiming the constitutional illegitimacy of the set of decisions that determines the application of the contractually established IGP-M.

On 08/19/2021, the Office of the General Counsel for the Federal Government expressed opposition to the request, arguing that the violation of the constitutional precepts indicated– Article 317 of the Civil Code and Articles 17 and 18 of the Brazilian Lease Law – was not demonstrated.

Regarding the decisions within the courts of justice, there is no peaceful understanding. There are favorable decision to non-judicial intervention in relations between private entities, as well as decisions determining the replacement of the rental readjustment index to ensure the balance between the contractual parties.

Considering the absence of a peaceful position in the courts and that the measures suggested by the Legislative and Executive have not yet been appreciated, the best way to solve the crisis generated by the application of IGP-M in lease agreements remains the negotiation between landlord and tenant.

References:

RIMOLI, Flavius Tambellini. The discharge of the IGP-M and the intervention of the Judiciary. Crumbs, July 27, 2021. Available in: <https://www.migalhas.com.br/depeso/349078/a-alta-do-igp-m-e-a-intervencao-do-poder-judiciario>.

MAGRI, Diogo. IGP-M explosion brings disproportionate increase in rent and reveals index that has aged. The country, April 15, 2021. Available in: <https://brasil.elpais.com/economia/2021-04-15/explosao-do-igp-m-traz-aumento-desproporcional-do-aluguel-e-revela-indice-que-envelheceu.html>.

CARNEIRO, Luiz Orlando. PSD requires the Supreme Court application of the IPCA in lease agreements. JOTA, July 21, 2021. Available in: <https://www.jota.info/stf/do-supremo/ipca-aluguel-stf-21072021>.

MENDES, Jaqueline. The disproportionate strength of the IGP-M. That is, August 13, 2021. Available in: <https://www.istoedinheiro.com.br/a-forca-desproporcional-do-igp-m/>.

IGP-M: Results 2021. Getúlio Vargas Foundation, January 4, 2021. Available in: <https://portal.fgv.br/noticias/igp-m-resultados-2021>.

IPCA - Broad National Consumer Price Index. Brazilian Institute of Geography and Statistics. Available in: <https://www.ibge.gov.br/estatisticas/economicas/precos-e-custos/9256-indice-nacional-de-precos-ao-consumidor-amplo.html?=&t=o-que-e>

General Price Index - Market (IGP-M). Value Consulting. Available in: <https://www.valor.srv.br/indices/igp-m.php>

Category: Litigation

The Superior Court of Justice (STJ) concluded the trial of Special Appeal No. 1903273/PR, under the rapporteurship of Minister Nancy Andrighi, and decided that the public disclosure of messages exchanged on the social media WhatsApp constitutes an unlawful act.

The Third Panel of the STJ maintained the understanding of the lower and the appellate court judge and, therefore, the obligation to compensate moral damages related to the illegal disclosure of prints of conversations exchanged in a group of WhatsApp, under the premise that "(...) third parties may only have access to WhatsApp messages with the consent of participants or judicial authorization."

According to the STJ, the confidentiality of communications under article 5, item XII,^[1] of the Constitution of the Federative Republic of Brazil (CF) aims to safeguard the right to intimacy and privacy of citizens and, although the item deals only with the inviolability of telephone communications, in view of the advancement of technology in recent decades and the consequent advent of new forms of communication, it must also applies, by symmetry, to conversations maintained through social medias such as WhatsApp.

Minister Nancy Andrighi pointed out that since 2016 WhatsApp uses encryption to prevent conversations maintained through the application from being accessed by third parties, thus protecting the communication maintained between its users. She also considered that the dissemination of the private content of messages sent through WhatsApp configures not only a breach of confidentiality but also a violation of "(...) legitimate expectation, privacy and intimacy of the issuer”, because, when using this specific social media as a means of communication, the sender expects that the message will be read only by the recipient (or recipients in the case of conversation groups).

The collegiate also reported to the analysis made by the lower and the appellate court judge on the evidential set, through which injury to the image and honor of the author of the indemnity  action of origin was found, caused by the unlawful disclosure of the prints of the conversations held in a WhatsApp’s group. The punishment of the person responsible for the dissemination of the messages did not result from the simple finding of the illegality of such disclosure, but rather the verification, in the specific case, of violation of the author’s personality rights perpetrated by the disclosure of the messages.

For the ministers of the Third Panel of the STJ, the confidentiality of communications can only be raised:

• by judicial decision, in the case of necessary criminal investigation or procedural instruction (Article 5, item XII, CF);
• upon consent of the participants or
• in cases where "(...) the display of the messages is intended to safeguard the receiver's own right", and it is necessary to examine the specific case in order to consider whether the right to freedom of information or the right to privacy will prevail.

It is interesting to draw attention to the understanding of the Superior Court in criminal proceedings. The panels specialized in criminal law have established their own interpretation by the illegality of the evidence obtained from accessing messages exchanged through WhatsApp without judicial authorization , since the conduct violates the constitutional guarantees of intimacy and private life^[2].

According to the Sixth Panel, "[e]ventual deletion of a message sent (in the option 'Delete only for Me') or a message received (in any case) leaves absolutely no trace, neither in the application, nor in the paired computer, and therefore can never be recovered for the purposes of evidence in criminal proceedings, and due to end-to-end encryption technology, not even the company that provides the service can store on any server the content of the conversations maintained on its platform ".^[3]

Given the volume of information exchanged daily via WhatsApp, the understanding of the Third Panel of the STJ outlines and updates the concept of confidentiality of communications constitutionally assured, establishing an significant development in the protection of constitutional guarantees to the privacy and intimacy of electronic message issuers.

Notwithstanding, although it was not specifically addressed in the decision, the ministers of the Third Panel remarked that there are cases in which it will be necessary for the sender or recipient of messages exchanged via WhatsApp to use its content to defend its own right, in which case the confidentiality of messages will be raised, even without the authorization of those involved or judicial authorization.

In summary, the use of electronic messages as a means of proof still finds an unclear scenario to be delineated by the case law, such as the considerations brought by the Sixth Panel of the STJ on the possible absence of authenticity of the messages exchanged via WhatsApp and its complete invalidity as a means of proof. With the advances in communication technologies, it is expected that the judiciary will increasingly face issues such as those dealt with in this decision, which challenge the concepts defined by the legislator and lead to the need for the judiciary to interpret them.

^[1] "XII – the confidentiality of correspondence and telegraph communications, data and telephone communications is inviolable, except, in the latter case, by authorization of a Judge, in the cases and in the form that the law lays down for the purposes of criminal investigation or procedural investigation;"

^[2] Rcl 36.734/SP, rel. Minister Rogerio Schietti Cruz, Third Section, judged on 10.2.2021, DJe 22.2.2021; AgRg no AgRg nos EDcl no REsp 1842062/RS, rel. Minister Felix Fischer, Fifth Panel, judged on 15.12.2020, DJe 18.12.2020.

^[3] RHC No. 99.735/SC, rel. Minister Laurita Vaz, Sixth Panel, judged on 27.11.2018, DJe 12.12.2018

Category: M&A and private equity

Resolution modifies rules for trading with securities and disclosure of material acts and facts

Alessandra de Souza Pinto, Clarissa Freitas, Raphael Zono, Giuliana Pescarolli Spadoni, Gabrielle Pelegrini and Helena Avanzi Leonardi

The Brazilian Securities and Exchange Commission (CVM) published, on August 23, CVM Resolution No. 44, replacing CVM Instruction No. 358/02, which deals with the rules for disclosure of information on material acts or facts, restrictions on trading in securities, and disclosure of information on securities trading.

CVM Resolution 44, which is expected to become effective on September 1, 2021, is the result of analysis of proposals sent by market participants, as well as of discussions promoted by the CVM itself on the matter within the scope of Public Hearing No. 06/20.

The main novelty brought in by the resolution was the inclusion of an exclusive chapter to regulate the illicit use of privileged information, promoting an alignment between the regulations and the case law of the panel, so that the presumptions that have been used in trials of cases involving insider trading are clearly provided for in the regulations.

Supported by Decree No. 10,139/19, CVM chairman Marcelo Barbosa found that the creation of a new resolution and changes to the rule would be more efficient: "The change brings about more clarity and predictability for market agents. The scope and interpretation of the standard become less dependent on the knowledge of a body of decisions handed down in concrete cases over time and more directly accessible from the reading of its content".^[1]

To establish the practice of illicit misuse of privileged information, article 13 of CVM Resolution 44 provides for a number of presumptions. The main ones are:

• The person who traded securities possessing material information not yet disclosed made use of such information in said trading.
• Controlling shareholders (direct or indirect), directors, and members of the Board of Directors and audit committee have access to all relevant information not yet disclosed. In addition, these persons, as well as those who have a commercial, professional, or trust relationship with the company, when accessing undisclosed material information, know that it is privileged information.
• An officer who leaves the company with material, undisclosed information is entitled to use such information if he trades in securities issued by the company within three months from the time he leaves the company (under the previous rule, former officers were prohibited from trading for six months).
• From the moment studies or analyses are initiated, the information on any transactions of corporate reorganization, business combination, change in control, cancellation of registration as a publicly-held company, and change in the environment or trading segment of the shares issued by the company, as well as on requests for judicial or extrajudicial reorganization and bankruptcy made by the company itself are relevant.

However, these presumptions are relative, which means that they admit evidence to the contrary, and may be used in combination, as the case may be. They must be analyzed in conjunction with other elements that indicate whether or not the illicit use of privileged information was in fact committed.

These presumptions do not apply:

• to cases of private trading of treasury shares, in the context of share-based compensation to which the company's officers and directors, employees, or service providers are entitled;
• trades involving repoed fixed income securities, under the conditions set forth in CVM Resolution 44; and
• the subscriptions of new securities issued by the company, without prejudice to the application of the rules on disclosure of information in the context of the issuance and offer of such securities.

The inclusion of the presumptions that had already been applied in the new resolution, addressing both their respective contents and the applicable subjects, provides a clearer picture for their application in concrete cases. Thus, the consolidation of CVM's own understanding and case law on the new resolution is beneficial, as it provides more transparency and clarity to market players.

Among the other changes brought about by CVM Resolution 44, the following stand out:

Trading by exclusive investment funds

The new standard also provides that trades of exclusive investment funds are presumed to have been decided under the influence of the shareholder, admitting evidence to the contrary. This presumption does not apply to exclusive investment funds whose unitholders are insurers or open-ended supplementary pension entities and have as their objective investment of funds in free benefit generating plans (PGBL) and free life benefit generating plans (VGBL) during the grant period.

Autonomous blackout period

CVM Resolution 44 maintained the prohibition against the company, controlling shareholders, officers, members of the board of directors, and audit committee from trading in securities issued by the company during the 15 days preceding the disclosure of quarterly financial information and annual financial statements.

However, the rule now makes it clear how the 15-day period is to be calculated (excluding the day of disclosure, with trading permitted on that day only after disclosure of the financial statements) and that the prohibition applies regardless of knowledge of the contents of the quarterly financial information and annual financial statements by such persons. In other words, this is now an objective prohibition, which does not depend on proof of whether or not such persons held relevant information not yet disclosed to the market.

The members of technical and advisory committees were excluded from the prohibition, although the general restriction on trading in securities issued by the company remains in place in the event of knowledge of material information not yet disclosed to the market.

The prohibition does not apply in cases of:

• trading involving repoed fixed income securities, under the conditions set forth in CVM Resolution 44;
• transactions aimed at fulfilling obligations assumed before the blackout period arising from securities lending and exercise of put or call options by third parties and forward sale and purchase agreements; and
• trades carried out by financial institutions and legal entities that are members of its economic group, if performed in accordance with the company's trading policy and in the normal course of business.

Disclosure policy

The policy for disclosure of material acts or facts, the adoption of which was mandatory for all publicly-held companies, will now be mandatory only for companies that, cumulatively:

• are registered with the CVM under category "A";
• are authorized by a market operator to trade securities on a stock exchange; and
• have outstanding shares (free float) issued by the company, understood as all shares that are not held by the controlling shareholder and persons related to it, as well as those held by company officers and directors and those held in treasury.

Thus, under the new standard, companies registered in category "B" or registered in category "A" without shares admitted for trading and free float are not required to approve a formal disclosure policy.

^[1] Ministry of Economy. "CVM updates rule on material facts". https://www.gov.br/cvm/pt-br/assuntos/noticias/cvm-atualiza-norma-sobre-fatos-relevantes

Category: Infrastructure and energy

The Ministry of Mines and Energy (MME) published, on August 16 of this year, Normative Ordinance No. 19/GM/MME (PN MME 19/21) to regulate the classification of pipeline projects in the oil, natural gas, and biofuels sector and infrastructure for production and processing of natural gas in the Special Arrangement for Incentives for Infrastructure Development - REIDI, established by Law No. 11,488/07.

PN MME 19/21 revokes prior ordinances that dealt with the matter. They are Ordinance No. 404/GM/MME, of October 20, 2009, and Ordinance No. 406/GM/MME, of October 20, 2009.

In order to facilitate identification of the modifications introduced by PN MME 19/21, we have prepared a comparative table among the three. We adopted as a reference the new ordinance, correlating it with the provisions of the prior ordinances that dealt basically with the same subject. We highlight in yellow some relevant points that were changed, but other issues should be evaluated according to the specific projects.

The table below can also be accessed by clicking here.

REIDI - This is the Special Arrangement for Incentives for the Development of Infrastructure.

Comparison between Normative Ordinance No. 19/GM/MME/21 and MME Normative Ordinance Nos. 404/09 and 406/09

Category: Restructuring and insolvency

Since the enactment of Law No. 11,101/05, legal scholars and case law have been trying to find a fair balance between the principles that govern bankruptcy law and the necessary protection of workers' rights. More recently, the case law has been revisiting issues pertinent to the treatment of labor creditors in reorganization and bankruptcy proceedings. At the same time, legislation has also challenged old formulas and sought new perspectives, especially with the advent of Law No. 14,112/20.

In the discussions prior to the approval of Law No. 11,101/05, the need to incorporate into the legislation a new vision that would break with the old paradigm of absolute inflexibility of workers' rights was already perceived, in order to reconcile the interests of the working class with the need to preserve the company. This was emphasized in an opinion by Senator Ramez Tebet when the text of the law was presented in the Federal Senate: "What is intended is to provide conditions for viable companies to remain active. Clearly, profound administrative reorganizations will often be necessary. But the important thing is that workers are not victimized by the most deleterious social effect of bankruptcies: the unemployment that arises from the pure and simple disintegration of bankrupt companies."

Although there is still some resistance, one notices that the case law tends to give labor claims  a more suitable treatment to protect the business activity and even the interests of the workers themselves. In addition to the need to ensure effective conditions for the viability of business, a balance is sought so that the legislation’s mechanisms for protection do not turn into damage precisely for those whom the law sought to protect.

As an example, there is the recent judgment of REsp No. 1.924.164/SP, which discussed the starjting point of the one-year term provided for in article 54 of Law No. 11,101/05 for payment of labor claims. In this case, with Justice Nancy Andrighi writing for the court, the Superior Court of Appeals (STJ) reversed the decision of the São Paulo Court of Appeals (TJSP) to define that the starting point for the payment of workers is the date of ratification of the plan, and not the date of the end of the period of suspension of actions against the debtor in possession, as indicated in Ruling I of the Group of Chambers Reserved for Business Law of the TJSP. In her written opinion, the Justice pointed out that "[...] maintenance of the solution granted by the appellate decision at issue may result in losses for the creditors to whom the Law sought to grant special treatment, given that, in view of the limited financial resources of the debtor in possession, they may be compelled to accept even greater discounts due to having to receive the amounts prior to the beginning of the company's reorganization."

The TJSP, which in the aforementioned judgment was more conservative with respect to the term for payment of labor creditors, has on other occasions been more flexible in this regard, as in the case of Interlocutory Appeal No. 2134208-86.2020.8.26.0000, for which the reporting judge was Appellate Judge Grava Brazil. Considering the peculiarities of the specific case, the São Paulo court admitted in this judgment extension of the one-year term established by article 54 of Law No. 11,101/05. This same appellate decision also addressed another recurring topic in the discussions related to control of the legality of the judicial reorganization plan, which is the possibility of applying a discount on labor claims, admitting, in this case, a discount of 50% from the claims.

Also noteworthy is the recent case of the judicial reorganization of the Renova Group, in which the chief judge of the TJSP granted staying effects to the special appeal filed by the debtor in possession in Interlocutory Appeal No. 2026269-13.2021.8.26.0000, suspending the effects of a decision that, based on Ruling I of the Group of Chambers Reserved for Business Law of the TJSP, established the starting point of payment of labor claims as of the end of the stay period.

Such is the importance of these issues that the reform promoted by Law No. 14,112/20 introduced paragraph 2 into article 54 of Law No. 11,101/05. Firm in the purpose of seeking a vision that conciliates the protection of labor creditors with a margin of availability that benefits effective restructuring, paragraph 2 of article 54 provides for the possibility of extending the payment period for labor creditors by up to two years, provided that:

• sufficient collateral has been provided;
• the proposal has been approved by the majority of the labor creditors; and
• full payment of the labor claims is guaranteed.

In cases involving qualified labor creditors, the TJSP has also indicated the possibility of establishing discounts and limitation on amounts for the payment of labor claims, as illustrated by Interlocutory Appeal No. 2231529-24.2020.8.26.0000, taken from the in-court reorganization of Odebrecht.

Negotiation initiatives involving labor claims are not restricted to the scope of the plan: in some cases there are campaigns for out-of-court settlements involving labor claims, as in the judicial reorganization of the Atlântico Sul Shipyard - case number 0000162-07.2020.8.17.2730, in progress before the 1st Civil Court of the Judicial District of Ipojuca/PE.

Another very significant example of this new vision incorporated into the treatment of labor creditors is the possible assignment of claims derived from labor legislation. This is an option that opens new horizons for labor creditors, with possible gains in liquidity, which acquires relevance in the midst of the pandemic and in times of economic recession.

Although Law 11,101/05 did not prohibit assignment of the claim, the (now repealed) article 83, paragraph 4, pertaining to bankruptcy, but sometimes applied by analogy to judicial reorganizations, represented a true disincentive for the practice, by providing that labor claims assigned to third parties would be considered unsecured. This condition resulted in damage to the labor creditors themselves, since it devaluates the claim of those who, in an inferior position, many times had in the assignment of their credits the opportunity to carry out faster recovery of funds. Law No. 14,112/20 repealed this provision, which should attract the increasing appetite of investors for receivables, considering the priority of labor claims in the competition of creditors, now maintained even after assignment.

In this regard, it is also worth mentioning the very recent decision by the Superior Labor Court (TST) in the judgment of AIRR - 820-23.2015.5.06.0221, rendered by Justice Douglas Alencar Rodrigues, which indicates the possibility of assignment of labor claims. Although in this case the claim of the purchaser of the receivable was not granted, due to merely procedural issues, the Justice pointed out that "the assignment of labor receivables is fully possible," referring to the innovation introduced by Law No. 14,112/20. This represents a great advance if we consider the strong reservations that the labor courts have always maintained in relation to this type of negotiation.

Another quite innovative aspect of Law No. 14,112/20 is the possibility of labor claims being submitted to out-of-court reorganization, which was prohibited in the original wording of article 161, paragraph 1, of Law No. 11,101/05. There is, therefore, one more vote of confidence given by the legislator to private negotiations involving labor claims, including in an environment subject to greater freedom, if compared to the judicial reorganization and bankruptcy arrangements. It is important to remember, however, that the negotiation with the workers in the scope of the out-of-court reorganization requires participation by the labor union of the category.

It is noticeable that the legislation and case law have been proposing a general change of paradigm that projects new perspectives for in-court and out-of-court reorganizations and bankruptcies in the treatment of labor claims under Law No. 11,101/05. Although it is still too early to assess the practical result of all these innovations, it is certain that this movement results from a perception by operators of the law that the traditional structures were not sufficient to solve the complex conflicts that emanate from relations between employees and insolvent companies. In any case, it seems clear that the trend is to get everyone, including those who did not do so or who did so with greater limitations, to actually be brought to the table to negotiate concrete solutions for the recovery of their claims.

Category: Labor and employment

Uncertainty about the return to face-to-face work and the flexibility provided by remote work have popularized the anywhere office, an English term that designates the work done from anywhere.

In practice, the employee performs his activities wherever he wants, without limiting himself to his original home address. At his sole discretion, he can work from another city or even from another country.

Second research conducted by the McKinsey Global Institute, 50% of the executives interviewed believe that their companies will adopt, after the pandemic, models in which up to 50% of the work will be carried out remotely. Only 10% of executives believe that more than 80% of the work will be done in person.

In this context, more and more companies have adopted strategies to improve remote work, in order to make it more attractive, healthy and productive for employees, thus benefiting both parties (employee and employer). More and more people have also rethought the need to continue living in large metropolises and work only from one place.

This is the case, for example, of employees who are from the capital and choose to rent houses in land or on the coast for seasons, or who choose to work from various places for certain periods, renting apartments or houses for short periods.

However, as a result of the change in the employee's residence and depending on the place chosen, the anywhere office may characterize transfer. This is because, according to Article 469 of the Consolidation of Labor Laws (CLT), the change in the workplace that results in the change of domicile of the employee is considered transfer.

In this case, it is the company's responsibility to bear all the costs of change. In the event of a provisional transfer (characterized when the employee has the prospect of returning to the original place of service), an additional transfer equivalent to 25% of the employee's monthly salary will be due.^[1]

Would the anywhere office then lead the payment of the costs of the moving and the additional transfer by the companies?

Labor legislation only provides for hypotheses in which the transfer takes place at the employer's initiative and not for the employee's exclusive interest. Accordingly, the case-law is that, when the transfer takes place at the request of the employee, the company is not obliged to pay the additional transfer.^[2]

Therefore, in case of change of the place of provision of the services made by the employee, in its sole discretion, the additional transfer would not be due and the company would not be responsible for the costs arising from the change of the workplace. However, the theme is recent and may give different interpretations if the circumstances of the change in the workplace are not demonstrated in case of questioning.

Thus, for companies that want to enable the anywhere office, it is essential that the remote work policy establishes the procedures and conditions to be observed by the employee who, by his/her will, wishes to change his/her workplace.

In addition, by agreeing with the anywhere office, the company may not require the employee to return immediately from the place where he/she is providing the services. It will be necessary to grant a minimum period of 15 days for the employee to return to the original place, in addition to providing for this period and the conditions of return in the company's policy on the subject.

The formalization of the rules and the express record of the employee's choice (and not the determination of the employer) are the main arguments of the company to mitigate risks in case of legal questions related to payments arising from the change of the workplace.

^[1] Jurisprudential Guidance No. 113 of the SDBI-1 of the Superior Labor Court (TST).

^[2] RR-Ag: 0001567-88.2012.5.09.0028

  RR-Ag: 0021680-38.2015.5.04.0015

  RO: 0011580-72.2017.5.03.0147

Category: Real estate

In the judgment of Extraordinary Appeal No. 695,911, published on April 19, the Supreme Federal Court (STF) ruled that the collection of associative fees in closed allotments prior to Federal Law No. 13,465/17, which changed the content of Law No. 6,766/79 (Urban Land Subdivision Law), when the owner of the lot has not adhered to the constitution of the association responsible for the administration of the allotment.

With the provisions of the federal law of 2017, the collection becomes legitimate if the owner is associated or if, when purchasing the lot, he became aware of the obligation to pay the associative fee by express mention to this collection registered in the Real Estate Registry Office.

In the process that gave rise to the trial, the owner of a lot located in the municipality of Mairinque, in São Paulo, opposed to the collection of associative fees on the understanding that the services charged were not used by her and based on the principle of free association and the prevention of illicit enrichment. In the first and second instances, it was confirmed the legitimacy of the collection of associative fees, which required the judgment of the extraordinary appeal by the Supreme Court.

Allotments are forms of land parcelling consisting in the subdivision of a large plot of land into lots intended for building. The roads opened for circulation between the lots, when the allotment is instituted, become part of the municipal property, in accordance with the Urban Land Subdivision Law. The closed allotment, in turn, had its first regulation with the federal law of 2017, which inserted the modality of allotment with controlled access in paragraph 8 of Article 2 of the Urban Land Subdivision Law.

Due to this control, complementary services to public services are necessary within a closed allotment, such as garbage collection, signage and security services, which must be hired and organized through the association of residents. Therefore, closed allotments have always had a similar operation to the condominium structure, in which the general costs with the maintenance of common areas are prorated between the owners by charging a fee.

Given the lack of a legal provision on the mandatory payment of associative fees until then, the general position contrary to this obligation is based on the objective interpretation of Article 5, item XX, of the Federal Constitution, according to which a person cannot be obliged to associate. Some precedents of jurisprudence understood the impossibility of collecting the fee. The Superior Court of Justice (STJ) even confirmed a thesis that residents' associations could not charge fees from those who are not associated, considering the lack of manifestation of the owner's willingness to contract the obligation to pay.^[1] On the other hand, there was also a discussion that the services of the association were presumable to any acquirer of an allotment lot, even without the formal expression of consent with the collection of the fees.

With the promulgation of federal law of 17, three relevant aspects to discussion were recognized: the new modality of allotment with controlled access (the so-called closed allotment), the activities carried out by associations of lot owners as similar to the activity of real estate management and the possibility of apportionment of expenses of these associations between the owners of the lots.

As a result, the Supreme Court understood that, in order for the collection of associative fee to be valid, it is necessary, at least, that the owner of the lot participated in the constitutive act of the residents’ association, agreeing to the apportionment of the common expenses of the allotment, even before the federal law of 2017, or that the obligation to pay the associative fee is registered in the so-called "mother title record" of the allotment in the Real Estate Registry Office. This guarantees publicity to the act for knowledge of all those acquiring lots after the constitution of the association.

Considering the municipal competence to regulate the planning and use of urban land, the Supreme Court also understood that, if there is a municipal law prior to the federal law of 2017 that regulates the apportionment of allotment expenses for a given municipality, the collection of fees will also be considered valid. Outside the indicated hypotheses, the collection is unconstitutional.

Recently, in a trial held on June 22 of this year, STJ understood that the associative fees due by the lot owner does not have a propter rem nature and, therefore, are not linked to the real estate property, even if the existence of such fees is mentioned in the standard contract for the purchase and sale of the lots. This implies that future acquirers of lots will not be responsible for paying off outstanding debts of associative fees, being obliged to pay the fees incurred only from their acquisition.

^[1] Theme 882 of the STJ in the case of repetitive resources - REsp no. 1,280,871/SP and REsp no. 1,439,163/SP.

Category: Litigation

The Public Civil Actions Law (Law No. 7,347/85) precedes the Federal Constitution of 1988 (CF/88) and seeks to ensure to citizens, since it was approved, better instruments of access to the Judiciary. In addition, collective actions guarantee wide-ranging efficacy (erga omnes effects), make it possible to concentrate claims, speed up the judicial process, and provide (procedural, financial, and personal) savings to the Judiciary. It is an effective instrument to settle claims.

In procedural advances and advances in scope, CF/88 promoted expansion of the subject matter of public civil actions to also include protection of individual and collective rights by representative entities, and further expansion through Law No. 11,448/07, which established the current wording of article 5 of the Public Civil Actions Law. According to the article, the following have standing to bring an action: the Public Prosecutor's Office; the Public Defender's Office; the Federal Government, the States, the Federal District, and the Municipalities; municipalities, agencies, public companies, foundations, and government-controlled companies; and associations, provided that certain particularities are observed (paragraphs a and b).

It was also after the Consumer Protection Code that the scope and subject matter of public civil actions were expanded, with confirmation of the possibility of filing a collective action for the protection of "homogeneous individual interests or rights, understood as those arising from a common origin" (article 81, III, of the Consumer Protection Code). It is this point that we will examine next.

Collective protection for the defense of "homogeneous individual interests or rights" requires the existence of an original fact that qualifies it as a "homogeneous individual" interest. There is an initial element of identity of the fact that extends to all those affected by that very same element: the collapse of a building, the rupture of a dam, the failure to provide sewage to a region. It is the life event that will indicate who are affected by the judgment that will be handed down in the collective action, as highlighted by the STJ case law and the best legal scholarship:

"The common origin, which establishes the homogeneous individual interest, refers to a specific fact or peculiar right that is universal to the countless individual legal relations, from which there will be a procedural connection between the interests, characterized by the identity of the proximate or remote cause of action” (STJ, REsp 1599142/SP, opinion drafted by Justice Nancy Andrighi, 3rd Panel, decided on September 25, 2018)

“The Brazilian legislator wished to value the common genesis existing among homogeneous individual rights (claims originating from the same fact of the supplier's liability), inspiring itself in the class action of the law of the United States in order to provide the consumer with accessible, swift, uniform, and efficient judicial relief" (STJ, REsp 1281023/GO, opinion drafted by Justice Humberto Martins, 2nd Panel., decided on October 16, 2014)

"The common origin, insofar as they arise as a consequence of the same fact or act, and the homogeneity that characterizes them imply the loss of their atomic and structurally isolated condition and their transformation into interests worthy of supra-individual procedural treatment."^[1]

"Finally, homogeneous individual rights are those of a common origin (article 81, sole paragraph, III, Consumer Protection Code). Despite the criticism made against the legal definition, there is no doubt that the owners of homogeneous individual rights can legitimately act in court, in atomized lawsuits, in their own name, defending their own interests. However, the treatment as a category of transindividual right derives from a legislative option, for the sake of harmony of judgments and, above all, procedural economy. A homogeneous individual right is the one that affects more than one subject due to a common genesis, whose object is divisible. Normally, it is the collectivity of consumers harmed by the acquisition of the same defective product that holds the ownership of the homogeneous individual right."^[2] 

The main characteristic of the judgment handed down in a public civil action for the protection of homogeneous rights is that it is generic (article 95 of the Consumer Protection Code).^[3]In other words, it grants the real beneficiaries of the judicial relief the option to liquidate and execute the judgment in an autonomous individual action (article 97 of the Consumer Protection Code).^{[4] [5]}

In individual actions for liquidation of the collective judgment, the alleged beneficiary presents the elements, evidence, and theories to prove compliance with the generic terms of the judgment and his right to enforce the judicial instrument. The process of individual liquidation of a collective judgment, therefore, is not a simple procedural phase in which a mere arithmetic calculation is performed for direct execution of the obligation determined in the generic judgment provided for in article 95 of the Consumer Protection Code. Quite to the contrary.

Under the rule of law, the defendant is guaranteed the full exercise of its constitutional right to a full defense, an adversarial proceeding, and due process of law in the ordinary liquidation action. The defendant shall have the opportunity to present an objection and produce the evidence provided for by law that guarantees it the unavoidable exercise of an adversarial process, under the exact terms of articles 509, II, and 511 of the Code of Civil Procedure (CPC):

Article 509. When the judgment orders payment of an illiquid amount, its liquidation shall be carried out, at the request of the judgment creditor or debtor: (...)

II - by the common procedure, when there is a need to allege and prove a new fact.

(...)

Article 511. In liquidation by the common procedure, the judge shall order the respondent, through the person of its attorney or of the law firm to which it is bound, to file an answer, if it so wishes, within fifteen (15) days, observing, as applicable, the provisions of Book I of the Special Part of this Code

This is a true trial proceeding, with broad and exhaustive review,^[6] in which all facts, allegations, and documents that may effectively legitimize and justify the plaintiff's own claim (i.e., new facts) must be verified and analyzed. The suitability of the claim to the objective limits of the collective judicial relief and all obstacles, objections, impugnations, and defenses raised by the defendant will also be analyzed on this occasion.

This is what the STJ and doctrinal teachings guarantee, highlighting the need for ample review during the individual liquidation of the collective judgment to verify the claim by the party allegedly having standing, under penalty of violation of the constitutional guarantees of the defendant:

            “MOTION TO RESOLVE DIVERGENCE. INDIVIDUAL EXECUTION OF COLLECTIVE JUDGMENT. INFLATION ADJUSTMENTS. NEED FOR PRIOR LIQUIDATION. 1. A judgment resulting from a collective decision is certain and precise, considering that certainty is an essential condition for judgments and the judgment clearly establishes the rights and obligations that enable its execution, however, it is not vested with the liquidity required for spontaneous compliance with the decision, and the recipients (cui debeatur) and extent of the compensation (quantum debeatur) must still be ascertained in liquidation. It is only at this moment, therefore, that individualization of the portion that will fall to the judgment creditor according to the judgment issued in the collective action will take place. 2. The execution of a generic judgment that orders payment of adjustments to savings accounts must be preceded by a liquidation phase through the common procedure, which will complete the partial review of the collective action by proving new facts determinant of the potential beneficiary in the relationship of substantive law, as well as the amount of the payment owed, ensuring the opportunity for the debtor to defend himself fully and in an adversarial process.” (STJ, Emb Div no REsp No. 1.705.018/DF, opinion drafted by Justice Luis Felipe Salomão, 2nd Section, decided on December 9, 2020)”^[7]

"Nelson Nery and Rosa Nery state that liquidation is an action for review of a constitutive and integrative nature. Luiz Rodrigues Wambier also understands that the liquidation is a new action, although filed in the same case. According to Araken de Assis, there is successive accumulation of claims in simultaneo processu, with regard to the original ruling of the case. Considering the purpose of the liquidation, one can state that it has the nature of an action, as do counterclaims, using the same procedural basis as the case that generated the judgment (...) Liquidation via the ordinary procedure calls for a full defense on the part of the defendant, wherein it is possible to perform various means of evidence admitted by law, that is, as stated by Araken de Assis, 'everything that is admitted in the ordinary procedure of the trial phase assumes immediate pertinence (intervention of third parties, evidence, counterclaims, etc.)' (...) If it is necessary to produce evidence, it shall be produced, and an evidentiary and trial hearing shall be scheduled, if appropriate. All evidence, in theory, is admissible, pursuant to article 369 of the CPC.”^[8]

In the motion to resolve divergence in REsp No. 1.705.018/DF, the majority of the 2nd Section of the Superior Court of Appeals emphasized the need to process actions for liquidation by the ordinary procedure, precisely in order to avoid situations in which the alleged beneficiary claims damages, although he does not present any evidence to this effect. The trial phase is essential to ensure the effectiveness of the generic judgment and direct it to those who actually have the right, as the excerpt from the opinion of Justice Luis Felipe Solomon makes clear:

“The possibility is frightening that people might directly filed for individual execution of a collective judgment although they do not prove their condition as being entitled to the judgment debt being enforced, nor even prove the case with suitable documents to support the breakdown of calculation presented in order to assess the amount due."

There is no doubt that a judgment in a public civil action constitutes a judicial enforcement instrument. However, although such judgment cannot be modified in the liquidation proceedings (article 509, paragraph 4, of the CPC), there is still the need for establishment of the adversarial process, under penalty of suppression of rights and basic guarantees of civil procedure.

The adjudicatory body cannot disregard the collective judgment and simply relegate the new trial phase to the time of filing of the action for liquidation judgment, when, in fact, new facts must be analyzed.

^[1] MARQUES, Claudia Lima; BENJAMIN, Antonio Herman V.; and MIRAGEM, Bruno. Comments on the Consumer Protection Code. 4th ed. São Paulo: Revista dos Tribunais, 2013 p. 1552

^[2] TUCCI, José Rogério Cruz e. Limites subjetivos da eficácia da sentença e da coisa julgada civil [“Subjective limits of the effectiveness of judgments and civil res judicata”]. São Paulo: Revista dos Tribunais, 2006, p. 313/314.

^[3] Consumer Protection Code: Article 95. If the claim is granted, the judgment will be generic, establishing the liability of the defendant for the damages caused.

^[4] Consumer Protection Code: Article 97. The liquidation and execution of judgment may be procured by the victim and his successors, as well as by the legal entities referred to in article 82.

^[5]"Among the cases of generic judgment provided for in our legal system is the one that judges collective actions for the defense of homogeneous individual rights (Law 8,078/1990, article 95). In this case, as seen, judicial review is limited to the homogeneous nucleus of the subjective rights presented in the claim. There is no determination of the amount of the payment due or identification of the potential plaintiffs of the substantive law relationship, which leaves the concrete legal rule undefined to a high degree. A generic judgment, for this very reason, is not amenable to judicial execution. To reach this point, it will have to be supplemented by another one, which will result in identification of the missing elements of the individualized legal rule. This supplementation activity takes place in an autonomous procedural phase, generally called liquidation of judgment. With regard to the generic judgment in collective actions, liquidation thereof is also called an enforcement action. It is an action intended eminently for judicial review, aimed at defining the amount of the payment to be enforced, or its object or the holder of the right, thus forming, integrated into the prior judgment, the instrument that enables the judgment creditor to seek judicial execution." (Zavascki, Teori Albino. Processo coletivo: tutela de direitos coletivos e tutela coletiva de direitos [“Collective procedure: protection of collective rights and collective protection of rights”], 7th ed., revised, current, and expanded, São Paulo: Editora Revista dos Tribunais, 2017. P. 186)

^[6] "Here, each judgment creditor, in the liquidation process, must prove, in a full adversarial process and with exhaustive review, the existence of his personal injury and the etiological link with the damage globally caused (that is, the an [sic]), besides quantifying it (that is, the quantum)." (GRINOVER, Ada Pellegrini; WATANABE, Kazuo; NERY JUNIOR, Nelson. Código Brasileiro de Defesa do Consumidor comentado pelos autores do anteprojeto [“Brazilian Consumer Protection Code commented on by the authors of the draft bill”]. Vol. II. Rio de Janeiro: Editora Forense, 2011, p. 154)”

^[7]See also: "The individual execution of a collective judgment cannot be considered a mere phase of the previous proceeding, since a new legal procedural relationship is established, as occurs with the execution of foreign, arbitral, or criminal judgments. Thus, it is necessary to summon the judgment debtor, pursuant to article 475-N, applicable to the case by extension" (STJ, REsp. No. 1.091.044/PR, opinion drafted by Justice Nancy Andrighi, 3rd Panel, decided on November 17, 2011).

^[8] PIZZOL, Patricia Miranda. Collective Relief: collective cases and techniques for standardization of decisions. São Paulo: Thomson Reuters Brasil, 2019, pp. 454-457. See also: "During the collective proceeding, the evidentiary aspects of specific and individual situations of the savers are not examined, since the documents that prove ownership of the credit are only submitted in the execution phase (fulfillment) of the judgment. For this reason, in the individual executions of judgment issued in collective actions, there is a clear need to procure liquidation of the amount paid and individualization of the damages, with a demonstration of ownership of the judgment creditor's right. This is because the judgment granting collective relief has a generic nature, the fulfillment of which, in relation to each of the individual holders, presupposes the suitability of the judgment creditor's condition to the legal situation established therein." (Demócrito Reinaldo Filho, Cuidados em execuções individuais de sentenças coletivas sobre expurgos [“Care in individual executions of collective judgments on write downs”]. Consultor Jurídico, February 8, 2015).

Category: Labor and employment

With the advance of the vaccination campaign against the new coronavirus after more than a year after the beginning of the covid-19 pandemic, finally the time has come to discuss and evaluate the concrete possibility of returing to in-person activities at the companies.

According to the latest survey by the National Sample Survey of Households (PNAD), about 7.9 million people have been working remotely since the beginning of the pandemic.

According to the labor legislation, part of these people may be in a telework or home office arrangement. Regardless of the arrangement adopted, the determination on when to return to work is a right of the employer as the party responsible for the economic activity. However, it is important for the employer to keep in mind the legal limits of its power and be aware of the recommendations so that the return to work occurs in a positive and safe manner.

Firstly, it is necessary to look at the arrangement to which the worker is subject in order to identify the minimum time limit for requesting a return:

• Home office: there is no minimum period required by law, nor is it necessary to formalize it in writing. The rules set out in the internal policy of the company that instituted the arrangement must be observed.

• Telework: a minimum transition period of 15 days must be guaranteed, with corresponding registration in a contractual amendment.^[1]

After identifying the model, it is important to check the locally instituted standards for return plans and consider the general recommendations from the federal government regarding precautions {care} with the return.

In commercial establishments and service providers and non-essential activities located in the State of São Paulo, according to State Decree 65,897, of July 30, 2021, it is hereby established that, in the return to on-site activities, the limitation of space of occupation up to 80% of the respective capacity must be observed, as well as the limitation of attendance to the public between 6 a.m. and midnight.

The decree imposed restrictions on occupation at companies providing services and non-essential activities, limiting the number of employees who may work in-person on office premises. The rule differs from prior decrees, in which capacity restrictions applied only to locations where there was service to the public. Companies and offices that intend to return to in-person work should therefore pay attention to the new rules. The decree also makes direct mention of the prohibition on crowding, observation of sanitary protocols, and mandatory use of face masks.

The other covid-19 containment measures remain in force (Ordinance No. 1,565/20 of the Ministry of Health, Joint Ordinance No. 20/20 of the Ministry of Economy and Special Bureau of Welfare and Labor, as well as state and municipal laws), especially the health protocols.

In the State of São Paulo, it is mandatory to wear a face mask, keep a distance of at least 1.5 m between employees, and follow sanitary protocols of hygiene and cleaning, air conditioning maintenance, and disinfection of workstations.

It is extremely important that the company have an internal protocol for managing cases of suspected contamination, allowing the worker the social isolation necessary to avoid spreading the virus among employees.

Compliance with the standards and recommendations of public authorities is essential, since, under Brazilian law, the employer is responsible for ensuring a safe and risk-free work environment for all its employees, under penalty of civil and criminal liability for any damages it may cause.

Besides the general precautions, companies must observe that the pregnant women cannot be obliged to return to in-person work, because as provided for in Law No. 14,151/21, the pregnant workers must remain away from in-person work activities, without prejudice to their her remuneration.^[2]

With respect to employees who fit into a risk group, it is possible to request a return to work in person, taking the precaution of redoubling care. It is recommended that these employees be kept on a remote working basis.

The restriction measures are expected to be fully relaxed by August 17, 2021, by which time the São Paulo state government aims to have all adults over the age of 18 vaccinated.

Even with the progress of vaccination, it is extremely important that all health measures recommended by the competent authorities continue to be followed and that everyone, employees and employers, take responsibility, taking the precautions necessary for it to be possible to overcome the pandemic and resume the economic strength of the country.

^[1] Article Article 75-C of the Consolidated Labor Laws.  The provision of services in the form of telework must be expressly stated in the individual employment contract, which will specify the activities that will be performed by the employee.

Paragraph 1. The change between in-person work and teleworking may be made provided that there is mutual agreement between the parties, registered in a contractual amendment.

Paragraph 2. The change from telework to in-person work may be made by determination of the employer, guaranteeing a minimum transition period of fifteen days, with a corresponding record in a contractual amendment.

^[2] Article Paragraph 1. During the public health emergency of national importance resulting from the new coronavirus, pregnant employees shall remain away from on-site work activities, without prejudice to their remuneration.

Sole paragraph. The employee who is absent pursuant to the head paragraph of this article will be available to perform activities at home, through telework, remote work, or another form of distance work.

Category: Infrastructure and energy

In mid-2016, the federal government created the Gas to Grow program, which preceded the New Gas Market program, launched in 2019. Both were designed to promote a dynamic and competitive liquid gas market that would stand up to the then deeply verticalized market dominated by a monopoly player.

The characteristics of the creation and development of the gas market in Brazil over the years have led to the existence of significant barriers in all links of the gas value chain, the overcoming of which demands, even today, continuous and coordinated efforts by the various players involved on various action fronts.

Thus, the stimulus to the new natural gas market had as its pillars, above all: promotion of competition; harmonization of state and federal regulations; integration of the gas sector with the electrical and industrial sectors; and removal of tax barriers.

In this context, the long-awaited approval of the new legal framework for natural gas in Brazil, with the publication of Law 14,134/21 (Gas Law) and, later, Decree 10,712/21 (Gas Decree), whose campaign dominated the industry scene especially in recent years, revived in the sector the enormous expectation of developing an effective natural gas market in Brazil, with dynamism, attractive potential for new players, and increased liquidity with the expansion of supply and demand.

The Gas Law and Decree brought about material advances expected by the sector, among which the following stand out:

• implementation of the inward and outward transport system;
• application of the authorization arrangement for the transport and storage of natural gas;
• expansion of the list of essential infrastructure and third party access; and
• deverticalization, with independence and autonomy in the activities of transport and distribution (although structured differently for each of these segments).

The challenges, however, were not all overcome with the publication of the new legal framework. New entrants have experienced many complexities in practice, which require them to analyze carefully whether they are to reap the benefits potentially offered by measures opening the gas market.

Among the various adversities faced by players and governments in the process of creating a liquid gas market, one of the most relevant derives from the fact that the Federal Constitution grants the states the competence to operate local piped gas services.

The states have exclusive authority to regulate and provide piped gas services, within their boundaries, to participants in the free market (free consumers, self-producers, and self-importers, referred to jointly as "free agents") and the captive market (residential and industrial consumers, among others who do not meet the requirements for joining the free market). Services may be provided directly by the state or via distribution utilities (CDLs).

The bipartition between the federal and state spheres produces an extremely material practical effect, especially for free agents and potential marketers: the multiplicity of state regulatory regimes, which brings about the most distinct of implications and developments, which agents interested in entering the free gas market must observe. In addition to the different state regulations, these agents must comply with the regulations established by the federal government, which is responsible for regulating natural gas loading and marketing activities, among others.^[1]

Currently, states are at different stages of maturity with respect to free market regulations: Amazonas, Sergipe, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro, São Paulo, Santa Catarina, and Rio Grande do Sul have recent regulations for the free market, published between 2019 and 2021; Maranhão, Mato Grosso, Mato Grosso do Sul, Pará, Paraná, and Pernambuco have less recent regulations; and Acre, Alagoas, Amapá, Ceará, Goiás, Paraíba, Piauí, Roraima, Rondônia, Rio Grande do Norte, and Tocantins have no regulations. Thus, of Brazil's 26 states, only eight have recent regulations that tend to more adequately reflect the current stage of the domestic gas market.

Main issues considered in the migration to the free market

In addition to the complexities related to compliance with the various state and federal regulations, which inevitably imposes high costs for the agent wishing to migrate to the free market, special attention must be paid to the challenges generated by the simultaneous existence and, to a certain extent, the need for compatibility of the main contracts characteristic of this market: Gas Supply Agreement (GSA); Gas Transportation Agreement (GTA), which can be incoming and/or outgoing; and Distribution System Use Agreement (CUSD).

An agent wishing to enter the gas market may opt for different contractual arrangements, such that it is not party to all three contracts mentioned, but only to two of them. A free consumer may, for example, not be responsible for contracting the transport, when this is the responsibility of its supplier. In this scenario, the free consumer would only contract CDL's gas supply (GSA) and gas distribution service (CUSD). However, exposure to several contracts, with different contracting parties in different links of the chain that are intrinsically related, substantially raises the aggregate risks of migration to the free market, requiring agents to make an integrated and careful assessment.

The main sensitivities arising from the coexistence and coordination of the aforementioned contracts and regulations include:

• Prior notice for migration to the free market and withdrawal of the notice: the issuing of the prior notice by the agent to the CDL binds it to that specific term for effective migration and consequent interruption of gas supply by the CDL. The moment the prior notice is sent out must be carefully evaluated by the agents, especially focusing on the term of their supply agreement with the CDL, since any delays in the schedule planned for negotiating and executing the GSA and GTA that cause a mismatch in the start of the term of the agreements may represent a high risk of gas shortage for the agent and exposure to penalties within the scope of one or more agreements. In this scenario, the possibility of waiving prior notice is an important instrument for agents seeking more security and predictability for the migration.

• Simultaneous contracting in the free and captive market: in some states, there is still considerable uncertainty regarding certain issues involving the possibility of contracting gas in the free and captive market simultaneously, which would constitute a partially free consumer. Although simultaneous contracting is allowed in many state regulations, the lack of clarity regarding the volume to be contracted in each of the markets represents a risk for the agent. Simultaneous contracting is also a much appreciated mechanism at a time of transition, as it can mitigate the risks of interruption in gas supply cited in the prior item.

• Penalty and accumulation of penalties across contracts: the probability that the agent will suffer simultaneous penalties due to the same event in all three contracts or in at least more than one of them is considerably high, especially in a network industry. Operational issues tangential to these contracts should be particularly assessed in order to have an accurate picture of the risk pointed out. The analysis of the stacking of penalties requires special attention from the agent when weighing the costs relative to migration to the free market.

• Sale of surplus quantity: in some states, the free agent must qualify as a trader before the state and the National Petroleum, Natural Gas, and Biofuels Agency (ANP) so that it can exercise efficient management of its portfolio, selling the surplus quantity of gas. Such regulatory impositions mean more bureaucracy and costs for the agent that intends to migrate.

• Tariffs applicable to the free market: the uncertainty as to the tariffs applicable to free agents is a relevant point of attention. Regulations that give little predictability to the tariffs (one of the main elements considered in migration) tend to discourage agents from migrating.

• Construction of dedicated pipelines: the construction of dedicated pipelines is a very sensitive topic for certain agents whose projects substantially depend on the construction of certain infrastructure involving very high investments. The lack of clarity regarding the regulatory treatment in the negotiation and execution of large investments represents an additional challenge to be faced by the agent interested in the investment.

• Contracting transportation - public calls for contracting of long-term firm products: the agent should establish a migration schedule to safely and efficiently accommodate public calls for contracting of transportation. There is also the possibility of evaluating non-firm and short-term products that can, in various scenarios, help agents whose needs are met by these modalities or who want to use them in a moment of transition, pending the contracting of firm capacity through a public call.

Long road to maturity

Despite the recognized advances introduced by the Gas Law and Decree, there is still a long way to go before the Brazilian market reaches the liquidity, dynamism, and competitiveness so desired. One aspect of this path is related to the agents' own knowledge curve regarding their new roles and responsibilities in the new market configuration.

The difficulties pointed out, however, do not prevent joint development of creative solutions to meet the challenges that present themselves. Each project needs to be carefully studied so that risks are mitigated in the most efficient way. Joining the efforts of market players remains one of the most effective ways to develop solutions capable of equating or minimizing existing risks.

^[1] For example, if an agent that has manufacturing plants located in all states of the Southeast Region wants to become a free consumer of gas in these states, it must observe the following regulations: Arsesp Resolution No. 1061/20, for the State of São Paulo; Agenersa Resolution No. 4142/20, for the State of Rio de Janeiro; Headquarters Resolution No. 17/13, for the State of Minas Gerais; ARSP Resolution No. 46/21 and State Law No. 11,173/20, for the State of Espírito Santo; in addition to ANP regulations for gas loading and marketing and sale.

Category: Infrastructure and energy

Laura Souza and Thiago Cantareli

MP 1,055/21 created the Chamber of Exceptional Rules for Hydropower Management (CREG), which will last until December 30 of this year, to establish emergency measures for optimizing the use of hydroelectric resources, in view of the water shortage. The objective is to prevent scenarios of water shortage or insufficient power generation.

Brazil has suffered from a shortage of rain since 2020, according to the Ministry of Mines and Energy (MME). From September to March of this year, the National Interconnected System (SIN) registered the worst index of water inflow into its reservoirs since 1931. This picture is aggravated by the prospect of little rainfall in the coming months, which coincides with a typically dry season.

Due to the multiple uses of water, such as human consumption, recreation, transportation, generation of energy, and agriculture, in addition to its environmental role, the scenario of water scarcity demands attention and measures for the optimization of this resource to increase the security of its availability, even in pessimistic water scenarios.

To respond to this situation, CREG was given the competence to:

• define mandatory, exceptional, and temporary guidelines to establish limits on the use, storage, and flow of hydroelectric plants and eventual mitigation measures;
• determine the deadlines for adoption of these guidelines by the federal public administration, the National Electric System Operator (ONS), the Electric Energy Trading Chamber (CCEE), and generation concessionaires; and
• request and establish deadlines for forwarding information and technical supporting documents to the Federal Public Administration, ONS, CCEE, and the generating concessionaires.

Another competence of the CREG is to decide on the ratification of the deliberations of the Monitoring Committee of the Electric Sector (CMSE) related to the measures for the security of the electric energy supply. With the approval by the CREG, compliance with the CMSE's resolutions will be mandatory for the direct and indirect federal public administration, ONS, CCEE, concessionaires, and authorized parties of the electric power sector, as well as concessionaires, permissionaires, or authorized parties of the oil, natural gas, and biofuels sector. These decisions may include contracting reserve capacity through simplified competitive procedures.

The operating costs incurred by electricity generators and resulting from the measures under MP 1,055 will be reimbursed by charges to cover the costs of the system’s services. To this end, they must be recognized by the National Electricity Agency (Aneel) and must not be covered by the terms of the concession contracts.

The rules of operation of the chamber were approved by the CREG on July 8, 2021, through Resolution No. 1, in the form of its exhibit. The CREG is composed of the ministers of Mines and Energy (chairman); of Economy; of Infrastructure; of Agriculture, Livestock, and Supply; of Environment; and of Regional Development. The chairman of the body may make decisions on matters within the competence of the CREG, which shall be subject to referendum by the plenary at the earliest opportunity. In addition, the chairman may invite experts, authorities, and representatives of other bodies and entities, public or private, to advise the CREG.

The ordinary meetings of the plenary will occur monthly, usually at the MME. Special meetings may be convened by the chairman on his own initiative or that of the members of the chamber. The CREG shall decide by means of decisions or informative acts, which shall be published or forwarded to the addressees within three business days of the meeting, if no shorter period is decided. The decisions will be disclosed through minutes, published on the MME website within two business days of approval. All acts issued shall receive wide publicity from the CREG Executive Board.

It is expected that the CREG will be able to promote the measures necessary to ensure a sufficient volume of water in the reservoirs and adequate energy generation, even in a scenario of unfavorable rainfall.

Category: Infrastructure and energy

Ana Karina Souza, Laura Souza, Lair Loureiro and Rafaela Falavina

On 08/18/2021, Bill No. 5,829/19 was approved by the House of Representatives, which aims to establish the regulatory framework for distributed minigeneration and microgeneration and the Electric Energy Compensation System (SCEE) in Brazil. The approved bill is a result of a joint effort of agents of the power sector, members of the house of representatives and regulatory entities with the scope of increasing legal certainty of the distributed generation sector in Brazil, and has been submitted to the analysis and deliberation of the Senate.

According to the approved bill, energy consumers, individuals or legal entities and their respective consumer units may join the SCEE:

• with distributed microgeneration or minigeneration with local or remote generation;
• members of multiple consumer units;
• with shared generation or shared generation members; and
• characterized as remote self-consumption.

The units participating in the SCEE will be subject to the tariff rules established by the National Electric Energy Agency (ANEEL) for the consumer units with microgeneration or minigeneration distributed after December 31, 2045, when existing on the date of publication of the law or if they file an access request to the distribution system within 12 months of the publication of the law. Projects requesting access between the 13th and 18th month of validity of the law will be inserted in the transition rules until 2031, while projects requesting access from the 19th month of validity of the law will be inserted in the transition rules until 2029.

After the transitional periods indicated by law, the participating consumer unit participating in the SCEE will be charged by the tariff modality stipulated by ANEEL for its respective consumption class. The charge will focus on the active consumed power from the distribution network and on the use or demand of all tariff components not associated with the cost of energy, and all the benefits to the electrical system provided by distributed microgeneration and  minigeneration plants should be reduced from the charged amounts.

After 12 months from the date of publication of the law, the Energy Development Account (CDE) will temporarily bear the costs of the tariff components not associated with the cost of energy incident and not remunerated by the generating consumer units on the electricity compensated by the consumer units participating in the SCEE.

The National Council for Energy Policy (CNPE) will have six months from the publication of the law to define the guidelines for the calculation of the costs and benefits of distributed microgeneration and minigeneration. ANEEL, in its turn, will use the guidelines established by the CNPE to calculate the benefits of distributed generation for the National Interconnected System (SIN). This calculation will be completed by regulation to be enacted by ANEEL within 18 months of the date of publication of the law and will consider all the benefits of distributed microgeneration and minigeneration for the electrical system, comprising the components of generation, electrical losses, transmission and distribution.

After the transition periods, the units participating in the SCEE will be subject to the tariff rules established by ANEEL for the consumer units with distributed microgeneration or minigeneration.

ANEEL must establish a standard form for the access request for distributed microgeneration and minigeneration, which must be filed with the competent electric power distribution concessionaire,  and the concessionaire will not be able to request additional documents to those indicated in such standardized form. In other words, ANEEL will unify the connection criteria for distributed generation projects, ending the currently decentralized analysis made by each electric power distribution concessionaires, individually.

The bill also establishes that those interested in implementing distributed minigeneration projects must submit a performance guarantee in amounts ranging from 2.5% of the investment value (for generating units with installed power greater than 500 kW and less than 1,000 kW) to 5% of the investment value (for generation units with installed power greater than or equal to 1,000 kW), being exempted from this obligation distributed microgeneration or minigeneration units  explored under consortium, cooperative and multiple consumer units structures.

In addition, distributed minigeneration projects will be considered electricity generation infrastructure projects, being able to benefit from the Special Incentive Regime for Infrastructure Development (Reidi). They will also be included in the list of projects that are able to constitute an Infrastructure Investment Fund (FIP-IE) and Investment Fund in Participation in Intensive Economic Production in Research, Development and Innovation (FIP-PD&I), and are therefore considered priority projects that provide relevant environmental and social benefits to Brazil.

Specifically in relation to distribution companies, their excess amounts of electricity, depending on the market variation resulting from the option of consumers for the distributed microgeneration and minigeneration regime, will be considered as an involuntary contractual exposure, thus reducing the risk of overload in the distribution system caused by energy overlap caused by consumers.

The bill also establishes the Social Renewable Energy Program, intended for investments in the installation of photovoltaic systems and other renewable sources, in the shared local or remote modality, for the benefit of consumers of the Low Income Residential Subclass, whose financial resources will come from the Energy Efficiency Program, from complementary resources,  or from the portion of other revenues from the activities carried out by electricity distribution companies converted to tariff affordability.

Even though still depending on resolution of the Senate, the approval of the bill by the House of Representatives represents an important milestone in the consolidation and modernization of the regulatory structure of distributed generation activities in Brazil, including in relation to legal certainty matters. These factors, as long as they are effectively implemented in the final text of the bill to be converted into federal law, can operate as an important investment vector in the sector and expand the participation of the solar source in the Brazilian energy matrix.