Category: Environmental

Decree 65,486/21, published on January 22, regulates the environmental clearing procedure for activities causing significant environmental impact in the State of São Paulo, as provided for in article 36 of Federal Law No. 9,985/00. The instrument, among other measures, raises environmental compensation to the degree of mandatory conditioning in environmental licensing of ventures, works or activities with significant impact, in procedures under the jurisdiction of the state entity.

The standard established as a duty of the Environmental Company of the State of São Paulo (Cetesb), in the procedures for issuance of an installation license (LI), the establishment of an amount for environmental clearance, based on the degree of environmental impact identified in the EIA/Rima. The agency will also point out the conservation units (UCs) affected by the activity or venture.

For the issuance of a Prior License (LP), the decree imposes as a condition mandatory execution of an Environmental Clearance Commitment Agreement (TCCA), an extrajudicially enforceable instrument the fulfillment of which will constitute a condition for obtaining and validating the LI of the activity, work, or venture.

The requirements established by the Law on the National System of Conservation Units (SNUC), as a minimum limit of 0.5% of the total costs foreseen for the implementation of a work or venture in the transfer of funds intended for environmental clearance, must be observed. To grant the license sought, it is also necessary to obtain authorization from the body responsible for managing the conservation unit directly affected by the work or venture.

The São Paulo decree also reinforced the action of the Environmental Clearance Chamber (CCA), the body in charge of the analysis, proposal, regulation, and application of funds aimed at environmental clearance, detailing its competencies and drawing the limits on its operation.

Decree No. 64,132/19 had already established the CCA as part of the structure of the Bureau of Infrastructure and Environment of the State of São Paulo, but prescribing the analysis of and proposal for application of funds from environmental clearance as its only competencies.

An important way to instrumentalize environmental compensation measures, the CCA is a joint body composed of members from the public sector and civil society, under the coordination of the Deputy Secretary for Infrastructure and the Environment. In addition to the duty already mentioned to analyze and propose the application of the funds from environmental clearance, Decree No. 65,486/21 invested the CCA with the duties of:

• Indicating the UCs benefited by the funds for this purpose;

• Stipulating the percentage of funds for clearance that will fall to each UC, either by authorizing the transfer of funds from the entrepreneur to the UCs benefited, or by making their application compatible;

• Preparing standard instruments for Environmental Clearance Discharge Agreements and Environmental Clearance Commitment Agreements, in addition to advertising the execution and fulfillment thereof;

• Reviewing proposals for application of environmental clearance funds arising from the managing bodies of the UCs;

• Establishing the actions to be carried out with the funds from environmental clearance in the UCs established by the State.

In addition to giving greater effectiveness to the CCA, the standard revokes Decrees No. 60,070/14, 60,919/14, 62,451/17, and 62,672/17.

Category: Tax

Following in the steps of what was inaugurated in the federal sphere, the State of São Paulo published, in October, Law No. 17,293/20, which, among other measures, instituted tax settlement at the state level, allowing consensual resolution of disputes related to debts registered as outstanding debt.

To regulate tax settlements, the State Attorney General's Office issued Resolution PGE-27/20 and Ordinance SUBG CTF-20/20, in force since the end of last year. The purpose of both rules was to establish objective and transparent criteria for entering into settlement, as well as for ranking the credits of taxpayer-debtors in order to ascertain their situation and calculate possible discounts for each specific case.

In general terms, and without prejudice to the peculiarities of each case, settlements in São Paulo and federal settlements have four fundamental differences:

1. While the federal arrangement provides for three modalities (asset-debt settlement, litigation settlement, and small-claims settlement), the state arrangement provides that only debts registered as outstanding debt can be subject to settlement.

2. State settlements allow the granting of discounts (although less significant) also for debts classified as A and B (debts with maximum recovery capacity), while the federal arrangement only admits settlements for outstanding debt referring to debts classified as irrecoverable or difficult to recover (C and D). It also adopts as criteria for granting discounts not only the degree of recoverability of the debt according to the criteria it specifies, but also the chances of success of the litigation.

3. State settlements allow the use of amounts deposited in court to reduce the amount of the debt to be settled.

4. The state legislation defines, even if it does not use this expression, a contumacious debtor, in relation to whom settlement shall not be admitted (Article 47, IV, of the Law “Settlements are prohibited that: (...) involve a debtor of the Tax on the Circulation of Goods and Services of Intermunicipal and Interstate Transport and Communication - ICMS that, in the last five (5) years, present a default of fifty percent (50%) or more of its obligations due"). Federal settlements, on the other hand, provide that settlement with contumacious debtors shall not be admitted, but does not define them. Until such time as there is such a definition, it is believed that this specific restriction does not apply in the federal sphere.

With the due peculiarities, discount on the amount of fines and interest, installment payment of debts, deferment of payment, or moratorium is allowed, in addition to the possibility of settlement on issues linked to guarantees. The use of court-issued registered warrants (precatórios) as a means of offsetting debts owed, on the other hand, is not allowed.

The classification of tax debts to be settled is done according to the following criteria, expressly provided for by law: guarantee, payment history, age of the debt, economic capacity, tax risk, and collection costs. On the basis of the analysis of these criteria, the tax debts to be settled will be divided into the following categories (rating): "A" (maximum recoverability), "B" (average), "C" (difficult), and "D" (irrecoverable).

That is, tax debts will be classified according to their recoverability, but will be eligible for settlement in any of the existing categories. The benefit to be granted is inversely proportional to the rating: the higher the rating, the lower the benefit.

Ratings will be differentiated by the tax to be settled, unlike in the federal sphere, where the rating is uniform. An example is the ICMS (Tax on Circulation of Goods and Services) taxpayers, which will have more specific criteria for classifying tax debts when compared to ITCMD (Causa Mortis and Estate Tax). The objective is to increase the collection of funds considered irrecoverable.

Paragraph 3 of article 54 of Law No. 17,293/20[1] establishes that all information classifying a debt as recoverable shall be confidential and may only be disclosed to debtors or their representative.

However, Resolution PGE-27/20 provides that taxpayer will only know their classification grade and, consequently, their rating when submitting the individual proposal for settlement or adhesion to a public notice. In other words, the resolution ended up creating a restriction of constitutionality and dubious legality, inasmuch as São Paulo law, in line with the Federal Constitution,[2] allows taxpayers access to information related to the recoverability of their debt without any time limitation.

According to the debt classification, the following discounts will be offered:

• 20% on interest and fines for debts classified within rating A, up to the limit of 10% of the total discounted value of the same debt on the date it is granted.

• 20% on interest and fines for debts classified within rating B, up to the limit of 15% of the total discounted value of the same debt on the date it is granted;

• 40% on interest and fines for debts classified within rating C, up to the limit of 20% of the total discounted value of the same debt on the date it is granted.

• 40% on interest and fines for debts classified within rating D, up to the limit of 30% of the total discounted value of the same debt on the date it is granted.

• For settlements with Microenterprises (ME), Small Businesses (EPP), or Individual Microentrepreneurs (MEI), the limits will be 30% for debts classified in ratings A and B, or 50% for debts classified in ratings C and D.

The law provides that settlement may take place by adhesion to the PGE proposal or by individual proposal by the taxpayer. Settlement by adhesion to the public notices will be allowed only for taxpayers that have debts registered at outstanding debt in the maximum amount of R$ 10 million. Above this amount, only settlements pursuant to an individual proposal will be allowed.

In individual settlements, it is up to taxpayers to propose to the PGE which debts they intend to settle and under what conditions. The forms for an individual proposal for settlement transaction requests have already been made available on the PGE-SP website, such that taxpayers that comply with the general requirements set out in Law No. 17,293/20, regulated by Resolution PGE-27/20 and SUBG CTF-20/20, may settlement with the São Paulo tax authorities and bring their situation into good standing.

A settlement by adhesion will be proposed by the PGE to close disputes that deal with the same legal controversy and will be subject to the acceptance of taxpayers that meet the conditions and requirements to be reported in a public notice. It is intended exclusively for taxpayers who have debts registered in an amount not exceeding R$ 10 million and will be made exclusively by adhesion to be formalized electronically. There is no open call for this type of settlement yet.

[1] Article 54 - The State Attorney General shall regulate:

(...)

V - the linkage of the provisions dealt with in article 46 to the degree of recoverability of the debts subject to the settlement, which will take into account the guarantees of the debts assessed, existing judicial deposits, the possibility of success for the Treasury in the claim, the age of the debt, the debtor's solvency capacity and payment history, and the costs of judicial collection;

(...)

Paragraph 3  - Information on the recoverability of the debt referred to in subsection V of this article shall be considered confidential and may be disclosed exclusively to debtors or their representative.

[2] Article 5, subsection XXXIII, of the Federal Constitution of 1988: "all have the right to receive from public bodies information of their private interest, or of collective or general interest, which shall be provided within the time period provided for by law, under penalty of liability, except that for which secrecy is essential to the safety of society and the State"

Category: Litigation

 In order to make its arbitration rules more efficient, flexible, and transparent, the International Court of Arbitration of the International Chamber of Commerce (ICC) has revised to its arbitration rules, which entered into force on January 1, 2021 (the "Arbitration Rules").

The ICC has been acting as an arbitral institution since 1923 and today it is considered to be the chamber with the largest international projection in the world.[1] Its rules are updated periodically, and the last modifications had been made in 2017. The new Arbitration Rules contain minor changes that have been proposed in order to adapt them to new trends in arbitration and to make the procedures more efficient and flexible.[2]

The revised rules will apply to all disputes submitted to the ICC as of January 1 of this year, unless the arbitration agreement that gives rise to the dispute expressly provides otherwise.

Inclusion of additional parties

With the inclusion of item "5", Article 7 of the Arbitration Rules now expressly provides for the possibility of submitting a request for inclusion of additional parties, even after the arbitral tribunal has been constituted. In such a case, the inclusion of new parties is subject to the new party(ies) acceptance of the arbitral tribunal and to the terms of reference already agreed upon between the original parties. The provision also establishes that it will be incumbent on the arbitral tribunal to decide on its jurisdiction over the additional party or parties and whether to include such new party or parties.

The 2017 version of the Rules (in item "1" of the same Article 7) prohibited the inclusion of additional parties after the appointment of an arbitrator, unless there was the consent of all parties. As a result, it was practically impossible to include additional parties after the arbitrator(s) had been appointed, even though, in many cases, the participation of additional party(ies) could make the process more efficient.

Consolidation of arbitral proceedings

Items "b" and "c" of Article 10 of the Arbitration Rules, which previously provided that the Court could consolidate two or more arbitrations governed by the Arbitration Rules and arising from the same arbitration agreement, have undergone minor adjustments and now provide for the possibility of consolidating arbitrations arising from separate contracts.

Disclosure of third-party funding

In view of the increasingly frequent use of third-party funding in international arbitration and the debates surrounding the duty to disclose the existence of such funding agreements, the ICC added item “7” to Article 11 of the Arbitration Rules, which establishes the obligation to disclose third parties with whom the party(ies) have entered into funding agreements.

The disclosure of the existence of a third party with an economic interest in the case is fundamental for the arbitrators to be able to evaluate potential conflicts of interest.

Appointment of the arbitral tribunal by the Court

With the inclusion of item "9" in Article 12, the Arbitration Rules now grant the Court express powers to appoint all members of the arbitral tribunal in exceptional situations, namely, whenever it is necessary “to avoid a significant risk of unequal treatment and unfairness”, without prejudice to any agreement entered into between the parties regarding the appointment of the arbitral tribunal.

This will most likely help to avoid possible challenges to arbitrators and requests for annulment of awards on the grounds of unequal treatment of the parties during the constitution of the arbitral tribunal.

Party representation

Among the measures adopted to mitigate the risks of conflicts of interest, Article 17 was also amended and the Arbitration Rules now provide that (i) the parties must report any change in their representation immediately (item "1"); and (ii) the arbitral tribunal may take any measures it deems necessary to avoid conflicts of interest arising from changes in the parties' representation and to preserve their independence and impartiality, and may even order the exclusion of new representatives retained by the parties after the constitution of the arbitral tribunal (item "2").

Virtual hearings

Item “1” of Article 26 of the Arbitration Rules, which previously only established that the arbitral tribunal had to notify the parties within a reasonable period of time of the scheduling of hearings, now expressly provides that both the parties and the arbitral tribunal may request hearings to be scheduled and that the arbitral tribunal may determine whether a designated hearing will be held in person or remotely, via videoconference, telephone, or such other means of communication as they deem appropriate.

Emergency arbitrator provisions

The new Arbitration Rules excluded a previously existing rule that the emergency arbitrator provisions (Appendix V of the Arbitration Rules) would not apply whenever the parties had agreed to some other pre-arbitral procedure for the granting of conservatory, interim or similar measures (former item "6", "c" of Article 29 of the 2017 Rules), thereby expanding the range of situations in which parties may resort to emergency arbitration.

Law applicable to disputes related to the Court's administration of arbitrations

Article 43 was included in the Arbitration Rules, which provides that any disputes related to the administration of arbitration proceedings by the Court under the Arbitration Rules shall be submitted to the Paris Judicial Tribunal and governed by French law.

Other relevant changes

In addition to the changes detailed above, the following changes to the Arbitration Rules are worth noting:

Arbitrations arising from treaties:

• No arbitrator shall be of the same nationality as any of the parties to arbitrations arising from treaties (Article 13(6)); and

• The emergency arbitrator provisions shall not apply to arbitrations arising from treaties (Article 29 (6)(c)).

• Article 36 of the Arbitration Rules has been amended to provide that, in addition to being able to request the correction of any errors in arbitral awards, the parties may request the issuance of an additional award on any claims that the arbitral tribunal failed to address in its original award.

• Article 5 has been included in Appendix II of the Arbitration Rules to provide that parties may request that the Court disclose the reasons behind its decisions on (i) the existence of the arbitration agreement (pursuant to Article 6, item "4”, of the Arbitration Rules); (ii) consolidation of proceedings (pursuant to Article 10); (iii) the appointment of the president of the arbitral tribunal or all arbitrators (pursuant to Article 12, items "8" and "9"); (iv) challenges against arbitrators (pursuant to Article 14); and (v) the replacement of an arbitrator at the Court's own initiative (pursuant to Article 15, item "2"). Although the new general rule is that of transparency, pursuant to item "2" of Article 5, in “exceptional circumstances”, the Court may choose not to communicate the reasons for the decisions above.

• Article 2 of Appendix VI to the Arbitration Rules has been amended to broaden the scope of cases that are governed by the expedited procedure provisions. Now, arbitrations involving amounts of up to US$ 3 million will, as a rule, be governed by the expedited procedure provisions set out in Appendix VI, which were implemented with the intention of expediting the settlement of such disputes. Until now, the limit had been US$2 million.

Access the new ICC arbitration rules here. The comparative version of the 2017 and 2021 rules is available here.

[1]According to the ICC International Arbitration Statistics report released in July of 2020 (for the year 2019), the Court recorded 869 new cases in 2019 involving parties from 147 countries and independent territories. In December of 2019, the Court recorded its 25,000^th case.

A summary of the 2020 statistics is available at: https://iccwbo.org/media-wall/news-speeches/icc-releases-2019-dispute-resolution-statistics/ [Accessed on February 1, 2021]

[2] As announced by the ICC itself in its note disclosing the new arbitration rules: https://iccwbo.org/media-wall/news-speeches/icc-unveils-revised-rules-of-arbitration/ [Accessed on February 1, 2021]

Category: Tecnology

Laura Aliende da Matta and Matheus Perez Matsuno

The week of the International Day for Personal Data Protection (January 28) brought news in the area of data protection in Brazil, with the publication of the Regulatory Agenda for the biennium 2021-2022,[1] through Ordinance No. 11/2021 of the National Data Protection Authority (ANPD). The agenda is a planning instrument that brings together the regulatory actions defined as priorities for the ANPD in the next two years, either as objects of study or regulation.

 This measure is of great importance to the business sector, as it provides the possibility of structuring adaptation strategies that go hand in hand with the regulatory advances of the Authority itself, allowing a scenario of greater predictability.

The agenda provides for semi-yearly reports on the monitoring of regulatory initiatives produced by the General Coordination of Standardization, without prejudice to the adjustment of initiatives and goals as necessary. At first, however, the Agenda listed ten priority topics in the area of data protection and reported the forecast for the start of regulatory activity related to them. The topics will be developed by the ANPD in three phases:

• Phase 1: initiatives starting within up to one year (by the 2nd half of 2021);

• Phase 2: initiatives starting within up to one year and six months (by the first half of 2022); and

• Phase 3: initiatives starting within up to two years (by the 2nd half of 2022).

The initiative for transparency is to be commended, but the lack of a definition as to how some of the issues will be tackled until they are regulated is still worrying. It would be recommendable for the ANPD to at least disclose the goals for business continuity with a greater degree of legal certainty. An example of a topic to be addressed is that of the bases for the international transfer of personal data (in detail below), for which it is not yet possible to provide a strict and literal interpretation, which leaves them susceptible to relevant differences of opinion. In addition, for a large part of the market, doing business without some degree of international data transfer is practically impossible today and, for the time being, there are no scalable legal solutions that can be adopted by processing agents.

In any case, the balance of Ordinance No. 11/2021 is positive, since it brings in relevant elements for the planning of adjustment actions, as well as for monitoring and collection of regulatory initiatives that will be adopted by the ANPD. Please check out all the topics on the agenda below:

Internal Regulations of the General Data Protection Law (LGPD) and the ANPD’s Strategic Planning

These first two topics are prerequisites for the ANPD to begin operations, as well as for the definition of actions, objectives, and deadlines. The documents are of great value for civil society to follow the development of the ANPD, through rendering of accounts and comparisons with the calendar determined. The ANPD’s Strategic Planning for 2021-2023 has three strategic objectives:

1. Promote strengthening of the culture of personal data protection;
2. Establish an effective regulatory environment for the protection of personal data; and
3. Improve the conditions for fulfillment of legal duties.

Protection of personal data and privacy for small and medium-sized enterprises, startups, and individuals who process personal data for economic purposes

This subject is in accordance with the regulatory competence established in article 55-J, subsection XVIII, of the LGPD. It is of special importance, as the burden of adjustment generated by the LGPD may mean a significant competitive constraint for these companies. In addition to dispensing with certain obligations in some contexts, such as appointing a data protection officer, it would be interesting if the regulations brought in elements of simplification from compliance with other obligations to facilitate adaptation to the law.

The rights of the holders of personal data

The fourth topic is scheduled to take place in Phase 3. The LGPD expressly defines some of the rights of data holders, but there are still many points of uncertainty, for example, in articles 9, 18, 20, and 23 of the law. For example, article 9 of the LGPD provides that data holders are entitled to information "made available in a clear, adequate, and conspicuous manner" concerning the processing of their data, but do not establish objective criteria for compliance with this requirement. With the regulation planned, it is expected that companies will be able to rely on objective protocols for the disclosure of information, which may greatly reduce costs related to implementation. In addition, article 18, which deals with the holder's requisition rights vis-à-vis the controller, is expected to have clearer guidelines on procedures such as anonymization, blocking, or elimination of unnecessary data, among other situations.

The establishment of rules for the application of article 52 et seq. of the LGPD

The fifth topic is planned for Phase 1. Article 52 et seq. of the LGPD discuss the administrative penalties applicable to controllers and operators. It is expected that the circumstances and conditions for the application of the penalties provided for will be better defined. In compliance with the foundation of economic and technological development and innovation stated in the law, it is necessary to provide information that enables controllers to understand the criteria for the application of administrative sanctions and adapt accordingly.

Reporting of incidents and specification of notice period

The sixth topic (also for Phase 1) is regulation of the items for incident reporting. Article 48 of the LGPD holds the data controller responsible for reporting to the ANPD and the holder the occurrence of safety incidents that may cause relevant risk or damage to the holders. However, there is no express provision of some essential elements for such reporting, such as specification of the notice period and format, which shall be described in a resolution of the ANPD.

Personal Data Protection Impact Report

Article 38 of the law, supplemented by article 55-J, subsection XIII, and §3, provides to the ANPD the option to require a Personal Data Protection Impact Report from data controllers. Despite the provisions of article 5, subsection XVII, there is still no standardized model for the report, as was provided by the European authorities, for example, when the General Data Protection Regulation (GDPR) was approved.

Personal Data Protection Officer

The eigth topic is planned for Phase 2. The personal data protection officer , also known as Data Protection Officer (DPO), shall be appointed by the controller to act as a means of communication between the processing agent, the holder, and the ANPD (article 5, subsection VIII, of the LGPD). Their appointment is mandatory for the controller, in accordance with article 48. However, paragraph 3 of the same article expressly states that the ANPD may establish supplementary rules on the definition, duties of the officer, and events in which their appointment is waived. Therefore, the ANPD will have the opportunity to assess the need to appoint an officer according to the nature and size of the entities or volume of data processing operations, as well as define the necessary duties of the professional allocated in each sector of activity.

International transfer of personal data

The agenda points to the need to regulate articles 33, 34, and 35 of the LGPD, an activity to be carried out in Phase 2. Article 33 provides for cases in which the international transfer of personal data is permitted, such as to countries or international bodies that provide an adequate level of data protection (article 33, subsection I, of the LGPD), while article 34 expresses which factors the ANPD will take into consideration in determining the level of personal data protection of these countries or bodies. The list of countries classified according to their degree of protection is not defined, however, as has been done by the European authorities. The ANPD is also expected to define guidelines for interpretation of what constitutes international transfer (which may include or exclude, for example, storage on international servers contracted for cloud service) and the content of standard contractual clauses (as per article 35 of the LGPD).

Legal scenarios for the processing of personal data

The tenth and last topic of the ANPD's Regulatory Agenda foresees for Phase 3 the publication of guidelines on the application of the legal bases and scenarios for data processing to the specific case. Legal bases such as legitimate interest and protection of credit are especially open to interpretation and lack clear guidelines that make it possible to satisfy the requirements of the law. The ANPD will publish a good practices guide with the guidelines for agents to proceed in a proper and lawful manner.

[1] BRASIL. National Data Protection Authority. Publishes the regulatory agenda for the biennium 2021-2022. Ordinance No. 11, January 27, 2021. Available at: http://www.in.gov.br/web/dou/-/portaria-n-11-de-27-de-janeiro-de-2021-301143313

Category: Environmental

Roberta Danelon Leonhardt, Carolina de Almeida Castelo Branco, Bruno Vinciprova Pileggi, Eduardo Perazza de Medeiros, Sergio Ferraz e Opice, and Isabella Guerrero.

State Law No. 23,795/21, published by the government of Minas Gerais (MG), entered into full force to establish important requirements in local legislation on dams, especially by making it mandatory for the state to provide assistance to those affected by dams before, during, and after the installation and maintenance of these structures, including the time of deactivation. The law institutes the State Policy on Persons Affected by Dams (PEAB), to be observed in all actions prior, concomitant with, and subsequent to planning, construction, installation, operation, expansion, maintenance, or even deactivation of dams, whenever their presence may present a risk (albeit potential) of damages to local communities.

According to the PEAB, all those who are harmed, even if only potentially (i.e. indirectly), by the impacts resulting from the dams will be considered affected, namely:

• loss of property or possession of property or reduction in its market value;

• loss of productive capacity of the land;

• loss of fishing area;

• total loss or partial reduction of sources of income;

• proven damage to local productive activities or that makes it impossible for commercial establishments to operate;

• impracticability of access or management activity to natural resources and fishing grounds;

• compulsory displacement;

• loss or restriction of access to resources necessary for reproduction of their way of life;

• breaking of ecosystems;

• loss or restriction of water supply or capture; and

• damage to quality of life and health.

Another very important point to be observed by entrepreneurs in the region is the creation of an Economic and Social Recovery Plan (PRDES), called a binding linked plan. Each and every dam installed in MG must be accompanied by a PRDES, for which the preparation, management, execution, and financing of resources for the actions planned will be under the responsibility of the dam's developer. The PRDES will obligatorily cover all the actions foreseen for remediation of the socioeconomic, cultural, or environmental damages caused by dams, as well as the estimated deadlines and costs and the mechanisms for broad social monitoring and follow-up. Such actions and mechanisms are necessary for full repair of socioeconomic impacts arising from the construction, installation, operation, expansion, maintenance, or deactivation of dams.

The law also provides for a series of rights to those affected by dams, such as access to information related to environmental licensing processes and feasibility studies for dams, participation in processes related to repair policies, technical advice funded by the developer, and prior and collective negotiation of forms and parameters for comprehensive repair of socio-economic impacts arising from the construction, installation, operation, expansion, maintenance, or deactivation of dams.

A concrete example, which embodies much of the rights of those affected by dams listed in the law, is the plan to create a representative committee, composed of technicians from the Public Administration and members of the affected community, whose duties include managing the actions provided for in the PEAB and participating in collective negotiations to redress socioeconomic impacts, promoting dialogue between those involved and the developer. In the same sense, as an attempt to ensure greater transparency to enterprises, the law provides that the PRDES shall be prepared in a simple and understandable manner and shall be subject to prior public consultation. Thus, its implementation and results will be monitored and evaluated by the representative committee.

Although the Brazilian PEAB has brought in definitions of the damage experienced by those affected by dams ensuring their right to redress, state law has also brought in open and undetermined concepts, which still need to be regulated by the Executive. An example of this is the pending definition of the scope of action of the independent technical advisor, as well as the rules for the operation and performance of the representative committee.

Finally, another point of attention for developers and entrepreneurs is the mandatory payment of a handling charge, provided for in the tax legislation of the state of Minas Gerais (State Law No. 6,763/75), to the State Bureau for Social Development, in order to fund the activities related to the analysis and monitoring of the PRDES under the PEAB.

In order to ward off new incidents and all the implications that emerge from their consequences, the various immediate and relevant requirements to be met by the state and local developers created by State Law No. 23,795/21 must be closely monitored by all those interested and involved in activities using dams in Minas Gerais, reinforcing preventive action and corporate social and environmental responsibility.

Category: Real estate

As another initiative to reduce bureaucracy in the Brazilian business environment, the Economic Freedom Act (Federal Law No. 13,874/19) received new regulations from the Committee for the Management of the National Network for the Simplification of Registration and Legalization of Companies and Business (CGSIM), this time related to urban licenses.

CGSIM Resolution No. 64, of December 11, 2020, exempts buildings and facilities classified as low risk from urban licensing, in addition to establishing automatic exemption from licensing for buildings considered to be moderate risk, by simply sending the documents indicated in the resolution itself. High risk buildings and installations remain subject to the traditional licensing rules in force.

For the risk classification, buildings and facilities are rated into levels of complexity and size according to various criteria, requirements, and constraints.

The states, Federal District, and municipalities are subject to the rules and provisions of CGSIM Resolution No. 64 as long as they do not have their own legislation, expressly created on the basis of the Economic Freedom Act, which regulates and delimits, in an exhaustive manner, the economic activities considered low risk and the exercise of which is independent of any urban licensing. Once such laws are promulgated, CGSIM Resolution No. 64 will have suppletory application.

Although federal entities have laws on risk classification and licensing waivers for low-risk activities, if such rules have not been promulgated based on the principles and definitions of the Economic Freedom Act, the rules of the resolution should prevail. CGSIM Resolution No. 64 is already receiving criticism related to its constitutionality, under the argument that it encroaches on the competence of the municipality in the ordering and control of land use and creates obligations for the drafting of its own legislation, disregarding the autonomy of the municipalities and the Federal District in legislating on their territory.

Another important point is that the licensing waiver process will be carried out in a declaratory manner by the interested parties, by sending documents via digital means, integrated and accessible simultaneously by all the competent licensing bodies. Once correct and complete submission has been made, the waiver of urban licensing is automatic.

The integrated submission to the licensing bodies must be done through individuals or legal entities, public or private, qualified by the CGSIM, called Digital Integration Proxies (PDI), forming the Market of Digital Urban Integration Proxies of National Integration (Murin). In general, IDPs are responsible for managing submissions, and may even act as representatives of the interested party before licensing bodies. While it is argued that Murin will facilitate citizen access and ensure free competition in the provision of such services, there are views that direct submission by the interested party should also be permitted.

There will certainly be further debates and criticism of CGSIM Resolution 64, which is why it is essential to monitor developments after its publication.

CGSIM Resolution No. 64 will take effect on (i) March 1, 2021, for municipalities with a population of over 5 million inhabitants, for the Federal District and for the municipalities and states affiliated to the National Network for the Simplification of Registration and Legalization of Companies and Business (Redesim), provided that they have registered for access to Murin; (ii) June 1, 2021, for the other municipalities and states affiliated with Redesim; and (iii) September 1, 2021, for the other federal entities.

Category: Real estate

With the publication of Decree No. 48,378/21, the Rio de Janeiro City Government created a new ancillary tax obligation for IPTU taxpayers for real estate located in the city. As of this fiscal year 2021, they are required to submit an Annual Statement of Registration Data (DeCAD) for all of their residential and non-residential urban properties by the last business day of June of each fiscal year. The measure aims to create an updated database and facilitate changes in the registration data of properties in the city of Rio de Janeiro, including ownership and addition of built area.

According to article 34 of the National Tax Code (CTN), a IPTU taxpayer is an owner of property, holder of its useful domain, or its owner on any account. Owner means the one who has the option to use, enjoy, and dispose of the property (article 1.228 of the Civil Code). Useful domain covers the rights of holders of rights of tenement, use, and sale, in relation to the tenement building. As for possession, it is understood that only the possessor with animus domini, that is, a definite spirit of dominion, may be a taxpayer of the IPTU. Lessees, for example, do not qualify as taxpayers, since they only hold direct possession of the property, without animus domini. Therefore, in the case of leased properties, the obligation to submit the DeCAD will, as a rule, be assigned to the lessor.

The DeCAD should be delivered electronically in the appropriate form to be made available on the website of the Municipal Department of Finance and Planning. IPTU taxpayers must confirm the following information regarding their property: current real estate registration number, complete address, taxpayer data, clarification regarding their legal relationship with the property, exercise to which the information provided in the DeCAD refers, whether the property is built or not, built area, and nature of use (whether residential or non-residential), including specifying the nature of the specific use of the property and typology/constructive characteristics of the property.

Taxpayers of more than one property may submit a single DeCAD containing all the information on the property owned by them individually. In the event of non-compliance with this ancillary tax obligation, as well as omission, inaccuracy, inadequacy, or falsity in the data entered on the form, the taxpayer shall be subject to the penalties provided for in the applicable municipal legislation.

The Municipal Tax Administration may use the information contained in or arising from the DeCAD to make tax entries. However, the data entered on the form is not presumed to be true, nor is it binding on the administrative authorities, which may continue to use other sources of information for tax purposes.

If it is necessary to rectify an DeCAD already submitted, taxpayers may submit, in the same exercise, a rectifying statement by the last business day of June (same deadline for regular submission of a DeCAD). For prior fiscal years, the rectifying statement may be submitted by October 30 of the fifth fiscal year following the taxable event.

The new decree entered into force on the date of its publication, January 1, 2021. IPTU taxpayers must already be scheduled to make the first DeCAD by June 30, 2021 (last business day of the month). The DeCAD form must be available by March 31, 2021.

Category: Tax

Until the advent of Law No. 13,988/20, known as the Legal Taxpayer Law or the Tax Settlement Law, the procedure for administrative resolution of small tax disputes (litigation of up to 60 minimum wages) was essentially regulated by the system introduced in Decree No. 70,235/72. According to the criteria established therein, administrative litigation of federal credits and debts occurred at two levels or trial stages.

In the first stage, which takes place within the scope of the Judicial Offices of the Special Federal Revenue Service (DRJs), a board formed solely of representatives of the Federal Revenue Service is responsible for examining the legality of the tax assessment or the decision that denies the restitution/compensation of a claim.

According to data released by the Brazilian Federal Revenue Service (RFB),[1] of the total stock of 267,000 administrative cases awaiting consideration in this first phase, in February of 2020, about 184,000, or almost 70% of the total, were cases with small value disputes. These cases waited an average of 948 days until the end of this trial phase.

The parties that did not have their claims accepted by the DRJs could enter a second stage of administrative dispute, submitting the case to trial by a joint body of the Administrative Tax Appeals Board (Carf),[2] which would lead take on average six years.

According to management data published on the Carf website, of the universe of 116,000 tax lawsuits awaiting judgment in February of 2020, 71,000 were small claims, that is, up to 60 minimum wages. In Brazilian Reais, small claims corresponded to a dispute of approximately R$ 1.6 billion, against R$ 627.9 billion referring to the value of the whole inventory of Carf proceedings. That is, 61% of all Carf's cases pending judgment represent not even 1% of the total amount in dispute.

The figures show that the model of administrative tax litigation, as it had been presented, was exhausted. Disputes for very low amounts ended up perpetuating themselves in time and congesting the judicial bodies, also responsible for deciding the largest tax controversies. The overall result of the equation is a deficiency in the provision of Public Administration services to society and an excessive slowness to resolve tax issues.

In this scenario, and with the declared goal of attributing greater speed and ensuring greater efficiency to federal administrative litigation for small claims, Law No. 13,899/20 was published, whose articles 23 et seq. were dedicated to instituting new measures to change the system for deciding administrative tax litigation for small claims.

The main changes introduced by Law No. 13,988/20 were: (i) final administrative judgment by the DRJs; and (ii) the possibility of adhering to a tax settlement, following its own criteria and procedures. We will look at the two measures below.

The judgment at last instance by the DRJ

Article 23 of Law No. 13,988/20, regulated by ME Ordinance No. 340/20, now provides that tax disputes for small amounts are ultimately examined by a board of the Brazilian Federal Revenue Service, prohibiting access to such administrative proceedings by an adjudicatory body with the Carf.

There are advantages and disadvantages to the new measure.

Although the measure strongly tends to speed up the judgment of low-value administrative tax proceedings, it ends up modifying the quorum for the body responsible for the second phase and, thus, restricting the taxpayers' defense.

One must recall that, until the enactment of Law No. 13,988/20, small claims litigation was judged at the appellate level by the extraordinary panels of Carf, a peer body, formed by the same number of representatives of the tax authorities and the taxpayer and with the opportunity for oral argument and monitoring of the judgment.

With the advent of this law, and its recent regulation by ME Ordinance No. 340/20, the plurality of parties in dispute in small claims administrative tax litigation has ended. In these cases, appeals are now ultimately examined by the appellate chambers of the DRJs, composed of three to seven judges selected from among the chief judges of the ordinary panels of the DRJs, all of whom are tax auditors and therefore representatives of the Brazilian Internal Revenue Service.

Moreover, in trials before the DRJ, oral arguments or even monitoring of the sessions by the parties is not allowed. For administrative proceedings for small amounts, therefore, defenses will be exercised only on paper, without reinforcement via oral arguments. Consequently, it becomes even more relevant to prepare a consistent and founded initial defense containing all the elements to prove the facts and the law.

An attempt to contribute to an environment of greater legal certainty came in the form of mandatory observance of the Precedents and Resolutions of the Carf by the DRJs, thus binding the position of the DRJs to that already included within the Carf’s guidance. The measure converges on greater uniformity of positioning. However, any repeated positions of the Carf, if not treated as a summary of law or precedent, will not be mandatory for the appellate panels of the DRJ.

Another point of attention is that, in the regulation of small claims litigation under ME Ordinance No. 340/20, the tie-breaking criterion was maintained by the vote of the presiding judge’s vote, contrary to the criterion established by Law No. 13,988/20 itself for the other administrative proceedings under the Carf, in which ties in judgments finding and ordering tax debts to be resolved favorably to the taxpayer.

Considering that administrative proceedings for small claims will no longer reach the Carf, the best solution, even to ensure the preservation of article 112 of the National Tax Code (CTN), would be that of disputes at the appellate level also in favor of the taxpayer.

The adoption of a special procedure for the judgment of administrative tax proceedings for small claims ensures greater speed in administrative litigation and, consequently, should substantially reduce the number of proceedings awaiting examination by the Carf. However, in pursuit of its objectives, Law No. 13,988/20 ended up sacrificing important constitutional principles for procedural practice, focusing on speed of review at the expense of full exercise of rights of defense.

Possibility of settlement

The second important measure adopted by Law No. 13,988/20 was the institution of settlements in tax matters. Bringing to reality the command until then pending regulation of the eighty-year old article 171 of the CTN, Law No. 13,988/20 allowed taxpayers and the Federal Government to settle regarding their debts.

Settlements, because they are an instrument that aims to solve tax disputes by extinguishing the debt through mutual concessions, represent an unequivocal change in the paradigm of the Public Administration in tax collection and should contribute to greater efficiency in tax litigation.

Among the modalities of settlement provided for in Law No. 13,988/20, a specific settlement was instituted for small tax litigation, allowing a discount of up to 50% of the tax debt with a payment period of up to 60 months.

Adherence to this type of settlement is subject to the rules that will be instituted by the PGFN and the RFB, as published notices.

The first notice for small value litigation settlements was published in August of 2020 (RFB Notice of Settlement No. 1/2020), allowing the payment of a downpayment of 6% of the net debt, after the application of the percentage reduction, and the payment of the remaining net debt from 7 to 52 installments, with discounts that could vary from 50% to 20% of the value of the principal, fine, interest, and other charges. Up to December 29, 2020, interested taxpayers could adhere to the conditions of this first notice. It is expected that the next notices will be published soon.

Although the measure represents a major advance in the tax authority/taxpayer relationship, its effectiveness depends on its scope. In order for the transaction to become a reality as a possible method of dispute resolution, especially in cases of small claims, the Brazilian Federal Revenue Service and the National Treasury Attorney's Office must follow a constant work of approximation with taxpayers, granting the advantages that effectively facilitate the settlement of tax debts and make the settlement attractive to a larger public.

The regulation of low-value administrative tax litigation and the possibility of offering these debts for tax settlements demonstrate an extreme concern by the federal government with reducing the serious tax outlook and the large amount of pending litigation. The proposed measures tend to translate into gains in speed, efficiency in dispute resolution, and savings for the public coffers, but are still on a path for improvement.

[1] NETO, José Barroso Tostes. "Contencioso administrativo tributário federal: diagnóstico e perspectivas” [“Federal administrative tax litigation: diagnosis and perspectives”] in Revista ETCO - Instituto Brasileiro de Ética Concorrencial [“ETCO Review - Brazilian Institute of Competition Ethics”]. Special Edition No. 25. Year 17. August 2020, p. 9.

[2] Within Carf, there is also a special trial body, under the responsibility of the Superior Chamber of Tax Appeals (CSRF), which is in charge of standardizing case law in tax matters, this being the last stage of federal administrative litigation.

Category: Labor and employment

The modernization of labor relations, the advancement of technologies, and the constant use of mobile phones have led to the creation of various possible channels of communication between employees and the proliferation of social networking groups. The lack of a regulation on their use at companies, however, exposes the employer to risks related to overtime, time on call, and even non-economic damages. This makes it essential to guide employees on how to use these means for professional purposes, especially in the most popular, less formal and usually personal channels, such as WhatsApp.

The sending of messages regarding work and the obligation to reply outside working hours can give rise to recognition of overtime and time on call. In 2019, a decision by the Labor Appeals Court (TRT) for the 4th Circuit/RS became final, which granted a claim for overtime by an employee who used WhatsApp outside of his normal working hours for conversations of interest to the company.[1]

The same court, in March of 2020, recognized an on call arrangement for an employee who was required to be available to the company by telephone and through messages in that application.[2] Likewise, in July of 2020, a decision by the TRT for the 1st Circuit/RJ became unappealable, according to which, for the purpose of establishing an on call arrangement, it is necessary to prove that there was an express requirement by the company regarding the employee's participation in the WhatsApp group outside of working hours.[3]

The creation of a WhatsApp group can confuse personal and professional relationships among employees and even lead to situations among subordinates and managers that could be interpreted as moral harassment. Recently, the 3rd Panel of the Superior Labor Court (TST) upheld a judgment for non-economic damages for moral harassment that occurred in a corporate WhatsApp group in which managers discussed delays and absences of employees, results, and names of those who did not meet the team's weekly goals.[4]

Although new channels of communication facilitate interaction between employees, the employer should be aware of the risks they present. One way to mitigate such risks is to develop internal policies to guide and regulate the use of these channels in order to maintain a safer working environment for workers and the company itself.

[1] RO 0021845-23.2017.5.04.0401

[2] ROT 0020459-74.2017.5.04.0233

[3] ROT 0100353-31.2018.5.01.0045

[4] RRAg-1001303-33.2018.5.02.0321

Category: Real estate

With the publication of Federal Law No. 13,786/18 (the Termination Law), the legislator sought to end the discussion regarding the fair and reasonable percentage that could be retained by real estate developers in the event that purchase and sale agreements are undone at the mere will of the purchaser or by default on the payment of the purchase price.

The law clearly defined the maximum retention limit at 25% (or 50%, for cases where there is segregated equity) of the amount paid by the purchaser, plus the brokerage commission. It did not indicate, however, what arrangement would apply to contracts executed before the law entered into force, which often provided for higher percentages (reaching 70% in some cases).

Faced with this doubt, the Public Prosecutor's Office of the State of São Paulo filed with the São Paulo Court of Appeals, in 2017, a collective consumer action[1] regarding the unfairness of provisions that stipulate withholdings between 50% and 70% of the amount paid by consumers. The action was submitted to the Third Panel of the Superior Court of Appeals (STJ) and decided under Special Appeal 1820330/SP, for which Justice Nancy Andrighi drafted the opinion.

Contrary to the provisions regarding the application of the Termination Law as a legal reference and in an analogical manner (considering that it had been published after the execution of the contracts at issue, but that it dealt fully with the subject), the Justice established that "the percentage of 25% unequivocally encompasses all indemnities that must be guaranteed to the seller in the event of breach of contract with the consumer at fault." In other words, in addition to reducing the contractual percentages in the specific case (which is in accordance with the criterion of the most current legislation), the STJ included, in this same limit, a brokerage commission, on the understanding that this is a cost within the liability of the seller of the unit (even if contractually the obligation to pay the commission is transferred to the purchaser, as understood by Topic 938/STJ).

The issue is delicate and the STJ’s solution is debatable. Even considering that it was already common to reduce the percentage of retention in cases of proven contractual abuse and that the adoption of the criterion of the most recent law may be a way out in certain cases, the STJ, by including the brokerage commission in this amount, ended up adopting a solution more onerous for the developers than the legislation itself, considering that the Termination Law allows retention of the brokerage commission in addition to the percentage of 25%.

Although the decision may serve as a parameter for future judgments in the STJ itself or in the state courts, it has not settled the issue and does not necessarily apply to all other cases that discuss the issue. In other words, it is not yet possible to define the course of the case law on the subject nor to define the applicability, by analogy, of the parameters brought in by the Termination Law to the contracts executed before its entrance into force.

[1] 1053043-30.2017.8.26.0100

Category: Tax

An analysis of the documents underlying the debate and subsequent approval of Complementary Law No. 160/2017 (LC 160/17) reveals that the purpose of the law was to terminate the litigation associated with the ICMS “Tax War”.

From the state tax perspective, LC 160/17 grants "forgiveness" for benefits unconstitutionally granted by the states over the years and ensures transparency and equality among federal entities for future ICMS incentives. At the federal level, articles 9 and 10 of the law sought to close the debate on whether or not an ICMS tax incentive can be classified as an investment subsidy and, therefore, excluded from the IRPJ, CSLL, PIS, and Cofins calculation basis.

The opinion of the Senate Economic Affairs Committee, when discussing the bill that resulted in LC 160/17, was perhaps the most emphatic on the law's objective: "the classification of ICMS tax benefits as a subsidy for funding or investment has been controverted (...) The aim of SCD No. 5 of 2017 is to close the discussion on the matter by inserting provisions in article 30 of Law No. 12,973, of 2014, to provide that ICMS tax benefits, whether or not granted within the scope of the “Tax War”, will be considered an investment subsidy. With this, the burden of the IRPJ, CSLL, PIS/Pasep Contribution, and Cofins will be eliminated."

It is clear that the legislator's intention was to eliminate the legal uncertainty surrounding the qualification of a tax incentive as an investment subsidy or as a cost subsidy, given the countless discussions that had been going on for years in the administrative and judicial courts on the matter (often adopting criteria not provided for in the legislation to qualify ICMS tax benefits as a kind of subsidy or otherwise), determining that any and all ICMS tax benefits will receive treatment as an investment subsidy. To reinforce this legal qualification, the new paragraph 4 of article 30 of Law No. 12,973/14 further emphasizes that "other requirements or conditions not provided for in this article may not be required" for classifying ICMS tax benefits as investment subsidies.

It seemed like the discussion was finally over. Provided that the states meet the requirements for registration and filing of tax benefits under LC 160/17 and that taxpayers allocate the “subsidy revenue" to the tax incentive reserve, the amount of the ICMS benefit could also be excluded from the IRPJ, CSLL, PIS, and Cofins taxable basis.

This position was even confirmed by the Federal Revenue Service itself in the Consultation Proceeding No. 11/20, which, despite the clarity of LC 160/17, was well received by the legal community as a definitive indication of the end of this debate, with a view to achieving some level of legal certainty. The favorable understanding of the tax authority, however, was short-lived.

In the recent Consultation Proceeding No. 145/20, published in December, the Federal Revenue Service reignited the debate over the qualification of ICMS benefits as investment subsidies or costs. In it, the agency states that, in order to be excluded from the taxable basis of IRPJ, CSLL, PIS, and Cofins, the state incentive must necessarily be granted as a "stimulus to the implementation or expansion of economic enterprises.”

Following this view, the intention of LC 160/17 was only to depart from the requirements of synchrony and binding that had been required until then by the tax authority to identify an investment subsidy, which are requirements set forth in Normative Ruling No. 112/78 and in article 198, paragraph 7, of Normative Instruction No. 1,700/17.

The new position of the Federal Revenue Service once again "selects" a specific set of ICMS benefits that may receive the tax treatment of "investment subsidy," which excludes those that do not present a clear counterpart in an economic enterprise.

Regardless of any value judgment on the tax policy choice of the Legislative Branch in the promulgation of LC 160/17 (which, it is worth remembering, had the vetoes of the Executive Branch on this matter overturned), it seems evident that Consultation Proceeding No. 145/20 is disregarding the legal text and the objective for which the complementary law was conceived, making it completely ineffective, in addition to modifying the recent response by the agency itself in the opposite direction, accentuating the scenario of legal uncertainty that so harms the Brazilian tax environment.

Thus, the tax authority's most recent interpretation leads to the conclusion that LC 160/17 was enacted solely to remove the infralegal and, always, illegal requirements of the Federal Revenue Service (synchronization and binding), which could never have been required due to the lack of a legal basis in that regard. Of course, it is not necessary for the legislator to promulgate a rule with the force of complementary law in order to set aside a rule inserted into the tax system, illegally, via a normative instruction, which does not even have the force of law.

As is increasingly common in Brazil, it seems that the Federal Revenue Service does not agree with the tax policy chosen by the legislator and, without any legal support, will cling to this discussion, dragging litigation on for another decade, contradicting the text of the complementary law and the positions already established in the higher courts on the impossibility of levying of IRPJ, CSLL, PIS, and Cofins on ICMS tax benefits, as per Topic 843, decided under the general repercussion regime by the Federal Supreme Court, and the Motion to Resolve Divergence in Special Appeal No. 1.517.492, decided by the First Section of the Superior Court of Appeals.

It is seen that the Executive Branch, this time through the Federal Revenue Service, insists on acting in a dissonant manner from the Legislative Branch (which, as mentioned before, overthrew the veto of the Executive Branch itself when passing LC 160/2017) and the Judiciary, contributing to a scenario of complexity, cost, and legal uncertainty.

Situations such as these reinforce the need for a broader tax reform, but also serve as a warning against the risk that it will not achieve its full effects as long as the contentious mentality of the Federal Revenue Service persists, which adopts its individual interpretation in clear conflict with the spirit of the legislator.

Category: Labor and employment

After almost a year of pandemic, the time has come to talk about carnival for 2021: how will Brazil's biggest festivity take place and how will it affect labor and employment relations? Will the workers continue to perform their activities normally? What should companies do?

First of all, is Carnival a holiday or not? There are two types of holidays in Brazil: civil and religious. Civil holidays are those established in federal, state, and municipal law. Religious holidays are made up of reserved days provided for by municipal law, not exceeding four in number, including Good Friday.

Carnival, despite being a tradition in Brazil, is not a national holiday. There is a carnival holiday only in places where state or municipal law establishes it. In the state of Rio de Janeiro, for example, Law No. 5,243/08 establishes Tuesday during Carnival as a state holiday.

In locations where Carnival is not a holiday, employers may adopt the measure they prefer in relation to their employees, always respecting the provisions of the collective bargaining agreement applicable to their employees.

Due to the pandemic, however, several cities have yet to define whether to hold or postpone Carnival. The festival will not take place in certain locations this year, and in others it may still be cancelled or postponed.

In certain localities, on the other hand, municipal and/or state authorities have already issued decrees canceling Carnival days as optional day-offs for public agencies. The São Paulo City Government, for example, by means of Municipal Decree No. 60,060/2021 defined that there will be no optional day-offs on February 15, 16, and 17, 2021. According to the City Government, the adoption of the optional day-off corresponding to the days of Carnival and Ash Wednesday would potentially encourage the agglomeration of people in public and private spaces, in the opposite direction of what is recommended by the health guidelines and protocols.

In any case, we emphasize that the fact that Carnival is or is not optional day-off for the purposes of the Public Administration does not affect labor and employment relations in the private initiative. This is because, for companies, what must be taken into consideration is whether or not there are state and/or municipal laws or regulations establishing Carnival as a local holiday, regardless of whether it is optional day-off.

Thus, if it is not a local holiday, companies have four alternatives:

1. Grant employees day off, on a voluntary basis, without the need for offsetting, on the date initially scheduled or on the date of the festivity to be established by the local authorities.
2. Grant day off on the date initially scheduled or on the date of the holiday to be established by the local authorities, with corresponding offsetting for hours not worked, by means of individual agreement or hours bank, provided that the limits for offsetting provided for by law and the terms of the applicable collective bargaining agreement are complied with.
3. Offset in advance the hours not worked due to Carnival, with flexible days off because of the uncertainty regarding the date, to be fixed via individual agreement or hours bank, provided that the limits on hours offsetting provided for by law and the terms of the applicable collective bargaining agreement are complied with.
4. Require normal work from employees, subject to the terms of the applicable collective bargaining agreement.

*Information updated on February 2, 2021.

Category: Litigation

After a long journey,[1] Law No. 13,709/18, the General Personal Data Protection Law or simply the LGPD, as it is popularly known, entered into force in the Brazilian legal system.[2] Its approval represents a paradigmatic change in the logic of personal data protection in Brazil, with the main purpose of giving broad protection to the informational self-determination of individuals, covering the security and predictability of the treatment given to their data.[3]

The data processing agents,[4] from both public and private spheres, then mobilized to comply with the new legal provisions, especially while the penalties for non-compliance are still under the regime of vacatio legis.[5] In this context, compliance professionals, more precisely those responsible for conducting so-called "internal corporate investigations", fear that their professional scope of action will be somewhat "hindered" by the enforcement power of the LGPD's own rights and principles, namely, the right to access, explain, rectify, delete, and explain data collected, as well as the principles of transparency, security, and accountability.

In fact, the performance of extensive analysis and data collection by private entities on various fronts is of the essence of the investigative activity, such as corporate e-mails, background checks, documentary analysis, assessment of the life style of the investigated party, exploratory and/or confirmatory interviews, among others, and even, during the investigation, sensitive data may be collected.[6] Depending on the interpretation of the law, one can conclude that the LGPD has created obstacles to conducting internal investigations carried out by the organizations. This is because paragraph 2 of article 4 of the law provides that "processing of the data referred to in section III of the head paragraph (processing of data for the purposes of public security, national defense, State security, or the investigation and prosecution of criminal offenses) by a person governed by private law is prohibited, except in proceedings under the supervision of a legal entity governed by public law.”

However, this interpretation would be inappropriate for two reasons. On the one hand, because today there are numerous private, serious, and responsible entities that provide investigative services collecting personal data and information within their clients or publicly available, with the objective of preventing, mitigating, or solving incompatible and/or unlawful conduct engaged in by members of an organization. On the other hand, due to the fact that, in certain situations, this action even results from a legal imposition.[7]

In addition, there are some understandings provided for in the European Personal Data Protection Regulation on the subject of "corporate investigations vs. processing of personal data.” Article 29 WP, in its Opinion 2/2017,[8] has consolidated understandings on corporate investigations in the workplace, providing that the legitimate interest of employers may be invoked as a legal basis for such processing, provided that, among other requirements, the processing is strictly necessary for a legitimate purpose and respects the principles of proportionality and subsidiarity.[9] Along the same lines, recital 47[10] of the European General Data Protection Regulation (GDPR), which expressly states that “the processing of personal data strictly necessary for the purposes of fraud prevention and control also constitutes a legitimate interest of the person responsible for processing such data", should be noted.

It turns out that, according to European understandings on the issue, there is nothing to be said of a prohibition on the processing of data for corporate research purposes. What is discussed there is how these data are processed within the organization and on what legal basis such processing should be rely.

Considering the notable influence that the GDPR exerts on the Brazilian data protection law,[11] nothing allows us to say that internal corporate investigations can no longer be conducted by private legal entities, in obedience to article 4, paragraph 2 described above. On the other hand, it is indisputable that such activities must respect the new law.

Thus, the work of the corporate investigator, specifically regarding the LGPD, must be exercised in good faith and, above all, the principles determined by law, such as transparency, necessity, prevention, and security.

In addition, depending on the type of investigation, it is necessary to choose the most appropriate legal basis for the processing. In most cases, it will be the one provided for in subsection IX of article 7 – “legitimate interest”. But it is possible to envision other scenarios, such as an investigation based on an accusation of committing sexual harassment, made through the entity's reporting channel. In this case, the legal basis provided for in subsection VII of article 7, “for the protection of the life or physical safety of the owner or a third party”, could be properly invoked.

Another example is the processing of data necessary for the controller to comply with a legal or regulatory obligation, as mentioned above. Even sensitive data could be handled in the context of a corporate investigation, as in the case of an investigation initiated based on the suspicion of presenting a false medical report by an employee in order to obtain leave from work. Whatever the legal basis used, however, it is of paramount importance to have documented all data processing records used during the investigation through the preparation of a personal data protection impact report (RIPD).[12] The RIPD has the objective of mitigating risks to civil liberties and fundamental rights of investigated persons and shall contain, at a minimum, a description of the types of data collected, the methodology used to collect and to guarantee the security of the information and the controller's analysis of the measures, safeguards, and risk mitigation mechanisms adopted.[13][14]

Another relevant point is the finding that corporate fraud, at some point, is committed in the digital environment of the organization. Thus, it is essential that some technical care be used to preserve the traces and integrity of the data extracted from the digital environment, in order for the result of investigations to not be questioned in the courts.[15]

In fact, during the process of internal corporate investigations, various kinds of personal data can be accessed and analyzed by a legal entity, in apparent conflict with the provisions of paragraph 2 of article 4 of the LGPD. However, investigating ethical violations and illegal acts proves to be not only an organization's compliance duty but also a legitimate interest in detecting and stopping illegal conduct by the agents involved. The objective is to allow any recovery of damages and losses caused to the organization and to mitigate risks of liability in the criminal, labor, competition, corporate, and other spheres.

In summary, the entry into force of the LGPD appeared at first sight to have created substantial limitations to internal corporate investigations. In truth, however, the law has not brought in limitations, but normative parameters capable of giving legitimacy to the conduct of these activities. Principles such as transparency ensure that investigated parties have clear and accurate information about the data being processed in the course of the investigation. However, the provision and granting of access to such information and data may undoubtedly be delayed if, and for as long as, it is necessary and proportionate to avoid prejudicing the investigations.

In short, it is all a question of adapting and adapting to the new reality. In view of this, the adoption of good practice and governance mechanisms by the organizations is crucial to avoid the risks arising from the massive processing of data carried out during the corporate investigation procedure.

[1] The public and legislative process began in 2010, with the opening of a public consultation on the subject, promoted by the Ministry of Justice, which subsequently resulted in the proposal of PL 5,276/16, annexed to PL 4,060/12, to the House of Representatives.

[2] The LGPD entered into force on September 18, 2020, 24 months after the date of its publication (article 65, as amended by Law No. 13,853/19).

[3] BIONI, Bruno et al (Coords.) Tratado de Proteção de Dados Pessoais [“Treaty on Personal Data Protection”], Rio de Janeiro: Forense, 2021. See p. 327.

[4] According to the law, agents are (i) the controller: the competent authority responsible for decisions concerning the processing of personal data; and (ii) the operator: an individual or legal entity, whether governed by public or private law, who carries out the processing of personal data on behalf of the controller; (article 5, subsections VIII and IX).

[5] The date set for application of the sanctions provided for in the law for companies that fail to comply with the rules, ranging from a warning to a fine of up to R$ 50 million, remains the same as in the original text of the LGPD: August of 2021.

[6] "Article 5. For the purposes of this law, the following definitions shall apply:

[...]

II - sensitive personal data: personal data on racial or ethnic origin, religious beliefs, political opinion, membership in a trade union or organization of a religious, philosophical, or political nature, data on health or sexual life, genetic or biometric data, when linked to an individual;”

[7] As an example, we may cite the provisions contained in article 7, subsection VIII, of Law No. 12,846/13 (the Anti-Corruption Law) and in article 10 of Law No. 9,613/98 (the Anti-Money Laundering Law).

[8]Data Protection Working Party is an advisory body consisting of a representative of the data protection authority of each Member State of the European Union, the European Data Protection Supervisor and the European Commission.

[9] Available at: https://ec.europa.eu/newsroom/article29/item-detail.cfm?item_id=610169

[10] Available at: https://gdpr-text.com/read/recital-47/

[11] The influence of the GDPR on the LGPD is evident. Both texts converge on the limitation of data processing to restricted scenarios, the assertion of data subjects' rights to anonymization and deletion of their data and the strict legal framework of processing possibilities.

[12] According to article 5, XVII, of the LGPD, the personal data protection impact report is the "controller's documentation which contains a description of the personal data processing processes that may generate risks to civil liberties and fundamental rights, as well as measures, safeguards, and risk mitigation mechanisms.

[13] Article 38, sole paragraph, of the LGPD.

[14] In the GDPR, the minimum compulsory elements, as per article 35 (7), are:

• a systematic description of the processing operations intended and the purpose of the processing, including, where appropriate, the legitimate interests of the controller;
• an assessment of the necessity and proportionality of processing operations in relation to the objectives; an assessment of the risks to the rights and freedoms of holders of rights;
• an assessment of the measures envisaged to address the risks, including safeguards, security measures, and procedures to ensure the protection of personal data and to demonstrate compliance with the Regulation, taking into account the rights and legitimate interests of the data subjects and other interested persons.

[15] According to the ISO/IEC 27037:2013 standard, the classification of digital/cibernetic traces must be done through identification, isolation, recording, collection, and preservation of digital evidence.

Category: Tax

The São Paulo state government has issued five decrees that amend the ICMS Regulation (RICMS / SP) and re-establish some of the tax benefits listed in Annex I of the RICMS / SP, as described below:

• Decree nº 65.469 / 21 - Alters item I of article 29 of Annex I of the RICMS, in order to remove the monthly limit for the enjoyment of the exemption on electric energy consumed by the rural establishment, which would come into force on 1/15/2021, thus maintaining the same conditions as the benefit in effect until that date.

• Decree nº 65.470 / 21 - Amends § 7 of article 54 of the RICMS, which aims to maintain the tax burden on internal operations with generic drugs, so that such operations are subject to the rate of 12%, without the application of the supplement of 1.3%.

• Decree No. 65.472 / 21 - Repeals Paragraph 6 of Article 36 and Paragraph 2 of Article 104, both of Annex I of the RICMS, to maintain the full exemption from ICMS in internal operations with natural fruit and vegetables.

• Decree nº 65.473 / 21 - Repeals § 6 of art. 41 of Annex I of the RICMS, to maintain the full exemption granted to internal operations with agricultural inputs.

Decree nº 65.471 / 21 does not refer to tax benefits, but changed article 265 of the RICMS, in order to provide for the mandatory payment of the supplement of the withholding tax for tax substitution for all forms of fixing the calculation basis.

This is an important point because, although the discussion on the legality of the institution of this complementation by ordinary law remains - Law nº 17.293 / 20, which added article 66-H to Law nº 6.374 / 89 - this decree makes it clear that “currently, the RICMS provides for the payment of the supplement only in the event that the calculation basis is the final consumer price, single or maximum, authorized or fixed by the competent authority, and therefore does not apply in situations where the tax is calculated using application of the added value margin or average price surveyed to the consumer ”.

In view of the changes, taxpayers must review the tax rules for their products.

Category: Infrastructure and energy

Maria Fernanda Soares e Victor Hugo Machado

On December 28th, the Public Services Regulatory Agency of the State of São Paulo (Arsesp) published Resolution No. 1,105/20, which establishes the conditions and criteria for the swap of natural gas and biomethane between the piped gas distribution networks in the state.

According to the Arsesp Regulatory Agenda, the regulation of swaps between the local distribution companies was expected to be completed in the second half of 2019. After several submissions by private and public entities in Arsesp Public Consultation No. 17/19 (CP 17/19), the text of the resolution was considered completed and published.

Arsesp Technical Note G 11/19 (NT 11/19) of CP 17/19 divides gas swap into two main types: commercial and operational. NT 11/19 explains that: “A commercial swap is a purely commercial service, defined in contractual agreements in which there are financial transactions generated by different infrastructure assets (networks) and without physical interconnection. [...] An operational swap, on the other hand, differs from a commercial swap in that there are common infrastructure assets or assets physically interconnected between the parties involved. This type of swap allows, for example, the delivery of gas to be done in a virtual counterflow (backhaul), where a user purchases the gas from a supplier that is downstream from the network flow that interconnects them."

According to article 2, XXVIII, of Arsesp Resolution No. 105/20, the operational swap of gas or swap is defined as "use of the distribution system, in which the physical and contractual flows differ, in whole or in part, contributing to the efficient operation of the distribution system", a concept very similar to that adopted by the ANP for the operational swap of gas in the transportation system, provided for in ANP Resolution No. 11/16.

The resolution follows the expansion of the Natural Gas Free Market in the state of São Paulo and arises from particularities of the local gas market. After the restructuring of the 1990s, with the privatization of the piped gas distribution services, the infrastructure of this activity began to be managed by three new concessionaires - GBD, Comgás, and GNSPS - each with different capacity and infrastructure size. Thus, the swap regulation was considered useful by Arsesp to enable the expansion of the capacity utilization of the distribution infrastructure.

The structure of the resolution is mainly practical. The only principle provision of the procedure is presented in article 3 on the "principle of non-discriminatory access of third parties to the concessionaires' distribution systems."

From this point on, the resolution may be summarized as follows: (i) explanation of the procedure; (ii) possibility of operational interconnection of distribution pipelines between different concession areas; (iii) coordinated public request for gas swap; and (iv) possibility of assignment of contracted capacity in the transportation pipelines.

Procedure

In articles 4 to 6, the regulated procedure for gas swap is presented. It begins with the presentation of the "Letter of intent for the use of the distribution system for swaps" to the concessionaires. Within a maximum period of 30 days, the concessionaires must submit their response in a document called a "Swap Proposal" or refuse to fulfill the gas swap, based on technical and economic parameters, in addition to presenting possible alternatives to make the activity viable.

The reply must be sent to Arsesp no later than 15 days after sending to the interested parties. The agency shall calculate, on a case-by-case basis, the swap rate applicable to the parties concerned, triggering the negotiations arising from the swap proposal.

After the negotiations, the concessionaires must submit the "Contract for use of the distribution network to swap gas", in accordance with article 5 of the resolution. The swap tariff applied, together with the characteristics of the gas swap, will be published by means of a specific Arsesp resolution.

Interconnection

In articles 7 and 8, the resolution provides for the interconnection of distribution pipelines between the concession areas in order to make gas swaps feasible, with a view to eliminating contract barriers and boosting the use of distribution capacities.

To this end, concessionaires must submit an "Interconnection Agreement" to Arsesp containing the applicable distribution tariffs and other terms and conditions relating to third party access to the distribution system. This agreement depends on an analysis by Arsesp on the viability of the interconnection, based on the economic and financial grounds presented by the interested parties. Any conflicts concerning these interconnections would be mediated by the regulatory agency.

Coordinated public solicitation

In article 9, the possibility is presented of Arsesp requesting that concessionaires carry out a process of "coordinated open-seasons for gas swap", with the condition that several free and/or partially free-market users demonstrate the intention to carry out a swap.

This is a procedure made by concessionaires, with guaranteed access to all free-market users, partially free-market users, producers, self-producers, self-importers, traders, or potential interested parties. Its purpose is to verify possibilities for gas swap by contracting distribution capacity.

The request seems to follow the pattern of a typical open-season, in which a public notice issued by the press would present the requirements for declaration of interest. It would also contain the available capacity of the distribution systems, accompanied by the physical flows and technical and operational characteristics of the system and the main commercial conditions of the future "Contract for use of the distribution network for gas swap."

This request would aim to detect not only possibilities of gas swap in the state, but also the possibility of interconnecting distribution pipelines in different concession areas. The open-season process must be carried out in a coordinated manner by the three concessionaires. After completion, the concessionaires should generate a database of users interested in the gas swap and, from the information extracted from this database, present the swap proposal to whomever expresses interest.

Capacity assignment

Article 10 regulates the transfer of the concessionaires’ contracted transport capacity in the transportion system, maintaining the contractual rights with the transporter with whom they have a firm gas transportation agreement in force. This provision would make possible the swap of gas between different areas by means of transportation pipelines, respecting ANP’s rules.

Possible impacts

In view of the unprecedented and recent nature of the resolution, we can only await the verification of its practical effects for the market. In the public consultation that led to the resolution, various entities in the gas sector had spoken out against the regulation. Issues of overlap between state and federal jurisdictions, with regard to transport systems, for example, have come to be raised as relevant points of concern by important players in the sector.

Category: Tax

The Brazilian Internal Revenue Service (RFB) clarified, through the Cosit Consultation Solution No. 148, of December 21, 2020, the limit of the application of the tax benefit instituted by article 5 of Law no. 13,982/20, which allowed deducting from the transfer of contributions to Social Security wages paid in the first 15 days to employees on leave due to contamination with the new coronavirus (Covid-19), up to the contribution salary ceiling to the General Social Security Policy (RGPS), pursuant to article 60, paragraph 3, of Law No. 8,213/91. Launched in April of 2020, the benefit was one of the exceptional social protection measures adopted to confront covid-19.

In the case at issue, the consulting firm questioned the possibility of deducting the amount paid to a pregnant employee who submitted a medical certificate for leave from work for 14 days, a period which did not give rise to the granting of the sick benefit.

In answering the question, the RFB took the view that the deduction of wages paid during the first 15 days of absence from work was restricted to cases in which the sick benefit was subsequently granted by the INSS. To support this understanding, the body claims that this was the intention of the rule when making express reference to article 60, paragraph 3, of Law No. 8,213/91, which disciplines the granting of sick benefits due to work disabilities.

The RFB argued that, if this had not been the intention, the rule would have allowed deduction of the amount owed by the company during the employee's leave due to the contamination by covid-19 without any mention of the legal provision dealing with the granting of sick benefits.

Thus, the understanding that the payment of wages in the first 15 days of the employee's leave with covid-19 is the responsibility of the employer, who will only be authorized to deduct it from the transfer of contributions to Social Security "as long as the employee has been granted sick benefits.”

Given the binding effect of consultation solutions (article 9 of IN No. 1,396/13), this indicates that the RFB must charge companies that avail themselves of the tax benefit in cases in which an employee contaminated by covid-19 has been on leave from work for less than 15 days or has sick benefits denied by the INSS. The amount of the tax due will be required plus penalty and interest.

In our understanding, the interpretation manifested in the consultation solution does not align with the legislation in force, as article 5 of Law No. 13,982/20 did not condition the benefit of the deduction on the granting of sick benefits to the employee on leave due to covid-19. The mention of article 60, paragraph 3, of Law 8,213/91, which imposes the employer's obligation to pay wages in the first 15 days of the employee’leave, was intended to clarify the portion of the wages that could be deducted from the transfer of contributions to Social Security, and the RFB's claim to restrict legally established benefits is illegitimate.

We believe that this is the interpretation that fits the purpose for which Law No. 13,982/20 was issued, which established exceptional social protection measures to be adopted to confront covid-19, and there are good legal grounds against the interpretation adopted by the RFB. In view of this scenario, it is advisable for the companies to evaluate the treatment given to cases of leave linked to covid-19 in order to confirm the existence of exposure or evnet overpayments, which requires adjustment of procedures or the use of preventive measures.