Category: Environmental

With increasing restrictions on the free movement of people and on the regular functioning of public agencies due to the covid-19 pandemic, most environmental agencies have taken steps to minimize the impacts of the virus on administrative proceedings.

There was an interruption in in-person services to the public, which led to suspension of deadlines for defenses and appeals, electronic processing of environmental licensing cases, and cancellation of any technical meetings. Although environmental oversight has not been officially suspended, there has been considerable impact on the activities of inspection agents.

At the Brazilian Institute for the Environment and Renewable Natural Resources (Ibama), a federal environmental agency, procedural deadlines have been suspended for an indefinite period of time and employees will have to work remotely. Even if the oversight activity is maintained, effective performance thereof requires a determination by Ibama's agents at each of its units.

In São Paulo, the Environmental Company of the State of São Paulo (Cetesb) temporarily cancelled service to the public, and ordered suspension of the procedural deadlines for 30 days, counting from March 16.

In Rio de Janeiro, the State Environmental Institute (Inea) also suspended in-person service between March 16 and 27, the same period for the suspension of appeal deadlines in administrative proceedings.

In Minas Gerais, the state government, through the State Environmental System (Sisema), suspended the deadlines for procedural acts carried out in environmental licensing, in environmental intervention, in grants for rights to use water resources and inspection, a decision which is valid through April 30 and applies to all authorized acts of the State Department of the Environment and Sustainable Development (Semad), the Minas Gerais Institute of Water Management (Igam), the State Forests Institute (IEF), and the State Foundation for the Environment (Feam).

The environmental agencies of the other states and municipal agencies have also been issuing rules for the suspension of services and deadlines, which should have a substantial impact on the progress of environmental licensing, authorization, and approval processes, as well as inspection activities as a whole.

Category: Labor and employment

Executive Order No. 927/20 (MP 927), which sets forth labor measures to address the state of public emergency resulting from the covid-19 pandemic, establishes that cases of contamination by the coronavirus will not be considered occupational, unless a causal link between the disease and the performance of the work is proven.

In a similar situation, the Social Security Benefits Law (Law No. 8,213/91) already provided, in its article 20, paragraph 1, "d", that endemic disease is excluded, as a rule, from the concept of an occupational disease. The law considers a disease to be occupational only if it is proven that the contamination resulted from exposure or direct contact determined by the nature of the work.

Thus, the general rule of classifying cases of workers contaminated by the coronavirus as a non-occupational disease is reasonable and appropriate, especially since, in view of the pandemic declared by the World Health Organization (WHO), it is not possible to know when and where the worker was contaminated.

The exception provided for in MP 927 is the case of an employer who assumed the risk of contamination and acted negligently with the employee's health.

As an example, contamination of an employee urged to travel for work to a place that is notoriously the epicenter of covid-19 may be considered an occupational disease. The same cannot be understood in the situation of employees who travelled for work, before the declaration of a global pandemic, to countries where there were not many confirmed cases of contamination.

A causal link may also be established when it is proven that the employer failed to comply with the guidelines issued by the health authorities, such as in the event that the quarantine of employees who have returned from travel to countries classified as at a higher risk of transmission of the virus has not been implemented.

Also, a company's omission in adopting preventive measures and containment of contamination may be understood as a contributory cause of possible disease due to the coronavirus. For this reason, companies need to evaluate the risks and the indispensability of their presence at work, in addition to taking actions to preserve the health of their employees.

As the occupational disease has repercussions and effects on the employment contract, it is essential to establish the origin of the contamination by the coronavirus. The main implications of recognition of an occupational illness are suspension of the employment contract and recognition of the employee's provisional job security for a minimum period of 12 months, as per article 118 of Law No. 8,213/91.

In addition, demonstration of a causal or contributory causal link between the work and the illness acquired, resulting from an employer's action or omission, may give rise to the payment of civil compensation to the contaminated employee.

Category: Labor and employment

Executive Order No. 927/20 (MP 927/20), enacted on March 22, provides for labor measures that may be adopted by employers to confront the state of public emergency decreed as a result of the covid-19 pandemic. In order to preserve jobs and reduce the negative economic impacts of the crisis, one of the alternatives presented in MP 927/20 is the creation of a special offsetting arrangement for work hours through an hours bank.

The adoption of this arrangement will allow employees to offset the time of interruption of their activities due to the decree of public emergency and quarantine when the work is resumed. The offsetting will be done via extension of the work day by up to two hours a day, subject to the daily limit of ten hours of work.

Companies interested in adopting the measure must establish an hours bank by means of an individual formal agreement with the employee or collective bargaining agreement, as already established in the Consolidated Labor Laws (CLT).

The great advantage of the measure is that the time limit for offsetting has been significantly increased. While the CLT provided that the offsetting resulting from the hours bank arrangement would have to be performed within up to six months in the case of an individual agreement, and within up to 12 months in the case of a collective agreement, MP 927/20 establishes a period of up to 18 months, counting from the end of the decree of the state of public emergency.

The proposal represents a change from the common idea of subsequent offsetting of prior work performed as overtime. In the hours bank established in MP 927/20, employees will have an initial negative balance, to be offset with overtime in the future.

For companies that already have an hours bank plan, it will be necessary to analyze the current terms on a case-by-case basis to determine whether the plan can be reconciled with MP 927/20 or whether there is a need to rework it.

By allowing more intense activity after the cessation of the state of public emergency, the adoption of the hours bank provided for in MP 927/20 may be a way out for the recovery of the sectors most affected by the work stoppage, such as retail, restaurants and services, and others whose activities are incompatible with teleworking.

With this measure, the expectation is that, after the end of the decree of the state of emergency, companies may recover the production gap and minimize the economic effects that will certainly be felt by all sectors of society.

Category: Labor and employment

Executive Order No. 927 ("MP 927"), published on March 22, amended the laws and regulations governing the labor measures that may be adopted by employers to preserve employment and income and to confront the coronavirus (covid-19) while the state of public emergency remains in effect.

Labor measures may be entered into between employees and employers by written individual agreement, which shall control over other regulatory, legal, and business instruments, within the limits of the Federal Constitution (the "FC").

The main measures addressed by MP 927 are the following:

• teleworking or remote work
• acceleration of individual vacations
• granting of collective vacation
• enjoyment and acceleration of holidays
• hours bank
• suspension of employment contracts for employee training (President Jair Bolsonaro announced on his social networks that he revoked this measure, but the official revocation has not been published yet.)
• suspension of administrative requirements in occupational safety and health
• deferment of collection of the Guarantee Fund for Length of Service (FGTS)

The table below summarizes the main issues related to each of them.

In addition, MP 927 established that labor measures adopted by employers that do not contradict the provisions of MP 927, taken during the 30-day period prior to March 22, 2020, are considered valid.

Finally, MP 927 determined that the state of public emergency constitutes, for labor purposes, a case of force majeure according to article 501 of the Consolidated Labor Laws (the "CLT"), which, according to article 503 of the CLT, implies the possibility of a general reduction in salaries of employees, in proportion to the salaries of each one, but not exceeding 25%, subject, in any case, to the minimum wage of the region.

However, article 2 of MP 927 itself refers to the limits of the FC. In this context, we understand that the salary reduction (i) should be implemented through collective bargaining, since, according to article 7, VI, of the FC, a salary reduction will only be considered valid if negotiated with the professional union; and (ii) may exceed the limit of 25% established by article 503 of the CLT, due to the prevalence of what is negotiated over what is legislated, as established by the Labor Reform.

MP 927 further established the following points:

• Health establishments are allowed, per written individual agreement, even for hazardous activities and for twelve-hour work days with thirty-six hours of rest: (i) to extend the work day, in accordance with the provisions of article 61 of the CLT; and (ii) to adopt overtime shifts between the thirteenth and twenty-fourth hour of the break during the work day, without any administrative penalty, guaranteeing paid weekly rest in accordance with the provisions of article 67 of the CLT
• During the 180-day period from March 22, 2020, the procedural deadlines for filing a defense and an appeal in administrative proceedings arising from labor infraction notices and FGTS debit notices are suspended
• Cases of contamination with the coronavirus will not be considered occupational, except upon proof of a causal link
• Collective bargaining agreements due or falling due, within 180 days, as of March 22, 2020, may be extended, at the employer's discretion, for a period of 90 days after the end of this period

We will continue to monitor the evolution of these topics and any potential developments.

Category: Real estate

The State Court Judicial Review Boards are issuing guidelines for the provision of extrajudicial services, notary publics, and registry offices due to the covid-19 pandemic.

This movement stems from Recommendation No. 45, issued by the National Judicial Review Board (CNJ) on March 17, to guide local review boards to suspend or reduce the operation of their services temporarily and always with attention to the evolution of the disease in Brazil. In response, some review boards, especially in the locations most affected by the new coronavirus, have already altered the functioning of extrajudicial registries and notary offices.

We have compiled below the changes identified thus far:

São Paulo

The General Judiciary Review Board of the State of São Paulo issued its position through GC Ordinance No. 7/2020 and GC Communiqué No. 231/2020, of March 17.

According to its understanding, the extrajudicial services of notary publics and real estate registries are considered indispensable for the exercise of fundamental rights of citizens, including the circulation of property and obtaining of credit with collateral. For this reason, termination of such services shall not be authorized.

As a way to contain the spread of the disease, each office may choose to encourage teleworking or remote work of its employees and change their working hours, respecting the minimum limit of at least four hours per day of service to the public. Because of the changes, the new opening hours and the peak hours of people on site must be reported to citizens in advance (posted in the office itself or on its website).

For services where there is a reduction in the employees' working hours or shifts of more than 1/3 of professionals, it is established that the validity of the deadlines for filing of notarial acts will be counted in double, except in cases expressly provided for, namely:

1. birth and death records;
2. marriage procedures and licenses;
3. records of contracts covering real guarantees on real and personal property;
4. the purging of arrears in contracts in which real estate is provided as collateral and in those contracts subject to Law No. 6,766/79;
5. the offering of objections in land boundary rectification procedures, out-of-court adverse possession, recording of urban land parceling. 

The measures mentioned in the ordinance shall be valid for 60 days.

General Judiciary Review Board Ordinance No. 7/2020 was regulated by Ordinance No. 8/2020, and CG Communiqué No. 240/2020, dated March 22, observing the quarantine established by State Decree No. 64,881, of March 22. This regulation established the possibility of suspending the operation of extrajudicial services in the state, and, in the event of suspension of activities, the running of deadlines will also be suspended.

However, there will be time on call, for a minimum period of two hours per day, either in person or virtually, still within the period of suspension of activities. The person responsible for the service should clarify to citizens the means by which the time on call will occur. For birth and death records, there will be remote time on call for at least four hours per day. The time on call may be in-person, virtually, or by other means of remote service, including electronic means of communication such as WhatsApp and Skype.

This arrangement is established as mandatory for services in which the responsible person, or his or her agents or staff, are infected by the coronavirus causing covid-19.

In addition, those responsible for the services may establish modules for the sending of documents via digital means during the period of suspension of activities; the interested parties must be physically present to present the document within 15 days from the end of suspension of the services.

Specifically for services in the municipality of São Paulo, according to Communiqué No. 1/2020 of the 1^st Public Registry Office of São Paulo, suspension of the activities of 18 real estate registry offices, 10 registry offices of deeds and documents and legal entities, and 10 notarial protest offices, was ordered (and not only authorized) on March 23 and 24, with in-person time on call dispensed with.

Rio de Janeiro

The state has allowed for a reduction in the functioning of extrajudicial registry offices, respecting a minimum operating time of four hours, according to Ordinance No. 20/2020 of the Rio de Janeiro Judicial Review Board, published on March 17.

Federal District

Similarly, the Federal District decided to maintain the activities of extrajudicial services, as decided by the Judicial Review Board of the Federal District and Territories on March 17.

Thus, the notary offices will also remain open. In order to avoid crowding, it was defined that real estate registry offices will only accept requests for the issuance of certificates of encumbrance and filings of public deeds for recording by electronic means. The fulfillment of any requirement may also occur via e-mail.

This same rule on issuing documents in digital format will apply to the issuance of second copies of marriage, death, and birth certificates by local notary offices.

Pernambuco

The state disciplined the issue on March 18, through Ordinance No. 08 of the Judicial Review Board, which establishes the normal functioning of the services, including the maintenance of its operating hours. Notary offices, however, should take measures to prevent the spread of the disease among citizens.

Santa Catarina

The decision rendered on March 18 by Judge Dinart Francisco Machado, in case 0013013-32.2020.8.24.0710, was to maintain the activity of extrajudicial registry offices, but to suspend deadlines for a period of 7 days.

Goiás

In Circular Letter 120/2020, of March 18, the state maintained extrajudicial services, but recommended that all acts be electronic. Filing of documents, by digital means, was authorized, according to the best convenience of the notary public or the registrar.

Notary offices with suspended activities

Other states have temporarily closed notary services. This is the case of Rio Grande do Sul, which, through Act No. 09/2020 of its Judicial Review Board, ordered the closure of all services until March 31. Minas Gerais, via Joint Ordinance 950, published on March 18, mandated that in-person services in the state be suspended until March 27.

Explanatory table

 To facilitate reference, we have summarized below the guidelines on extrajudicial services in each state:

Category: Competition

A recent discussion held by the Administrative Council for Economic Defense (CADE) has raised questions about the criteria applicable when calculating the turnover of an economic group of investment funds, an exercise necessary to evaluate the need to submit mergers involving funds to the agency's scrutiny.

CADE’s rule (Resolution No. 2/12, amended in 2014) provides that, for this purpose, members of the economic group of an investment fund are considered to be the group of each quotaholder that holds a stake equal to or greater than 50% of the quotas of the fund (individually or per a quotaholders' agreement), the companies controlled by the fund, and the companies in which this fund directly or indirectly holds a stake equal to or greater than 20% of the total or voting capital.

In the present case, the investor fund, managed by Tarpon Gestora de Recursos S.A., asked CADE's General Superintendence to recognize that submission of the transaction was mandatory on the grounds that the manager should be seen as a member of its economic group, because it had autonomy and control over its investments.

In its decision, the General Superintendence chose to consider the manager to be a member of the fund’s group. However, it made reference to the fact that, originally, Resolution No. 2/2012 considered the manager to be a member of the fund's group for the purpose of calculating turnover, but when reviewing this rule in 2014, CADE opted to limit the group to the quotaholders with a substantial percentage of the quotas and to the fund's portfolio companies, even knowing the role exercised by the manager. It also mentioned that recent judgements by CADE have confirmed the understanding that the applicable rule disregards fund managers. It stressed, finally, that in that specific case the manager was considered a part of the group of the purchasing fund under a conservative approach, especially because of the repeated statement that the fund is under its control.

In short, although the decision of the General Superintendence did not expressly mention the exceptional nature of the understanding adopted, its content would authorize such conclusion.

This conclusion was reinforced in light of the discussions held during the trial session of CADE’s Tribunal held on March 4 of this year. On that occasion, one of its members submitted a proposal for review of the General Superintendence decision on the ground that the tribunal should deal with the issue of defining an economic group of investment funds in a more precise and definitive manner, given the possibility that such decision might give rise to legal uncertainty in future cases. The proposal was rejected because the perception prevailed among the members of the tribunal that the General Superintendence had not adopted an interpretation contrary to the current text of Resolution No. 2/12, nor one that generated legal uncertainty. Finally, CADE’s chairman suggested the formation of a working group to discuss the possibility of revising the standard in question.

Therefore, until the rule is amended or CADE perchance adopts a non-literal interpretation of its provisions in repeated decisions, a scenario that at this moment seems unlikely, it is not necessary to take into account the manager when calculating the turnover of an investment fund's group.

Category: Labor and employment

The report of the Joint Committee responsible for evaluating Executive Order 905 of 2019 (MP 2019) confirms a step backwards from the initial proposal on negotiations with respect to profit sharing programs (PLR).

While the original text of MP 905 amended the current law so as to dispense with compulsory participation by labor unions, the new wording includes the need to at least notify the union entity. Only if the labor union does not appoint a representative within seven days to participate in the negotiation process may the committee conduct and complete the work autonomously.

In his opinion, the rapporteur for the joint committee justified the change by arguing that waiving labor union participation would result in the weakening of these entities and, in his view, it is necessary to preserve the role of labor unions in negotiations.

Trade unions’ role may even be very relevant and beneficial in negotiations of PLRs. However, the obligation to always notify them, regardless of the environment and the context of a specific negotiation, is a real step back from the proposal of MP 905, which sought to resolve a series of difficulties faced by companies in establishing PLR programs.

Today, the law presents as a requirement the participation of labor unions, which not infrequently results in some mishaps, such as:

• The silence of some entities in response to calls to sit on the joint committees;

• Interventions by labor unions often detached from corporate reality and misaligned with the workers' own desires;

• Trade unions that condition their participation in the negotiation process on the creation of a negotiation fee or compulsory contribution (scenario aggravated after the end of the compulsory payment of union dues).

The proposal by the joint committee resolves the first difficulty mentioned, since the companies will be able to sign the PLR program via the joint committee of employees, if the union notified does not respond within seven days.

This condition should avoid the repeated tax assessments applied to companies that decided to sign the PLR program directly with the committee, without the labor union’s endorsement.[1] The other two situations of deadlock, however, would remain unresolved.

As already occurs today, it would be up to companies to decide between attending to eccentric labor union proposals or complying with claims for mandatory negotiating fees (at risk of having their legality questioned). Otherwise, the business deadlock that has been installed may attract unnecessary strike movements and collective bargaining disputes, which, generally, do not resolve the issue.[2]

In this context, the original wording of MP 905 is more in line with the initiatives of economic freedom and de-bureaucratization defended by the current government. If it is approved by the Brazilian Congress, to the detriment of the text proposed by the joint committee, the difficult situations that many companies have been facing in instituting programs aimed at sharing profits or results with their employees could be resolved.

And, contrary to what is argued, this will not necessarily mean devaluation of labor unions. Professional entities that are actually representative will always be positively involved in negotiations of PLRs.

[1] The most recent decisions by the Carf have defended the position that the participation of labor unions in the negotiation of PLR programs is essential and that silence by some entities with respect to call notices made by companies does not eliminate this need.

[2] Many labor courts take the position that the prerogative to negotiate PLR issues is exclusive to employers, employees, and labor unions and for this reason they do not resolve the conflict. The Regional Court of Labor Appeals for the 2nd Region, for example, consolidated this understanding in Precedent 35 of the Collective Disputes Section, which returns the deadlock to the parties for them to form a committee to negotiate the PLR.

Category: Tax

The Ministry of Economy issued Ordinance No. 103/20 authorizing the Attorney General of the National Treasury to adopt a set of measures to suspend collection activities and facilitate renegotiation of overdue tax debts due to the coronarvirus pandemic (covid-19). The measures authorized on the basis of Executive Order No. 899/19 are the following:

I - suspend, for up to 90 days:

(a) the time limits for defending against administrative proceedings for collection of overdue tax debt of the Federal Government;

1. b) the forwarding of certificates of overdue tax debt for extrajudicial protest;

(c) the establishment of new procedures for the collection and liability of taxpayers; and

(d) the procedures for cancellation of payments for default.

II - offer a proposal for a transaction by adhesion related to debts registered as overdue tax of the Federal Government, upon payment of at least 1% of the total amount of the debt, with deferment of payment of the other installments for 90 days, subject to the maximum term of 84 months or up to 100 months for individuals, micro-companies, or small businesses, as well as the other conditions and limits established in Executive Order No. 899/19.

These measures for the adaptation of actions to collect the overdue tax debt of the Federal Government should be regulated by the PGFN in the coming days.

However, there is still no provision for extending the term of validity of clearance certificates, which is the taxpayers' claim in view of the current scenario.

Category: Banking, insurance and finance

The National Monetary Council (CMN) issued two new resolutions on March 16 to ease prudential regulatory constraints imposed on banks in an attempt to maintain the flow of credit in the Brazilian economy and stimulate economic activity.

The first of these, CMN Resolution No. 4782/20, determined that, for the next six months, restructuring of debts with individuals and legal entities that have suffered deterioration in their credit capacity as a result of the current crisis no longer need to be considered "problematic assets" for the purposes of article 24 of CMN Resolution No. 4,557/17. In order to qualify for this exception, the transactions that will be restructured: (i) must not be characterized as problematic assets on the date of publication of this new rule; and (ii) must have individuals or legal entities with financial capacity to honor the obligation as counterparties, considering the new conditions agreed upon.

In practice, banks will not need to increase the provisioning normally required for this type of transaction, as the Risk Weighting Factor (FPR) applicable to these debts may be maintained at 85% of the exposure amount, as provided for in article 24-A of BCB Circular No. 3,644/13.

Through this act, the Central Bank of Brazil expects that up to R$ 3.2 trillion in debts may be renegotiated more easily, depending on the interest of the parties.[1]

It is important, however, that the financial institutions that make use of this exception log the adequacy of these renegotiations to the criteria mentioned above. In order to avoid abuses, CMN Resolution No. 4,782/20 requires that credit analysis documentation relating to restructurings carried out under such circumstances be kept at the disposal of the Central Bank of Brazil for five years.

The second rule, CMN Resolution No. 4,783/20, reduced financial institutions’ capital requirements until April of 2022. More specifically, the Additional Principal Capital Conservation (ACPconservation), currently set at 2.5% of institutions' risk weighted assets (RWA), will be reduced to 1.25% between April of this year and March of next year, with a gradual increase projected to return to the current level in April of 2022. ACPconservation is additional capital that banks must maintain in relation to the total volume of their exposures in normal times to ensure that in stress scenarios their core capital is more protected as losses occur.

With this measure, banks gain some room to expand their credit portfolios without the need to raise additional capital to that end. The expected result is an increase of approximately R$ 637 billion in the financial system's credit extension capacity.[2]

The CMN's changes to prudential rules show that this regulator is attentive to recent events and understands that what is usually prudent in times of normality may not be so in exceptional situations. Given that it has not yet been possible to size up the economic shock of the covid-19 outbreak, the expectation is that many other fostering measures may be established by the Brazilian government in the coming weeks, including significant regulatory changes with direct effects on the core business of financial institutions. Proper monitoring and necessary adjustments corresponding to these measures are essential to mitigate the structural effects of the crisis on financial institutions and on the Brazilian economy in general.

[1]Estadão. "BC facilitates renegotiation of debts of companies and families." https://economia.estadao.com.br/noticias/geral,bc-facilita-renegociacao-de-dividas-de-empresas-e-familias,70003234653

[2] Idem

Category: Contracts and complex negotiations

The covid-19 pandemic affects, more or less severely, the most varied sectors of the economy, preventing or generating difficulties for companies and individuals in fulfilling their contracts. In this situation, what are the applicable legal solutions?

Although a pandemic like this one is an unusual experience for Brazilians, the law, in the course of its very long historical evolution, has developed, as a response to crises and troubled periods, institutes to regulate problems of this nature. These institutes deal with the problem of supervening changes in contractual circumstances and their effects on contractual relations as a means of softening the harshness of the traditional principle pacta sunt servanda ("contracts must be performed").

In current Brazilian civil law, the following institutes are more commonly employed: theory of unpredictability, excessive burdensomeness, acts of God, and force majeure.

We explain each of them below, indicating their legal basis and the practical consequences of their application:

 Theory of unpredictability

Excessive burdensomeness

Acts of God and force majeure 

This is a very simplified overview of the institutes, just to provide a first explanation. The problem of change in circumstances, due to their exceptional nature, obviously always depends on a circumstantial analysis. In a more analytical manner, the problem depends on several factors, such as:

• Nature of the contract: long or short term; type of contract; nature of the obligations agreed upon (of means, outcome, or guarantee); whether the contract is arm’s length or random.
• Existence of terms and conditions on the subject.
• The branch of law applicable to the contract: whether subject to civil law, consumer law, labor law, administrative law, etc.
• Branch of activity of the party to the contract affected by the change in circumstances.
• Determination of the real impact of the new circumstances on the ability of the party to the contract to fulfil its obligations.
• Whether or not alternatives exist so that, despite the new circumstances, the party to the contract will continue to fulfil its obligations.
• Determination in the light of the law, especially objective good faith, to verify whether the measures taken by the party to the contract may be considered reasonable, either to continue to fulfill its obligations to the extent possible, or to protect other interests (for example, the health of its employees).

The implementation of each institute leads to different effects. In the case of the unpredictability theory, the result that can be achieved is, in principle, revision of the contract values, with the objective of re-establishing the economic balanced damaged by the event. For excessive burdensomeness, the request made by the affected party is for termination of the contract (or, in the case of contracts that generate obligations only for one of the parties, revision of the contract), with the other party being able to offer adjustments to the contract in order to maintain the obligation, but on new bases. Finally, for force majeure, the result is, first, release from liability for breach of contract and, second, suspension of performance of the obligation or termination of contract, depending on whether the impediment is temporary (i.e. it lasts for a period that, after exceeding its effects, the parties still have an interest in performance of the obligation) or definitive (the effects last for a period that makes the contract engagement impossible).

Another area in which the institutes described above will have various effects is that of administrative contracts. There are many species in this genus governed by different laws and, therefore, they should be treated on a case-by-case basis. In any case, the general rule of Brazilian administrative law (embodied in article 37, subsection XXI, of the Federal Constitution and article 65 of Law No. 8,666/93) points to the fact that, in the case of an unforeseeable event or, even, a foreseeable event but with incalculable consequences, the Government will be responsible for the economic and financial rebalancing of the contracts. That is, even if the event could be classified as pertaining to the institutes of the theory of unpredictability, excessive burdensomeness, or force majeure, the consequence will be the assumption of damages by the Government and not sharing between the parties, as happens in contracts governed by private law.

The different treatment of administrative contracts, which may seem more favorable to private parties, is based precisely on the fact that, when participating in a bidding process, the private party prices its contract within conditions of risk, but not of total uncertainty caused by events of an unpredictable or foreseeable nature, but of incalculable consequences. Thus, the pricing of contracts depends on the assumption of uncertainties by the Government, since, otherwise, it would not be possible to choose a winning bid. In addition, private entities that contract with the Government are also subject to contractual amendments and assumption of burdens, due to the power of unilateral amendment of contracts and continuity in the provision of services even under adverse financial conditions, to which private entities are not subject in their relations with each other. Consequently, rebalancing is the protection of private parties who contract with the Government.

This general rule has been given its own treatment in public service concession contracts, governed by Law No. 8,987/95 (common concessions) or by Law No. 11,079/04 (PPPs). Because they are long-term contracts, they provide for their own risk allocation. However, even in this type of administrative contract, force majeure events, especially those not insurable, tend to be allocated to the Government, following the rule that total unpredictability should be allocated to the Government. Public services in general will therefore suffer a sensitive and, in all likelihood, unprecedented impact due to the pandemic. It is easy to note some sectors that will be even more affected, such as public passenger or cargo transportation service providers, logistics infrastructure operators (highways, airports, railways, and ports) and health service providers, among others.

Thus, if due to measures of loss of demand or increased obligations, with the adoption of new protocols and work shifts to attend to the state of emergency decreed by the Federal Government, by many states, and by some municipalities, it is a fact that the unpredictable pandemic will generate consequences that cannot be addressed without rebalancing of agreements with the Government. The form and intensity of each rebalancing will depend on the identification of the impact and nature of the service.

Therefore, at the present time, depending on the circumstances of each contract, all the above institutes may be applicable for contracts whose performance has been substantially impaired by covid-19.

In relation to new contracts signed with knowledge of the effects of covid-19, it is very important that the parties explicitly address, and, if possible, in detail, the allocation of the risks of the pandemic. For them, the possibility of contractual revision based on the above-mentioned institutes, especially the theory of unpredictability and excessive burdensomeness, will be reduced due to the predictability of the economic and social effects of the crisis.

This article serves as initial guidance regarding the problem, and does not avoid the need to analyze the concrete circumstances of each situation under consultation.

Category: Tax

On February 12, the Superior Court of Justice (STJ) initiated a ruling that may have important repercussions on the use of writs of mandamus to obtain a declaration of rights to offset tax overpayments. The discussion relates to a motion to decide diverging rulings in Special Appeal No. 1.770.495-RS (EREsp 1.770.495-RS), filed after a judgment handed down by the 2^nd Panel of the court.

On that occasion, having upheld the appellate decision handed down by the Court of Appeals of the State of Rio Grande do Sul, the understanding prevailed that, although a writ of mandamus may be used as an instrument to declare the right to offset tax overpayments not extinguished by the statute of limitations, this procedure could not affect past property effects. Accordingly, the amounts collected should be claimed via administrative means or in a separate lawsuit.

The decision's line of argumentation puts into debate the coexistence of the guidelines contained in Precedent 271 of the Federal Supreme Court (STF) and Precedent 213 of the STJ. The first, approved by the STF in December of 1963, establishes that a writ of mandamus does not produce past property effects, which must be subject to a request before the Government or a separate lawsuit. The second, approved by the STJ in September of 1998, establishes that a writ of mandamus is the appropriate means for declaring the right to an offset.

It is therefore appropriate to investigate the judgments[1] that resulted in the approval by the STF of Precedent 271 in order to identify the scope of this precedent and to state that Law No. 12,016/09, which currently governs writs of mandamus, included a specific provision for the issue.

An analysis of the cases that preceded the issuance of the precedent shows that they referred to situations in which employees claimed recognition of a certain right before the Government, for example, appointment to an office after approval in a civil-service examination, and, as a result, payment of a certain amount.

The judicial relief in the writs of mandamus with the scope reported was eminently of the nature of establishing rights. Therefore, the collection of any amounts arising from delay in the implementation of this legal relationship, as a kind of compensation, would not be compatible with this procedural instrument.

Law No. 12,016/09, as explained above, provided in its article 14, paragraph 4,[2] that wages and monetary advantages recognized in favor of a public servant by a judgment issued in a writ of mandamus do not cover the period prior to the application for mandamus. This confirms the understanding that decisions recognizing a certain right in favor of a public servant does not allow for a claim, through the narrow pathway of a writ of mandamus, for economic redress concerning the past. The time limit is the assignment to a judge of the judicial measure.

In turn, in the STJ, Precedent 213 arose as a result of consolidated case law in favor of the possibility of using the writ of mandamus as an instrument to declare the right to offset a tax overpayment. In other words, since the tax obligation derives from the law, in view of the fact that the principle of legality is the guiding principle of the Brazilian tax system, a defect of unconstitutionality or illegality in the normative vehicle that introduces a new requirement is the precondition for declaring the right to return amounts paid by way of an offset. It is precisely this issue of law alone that must be assessed in the writ of mandamus in order to declare the right to an offset.

One consequence of this limitation on the scope of writs of mandamus seeking a declaration of the right to an offset is the prohibition on reviewing issues concerning the definition of the amount to be returned, which would even exceed the restrictions on the use of the constitutional remedy. All issues relating to calculation of the amounts to be offset, proof of undue payments, and procedure, among others, shall follow the provisions of specific legislation and shall be effective vis-à-vis the Government.

An additional element in admission of the writ of mandamus as a means of recognizing the right to an offset is the fact that the activities of the administrative authorities acting in tax matters are binding. This means that, even if the STF or the STJ has decided that a certain provision of law is unconstitutional or illegal, the authorities will continue to apply the unconstitutional or illegal command until the provision is expressly revoked or a decision in concentrated control of constitutionality or binding precedent is issued by the STF. The effective result of this position is that if the taxpayer chooses to initiate the procedure for an offset before the Government, regardless of a court decision, its request will be rejected and a penalty imposed.

In this scenario, a writ of mandamus having as its scope the declaration of a right to an offset is the appropriate mechanism for a taxpayer to obtain judicial relief authorizing it to offset amounts charged on the grounds of unconstitutional or illegal provision.

It follows, therefore, that mere declaration that the taxpayer is entitled to an offset does not allow the conclusion to be drawn that past property effects have been assigned. On the contrary, the decision is an order that only declares the right to the offset and its effectiveness vis-à-vis the Government is conditioned on the observance of a specific procedure (at the federal level, Law No. 9,430/96 and RFB Normative Instruction No. 1,717/17).

Returning to EREsp 1.770.495-RS, it may be seen that the assessment of the matter by the First Section of the STJ is the result of some confusion between the guidelines of Precedent 271 of the STF and Precedent 213 of the STJ. The conclusion of the judgment may lead to a relevant change in the way writs of mandamus are used to declare a right to an offset.

Thus far, two opinions have been issued, by Justice Gurgel de Faria and Justice Napoleão Nunes Maia Filho, in order to reaffirm the case law of the STJ and the guidance of Precedent 213, admitting writs of mandamus to declare a right to an offset. And the important thing: always with the proviso that the corresponding rules and confirmation of amounts must be respected before the Government, which is charged with supervising the entire procedure adopted. There is not yet a date for resumption of the judgment, which will occur with the presentation of the opinion of Justice Herman Benjamin.

With the completion of this judgment, the STJ is expected to correct the confusion created in the specific case (EREsp 1.770.495-RS), which led to the matter being reviewed by the First Section. This may avoid the regression represented by the acceptance of varying guidance, which dates all the way back to 1963, and the contempt for the case law of the Court settled more than 20 years ago.

[1] Ordinary Appeal in Writ of Mandamus 6,747 and Extraordinary Appeal 48,657.

[2] Article 14. An appeal may be brought against the judgment denying or granting mandamus. (...)

Paragraph 4. The payment of wages and monetary advantages assured in a judgment granting a writ of mandamus to a public servant of the direct administration or federal, state, and municipal authorities shall only be made in relation to the benefits that fall due as of the date of filing of the complaint.

Category: Capital markets

B3 S.A. - Bolsa, Brasil, Balcão recently issued a second report on listed companies to adapt to Novo Mercado´s regulations, focusing on the obligations that will come into force in 2021. In the report, 121 companies listed in the Novo Mercado segment were reviewed.

Companies must fully implement the changes by the time of the general meetings to be held in 2021 (to approve the results for the 2020´s fiscal year). The deadline applies solely to companies that were already listed in the Novo Mercado segment by January 2, 2018. Those companies who joined the Novo Mercado after such date must be in compliance with the new rules as of their listing.

As in its first report issued in February of 2019, B3 pointed out that several companies have not yet made all the changes required (both reports may be found at the b3 website). It is clear, therefore, that B3 is regularly monitoring the implementation of the changes required by the regulations of its premium segment, in which there is a higher bar for corporate governance standards.

In this article, we provide some guidelines on how to adapt in order to comply with the regulations requirements.

Changes in corporate bylaws

Companies need to adapt their bylaws to provide for the board of directors’ composition with at least two independent directors or 20% of the members of the board of directors, whichever is greater (it is mandatory that the independence criteria be in accordance with the new regulation requirements).

Companies will also have to adjust the provisions on transfer of control (articles 37 and 38 of the Novo Mercado Regulation), withdrawal from the Novo Mercado segment (articles 42 to 45 of the Novo Mercado Regulation), arbitration (articles 39 and 40 of the Novo Mercado Regulation), and some other items provided for in the Novo Mercado Regulation.

Official letter 618/2017-DRE issued by B3, is quite useful in the process as it describes examples of provisions that comply with the new regulation. It is available at B3’s website.

As a rule, companies that have gone through the adaptation of their bylaws have adopted the provisions contained in said official letter or have opted for a similar wording as indicated by B3.

Management evaluation

In accordance with article 18 of the Novo Mercado regulation, companies must structure and disclose a process for evaluating their management (board of directors, board of executive officers and committees). In order to comply with this requirement, it is necessary to indicate the management evaluation mechanisms as per item "d" of section 12.1 of the Reference Form.

In general, companies have been quite succinct in the description of their evaluation process. Some choose to describe them by body (below is an example relating to the board of directors):

"The Board of Directors is subject to an evaluation process. It is annual, formal, and structured, conducted by the chairman of the body, and includes two dimensions: global performance by the board of directors and individual performance among its members.

In relation to global performance, the evaluation criteria are grouped into four categories: a) strategic focus of the board; b) knowledge and information about the business; c) independence of the board; and d) organization and operation. In the individual evaluation among members, the items for evaluation are grouped into the following categories: a) impartiality, b) effective contribution to the decision-making process, and c) assertiveness.

The purpose of the process is to facilitate the pondering and a structured discussion over the actions for continuous improvement of the Board of Directors' performance, systematically improving the body's efficiency. The first stage of the process is an individual reflection by each member regarding the board, recorded through a questionnaire. Then there is a consolidation of the individual notes and a conversation between each member of the Board of Directors and its chairman, who conducts interview and feedback processes. The results are consolidated and discussed at a board meeting, which then establishes an action plan for any improvements."

Other companies, as in the example below, describe a joint evaluation for all management bodies:

"The performance evaluations of the management and advisory bodies, as boards, are performed annually, after review and recommendations made by the Corporate Governance Committee to the Board of Directors, contemplating various issues related to the functioning of such bodies during the period under analysis, including the quality of participation and performance. The purpose is to identify opportunities to improve the functioning of the bodies. The evaluations are performed through interviews with the members of each body and the main executives of the company, who also perform a self-evaluation with respect to their performance in the exercise of their functions, without, however, individually evaluating the other members of management and/or other bodies. The company uses the results of these evaluations in the continuous improvement of its corporate governance structure, including the functioning of the Board of Directors, therein making the adjustments necessary so that its practices are always in line with the best local and international practices. The company has already carried out an evaluation of its management in 2019, and there was a discussion with the Board of Directors in May of this year. No outside consulting or advisory services have been engaged by the company related to the subject-matter of this item “d.”

Auditing Committee

Companies must establish an Auditing Committee in accordance with article 22 of the Novo Mercado regulation. The duties of this committee should be exercised in practice by the body, contributing to the corporate governance of the company.

Within the scope of B3’s supervision, however, the evaluation of the adoption of the Auditing Committee is only performed formally, by confirming the description of its operation and responsibilities (according to items 5.1 to 5.4 of the Reference Form), as well as its composition (items 12.5/6 and 12.7/8 of the Reference Form).

The companies that have already established an Auditing Committee generally sought to reconcile their duties with those of the Internal Audit and Compliance areas, which are also related to the company's risk management (and which are required by the regulation).

As a rule, companies have chosen to assign to the Auditing Committee the functions of supervision and risk assessment, as per the examples below:

"Auditing, Risk Management, and Finance Committee: mission to oversee the implementation of internal and external auditing processes, mechanisms, and controls related to risk management; the consistency of financial policies with strategic guidelines; and the risk profile of the business units, also overseeing the review of financial statements and information released to the market."

"Lastly, the Auditing Committee, the body of the company's governance structure responsible for assessing the effectiveness and sufficiency of the internal controls and risk management structure, considers that the procedures aimed at increasing the effectiveness of the internal controls and risk management processes currently adopted are adequate, according to the Auditing Committee Report disclosed in the Financial Statements of December 31, 2018."

The regulation requires that the Auditing Committee: (i) have autonomy and budget approved by the Board of Directors; (ii) have a coordinator indicated in the Reference Form; (iii) have internal rules (the full text of which must be made available on the CVM’s IPE Online system); (iv) have the minimum responsibilities and composition stipulated by the regulation; (v) release a report at least once a year on its main subjects and recommendations; and (vi) report its activities on a quarterly basis to the Board of Directors and the Company must publish the minutes of the Board of Directors' meeting in which such information is analyzed.

Audit Department

Another obligation related to the audit structure is the creation of a specific department to perform this function in the company (article 23 of the regulation).

To confirm the implementation of this structure, B3 will also evaluate items 5.1 to 5.4 of the Reference Form. As a rule, companies have chosen to describe the Audit department as the one responsible for performing operational activities related to risk assessment and to provide to the Auditing Committee and the Board of Directors the information necessary to improve management tools. The Internal Audit department has also been assigned the role of monitoring complaints or other activities carried out in cooperation with the Compliance teams:

"The scope of Internal Audit is (i) to issue an opinion on the conformity of the processes; and (ii) to investigate processes in cases of complaints, with reporting to the Auditing Committee, an advisory body to the Board of Directors.”

"Internal Audit Board, reporting to the Auditing, Risk Management, and Finance Committees, responsible for carrying out work on different business processes, in accordance with the audit plan validated annually by the committee.”

"The company also has an Internal Audit Board, subordinated to the Auditing Committee (body of the Board of Directors), which serves in the independent evaluation of the processes and investigation of potential violations."

"Audit Board: its mission is to provide the Board of Directors, the Auditing Committee, and the Board of Executive Officers with independent, impartial, and timely assessments of the effectiveness of the risk management and governance processes, as well as the adequacy of internal controls and compliance with the rules and regulations associated with the operations of the company and its subsidiaries. Internal Audit functionally reports to the Board of Directors and the Auditing Committee, and the Auditing Committee is responsible for periodically evaluating the performance of the Audit Officer, after hearing the considerations of the Board of Executive Officers."

Under the terms of the sole paragraph of article 23 of the Novo Mercado regulation, the company may engage an auditor registered with the CVM to perform this function, in lieu of the obligation to create it internally.

Compliance, internal controls, and corporate risks

B3 assesses compliance with this requirement based on an analysis of items 5.1 to 5.4 of the Reference Form, in which companies describe their Compliance departments with the following functions:

"Compliance: assist in the fulfillment, compliance, and application of internal and external regulations imposed on the company's activities.”

"Compliance Board, subordinate to the Legal and Compliance Vice-Presidency: responsible for the compliance program against corruption and bribery, applied and updated according to the characteristics and current risks of the company's activities."

Under the terms of B3's regulation, the functions of Compliance, internal controls, and corporate risks cannot be accumulated with operational activities (among others, those conducted by the legal, controllership, internal audit, and investor relations areas are considered non-operational activities).

Disclosure of policies and rules required by the regulation

The Novo Mercado regulation, in different articles, require companies to present certain policies, codes, and regulations, as indicated below:

• Internal rules of the Board of Directors (article 25)
• Internal rules of the Auditing Committee and other committees (article 22, II, and article 25)
• Internal rules of the Auditing Committee (article 25)
• Code of professional conduct (article 31)
• Remuneration policy (article 32, I)
• Policy for appointing members of the Board of Directors, its advisory committees, and executives under the bylaws (article 32, II)
• Risk management policy (article 32, III)
• Related parties transaction policy (article 32, IV)
• Securities trading policy (article 32, V)

The existence of policies, codes, and rules is evaluated by B3 based on documents made available by the companies on the CVM portal through the Empresas Net system.

Each company prepares these documents to meet the minimum requirements of the regulation and adapt it to its own reality. For companies that still need to prepare these documents, there are good examples available for consultation on the CVM’s system.

Conclusion

The preparation of regular reporting demonstrates the importance that B3 has been giving to the issue, as well as its initiative to guide and assist companies in the process of compliance with the regulation. It is expected, therefore, that compliance with the provisions will be subject to intense monitoring by B3.

In this sense, companies should pay special attention to the changes, even if such changes provide a reasonable grace period for companies to adapt. It is important to emphasize that structural changes required to meet the obligations of the regulation are not always easy to implement. One example of the implementation of internal audit and compliance departments, which needs to be evaluated outright, as it may require a separate budget and hiring of specialized personnel.

Category: Capital markets

Brazilian companies have been waiting for more than a decade for a new window of opportunity to raise funds in Brazil's capital markets through initial or follow-on public offers of equity-linked shares or securities (public equity offers). Since 2006 and 2007, it has been years of low or no funding through these transactions. In 2019, the market expected constant growth in these offers, with an effective resumption (boom) expected by 2020.

The information on applications for registration of public equity offers available for consultation on the website of the Brazilian Securities and Exchange Commission (CVM) confirms these expectations: on March 16, 2020, there were 27 applications undergoing CVM review, pursuant to CVM Instruction No. 400/03, as amended, in contrast to ten recorded throughout 2019 (not considering the offers under review on a strictly confidential basis).

With the news about the rapid spread of the coronavirus causing covid-19 in China at the end of 2019, issuing companies and other agents involved in public equity offers in Brazil began to discuss the need to include in the documentation of these applications a risk factor that would address potential deterioration of the world economy and, consequently, of the activities, business, and revenue of the issuing companies. This risk, however, became a reality with the spread of the coronavirus to other countries, including Brazil, and with the outbreak of an unprecedented crisis with the decree by the World Health Organization (WHO) on March 11, 2020, that covid-19 is a pandemic.

As a result of this scenario, in recent weeks there has been enormous volatility in the price of securities of companies around the world and a significant deterioration in their market prices, which many experts are classifying as an even more serious crisis than the one experienced in 2008 due to subprime mortgages. The viability of public equity offers in a period of such uncertainty and global economic crisis has been called into question, and the CVM has had to review some rules and interpretations applicable to the Brazilian capital market.

With respect to public offers of securities governed by CVM Instruction 400, which include public equity offers, the CVM has disclosed, as of March 13, three important and unprecedented measures for the exclusive purpose of, at least for the time being, trying to prevent a flurry of requests for cancellation (i) of public offers of securities registered with the CVM that have not yet been settled (registered public offers) and (ii) of public equity offers and other public offers of securities currently under review by the regulator.

The first guideline disclosed by the Bureau of Securities Registration of the CVM (SRE), through Circular Letter No. 2/2020-CVM/SRE, is applicable to the public offers registered. The agency sought to clarify that, as a result of the impacts of coronavirus on the world capital markets and, especially, on the Brazilian market, the CVM will automatically respond to requests for modifications to these offers (in consideration for the agency's prerogative, set forth in the head paragraph of article 25 of CVM Instruction 400, to accept or deny the request for modification), provided that such request is related to the impacts of the coronavirus on such offer. In addition, the CVM granted an additional time period for the modified offer to be held, which went from up to 90 days, as provided for in paragraph 2 of article 25 of CVM Instruction 400, to up to 180 days.

The guidance disclosed by the CVM was well received by the market, inasmuch as it gave the issuing companies and other agents involved in the registered public offers the assurance that the CVM will not prevent such offers from being modified (automatic acceptance of requests for modification) to the detriment of being cancelled or discontinued. This gives the parties involved in structuring the offer greater flexibility and predictability in relation to its effective settlement.

The second move made by the CVM culminated in the promulgation of CVM Resolution No. 846, of March 16, 2020. The measure changed the maximum period of interruption from 60 to 180 business days for the review period for public equity offers (and other public offers governed by CVM Instruction 400) by the SRE and by the Company Relations Bureau of the CVM (SEP), provided that the application for registration as a securities issuer (a publicly-held company) with the CVM is made at the same time as the application for registration of a public equity offer with the SRE. Faced with the impossibility of predicting the impacts of the coronavirus on the market, the CVM, in practice, has granted issuing companies and other agents involved in structuring public equity offers the possibility of interrupting registration procedures for an additional period. This increases the chances that the market and stock prices will recover at least partially and may prevent cancellations of offers.

The third and last measure presented by the CVM was Circular Letter No. 3/2020-CVM/SRE, of March 18, 2020. Seeking once again to encourage the maintenance of public equity offers (as well as the other public offers governed by CVM Instruction 400), the CVM has decided to  make more flexible the understanding regarding the applicability of article 48 of CVM Instruction 400 to offers during the interruption period. On an exceptional basis and in view of the lengthening of the period during which an offer may be interrupted, the CVM clarified that the expression "decided or projected" in the article, which is the basis for defining the beginning of the silent period during the course of an offer, will now be interpreted as the moment when the issuing companies decide to resume review of the application for registration of the public equity offer.

The measure, certainly correct in the exclusive context of fostering the market, eliminated a major motivator for the cancellation of public equity offers, i.e. the issuing companies and other agents involved are no longer subject to compliance with the rules regarding the silent period provided for in article 48 of CVM Instruction 400.

Regarding postponement of the decision to cancel the public equity offer, two possible alternatives must be currently evaluated by the issuing companies and the other agents involved in structuring the transaction: (i) use the regulatory deadlines to meet the CVM's requirements (which, in relation to the first requirements letter, may reach 60 business days) and, if applicable, after this time has elapsed, request from the CVM interruption of the review deadlines (which went from up to 60 business days to up to 180 business days); or (ii) request, at any time, including after the receipt of the first requirements letter, interruption of the review deadlines with the CVM (which went from up to 60 business days to up to 180 business days) and, if applicable, use the regulatory deadlines to meet the CVM's requirements (up to 60 business days).

The review of the best pathway to be adopted usually depends on factors intrinsic to each issuing company, but it is important to note that the CVM reserved the right to reassess the content of CVM Resolution 846 30 days after of its publication. This means that issuers that do not opt to discontinue the public equity offer now (or at least within 30 days from the date of the resolution) may eventually no longer enjoy the extended deadline. On the other hand, since interruption of review causes the CVM's deadlines to start running again as if a new registration application had been made, opting to interrupt a public equity offer at this time in order to benefit from extension of the deadline may lead to a loss of agility in the transaction schedule, which does not occur in the case of a decision to use the regulatory deadlines to meet the CVM's requirements.

Category: Tax

The Judiciary, although not in a uniform manner, has formalized some guidelines for confronting the coronavirus pandemic. Some courts have suspended attendance to the public, hearings, in-person trial sessions, except for urgent measures and the possibility of the performance of acts by electronic means.

The procedural deadlines have been suspended in some courts, but there is still no uniformity of measures. Some have thus far adopted no suspension measures, others have formalized suspension for 14 days, extendable, others are still suspending the deadlines until March 30, and there are some who have established suspension measures for 30 days. The Federal Supreme Court (STF), for example, has not issued acts suspending deadlines and has thus far maintained in-person trials, with restricted access.

It is essential to monitor the acts issued by each court and the information that is being updated almost daily.

The following is a list of some of the rules promulgated thus far:

Category: Public and regulatory law

The declaration of state of emergency in the municipality of São Paulo (Decree No. 59,283/20), on March 17, sheds light on a determining aspect of the global crisis unleashed by the coronavirus pandemic (covid-19): its pervasive effects on various areas of Brazilian and international law.

Among the various challenges imposed on this legal analysis are the unfeasibility of fulfilling contractual obligations and the consequent loss of functionality of commercial contracts, the potential liability of employers and/or service providers for infections contracted on their premises, or the increased risk of insolvency and unsustainability of corporate debts.

The pandemic also has a number of implications for public law in Brazil resulting especially from (i) the urgent need for specific laws and regulations to deal with this public calamity; (ii) the possible conflict between, on the one hand, the measures proposed to prevent contamination and, on the other, individual rights or other aspects of Brazil's legal system; and (iii) the repercussions of this crisis for public services, the infrastructure sectors, and any of their private suppliers.

The regulations designed to confront the coronavirus originates from Ordinance 188 of the Ministry of Health, of February 3, 2020, responsible for the declaration of state of emergency in public health of national importance (pursuant to Decree No. 7,616/11). The ministerial regulation initially sought to issue guidelines for health and sanitary authorities to contain the epidemic.

Immediately after the declaration of state of emergency, on February 6, 2020, Law No. 13,979 (the Coronavirus Law, later regulated by MS Ordinance No. 356, of March 11) was passed, which provides for measures related to combating the covid-19 outbreak, such as: (i) provision for isolation, quarantines, compulsory examinations and tests, or temporary closure of Brazil's borders; (ii) the waiving of bidding for the acquisition of goods and services intended to deal with the emergency and the authorization to request goods and services from individuals and legal entities (notably private hospitals, without the need to enter into an administrative contract, and health professionals, without the formation of employment relationships), therein ensuring fair compensation; and (iii) the obligation, even for legal entities under private law to disclose information that may contribute in identifying persons infected or suspected of being infected by covid-19, if requested by a health authority.

After the official declaration of the coronavirus pandemic by the World Health Organization (WHO) on March 11, a series of state (and even municipal) decrees, such as the recent declaration of state of emergency in the municipality of São Paulo, have been added to the federal program. Among the states that provided for emergency prevention measures are: (i) Minas Gerais (Decree No. 47,886, of March 12, 2020); (ii) São Paulo (Decree No. 64,862, of March 13, 2020); (iii) Rio de Janeiro (Decree No. 46,970, of March 13, 2020); (iv) Rio Grande do Sul (Decree No. 55,115, of March 13, 2020); (v) Espírito Santo (Decree No. 4,593-R, of March 13, 2020); and (vi) the Federal District (Decree No. 40,520, of March 14, 2020).

The provisions of the aforementioned state decrees range from mere internalization, in the respective state legal systems, of the provisions and instruments contained in the Coronavirus Law; issuance of commands binding on state government agencies and entities, to suspension of events, collective activities, and classes for a determined period of time. Some provisions, however, gain prominence, particularly in the decrees of the Federal District and Rio de Janeiro. The instrument from Brasília, in its article 5, states that it will be considered an abuse of economic power to increase prices, without just cause, with the purpose of arbitrarily increasing profits on inputs and services related to the confrontation of covid-19 (both in the manner set forth in Law No. 12,529/11 and Decree No. 52,025/63). The Rio de Janeiro decree, in turn, provides, in its article 6, that "private legal entities providing services to the general public should observe the good practices provided by the World Health Organization."

However, despite the seriousness of the outbreak that plagues the country (in social, economic, and political terms), conflicts may arise regarding the interventions proposed to contain covid-19, especially the most severe remedies, such as mandatory hospitalization of contaminated people or mandatory closure of commercial establishments.

On the one hand, there are those who argue that, even under such circumstances, such strict restrictions on individual rights, such as freedom of movement or free initiative, would demand a decree of state of emergency, with a view to "preserving or promptly restoring, in restricted and determined places, public order or social peace threatened by serious and imminent institutional instability or affected by calamities of great proportions in nature" (pursuant to article 136 of the Federal Constitution). On the other hand, it can be argued that, in the balance between individual rights and the collective rights to health, protection, safety, and assistance, the latter would prevail, especially in such a critical context as a pandemic.

Another legal issue to be considered involves the regulation of the recommendations released by various public authorities in the current context (such as the Minister of Health himself, governors, mayors, and emergency health operation centers at various levels), in addition to the legal effects arising from non-compliance therewith, especially with regard to liability regimes, at least in the civil sphere.

From a Brazilian public law perspective, the coronavirus outbreak also brings about profound challenges related to the provision of public services and essential public infrastructure by private partners. Examples include risks such as (i) frustration of demand projections in concession contracts, either due to a spontaneous fall in the circulation of people or to the compulsory imposition of a curfew to prevent contagion; (ii) acute exchange rate variations resulting from volatility in domestic and international financial markets, all the more accentuated by the simultaneous oil crisis; or (iii) the generalized increase in risks identified by rating agencies that affect the bankability of strategic projects. A clear example of these risks is the plan for emergency measures currently under consideration by the federal government to provide financial assistance to airlines.

Although the treatment of each case will depend fundamentally on how such risks have been addressed in the respective contracts, some institutes will gain particular relevance and should soon be brought before judicial and administrative bodies. Force majeure provisions (for which China alone has already issued more than US$ 38 billion in certificates to exempt its exporters from fault for breaches of contract), unforeseen circumstances, and claims for economic and financial rebalancing should play a key role in accommodating contracts and enabling continuity of the services affected.

Category: Competition

The Administrative Council for Economic Defense (Cade) took another step to encourage private suits before the judiciary for damages for competitive violations, a measure considered important in the fight against cartels.

Ordinance No. 869/19, published in November, details the procedures for conferring on interested third parties access to sensitive documents and information produced in administrative proceedings initiated to investigate violations of the Defense of Competition Law (Law No. 12,529/11).

As a general rule, it will be incumbent on the rapporteur, when the administrative proceeding is decided by the Cade Administrative Court, to indicate which documents and information will be disclosed in the public record upon final decision by the Council.

Ultra-sensitive documents and information, such as self-accusatory material arising from leniency agreements and consent decrees (TCC), frustrated or entered into, including the history of conduct and the documentary evidence produced by those seeking to turn state’s evidence will be kept confidential even after the Cade Administrative Court's final decision. They may not be supplied to interested third parties, as already provided for in Resolution No. 21/18.

The office of Cade’s chairman shall be responsible for examining requests for access to documents and information made before the judgment in the proceeding based on an express legal determination, specific judicial decision, authorization by the signatory of the leniency agreement or party to the consent decree, or international legal cooperation. The parties investigated in the proceeding in question shall be notified in advance of the need to maintain the confidentiality of the documents, except in the case of an express legal order or specific judicial decision.

In the event of an application for access to documents and information contained in cases decided before the entry into force of Resolution No. 21/18, it shall incumbent on the commissioner writing for the court (or the Chairman’s office in cases where such commissioner's term of office has expired) to decide on a case-by-case basis whether or not to grant access. In a recent judgment, the current Cade commissioners expressed the understanding that the mandatory disclosure of documents contained in Resolution No. 21/18 only applies to settlements entered into after publication of the standard.

Also as part of the effort to facilitate the compensation of parties injured due to competitive violations, Cade will disclose on its website the list of cases decided, with an indication of the information and documents made available.