Brazil Legal Framework

Transcription

1 Brazil Legal Framework Recurring Issues for Companies Doing or Seeking Business in Brazil Alexandre R. Chequer Partner Tauil & Chequer Advogados is associated with Mayer Brown LLP, a limited liability partnership established in the United States. Rio: Houston: AChequer@mayerbrown.com

2 Summary Brazil on the Spotlight Brazilian Legal System Corporate Issues Labor Issues Tax Issues Environmental Issues

3 Brazil in the Spotlight

4 Brazil in the Spotlight Brazil Facts Area: 8,514,877 km² (5th) Labor Force: million (6th) GDP (2010): $ 2.57 trillion (6th) GDP Real Growth (2010): 7.50 % Electricity Production: Billion KWH (9th) Oil Proved Reserves: 12.8 billion bbl (to triple after pre-salt) Natural Gas Proved Reserves: 417 billion cu m Pipeline Network: ,00 km Sources: CIA World Factbook / IMF World Economic Outlook Database / ANP

5 Brazil in the Spotlight Brazil is one of the world s fastest growing major economies Investments in the country estimated in US$ 2 trillion until Main sectors: oil and gas, infrastructure, logistics, energy, petrochemicals and cellulose Large oil reserves, high E&P technology, diversified industrial foundation, great consumer market, abundant labor force and legal/institutional consolidated stability Brazilinthecalendarofmajorglobalevents: FIFA Confederation Cup World Expo Military World Games Rio + 20 FIFA Confederation Cup FIFA World Cup Olympics Rio 2016 World Expo 2020 probably in São Paulo

6 Brazil in the Spotlight World Cup and Olympic Games- Related Investments: Mass Transportation High-SpeedRailRiodeJaneiroxSãoPaulo:R$33billion Hospitality infrastructure Leisure complexes associated with stadiums (cinemas, shopping centers, sports facilities) Real Estate projects Increase in electricity generation Government Incentives: R$5.3billiontoairportsof10hostcities CreditLineofR$4.8billiontostadiumsandR$1billiontohotels Tax Exemptions and Deductions to Stadiums Source: Sustainable Brazil: Socio-economic impacts of the 2014 World Cup - Ernst & Young and FGV Projetos

7 Brazil in the Spotlight OilandGasSector Pre-SaltAreas Upto90bboeofhighqualitylightoil 62%ofPre-saltareayettobeexplored(71,000km2) InvestmentsofmorethanUS$500billionalongthenext20years Possibility of turning Brazil into a significant exporter of petroleum EPC Opportunities: onshore basis, refineries, FPSOs, vessels, ultra deep water rigs and pipelines Non Pre-Salt Areas: Most of the Brazilian sedimentary basins still not fully studied 52%oftheareasunderconcessionarestillintheexplorationphase BidRound11expectedtooccurthisyearwith174blocks

8 Brazilian Legal System

9 Brazilian Legal System Federative Republic Three Levels of Government Federal Union States / Federal District Municipalities There is no hierarchy: each level has authority to legislate within its sphere of competence: Federal Union: General Rules States: Self Organization and Specific Rules Municipalities: Issues of Local Interest Recurrent Issues - Needtodealwithauthoritiesfromthe3levelsofgovernment

10 Brazilian Legal System CivilLaw Written legislation as the primary source of law Court decisions determine the interpretation of law Courtsarenotboundbyprecedents Constitution Federal Laws State Laws Municipal Laws Recurrent Issues - DealingwiththeBrazilianLegalSystemisnotaneasytask - Slowness of Legislative: complex or controversial subjects may take years to be regulated - Multiplicity of Laws: a single subject may be regulated in several different statutes - Inconsistence: laws and regulations from different levels may have conflicting provisions - Assistance of an experienced lawyer is essential

11 Brazilian Legal System Judiciary System Jurisdiction of courts divided by region and subject-matters Access to judiciary is a constitutional right Right to appeal to second instances State Courts of Appeals Superior Courts Federal Courts of Appeals Administrative Proceedings Righttorequesttheadministrationagentorbodytoreviewitsacts State Courts Federal Courts Administration must follow the principles of legality, full defense and adversary system Recurrent Issues - Proceedings may take a long time until final conclusion - Multiple instances and several possibilities of appeals - Overburdened courts

12 Corporate Issues

13 Corporate Issues Corporation(Sociedade Anônima): Obligation to publish annual financial statements Resolutions to be taken by shareholders majority of votes Shareholders Meeting to be held once a year Review the managers Accounts Decide the application of profits and dividends distribution Elect managers and members of the board of auditors Other matters to be decided in Extraordinary Shareholders Meetings Amendments to Bylaws must be recorded in the Commercial Registry

14 Corporate Issues Administration of Corporations Managements is performed by: Board of Auditors Officers Board of Directors Managers elected in the Shareholders Meetings Members of the Board of Auditors and Officers must be Brazilian residents Foreign individuals will depend on the obtainment of a permanent visa Members of the Board of Directors must be shareholders Foreign residents: required to be represented by a Brazilian resident

15 Corporate Issues Limited Liability Companies(Limitadas): No obligation to publish annual financial statements Partners meeting to be held at least once a year Approval of Accounting Records Approval of Balance Sheet Amendments to Articles of Association must be filed in the Commercial Registry Foreign Partners Issues Required to be represented by a Brazilian resident Corporate Capital Increase: Foreign Exchange Contracts and registry in the Central Bank

16 Corporate Issues Administration of Limited Liability Companies Managers must be appointed in the Articles of Association or in a separate document Managers must be Brazilian residents (partners or not) Foreign individuals will depend on the obtainment of a permanent visa Approval of 2/3 of the corporate capital for appointment of a non-partner manager Articles of Association may establish some limitations and mechanisms to control the powers granted to managers Some matters may require prior approval of partners

17 Labor Issues

18 Labor Issues LaborCode(CLT) Brazilian labor law is protectionist to workers: Workernotallowedtonegotiateorwaiveitsbasicrights Continuity of Employment: dismissal without just cause requires indemnification Work Hours: Regular Period: 8 hours/day and 44 hours/week May vary depending on the class of workers(i.e. offshore workers) Overtime: payment 50% higher than regular work hours Labor Unions Annual Collective Bargaining Agreements

19 Labor Issues Compensation Minimum Salary: R$622 in 2012(approximately U$350) Specific classes of workers may have quite higher minimum salaries Compensation cannot be reduced, except by collective bargaining agreement Other Benefits: 13 th MonthSalary(Christmasbonus) PaidVacation(30days/year) Maternity Leave Workers Severance Fund(FGTS) Social Security(INSS) Transportation Coupon

20 Labor Issues Labor Disputes Disputes processed and ruled by specialized Labor Courts Principle of reality of facts: during trial the actual facts prevail over formalities Main causes of labor litigation: Work accidents or occupational diseases Outsourcing Incorrect payment of salaries and labor benefits Recurrent Issues Workers haveeasyaccesstolaborcourts:companymustbereadytolabordisputes Interpretation and application of rules tend to be favorable to worker

21 Tax Issues

22 Tax Issues Liability of client and service provider(or seller) Correct withholding of taxes and contributions Different federal, state and municipal taxes to be considered when submitting a bid or commercial proposal, including: Income Tax, Net Profit Social Contribution, PIS, COFINS, ICMS (VAT), Service Tax (ISS), Property Tax, among others. Recurrent Issues Incorrect calculation and payment of tax Lessprofit(orevenloss) Taxassessment(finesupto150%+interest)

23 Tax Issues Importation of equipment and materials Permanently(nationalization) Payment of all applicable taxes Temporary regime Payment of proportional taxes Special regimes(i.e. REPETRO) Suspension of all taxes Recurrent Issues Mistakes in the classification of goods Paymentoffines

24 Environmental Issues

25 Environmental Issues Environmental Permitting Location, installation, operation and alteration of projects or activities considered effectively or potentially polluting are subject to environmental permitting May be conducted in all government levels (Federal, State or Municipal) by the competent environmental agency, depending on the extent of the activity impacts Different kinds of permits applicable according to the stage of the activity and its characteristics Recurrent Issues Morosity of public administration Significant level of discretion granted to environmental agencies Controversies concerning competent environmental agency Controversies regarding required environmental studies Need to obtain authorization/exemption from other agencies/authorities

26 Environmental Issues Environmental Damages- Liabilities Civil Strict: no guilt of the polluter has to be proven for recovery/compensation obligation Jointly shared: obligation may be entirely charged on anyone who has directly or indirectly contributed to the damage, regardless of the degree of participation(normally results in deep pocket doctrine ) Unlimited: there is no limitation(cap) for compensation/ recovery costs Criminal Guiltofagentwhocausedthedamagehastobeproven Companies and senior managers, officers, auditors, members of board or committees or legal representatives may be held criminally liable Penalties range from restriction of rights to imprisonment Recurrent Issues Judicialization of environmental issues: strong participation of the Public Prosecutor s Office and environmental organizations Injunctions issued to impose immediate obligations Long time until final decision

27 Environmental Issues Environmental Damages- Liabilities Administrative Transgressor subject to sanctions: warning, fines, confiscation, suspension of activities and restriction of rights Administrative fines: may range from R$50 to R$50,000,000 Restriction of rights: suspension or cancellation of registration, permit or authorization; restriction or suspension of tax benefits and incentives or credit from official institutions; and prohibition to execute any contract with public authorities Recurrent Issues Environmental agencies from all levels are entitled to impose administrative sanctions Legal parameters not usually observed when establishing the values of fines Long time until final decisions Sanctions often maintained, since administrative appeals are analyzed by the public authority itself

28 Dealing with Petrobras

29 Dealing with Petrobras PetrobrasisthelargestcompanyofBrazilandthe4thoftheworld Operates 93% of Brazilian fields Productionofover2millionboeperday Controls approximately 30% of fuels market in Brazil Petrobras investment plan involves US$ 224 billion until 2014 By 2013 By 2015 By 2020 Drilling Rigs - Water Depth Above 2000m Supply and Special Vessels Production Platforms SS and FPSO Others (Jacket and TLWP)

30 Dealing with Petrobras Petrobras Production Targets Highest growth rate target in the world Source: Petrobras Business Plan

31 Dealing with Petrobras Contractors are subject to a Simplified Bid Proceeding(Decree 2.745/1998) Different types of proceedings: Competition Pricesurveyonthemarket Invitation to bid Public contest for hiring of employees Auction for sale of Petrobras assets Direct Contracting- May happen in circumstances that prevent Petrobras to proceed with the bid, including acquisition from exclusive suppliers or transfer of technology Recurrent Issues Tender Protocols frequently unclear in certain subjects Local Content Petrobras has increased its requirements in last years (from 57% in 2003tonearly70%in2010)

32 Dealing with Petrobras Registration of Suppliers Petrobras keeps a registry of companies interested in the procurement of services and goods The registry certifies that the company has been approved by Petrobras legal, technical, financial and tax qualification requirements Suppliers may be classified as manufacturer, distributor, retailer or service provider Recurrent Issues Registration process may be complex for certain types of suppliers Difficulty to identify the correct category for registration of the good or service Difficulty to obtain information or clarifications from Petrobras Bureaucracy and certain limitations for registration of foreign companies

33 Dealing with Petrobras Manual of Contractual Procedures Petrobras internal rule with basic condition and general provisions applicable to all contracts 4 types of administrative sanctions(pursuant to seriousness of fault): Advertence Fine Suspension of contract, suspension of right to bid, or suspension of registry Ineligibility to contract The sanctions have a disciplinary nature and do not prejudice the right of Petrobras to impose other contractual sanctions in case it considers necessary Recurrent Issues No specific deadline for Petrobras to start administrative processes In general, the administrative processes result in a simple advertence

34 Dealing with Petrobras CFM 2005 Rev 02 Petrobras basic conditions for acquisition of materials Liability Limited to direct damages Limitedto10%ofthecontractvalue Exceptions to Limitation: Willful misconduct Breach of environmental, tax, labor and social security legislation Penalties: 0,1%/day of delay, limited to 10% of contract price Recurrent Issues Ingeneral,noroomfornegotiationsundertheCFM Unlimited environmental liability when resulting from breach of legislation

35 Short Term Opportunities!

36 Short Term Opportunites! This weekend it s Carnival in Rio! We will be glad to have you there!

37 Thank you!