The recently approved labour reform allows arbitration in individual employment agreements, provided that the employee's monthly salary is twice as high as the cap on social security pensions and the arbitration clause is proposed or expressly agreed by the employee, according to the Arbitration Law. This means that employees with a higher level of education and income can now sign employment contracts for the settlement of any disputes through arbitration.
The full bench of the Superior Court of Justice recently refused the recognition and enforcement of two arbitral awards issued by an arbitral tribunal seated in New York under the International Chamber of Commerce Rules. This decision is historic and important for arbitration, as it is one of the rare cases in which the Superior Court of Justice failed to recognise a foreign arbitral award.
The Sao Paulo State Court was recently faced with a dispute between the contracting parties to a franchise agreement. While the judge rapporteur recognised that the Brazilian legal system provides for competence-competence as a general rule, given the circumstances of this case, he declared the arbitration clause in the relevant franchise agreement to be null.
The Superior Court of Justice recently issued an important decision that not only demonstrates the level of sophistication reached by the superior courts in relation to arbitration, but also the prestige that arbitration has achieved in the country as a dispute resolution method which has a jurisdictional characteristic. The decision is critical for the development of arbitration in Brazil, since it reinforces the state courts' position in favour of arbitration.
December 14 2016 is already being considered 'D-day' with regard to arbitration and corporate law, as before the Brazilian judiciary's court recess, two important precedents were set on the subject. Questions still exist regarding whether these precedents are conflicting and only time and the likely debates following these decisions will be able to resolve them. However, one thing is certain: the judiciary's final decisions in 2016 are likely to cause intense discussions in 2017.
For the past few months, the Brazilian Aeronautical Registry has experimented with a new electronic filing system that allows parties to file documents electronically 24 hours a day, seven days a week. This system is now operative for documents relating to commercial aircraft. Documents relating to private aircraft, business aircraft and helicopters are still being filed physically. The new electronic system is expected to become available to them during the second half of 2017.
In September 2016 the Brazilian Revenue Service unexpectedly promulgated a change in its treatment of Ireland, which had the potential to wreak havoc on the aircraft leasing sector for the entire country. After four weeks of considerable uncertainty, the changes – as they apply to commercial aircraft leases – were suspended. While the clarifications temporarily resolve the initial concerns regarding commercial aircraft leases, they provide no relief for other important sectors, such as the air taxi sector.
As the revision to the Aeronautical Code is taking longer than expected, the president promulgated interim legal measures earlier in 2016, including one change particularly relevant to air carriers – restrictions on foreign investment in airlines. Although ultimately vetoed, these measures still merit attention, as they are indicative of future legislation.
Brazil's airlines are facing unprecedented economic and financial pressures. With approximately 15 to 20% of their payment obligations fixed in US dollars, they have seen their operational profits drastically decline and are experiencing significant operating losses. Although no airline has sought bankruptcy protection, the risk that a major airline will do so is considerable and lessors should be aware of their rights and risks should this occur.
The Senate is undertaking a serious effort to revise and modernise the Aeronautical Code, which dates back to 1986. Although it is too early to know the special senate committee's final recommendations, the new code is expected to conform to the Cape Town Convention and relax existing restrictions on foreign investment in Brazilian airlines.
The government recently ratified the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents. The convention aims to remove the requirement of diplomatic or consular legalisation of foreign documents. The government's goal in ratifying the convention is clearly to reduce bureaucracy. For companies, this reduction will decrease the expenses associated with, among other things, validating foreign documents.
As in other jurisdictions, the Brazilian authorities have been striving to build a well-respected leniency programme. Evidence from recent years suggests that before allowing a company to benefit from its leniency programme, the Administrative Council for Economic Defence has become more demanding, requesting strong evidence of the existence of collusion, as well as proof of any (potential) impact in the country.
Under the former Brazilian merger control system, several non-classical M&A transactions were subject to merger review by the Administrative Council for Economic Defence. This broad statutory language left much room for uncertainty. With the introduction of the new law, the open-ended wording of the former law has been replaced by a list of reportable transactions.
Since the entry into force of the new Competition Law, practitioners, investors and the competition authority have spent much time discussing the review of transactions involving investment funds. Most issues in connection to these discussions arise as a result of the authority's regulation that sets forth a broad definition of 'group of companies' whenever investment funds are involved.
The year 2012 was key for the modernisation of antitrust law and policy in Brazil, with the new Competition Law finally entering into force. The new legal framework changed the dynamics of the antitrust review process – not only for the antitrust authority, which now has a new deadline to review merger cases, but also for companies, which must now deal with a ban on closing obligations during the merger review process.
The use of outsourcing has historically been uncertain in Brazil, particularly in relation to the outsourcing of a company's core business. However, once in force, the labour reform will create a scenario of greater legal certainty for outsourcing because it expressly authorises the outsourcing of any activities, including a company's core business.
According to a precedent established by the Superior Labour Court, the acquiring company is not liable for the labour debts of other companies within a corporate group that encompasses the acquired company, provided that the entities – at the time of the transaction – were creditworthy or economically viable, except in the case of bad faith or fraud. However, a recent reform to the Labour Code will enter into force in November 2017 and may change the existing understanding in this regard.
The need to modernise the procedural rules applicable to the labour procedure has long been a concern in Brazil. As such, it was well known that labour relations were being modernised and that the law did not satisfactorily account for this progress. In light of this, the newly enacted Law 13,467/2017 will introduce, among several changes not seen in prior legislative amendments, equal treatment of litigating parties and greater legal certainty for both litigating parties and Brazilian society as a whole.
The recently approved labour reform has amended several articles of the Labour Code and Laws 6,019/1974 (temporary employment), 8,036/90 (severance fund) and 8,212/1991 (social contributions). The legislation still protects the constitutional rights of workers. However, it seeks to modernise labour relations by creating rules and defining concepts which allow workers, companies and unions to have more freedom to negotiate their rights.
Struggling against one of the most severe financial and political crises, the government has adopted an agenda that aims to spur an uptick in the economy and reduce the unemployment rate, which hovers around 13%. In this regard, the government has proposed labour and social security reforms. However, some employee unions are urging a general strike across the entire country to obstruct these reforms.