Author: Mota Advogados

On June 21st, 23rd and 25th, ANPD will hold technical meetings on the topic “Personal Data Impact Assessment”, live, always at 10 am on ANPD’s YouTube channel.

The event will be divided into three panels, where experts will address topics such as: “How should ANPD evaluate a data protection impact assessment presented by the processing agent” and “How the commercial or industrial secret may limit the content of a data protection impact assessment?”.

An important initiative of the agency, which has as one of its missions to bring together all public and private actors in building a culture of Privacy and Data Protection in Brazil.

Previously, it is important to understand that the impact assessment issued is a privacy risk management tool. Thus, fulfilling the function of demonstrating that the Controller assessed the risks in the operations of processing personal data and adopted measures to mitigate them.

The impact assessment has a legal provision in article 5, item XVII, of the LGPD, defined as:

“Controller documentation that contains the description of the processes for processing personal data that may create risks to civil liberties and fundamental rights, as well as measures, safeguards and risk mitigation mechanisms;”

Thus, among the many points required by the LGPD, the – Data Protection Impact Assessment – DPIA, stands out as the instrument used by the controller in cases where the processing of personal data can generate risks to civil liberties and fundamental rights holders, serving as a tool to identify measures, safeguards and risk mitigation mechanisms.

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On June 04, 2021, Brazil signed the United Nations Convention on International Settlement Agreements resulting from Mediation, the “Singapore Convention on Mediation”. The adoption of the Convention by Brazil is part of the efforts of the Federal Government to promote de-bureaucratization, in order to support the development of businesses and stimulate the economy.

The Singapore Convention aims to give effectiveness to international settlements resulting from mediation, strengthening the mediation as an effective consensual alternative to resolve international disputes. It establishes a harmonized legal framework applicable to settlements resulting from mediation, which allows that a settlement to be easily invoked and enforced in many jurisdictions.

In accordance with the Convention, a party may enforce the settlement resulting from mediation at a local court of any of the contracting states, provided that the settlement is entered in one of the contracting states. The local courts may only refuse to grant relief in limited circumstances, such as (1) incapacity of the disputing parties, or (2) issued related to the validity of the settlement agreement, or (3) the conduct of the mediator which influenced the entering of the settlement or its terms, or (4) violation of public policy or (5) if the subject matter of the dispute cannot be settled by mediation.

Brazil is the 54th country to sing the Convention, that is already in force in 6 countries. For the Convention to enter into force in Brazil it depends, now, on the approval of the National Congress.

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The foreign capital census of the Brazilian Central Bank (“Census”) is a mandatory declaration for Brazilian entities and investment funds whose patrimonial composition contains foreign participation, or which have received investments from non-residents.

The purpose of the Census is to collect information about the external debt of Brazil, allowing the Central Bank to compile statistics to subsidize the formulation of economic policies, and to assist research and activities of international organizations.

The Census is governed by Circular 3.795, of 16 June 2016 issued by the Central Bank, which stablishes the Annual Census and the Quinquennial Census.

The Quinquennial Census refer to years finishing in zero (0) or (5), and the respective declaration must be submitted in the period starting on July 1st, up to August 15, at 6pm, of the subsequent year. In the years that the Quinquennial Census does not occur, the Annual Census declaration must be submitted.

Therefore, starting on July 1st, 2021, up to August 15, 2021, the following entities must submit to the Brazilian Central Bank the Declaration of the Quinquennial Census of Foreign Capital in Brazil, with reference to year 2020:

  1. entities located in Brazil, whose capital contains foreign direct investment, in any amount, on December 31st, 2020;
  2. investment funds with non-resident quotaholders on December 31st, 2020;
  3. entities located in Brazil, with short term debts (payment term up to 360 days) owed to non-residents, in the total amount equivalent to or higher than USD 1 million (one million US Dollars), on December 31st, 2020.

Persons, entities with foreign debts granted by financial institutions located in Brazil and non-profit organizations maintained by contributions of non-residents, are exempt from the obligation to submit the declaration related to both Census.

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The article “The Petrobras and the Integrity Criterion, does the ends justify the means?””, such a important topic for the companies, was published by the TN Petrobras.

In this article, Julia Mota and Ana Clara Chicrala discussed about de complex classification of the Integrity Criterion by Petrobras, which can unilaterally prevent companies to take part in bidding procedures.

“Good corporate governance and compliance practices today consist in a supporting pillar for the state-owned business. But the ends does not justify the means: the guarantee that suppliers are fit according to the expected integrity requirements must be acquired legally: with transparency and respect for the basic principles of public tenders, under penalty of excessive judicialization.”

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On March 10, partners Julia Mota and Rita Zanforlin spoke at the webinar organized by the Brazil-Texas Chamber of Commerce on the topic “Breaking Down the New Brazilian REPETRO: Recent Tax Reliefs, Impacts on Business Structures.”

The event covered challenges and opportunities of the REPETRO Regime under the perspective of tax law, customs and business models. Julia and Rita discussed the contract models used in REPETRO operations, and corporate structures available for the regime, considering adopted practices, points of attention to enjoy the tax benefits and recommended protections.

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We are happy to launch our Doing Business in Brazil guide, focusing in the oil and gas sector in Brazil. It covers some relevant legal issues foreign investors need to consider in their plans to start a business in Brazil, such as oil and gas specific regulatory, tax and labor issues, as well as corporate structures, intellectual property, data protection, visas and immigration.

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The General Data Protection Law, in force since September 2020, provides new parameters in the treatment of personal data, in line with global legislation. What does that mean? Your company’s compliance with the Law, beyond the merely complying with a legal obligation, will bring a competitive advantage by providing innovation, transparency and trust for the company, customers and investors.

Thus, thinking about the needs of our clients, we held a webinar with the objective of announcing the new practice area of ​​the office, in Digital Law and Data Protection, which, in partnership with Macher Tecnologia, will offer a multidisciplinary and complete service .

Our event occurred on February 25, with the presence of our partner Julia Mota, our associate Ana Clara Chicrala and our guests Alexandre Antabi and Erica Bakonyi. Many practical implementation tips were shared and this will certainly help you in the beginning of the adaptation process.

Watch our complete recording:

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The contract has a social function, and it is up to the public authorities to prevent any type of contractual imbalance caused by an unpredictable and/or inevitable event that may generate excessive burden to one of the contractors.
Brazilian law enshrines the principle of exoneration due to non-imputability, as provided in Article 393 of the Civil Code: “The debtor is not liable for damages resulting from unforeseeable circumstances or force majeure, if he is not expressly held responsible for them.” The act of God or force majeure are events whose effects cannot be avoided or prevented, imposed by natural or third party fact.

We first observe that the event must make it impossible to fulfill the obligation, such as, for example, a cargo transport that cannot be carried out because the highway was closed by the authorities to prevent the entry of vehicles and the spread of the coronavirus. In this case, the carrier is not responsible for the default of the transport obligation, and consequently for the damage caused. It is important to note that the effects of the event must be inevitable.

In view of these concepts, it is necessary to analyze the special circumstances of each contract to verify: whether there was a real impossibility of fulfilling the obligation and the inevitability of the obstacle. But if an event, such as the Covid-19 pandemic, complicates or makes it excessively expensive to fulfill an obligation, force majeure or unforeseeable circumstances concepts are not applicable. The effects of acts of God and force majeure must necessarily preclude the fulfillment of the obligation and, in order to determine such effects, it is important that the disabled party has expressly exempted itself from liability for losses arising from acts of God and force majeure.

According to the theory of unpredictability, however, applicable to continuous or deferred execution contracts, when there is an unpredictable fact, potential damage and excessive cost on the part of one party and extreme advantage for the other, the contract can be terminated, according to article 478 of the Civil Code.

As an alternative to the contract termination, it is important to note the article 421-A, recently introduced in the Civil Code by the Economic Freedom Act, establishes the possibility of contractual review, however, in an exceptional and limited way.

The companies negotiated their contracts taking into account an economic and business scenario, which has been profoundly modified by the pandemic caused by the coronavirus. As a consequence, several contracts can no longer be fulfilled and a revision is necessary to restore their balance.

Does this mean that the parties can fail to comply with their contractual obligations under the
aforementioned institutes?

It depends on the specific case. Regardless of the answer, it is important that the debtor party, from the outset, open a dialogue with the creditor, exposing its concrete difficulties and making room for the dialogue and negotiation in order to seek ways to reestablish the pacts, on an equal basis between the parties, avoiding the termination of contracts, by the principle of good faith, as recommended by art. 479, of the Civil Code.

The key word of the moment is collaboration, because going to the clash in the judiciary can further complicate the situation of the companies, not to mention that it implies costs and time for both parties. A mediator can help the parties to stay focused on the negotiation process, encouraging the generation of creative options, helping the parties to clarify interests, exchange information safely and build satisfatory business solutions.

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Decomissioning of facilities is a big challenge for the Brazilian oil and natural gas industry. The beginning of the production occurred in 1940 in onshore fields and in the late 1960`s for the maritime, and the fields that start its exploitation in 1998 (bid “o”) has rigs operating for over than 25 years, in its final stage of life.

Besides the challenge of measuring the liability throughout the project, a number of factors has to be considered, mainly the suitability of the regulation and the technical capacity for presenting proper solutions for the decommissioning.

The regulator body – ANP (National Agency of Petroleum, Natural Gas and Biofuels) has the complex task of drafting rules which can guide the decommissioning activities, mitigating risks to people and environment. The operators shall be accountable for recovering the affected areas, with environmental liabilities.

Petrobras has been prioritizing the pre-salt production, which has soared in the late years (729% between 2012 and 2018), meanwhile pos-salt has faced a decrease (41% between 2012 and 2018). In this scenario, some decommissioning programs have been approved, such as Roncador and Marlim Sul, and several others are been analyzed.

Decommissioning opportunities will drive the market and create demand for various services and equipment for many years in Brazil. There are several related services: engineering projects, subsea inspection, waste management, environmental monitoring, among others. As for equipment, probes, HLSVs, PSVs, tugs, rafts and other specialized items are required. Investments in 2020-2040 in offshore are estimated at R $ 50 billion, considering 100 platforms and 1,000 offshore wells (source: ANP).

ANP Resolution No. 27/2006, currently under review by the ANP, with the participation of IBAMA, the Brazilian Navy and the Brazilian Petroleum Institute (IBP), will define the procedures to be adopted for the facilities decommissioning, return of areas, disposal and reversal of assets and the content of the program and the final decommissioning report. The purpose of the new resolution is to maximize reservoir recovery and avoid premature decommissioning, foster business between future and current operators, develop new markets and provide predictability and regulatory simplification.

Petrobras has initiated bids for decommissioning, and currently has eight projects (10 platforms) to be executed in the coming years. The Cação project is underway and has contributed to many lessons learned for future projects. Since 2015 the 13 wells have been decommissioned (probe P-59), the permanent deactivation of the transfer ducts and the dismantling of the decks of PCA-1, PCA-2 and PCA-3. Its remaining scope will be realized by an EPRD (Engineering, Preparation, Removal and Disposal) contract in 2020 (source: Petrobras).

Repetro-Sped

Repetro has undergone significant changes with the implementation of Provisional Measure No. 795 of August 17, 2017. These changes required the issuance of a new Normative Instruction and the new Repetro is now called Repetro-Sped. With the new legislation, Repetro (previous regime) will remain in effect until 12/31/2020.

The main changes are: the inclusion of a new mode of application of the regime, which is the importation of goods for permanent permanence in the country with suspension of the payment of federal taxes on importation; The adoption of Sped for accounting control to replace the current computerized system used to control Repetro and Repetro-Sped will include the control of temporary admissions for economical use with proportional payment.

Petrobras has already brought six new platforms (FPSOs) in Repetro-Sped (acquired) and has 34 of its own in operation admitted to Repetro, which will therefore be nationalized by Dec. 2020. It has over 300 new subseas and 2,800 in operation to be nationalized, as well as 1,200 ancillary goods (source: Petrobras).

One of the advantages of the new system is that when migrating to Repetro-Sped, the accessory goods can be migrated together with the platform, which facilitates the processes. Petrobras has 57 offshore fields with material in Repetro.

Decomissioning

Petrobras has now eight offshore decommissioning projects underway. In fact, three platforms in Bacia de Campos have already been disconnected. As these systems are very old (from the 1980s), it faces enormous difficulty in finding documentation and information to support regime migration.

The challenge is even greater when the platform is operated by third parties. In this case, decommissioning is jointly conducted by the vessel operator, the service provider (such as SBM, Modec and others) and the (oil) operators. Both have to provide sufficient documentation and information to achieve the purpose of decommissioning. In general, subsea equipment is the responsibility of the operator, and platforms and accessory equipment are imported by the contractor.

The amount of goods and services used in decommissioning operations is enormous. The same decommissioning vessels also install, so the market is competitive and the values are high.

Another challenge is the issue of storing the material in the bases. Studies and analysis related to the disassembly, disposal and destruction process are required in light of environmental issues.

In the Repetro-Sped definitive import mode, the goods must remain destined to the exploration, development and production of oil and natural gas deposits for a period of 5 years. The Repetro-Sped regime will be automatically terminated, and in the event of regular disposal of the good, after the expiration of a 5-year period from the registration of DI. If the good becomes unusable before 5 years of age, the beneficiary may allocate the equipment in another field, dispose of it to another legal entity qualified in the scheme or remain installed or release it in its original place of employment.

Destination of subsea goods (“subsea”) is considered to be used when affixed to the subsoil; and vessels and platforms where they are still available at the locations indicated in the concession agreement, authorization, assignment or sharing agreements.

Since the new legislation was published, there has been a fruitful market dialogue with the IRS, which has been very receptive to operators’ claims to correct flaws and loopholes in the law.

The analysis of all applicable legislation to the regime is a daunting task: laws, decrees, regulations, ordinances, normative instructions, constantly repealed and modified, which does not facilitate its absorption. Good assistance is provided by the “Repetro-Sped Manual”, which systematically summarizes the legislation; and the “Questions and Answers”, which are a direct channel for IRS communication with taxpayers. Obviously, for greater legal certainty, it is necessary that the answers are transcribed in normative.

Note that there are still unresolved issues. For example, the five-year rule applies to all equipment, including old equipment, and not only to equipment imported from January 1, 2018 on Repetro-Sped. Among the permitted hypotheses for the destination of the good, before or after the 5-year period, there is no explicit exportation, disposal of the good for non-beneficiary of Repetro-Sped or destruction. Thus, these cases could be considered deviation of purpose, imposing the payment of suspended taxes plus interest and late payment, calculated based on the migration ID of Repetro to Repetro-Sped.

It should be noted that these assets were already applied to the E&P activity, under the Repetro regime, for a period sometimes much longer than the 5 years required by the new legislation.

There is an apparent difficulty in adapting the legislation to the activity due to its intrinsic characteristics.

In the migration of regimes from Repetro to Repetro-Sped, caution should be exercised, thus avoiding a series of legal penalties, such as the execution of the liability term (TR) with full payment of suspended taxes plus default charges, application of a 10% fine on the customs value of the goods for non-compliance with the terms and conditions of the special regime, and a 75% fine on the taxes due, in case of tax assessment.

In addition, little attention is paid to accounting entries, which, if incorrect, will have an impact on accounting and income taxes (IRPJ and CSLL).

Despite the difficulties in adapting to the new regime, it is clear that there has been a great evolution with the inclusion of the regime’s application modality in the importation of goods for permanent permanence in the country, and clearly a better understanding and dialogue between government, companies and the IRS, generating mutual benefits and the necessary stimulus for oil and gas exploration and production in the country. In their decommissioning activities, Petrobras and other operators should certainly seek to enjoy the benefits of the new regime, thereby reducing the high costs related to this activity.

Julia Mota is founder of Mota Advogados, law firm specialized in the oil and gas area.

www.mlaw.com.br

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Published at TN Petroleum Magazine in 05/28/2018

Decree 2.745/1998 simplified Petrobras’ procurement processes, bringing the required agility to compete in a market that became competitive after the opening of the oil and gas sector to the private sector, with the advent of Law 9.478/1997 (The Petroleum Law). After almost 20 years of the simplified regime, Petrobras is forced to comply with a public bidding regime, with the enactment of the State Law (13.303/2016). This law will govern all procurement by all Brazilian state-owned companies – around 150 of the federal government alone, not counting the state and municipal state-owned companies, which operate in several areas such as agriculture, tourism, ports, nuclear, war, banks, among others.

The process of adaptation to the State Law by Petrobras has been very difficult. This is because it treats the purchase of simple items, such as a common engine, for example, in the same way as sophisticated equipment such as christmas trees, which is not in line with industry best practices. The upstream sector presents peculiar characteristics, and the major oil companies in the world follow a specific pattern of procurement, due to the reduced number of suppliers in certain segments and the high technology involved. Oil companies need to develop strategic partnerships with their main suppliers, a business model not contemplated by the State Law, precisely because the law is generic.

A critical point is the 5th paragraph of Article 1 of the law, which provides that the state-owned company participating to a consortium, as operator, is subject to the law. This generated a problem because Petrobras, as operator of consortia formed for joint operation of oil and gas exploration, is in charge of the procurement of the consortia, which have always ran under a private legal regime. Compliance with public procurement rules came against Petrobras’ business plans and projects economics in the partnerships with other oil companies.

The recent Decree 9.355/2018, published on April 26, determines in its Article 1, paragraph 7 that goods and services procurement performed by the consortia operated by Petrobras are subject to the private regime of private companies, in which case the public tendering procedure is not applicable. The inclusion of this provision in this Decree was surprising, as its purpose is to determine rules for the assignment of Petrobras’ rights to the exploration, development and production of oil and gas. Timely or not, the new rule exempts Petrobras from the obligation set forth in above mentioned paragraph 5 of Article 1 of Law 13.303.

Petrobras plans to invest US$ 60.6 billion in exploration and production of oil and natural gas by 2021. The largest projects, especially in the pre-salt, will be explored by Petrobras in partnership with other companies. In this context, suppliers are confused and do not know how to act and participate in the projects developed by the consortia. A question arises: how to reconcile two different procurement regimes in the same company?

Petrobras has made a huge and commendable effort to inform and train suppliers in the new procedures of Law 13.303, including providing an application where suppliers can track all bids in progress. However, there is no information available on the procurement of the consortia. Without going into the merits of the (debatable) legality of Decree 9.355, the situation is Kafkian because Petrobras is currently exercising unfair competition with itself: when it operates alone, it does not have the same tools as when it acts in a consortium. In order to avoid bureaucracy, objections, delays and, as a consequence, cost increases, Petrobras tends to change its business model and to explore all its fields in partnership with other companies, in order to simplify procurement procedures.

To be efficient and fulfill its purpose, a company, state or non-state, must obey management principles and rules, not just legal principles and rules. The São Paulo Stock Exchange B3 recently authorized Petrobras to join the special Corporate Governance Level 2 listing segment: “These achievements reinforce the progress made in Petrobras’ corporate governance and ratify its commitment to continuous process improvement and alignment with best practices in the market” as stated by the oil company itself. In fact, there has been a significant improvement in its disclosure, transparency for stakeholders and compliance (code of ethics and organizational integrity). Advances are evident, and the risk of illegalities has been significantly reduced. This may be enough to prevent criminal actions, and the company could count on a uniform, simpler and more agile procurement procedure, in line with international standards, similar to other oil companies.

We are living a new context in Brazil: intolerance to corruption, bargaining and other crimes is notorious, reflecting a deep and historic cultural change. State companies needed a management, governance, and compliance clash. But when it comes to procurement procedures, although Law 13.303 is less bureaucratic than Law 8.666/93 (public procurement law), should Petrobras not have its own rules, adapted to the reality of the oil sector? In an extremely competitive market, this may be necessary.

An analysis of the best practices of procurement and hiring in this sector is inevitable, tracking the worldwide recognized and standardized practices. This would help determining in a logical and objective way, the best procedures for Petrobras, taking into account the legal nature of the company – a semi-public – since this continues to be the Brazilian option, that is, to maintain a state-owned company as a leading actor in this sector.

 

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