The COVID-19 pandemic rekindled the importance of governmental economic and social actions. Due to factors like severe currency depreciation, interruption of activities, shortage of inputs, and necessities of permanent support for the acquisition of resources to fight against the disease, public contracts undertook an even more crucial role.

However, contracting in the current scenario is not a simple task. So, to enable the conduction of bids and execution of public contracts, the Public Authorities shall create and activate some devices of exception, about which we make some comments hereinafter.

    1. Decrees of public calamity and emergency

The publication of normative rules that recognized and enacted a state of public calamity or emergency has established the state of extraordinary things, which justifies the adoption of exceptional measures for public contracting.

Both public calamity and emergency refer to unusual situations, causative of damages and losses that jeopardize the targeted public entity’s capacity of an answer. The state of emergency occurs when the affected entity may overcome the impacts through the reorganization of its own budgets. On the other hand, the state of public calamity relates to substantial effects, in which remediation requires the release of resources aside from the limits outlined in the Fiscal Liability Law (Supplementary Law n. 101/2000).

Main decrees of public calamity in force: (i) Legislative Decree n. 6/2020 (National); (ii) State Decree n. 46.984/2020 (Rio de Janeiro); (iii) Municipal Decree n. 47.355/2020 (Rio de Janeiro); (iv) State Decree n. 64.879/2020 (São Paulo); (v) Municipal Decree n. 59.291/2020 (São Paulo).

    1. Special Bids and Contracts

The Provisional Measure n. 926/2020 amended Law n. 13.929/2020 and exempted bid proceedings for acquisitions of assets, services (including engineering), and inputs needed for the fight against COVID-19. It is a temporary hypothesis of direct contracts, applicable just while the state of public health emergency lasts, according to decrees issued by competent authorities.

The Law n. 13.929/2020 also brings special rules valid for public bids that involve assets and services needed in the fight against COVID-19, just like:

        • bids through electronic or on-site auctions with procedural deadlines reduced in a half;
        • release of basic information about the acquisition on the official and specific website of the contracting entity (supplier’s name and CPF/CNPJ, amount and term of the contract, number of the administrative proceeding);
        • unique supplier of a particular asset or service may be contracted, even if declared as disreputable or suspended from the right of participating in bids and contracting with Public Authorities;
        • the Government may contract used products and equipment, provided that the supplier takes on the liability for their conditions of use and operation;
        • presumption of truthfulness about the occurrence of some facts (emergency; the necessity of quick response; risks to people, constructions, services, and public or private assets; limitation of the contract to the needed portion), which may only be questioned with reverse evidence;
        • exemption of preliminary reports for the acquisition of ordinary assets and services, as well as acceptance of simplified reference terms and basic projects in the other proceedings;
        • if there is a limited number of suppliers for the bid, the competent authority, through written justification, may exempt the delivery of documents attesting fiscal and labor regularity, as well as remove one or more requests for qualification (evidence related to Social Security and statement referring to non-exploitation of child workforce must not be discharged);
        • suppliers must accept additions and removals evaluated in up to 50% of the contract’s entire amount, unilaterally fixed by the Public Authority; and
        • contracts will have a maximum term of six months, with possibility of successive extensions while the emergency lasts.

On the other hand, there are assets and services that, although do not have a direct association with the fight against COVID-19, are needed due to the national calamity scenario. We understand that in these cases, as well as in cases of constructions and services that may be concluded within 180 consecutive days, the Public Authority may carry out direct contracts, through clear and express justification, based on the hypothesis of bid exemption described on article 24, IV, of Law n. 8.666/93.

As a rule, emergency contracts arising out of Law n. 8.666/93 are non-extendable. However, precedents of the Federal Court of Auditors (“TCU”) postponement, to the precise extent of essentiality, if there is proof about the necessity of more time to meet the emergency and its effects.

    1. Provisional Measure n. 961/2020

Following the adaptations to the exception regime instituted due to COVID-19, on 05.07.2020, the Federal Government enacted the Provisional Measure n. 961/2020, whose propositions may be adopted by the public authorities of all Powers and federative entities.

The measures apply only to bids and public contracts (including their extensions) executed as of 05.07.2020 up to 12.31.2020 (deadline of the public calamity, as outlined in Legislative Decree n. 6/2020).

The main innovation brought by the Provisional Measure is the possibility of Public Authorities making anticipated payments to suppliers, provided that:

        • the anticipation is foreseen in auction notice or term of direct procurement (exemption hypothesis);
        • the Authority requires the return of the entire amount in case of non-performance;
        • the anticipated payment represents the paramount condition for the obtainment of assets or services;
        • the option fosters material economy of resources for the public treasury; and
        • the contract is not destined to the provision of services under the workforce full dedication regime.

The Public Authority may protect itself against eventual risks of default, demanding from the suppliers that: (i) prove the performance of part of the contract as a condition to release the final of payment installment; (ii) grant guarantees corresponding to 30% of the contract’s entire amount; (iii) issue securities; (iv) allow the monitoring of the acquired assets by a representative of the public entity; and (v) send certifications of products and suppliers.

Finally, the Provisional Measure n. 961/2020 has also: (a) raised the caps for contracts through bid exemption, outlined in Article 24, caput, I and II, of Law n. 8.666/93 – up to R$ 100,000.00 for constructions and engineering services; R$ 50,000.00 for assets and other services -; as well as (b) expanded the incidence of the Differentiated Public Procurement Regime – “RDC” (Law n. 12.462/2011) to all kind of bids and public contracts.

  1. Rebalancing and Suspension of Contracts

Besides procedural adjustments to enable new hirings, COVID-19’s consequences also brought the necessity of evaluating the performance and continuity of public contracts that have already been signed.

Because of this, we have found a lot of debates about the economic-financial rebalancing, which is founded on article 65, caput, II, “d”, of Law n. 8.666/93.

According to the provision, public contracts may be altered, through an agreement between Public Authority and supplier, whenever that the original equilibrium of obligations gets jeopardized by extraordinary and non-contractual economic alea, deriving from one of the following types of events: (i) unforeseeable or foreseeable facts with inestimable consequences (unpredictability theory); (ii) force majeure; (iii) “prince’s fact”.

Due to the uncertainty about the duration of the pandemic, the restrictive measures, and the adverse effects caused on the global economy, there are strong arguments to include the situation in the definitions of the unpredictability theory and force majeure (article 393 of Brazilian Civil Code).

The rebalancing may also find legal support under the perspective of “prince’s fact” (defined as “one general action of Public Administration that reflects over the contract”), whose configuration would relate to the government decrees that enacted calamity/emergency states, as well as several restrictions.

Regardless of the argument chosen, the rebalancing only applies when the alleged events happen after the contract’s signature. If before, other legal techniques shall be used.

The rebalancing request shall not be abstract or generic, being indispensable for the supplier to evidence, through spreadsheets and documents, that the resonances of COVID-19 effectively prevent or delay the compliance of a particular contractual obligation. Indeed, not all contracts are directly affected by the pandemic and, among the reached ones, there are impacts of different levels.

Public Authority also holds the option of suspending, through written determination, the performance of any contract, according to article 78, XIV, of Law n. 8.666/93. As a general rule, there is a 120-day suspension deadline; however, the legislator has stipulated exception for public calamity situations (which enhances the role of decrees as tools to avoid massive contract terminations due to COVID-19).

    1. Singularities of other instruments

It is possible to review the prices registered on minutes of prices registration, based on the criteria set forth in article 65, caput, II, “d”, of Law n. 8.666/93, in case of further facts that raise the cost of services or assets offered by suppliers.

However, there are distinctive rules outlined in Decree n. 7.892/2013, among which we emphasize the obligation of the entity responsible for the management of minutes to open a negotiation stage with the other suppliers, before adjusting the prices registered by the victorious bidder. There is no direct transaction, involving the only contractor and Public Authority, as happens in public contracts. On minutes of price registration, the amendments may only occur after the other participants were heard.

There are controversies if the Public Authority is obliged to look for all participants that have disputed the bid or exclusively those bidders allocated on a reservation list. Suppliers that refuse to adjust their prices, as requested by the entity, shall be released from their commitment without penalties (as long as the truthfulness of their justifications is attested). When the market price surpasses the registered amount, the supplier shall communicate its impossibility of honoring the proposal before receiving a request of supply from the public entity. Otherwise, it will be subject to administrative penalties.

It is also publicly known that COVID-19 has caused the interruption of several services regulated through concession contracts, such as civil aviation, provision of electric energy, and water supply. In this scenario, article 38, §1º, II, of Law n. 8.987/95 protects operators from the risk of termination of contracts due to infringement of obligations (expiration), since they prove a practical impossibility of keeping their regular activities because of the pandemic (force majeure).

Concerning contracts of public-private partnerships (PPPs), under Article 5, III, of Law n. 11.079/2004, they must already contain a clause that provides the share of all venture risks between Public Authority and the private partner, including those arising out of force majeure, “prince’s fact”, and extraordinary economic alea. Thus, concerning PPPs, there is no space for rebalancing negotiations, once the risks of any event, even those unforeseeable and inestimable, are previously distributed among the parties at the moment of contract’s execution.

    1. How to deal with public contracts in this crisis?

Regardless of the solution sought by the supplier and the hiring Public Authority, it is essential that all manifestation is documented and duly formalized in an administrative proceeding.

As we live today in a context of exception, extraordinary measures may only be carried out if, on one side, the supplier demonstrates that COVID-19’s pandemic causes effective disruption in the contract and, on the other, the Public Authority expressly reveals the reasons that justify the adoption of its prerogatives.

Due to the complexities inherent to public contracts, especially in these moments of exception, it is recommended that suppliers rely on legal support from specialized professionals.

The teams of Fraga, Bekierman & Cristiano Advogados are available to answer any questions about the legislation mentioned above.

With the severe economic impacts arising from COVID-19, the Federal Government has been working on the implementation of measures aiming to preserve the financial capacity of Brazilian companies.

In this context, Provisional Measure no 944, dated 04.20.2020, established the Emergency Employment Support Program, so that companies with gross revenues between BRL 360,000 and BRL 10 million receive financing to pay up to two (2) months of their payrolls, with a limitation of two (2) minimum salaries per employee.

With a broader scope, the National Economic and Social Development Bank (“BNDES”) announced the availability of three special credit lines:

EMERGENCY PROGRAM FOR EMPLOYMENT SUPPORT

Target Group: Companies with annual income between BRL 360K and BRL 10M.

Purpose(s): Exclusively to pay two (2) months of company’s payroll.

Conditions: (i) during the 2 months, company cannot dismiss employees with financed wages; (ii) financing limit is up to BRL 2,090.00 – two minimum wages – per employee; (iii) employees with wages ≤ BRL 2,090.00 shall receive the entire amount, without increment; (iv) employees with wages > BRL 2,090.00 shall receive the financing cap + balance according to the company’s cash availability; and (v) the program may be hired up to 06.30.2020.

To whom request: Financial institution responsible for processing the company’s payroll.

Interest Rate: 3.75% per year (pre-determined and exempted of remuneration to BNDES and banks).

Discharge Term: Up to 36 months (30 months for redemption + 6-month grace period).

BNDES PROGRAM FOR EMERGENCY SUPPORT ON ACTIONS AGAINST COVID-19 PANDEMIC

Target Group: Legal entities that hold on their main or subsidiary CNAEs (National Economic Activities Classes): (i) assembly and provision of provisional emergency hospital beds for intensive care (71.1); (ii) provision of health services (86.1), with assembled capacity ≥ 100 beds; or (iii) production, import and/or sales of equipment, materials, supplies, components and/or products for health industry (26.6, 32.5, 32.9, 46.4 and 46.6). Companies and institutes that suit exceptionally their regular productive activities to provide hospital beds and health products (CNAE – Section C).

Purpose(s): To enable the enhancement of hospital beds provision, as well as acquisition of critical equipment, materials, supplies, components and products to meet assistance needs related to Covid-19.

Conditions: (i) The amount financed shall be used by the beneficiary within 6 months; (ii) Minimum financing amount = BRL 10M per operation; (iii) Financing Cap for Economic Group = BRL150M (for each 6 months); and (iv) The program may be hired up to 09.30.2020.

Whom to request: Directly to BNDES (after entitlement before the institution).

Interest Rate: TLP (IPCA + 1.98% per year) + BNDES charge (1% per year) + Credit Risk (up to 4.26% per year).

Discharge Term: Up to 60 months (including 3-24 months grace period).

BNDES CREDIT LINE FOR SMALL AND MEDIUM-SIZED COMPANIES

Target Group: (i) Ordinary Beneficiaries: small companies, individual entrepreneurs and medium-sized companies with annual revenues up to BRL 90M; and (ii) Temporary Beneficiaries: medium-sized companies and economic groups with annual revenues up to BRL 300M.

Purpose(s): To assure business continuation, preservation and creation of job positions.

Conditions: (i) Financing cap per applicant: up to BRL 70M per year; (ii) Although the resources derive 100% from BNDES, credit analysis, deadlines, charges and guarantees of the operation will depend on negotiation with financial institutions; (iii) Temporary Beneficiaries may only hire this program up to 09.30.2020; (iv) After 09.30.2020, financing cap returns to R$ 10M per year.

To whom request: Small companies may send the request through MPME’s platform. The others shall look for one authorized financial institution of their choice.

Interest Rate: (TFB, TLC or Selic) + BNDES charge (1,25% per year) + Financial Institution Fees (determined in negotiation with the bank).

Discharge Term: Up to 5 years (including grace period up to 2 years).

In addition to the aforementioned credit lines, companies may request a 6-month interruption in the payment of interests and main debts to BNDES. This option is applicable for direct, indirect, automatic, non-automatic and conjugated operations. Interrupted installments will be capitalized in the unpaid balance, without changes in the agreement’s deadline.

The professional teams of Fraga, Bekierman & Cristiano Advogados are at your disposal to help with the requested legal clarifications.

Except for the health area, all public agencies have adjusted their functioning to deal with the emergency scenario of COVID-19. Here are some examples:

Judiciary Power. The National Council of Justice (CNJ) enacted, on June 1st, the Resolution No. 322, which authorizes the gradual resumption of on-site services within the Brazilian Judiciary as of June 15, if sanitary conditions and public health care make it feasible. It also establishes the reckoning of the procedural deadlines, including for physical actions, from the date of resumption. From the date on which each Courts decides to resume in-site activities, their respective Presidents will have up to 10 days to issue the normative act that will establish the new rules of prevention and safety. We listed below the court statements up to now:

TJRJ – Normative Act no. 25

TRF2 – Note of Clarification

TJSP – Note of Clarification

TRF3 – Normative Act no. 8

Rio de Janeiro Municipal Treasury Department (SMF-Rio). Among the emergency measures imposed on all SMF-Rio bodies, the following stand out: (i) suspension, from indefinite period, of the deadlines for challenges, administrative resources, compliance with requirements, cancellation of municipal registration or exclusion of services from the register of economic activities; and (ii) extension of the validity periods of ISS tax certificates and fees for 60 (sixty) days.

Rio de Janeiro State Treasury Secretariat (SEFAZ / RJ). All state public servants, including from SEFAZ, are in remote working regime.

Federal Revenue of Brazil (RFB). From 03.23.2020 to 06.30.2020, the on-site service will be provided in some service units, for the following services: (i) Regularization of Individual Taxpayers’ Registry (CPF); (ii) copy of documents related to the Individual Income Tax Return (DIRPF) and the Withholding Income Tax Declaration (Dirf) – beneficiary; (iii) installments and reinstallments not available on the internet; (iv) Brazilian Federal Revenue power of attorney; and (v) protocol of processes related to the services of a) analysis and release of the certificate of fiscal good standing before the National Treasury; b) analysis and release of the certificate of fiscal good standing of rural property; c) analysis and release of certificate for registration of civil construction work; d) payment rectifications; and e) Corporate Taxpayers’ Registry (CNPJ). The other services must be solved by the virtual service or by scheduling the service on a date after 06.30.2020.

Rio de Janeiro Board of Trade (JUCERJA). The in-person services have returned on June 8, 2020 and are being carried out only through the previous scheduling in the “Contact Us” of the JUCERJA website, in the “Scheduling” option. All the digital registration options where maintained.

São Paulo Board of Trade (JUCESP). Since May 12, 2020, the on-site services are being performed on a restricted basis, from 8am to 4pm, upon appointment, in two ways: (i) delivery (via post); or (ii) drive-thru (delivery via malt). In case of requirements, schedule is available for withdrawal through the service channel.

Public Administration Bodies of the Municipality of São Paulo. In accordance with Decree No. 64,994 of May 28, 2020, which extended the quarantine measures in the State of São Paulo until June 15, the Municipality issued Decree No. 59,511 of June 9, 2020, determining that units of the Direct and Indirect Public Administration bodies shall operate exclusively through prior scheduling, with intervals between attendances and with reduced hours.

Civil Registry of Legal Entities of the Capital of Rio de Janeiro (RCPJ-RJ). The online services continue to function normally through RCPJ Central. For services in-site, the RCPJ-RJ is attending from Monday to Friday, from 11 am to 16 pm.

Securities and Exchange Commission (CVM). Civil servants and trainees are working remotely. The attendance in-site, the receipt of physical documents,  the in-site trial sessions, and the internal or external meetings are suspended.

Notaries and Property Registry Offices. The measures of suspension and reduction of activities within the Extrajudicial Services were extended until June 14, in accordance with CNJ Provisional Decree 101/2020. In the State of Rio de Janeiro, the Ordinance CGJ/RJ 42/2020  regulated the measures to confront covid-19 until the same date, maintaining the recommendation of remote work and the observation of the protocols of the public health authorities in cases of in-person services. In the State of São Paulo, the Notice CGJ 421/2020 extended the measures of suspension and reduction of the activities provided by the Ordinance  CGJ/SP 08/2020 in the State until June 14.

Our offices in Rio de Janeiro and São Paulo are available to answer any questions about the above measures.

Given the countless social and economic repercussions resulting from the pandemic of the new coronavirus (COVID-19), public authorities have recommended preventive measures and imposed restrictions on the entire population. Public and private entities adopted precautionary protocols and reformulated their activities to better adapt to times of crisis.

The first measures planned to deal with the public health emergency resulting from the spread of COVID-19 were set out in Law No. 13.979, of February 6, 2020, among them: isolation and quarantine of people; temporary closure of ports, highways and airports; compulsory laboratory exams and tests and medical treatments; requisition of goods and services, with subsequent compensation; exceptional and temporary authorization to import products without registration with Anvisa; and exemption from bidding for the purchase of health goods, services, and supplies for dealing with calamity.

With the worsening of the crisis, , the Brazilian Senate recognized the state of public calamity (Legislative Decree No. 6, 2020), with effects until December 31st, 2020. In the same direction, the Governments of mainly all the States, as well as the respective Governments of the biggest Municipalities, declared a situation of public emergency, to implement measures to face the pandemic. General restrictions on the movement of people were imposed, with the suspension of classes in public and private schools and universities, closure or teleworking regime in public agencies, reduction in the operation of public transport, and closure of commercial establishments. Offending agents are subject to civil, administrative and criminal liability, as regulated by the Ministries of Justice and Public Security and Health.

Aware of the repercussions caused by such an emergency, the teams from Fraga, Bekierman & Cristiano Advogados prepared this report with a summary of the main normative acts related to COVID-19 and their impacts on business continuity.

Tax and Customs Aspects
For more detailed information about tax aspects, please access our Newsletter about the main tax measures to mitigate the impacts of Covid-19 clicking here.
Labor Aspects
For detailed information about labor aspects, please click here.
Contractual Aspects
Check out the material that our team has prepared regarding the contractual alternatives in the context of the pandemic by clicking here.
Other Legal and Economic Aspects
Here are the main measures proposed by the authorities so far.
Public Bodies Functioning and Terms
Except for the health area, all public agencies have adjusted their functioning to deal with the emergency scenario of COVID-19.

 

Our offices in Rio de Janeiro and São Paulo are available to answer any questions about the measures described above.

Our partners Roberto Bekierman and Lycia Braz Moreira are among the speakers of the seventh edition of the “UTCAL Summit 2018” event. The event will debate the primary issues affecting Public Utility Concessionaires, in terms of technology and telecommunications. The attorneys will present the panel “Tax and Regulatory Aspects of Infrastructure Sharing and Swapping Operations.” The panel will be presented on April 4, at 15:30, at Windsor Barra Hotel.

 

DATE: APRIL 4, 2018
TIME: 15:30
LOCATION: WINDSOR BARRA HOTEL | AV. LÚCIO COSTA, 2630 – BARRA DA TIJUCA, RJ

 

Program and additional information available on the event’s website »

The Brazilian Central Bank (BACEN) will perform the Five-Year Census of Foreign Capital in Brazil from July 1st, 2016 to August 15th, 2016, as established by the Ordinance no. 3.795, of June 16th, 2016.

Such Ordinance consolidated the regulations about the Five-Year and the Annual Census, defining that the Five-Year Census has as database the years ending in zero (0) and five (5), whilst the Annual Census refers to the other years.

Mandatory Statement in 2016 Census

The Declaration of Five-Year Census is mandatory to: (i) companies headquartered in Brazil with direct non-resident participation in the equity capital, in any amount, on December 31st, 2015; (ii) investment funds with direct non-resident participation, on December 31st, 2015; and (iii) companies headquartered in Brazil, recipient of short-term trade credits (with terms up to 360 days) granted by non-residents, if the related amount is equal or exceeding USD 1 million on December 31st, 2015.

The Annual Census, which will be required only in 2017, referring to the base date of December 31st, 2016, must be submitted by: (i) companies headquartered in Brazil with direct non-resident participation in the equity capital, in any amount, with net worth equal or superior to USD 100 million; (ii) investment funds with direct non-resident participation with net worth equal or superior to USD 100 million; and (iii) companies headquartered in Brazil, recipient of short-term trade credits (with terms up to 360 days) granted by non-residents, if the related amount is equal or exceeding USD 10 million.

Statement in the Census

The Declaration of Five-Year Census of Foreign Capital is available at the Brazilian Central Bank’s website, at the address www.bcb.gov.br.

Term Date

The period to submit the statement is from July 1st to August 15th, 2016.

Penalties

The delay or failure to declare, as well as the declaration with inaccurate, incomplete or false information, may subject the declaring legal entity to penalties, including fines up to BRL 250.000,00 (two hundred and fifty thousand reais).

The team of Fraga, Bekierman & Cristiano Advogados make themselves available to assist with the fulfilling of this obligation to BACEN.

 

 

The Central Bank of Brazil (BACEN) will perform from July 1st to August 15th the Census of Foreign Capital in Brazil, in order to assist in the establishment of governmental economic foreign exchange policies.

1. Mandatory Statement in Census 2014

The obligatoriness of annually submitting the statement on foreign capital in Brazil was established through the Ordinance no. 3.602, issued by BACEN on June 25th, 2012. In accordance with the Ordinance, are required to submit the statement those legal entities which, in December 31st, 2013:

I – had equity equal to or exceeding US$100 million and, simultaneously, direct participation, in any amount, of non-residents in their social capital; and/or

II – had outstanding balance exceeding US$10 million in short-term trade credits (payable within 360 days) granted by non-residents, regardless of foreign participation in their capital.

2. Deadline to Declare

The term to submit the declaration is July 1st to August 15th, 2014.

3. Penalties

The delay or failure to declare, as well as the declaration with inaccurate, incomplete or false information, may subject the declaring legal entity to penalties. The lawyers of Fraga, Bekierman & Cristiano Advogados make themselves available to assist with the submission of the statement