On March 30, 2020, Senator Antonio Anastasia, the Brazilian Senate’s Vice-President, submitted a Draft Bill (“Projeto de Lei”) providing an emergency and temporary legal regime for private law relations during the coronavirus disease 2019 (COVID-19) pandemic in Brazil.
Draft Bill No. 1,179/2020 does not change any existing legal rules, but suspends the operation of some current rules. The Draft Bill awaits approval from the legislative branch.
The purpose of the Draft Bill, which is based on an initiative launched by Supreme Court Justice Dias Toffoli in coordination with a group of legal experts, is to provide some degree of legal certainty in anticipation of probable contractual breaches and/or default and a resulting increase in litigation between involved parties.
In summary, the Draft Bill establishes, among other things, that:
- March 20, 2020 is the official start date of the COVID-19 pandemic. This date provides a clear dividing line for legal relations. Events before versus after this date will be treated differently, particularly in relation to any argument of the unpredictability of the COVID-19 pandemic and its impact on contracts or legal obligations.
- Statutes of limitations are suspended until October 30, 2020.
- Legal entities shall avoid in-person meetings.
- Inflation, exchange rate changes, devaluation, or substitution of monetary standards will not be considered unpredictable facts for purposes of contractual review or termination.
- Under Brazil’s Consumer Law, the seven-day term for a consumer to exercise his or her right of regret is suspended.
- If an eviction lawsuit was filed as of March 20, 2020, courts cannot order any tenant evictions until December 31, 2020.
- Brazil’s data protection law (“LGPD”) will not go into effect as scheduled and will be postponed.
- The fulfillment of agricultural contracts can also be postponed.
The Bill’s objectives are commendable. It does not encourage parties to suspend their obligations under a contract − quite the opposite. By providing clarity, the Bill aims to ensure that contractual relationships will endure during the COVID-19 pandemic without the need for parties to resort to court or arbitration.
Since Brazil is considered by some to be an extremely litigious country, it is possible that the COVID-19 pandemic will be used as a general excuse for contractual breach and/or default, causing a significant increase in disputes. As currently worded, Sections 393 and 478 of the Brazilian Civil Code are very broad, creating opportunity for the COVID-19 crisis to be construed as a force majeure event and, ultimately, leading to the renegotiation of contracts in general or requests for courts to terminate contracts. The Draft Bill aims to minimize litigation that might otherwise arise due to business interruptions and contractual issues related to the COVID-19 emergency.
Because the Bill still must be approved by the Senate and then the Chamber of Deputies, the information in this article may change and may no longer be applicable depending on the final wording of the law that passes. We will be monitoring these events closely in the days and weeks ahead.
Learn more about the implications of the Draft Bill by contacting the authors, any member of relationship firm Campos Mello Advogados, or your DLA Piper relationship partner.
This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction.