Doing Business in Brazil

1.2. Brazilian Legal Estructure

07/22/20

BRIEF CONSIDERATIONS ON THE BRAZILIAN LEGAL SYSTEM

The main normative source of the Brazilian legal system is the Brazilian Federal Constitution, 1988, which stipulates the core foundations and purposes of the republic and presents a wide list of fundamental rights and guarantees, social rights, and principles to be applied by lawmakers and enforcers, in addition to stipulating the powers detained by the government. Besides, differently from the constitution of most countries, the Brazilian Constitution gives general provisions on several areas and, in some cases, even stipulates detailed rules, like in regard to the national tax system and to the budget system.

When it comes to the stipulation of the powers detained by the government, the Constitution adopts a federative model, politically and administratively organizing the republic based on the division of powers among the federal government, the federal district, and the municipalities, all of which are autonomous and have their competence limited by the very constitutional text (in some cases, with concurrent competences, i.e., there are matters that are subject to regulation by more than one of these spheres). The federative division of the republic has a huge relevance, since the Brazilian federation cannot be abolished, not even by constitutional amendment (in other words, it is one of the so-called entrenched clauses).

In addition to adopting a widespread tripartite model for its political and administrative organization, the Brazilian Federal Constitution divides the government functions among the executive, legislative, and judiciary branches, each having specific attributions. The federal government, the states, and the federal district have their own executive, legislative, and judiciary powers, while the municipalities have local executive and legislative powers only (depending on the subject, judicial issues are addressed by bodies managed by the state or federal government).

In addition to the three branches mentioned above, the Prosecution Office acts as an extremally relevant entity in Brazil, being essential to its jurisdictional function. It is responsible for the defense of the legal order, of the democratic regime, and of the unavailable social and individual rights, reason why some identify it as a fourth branch.

Just like it happens in other countries that opt for the regime of separation of powers, the administrative functions fall within the competence of the executive branch, whose operation should always observe the competences defined in the Brazilian Federal Constitution and in the existing law. Such limits arise from the principle of strict legality, according to which the public administration may only act under the law, though there are exceptions, such as issues for which the very law (or Constitution) allows for a certain flexibility in the actions to be performed by legal agents, commonly known as “discretion”. Besides, the action of regulatory agencies related to economy sectors that require a more intense surveillance by the government, like the Brazilian National Oil and Gas Agency and the Brazilian National Agency of Sanitary Surveillance, should be highlighted, as well as the action of autarchies responsible for the surveillance of the economic activity, like the Federal Revenue Service, the Central Bank, and the Securities Commission, whose purpose is to create specific rules based on the powers assigned to them by law and to oversee the compliance of activities carried out by private entities, so as to assure the constitutional precepts related to the economic order and to the operation and development of the Brazilian economy according to the rules provided for in the 1988 Constitution.

Additionally – except for the creation of provisional presidential decrees, which may only be adopted by the President of the Republic in relevant and urgent cases, observing the limits and matters provided for in the Federal Constitution –, in Brazil, the executive branch cannot create rules introducing changes to the legal system (creating, changing, or extinguishing fundamental rights established in the legislative system), moreover in cases where there is already an act to the contrary. Even provisional presidential decrees require deliberation by the congress, which might or might not pass it, highlighting the permanent need for congress intervention to create new legal rules in Brazil.

In turn, the legislative branch is responsible for creating acts according to the matters, limits, and procedures provided for in the constitutions of the republic and states and in the municipal charters. It should be stressed that some matters submitted to deliberation by the legislative branch should be exclusively proposed by the executive branch, such as the budget acts, which are crucial instruments to the public management in the Brazilian legal system. Though some matters should be exclusively proposed by the executive branch, since the democratic regime always requires the congress intervention to pass acts in Brazil, the legislative branch is free to change the content of proposals presented.

Finally, the judiciary branch exercises the role of judging conflicts between individuals, companies and/or the government so as to enforce the Constitution and law in concrete cases and, thus, mitigate conflicts brough to such branch. Besides, some courts are competent to decide abstract constitutionality issues, like the Federal Supreme Court (STF), which is competent to judge the constitutionality of federal and state acts, and the Courts of Appeals of the states, which judge cases related to municipal acts. Regarding the STF, decisions rendered in direct actions for the declaration of unconstitutionality (ADINs), as well as in direct actions for the declaration of constitutionality (ADCs) are binding and enforceable for all (the so-called erga omnes effect), moreover for the government.

Though originally created with a strong influence from the civil law system, based on the production of norms exclusively created by the legislative branch, the Brazilian legal system has been opening up for some characteristics that are traditionally related to the common law. It is due to the fact that, in recent years, some changes to procedural acts and to the very Constitution have been giving a higher efficacy to judicial decisions rendered under a control centered in the constitutionality (the abovementioned ADINs and ADCs), thus also becoming binding and having erga omnes effects, though being aimed at concrete cases decided in specific-party actions. This is the case of general repercussion decisions, for STF, and of repetitive appeal proceedings, for the Superior Court of Justice (STJ). The STF precedents also became binding, having, from a pragmatic perspective, a similar effect to that of law.


 

Authors:

MaurĂ­cio Barros

Partner at Gaia Silva Gaede & Associados, in São Paulo, PhD in Economic, Financial, and Tax Law from USP, Master in Tax Law from PUC/SP, Specialist in Tax Law from IBET, Lawyer graduated from PUC/SP, Substitute Judge at the Tax Court of the State of São Paulo (TIT/SP), Coordinator at the Tax Center of the Legal Commission of the Italo-Brazilian Chamber of Commerce, Industry and Agriculture (ITALCAM), Member of the research group “Taxation and New Technologies” of FGV Law/SP

SahelĂȘ Felicio

Associate lawyer at Gaia Silva Gaede & Associados, graduated from the Law School of Universidade Presbiteriana Mackenzie, Master in Contract Law from Instituto de Ensino e Pesquisa (INSPER)

 

Gaia, Silva, Gaede & Associados

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