Doing Business in Brazil

15. Environmental

04/22/19

15.1. Evolution of the environmental protection in Brazil

In the past decades, especially since the United Nations Conference on the Human Environment – Stockholm Conference – held in 1972, concern in relation to environmental issues has risen worldwide.

However, it was in the ‘80s, pursuant to the enactment of the National Environmental Policy Act (1981), the Public Civil Action Act (1985) and the Federal Constitution (1988) that the environmental legal protection gained significant recognition in Brazil.

Since then environmental issues have been receiving increased attention at the Brazilian Legislative Branch with the enactment of several environmental regulations that require both the public and the private sectors to constantly consider the environmental agenda in their activities.

The Judiciary has also been more frequently ruling cases related to the enforcement and interpretation of environmental law, resulting in the consolidation of court decisions and in the enactment of precedents by the Superior Court of Justice.

In parallel, a greater movement has also being perceived in the role played by the Public Prosecutor and Non-Governmental Organizations to protect the environment and natural resources as well as in the inspection actions taken by environmental authorities.

All these factors combined resulted in a growing pressure on those who are not committed to the adequacy of its activities in relation to the environmental legislation in force, and it should be noted that the conducts taken by the companies have been increasingly considered by the community in general, including consumers, clients, suppliers, employees, sponsors and other interested parties.

Hence, the incorporation of environmentally appropriate actions, in compliance with the applicable legislation, becomes increasingly relevant in order to ensure the sustainability of a company.

15.2. Authority over environmental matters

According to the Brazilian Federal Constitution, the Federal Government and the States have the power to legislate in a competitive way about environmental protection and pollution control, as well as about liability for environmental damages. Additionally, Municipalities are also entitled to legislate on environmental matters in relation to issues considered of local interest and may complement federal and state legislation whenever necessary.

Therefore, all levels of government legislate on environmental matters and a wide federal, state and local legislation regarding the subject exist. Although there is some divergence, the majority view of doctrine and of the Judiciary is that, in situations where there is a conflict of rules, the legislation offering greater environmental protection shall prevail.

In relation to the activities of inspection, protection, improvement and recovery of environmental conditions in Brazil, all levels of the government have common powers, what means that all of them can, by means of the authorities that are part of the SISNAMA – National System of Environment, exercise such activities, observing the definitions and limits provided for in Complementary Law No. 140/2011.

The Public Prosecutors’ Office, in its turn, has institutional powers, under Brazilian Federal Constitution, to initiate civil investigations and to bring public civil actions with respect to environmental damages, as well as to file lawsuits related to crimes against the environment.

15.3. Major Federal Laws

In the federal level, two statutes provide the general structure of environmental protection. They are the National Environmental Policy Act and the Environmental Crimes Act, the latter also dealing with administrative liability as regulated by Federal Decree No. 6,514/2008.

The Federal Law No. 6,938/81 established the national environmental policy, which consists of a series of directives and rules related to environmental protection and recovery of damages to the environment.

The referred act introduced into Brazilian legislation the concept of sustainable development, according to which economic development must be compatible with the conservation of the environment and with the rational use of natural resources. It also established the “polluter pays” principle, according to which the burden of preserving the environment and repairing possible environmental damage falls upon the party responsible for carrying out the polluting activity, and the “user pays” principle, which seeks to impose compensation for the commercial use of natural resources.

On the other hand, the Environmental Crimes Act (Federal Law No. 9605/1998) sets forth the crimes against the environment, including crimes related to the flora, fauna, pollution, against others. This statute describes those conducts deemed to be crime and establishes the applicable penalties. One point brought by the Environmental Crimes Act is the possibility to attribute criminal liability to a legal entity when a violation is committed as a result of a decision taken by its representative, or by one of its corporate bodies, in the interest or benefit of the company.

In addition, the Federal Decree No. 6,514/2008 regulates the Environmental Crimes Act with respect to environmental administrative violations, describing the acts considered violations to the legislation and setting forth the administrative sanctions applicable to each of them.

15.4. Environmental Liability in Brazil

Under Brazilian Federal Constitution, environmental liability may occur, severally and cumulatively, in civil, administrative and criminal levels.

In the civil level, liability arises from damages caused to the environment and may be claimed in court by the Public Prosecutor’s Office, the Public Defender’s Office, the federal, state and municipal governments, by government corporation, foundation or mixed-capital company, or even by associations created to defend the environment.

According to the National Environmental Policy Act, civil liability for environmental damages is strict, i.e., it occurs irrespective of fault by those that have caused the damage. However, although it does not require the evidence of fault, it is necessary to proof the actual damage and the chain of causation between such damage and the activity undertaken by the applicable party. In this sense, the party will only be held liable if the damage, its extent and the link between such damage and the activity are evidenced.

Moreover, in Brazil it is understood that environmental civil liability is joint and several among those who, by virtue of their activity, facilitate or contribute to the occurrence of environmental damages, based on the definition of polluter provided by the National Environmental Policy Act. According to it, a polluter is defined as the individual or legal entity directly or indirectly responsible for activities that cause environmental degradation.

Administrative liability, in its turn, is verified when the environmental legislation is violated. An environmental administrative violation is defined by Federal Decree No. 6,514/2008 as any act or omission that violates the legal rules for the use, enjoyment, promotion, protection and recovery of the environment.

Failure to observe the applicable rules may subject the party to penalties, such as warning, fines ranging from BRL 50 to BRL 50 million, total or partial suspension of activities, suspension or cancellation of licenses, permits and authorizations, prohibition on contracting with the government, enjoyment of tax benefits and/or obtaining financing from official credit institutions, among others.

At last, criminal liability is verified in a public criminal action brought exclusively by the Public Prosecutor against those who have allegedly committed an act defined in the law as an environmental crime.

Attribution of criminal liability requires proof by the Public Prosecutor that the person accused of committing an environmental crime acted with negligence or willful misconduct. The conduct must also be expressly described by law as a crime. The Environmental Crimes Act (Federal Law No. 9,605/98) allows for the assignment of criminal liability to individuals and legal entities.

15.5. Environmental Licensing 

Pursuant to the Brazilian environmental law, effectively or potentially pollutant activities, as well as activities that, in any form, may cause environmental degradation, shall be subject to previous environmental licensing, which consists of a public administrative proceeding in which the environmental agency evaluates and authorizes the location, installation, expansion and operation of those activities, considering the applicable legal provisions, regulations and technical rules in each case.

During the environmental licensing process, the entrepreneur may be required to submit environmental studies to support the analysis for the requested licenses. There are various types of environmental studies, and the environmental licensing agency shall indicate the study that applies to each specific case.

Environmental licensing encompasses, as a rule, three distinct and successive phases in which the environmental feasibility of the project is analyzed and the conditions for the project’s implementation and operation are established. These phases involve the issuance of the following licenses:

• Preliminary License – granted in the preliminary planning phase of the project or activity, approving its location and design, attesting its environmental feasibility and establishing the basic requirements and conditions to be complied with in upcoming phases of implementation;

• Installation License – authorizes the installation of the project or activity according to the specifications contained in the approved plans, programs and projects, including the measures needed for environmental control and other conditions;

• Operating License – authorizes the operation of the project after certification of effective compliance with the provisions contained in the previous licenses and provides the measures needed for environmental control and the conditions set for the project’s operation.

Other environmental permits and documents may be required for certain activities, such as authorization for suppression of vegetation, authorization for management of fauna and water grant for intervention in water courses.

Pursuant to Complementary Law No. 140/2011 the power for issuance of environmental licenses and permits is generally attributed to State environmental agencies. In certain cases, such power is attributed to the federal environmental agency (Instituto Brasileiro do Meio Ambiente e dos Recuros Naturais Renováveis) (“IBAMA”) or to the Municipal environmental authorities.

15.6. Reverse Logistics

Reverse logistics is one of the instruments foreseen by Brazilian legislation to strengthen the shared responsibility among manufacturers, importers, distributors, traders and consumers in relation to solid waste management. Its objective is to enable the collection and restitution of solid waste to the business sector for reuse or for another environmentally appropriate final destination, including, among other alternatives, recycling, composting, recovery and energy production. This instrument was formally created by Federal Law No. 12,305/2010, which established the National Policy on Solid Waste, and regulated by Federal Decree No. 7,404/2010, despite the existence of rules enacted prior to such law and decree related to the reverse logistics of some specific products.

Pursuant to the applicable legislation, the institution of a reverse logistics system is mandatory for the following products: (i) pesticides, their residues and packaging, as well as other products whose packaging, after use, constitutes hazardous waste, (ii) batteries, (iii) tires, (iv) lubricant oils, their residues and packaging, (v) fluorescent lamps, sodium and mercury lamps and mixed lamps, and (vi) electronics and their components. At the federal level, reverse logistics systems have been instituted for all those products, except for electronics, whose system is still under discussion between the competent authorities and the business sector.

The legislation also provides for the possibility of expanding the list of products subject to reverse logistics, what should be done by the enactment of decrees or execution of sectoral agreements or commitment agreements, after verifying the technical and economic viability of the implementation of such system. In this sense, a reverse logistics system has been established, at the national level, for packaging in general, composed of paper and cardboard, plastic, aluminum, steel, glass or combination of these materials, such as long life packaging. With regard to the reverse logistics of medicines at the national level, after the pharmaceutical industry refused to execute a sectoral agreement, a decree, not yet published, was prepared to establish it.

In addition, it is possible that reverse logistics systems are instituted at the state and municipal levels, also through decree, sectoral agreement or commitment agreement. Regarding medicines, for example, although the decree instituting the reverse logistics system at the federal level has not been published yet, some states and municipalities have already instituted such system in their respective territories.

In general terms, in a reverse logistics system, traders and distributors are responsible for receiving products and packaging returned by consumers and delivering them to manufacturers or importers. Manufacturers and importers, on their turn, must provide environmentally appropriate final destination for such products and packaging. The volume of used products and packaging to be collected shall meet the targets set by means of regulations, sectoral agreement or commitment agreement, proportionally to the volume of products commercialized by the manufacturer, importer, trader and distributor.

15.7. Biodiversity

Brazil ratified the Convention on Biological Diversity (“CBD”) then undertaking the obligation to establish internal rules regarding the access to the genetic resources under its jurisdiction and to protect the traditional knowledge of local communities and indigenous population, valuable to the conservation and sustainable use of the biodiversity.

The first legal milestone on the subject in the Brazilian legal system was the Provisional Measure No. 2,186-16 enacted on August 23, 2001, which remained effective until 2015, when Federal Law No. 13,123 was enacted. The Federal Decree No. 8,772/2016 was later issued in order to regulate referred Law. For the purposes of this text, the Federal Law No. 13,123/2015 and Federal Decree No. 8,772/2016 will be collectively referred to as the “Biodiversity Law”.
The Biodiversity Law regulates, among others, the access to the genetic resource of the country and to the associated traditional knowledge. For the purposes of the Brazilian Biodiversity Law, whenever there are researches activities and/or the technological development on either a Brazilian genetic resource or an associated traditional knowledge, there is access.

According to the Biodiversity Law genetic resource is the genetic information from flora, fauna, microbial or other nature species, including those originating from such living beings’ metabolism while the associated traditional knowledge is information or customs from indigenous population, traditional community or traditional farmers regarding the properties, direct or indirect uses associated to the genetic resource.

If a certain company or university intends to perform access activities on components of the Brazilian biodiversity or the associated traditional knowledge previous authorization from the Council for Management of Genetic Heritage (Conselho de Gestão do Patrimônio Genético) (“CGEN”) is no longer necessary, as opposed to what was required during the validity of the Provisional Measure No. 2,186-16/2001.

Currently, just an online registry at the National System for the Management of Genetic Heritage and Associated Traditional Knowledge (Sistema Nacional de Gestão do Patrimônio Genético e do Conhecimento Tradicional Associado) (“SisGen”) will be required. Such registration must, nevertheless, be done before remittance of samples abroad, commercializing by-products or final products, applying for intellectual property rights or publishing research results.

Although no prior authorization from CGEN is required for entities to perform access activities, prior authorization from the provider of any traditional knowledge will be required if such provider is considered as identifiable pursuant to the Biodiversity Law.

The benefit sharing is due when there is economic exploitation of products or reproductive material (in case of agricultural activities) resulting from access to either or both the genetic resource and/or the associated traditional knowledge. However, in case of products, the benefit sharing will be due to the extent the component from the Brazilian biodiversity is main element adding value to such a product2.

In case of access to the genetic resource, 1% of the net revenue arising out of either domestic or foreign commercialization of products or reproductive materials has to be paid as benefit sharing. Pursuant to the Biodiversity Law, such amount should be paid to the National Fund for Benefit Sharing (Fundo Nacional para a Repartição de Benefícios) (“FNRB”) as opposed to the provider of the genetic resource, as formerly regulated by Provisional Measure No. 2,186-16.

To encourage non-monetary benefit sharing, companies may choose to implement certain pre-defined social and environmental projects, in which case the amount due as benefit sharing will may be reduced to 0.75%.

In case of access to the traditional knowledge from an identifiable source, the manufacturer of the final product or producer of the reproductive material has to pay as benefit sharing an amount that has to be freely negotiated with the provider of such knowledge plus 0.5% of the net revenue arising out of the commercialization of the product or reproductive material to the FNRB.

In case of access to traditional knowledge from a non-identifiable source, 1% of the net revenue arising out of the commercialization of the product or reproductive material has to be paid to the FNRB.

If it is demonstrated that the 1% standard amount due as benefit sharing for access to the genetic resource or associated traditional knowledge effectively or potentially causes damage to a given productive sector, it is possible for companies to enter into a sectoral agreement, in which case the percentage due will be reduced to 0.1%.

Finally, if the product or reproductive material results from the access to both the genetic resource and the associated traditional knowledge, then only the benefit sharing related to the access of the associated traditional knowledge will be due. Likewise, products and reproductive material resulting from different access activities will be subject to the payment of a single access.

The one responsible for the benefit sharing is the manufacturer of the product or in case of agricultural activities, the producer of the reproductive material that supplies it for production, processing and commercialization of food, beverage, fibers, energy and planted forests, regardless of who has formerly performed the access in the production chain. This obligation also applies to foreign manufacturers and producers.

In view of the above, the importer, controlled, subsidiary, affiliate, or commercial representative of foreign manufacturers and producers located in Brazil will be jointly and severally responsible for the benefit sharing with such foreign manufacturers and producers.
The enforcement of the Biodiversity Law is performed by IBAMA, which is entitled to:

• Impose fines ranging from (i) BRL 300 to BRL 30,300 when the violation is committed by individuals; and (ii) from BRL 3,030 to BRL 3,030,300 when the violation is committed by a legal entity.

• Seize (i) samples containing the component from the Brazilian biodiversity that was subject to the access; (ii) instruments employed to acquire or process the component from the Brazilian biodiversity or of the associated traditional knowledge that was subject to access; (iii) products deriving from the access to the genetic resource or to associated traditional knowledge; or (iv) products obtained from information arising out of associated traditional knowledge.

• Suspend temporarily the manufacturing and sale of the finished product or reproductive material deriving from access to the genetic resource or to associated traditional knowledge up to its regularization.

• Suspend (fully or partially) the specific activity related to the infraction.

• Suspend or cancel a certificate or authorization granted.

In addition to the administrative sanctions above, companies that violate the law may have their names associated with biopiracy, then offering a serious risk of damage to their brands and image.

The last years have been subject to ongoing climate change, extinction of species and social inequality. The sustainable use of biodiversity and compliance with access and benefit sharing rules by companies is therefore a competitive advantage and a solid way to implement CBD principles. It also copes with environmental policies, stimulate socioeconomic development, public health and encourages research, development and innovation.

1.Foreign companies may only develop access activities if in association to a Brazilian legal entity. There are nevertheless discussions ongoing at CGEN on the possibility for foreign companies to perform such activities without the participation of Brazilian companies.

2. Is the element whose presence in the finished product is essential to the existence of its functional features or to the marketing appeal.

 


Authors: ​Adriana Mathias Baptista and Bianca Bilton Signorini Antacli

TozziniFreire Advogados

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04038-904 – São Paulo – SP
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