Adopting environmental, social and governance (ESG) criteria is now essential for managing risks, opportunities, and business longevity.
Acting by ESG standards enhances the competitiveness of the business sector. Nowadays, where companies are closely scrutinized by various stakeholders, ESG is synonymous with solidity, a better reputation, and greater resilience in the face of uncertainty and vulnerability.
Companies and institutions from various sectors have actively adopted and implemented ESG criteria with practices aimed at environmental, social and governance compliance.
Below are essential concepts and considerations about Brazilian environmental liability to achieve environmental compliance in meeting ESG environmental criteria.
What is civil environmental liability in Brazilian law?
Everyone has the right to an ecologically balanced environment and must defend and preserve it for present and future generations. This is stated in the Brazilian Constitution (“CF/88”).
Anyone who exploits natural resources or causes environmental damage must repair it without prejudice to the applicable criminal and administrative sanctions.
Environmental civil liability is a procedural mechanism for liability for environmental damage. In Brazilian law, it is characterized as objective and joint and several, through the application of the comprehensive risk theory to the polluter/payer (Law 6.938/81).
Thus, all polluters, direct or indirect, natural or legal persons, are civilly liable for the environmental damage caused by their activities.
This means that the responsibility to repair the damage arises from verifying the causal link between the activity carried out and the environmental damage caused, regardless of the existence of culpable or intentional conduct; that is, the consequences of the risk of the activities are accepted.
Regarding solidarity, if there is more than one cause of the damage or more than one actor who benefited from the activity that caused the environmental damage, they are all jointly liable. If the damage is repaired by one of the polluters, he can sue the others on a regressive basis.
It is also worth mentioning that in Brazil, environmental civil liability runs with the property; it is a propter rem obligation. For example, whoever acquires a property assumes the risk of environmental harm and the responsibility to repair it, even without having caused environmental damage (Law 12651/12).
The procedural means used for the liability for environmental damage are the popular action and the public civil action, being common in these actions; at the end, if the occurrence of damage is proven, the signing of a Commitment to Adjust Conduct Term (“TAC”), aiming at the repair of the damage.
It should be noted that in Brazil, this strong and broad system of liability of individuals and legal entities in environmental matters is mainly based on the principles of full reparation, the polluter pays, and the prioritization of damage recovery, with a focus on the effective recovery of environmental liabilities, as well as reflex damages resulting from environmental degradation.
The Brazilian Courts’ Understanding of Civil Liability for Environmental Damage
The Brazilian Superior Court (“STJ”)1 has understood that, in determining the causation of environmental damage, the following are responsible “those who do, those who do not when they should, those who allow others to do, those who do not care if they do, those who finance their actions, and those who benefit when others do.
Based on this understanding, partners and managers of companies can be held civilly liable for environmental damage in two cases.
In the first case, the partners and managers are held jointly and severally liable with the company if the damage has a causal link with their management and administrative acts if it is proven that the conduct/decisions of the partners and managers contributed to the occurrence of the environmental damage.
In the second case, the civil liability of the partners and managers is subsidiary to that of the company to the extent that it cannot pay for the repair of the damage caused by the company.
Brazilian jurisprudence and doctrine prevail over the understanding that the disregard of the legal entity, in the occurrence of environmental damage, falls on the mere insolvency of the company to fulfill its obligation to repair, regardless of the existence of deviation of purpose or confusion of assets, known as the lesser theory of disregard of the legal entity (Federal Law 9605/98).
In addition, the Federal Supreme Court (“STF”)2 recently ruled that environmental damage is not subject to a time limit. This means that those responsible for pollution can be sued at any time to repair the environmental damage caused, which is a crucial risk analysis factor in business succession processes.
From the above, Brazil has a strict legal framework of environmental protection, which is, therefore, a warning point for venturers.
Therefore, when establishing business activities in Brazil, it is essential to consider the adoption of environmental compliance to create control mechanisms to avoid, minimize or verify possible environmental liabilities that may generate future liabilities for venturers.
1STJ, 2nd Panel, AgInt in AREsp 277.167/MG, Rapporteur: Fernandes, judged on 03/14/2017, published on 03/20/2017.
2STF – RE 654833, Rapporteur: Alexandre de Moraes, judged on 04/20/2020, published on 06/24/2020.
Authors: Szajnferber de Franco Carneiro, Paula Alice Barroso Cruz Thompson, and Fernanda Martins de Azevedo Reis
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