Guarantees and securities in Brazilian Law

Brazilian Law provides for wide array of guarantees and securities. Herein below, you will find a brief explanation of the main varieties.

1.         Endorsement (aval)

The endorsement is a personal guarantee of the payment of an instrument of credit. Under the endorsement, the guarantor promises to pay the debt in the event the borrower fails to do so. The creditor becomes invested in the power of collecting the debt from the guarantor or the borrower as soon as the instrument of credit becomes due.

The endorsement is a type of guarantee mainly used in instruments of credit (on the back of note, for example; or a personal endorsement made by the director of a firm). 

It is a very commong guarantee. 

2.         Surety (fiança)

It is a written obligation. It is a contract whereby the surety guarantees the fulfillment of the obligation of the debtor in the event the latter fails to do so. It also guarantees the payment of compensation or penalty for non-fulfillment of an obligation undertaken by the debtor.

The surety may be granted by individuals or legal entities, including banks, whereby the debtor hires a financial institution to act as guarantor of an obligation.

It is very common in rental agreements and in some kinds of loans.

3.         Bill of Exchange (letra de câmbio)

It is a Marketable title. It consists of a payment order by means of which an individual demands that another individual pays a certain amount to a third party. It comprises details such as payment, date and place to perform it.

This is the same Bill of Exchange used in the US and in Europe. However, in Brazil its use is very limited. Only markets where the players are used to it actually use it. Most people will prefer a Promissory Note (see below).

4.         Promissory Note (nota promissória)

An instrument of credit represented by an unconditional promise in writing between two parties, signed by one who agrees to pay on a certain date a certain sum of money to the other or the bearer of the promissory note.

The promissory note is more widely used in Brazil, in comparison with the Bill of Exchange.

5.         Commercial Pledge (penhor mercantil)

Commercial pledge is to have a commercial good ensuring the fulfillment of an obligation. It becomes valid with the transference of possession of the property of the good by the debtor to the creditor.

The pledge shall be in written form and is usually registered before the Registry of Deeds and Documents. 

This is not too common.

6.         Security deposit of instruments of credit (caução de títulos de crédito)

Derived from the commercial pledge, the security deposit of instruments of credit is a guarantee established over credits held by the guarantor.

In the security deposit, the object of the guarantee is the right of the guarantor represented by a negotiable instrument. Therefore, the need to guarantee demands the delivery of the instrument to the creditor, by means of an agreement executed between the parties.

Through the security deposit agreement, the creditor becomes able to exercise all the rights to the instrument of credit, but always on behalf of the debtor, ie, there is no transfer of the property of the instrument of credit.

This is a common kind of guarantee, since it is easy to manage.

7.         Trust receipt (alienação fiduciária)

The trust receipt operates by means of the transfer of ownership of a certain good to the creditor in order to secure the fulfillment of an obligation of the debtor, who maintains the direct ownership of the good, as depositary.

In this type of guarantee, if the debtor fails to settle the obligation at the due date, then the creditor may require action of search and seizure of the sold good, and after taking possession of such good, it may sell it to a third party and settle the outstanding debt.

This is more commonly used by banks, in lease and financing agreements.

8.         Antichresis (anticrese)

The antichresis grants the creditor the right of receiving the real property from the debtor and also the right to earn profits from such real property for the term the contract is in force.

This is rarely used.

9.         Mortgage (hipoteca)

A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Under Brazilian Law, mortgages must be registered before the Real State Registry. In the event the debtor fails to provide payment in the due date, the rights of ownership and possession over the real property are transferred to the creditor.

This is fairly used, especially in the financing of real estate.

Lawsuits against Petrobras - Enforcement in Brazil

Hello,

This is a draft article.

It is going to be published at Alternative Latin Investor magazine after it is reviewed.

Plese give me your comments.

Minority Shareholder’s right to sue Directors and controlling investors in Brazil

Brazilian stock market has recently watched the crash of OGX and the ensuing lawsuits filed by its minority shareholders, who claimed compensation for the losses allegedly caused by the company’s directive body.

Now, Petrobras, one of Brazilian largest companies, is involved in corruption scandals that have caused the price of its stock to decline sharply.

Several American law firm, the first being Wolf Popper, are representing holders of Petrobras’ American Depositary Receipts (ADR) in a class action against the company.

In Brazil, investment funds and other minority shareholders are reportedly considering filing a lawsuit against the company.

In this article, I would like to give a brief overview of the legal paths available for investors who own Petrobras shares traded in the Brazilian Stock Market. Also, to comment briefly on the foreseeable consequences, under a Brazilian law perspective, of a hypothetical future ruling in the class action filed in the US.

Brazil and US: different systems for compensating investors

US is famous for allowing a direct compensation of the shareholders in cases where misrepresentation, fraud or management failure has caused losses to investors.

In Brazil, the system is different. Shareholders are not allowed to receive direct compensation for losses caused by bad management or misrepresentation. According to Brazilian rules, the main victims of such acts are not the shareholders, but the company itself.

Thus, any lawsuit should be directed at obtaining a compensation for the company. The company may, in the future, make this compensation flow to the shareholders in the form of dividends. But there is no direct connection between the shareholder’s future dividends and the compensation to be paid to the corporate entity.

The lawsuit can be filed by the corporation itself against its management staff. Minority shareholders representing at least 5% of the shares can also file such lawsuit.

Where the losses have been caused not by the directors, but by a majority shareholder acting in bad faith, minority shareholders are also allowed to seek compensation for the company. The minority shareholder’s that files the lawsuit might receive 5% of the award as bonus compensation. Even so, this is an exception stated in law and does not change the overall system.

Taking those differences in consideration, it is clear that ADR holders have a greater incentive to litigate in the US, where the financial compensation can be received directly.

The class action filed in the US, however, only covers the losses regarding the trading of Petrobras’ ADR. A vast part of the company’s shares is traded in Brazil only, where direct compensation is not available.

Enforcement of foreign rulings in Brazil

I’m not an American lawyer and, thus, cannot comments on the consequences of the class action lawsuit in the USA.  I may, however, speculate on the consequences that a direct ruling against Petrobras (and not against any financial intermediary backing the ADR in the US) would have in Brazil.

Assuming Petrobras, or its Directors or controlling shareholders, were to be condemned to pay compensation for the losses caused to ADR holders, how would this ruling be received by Brazilian courts, in case enforcement against assets located in Brazil became necessary?

Brazilian procedural rules command that any foreign rulings can be enforced in Brazil, as long as they fulfill basic formalities, such as valid citation of both parties and do not conflict with Brazilian public order.

Brazilian Superior Court of Justice (STJ, not to be confused with the Supreme Constitutional Court, known as STF) is the venue responsible for evaluating such formalities.

After the green light by STJ, the ruling would be able to be enforced in Brazil, as if it were a Brazilian issued by a local judge or tribunal.

The most relevant aspect of this simulation is that, in theory, a foreign ruling that is evaluated and homologated by STJ before any other Brazilian lawsuit on the same topic has received a final decision will become the final decision on the matter.

As we have seen, the main cause for litigation is different in each country. In the US the class action seeks direct compensation to shareholders, while in Brazil any lawsuit would mainly seek compensation to the company.

Even so, the matters may be partially superposed, since either lawsuit must investigate corruption accusations, misleading declarations, etc.

Therefore, it may be that the American ruling, in the aspects in which it superposes a Brazilian lawsuit, becomes the valid and final decision in Brazil.

Not to mention, of course, the execution of the indemnity claims, that could become a huge burden for Petrobras’ assets.

Further complications

Petrobras’ statutes say that arbitration should be used as the means for dispute resolution.  This matter will probably be called to the attention of American Courts. It is unclear now if arbitration would prevail over the class action lawsuit.

Also, in case US courts decide that arbitration is not applicable, it is not clear if this would be considered by STJ as a breach of formal requirements. This would put the enforceability of the American ruling in Brazil at jeopardy.

I’m also curious about the production of evidence regarding corruption accusations. Brazilian law offers any plaintiff extensive rights to produce evidence in its favor. Would a lawsuit conducted in the US be able to provide for it?

Finally, one might wonder what would be the consequences in case the controlling shareholder (which is the Brazilian Federal Government) was found responsible for choosing inapt directors (culpa in eligendo). Enforcement of monetary claims against the Brazilian government is legally and historically very difficult. 

Practical problems with the new Brazilian internet law (Marco Civil da Internet) - 2

Please also read: 

Mandatory changes to Internet User Agreements in Brazil

I'm starting a series on Brazilian new Internet Law.  This is the second post. 


I will proceed with some conversations I had just after the law came into force. A longer and more detailed article will follow. 





Dear Adler,

I actually thought about you those days.

We are currently researching questions around data security of cloud services (i.p. e-mail, files) in Brazil for a Germany company who is planning to integrate a Brazilian subsidiary into their IT. We hope to get a project out of it, in which case we would probably also need some legal advise on the topic. E.g. 

- regulations and data protection laws (compared to US/ Europe)

- privacy protection for data transferred to Brazil

- do other international companies use cloud services in Brazil, despite the security problems?

- etc.

Is that an area you are familiar with, so that we could come back to you? 

Best regards,

Edith Cavell

---------------------------------

Dear Edith,

Your consultation comes at a very interesting time. Just yesterday a new law has come into force in Brazil, the Marco Civil da Internet (Internet Civil Regulation). 

Is has basically changed the Brazilian data protection system completely. It has, for example, made Brazilian law mandatory in many cases.

Since this kind of conflict of law situation is my specialty, I'm currently providing consultancy to another foreign company in the matter. 

That said, I would be honored to help you in this situation.  Please tell me more details. I'm also open to a phone call, if you prefer. 

May I post this conversation in my blog, without mentioning names? I'm currently writing a few articles on this subject, since the law is very recent and there is little material about it. 

Regards,

Adler

--------------------------

Hi Adler,

as promised, here is some more background information:

- A Germany-headquarted international company has recently acquired two companies in São Paulo. 

- Now the IT should be integrated, and it is evaluated whether cloud services can be used for email and files (Microsoft Office365). 

- Technical support should be provided from support centers in the EU and/ or USA. For this purpose, personal data from Brazilian employees and customers, stored on servers in Brazil, would need to be accessed from Europe or the US. 

- Sidenote: EU’s data protection laws restrict exporting personal data outside of the EU. Companies must sign detailed EU Standard Contractual Clauses (aka “Model Clauses”) with partners outside of the EU. For data exchange with US-companies, there is also a "Safe Harbour" framework, which e.g. Microsoft has signed.

So here are some questions that come to my mind:

- Do you know whether it is common for international companies to use cloud services in Brazil?

- What are the legal regulations and requirements w.r.t. data protection for using cloud services in Brazil, and exporting personal information to the exterior?

- I have read the new law. What will it mean in practice for a company using cloud services like Office365 in Brazil? Are there other laws and regulations besides the Marco Civil da Internet applicable for this case?

- Are there any standard regulations or contracts between Brazil and the EU or USA (like the "Safe Harbour")?

I am free to talk via phone or e-mail, whatever is more convenient for you. For phone please just let me know when there would be a good time to call you. 

We should also think about a future collaboration, I hope that there will be a project and further advice needed.

Many thanks,

E. C.

---------------

Dear Adler,

just a quick heads up: I will have to finish my research on this topic today.

From what I found out so far, there is no restriction in Brazil for a company saving user data outside of the country. The only difference with the new law seems to be that Brazilian law applies. So that if a Brazilian authority requires the data it has to be available regardless the law of the country where the data is stored.

In case there is anything else you can advise to the topic in addition to that, I would be greatful for a hint.

Thanks for your time and effort!

E.C.

-------------------

Dear Edith,

You are correct. It is possible to save data abroad, but Brazilian law will apply. Not all of Brazilian law, but only some specific privacy provisions brought by the Marco Civil.

But I would add that it is not only the data that must be available,  it must be clear to the government that the company has taken measures not to keep data from Brazilians for longer that the law allows (typically one year). 

Since Brazil does not have jurisdiction abroad, lack of compliance will probably means that Internet providers in Brazil will be forbidden to grant access to the website.  That is, your website or email server could be shut down.

Regards, 

Adler

Has Eike and the "X" group mislead investors? My analysis

READ ALSO:  Eike Batista's OGX Austria and OGX Netherlands: left out of bankruptcy, but why do they exist?

Brazilian (not so) timid take on transnational jurisdiction: OGX Austria included in the Brazilian bankruptcy

I have been asked by Alternative Emerging Investors, a magazine, to evaluate OGX's relevant facts, in order to evaluate the claims that are being made against the company.

Please find the article below. I think it is very interesting.

If you have any comments, please leave them at the end of the post, or write me at contato@adler.net.br.

Note: This is just an exercise. I'm not connected to OGX or to any investors that has claims against the X group.

__________________________________________________________________________________________________________________________________________________________________

__________________________________________________________________________________________________________________________________________________________________

This article has originally been published at the fourth installment of - Alternative Emerging Investor.

To subscribe or purchase this issue, please visit www.aeinvestor.com, or contact Ms. Tiffany Swenson at tiffany@aeinvestor.com.

Opening a Brazilian Bank account for non-residents

See also:

-Financial investments by non-resident in the Brazilian financial and capital markets

- How to get cash back from Brazil to Europe

Can you have a Bank account in Brazil if you don't live here? Yes.

The Central Bank of Brazil authorizes the opening of bank accounts in Brazil by individuals and entities who are non-residents.

However, in addition to the fact that Brazilian banks are not obliged to offer such service, each bank has its own procedure, which are, in most cases, unreasonable and too complicated.

Opening a non-resident bank account will require a - CPF (If you don`t know what a CPF is, please read this article). 


These accounts are usually very limited in the services they provide. Also, they are expensive to maintain. 

The non-resident account is more appropriate for investments in Bank Bonds (that provide interests similar to the Brazilian basic interest rates) and Poupança (a savings account that pays 6% of interest per year). 

Some banks will be willing to open bank accounts for non-residents against a minimum initial deposit of USD 100,000.00.  

I have contacts with a limited number of investment banks that provide this service. But compliance evaluation is very strict. 

Some people will prefer to incorporate in Brazil and use a corporate account, instead of managing a non-resident account. 

  - Getting money into your Brazilian company - a few common problems

- How to get cash back from Brazil to Europe

Who owns the 2016 Olympics in Brazil

See also:

Intellectual property and 'fair use' under Brazilian Law

Singapore and Brazil sign MOU on intellectual property cooperation 

Recently, I have worked on a case involving the Brazilian Olympic Committee and the protection of trademarks related to the Brazilian 2016 Olympics.

One of my clients, a software company, has received a notification from a law firm connected to the Olympic Committee. The notification required him to stop using the  words "Olympics 2016" in one of the apps he was distributing for free. 

It is important to mention that my client at no time suggested in his product that he was a representative of the Olympic Committee. His product also lacked commercial purposes, having purely informational purposes for the general public.

Nevertheless, he received the notification. Why did this happen? 

This is mainly due to the so-called Olympic Act (Brazilian Law No. 12035, from 2009), which determines an extremely rigid monopoly over the protection of Brazilian Olympic names and brands.

This law, which is much more rigid than any other Brazilian laws relating to intellectual property, does not recognize the so-called "innocent use" or "fair use" (on this subject, please, read this other post “Intellectual property and 'fair use' under Brazilian Law”).

The law gives the same treatment for both commercial and non-commercial use of Olympics related symbols. 

This can lead to nonsense situations, where initiatives aimed at informing the public about the Olympics end up being considered as unlawful acts,  simply because of the use of the words "Olympics 2016".

I have heard similar stories regarding the 2014 World Cup. 

Any comments?

See also:

Intellectual property and 'fair use' under Brazilian Law

Singapore and Brazil sign MOU on intellectual property cooperation 

Medical cares that should be taken before coming to Brazil

See more Ms. Gringa's posts:

Xerox, Authenticated Copies, I need caipirinha, please

Border control in Brazil

Here is another guest post by Ms. Gringa da Silva. Hope you enjoy it!

Hello my pretties, it's is me, Ms. Gringa,

Adler and I have been having scheduling issues, so the posting of a weekly column is somewhat skewed at the moment.

Fear not, however, Ms. Gringa is here to help you, always.

So, this week’s post is about health care, hospitals, insurance and stuff like that.

Ms. Gringa has spent the last week running back and forth to the toilet with a nasty touch of Delhi Belly. What started out as an innocent night out and a lovely dinner, turned into a full blown mess which eventually led to going to the hospital. Fun.

Add to this, Ms. Gringa has not had caipirinha in more than a week.

Before you come to Brazil, you really do need to ensure that you go to the dentist, have your annual check-ups, get whatever vaccinations you need updated, or added and if needed collect a refill of your prescriptions, (carry your paper prescriptions with you, you might be asked to prove that the pills are for you and don't carry too many or someone may assume you are importing them for resale) favorite supplements, contact lens solution and so on.

Not because Brazil does not have adequate medical services or equivalents, but because you really don't want to be bothering with this stuff as soon as you land.

Remember, if you are bringing something that the customs declaration form wants you to declare, then declare it. No one gives a damn unless it is illegal, but paperwork is The King, so fill it out, for heaven’s sake. You could be turned away at the border for being inconvenient if you do not...

You will need Hepatitis A and B vaccines. You should get Yellow Fever, regardless of whatever the websites may tell you. Remembering that Border Control is always looking for a reason, so don't give them one. Make sure your Tetanus is up to date, and whatever that Jenny McCartney may have to say about it, also MMR if you did not get it as a child for some strange reason.

If you don't have a Polio vaccine, you are beyond help, so don't come to Brazil.

Unless you plan on being in some extremely undeveloped area, drinking untreated water and bathing in a polluted river, you do not need a Typhoid vaccine.

Malaria Prophylactics? It depends on where you will be going. Dengue Fever is far more prevalent and preventing bites is always desirable. The Malaria Prophylactics are available here by the way.

Unless you need to take them, don't. You might be taking medicine for no reason and allowing the spread of potentially drug resistant malaria to proliferate.

Children will be possibly required to show proof at the border of the basic childhood vaccines, but adults typically might be only required to show proof of Yellow Fever Vaccine.

All vaccines and medicines and procedures and mosquito repellents and life come with potential problems and side effects and issues, so remember to talk with your doctor, and also remember, Ms. Gringa da Silva and Adler Martins ARE NOT RESPONSIBLE for what you do or what happens to you if you do it, these words in this post are just suggestions, after all. Everyone hates legal disclaimers, but it is a litigious word and people tend to behave like spoiled children, versus adults responsible for their own actions, so they are needed.

Now, onwards. Get travel insurance before you come and get the complete package. Coming to Brazil and being in Brazil without insurance is about as smart as swimming in shark infested waters with a bacon bikini on.

If you are planning to be here a while, you will need private health insurance. To get this in the best way, it is good to get an insurance broker, who for a fee, will run the gauntlet of paperwork and red-tape and other nonsense for you. Inquire from your co-workers and Brazilian friends as to what provider and broker is the best one for your needs.

Word of mouth is a much better indicator of quality and reliability here than any other thing or advertisement.

The caveat is that Brazilian providers will not provide you with health insurance without CPF and RNE numbers. We will be going into great detail about how to obtain those things soon, I promise. (and the caipirinha scale will go up exponentially as we discuss them) In the meantime, make sure your travel and health insurance from your home country covers the time you will be in Brazil until such a time as you being able to get the relevant thing here.

Private hospitals in Brazil are great, but like everything else, they involve paperwork and are exacting in their methods. Deal with it. In a private hospital you can complain, but unless you are being kicked around, be an adult and deal with it like the Brazilians standing beside you do.

You will be able to obtain medical care of sorts here without private insurance, but it is not recommended and it may end up costing you a great deal of time and money, inconvenience and is not reliable. You won't be allowed to die or anything and your Embassy might help you in any case if it is serious.

The Brazilian Government provides a health care system called SUS: http://en.wikipedia.org/wiki/Sistema_%C3%9Anico_de_Sa%C3%BAde Ms. Gringa does not know much about it, just poorly understood second hand accounts from people who work for me, with me, or that I know. It is available to foreigners of course, but really, if you can afford to come here, you can afford travel insurance at least. I can’t stress this enough.

Adler will go into more detail about SUS in other posts on his blog.

Ms. Gringa needs to go back to bed now.

The above annoyances and inconveniences range from a 1 to a 2 on the caipirinha scale. Not having insurance in Brazil and needing it, will land you a 5 on the caipirinha scale, trust me.

We will return to our regularly scheduled bureaucracy discussions forthwith.

So, my pretties, until next time, yours in the spirit of cachaça,

Ms. Gringa da Silva

All rights reserved © 2013 by Ms. Gringa da Silva (http://msgringadasilva.orgfree.com/)

See more Ms. Gringa's posts:

Xerox, Authenticated Copies, I need caipirinha, please

Border control in Brazil

May I switch jobs when under a working Visa in Brazil?

See also:Visa options for investors in Brazil

Foreigners with a working Visa in Brazil, steps to get your documents in order

This is a conversation I had with a client about a relatively normal problem here: changing jobs while on a work visa.

Hi Adler, 

Tudo bem? 

I am looking for what is the process if a foreigner, who is currently working in Brazil on a work visa ITEM V, finds a job in a different company and wants to transfer the visa to the new company.

If you have an article about it that would be great.

And once more thanks and I appreciate your work to make business easier for foreigners in Brazil.

Abracos,

Scarlet Speedster
PS: please reply in flash speed. 

__________

Dear Mr. Speedster,

The rules regarding working visa have been recently modified. 

According to the old rules, your current employer would need to be consulted. Also,  your current visa would be cancelled, and a new one would have to be issued, meaning that you would have to pick it up at the Brazilian consulate in your home country.

But you are lucky!

If you check the article Easier rules for work visas in Brazil, you will see that the new procedure is easier and faster than the previous one. Your new employer will have to contribute with some paperwork, and evens sign a few forms, but it is doable. Above all: your visa will not be cancelled, so you will not have to leave Brazil.

I do not advise you to actually change jobs before going through the new procedures. Some people do change jobs without consideration for the rules, but that is risky, illegal and may get you expelled from the country.

If you need any further information, please get in touch. 

Regards, 

Adler

See also:

Visa options for investors in Brazil
Foreigners with a working Visa in Brazil, steps to get your documents in order
Europeans may come to Brazil without a visa
A Brazilian Visa: Worth the Price of a Fake Marriage
Visa issues in Brazil

ARBITRATION IN BRAZIL IS LESS SAFE NOW

I have written before about how Brazil was in the right way regarding arbitration. This post it to take that back.

I'm not recommending Brazil as a venue for arbitration anymore. At least not until some very sensitive issues are solved.


Here is the story:

In February, the Brazilian Revenue Service (which I will call Beast from now on) has contacted many arbitration chambers, asking them for information about the fees their arbitrators were receiving. I read the news at the time (I read everything related to Brazilian taxes compulsively, as the old readers already now), but didn't pay too much attention.

The Beast has the right to ask for commercial information, of course. Arbitration chambers are organized as foundations, associations or companies, all of which must keep financial books, collect labor taxes over what the pay their employees, etc. So, nothing wrong about asking to check the chamber's own books.

But the Beast has required a full copy of all the arbitration procedures, evidences and confidential documents included !

You know what that means? It means delivering your computer codes, commercial plans and, theoretically, even the Coca Cola Formula to some government employee. 

Not to mention that the Revenue Service employs several law interns, who usually are 18 or 19-year-olds and who have full access to all the data and procedures.

Why would they do that?

1) The Beast is afraid that arbitration will turn out to be big money laundering and tax evading schemes;
2) Brazilian government's "zeitgeist" is that professional secrecy, specially regarding lawyers, it getting in the way of tax collection (if destroying professional secrecy is against the constitution does not seem to bother them)
3) The Beast has noticed that many arbitration procedures are not conducted by lawyers, and, therefore, are easier to break in, since other professions are not as well protected regarding confidentiality (one should note that the chambers managed by the Bar Association have not suffered any attack)
4) The Beast wants to use the information it acquires from the arbitration procedures, specially regarding corporate structures, offshore subsidiaries, etc to plan raids and investigations against big companies.


And can they do it?

It depends.

If there is no lawyer involved in the arbitration, the Revenue Service could, theoretically, ask for the documents that are strictly necessary in order to assess how much the arbitrators have been paid, and how much the chamber has received in fees. A previous agreement or some excerpts of the final decision should suffice.

But I understand that full disclosure is way out of their powers, and completely illegal.

How to prevent it?

1) Do not arbitrate in Brazil;
2) If arbitration in Brazil is mandatory for some reason, use the Bar Association arbitration chambers, and use only (or mostly) lawyers as arbitrators;
3) Add an obligation to destroy the arbitration procedure's records.


I'm very sad, but I'm serious.

What do you think about that?


You may check part 3 and part 2. 

Choice of venue and applicable law in Brazil

From time to time, I will post some interesting conversations I have had with readers. Content is true, names, maybe.

Mr. Martins,

I am a law student at the University of Gotham in the United States.

I'm doing class research on accepting Brazilian law as the governing law for a contract between an American software company and a Brazilian telecommunications company, and was wondering if you had any insight. 

I am also researching how to establish Brazil as the jurisdiction or venue for any disputes that may arise during the course of this contract.

I read your article on electronic contracts posted on February 11th, and it was helpful (though I can't read the Portuguese article you linked to).

However, I was wondering if it would apply to a paper contract that would be mailed back and forth between the two companies.

Thank you in advance for any help you can provide.

Sincerely,

Bruce Attman Wayne

_____________

Dear B. Attman,

Thank you for your message. It is always a pleasure to help readers of my blog.  

What is the contract about? Brazil has a regulatory agency for Telecommunication issues, called Anatel, which issues a considerable number of regulations: http://www.anatel.gov.br/Portal/exibirPortalInternet.do .

However, if the subject is related only to software, the American company may be able to skip these regulations. 

Brazil accepts choice of venue clauses, generally speaking (not to be confuse with choice of Law clauses. Those are only applicable in case of arbitration).

So, you won't have a problem with that, unless the agreement deals with real estate or inheritance. In these cases, the Brazilian venue shall generally apply. 

The same rules regarding electronic contracts apply to paper ones mailed back and forth (the law applicable to the agreement is the law of the country where the final proposal has been made).

The regulations are contained in articles 427 to 435 of the Brazilian Civil Code.  However, since the acceptance is not instantaneous, the contract will be reputed as celebrated once the acceptance is received by the offeror, or declined if an acceptance fails to reach the offeror within reasonable time. 

Adler

__________

Mr. Martins,

Thank you for your quick response.

The contract covers the sale of software services to the telecommunications company.  Would the American software company still need to comply with the Anatel regulations?

Glad to hear about the choice of venue clause and the contract does not cover real estate or heritages.  What about the governing law of the contract (and any disputes that may arise)?  Are there any issues with creating a contract that is governed by Brazilian law?

I will look at those sections of the civil code and thanks again for your help!

B. Wayne

__________

Master Wayne, 

Sorry for the late response this time. 

It looks like only the Telecommunication company should worry about Anatel's regulations. But I'd have to take a closer look to be sure. 

About the governing law: Brazilian courts will always use Brazilian conflict of law rules to determine the applicable law, regardless of the choice of the parties, unless the parties choose arbitration. 

Regarding the Brazilian law, if the contract is to be executed directly in Brazil, it might be the safest bet.

__________

Mr. Martins,

Thanks again for your response and your willingness to talk to a student about an obscure (dark) Brazilian contract law problem.

You've been a great help and if I have any further questions, I will definitely email you back.

By the way, the company is called Wayne Enterprises.