BRAZIL Law and Practice Contributed by: Thaís Vasconcellos de Sá and Ana Julia Grein Moniz de Aragão, Bermudes Advogados
example, as per the Federal Law No 9,433/97 (that establishes the National Policy for Water Resources). Sector contributions and price mechanisms (eg, fuel CIDE) can also have environmentally-related purpos- es (eg, part of the resource from these contributions should be directed to environmental conservation pro- jects by the respective authority). 6.3 Incentives, Exemptions and Penalties Incentives for sustainable practices in Brazil can include: • tax benefits, such as reductions in IPI (tax appli- cable over industrialised products) for recyclable goods, tax credits for companies investing in envi- ronmental technology, and ICMS (tax applied to the circulation of goods and services), or tax exemp- tions for renewable energy equipment; and • financing opportunities for projects with positive environmental performance through development banks (such as BNDES), and preferential condi- tions for participation in public procurement pro- ceedings for sustainable projects. Deterrence measures are those related to administra- tive penalties (addressed in 5.1 Key Types of Liability , “Administrative Liability”), with sanctions varying from fines, suspension of activities, embargoes, restrictions from public funding and even public procurement debarment in case of serious/recurrent violations. 6.4 Shareholder or Parent Company Liability Under Brazilian law, corporate separateness is a cor- nerstone principle (Law No 6,404/1976, Article 1; Civil Code, Article 49-A). Accordingly, shareholders are not personally liable for environmental damage caused by the company, unless the corporate veil is pierced. In general civil liability, veil piercing requires abuse of legal personality, evidenced by fraudulent acts ( desvio de finalidade ) or asset commingling ( confusão patri- monial ) (Civil Code, Article 50). However, in environ- mental matters, liability may extend to shareholders if the company is unable to fulfil its environmental recovery obligations, pursuant to Law No 9,605/1998, Article 4.
Some scholars and lower court decisions recognise liability for shareholders as “indirect polluters”. This concept applies to those who, although not directly performing the damaging activity, have a specific legal or contractual duty of safety towards the operator and breach it, thereby contributing, with direct and imme- diate causal link (Civil Code, Article 403), to the envi- ronmental damage. See 10.1 Civil Claims . However, Brazilian law does not assign shareholders a legal duty of safety over their investee’s environmen- tal conduct. Such a duty does not arise merely from corporate control or group affiliation. Even controlling shareholders are not indirect polluters solely by virtue of ownership. If shareholders, acting within the company’s govern- ance, commit unlawful or abusive acts or omissions that lead to environmental harm, they may incur liability towards the company itself under Law No 6,404/1976 (for corporations) or the Civil Code (for limited liability companies), but not as indirect polluters. This interpretation, limiting shareholder liability to cas- es of veil piercing or direct unlawful acts, is endorsed by leading scholars and upheld by the Superior Court of Justice (STJ) as the prevailing understanding of Companies are increasingly expected to show their engagement with ESG practices and targets on licens- ing proceedings, PNRS obligations, anti-deforestation controls, labour and human rights frameworks, and securities market disclosure of material risks. Publicly traded companies must disclose material environmental contingencies and risks; regulators and stock exchanges have promoted sustainability report- ing frameworks on a “comply or explain” basis, with a trend towards alignment to international standards. Some sector regulators also impose specific climate and environmental risk management rules in regulated sectors, such as the financial services market. There have not been significant court cases or rele- vant judicial decisions discussing breach of ESG com- promises (eventual breaches are usually described as Brazilian environmental law. 6.5 ESG Requirements
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