BRAZIL Law and Practice Contributed by: Godofredo Mendes Vianna, Camila Mendes Vianna Cardoso and Lucas Leite Marques, Kincaid | Mendes Vianna Advogados
Security packages: Security packages include: • assignments of rights – earnings generated by ves - sels may be assigned to lenders as security; • insurance policies – lenders often require that insurance policies be assigned to them to cover risks associated with the vessel; • corporate guarantees (or parent company guar - antee) – guarantees from the ship owner’s parent or affiliate companies to increase the security for lenders; • bank accounts – lenders may seek security over accounts used for revenue from the vessel’s opera - tions; and • pledge – pledge over the shares or quotas of the shipowning entity. 2.2 Ship Leasing Ship leasing transactions have been increasing in Bra - zil, primarily due to: • Flexibility – Leasing offers ship-owners and opera - tors flexibility in financing without the burden of ownership or significant initial capital outlay; • Tax benefits – Leasing can attract tax advantages, as lease payments may be treated as operating expenses; and • Operational efficiency – Ship-owners prefer leas - ing to maintain liquidity and operational efficiency amidst fluctuating market conditions. Investors looking for higher returns are increasingly entering the maritime financing space, providing com - petitive options. Chinese financial institutions and leasing companies have become prominent players in the ship financing landscape, often offering favour - able terms and conditions. Differences between lessor/lessee and lender/bor - rower relationships: Lessees have a contractual obli - gation to pay lease rents for the use of the vessel. Lessees typically operate the vessel, while lessors retain ownership. At the end of the lease term, the vessel is returned, usually in good condition as per agreed standards. On the other hand, borrowers are obligated to repay the loan principal and interest over a set term. Borrowers gain ownership of the vessel, taking on risks and benefits associated with owner -
ship; the vessel usually serves as collateral, with the lender holding a mortgage over it. Enforcement: Courts will enforce mortgage rights through repossession or forced sale processes as per Brazilian law. In cases of lease defaults, lessors may pursue remedies outlined in the lease agreement, including repossession of the vessel. The jurisdiction typically respects the terms of the lease. The treat - ment of defaults may differ in formal court proceed - ings compared to arbitral tribunals, with the latter often providing a faster resolution suited to commer - cial disputes. Sale and leaseback transactions: Sale and leaseback transactions have become more common in Bra - zil, allowing companies to free up capital by selling a vessel and leasing it back for continued use. This arrangement supports liquidity while ensuring ongoing access to the vessel’s operational capabilities. 3. Marine Casualties and Owners’ Liability 3.1 International Conventions: Pollution and Wreck Removal Brazil is not a signatory to the International Conven - tion on the Removal of Wrecks, but has ratified the following maritime conventions related to pollution: • the International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990 (OPRC/1990); • the International Convention for the Prevention of Pollution from Ships (MARPOL) 73/78; • the International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC/69); and • the International Convention for the Control and Management of Ships’ Ballast Water and Sedi - ments, 2004 (CCAIMO). Brazil has several domestic laws that regulate liability and procedures in case of wreck removal and pollu - tion.
99
CHAMBERS.COM
Powered by FlippingBook