Contributed By Kincaid | Mendes Vianna Advogados
In Brazil, there is no general rule for maritime and shipping courts. The Brazilian legal system is a State Court system in which each state has the authority to organise and define the matters that will be dealt with in each of its courts. For example, in the State Court of Rio de Janeiro, there are seven first-instance courts that have jurisdiction over commercial matters such as insolvency, bankruptcy and maritime disputes, which sits apart from other civil matters. However, in most states there are no specialised courts and maritime matters are ruled by regular civil courts. In some circumstances, such as if a state-owned vessel or a federal interest is involved, Federal Courts will have jurisdiction.
In the above-mentioned judiciary system, the most common claims involve charter contract disputes, demurrage claims, cargo claims, arrest of vessels, indemnity claims for accidents involving vessels and others.
It should also be noted that Brazil has an Admiralty Court located in Rio de Janeiro. This court has nationwide jurisdiction to rule on maritime accidents and facts of navigation and its main goal is to find the causes of the incident and the parties responsible for it and to apply administrative penalties set forth in Law 2.180/54. However, this court is not part of the judiciary system, but an administrative tribunal subordinated to the Ministry of Defence/Navy Command.
The Admiralty Court adjudicates a wide variety of cases involving maritime accidents and facts of navigations, of which the most common cases involve personal injuries of crew members, machine failures, collisions and other accidents.
Brazil follows the resolutions of the International Maritime Organization (IMO) on Port State Control and is a signatory to the Latin American Ship Control Agreement by the State of Porto (Viña del Mar Agreement), committing itself to maintaining an effective system of inspections of foreign vessels and aiming at ensuring compliance with the international requirements applicable on board.
In this regard, port state control in Brazil is performed by qualified naval inspectors accredited by the Department of Ports and Coasts (DPC), as per regulations set forth in the NORMAM-04 Ordinance.
The DPC has the authority to contribute to:
The DPC may also:
Port state control may, for example, stop vessels from sailing if there is any risk to navigation, life or the environment. It should also provide assistance to the Port Authority and Environmental Agencies in environmental matters.
In relation to wreck removal, it should be noted that it is regulated by Federal Law No 7,542/1986, which grants the Brazilian maritime authorities, or any other authority with delegated powers, the power to order wreck removal by the responsible party, if it is deemed to be a danger or an obstacle to navigation or a threat of damage to third parties or to the environment. Navy Ordinance NORMAM-10 also establishes the requirements for obtaining a permit for a wreck removal.
In Brazil, there are two types of registrations for vessels, the ownership registration and the Special Brazilian Registry (REB). The Brazilian Vessel Ownership Registry is a mandatory registry for all Brazilian vessels which have 100 or more gross tonnage employed in any kind of navigation. For vessels below this threshold of tonnage, the Ownership Registry is not handled by Admiralty Court but by the port captaincy with jurisdiction over the Vessel.
Law 7.652/88, together with the ordinances from Admiralty Court, is the main legislation applicable to ship registration in Brazil.
The Brazilian registry is only available to Brazilian nationals and companies incorporated under Brazilian Laws. There is an exemption to this rule related to the registration of yacht and leisure vessels, which could be registered under Brazilian registry, even if not owned by Brazilian citizens or Brazilian companies.
Although it is not possible to register ownership over a hull, it is possible to register a vessel under construction at the Brazilian Special Registry (REB), which is used mostly to grant tax benefits to the hull’s construction.
Temporary registration is allowed to foreign-flagged vessels under bareboat charter to Brazilian shipping companies that hold necessary tonnage, with temporary suspension of the flag of origin.
The dual registration of Brazilian vessels are provided under Brazilian Law.
Thus, Brazilian law authorises to fly the Brazilian flag those vessels that are genuinely Brazilian and also foreign vessels when bareboat chartered into Brazil with suspension of the original flag.
The registration of the ship finance agreements is not mandatory in Brazil, but encumbrances over the vessels, such as mortgages, must be issued as a deed by a notary (maritime notary if available in that jurisdiction) and further registered before the Admiralty Court to be considered valid and in effect in Brazil.
In this sense, in order for a mortgage to be considered valid and in effect under the Brazilian law, all maritime mortgages over Brazilian-flag vessels must be constituted through a public deed and registered with the Admiralty Court. The necessary documents to register a mortgage through a public deed are:
Information related to ownership and encumbrances over vessels can be obtained by any third party through certificates issued by the Admiralty Court. Information related to financing documents and other types of guarantees are usually registered in the Titles and Deeds Registry; in this case, those would also be available through a request for certificates.
Brazil is not a signatory to the International Convention on the Removal of Wrecks, but has ratified the following maritime conventions related to pollution:
Brazil has several domestic laws that regulate liability in the case of wreck removal and pollution.
Brazil has signed the following international conventions regarding the liability of ship-owners and carriers, in relation to collisions and salvage:
However, Brazil is not a signatory of the Hague Rules, the Hague-Visby Rules or the Hamburg Rules.
Brazil also has domestic regulations on salvage (Law No 7.203/1984) and related to liability in the case of accidents.
Brazil is party to the 1924 International Convention for the Unification of Certain Rules Relating to the Limitation of the Liability of Owners of Sea-going Vessels (the 1924 Brussels Convention) and to the International Convention on Civil Liability for Oil Pollution Damage (CLC-69). However, it is not a signatory to more recent and relevant conventions that exclude or minimise owner’s liability, such as the Hague-Visby Rules, the Hamburg Rules, and the International Convention for the Limitation of Liabilities for Maritime Claims, London 1976.
The general rule in Brazil, set forth in the Brazilian Civil Law, is that anyone who causes damage to the other party shall fully compensate the damages caused. As Brazilian law does not provide for punitive damages, compensation is generally limited to the direct damages suffered by the party, including the actual losses and loss of profit. Indirect losses are generally excluded, unless otherwise agreed.
Moreover, the Brazilian Civil Code in its Article 750 establishes that the carrier’s liability is limited to the value inserted in the bill of lading.
As a general rule, liability could be limited under a contract. There have been some cases where the limitation of liability was tested, and judges accepted the validity of that limitation. Nevertheless, if the contract is considered a "standard form contract", the limitation clause might be considered null and void by Brazilian courts.
Brazil is not a member of the International Oil Pollution Compensation Funds.
Brazil is not a signatory to the international conventions concerning bills of lading.
Law No 9,611/98 regulates the multi-modal transport of cargo in Brazil and sets forth the rules for issuance of the multi-modal bill of lading and the rights and obligations of the multi-modal transport operator.
In addition, there are a number of domestic commercial laws dealing with sea transport and the bill of lading, such as the 1856 Commercial Code, the National Tax Code and, mainly, the 2002 Brazilian Civil Code, which is the most complete and important legislation in terms of private and commercial law in Brazil.
All parties to the contract of carriage represented by the bill of lading have title to sue, such as the consignee, the shipper or the carrier, who are entitled to file a claim in the case of a breach of the contractual obligations.
The subrogated underwriters of the cargo are also entitled to a recovery lawsuit against the carrier under the bill of lading.
The general rule in Brazil, set forth in the Brazilian Civil Law, is that anyone who causes damage to the other party must fully compensate the damages caused. As Brazilian law does not provide for punitive damages, as a rule indemnity is limited to the direct damages suffered by the party. Indirect losses are generally excluded, unless otherwise agreed.
Moreover, the Brazilian Civil Code in its Article 750 establishes that the carrier’s liability is limited to the value inserted in the bill of lading.
Liability may also be limited by the parties under a contract. However, if the contract is considered a "standard form contract", the limitation clause might be considered null and void by Brazilian courts.
While there is no specific rule regulating liability for the misdeclaration of cargo in Brazil, general liability rules would apply in such a situation. Thus, a carrier that suffers damages due to the misdeclaration of cargo by the shipper would, in principle, have a claim against the shipper.
In general, a three-year time bar applies to indemnity and civil lawsuits related to unlawful acts, as prescribed by the Brazilian Civil Code. Specifically in relation to cargo claims resulting from sea carriage, the Federal Decree No 116/1967 provides a one-year time bar from the date of discharge, similarly to the Law on Multi-modal Transportation (Law No 9.611/98) and the Law for inland carriage (Law No 11.442/2007).
A time bar may be interrupted once at court, through a judicial notification. Once interrupted, the time bar is renewed for an equal period.
It is not possible to extend the time limit by an agreement between the parties, as this is a question of legal certainty that cannot be changed by the will of the parties.
Brazil has not ratified the International Convention to the Arrest of Sea-going Ships 1952 nor the International Convention on Arrest of Ships 1999.
However, Brazil is part of the Brussels International Convention for the Unification of Certain Rules of Law Relating to Maritime Liens and Mortgages which, despite not providing rules for the arrest of ships, establishes additional credits that will be admitted in Brazilian Law to give rise to an arrest.
Usually, arrests are requested in Brazil following the rules prescribed by the Brazilian Civil Procedural Code, which sets out the possibility to request injunctions to seize assets, such as an arrest of a vessel. The Code determines some requirements to be met, such as to show the probability of the right and an urgency, for example that the vessel may attempt to leave Brazilian waters.
Maritime liens in Brazil are governed by the Commercial Code and the 1926 Brussels Convention on Maritime Liens and Mortgages. Based on a joint interpretation of both of these, the following claims can be considered to give rise to maritime liens:
If the arrest is in rem, the creditor shall have the privileged credit properly constituted, according to Article 1 of the 1926 Brussels Convention. If the arrest is filed in personam, the claimant shall demonstrate the requirements previously mentioned that are applicable to injunction requests as determined by the Procedural Code.
Personal liability of an owner or demise charterer is not required for ship arrest, when attempting an arrest based on claims that attach to the vessel (in rem). However, the creditor must have the privileged credit properly constituted.
According to the Brazilian Commercial Code and the 1926 Brussels Convention, credits arising out of ship suppliers out of the port of registry, including bunkers, are considered privileged. Therefore, due to the legal nature of those credits, they have in rem effects and will attach to the vessel, it therefore being possible to arrest the vessel even if the bunker supply contract was entered with the charterer and not with the owner.
In order to initiate an arrest claim in court, parties must be represented by lawyers, and a power of attorney (POA) is needed for the appointment of those lawyers. The POA must be signed by a representative of the company, duly empowered as per its by-laws or certificates. Such documents must also be duly notarised/legalised or apostilled (if the country in which the document is signed is a signatory of the Apostille Convention). In the case of urgency measures, such as an arrest, the Brazilian Civil Procedural Code grants the party 15 days to present the POA to the case records after the filing of the claim. This deadline can be extended for an additional 15 days.
All foreign documents that are relevant to the claim must be translated into Portuguese by a sworn translator. If it is not possible to translate them before the filing of the arrest application, it is possible to request the judge to grant an extension for the presentation of these documents. However, it is recommendable that all documents are presented upon the filing, as there is a risk of the judge understanding that the aforementioned documents were necessary for the analysis of the arrest request and the decision of the arrest would be delayed as a consequence.
In states where the courts have electronic proceedings, scanned copies of the documents may be sufficient.
Finally, it should be highlighted that Brazil is a signatory to the Apostille Convention, which helps to avoid time and costs with legalisation and consularisation procedures.
The arrest of bunkers is not a common practice within the Brazilian jurisdiction and there is no specific legislation providing this possibility. However, it would be possible to request the arrest of bunkers based on the general rules set forth in the Civil Procedural Code.
The general rules provide that a party may request an arrest of assets or security in general if that party is able to demonstrate both the liquidity of its credits and a risk that the debtor and its assets may disappear in the near future.
It should be noted that the arrest of bunkers may involve logistic difficulties for the arresting party as the claimant will be obliged to nominate a fiduciary agent to be responsible for the bunker and arrange a licensed facility to receive the bunker when it is eventually arrested.
The Brazilian legal system does not provide a specific regulation regarding the arrest of sister ships.
If the claim is based on privileged creditors with effects in rem on the vessel, the claimant would be unlikely to obtain the arrest of another vessel of the debtor’s fleet. However, if the arrest is in personam, in principle it may be possible to file a precautionary lawsuit against the ship-owner to arrest a sister ship and request security.
The Brazilian Civil Procedural Code establishes other forms of measures and injunctions sought to obtain security and/or the compliance with a judicial order, the most common of which are the attachment of values, seizure and constrains of assets, either liquid or illiquid.
In order to release an arrested ship, the ship-owner will have to request the release from the Court and simultaneously provide a guarantee to replace the arrested vessel, plus the legal and attorneys' fees.
Normally, the most common type of guarantee is a judicial deposit or a letter of credit issued by a first-line bank headquartered in Brazil.
Protection and indemnity insurance club letters of undertaking are not recognised by the Brazilian courts, but may be accepted by the judge if they are accepted by the opposing party and translated into Portuguese.
The judicial sale of vessels in Brazil follows the same general rules of asset bidding. The auctions are conducted by the public auctioneer in the course of a judicial proceeding, who will adopt all necessary formalities to conduct the auction and sell the vessel under a commission.
The public auctioneer will publish a Public Call announcing the auction for any interested party, which will contain a description of the object to be sold, the minimum price for the bid, the conditions of payment and the place where the auction will take place, among other details. The Public Call must be published at least five days prior to the auction date. As a rule, the Public Call must be made available on a webpage to be determined by the judge. However, the judge may also determine the Public Call to be fixed on a local customary place and published in a newspaper of wide circulation.
Types of bonds required to/for:
Furthermore, regarding the position of the mortgage in relation to other maritime claims, it should be noted that, based on the application of the Brazilian Commercial Code and the Brussels Convention, the level of priority of each credit is the following:
The primary legislation governing insolvency and restructure proceedings in Brazil is the Federal Law 11.101/2005 (Brazilian Business Insolvency Act), which has been updated recently with new rules having taken effect on 25 January 2021. Among the main changes can be highlighted the incorporation of the UNCITRAL Model Law on Cross-Border Insolvency to assist states with cases where the insolvent debtor has assets in more than one country or where some of the creditors of the debtor are not from the country where the insolvency proceedings are taking place.
Regarding a possible order of arrest and judicial sale of a vessel before the competent bankruptcy court, it should be noted that, if the asset is considered essential for the preservation of the company’s activity, it cannot be arrested. Furthermore, the decision of the essentiality of the asset is a matter only for the bankruptcy court. If the interest is in the sale of the vessel, this must be previously requested to the bankruptcy court, as determined by Article 66 of Law 11.101/2005.
The Civil Procedural Code allows the defendant of a wrongful arrest to seek an indemnity and compensation for all the losses suffered by the wrongful arrest. That compensation can be assessed and liquidated in the same legal proceedings as the arrest.
Brazil is not a signatory to the Athens Convention or its protocols. Brazilian and foreign passengers, while being transported or on cruise trips, have their rights supported by both the Brazilian Civil Code and the Brazilian Consumers Code, which establish the right to full reparation of the passenger or consumer plus non-material damages.
The time bar to file a claim based on the Brazilian Consumers Act is five years.
The Brazilian Procedural Code expressly recognises forum selection clauses as valid and binding and therefore a clause in this respect should be complied with.
Specifically in relation to bills of lading, there are some court decisions considering the bill of lading as an adhesion contract, when the issuer (ship-owner) establishes its clauses without negotiation with the other party and the other party is considered not to have expressly agreed. However, it will be very important to verify if the party adhering to the contract had or should have had knowledge of what it was accepting with the contract.
In the same way as in 6.1 Enforcement of Law and Jurisdiction Clauses Stated in Bills of Lading, if the contracting parties expressly agree on a specific arbitration clause, that clause shall be binding.
Brazil has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 10 June 1958). The enforcement of foreign judgments and awards in Brazil depends on an exequatur, to be obtained through a procedure regulated by the internal procedural rules of the Superior Court of Justice and by the provisions of the Civil Procedural Code of 2015. The exequatur is the authorisation granted by the Superior Court of Justice for all procedures requested by a foreign judicial authority to be validly executed in the jurisdiction of the competent Brazilian judge.
The Superior Court of Justice recognises foreign judgments and awards, provided they are not contrary to the Brazilian legal order, public policy, national sovereignty, and good moral conduct.
When the exequatur is granted, the award is forwarded to the federal judge of the state in which it will be enforced.
Brazil has not ratified the International Arrest Convention. According to domestic legislation, in order to request an arrest in Brazil, Brazilian courts must also have jurisdiction over the relevant claim. It is not permissible to file an arrest simply as a precautionary matter to secure a claim that will be attempted in another jurisdiction.
Brazil has domestic arbitral institutions with arbitrators specialised in maritime matters such as the Brazilian Centre of Mediation and Arbitration (CBMA), the Brazilian Centre of Maritime Arbitration and the Mediation and Arbitration Chamber of the Getúlio Vargas Foundation.
The CBMA, for instance, has a specialised commission to deal with maritime and port-related disputes, comprised of competent and qualified practitioners and arbitrators with the expertise to address the growing number of disputes in this sector.
Arbitration is an increasing practice in Brazil, following the arbitration law (Law No 9,307/96), the ratification of the New York Convention in 2002, the ratification of the CISG in 2013, the enactment of a mediation law in 2015, the reform of the Arbitration Act in 2015 and the Civil Procedural Code of 2015, which provides for a mandatory mediation procedure prior to judicial disputes.
The defendant should challenge the court’s jurisdiction when presenting its defence by alleging that a foreign court or arbitral tribunal election clause should be observed.
Thus, if a lawsuit is filed in breach of an arbitration or foreign jurisdiction clause, the case can be extinguished in accordance with the Brazilian Procedural Code, as long as the defendant invokes that clause.
Brazilian tax legislation provides for a zero withholding income tax (WHT) rate reduction on the payment of charter hire abroad, unless the beneficiary is located in a “low-tax jurisdiction” which triggers WHT at 25%.
For charter hire payment, credit or remittances in the so-called “split contract structure” applied to oil and gas exploration and production (E&P) and regasification activities, there are maximum charter ratios vis-à-vis the total charter and service contract for purposes of qualification for the WHT zero rate reduction.
Hires exceeding these ratios will be subject to WHT at 15% or at 25% for beneficiaries located in “low tax jurisdictions” or subject to a “privileged tax regime”.
As of 1 January 2018, the maximum charter rations were amended as follows:
The maximum charter ratios do not apply to vessels used in offshore support services.
Brazil has been adapting its accounting rules to the International Financial Reporting Standards (IFRS) standards and, as of 1 January 2019, Brazilian charterers are required to comply with the so-called “CPC 06” (IFRS 16) on operational leases.
Occasional changes will not affect the taxes to be paid in Brazil pursuant to the IRS Normative Ruling 1889/2019.
In Brazil, the shares have been nominative since the 1990s. There have been no recent changes in the corporate legislation concerning the matter.
There is no specific legislation in Brazil related to the liquidation of assets outside the country, nor relevant time requirements; the standard liquidation rules are to be followed.
Since the beginning of the pandemic, Brazil has prioritised the operation of any and all services considered essential, which includes almost all maritime activity with the exception of passenger cruises.
Since March 2020, the National Agency for Ports and Navigation (ANTAQ) introduced several measures regulating the maintenance of the operation of vessels and port facilities, prohibiting any action that would restrict the movement of workers or the circulation of cargo, avoiding any effect on essential activities that could lead to shortage of necessary supplies. It also established restrictions on the embarkation of symptomatic crew and passengers and security measures to be adopted by port facilities and companies operating in waterway transportation.
The need to quarantine the crew was also widely discussed in Brazil. For instance, in March 2020, the Ministry of Infrastructure, through the National Commission of Port Authorities (CONAPORTOS), issued Resolution 2 with guidelines for ports, instructing ports to require cargo ships from abroad to dock without unloaded crew for up to 15 days from the last departure from a foreign port, except for landings that were essential for the operation. The resolution also suspended new shipments on cruise ships in Brazilian waters and imposed restrictions on the operation and disembarkation of individuals on cruise ships from abroad. In addition, further rules restricted the disembarkation of foreigners by inland waterway, with exceptions. More recently, additional precautions were adopted due to the variant of COVID-19 that started spreading from the UK, amongst which was the requirement to evidence COVID-19 testing prior to embarking.
Maritime authorities and the Admiralty Court, responsible for, among other functions, maintaining the register of naval goods, mortgages of Brazilian vessels and the Brazilian Special Registry, in addition to deciding on accidents and navigation facts, published a set of normative acts and ordinances on COVID-19. Although they recognised the need to guarantee security in the midst of the pandemic, their services were considered essential and, therefore, should continue, with the adoption of protective measures for users and workers.
It should be noted that, unlike most countries with a strong maritime tradition in which force majeure is only a contractual matter, Brazil also provides for force majeure in the Civil Law. In any case, commonly, the contracts signed between the parties in maritime areas also bring provisions related to force majeure, with definitions and cases where it could be claimed.
Brazilian law has several provisions that ensure the exclusion of liability and the possibility of alleging excessive burdens and contractual imbalance, should any contract be impacted by an unpredictable event that affects the obligations of the parties. The verification of whether the coronavirus pandemic would fit into this force majeure depends on a case-by-case analysis and what direct impacts it had on the performance of the obligations.
There is no additional legal information that should be borne in mind in relation to legal aspects of maritime or shipping matters.