The National Waterway Transportation Agency (ANTAQ), created by Law No 10,233/2001, is the regulatory body that governs maritime activities, responsible for regulating, supervising and inspecting the development of waterway transportation and the exploration of port and waterway infrastructure in Brazil.
In order to operate in cabotage, maritime support, port support and inland navigation, each company must be registered as a Brazilian shipping company before ANTAQ. In addition, the vessels operating in their fleet must also be registered.
In Brazil, as a general rule, Law No 12,529/2011 (Competition Law) sets forth the prevention and prosecution of infractions against the economic order, guided by the constitutional provisions of freedom of initiative, free competition, social function of property, consumer protection and repression of the abuse of economic power.
In addition, Law No 9,432/1997 (Maritime Transportation Law) establishes requirements to operate in the maritime sector, being protective in relation to the Brazilian shipping companies.
The national agency for in-water transportation (ANTAQ) has as one of its prerequisites the aim to foster free competition and avoid situations that characterise unfair competition in the maritime industry. If any such situations are identified, ANTAQ will notify the antitrust bodies for the applicable measures and penalties.
Brazil is not within the top ten Flag States; it is in 26th position in the order of priority.
The number of vessels and tonnage of the Brazilian fleet, ranked by dead-weight tonnage, is as follows:
Brazil has ratified several maritime conventions, namely:
The classification societies authorised to operate under Brazilian jurisdiction are the following:
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 an 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 optional; it is necessary only for registration by the port captaincy.
In relation to the requirements to obtain registration at the Brazilian Ownership Registry, it should be noted that Article 6 of Law 7.652 clearly establishes that registration will be granted to individuals residing in the country or private entities with head offices in Brazil. Brazilian registration cannot be suspended.
Therefore, Brazilian registration is related to the owner’s nationality, except for leisure vessels, which can be registered under the Brazilian flag, if the owner so chooses, even if that owner is a foreign citizen or company.
However, the Brazilian Special Register (REB) is an optional registry for (i) Brazilian vessels operated by Brazilian shipping companies, and (ii) foreign-flagged vessels under bareboat charter to Brazilian shipping companies that hold the necessary tonnage, with temporary suspension of the foreign flag. The REB as a secondary special registry was created to grant Brazilian Vessels and ship-owners special rights.
Thus, Brazilian law authorises the flying of the Brazilian flag by the vessels that are genuinely Brazilian and also foreign vessels when bareboat-chartered into Brazil with suspension of their original flag.
With regard to the types of discounts on registration and taxes offered by Brazilian jurisdiction, the Brazilian Especial Registry (REB) should be highlighted. Among the benefits granted, Law No 9.432/1997 determines:
It is important to mention that the Additional Freight for Merchant Marine Renewal (AFRMM), provides benefits for the Brazilian Shipping Companies, with the purpose of stimulating the development of the Brazilian merchant navy and naval industry; it is a kind of compulsory contribution to a savings scheme, which constitutes the Merchant Marine Fund (FMM) or Fundo da Marinha Mercante and is designed for the financing of activities for vessels in Brazilian shipyards.
Also, Brazilian laws grant several tax benefits for some regions of Brazil, for example, Amazônia and the Northeast.
As mentioned in 1.6 Types of Registrations, the Brazilian registry is only available to Brazilian nationals and companies incorporated under Brazilian Laws. Brazilian Special Registration (REB) is available to foreign vessels under a demise charter or bareboat charter to a Brazilian shipping company that holds sufficient tonnage. It should be noted that there are no restrictions related to the original flag or registrations of vessels subject to REB registry, except that their original flag is suspended.
In relation to local content on crewing, the Normative Resolution CNIG 06/2017 regulates the proportion of Brazilians and foreign citizens on board foreign vessels operating in Brazil. The same regulation provides for the procedures and requirements for issuance of work permits for mariners working on such vessels.
Law No 9.432/1997 and the Normative Resolution ANTAQ 05/2016 set forth the regulation to operate in cabotage navigation in Brazil.
Cabotage navigation is restricted to Brazilian shipping companies and preferential rights are granted to Brazilian-flagged vessels.
Also, the Ministry of Infrastructure has initiated a project to stimulate cabotage navigation. This project aims to promote the expansion of the cabotage segment in the Brazilian logistics matrix, in addition to providing regulatory security to private investors to constitute a merchant fleet linked to the country, so that this fleet is always available to provide security to the service user of transport with regard to the regularity, stability and predictability of prices for the flow of its cargo, which brings reliability to the user in the efficiency of the waterway model.
Brazil is not a ship finance centre. However, the Brazilian government has developed special programmes to finance the Brazilian ship-building industry and Brazilian fleet. The programmes are funded by the Merchant Navy Fund. This fund aims to provide resources for the renewal and expansion of the national fleet in its various segments.
Usually, the registration of ship finance agreements is not mandatory. However, creditors usually require registration to generate publicity for the arrangements. These registrations are carried out before the Titles and Deeds Registry and any document written in a foreign language must be accompanied by a sworn translation.
Any guarantees may be registered under the Titles and Deeds Registry, but encumbrances over the vessels, such as mortgages and chattel mortgages must be issued as a deed by a notary (a maritime notary if available in that jurisdiction) and further registered before the Admiralty Court to be considered valid and in effect in Brazil. As a consequence, any mortgages or liens over Brazilian vessels would be indicated in the Certificate of Liens or the Certificate of Maritime Property.
In Brazil, ship financing through commercial banks is not usually attractive, therefore, in practical terms ship financing usually uses the resources of the Merchant Marine Fund. The Merchant Marine Fund (FMM) is a fund created to provide resources for the development of the Merchant Navy and the Brazilian ship-building and repair industry (Article 22 of Law No 10.893/2004), and its main source of resources is the Merchant Marine Renewal Freight (AFRMM).
FMM financial agents are the National Bank Social Development Bank (BNDES), the other official federal banks (Banco do Brasil, Banco do Nordeste do Brasil and Banco da Amazônia), and, recently, Caixa Econômica Federal (Caixa). Financing with resources of the FMM offer a repayment term of up to 20 years, with a grace period of up to four years and interest rates that vary from 2% to 7% per year.
In Brazil, the following guarantees are commonly used in ship financing: a letter of credit or bank guarantee, a parent company guarantee, a mortgage or fiduciary alienation, assignment of credits and pledge of shares of the debtor. However, for ship financing either a bank guarantee or an in rem guarantee (mortgage or fiduciary alienation) shall be combined with the other types of corporate guarantees.
The information related to ownership and encumbrances over vessels are obtained through certificates issued by the Admiralty Court, which is not available online, so foreign entities would have to hire Brazilian representatives to obtain such information due to bureaucratic issues. Information related to financing documents and other types of guarantees are registered in the Titles and Deeds Registry and are available through websites; it is also possible to contact them online.
Brazilian jurisdiction does not issue certificates in any required language to be used abroad, only in Portuguese. Brazil is a signatory of the apostille convention and therefore public or notarised documents can be apostilled and a sworn translation into any language can be provided, so that it can be used abroad.
Any document can be registered before the Registry of Titles and Deeds to grant publicity to third parties. Maritime contracts and documents shall be registered before the Maritime Notary in the states of Rio de Janeiro, Pará and Maranhão.
The deadline for issuance depends on each registry and each certificate will depend on the type of document.
There is no formal co-operation between the Brazilian registry with other registries during reflagging. However, the Brazilian registry will work to close any gaps in a reflagging procedure.
The costs involved for registration of ship mortgages are low in Brazil, since the charges of the Admiralty Court and Port Captaincy to effect such registrations are greatly reduced. However, according to Brazilian Law, mortgages over Brazilian vessels are to be issued through public deeds. The costs charged by the Maritime Notary, or by other notaries, in localities where there are no maritime notaries can vary greatly and will also depend on the debt being guaranteed and the vessel’s value.
Vessels in Brazil can be subject to several mortgages. The consent from a higher-recorded mortgagee is not required, observing the degree of each mortgage. However, in Brazil it is very common to have a fiduciary alienation instead of a mortgage. Fiduciary alienations are not subject to a second-degree encumbrance.
Pledge agreements are subject to registration in Brazil. The competent entity for registration of the pledges will depend on the object of the pledge. Pledge over shares or quotas of a Brazilian company are to be recorded before the Board of Trade, and general pledges, over bank accounts, for instance, are subject to registration before the Titles and Deeds Registry.
The Brazilian Commercial Code (as amended since 1850 and complemented by Article 2 of the Brussels International Convention of 1926) will prove a mortgage. The following claims are considered to enjoy maritime liens over the vessels' (in order of priority):
A vessel subject to a duly recorded mortgage cannot be sold or deleted from the registry without the prior written consent of the recorded mortgagee or mortgage cancellation by the recorded mortgagees.
Once a duly recorded mortgage expires, a cancellation shall be formally requested by debtor or creditor.
According to Article 5, XXV of the Brazilian Federal Constitution, in the event of imminent public danger, the competent authority may use private property, and assure the owner that there will be further compensation if there is any damage caused to that property. This shall include vessels, among other items of private property.
In Brazil, shipping companies may raise capital through a public offering of shares to be traded on the stock exchange. If a privately held company needs to raise capital, it would need to make an Initial Public Offering (IPO) in which shares of a company are sold to institutional investors. An IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, a privately held company is transformed into a public company.
However, in Brazil the most common means of ship financing is financing with resources from the Merchant Marine Fund (FMM).
Fleet mortgages and syndicated loans are not frequently used in Brazil. As previously mentioned, in Brazil most ship finance is done through the banks that act as agents to the Merchant Marine Fund, using resources of the Merchant Marine Fund. In those transactions, the in rem guarantees offered are usually a mortgage over the hull or vessel being financed, together with other guarantees.
In Brazil, the banks take into consideration the company’s financial strength. The company needs to prove that it has the right conditions to offer guarantees. Usually, the bank asks for a letter of credit or bank guarantee from another bank or a mortgage over the vessel. If the vessel is guaranteeing the financing, through a mortgage or fiduciary alienation, it is common that vessel shall be bound to keep the Brazilian flag and refrain from being bareboat-chartered to foreign owners.
In maritime transport, bank financing with resources from the Merchant Marine Fund comes at a very competitive price and the agencies are careful with regard to risk-rating. In addition, ship-owners prefer flexible financing and the limited role of securitisation becomes more noticeable.
It should be noted that in Brazil there has been no meaningful decrease in the participation of capital markets in shipping transactions over the past several years, since Brazilian ship-owners are not traditionally involved in the capital markets.
The applicable labour laws are the Brazilian Consolidation of Labour Laws, the Constitution of the Federative Republic, and conventions of the International Labour Organization (ILO) that was ratified by the Brazilian jurisdiction and others' legislations in respect of specific labour areas or workers.
Regarding the Normative Resolution 6 of Brazilian law, when foreign vessels or platforms operate in Brazilian jurisdictional waters for a period exceeding 90 continuous days, seafarers and other Brazilian professionals shall be admitted, subject to the following conditions and proportions.
For vessels used in maritime support navigation engaged in mineral and hydrocarbon exploration and mining activities:
For exploration or prospecting vessels, intended for activities directly or indirectly related to the exploration:
For vessels engaged in cabotage trade:
The minimum wage required by law is BRL1,039 (approximately USD254); however, this is the uncommon wage to be paid to seafarers, which is the minimum wage agreed between the Labour Union and shipping companies because the specificity of the work provided in the maritime industry.
With regard to the general rule of the Brazilian Consolidation of Labour Laws and Constitution of the Federative Republic for the normal worker, the normal working hours not exceeds eight hours per day and 44 hours per week, with the option of compensating working hours and reducing the length of the workday through an agreement or a collective bargaining covenant and, if the employee works more than the number of hours described on the Brazilian legislation, it will be considered overtime.
However, it is important to highlight that for maritime workers there is a difference in treatment by the Brazilian labour law, because between midnight on one day and midnight on the next following calendar day a member of the crew may be kept at his or her post for eight hours, either continuously or intermittently, and the time in excess of eight hours spent on actual work shall be deemed to be overtime, giving a right to compensation. It shall be given for overtime, either by the granting of a rest period of equivalent duration on the day next following or the subsequent day during the normal hours of work or at the end of the voyage, or by payment of the corresponding wages, as may best suit the service.
In the same way, it is common for companies to enter into contract collective bargaining agreements that establish differentiated rules for employees, including rules related to working hours, compensation and overtime.
Regarding Article 482 of the Brazilian Consolidation of Labour Laws in view of cases for justified dismissal, the following shall be deemed to be lawful causes for the cancellation of a contract of employment by the employer:
The Brazilian law has a scale to compensate for moral damages but this scale is usually questioned in the Labour Court and is often not used.
A ship-owner’s private insurance needs to be analysed on a case-by-case, according to coverage available.
The Brazilian law ensures the employee the payment of wages by the social security department in the event of absence from work for longer than 15 days.
Regarding Article 114 of the Constitution of the Federative Republic, Brazil has specific court of justice in which to solve labour disputes, named the Labour Court.
The Brazilian legislation ratified the Convention 166 of the International Labour Organization (ILO) that details about repatriation and, in the view of the Repatriation of Seamen Convention, it shall be the responsibility of the ship-owner to arrange for repatriation by appropriate and expeditious means. The normal mode of transport shall be by air. The cost of repatriation shall be borne by the ship-owner as:
The collective bargaining agreement is used in the Brazilian jurisdiction. Brazil uses this because the collective labour agreement is an agreement laying down certain binding principles whereby two or more industrial associations represent economic and occupational categories that stipulate certain conditions of employment governing individual employment relationships within their respective spheres of representation.
It is common for maritime companies to enter into collective bargaining agreements that establish differentiated rules for employees.
In relation to the judiciary system, the Brazilian legal system provides for a state court system, in which it is incumbent on each state to define the jurisdiction of its courts and to create courts designed to handle maritime disputes. For example, in the State Court of Rio de Janeiro, there are seven first instance courts specialised in corporate/commercial matters, including maritime disputes. However, in most states there are no specialised courts and maritime matters are ruled by civil courts. In some circumstances, such as when a state-owned vessel is involved, federal courts have jurisdiction.
Brazil also has an Admiralty Court located in Rio de Janeiro. However, this court is not part of the judiciary system, but is an administrative tribunal subordinated to the Ministry of Defence/Navy Command. This court has jurisdiction to rule on maritime accidents and facts of navigation and its main intent is to find the causes of the incident and the parties responsible for it and to apply the administrative penalties set forth in Law 2.180/54.
As previously mentioned, each state defines the jurisdiction of its courts, and is able to define which disputes would be subject to the jurisdiction of those courts. However, as has been mentioned, most states do not have maritime courts.
Brazil does not have a Maritime Code in force. The chapter regarding maritime matters of the Brazilian Commercial Code, dated 1850, is still in force, and its rules are applied together with other specific legislation, the Civil Code and the Civil Procedural Code. Thus, except for a few specific procedures related to maritime matters, such as regulation of general average and ratification of maritime protests formed on board, the procedure to be applied to maritime disputes is similar to the procedure available to general civil matters set by the Civil Procedural Code.
In summary, the general civil proceeding is the following: the first instance entails points of claims, points of defence, the discovery process (production of evidence, etc) and it is concluded with a decision. Against that decision, parties may present an appeal to the Court of Appeal. In some circumstances, it is possible to appeal to the Superior Court of Justice and/or to the Supreme Federal Court. The Superior Court of Justice (STJ) judges the legality of rulings by the Courts of Appeal and the Federal Supreme Court (STF) has as its primary role the judgment of constitutional issues.
Most claims would be in personam, thus filed against specific individuals (such as the vessel-owner) who must be summoned to join the proceeding. In the case of a maritime lien, in rem effects can be requested.
Arbitration and mediation are available as alternative sources of dispute resolution, regulated by Federal Law No 9.307/1996 and Federal Law No 13.140/2015 respectively. Maritime arbitration has undergone significant development through the years, and Brazil will host the XXI ICMA (International Congress of Maritime Arbitrators) in March 2020.
The judicial sale of vessels in Brazil follows the same general rules of asset bidding. 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:
The Federal Constitution establishes that foreign decisions must be ratified by the Superior Court of Justice through a specific proceeding in order to become valid and effective in Brazil.
In order to be enforceable in Brazil, the foreign decision must attend to the following requirements provided for in Article 15 of the Decree Law No 4.657/1942:
In Brazil, the priority of maritime claims is governed by the 1850 Commercial Code and by the 1926 Brussels Convention on Maritime Liens and Mortgages.
The 1926 Brussels Convention has a list of liens in Article 2 and provides in its Article 3 that mortgages constituted under the signatory Estates regulation shall rank immediately after the maritime liens ranked in its Article 2. The Commercial Code, dated 1850, in Articles 470 and 471, provides its own privileged ranking, which also encompasses a few hypotheses of the Convention.
It is debatable in Brazil whether rules adopted from International Conventions would apply over domestic legislation in the case of conflicts or whether domestic rules would have priority.
While there is no clear and express list covering the complete ranking of liens, based on an attempt of the harmonious application of the rules of both the Commercial Code and the 1926 Brussels Convention, the order of priority could be considered to be the following, from highest to lowest:
The Brazilian legal system does not provide for a specific regulation regarding the arrest of sister ships or of vessels owned by affiliates.
Brazil is party to the 1924 International Convention for the Unification of Certain Rules Relating to the Limitation of the Liability of Owners of Seagoing 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 compensate them fully for 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, including the actual losses and loss of profit. Indirect losses are generally excluded, unless otherwise agreed.
The 1924 Brussels Convention establishes a few rules related to the limitation of liability and entitles a ship-owner to limit its liability to an amount equal to the value of the vessel, the freight and the accessories of the vessel in particular circumstances.
Moreover, the Brazilian Civil Code in its Article 750 establishes that a carrier’s liability is limited to the value inserted in the bill of lading.
There is no specific procedure to limit liability. Ship-owners may also limit liability under a contract. There are some cases where the limitation of liability was tested and judges accepted the validity of such a limitation. Nevertheless, if the contract is considered a "standard form contract", the limitation clause might be considered null and void by Brazilian courts.
As previously mentioned, maritime claims would usually follow the general civil proceedings. Brazilian Civil Procedural Code offers the parties the possibility to settle at any phase of the process in order to terminate a lawsuit.
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 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 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 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.
Brazil follows the universal tax system. Brazilian residents are taxed on their worldwide (local and foreign) income, while non-residents are taxed only on the income and gains received from a Brazilian source or with respect to assets located in the country.
According to Brazilian Law, for a company to be legally terminated or to cease to exist, it must follow a dissolution procedure or be incorporated by another company. In the case of incorporation or fusion, the surviving entity or the successor will handle all suits, pending business or assets of the terminated company.
Companies that go through the formal dissolution procedure must settle all their matters during the liquidation phase. Once the company is terminated, no more suits or other charges may be enforced against the terminated company. Of course, in cases of fraud or irregular termination, the managers and shareholders may be held liable for the unfinished business of the terminated company.
Brazil is a party to many treaties aimed at preventing double taxation in international transactions, which follows the OECD (Organization for Economic Co-operation and Development) model convention.
Brazil has entered into treaties with Argentina, Austria, Belgium, Canada, Chile, China, the Czech Republic and Slovakia, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Netherlands, Mexico, Norway, Peru, Philippines, Portugal, Russia, Spain, South Africa, South Korea, Sweden, Trinidad and Tobago, Turkey, Ukraine and Venezuela.
Accordingly, the income derived from the international maritime operations and capital gains resulting from the sale of vessels can be taxed only in the jurisdiction of residence of the shipping company.