Environmental law and practice in Brazil: overview

A Q&A guide to environment law in Brazil. This Q&A provides a high level overview of environment law in Brazil and looks at key practical issues including emissions to air and water, environmental impact assessments, waste, contaminated land, and environmental issues in transactions. In addition, answers to questions can be compared across a number of jurisdictions to assist in the management of cross-border transactions (see Country Q&A Tool).

This Q&A is part of the Practical Law multi-jurisdictional guide to environment. For a full list of jurisdictional Q&As visit www.practicallaw.com/environment-mjg.

Eduardo Damião Gonçalves and Lina Pimentel Garcia, Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados
Contents

Environmental regulatory framework

1. What are the key pieces of environmental legislation and the regulatory authorities in your jurisdiction?

The main environmental legislation includes:

  • Federal Constitution 1988, which provides the main framework and provisions for environmental protection in Brazil (Article 225).

  • Federal Law No. 6,938/1981, which established the National Environmental Policy.

  • Federal Law No. 7,735/1989, which created the federal environmental protection agency (Instituto Nacional do Meio Ambiente e dos Recursos Naturais Renováveis) (IBAMA).

  • Federal Law No. 9,605/1998 (Environmental Crimes Act), which addresses criminal and administrative breaches.

  • Federal Law No. 9,985/2000, which established the National System for Conservation Units.

  • Federal Law No. 11,516/2007, which created the federal agency responsible for the management of federal conservation units (Instituto Chico Mendes de Conservação da Biodiversidade) (ICMBio).

  • Federal Decree No. 6,514/2008, which contains the implementing regulations for the Environmental Crimes Act, and specifically, administrative penalties.

  • Federal Law No. 12,305/2010, which establishes the National Policy for Solid Waste.

  • Federal Complementary Law No. 140/2011, which co-ordinates the constitutional jurisdiction for protecting the environment and natural resources.

  • Federal Law No. 12,651/2012, which established the new Forest Code.

 

Regulatory enforcement

2. To what extent are environmental requirements enforced by regulators in your jurisdiction?

In the State of São Paulo, environmental laws are tightly enforced by the state environmental agency (Companhia Ambiental do Estado de São Paulo) (CETESB). Several other state environmental regulators have jurisdiction over environmental matters within the state. The federal agencies IBAMA and ICMBio are also well established and active in enforcement. Some state agencies are still dependent on public prosecutors and NGOs to initiate their enforcement of environmental laws within their respective territories, but enforcement has been gradually improving. There are several public actions that can be brought by environmental authorities, public attorneys and non-NGOs to claim against non-fulfilment of environmental obligations.

 

Environmental NGOs

3. To what extent are environmental non-governmental organisations (NGOs) and other pressure groups active in your jurisdiction?

NGOs have an important role in environmental licensing in Brazil, as they have been defending environmental assets since the 1970s. For example, the most active include Fundação SOS Mata Atlântica, Greenpeace Brasil, World Wide Fund for Nature (WWF), Instituto do Homem e Meio Ambiente da Amazônia (Imazon).

Many NGOs head public actions that challenge environmental licensing that may not be acting to control negative impacts. Lack of dialogue with local communities has also caused opposition from NGOs against undertakings involving the use of natural resources. For example, Greenpeace played a role during the licensing process for building Belo Monte Dam (a hydropower plant that is being built in the Xingu River, one of the largest rivers in the Amazon basin). The Federal Public Prosecutor filed several law suits against Belo Monte Dam and Greenpeace's work, for example aerial photos, has been helping in the prosecution of alleged environmental damage caused by this project.

 

Environmental permits

4. Is there an integrated permitting regime or are there separate environmental regimes for different types of emissions? Can companies apply for a single environmental permit for all activities on a site or do they have to apply for separate permits?

Integrated/separate permitting regime

The licensing procedure usually depends on both sectoral rules and specific state or municipal regulations, due to the concurrent jurisdiction of public agencies over environmental matters. However, generally, an environmental licence covers the main activity undertaken at a specific facility and all equipment and production lines. Potential improvements to facilities can be licensed separately and integrated with the main licence when this is renewed.

Single/separate permits

Environmental legislation may require for separate permits related to specific activities connected to the main activity that may have different consequences. Examples of separate permits include deforestation authorisations and waste transportation licences.

 
5. What is the framework for the integrated permitting regime?

Permits and regulator

The construction, installation, expansion and operation of any establishment or activity that uses environmental resources, and that is deemed actually or potentially polluting, or capable of causing any kind of environmental degradation, are subject to licensing.

The following three-step process is used when an environmental operating licence is granted:

  • Preliminary licence (LP). This is granted during the preliminary stage of planning the enterprise or activity and approves its location and conception. It confirms the environmental feasibility and sets out the basic and conditional requirements to be met during the subsequent stages of its implementation.

  • Installation licence (LI). This authorises the setting up of the enterprise or operation according to specifications in the approved plans, programmes and designs, including environmental control measures and conditions, which are determining factors.

  • Operation licence (LO). This authorises the operation of the activity or enterprise, after effective compliance with LP and LI conditions with the environmental control measures and requirements determined for the operation having been verified.

A new environmental licence must be issued whenever there is a change at the company's facilities or new equipment is introduced to the enterprise.

A state government has jurisdiction over the licensing of facilities to be built within its territory, unless the environmental impact extends beyond its borders, when the federal government has jurisdiction. In addition, municipalities have jurisdiction to licence enterprises whose impact is merely local. In addition to the general guidelines established by the federal government, each state has authority to regulate environmental licensing procedures occurring within its borders.

Length of permit

Each licence is valid for a specific term, on the expiration of which the licence must be renewed. State environmental authorities can establish the specific term of each licence issued, provided that the term does not exceed the following maximum terms:

  • Five years for a LP.

  • Six years for an LI.

  • From four to ten years for a LO.

The request for the renewal of a LO must be filed 120 days before its expiration date, so that it remains valid until the new and renewed licence is issued (Article 13(4), Complementary Law No. 140/2011).

Licence periods may be reduced depending on the regulation of specific sectors and state or municipal regulations. For example, in Niterói, Municipality of Rio de Janeiro State, an environmental operation licence is valid for only one year. This shorter term is imposed by the municipal environmental agency to improve environmental supervision. An entity must request renewal of its environmental licences, which will only be granted by the municipality if the entity can verify that it has fulfilled the environment requirements imposed by the relevant authority.

Restrictions on transfer

Environmental licences in Brazil always relate to the facility. The ownership of an environmental licence can be transferred by a simple request to the relevant public authority confirming the transfer.

Penalties

Individuals or legal entities that perform regulated activities but do not hold the required licences can be subject to administrative and criminal liabilities, even if their activities do not cause environmental damage.

Administrative penalties for irregular installations or operations include, among others things:

  • Shutdowns.

  • Fines ranging from BRL500 to BRL10 million.

Non-compliance with requirements and conditions set out in environmental licences can also subject an entity to the same penalties (Article 66, II, Federal Decree No. 6,514/2008).

 

Water pollution

6. What is the regulatory regime for water pollution (whether part of an integrated regime or separate)?

Permits and regulator

The National Policy on Water Resources sets out the following uses of water resources, which are subject to licensing by public authorities (Article 12, I, Federal Law No. 9,433/1997):

  • Diverting or taking water from a body of water for consumption, including for public supplies or production processes.

  • Taking water from an underground body of water for final consumption or for production processes.

  • Disposal of sewage waste and other liquid or gaseous waste, whether treated or not, into a body of water for dilution, transportation or final disposal.

  • Hydroelectric generation.

  • Other uses that change the quantity or quality of the water existing in a body of water.

Every licence must be:

  • Specific to uses as set out in water resource plans. Water resource plans are management instruments established for the planning of multiple uses of water. They set out priorities, actions, programmes and projects and aim to harmonise the uses of water with the preservation of water resources. The water resource plan is developed with the participation of public, state and municipal governments and civil society, which provides guidelines for implementing the Policy on Water Resources.

  • Observe the class in which the body of water is included and maintenance of appropriate waterway transportation, if applicable.

  • Issued through an Act by the appropriate federal, state or federal district executive authority.

Water quality and related discharges of effluent into river courses are governed by the relevant environmental licensing authority for the operation of the activities. However, water quantity is controlled by federal or state water agencies through separate water permits.

Prohibited activities

The following activities are considered breaches of use of surface or underground water resources (Article 49, I, Federal Law No. 9,433/1997):

  • Extracting or using water for any purpose without the proper grant of use rights.

  • Beginning deployment or deploying an enterprise related to extracting or using of surface or underground water resources, involving changes to their quantity, quality, characteristics or regime without a grant from the competent authorities.

  • Using water resources, or performing work or services related to them, violating the conditions of the grant.

  • Drilling wells to extract groundwater or operating them without proper authorisation.

  • Fraudulently measuring the volume of water used or declaring different values measured.

  • Violating federal laws, including instructions and procedures established by public authorities.

  • Obstructing or hindering the activities of the supervisory authorities while they are performing their functions.

An example of a restriction includes the prohibition on releasing effluent from sugarcane plants into rivers. This restriction is to avoid damage to water quality and has been in force since 1980.

Clean-up/compensation

The polluter, whether direct or indirect, is liable for any environmental damage arising from its activity, including the obligation to clean up or pay compensation for water pollution. The extent of compensation varies with the specific damage verified or estimated.

Penalties

The absence of a water licence allowing for interference with watercourses or with underground water is deemed to be an administrative breach and generally can result in fines of between BRL100 and BRL10,000. However, pollution to water resources can be fined by up to BRL50 million, depending on the extent of the damage.

 

Air pollution

7. What is the regulatory regime for air pollution (whether part of an integrated regime or separate)?

Permits and regulator

The release control of emissions into the atmosphere must always be considered during the environmental licensing of a facility.

Prohibited activities

There are 12 persistent organic pollutants (POPs) (commonly known as the dirty dozen), whose production and use was prohibited in Brazil by Federal Decree No. 5,472/2005. These are: Aldrin, chlordane, mirex, dieldrin, DDT, dioxins, furans, polychlorinated biphenyls (PCBs), endrin, heptachlor, toxaphene and hexachlorobenzene (HCB).

The use of substances designated as regulated substances by the Montreal Protocol on Substances that Deplete the Ozone Layer are prohibited in systems, equipment, facilities and new products, whether domestic or imported (Article 2, CONAMA Resolution No. 267/2000).

There are also specific state laws that identify certain areas that are considered to have reached saturated concentration levels of specific air pollutants and that therefore cannot be further exposed to any of these pollutants.

Clean-up/compensation

If an emission is in violation of the terms of an environmental licence, a party can be assessed or sued to compensate for the damages identified.

Penalties

Penalties for environmental crimes include imprisonment of one to four years, plus fines. Administrative penalties include fines ranging from BRL5,000 to BRL50 million. In a worst-case scenario, if a plant cannot adapt or modify its equipment to comply with the law, there are provisions to shut down these establishments.

 

Climate change, renewable energy and energy efficiency

8. Are there any national targets for reducing greenhouse gas emissions, increasing the use of renewable energy (such as wind power) and/or increasing energy efficiency (for example in buildings and appliances)?

At the UN Conference on Climate Change (COP-15), Brazil announced a national target for reducing greenhouse gas (GHG) emissions by 2020. The announced reduction was of 36.1% to 38.9% from to 1990 emissions levels. This reduction is to be achieved through efficiency projects, which may include use of renewable energy. Each industry sector in Brazil is currently presenting alternatives to decrease its emissions to the government (October 2012). States and municipal authorities are also issuing additional regulations related to climate change.

To meet voluntary commitments, Federal Decree No. 7,390/2010 provides for the creation of Sector Plans to apply actions, indicators and targets to reduce emissions and mechanisms to verify compliance. Sector Plans were established to enable the enforcement of the National Policy on Climate Change (Law No. 12,187/2009).

 
9. Is your jurisdiction party to the United Nations Framework Convention on Climate Change (UNFCCC) and/or the Kyoto Protocol? How have the requirements under those international agreements been implemented?

Parties to UNFCCC/Kyoto Protocol

Brazil was the first nation to sign the UNFCCC and it has occupied a leading position with respect to the treaty among developing countries.

Implementation

The National Policy on Climate Change was passed to establish domestic public policies related to GHG reduction. Currently, sectoral plans for reductions are being discussed between industries and government. However, the most important activities that contribute to GHG emissions in Brazil have already been dealt with in specific national plans to meet targets (deforestation, energy, agriculture, steel), although it must be said that a lack of enforcement has prevented those targets from being met.

 
10. What, if any, emissions/carbon trading schemes operate in your jurisdiction?

One of the means created by the Kyoto Protocol to facilitate GHG emissions reduction is the Clean Development Mechanism (CDM) (Mecanismo de Desenvolvimento Limpo) (MDL). Brazil can freely issue carbon credits under the UNFCCC provisions until the end of 2012.

Brazil has no targets under CDM as it is a non-Annex I country of the Kyoto Protocol.

In addition to international regulations, federal and state governments are establishing a framework that will allow for domestic carbon trading. However, it is not yet operational. Carbon credits resulting from forest conservation will have an important role in Brazil and will likely have an important role in the voluntary international trading scheme.

 

Environmental impact assessments

11. Are there any requirements to carry out environmental impact assessments (EIAs) for certain types of projects?

Scope

The environmental licensing procedure in Brazil includes the analysis of documents, projects and environmental studies submitted by the entrepreneur. The licensing procedure of certain activities deemed to significantly impact on the environment require an EIA and the corresponding environmental impact statement (Relatório de Impacto Ambiental) (RIMA). The EIA and RIMA (EIA/RIMA) must both be submitted for approval by the appropriate authorities (CONAMA Resolution No. 1/1986 and other regulations).

In addition to complying with legal provisions, the EIA must also adhere to certain general guidelines, such as:

  • Addressing all technological and project location options.

  • Identifying and assessing, on a continuing basis, the environmental impact caused during the implementation and operation of the pertinent activity.

  • Defining geographic limits directly and indirectly affected by that activity, the area of influence of the project.

  • Considering government plans and programmes proposed and being implemented in areas influenced by the project, and their compatibility.

The EIA/RIMA must be presented when applying for an LP as the EIA/RIMA gives the technical information on which the environment agency can support its licensing decision.

Permits and regulator

Developing an EIA/RIMA is a necessary step to obtain a LP for significant impact activities. See Question 5.

Penalties

Failing to possess an EIA/RIMA when required for renewing an environmental licence can result in the environmental licence being cancelled. A company can also be considered liable for any damage caused that may have been avoided by conducting an EIA/RIMA. See Question 5, Penalties.

 

Waste

12. What is the regulatory regime for waste?

Permits and regulator

The generation, treatment and final disposal of hazardous waste in general are governed by specific legislation in Brazil (Federal Law No. 12,305/2010 set the National Policy on Solid Waste (Política Nacional de Resíduos Sólidos), regulated by Federal Decree No. 7,404/2010). As a general rule, federal law defines the term "polluter" as a person/company who directly or indirectly causes environmental degradation. Based on this legal provision, Brazil's public authorities in general adopt the view that whoever generates waste of whatever nature is responsible for environmental damage caused as a result of the management of such waste (temporary storage, transportation and final disposal), even if that management is carried out by third parties.

Prohibited activities

A generator of waste must dispose of its waste with entities that hold environmental licences for transporting, disposing of or treating the specific kind of waste being disposed of. Non-compliance with administrative rules governing final disposal of waste, whether solid, liquid or gaseous, can subject the company to fines and embargos, among other types of sanctions (Article 62, Federal Decree No. 6,514/2008).

Any disposal of waste in non-compliance with environmental standards is prohibited. As an example of prohibited activities, warehousing, burning or disposing of waste under open skies is not acceptable in any circumstances (National Solid Waste Policy).

Operator criteria

An operator must comply with environmental rules as it remains liable under the joint and strict regime applicable to environmental law in Brazil.

Special rules for certain waste

There are specific rules establishing obligations in connection with the adequate management of certain waste, such as the disposal of used batteries containing lead, cadmium and zinc, and formal rules, including, for example, the procedure for obtaining authorisations for the transportation and final disposal of hazardous industrial waste and the preparation and delivery of inventories of industrial waste to the competent environmental authorities.

In addition, independently of public urban clean-up and solid waste management, the following parties must design and implement "reverse logistic" (reuse) systems for the return of products after use by consumers, manufacturers, importers, distributors and traders of (National Solid Waste Policy):

  • Agrochemicals, their waste and packaging, as well as other products whose packaging after use constitutes hazardous waste.

  • Batteries.

  • Tyres.

  • Lubricant oil, waste materials and packaging.

  • Fluorescent lamps of sodium vapour and mercury.

  • Electronic products and their components.

In addition, medical waste must be disposed of under more restrictive rules (National Solid Waste Policy).

Penalties

See above, Prohibited activities. For regulation of reverse logistics, the authorities are still determining the specific sanctions for non-compliance with the National Policy for Solid Waste.

 

Asbestos

13. What is the regulatory regime for asbestos in buildings?

Prohibited activities

Federal Law No. 9,055/1995, regulated by Federal Decree No. 2,350/1997, provides for the extraction, processing, use, sale and transportation of asbestos, and prohibits certain uses of it, such as fibre powder in bulk and fibrespray.

In the State of São Paulo and several other states, for example, any manufacture of materials containing asbestos is prohibited under State Law 12,684/2007. However, the constitutionality of this ban is currently being litigated before Brazil's Federal Supreme Court.

Main obligations

See above, Prohibited activities.

Permits and regulator

See above, Prohibited activities. Environmental agencies (federal, state and municipal), and health and labour agencies are responsible for regulation depending on the level of impact and type of relevant industry.

Penalties

In the State of São Paulo, for example, the use of asbestos in any form is an administrative breach subject to, among other things, warnings and fines ranging from BRL184.40 to BRL184,400, and confiscation of products.

 

Contaminated land

14. What is the regulatory regime for contaminated land?

Regulator and legislation

Brazil's Federal Constitution and National Environmental Policy (Federal Law No. 6,938/1981) establish that civil liability of polluters is joint and several and does not require verification of actual fault. The mere demonstration of the damages caused and the existence of causal connection to the polluter's activity is sufficient for polluter liability.

Brazilian laws and regulations establish specific guidelines for the management of contaminated lands.

At the federal level, the management of contaminated areas is regulated by the National Environmental Council (Conselho Nacional do Meio Ambiente) (CONAMA) through Resolution 420/2009, which establishes general guidelines for environmental management of contaminated areas.

When substances that may cause risks to human health are detected, the relevant agencies must undertake actions to protect the exposed population (Article 17, IV, Conama Resolution No. 420/2009).

In addition to the general rules established by federal law, states may also enact specific regulations regarding environmental management of contaminated areas.

In this regard, the States of São Paulo and Minas Gerais have enacted laws and regulations (São Paulo, State Law No. 13, 577/2009; Minas Gerais, Deliberative Resolution No. 116/2008) that protect soil quality and provide for management of contaminated areas. Other states have similar legislation.

In addition, the acquirer of a property where activities took place, or continue to take place, that are damaging to the environment automatically undertakes to redress any environmental damages or adverse impact that has been left by the property's seller, regardless of how it was acquired.

Investigation and clean-up

The owner of a property that contains soil that was contaminated by hazardous materials must clean the soil and underground water, which may be costly. However, if an owner is found liable, he can exercise his right of recourse against the party from whom he acquired the land if he can show that the pollution occurred before the acquisition.

Environmental agencies and other entitled parties (Public Attorney's Office, NGOs or individuals) can demand that responsible parties clean up lands by requesting relevant assessments and a remediation plan that can achieve safe standards for soil quality and underground water.

Penalties

The penalties for environmental crime include imprisonment of one to four years, and a fine. There is also an administrative penalty, with fines that vary from BRL5,000 to BRL50 million depending on the extent of the damage.

 
15. Who is liable for the clean-up of contaminated land? Can this be excluded?

Liable party

The owner of property containing soil contaminated by hazardous materials must clean up the land.

The parties that may be jointly responsible for the prevention, identification and remediation of a contaminated area include:

  • The party that caused the contamination, and its successors.

  • The owner of the contaminated area.

  • The landowner.

  • The party having actual possession.

  • Anyone who directly or indirectly benefits from the use of the area.

Owner/occupier liability

The owner of property containing contaminated soil is liable for environmental damages related to it, regardless of fault.

Previous owner/occupier liability

A previous owner/occupier is only liable for environmental damages that it caused.

Limitation of liability

There is no limitation on liability due to its strict and joint nature. However, in cases featuring multiple polluters, the execution of a conduct adjustment term may establish divided responsibilities among the parties. The conduct adjustment term is an agreement to stop environmental degradation and remediate the affected area (which can include compensation) signed between the wrongdoer(s) and either:

  • The relevant environmental authority.

  • The Public Attorney’s Office.

An adjustment can occur to avoid either:

  • Imposing of an environmental penalty.

  • Filing of a Public Civil Action (Ação Civil Publica, which is similar to a class action).

 
16. Can a lender incur liability for contaminated land and is it common for a lender to incur liability? What steps do lenders commonly take to minimise liability?

Lender liability

A lender to the owner or holder of contaminated land can be liable for environmental damage under strict and joint liability as set out in Article 14(1) of Federal Law No. 6,938/1981. It is common for a lender to incur liability jointly with the land owner or land holder.

Minimising liability

To minimise environmental liability, the lender may supervise the holders' activity, and require contractually that the lender will be free of all environmental liabilities (this does not exclude strict and joint liability, but ensures a right of redress). Previous periodic technical audits performed by the lender, owner and occupiers, and good operational practices, may strongly reduce risks of contamination and, therefore, of liability.

 
17. Can an individual bring legal action against a polluter, owner or occupier?

Any party can bring legal action against a polluter, owner or occupier in relation to environmental damages caused to itself or to its property. Class actions can only be brought when there is damage to public property, heritage, administrative improbity or fault that resulted in environmental damage.

 

Environmental liability and asset/share transfers

18. In what circumstances can a buyer inherit pre-acquisition environmental liability in an asset sale/the sale of a company (share sale)?

Asset sale and share sale

Environmental liability is strict and joint, and does not depend on the establishment of fault. Environmental liabilities resulting from either a share or asset sale depend on each case and on the terms of the purchase agreement. However, both parties may be held liable as against third parties as environmental legislation provides that the corporate veil of the corporate entity may be disregarded (pierced) when there is an obstacle to environmental recovery. Therefore, either for the purposes of joint and strict liability or any fraud using the corporate structure that aims to avoid the recovery of damages, other parties in these transactions (such as seller, purchaser or shareholders) may be considered liable for environmental risk.

 
19. In what circumstances can a seller retain environmental liability after an asset sale/a share sale?

Environmental law establishes standards for environmental quality and rules for environmental protection that must be respected by parties that are sources of pollution. Violation of these standards and rules are subject to administrative, civil and criminal penalties.

In the case of an asset or share sale, the seller retains environmental civil liability if environmental damage is demonstrated and the existence of a causal connection to the seller's activity is established. In addition, the seller can be responsible for administrative penalties, if applicable, for any environmental damage caused during the seller's activities.

The liability of the seller is set out in the agreement governing the asset/share sale. As a general rule, the seller will indemnify and hold the purchaser harmless against any losses arising out of acts, facts or omissions that occurred before the closing date, including any environmental losses. However, depending on the circumstances of the transaction, the parties may also agree that the seller is not liable for any losses of the purchased company/assets in connection with acts, facts or omissions that occurred before the closing date.

 
20. Does a seller have to disclose environmental information to the buyer in an asset sale/a share sale?

Asset sale and share sale

There is no legal provision determining disclosure of environmental information in connection with an asset or share sale. However, it may be possible to argue that to the extent that the seller is aware of the existence of an environmental risk, that information will be disclosed under good faith principles under the Brazilian Civil Code. However, this will depend on the circumstances on a case-by-case basis. Typically, the acquirer requests the information during the due diligence phase.

In public offers, the seller must disclose environmental information in the relevant offering memorandum to the buyer.

 
21. Is environmental due diligence common in an asset sale/a share sale?

Scope

Environmental due diligence is common in an asset or a share sale. Many activities, and especially those connected to potentially polluting activities, may create environmental issues that should be reviewed in a legal due diligence investigation given that liability is joint and strict in Brazil.

If shares are being sold, a more rigorous environmental analysis should be carried out to review the company's full environmental history. If only assets are sold, the due diligence is focused on the specific assets (land or the physical plant) to determine any risks related to the assets that may be transferred to the purchaser.

Types of assessment

Environmental lawyers are not licensed to perform any kind of technical assessment, although they can review technical reports prepared by skilled technicians.

Environmental consultants

It is highly advisable to have environmental consultants assist in the acquisition of assets or shares related to a potentially polluting activity. These experts undertake technical due diligence that, together with legal environmental auditing, help the purchaser evaluate environmental risks that affect how the transaction is valued and related risks.

 
22. Are environmental warranties and indemnities usually given and what issues do they usually cover in an asset sale/a share sale?

An environmental representation is commonly given by the seller in connection with an asset/a share sale. Generally, the wording of this particular representation covers the following:

  • Compliance with environmental laws.

  • The existence and validity of all environmental licences.

  • The non-existence of any environmental liabilities.

  • The non-existence of any claims in connection with environmental matters.

Other specific issues may be addressed depending on the nature of the activities carried out by the acquired company/asset.

 
23. Are there usually limits on environmental warranties and indemnities?

The sellers' indemnification for environmental matters is usually subject to certain limitations (for example, a cap, basket, minimums or a time limit). However, the precise nature of the indemnification depends on the circumstances of each transaction. If environmental liability is an issue with the acquired company/asset, any indemnification will likely be subject to limitations.

 

Reporting and auditing

24. Do regulators keep public registers of environmental information? What is the procedure for a third party to search those registers?

Public registers

Environmental protection agencies (federal, state and municipal) must keep public registries of certain environmental information, such as permits and impact assessments. Other information, such as registers of contaminated properties (if any), can be disclosed to the public if they are already public records with the environmental agency (such as in the State of São Paulo).

Third-party procedures

Generally, third parties may have to formally request to search these registers even if they are not considered confidential. Only those proceedings that involve technological or economic confidential data are given confidential treatment.

 
25. Do companies have to carry out environmental auditing? Do companies have to report information to the regulators and the public about environmental performance?

Environmental auditing

No federal law provides a general obligation to perform mandatory environmental audits. Only CONAMA, which is a deliberative council connected to IBAMA, enacted Resolutions 306/2002 and 381/2006, which provide for one mandatory type of audit that is specific to the oil and gas industry. Other industries need not carry out internal and independent audits.

The Brazilian Constitution provides that, in the absence of general guidelines determined by federal laws, the states possess full authority to issue laws. For compulsory audits, some states (Parana, Rio de Janeiro) have enacted laws that regulate compulsory audits.

 
26. Do companies have to report information to the regulators and the public about environmental incidents (such as water pollution and soil contamination)?

It is mandatory that legal entities and individuals report information to the environmental protection agencies regarding environmental incidents, especially when they result in risks to human health or significant risks to the environment.

There are specific rules applicable to some sectors that provide for specific procedures to communicate accidents to the authorities, such as the transportation of hazardous products, and the oil and gas industry. Appropriate authorities must be promptly notified by the responsible party if an accident occurs that may impact public health.

 
27. What access powers do environmental regulators have to access a company?

Environmental protection agencies have full authority to inspect sites and access documents related to environmental aspects of an activity. Any opposition to inspection demanded by authorities is considered an environmental breach, and also a crime under Law No. 9,605/1998.

 

Environmental insurance

28. What types of insurance cover are available for environmental damage or liability and what risks are usually covered? How easy is it to obtain environmental insurance and is it common in practice?

Types of insurance and risk

Insurance companies can offer any type of coverage, including for environmental liabilities.

Obtaining insurance

It is recommended to check with the insurer what types of coverage are offered, taking into consideration the requirements of the interested party that intends to contract the insurance.

 

Environmental tax

29. What are the main environmental taxes in your jurisdiction?

Taxa de controle de fiscalização ambiental (TCFA tax)

The main environmental tax is the Environmental Inspection and Control Fee (Taxa de Controle de Fiscalização Ambiental) (TCFA), which is levied by IBAMA. TCFA relates to all potentially polluting activity that is subject to environmental licensing.

Tax liability

The party responsible for developing a potentially polluting activity is responsible for paying the TCFA.

Tax rates

Typically, TCFA rates vary from BRL200 per year to BRL10,000 per year for each plant or facility, depending on the size and polluting impact of the activity.

 

Reform

30. What proposals are there for significant reform (changes) or environmental law in your jurisdiction?

In 2012, a new Forest Code (Federal Law No. 12, 651/2012) was enacted, replacing the former forest code (Federal Law No. 4, 771/1965) and regulating, among other things, deforestation in protected areas. In addition, it is expected that Brazil's executive branch of government will issue specific regulations that may further modify the regulatory regime for deforestation and general environmental matters for rural areas.

The new forest code has been very much criticised as it provides for potential amnesty for deforestation that has already occurred in specific cases. In addition, it is considered to reduce environmental protection for natural resources (for example, permanent preservation areas (Áreas de Preservação Permanente) (APP) surrounding river courses) while expanding possibilities for human intervention in protected areas.

An example of environmental protection reduction brought by the new forest code is in relation to river margins (riparian areas), which are considered APPs. The old forest code set this protection areas up to 200 metres, depending on the width of the water course. However, the new Forest Code sets these areas at up to only 30 metres.

The new forest code is still being regulated by the federal government. There are controversial issues still pending between legislative and executive branches. The legislation may still be modified in the next weeks/months through provisional measures to be issued by the federal government.

This is a sensitive political matter involving environmentalists and landowners in a dispute that reflects the more general discussion about sustainable development, that is, economic growth versus environmental protection.

 

The regulatory authorities

Federal authorities

Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis (IBAMA)

Main activities. IBAMA carries out inspections, undertakes actions linked to the preservation of the environment, undertakes federal environmental licensing (including supplementary intervention in state environmental licensing) and oversees the use of natural resources.

W www.ibama.gov.br

Instituto Chico Mendes de Conservação da Biodiversidade (ICMBio)

Main activities. ICMBio carries out inspections and undertakes actions linked to the preservation of the environment related to federal conservation units. It also carries out environmental licensing within conservation units.

W www.icmbio.gov.br

Companhia Ambiental do Estado de São Paulo (CETESB)

Main activities. CETESB carries out inspections, undertakes actions linked to the preservation of the environment, undertakes actions linked to state environmental licensing and oversees the use of natural resources.

W www.cetesb.sp.gov.br

State authorities

The following carry out inspections, undertake actions linked to the preservation of the environment, undertake state environmental licensing and oversee the use of natural resources.

Fundação Estadual do Meio Ambiente (FEAM)

W www.feam.br (State of Minas Gerais)

Instituto do Meio Ambiente e Recursos Hídricos (INEMA)

W www.inema.ba.gov.br (State of Bahia)

Instituto Estadual do Meio Ambiente (INEA)

W www.inea.rj.gov.br (State of Rio de Janeiro)

Instituto Ambiental do Paraná (IAP)

W www.iap.pr.gov.br (State of Paraná)

Secretaria do Meio Ambiente e dos Recursos Hídricos (SEMARH)

W www.agenciaambiental.go.gov.br (State of Goiás)

Secretaria de Estado de Meio Ambiente do Pará (SEMA)

W www.sema.pa.gov.br (State of Pará)

Secretaria de Estado de Meio Ambiente do Mato Grosso (SEMA)

W www.sema.mt.gov.br (State of Mato Grosso)



Online resources

W www.ibama.gov.br

Description. This is an official website maintained by IBAMA that contains environmental information and legislation.

W www.icmbio.gov.br

Description. This is an official website maintained by ICMBio that contains environmental information and legislation.

There is no official website containing English-language translations.


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