On April 30, 2019 the Brazilian Federal government has enacted Provisional Measure 881 (“MP 881”), with the intention of boosting economic freedom and reducing bureaucracy. MP 881 reflects a liberal view of law. Not only it lifts several formalities for business activities, but it also changes key legal provisions in a pro-business manner, including stricter rules on piercing of corporate veil and more flexibility to set up certain corporate structures.
The MP 881 amended certain provisions of the Brazilian Civil Code to grant more legal security of contracts. As such, this new piece of legislation could be quite relevant for arbitrations subject to Brazilian civil and business law.
For instance, MP 881 changed article 421 of the Brazilian Civil Code, to set forth that, in agreements between private parties, the state intervention should be minimum, so that review of contractual provisions should be exceptional. This provision aims at addressing the fact that Brazilian courts sometimes adopt a broad interpretation of powers to review contracts.
For the same reason, a new art. 480-A was included in the Civil Code, to allow the parties to set forth objective parameters for requirements of review and termination of contracts.
A new article 480-B was also inserted, to establish that, in business transactions, one should assume that the parties had equal bargaining powers and their allocation of risks should be respected. This is to avoid interpretation against the weaker party in business deals and to curb judicial review of contracts.
Moreover, article 423 of the Brazilian Civil code was amended, to include the contra proferentem principle, according to which a contract should be interpreted against the offeror. This in line with international practice and treaties such as CISG on international sales of goods.
Provisional measures such as MP 881 have the same force of a law, but they produce effects only for 60 days (extendable for additional 60 days). During this period, the Congress can either (i) convert the MP 881 into law, as originally written or with amendments; or (ii) reject the MP 881, which would cease to produce effects retroactively.
