Article | Draft Bill No. 1,179/2020 – A compass for Brazilian Private Law during Covid-19?

Senator Antonio Anastasia, Senate’s Vice-President, has submitted on March 30, 2020, a Draft Bill (“Projeto de Lei”) providing an emergency and temporary legal regime for private law relations during the Covid-19 pandemic in Brazil.

Draft Bill No. 1,179/2020 does not change any existing legal rule but suspends the effectiveness of some.

This Draft Bill was based on an initiative from the Supreme Court Justice Dias Toffoli that has coordinated a group of legal experts and it seems that the purpose of the Draft Bill is to provide some level of legal certainty in a probable scenario of contractual breaches and/or default and the consequent massive increase in litigation between the involved parties.

In summary, the Draft Bill establishes, among others, that:

(i)    March 20, 2020 will be the beginning of the Covid-19 pandemic. This date is a dividing line for legal relations since they will have a differentiated treatment, mostly due to the unpredictability argument;

(ii)   Statute of Limitations are suspended until October 30, 2020;

(iii)   Legal entities shall avoid presential meetings;

(iv)   Inflation, change in the exchange rate, devaluation or substitution of the monetary standards will not be considered to be unpredictable facts for the purposes of contractual review or termination;

(v)   Under Consumer Law, the term of seven (7) days for a consumer to exercise his/her right of regret is suspended;

(vi)   If the lawsuit is filed as of March 20, 2020, Courts cannot order the eviction of tenants until December 31, 2020.

(vii)   Brazil’s data protection law (“LGPD”) entry into force will be postponed; and

(viii)   Agricultural contracts can also be postponed.

The Bill’s intention is commendable. It does not encourage the suspension of the parties’ obligations under the contract, quite the opposite. It aims to ensure that contractual relationships will endure without the need for the parties to resort to court or arbitration.

Since Brazil is an extremely litigious country, it is possible that the Covid-19 pandemic will be used as a general “excuse” for contractual breach and/or default, initiating a great number of disputes. Currently, the wording of Section 393 and 478 of the Brazilian Civil Code is very broad, therefore opening space for the COVID-19 crisis to be construed as a force majeure event and, ultimately, leading to the rebalance of contracts in general or even allowing a court to terminate the contract.

The Draft Bill awaits approval from the Legislative Branch.

As the Bill still must be approved by the Senate and further on by the Chamber of Deputies, the comments that are addressed in this Article may suffer changes or even be excluded by the final wording of the law.