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Municipal regulation of individual private paid transportation of passengers

25 / 09 / 2018

On March 28, 2018, the Brazilian Federal Law n. 13.640 was sanctioned by the President and it has changed some articles of the Brazilian Federal Law n. 15.587/2012, which established the National Urban Mobility Policy (“NUMP”).

The new Law modified NUMP Article 4, subsection X, and has defined the individual private paid transportation of passengers as “paid service of passenger transportation, not open to public, to offer individual or shared journeys requested exclusively by users previously registered on apps or other networking platforms”.

NUMP’s own definition of the activity leads to concluding that it is not a public service, but an economic activity not monopolized by the State, because it is not open to public and it requires the previous register of passengers and drivers on the apps, in contrast to individual public transportation, which is open to public through rental vehicles (for example: taxis).

Articles 11-A and 11-B were also added to NUMP and they have established rules of jurisdiction to regulate and supervise the activity. These provisions determine that Municipalities and the Federal District are responsible for regulating and supervising the service and sets guidelines to guarantee its efficiency, efficacy and security. Besides, for the Municipalities that opt to regulate the activity, the Law imposes conditions that have to be observed by drivers, under penalty of characterization as illegal transportation of passengers.

During the voting on Brazilian National Congress of the then Draft Law n. 5.587, the Brazilian Senate proposed an amendment. The proposition was that Municipalities would no longer have jurisdiction to regulate private transportation, since this would be formally unconstitutional, as per Article 22, subsection IX, of the Brazilian Federal Constitution. However, the Brazilian Chamber of Deputies rejected the amendment, preserved the possibility of municipal regulation on the service and added that the Municipalities could limit the number of vehicles in operation[1].

Indeed, the subject matters provided for on Article 22 of the Brazilian Federal Constitution are the Union’s private jurisdiction, on which, as a rule, other federal entities cannot legislate. The exception is contemplated on such article’s sole paragraph, which provides that the States can be authorized by Complementary Law to legislate on these matters.

Among the subject matters on which only the Union may legislate are the “guidelines of the national policy of transportation” (subsection IX) and “traffic and transportation” (subsection XI). The Brazilian Supreme Court has already expressed their aversion to the possibility of States legislating about transportation of passengers, more specifically the transportation by motorcycle taxis, unless it is authorized by Complementary Law[2]. Furthermore, as also recognized by the Brazilian Supreme Court, the jurisdiction of Municipalities to legislate about local interest, provided for on the Article 30, subsection I, of the Brazilian Federal Constitution, does not authorize them to freely legislate about subject matters that the Brazilian Federal Constitution assigns privately to the Union[3].

Besides that, since individual private paid transportation of passengers is an economic activity, any restriction should be based on Law, as established on Article 5º, subsection II, and Article 170, sole paragraph, of the Brazilian Federal Constitution.

Therefore, eventual municipal regulation of this activity that extrapolates the limits of the – undetermined – concept of “local interest”, will be formally unconstitutional.

Because federal legislation establishes the activity as part of the NUMP, Municipalities cannot rule on its legality. Thus, since Law n. 13.640/2018 is excessively broad in scope, does not limit Municipalities’ regulatory power and imposes sanctions to companies, it unduly restricts the activity, challenging the free initiative established by the Brazilian Federal Constitution. Even worse: the restrictions could be different for each of the almost six thousand Brazilian Municipalities.

This was the case, for example, of the Resolution n. 16/2017 of the Municipal Committee for the Road System of São Paulo, which complements the Municipal Decree n. 56.981/2016. Floriano de Azevedo Marques Neto, the Director of the Law School of the University of São Paulo and Professor of State Law, has already criticized the mentioned Resolution because it would represent  “distortions and excesses of municipal regulation[4]. The Professor has considered that the rule exemplifies a regulatory excess from form to content, due to the fact that it imposes to drivers burdens without direct relation to the activity.

The critical analysis of this activity’s regulation is extremely relevant at this moment, considering the increase of using apps that offers it and its dispersion through the country. Instead of promoting the activity development, the choice of Public Administration seems to be an excessive regulation, which discourages the drivers, rises the rates and even results on legal uncertainty.

Notes and References

[1] Reporter Deputy Daniel Coelho’s opinion: “What is not allowed is a federal rule, unique, presuming that Brazil, which is huge, could have the same characteristics on North cities, Northeast cities, São Paulo or Rio de Janeiro. This is an issue of each Municipality. Some cities have huge taxis fleets and other have smaller ones. Thus, from the point of view of allowing Municipalities to regulate, I think there was a mistake on Brazilian Federal Senate and we should reject their proposal and permit the Municipality’s regulation. It is not this Plenary duty to make the decision of banning apps. The Municipalities have to discuss about limiting or not the vehicles’ numbers and about the rule layout. The Plenary duty today is to establish the basic items of regulation that guarantee the user’s security. This is the National Congress’ duty”.

[2] Brazilian Supreme Court: ADI 2.606/SC, Reporter Minister Maurício Corrêa, judged on 07 feb. 2003; ADI 3.136/MG, Reporter Minister Ricardo Lewandowski, judged on 10 nov. 2006; ADI 3.610/DF, Reporter Minister Cezar Peluso, judged on 22 sept. 2011.

[3] Brazilian Supreme Court: ARE 668285 AgR/RS, Reporter Minister Rosa Weber, judged on 12 jun. 2014; RE 596489 AgR, Reporter Minister Eros Grau, judged on 20 nov. 2009; RE 313.060, Reporter Minister Ellen Gracie, judged on 24 feb. 2006.

[4] MARQUES NETO, Floriano de Azevedo. Excessos da regulação paulistana sobre aplicativos de transporte. Available in https://www.conjur.com.br/2017-set-18/floriano-neto-excessos-regulacao-sp-uber-outros. Access in 24 sept. 2018.

CONTATOS:

Maysa Verzola
Partner of Litigation and Arbitration
maysa.verzola@cmalaw.com

Kamile Medeiros do Valle
Lawyer of Litigation and Arbitration
kamile.valle@cmalaw.com