Dear friends and clients,
we hope everyone is well and healthy. Here are some interesting articles from the legal world.
The first article in this edition deals with “Unilateral termination of an agreement for services for a fixed term”, which brings a reflection of how something that appears to be simple may conceal an important contingent liability.
In the article “Brazil signs the Singapore Convention on Mediation”, we highlight some relevant points.
In the article on “Data Protection Officer (DPO) in Brazil”, we warn about the obligation of all companies to appoint a personal data controller, also known as a Data Protection Officer (DPO) by European law.
Good reading! The Stüssi-Neves team is at your disposal for any further explanation you may require.
With kind regards,
Gustavo Stüssi Neves
Agreements involving the provision of services are entered into every day and there are countless models for this type of contract, which are used in day-to-day business.
It so happens that, precisely because they are so commonplace, the contracts are frequently adapted to the specific needs of each business, which leads to a number of distortions and technical improprieties, culminating in the generation of certain risks, which go unnoticed at the time of formalization of such contracts.
One of these situations, frequently observed, is the provision for the possibility of unilateral and unjustified termination of contracts for a fixed term, free of any penalty. Thus, it is common to see clauses establishing that either party may put an end to the relationship, at any time, simply by communicating their decision to the other party, often the only obligation being to give a certain period of notice, without the need to respect the term initially established for such relationship.
This type of provision can lead the parties into real traps, since they are under the impression that the agreement may be terminated unilaterally without any consequences. However, many jurists take the view that premature termination without cause always entitles the innocent party to compensation, as provided in the Civil Code, in articles 602 and 603, as follows:
Art. 602. A service provider hired for a fixed period of time, or for a specific job, cannot take leave of absence or quit without cause, before the time has elapsed or the work has been concluded.
Sole paragraph. If he quits without cause, he shall be entitled to payment for the work done. but shall be liable for damages. The same shall occur if he is dismissed for cause.
Art. 603. If the service provider is dismissed without cause, the other party shall be obliged to pay him in full for the work done, and one half of the amount that would be due from then until the end of the contractual term.
The Brazilian courts have not yet reached a unanimous position on the matter, and the Superior Court of Justice is in fact currently discussing the need to determine (i) whether a clause in an agreement for services for a fixed term, authorizing unilateral termination with a waiver of any type of indemnity, is legal, provided there is prior notice from the other party, and (ii) whether the party that enters into this type of legal transaction, agreeing to an express clause waiving any indemnity in the event of unjustified and premature termination, is guilty of contradictory behaviour (violation of objective good faith) if he seeks compensation in court.
Currently, there are many decisions that impose an obligation on the party that made the decision to leave the relationship prematurely to pay compensation, even if the contract expressly excludes any penalty or indemnity.
Accordingly, it is evident that something that appears to be simple may conceal an important contingent liability.
Thus, for as long as there remains no uniform opinion of the courts, it is recommended that the parties pay extra attention when entering into their contracts, and assess potential risks that may arise from a premature termination of relationships for a fixed term.
An alternative could be to enter into agreements for an indefinite term, with a provision for termination on giving a certain period of prior notice stipulated jointly by the parties, which may eliminate the risk of paying compensation on termination. However, the suitability of this alternative should be verified in each specific case with the advice of a legal professional, because even agreements for an indefinite term may give rise to additional obligations if, for example, the period of notice is not compatible with expectations created at the beginning of the term or investments made by the parties.
The discussion of termination of agreements for an indefinite term will be the subject of a future article.
Partner in the Civil Area – São Paulo
On June 4, 2021, Brazil became the 54th country to sign the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention), which came into force on September 12, 2020.
The Singapore Convention fills a notable gap regarding the cross-border enforcement of private agreements resulting from international mediation – a situation that hindered not only the strengthening of commercial relations between nations but also the prestige of the consensual method of non-adversarial dispute resolution.
The purpose of the Convention, like the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 1958) in the case of international arbitration, is to lend certainty and enforceability to written agreements arising from mediation in international trade matters.
Mediation, regulated in Brazil by Law no. 13.140/2015, the Code of Civil Procedure and Resolution No. 125/100 of the National Council of Justice, offers considerable advantages to the parties: confidentiality, reduced bureaucracy, speed, lower costs – as a rule, when compared to judicial proceedings and/or arbitration – and, finally, the possibility for the parties, with the help of the mediator, to reach a customized solution.
The adhesion of Brazil to the treaty in question, alongside such solid commercial partners as China, India and the United States, will only bring benefits from the economic point of view, notably because the parties and foreign investors will enjoy a greater degree of legal security in international trade mediation.
Despite the fact that Brazil has become a signatory – an act of manifestation of will by the representative of the State that considers a treaty approved – it is still necessary, in order that the Convention may effectively form part of the Brazilian legal system, to fulfill certain requirements: (i) approval by both houses of the National Congress, by means of a legislative decree, pursuant to art. 49, item I of the CRFB/88; (ii) ratification and promulgation by the President of the Republic, by means of a presidential decree; (iii) publication of the presidential decree in the Federal Official Gazette.
If these stages are confirmed, which may still take a few months, it is expected that Brazil, already considered an arbitration-friendly country, will go a long way towards the promotion of a non-adversarial culture, becoming a reference, in the near future, in the use of consensual methods of resolving disputes.
Matheus Araujo Oliveira and Thiago Stüssi LL.M. (Berlin)
Associate lawyers in the Civil Area – Rio de Janeiro
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The personal data controller is a person appointed by the company who basically will be responsible for the communication between the latter, the subject of the personal data and the ANPD (National Data Protection Authority), which oversees compliance with Law no. 13.709/2018, the General Law on Personal Data Protection (LGPD).
Article 41 of the LGPD obliges all companies to appoint a personal data controller, also known as a Data Protection Officer (DPO) by European law.
For the time being, there are no exceptions to the rule referred to in the previous paragraph, although the matter is already the subject of public consultation, for the exemption of small data processors, such as micro-enterprises, small businesses, startups and non-profit legal entities, natural persons and unincorporated entities. If these small processors do not appoint a controller, an obligation at least to provide a channel for communication with the data subject is also under consideration.
Note that this exemption applies only to the data controller. The LGPD will not cease to apply to small data processors.
The ANPD has not completed this public consultation and therefore its opinion has not yet been released.
What does a DPO do? According to the paragraphs of article 41, the DPO is responsible for: 1) accepting complaints and communications from data subjects, providing explanations and taking appropriate action; 2) receiving communications from the national authority and taking appropriate action; 3) advising the entity’s employees and collaborators on the practices to be followed with regard to the protection of personal data; and 4) performing the other duties determined by the controller or established in supplementary regulations.
Is it possible to outsource the control of personal data in Brazil? The LGPD does not prohibit outsourcing of the data control. Therefore, it is not obligatory that the controller be an employee of the company.
Accordingly, since it is possible to hire an external DPO, the employees can focus on the company’s core business, without being overburdened or even distorting their employment contracts, which could give rise to legal consequences, such as the payment of additional compensation for deviation from their original function or dual activity.
Logically, hiring a DPO, as a regular employee of the company, is justified when the company’s size and volume of data processing is so significant as to warrant this person’s dedication exclusively to this function.
The Brazilian Bar Association, in response to Consultation no. E-5.537/2021, has authorized lawyers to exercise officially the activities of DPO.
Penalties for non-compliance with the LGPD, which includes absence of a controller, have been in force since the beginning of August 2021, including fines of up to R$50 million, in addition to compensation for property, moral, individual or collective damage.
The Stüssi-Neves Advogados team is at your disposal for any additional explanation regarding this matter.
Fernando Seiji Mihara and Maria Lúcia Menezes Gadotti
Anwalt and Partnerin des arbeitsrechtlichen Bereichs – São Paulo
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