Civil asset recovery in Brazil

Civil asset recovery

Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?

There is no such restriction.

In Brazilian law, criminal proceedings are separated from and independent of civil proceedings (article 935, Civil Code, and article 64, Criminal Procedure Code). However, after an unappealable judgment by the Criminal Court, the Civil Court cannot review findings of fact or identity of the agents in the same matter.

When the civil liability originates in a fact that must be solved in the Criminal Court, the civil proceeding can be issued a stay until the criminal proceeding (article 64, Criminal Procedure Code) is finished. When this is the case, the running of the limitation period is also suspended (article 200, Civil Code).

In which court should proceedings be brought?

All civil matters must be brought in state or federal courts.

Basically, federal courts have jurisdiction in cases of which the Union, a federal agency or federal government controlled company have an interest as plaintiffs, defendants, privies or interveners, with the exception of cases of bankruptcy, of occupational accidents, and of those subject to the electoral and labour courts (article 109, Federal Constitution).

State courts’ jurisdiction is residual. They are responsible for judging matters that do not fall within the jurisdiction of the federal, labour, electoral and military courts.

The Code of Civil Procedure (article 46) provides the general criteria for the geographical jurisdiction of civil courts. For ordinary proceedings, the court is that of the place where the defendant is domiciled. If the defendant’s domicile is unknown, the defendant can be sued in the plaintiff’s domicile.

Furthermore, when the defendant does not have domicile or residence in Brazil, the lawsuit shall be brought in the venue of the plaintiff’s domicile and, if the plaintiff is also resident outside Brazil, the lawsuit can be brought in any venue (article 46, paragraph 3, Civil Procedure Code).

For claims related to civil reparation, the competent court is the location of the act or the fact giving rise to the action (article 53, IV, a, Code of Civil Procedure).

In contract disputes, when there is a mandatory venue clause, the parties shall bring the proceeding in the court required by the clause (article 63, Civil Procedure Code).

What are the time limits for starting civil court proceedings?

The limitation to sue for civil proceedings varies according to the subject matter of the claim and can be up to a maximum of 10 years (article 205, Civil Code).

Most claims become time-barred after three years (article 206, paragraph 3°, Civil Code), such as civil reparation and restitution of profits received in bad faith. In Brazilian law, as it has been established on many precedents, the three-year limitation for damages in contract disputes is restricted to the damages arising out of a breach of contract. The contractual obligation in itself is time-barred after a five-year period.

Unpaid amounts expressly stated in a contract fall under the collection of liquid debts in a public or private legal document (article 206, paragraph 5, I, Civil Code), which has a five-year limitation.

The limitation is counted from the date the plaintiff knows or could have known the facts. Specific events can determine either the suspension of the period or its renewal (only once in the latter case).

In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?

Civil law disputes are decided by the state courts or federal courts, depending on the matter discussed and the parties involved in the litigation.

Defendants may challenge jurisdiction or venue of the court where litigation is filed, requesting an absolute lack of jurisdiction (in the case of public interest) or a relative lack of jurisdiction (in the case of private interest).

The absolute lack of jurisdiction can be argued at any time, whereas the relative lack of jurisdiction may only be requested as a preliminary objection on its statement or defence (article 64, paragraph 1, Civil Procedure Code).

Once the other party is heard, the judge shall immediately decide the preliminary objection. In the case of an absolute lack of jurisdiction, the judge may decide on his or her own initiative.

Should the challenge be accepted, the decisions rendered by the prior court shall be preserved until new ones are rendered (article 64, paragraph 4, Civil Procedure Code).

What is the usual time frame for a claim to reach trial?

The time frame for a claim to reach trial depends on a variety of factors, such as the court in which the case is pending, the proceeding class and the possibility of appeal.

Nevertheless, on average, according to the National Justice Council of Brazil (CNJ), the length of civil trials in state courts is 30 months and in federal courts is 28 months for first instance decisions. Appeals will usually be judged within eight months in state courts and 23 months in federal courts.

Some states resolve matters faster than others. For instance, the average time frame of the State Court of Rio de Janeiro is 18 months, whereas in the State Court of São Paulo the cases remain pending for around 16 months.

What rules apply to the admissibility of evidence in civil proceedings?

Brazilian law relies on the free evaluation of evidence by the judge, but the court has to provide reasons to establish a conviction.

Article 369 of the Code of Civil Procedure states that the parties have the right to employ all legal, as well as morally legitimate, means to prove the truth of the facts on which the claim or the defence is based, such as oral evidence, material evidence and experts’ reports, including evidences produced in another claim (article 372, Code of Civil Procedure).

Additionally, in Brazil there is no US-style discovery or Norwich Pharmacal order. To obtain evidence before the beginning of a trial, the party must indicate precisely each document sought and demonstrate the purpose of the required evidence. It is called an ‘anticipated evidence production’ provision.

In all cases, the defendants (or third parties) are personally summoned to respond before the judicial order and, if the other party remains silent, the facts stated by the applicant are presumed to be true and correct (article 344, Code of Civil Procedure).

What powers are available to compel witnesses to give evidence?

Summoned witnesses must appear before the court at the appointed day and time. When a witness does not appear at the court hearing without a justified reason, the expenses for postponing the hearing are her responsibility, and the court shall issue a warrant ordering a witness to be brought to court with police cooperation, if necessary.

Witnesses must take an oath to tell the truth about what they know regarding what is asked, otherwise they may face charges for the crime of false testimony.

What sources of information about assets are publicly available?

The following information about assets are publicly available (in some cases, it may require a fee payment) (the list is non-exhaustive):

• Real estate registration: deeds registry, distributed in the Brazilian municipalities, maintains public records and documents about real estate property rights. In addition, general information about rural properties can be obtained on INCRA’s website (a federal agency).
• Vehicle registration: land vehicles and motorcycles are registered and supervised by the Department of Transportation (DETRAN), an executive state branch agency. Almost all states provide online information about vehicle ownership history and vehicle debits information.
• Aircraft registration: National Civil Aviation Agency) (ANAC) provides certified information about civil aircraft with Brazilian nationality. The publicly available information includes ownership of aircraft (including negative certificates), registration certificates and aircraft details.
• Limited liability companies ownership: the Brazilian Internal Revenue Service discloses information of registration, corporate status and ownership structure of companies. Also, in the Commerce Registry, amendments to the articles of incorporation of companies are publicly available.
• Publicly traded companies’ financial data: through the Securities Exchange Commission of Brazil (CVM) it is possible to obtain online information about financial data of publicly traded companies.

Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?

The Code of Civil Procedure states that the court may allow the usage of evidence produced in another lawsuit (article 372). Consequently, records concerning lawsuits may be obtained, except in case of a gag order.

If the desired information and evidence are not public, it is necessary to request the court to order the regulatory agencies to provide the information.

How can information be obtained from third parties not suspected of wrongdoing?

Third parties can be summoned in any lawsuit to inform courts about facts and circumstances of which they may be aware or reveal documents that may be in their possession.

In case of refusal to cooperate, the court may determine levying of a fine, and other persuasive, coercive or injunctive measures (article 380, Code of Civil Procedure).

If a litigant needs to obtain access to documents before filing a lawsuit, a claim may be filed requesting the presentation of a specific document by another litigant or a third party (no ‘fishing expedition’ is admitted), explaining the purpose for which they are being sought.

The judge will not admit any refusal of the other party when:

• the party has a legal obligation to disclose the documents;
• the party makes reference to the document as a means of evidence; and
• the document is considered ‘common’ to the parties.

What interim relief is available pre-judgment to prevent the dissipation of assets by, and to obtain information from, those suspected of involvement in the fraud?

In special circumstances, when there are indications of fraud and dissipation of assets, a interim relief may be requested to freeze assets to guarantee future execution.

Generally, interim remedies are granted in cases when the party’s right is at risk of being lost before the final award is given (urgency). Even if there is no risk of loss, some relief may be granted when there are elements that prove the probability of the alleged claim.

Also, interim reliefs may be granted when there is abuse of the right of defence, and the party demonstrates clear intentions of delaying the proceedings, or when the complaint produces sufficient documental evidence of the facts that constitute the plaintiff’s right. However, in all cases, the alleged right may be challenged at a later stage in the proceedings.

At any time, provisional remedies may be revoked or modified while the lawsuit is pending, provided that the judge clearly and precisely states the reasons for the order.

How do courts punish failure to comply with court orders?

Non-compliance with a judicial order is a serious offence and defined as a crime under the Criminal Code (article 330). This crime is punished with imprisonment of up to six months and a fine.

Furthermore, in civil proceedings, courts may establish fines, which can be increased when the party seems to have no motivation to comply with the judicial order.

How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?

Information located in foreign jurisdictions may be obtained through direct assistance, letters rogatory (based on the Code of Civil Procedure or on the Inter-American Convention on Letters Rogatory, if applicable), and letter of request, pursuant to the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, to which Brazil is signatory.

Direct assistance is appropriate to obtain procedural claims of a foreign entity, such as information regarding legal system and administrative or court proceedings, whether pending or finished, to gather evidence, unless the measure is adopted in proceedings abroad, which is the exclusive competence of a Brazilian judicial authority, and any other judicial or extrajudicial measure not prohibited by Brazilian law.

Additionally, the 1970 Hague Convention regulates the procedures for requesting letters rogatory to obtain evidence or to perform some other judicial act. These letters are sent directly to the Central Authority of the other state, which will transmit them to the competent authority.

Brazil is also a member of the Inter-American Convention on Letters Rogatory. In general, this convention applies to letters rogatory issued in conjunction with proceedings in civil and commercial matters that have purposes such as service of process, summonses or subpoenas, or taking of evidence and the obtaining of information.

These letters rogatory are transmitted through judicial channels, diplomatic or consular agents, or the central authority of the states. Whenever letters rogatory are transmitted through consular or diplomatic channels or through the Central Authority, legalisation shall not be required.

In Brazil, the Ministry of Justice, through the Department of Asset Recovery and International Legal Cooperation (DRCI) of Brazil, operates as the competent authority for the exchange information and acts as an intermediary for providing judicial assistance. The DRCI is an agency responsible ofor reporting public politics and coordinating the recovery of assets, international legal cooperation, as well as the prevention and fight against money laundering and transnational organised crime.

What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?

Brazil will assist foreign courts in asset recovery proceedings through direct assistance, letters rogatory (based on the Code of Civil Procedure or on the Inter-American Convention on Letters Rogatory, if applicable), and letter of request (based on the 1970 Hague Convention).

As stated in question 13, the 1970 Hague Convention allows private litigants to seek evidence from another participating jurisdiction for use in judicial proceedings. This allows courts in other jurisdictions to send requests directly to the DRCI.

For requests of non-member countries of the 1970 Hague Convention and the Inter-American Convention on Letters Rogatory, if the request does not fulfil the direct assistance requirements, cooperations will be exercised through the use of letters rogatory based on the Code of Civil Procedure (if there is no other bilateral agreement between the two states).

A regular letter rogatory will only be enforceable in Brazil after the grant of exequatur, carried out by the Superior Court of Justice. In the event the exequatur is granted, the letter rogatory will be handed over to the appropriate court for enforcement.

What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?

The main causes of action in civil asset recovery cases are the following:

• breach of a contract;
• fraud and fraudulent transfer;
• proprietary claims; and
• directors’ and officers’ misappropriation of company funds.

What remedies are available in a civil recovery action?

Under the Civil Code and the Civil Procedure Code, restitution, damages and seizure are common types of remedies available in a civil recovery action.

Can a victim obtain a judgment without the need for a full trial?

A victim can obtain a judgment without the need for a full trial, typically by obtaining either a default or summary judgment.

In a default judgment, the facts stated by the claimant are presumed to be true and correct (article 344, Code of Civil Procedure). Judgment for the plaintiff does not, however, follow automatically. The default does not produce any effects if the dispute deals with inalienable rights, if the complaint is not accompanied by an instrument considered by law to be indispensable evidence of the act and if the facts appear to be untrue or contradictory. The defaulting party may intervene in the proceedings at any stage, in whatever state it may be found.

Summary judgments are also allowed when the matter involves only a question of law and when there is no need to produce further evidence.

What post-judgment relief is available to successful claimants?

Successful plaintiffs may obtain freezing orders from the court during the trial stage and after a judgment, when there is danger that a judgment will be wholly or partly unsatisfied.

To prevent the dissipation of assets, the post-judgment relief may be enforced through provisional attachment, sequestration, attachment lien on assets, and the lodging of a protest against the alienation of property.

What methods of enforcement are available?

A money judgment may be enforced through compulsory conveyance of property from the judgment debtor to the judgment creditor, alienation and appropriation of gains and revenues of a company.

The enforcement proceeding shall be conducted by the following methods:

• Writ of execution: the judgment debtor shall be served with process in order to pay the debt. If the voluntary payment is not made in a timely manner, a writ of execution and appraisal shall be issued.
• Charging order: the judgment creditor may obtain a certificate attesting that the execution was admitted by the judge, with the identification of the parties and the value of the claim, for the purpose of making amendments in the records of the deeds registry, the Department of Transportation, or other assets subject to levy of execution, provisional attachment or freezing.
• Electronic judicial asset freezing: judges may issue asset freezing orders through the electronic system of the Central Bank of Brazil, called BacenJud, which expedites requests to pledge money directly into the debtor’s bank account.

Assets that cannot be levied or sold shall not be subject to execution, such as salaries, retirement pensions, earnings of self-employed workers and professional fees, life insurance and small rural properties, among others (described in article 833 of Code of Civil Procedure).

What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?

Lawyers usually charge a fixed fee per event (eg, pleadings, evidence, appeal) plus a success fee (to be paid when there is a positive outcome). Although not usual in Brazil, there are no restrictions on different funding arrangements to be made between lawyers and clients.

Judges may influence the cost of litigation when determining the value of the cause - which is used to calculate litigation taxes. The court shall also fix a percentage of condemnation to be paid as lawyers’ fees by the defeated party - which can be from 10 to 20 per cent, according to article 85 of the Civil Procedure Code.