Civil liability

Primary liability

What civil law causes of action are available against businesses for human rights abuses?

Beside criminal prosecution and international law measures, human rights abuses committed by businesses may also give rise to causes of action for both civil liability claims and injunctions before Brazilian courts, which may be filed jointly or singly in accordance with the victim’s choice or need.

Concerning civil liability claims in Brazilian law, the available causes of actions are allocated in two branches.

  • Contractual liability: the breach of contractual obligations may be a cause of action applicable to contractual parties for civil liability claims against businesses that committed human rights abuses within contracts. In the case of breach of a contractual obligation, the injured party can choose between claiming the termination of the contract or the enforcement of specific performance, without prejudice to claim, in any case, compensation for damage, provided that the damage has a direct causal link with the contractual breach; and
  • Torts liability: acts or omissions that gives rise to injury or harm to another (ie, torts) may be a cause of action for civil liability against businesses applicable to any person or entity that incurs damages caused by human rights abuses committed by those businesses. As a rule, cause of action for tort liability requires intent or negligence of the wrongdoer, except for specific hypotheses expressly provided by law in which the intent or negligence is not required (eg, liability claim against employers for employees’ torts). Furthermore, there are three cumulative elements required for the establishment of tort liability:
    • the practice of an unlawful conduct (act or omission);
    • damage to the injured party; and
    • direct causal link between the unlawful act and the damage.

 

For both contractual and tort liability, Brazilian law allows the injured party to pursue civil liability claims to remedy the harm suffered in the form of monetary compensation, which should be awarded according to the extent of the loss and damages effectively suffered. Brazilian law does not provide for compensation for remote or speculative damages and does not allow the award of punitive damages. In Brazil, both financial and moral damages, as well as individual and collective damages, can be compensated through civil liability.

Concerning injunctive claims in Brazilian law, the available cause of action for injunctions in Brazil is the probability of the right claimed plus the risk of irreparable damages or risk to the useful outcome of the proceeding. If a person or entity has a claim concerning continuous human rights abuses committed by businesses, it may file an injunction requesting the court to compel the wrongdoer to cease an activity before an unlawful conduct causes harm, preventing irreparable damage in the future. In another example, it is possible to file an injunction aiming to block the wrongdoer’s assets or cease any of the wrongdoer’s conduct oriented to frustrate a future award. In any case, considering the preliminary nature of an injunction, the requested measure must be reversible to be granted.

Before a lawsuit for civil liability or injunction concerning human rights abuses committed by businesses, the accused party will be able to present its defence as in any other lawsuit or injunction filed under Brazilian law: respecting the due process of law and the contradictory procedure. Brazilian procedural law does not provide for any special proceedings concerning civil liability for human rights matters; therefore, the accused party will have the right to present its answer to the civil liability claim, denying the claimant’s allegations and, if needed, presenting counterclaims.

Moreover, the defendant may evoke one of the Brazilian law hypotheses of exclusion or reduction of civil liability:

  1. the wrongdoer was acting in self-defence;
  2. the wrongdoer was acting for extreme necessity; or
  3. the wrongdoer was acting in regular exercise of a right.

 

A harmful act may not be considered illicit if the wrongdoer was acting to repel imminent danger to him or herself or to another (item (1) or (2)), or within the limits imposed by law (item (3)). A fourth hypothesis of exclusion or reduction of civil liability relies on the victim’s negligence or culpability, which is when the defendant argues that the injured party was exclusively or partially responsible for the conduct (act or omission) that led to the causation of the damages claimed.

Regarding environmental matters, both direct and indirect polluters are liable for repairing or indemnifying the damage caused to the environment and to third parties affected by their activities, regardless of fault. To hold anyone liable for environmental damage, it is enough to prove the actual damage and the chain of causation between it and the activity of the polluter.

Director and officer liability

In what circumstances and to what extent are directors and officers of businesses subject to civil liability for involvement or complicity in human rights abuses?

As a rule, directors and officers are not personally liable for a business’s actions; however, according to the Corporations Act, directors and officers are civilly liable (before the company and before third parties) for any harm or damage they cause:

  • through negligent or malicious conduct (acts or omissions) in their management of the company; or
  • by violating the law or the corporation’s by-laws, in misusing or exceeding the powers that were granted to them.

 

In some other exceptional situations, such as cases regarding tax or labour liability, officers may also be liable if, besides the circumstances mentioned above, the legal entity cannot honour its debts. In the case of environmental damage, officers involved are jointly and severally liable.

With regard to decisions of collegiate governance bodies, an officer may be able to exempt him or herself of responsibility if there is a record of the dissenting opinion in the minutes of a board meeting. On the other hand, however, an officer will be jointly and severally liable if he or she contributes to unlawful conduct of other officers, acting in connivance with them or, if despite being aware of the illicit conduct, he or she fails to prevent it from happening.

A party may file a civil liability claim against a director or an officer demonstrating the occurrence of the elements mentioned above. The accused party, on the other hand, may present his or her defence as an answer to the civil liability claim, denying the claimant’s allegations and, if needed, presenting counterclaims.

Piercing the corporate veil

When can the courts disregard the separate legal personalities of corporate entities within a group in relation to human rights issues so as to hold a parent company liable for the acts or omissions of a subsidiary?

In Brazil, corporate entities within a group are separate legal entities and, because of this, as general rule, the liability of parent companies for acts or omissions of their subsidiaries is exceptional.

For a court to order the piercing of the corporate veil of a subsidiary to reach its parent company (or vice versa), Brazilian law provides that the following requirements must be met:

  • abuse of the entity’s legal personality through conduct that can be classified as a violation of the law or fraud against creditors, which may be:
    • the misuse or deviation of the entity’s activities and purpose; or
    • improper mixture or confusion of the entity’s and the shareholder’s assets; and
  • request under lawsuit by the creditor or by the public prosecutor.

 

The Civil Procedure Law (Federal Law No. 13,105/2015) sets forth specific proceedings to pierce the corporate veil and disregard legal personality. The accused parent company must participate in the proceedings to pierce its corporate veil and must be able to present its defence in a contradictory procedure. Only with a favourable decision may the interested party be able to reach the parent company’s assets to compensate damages through civil liability claims.

Regarding environmental matters, the legal entity may be disregarded whenever its personality is an obstacle to the compensation of damage caused to the quality of the environment (Federal Law No. 9,605/1998). Nevertheless, the piercing of the corporate veil, although provided by legislation, has not been observed often in environmental damage claims, since the extension of the liability for environmental damage to the shareholders does not depend on it: it can be achieved through simply applying the joint and several liability regime, which is more efficient from the public authorities’ point of view.

Secondary liability

In what circumstances and to what extent can businesses be held liable for human rights abuses committed by third parties?

Brazilian law sets forth that no one is liable for a third party’s conduct. However, businesses may be held liable for third parties’ torts (including human rights abuses) in the following situations:

  • a specific hypothesis in which the law expressly imposes such liability (eg, the employer’s liability for employees’ or representatives’ unlawful conduct);
  • a hypothesis in which the company chooses its contractors and services providers negligently; and
  • a specific hypothesis in which the law imposes secondary liability for the harm caused (eg, the entities’ liability in the consumer supply chain they are part of (meaning businesses that are not part of the same corporate group, but that are operating together through contractual arrangements); the liability can be incurred for more than one debtor for the same obligation, with each one being independently liable for the full extent of the damage caused).

 

Apart from that, in Brazil, secondary liability only arises from the law or the contract and cannot be presumed.

A party may file a civil liability claim based on a third party's tort, demonstrating the occurrence of the above-mentioned liability circumstances. The accused party, on the other hand, may present his or her defence as an answer to the civil liability claim, denying the claimant’s allegations and, if needed, presenting counterclaims.

Regarding environmental matters, indirect polluters are liable for repairing or indemnifying the damage caused to the environment and to third parties affected by their activities, regardless of fault. To hold anyone liable for environmental damage, it is enough to prove the actual damage and the chain of causation between it and the activity of the polluter. In respect of the chain of causation, the Superior Court of Justice has established that:

 

one shall be considered liable if one: (i) causes the damage, (ii) has not done something that should have been done, (iii) allows someone to do it, (iv) does not care for having someone doing it, (v) finances someone to do it; or (vi) benefits when others have caused damages.

 

This precedent has been consistently reaffirmed by the Court, as well as by lower regional courts.

Additionally, regarding supply chains, there is specific legislation in the state of Sao Paulo providing the cancellation of state service tax registration of companies convicted of slave labour. Without state service tax registration, companies are not allowed to establish any commercial operations in the state.

Shareholder liability

In what circumstances can shareholders be held liable for involvement or complicity inhuman rights abuses?

As a rule, shareholders’ responsibility is limited to the issue price of subscribed shares held by each shareholder in the corporation. However, according to the Corporation Act, the controlling shareholder is civilly liable (before the company and before third parties) for any damage caused by the abuse and misuse of its controlling power.

Besides that, Brazilian law provides for the circumstances in which courts may exceptionally disregard the separate legal personality of a corporation to reach shareholders’ assets and compensate damages through a civil liability claim.

Law stated date

Correct as of

Give the date on which the information above is accurate.

6 February 2021.