LAW OFFICES CARL KINCAID MENDES VIANNA ADVOGADOS ASSOCIADOS. MARITIME INFRASTRUCTURE AND INVESTMENT OPPORTUNITIES IN BRAZIL BRAZILIAN-AMERICAN CHAMBER OF COMMERCE NEW YORK - NOVEMBER, 2008. SHIPBUILDING INDUSTRY IN BRAZIL – HISTORY & BACKGROUND.
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MARITIME INFRASTRUCTURE AND INVESTMENT OPPORTUNITIES IN BRAZIL
BRAZILIAN-AMERICAN CHAMBER OF COMMERCE
NEW YORK - NOVEMBER, 2008
SOURCE: Brazil/Scanbrasil – Offshore – The Brazilian Offshore Market – March 2008.
PETROBRAS - INVESTMENTS
TO BE CONTRACTED:
SOURCE: Navalshore Seminar. http://www.sinaval.org.br/navalshore2008.pdf. June 2008.
The Brazilian Government has a special program for the financing of the shipbuilding industry, which is funded by the Marine Merchant Fund and operated by the Brazilian Development Bank – BNDES, as main agent and lender, although other agents are also beginning to act, as Banco do Brasil.
THE LEGAL BENEFICIARIES OF THE FMM (art. 26 of Law 10.893/2004):
Brazilian Shipping Companies (“BSC”)
LEGAL REQUIREMENTS TO INCORPORATE A BSC:
The company can be fully controlled by foreigner investors, but the administrator should be a Brazilian citizen or a foreigner individual holding a permanent Brazilian visa.
The company can be incorporated as a corporation or as a limited liability company and it is mandatory to have an office located within Brazilian territory.
The shipping activity is regulated and controlled by Antaq (Federal Government Agency for Inland and Ocean Navigation). The Resolution 843 issued by Antaq states that to obtain an authorization to operate as a shipping company is necessary to fulfill the following requirements:
(i) own or bareboat a Brazilian flag vessel of the same type for a period of more than a year;
(ii) a minimum net worth of : (a) US$ 4,000,000.00 for high sea navigation; (b) US$ 3,000,000,00 for cabotage navigation; (c) US$ 1,250,000.00 for maritime support and port support navigation and;
(iii) positive equity level - equal 1 or more.
However, if the objective of the company is initially not to operate, but exclusively to apply for the FMM financing and the construction of a Brazilian flag vessel in a Brazilian shipyard, Antaq would waive the requirement mentioned above, and will not be necessary to own or bareboat a Brazilian flag vessel beforehand.
CONDITIONS FOR FINANCING THROUGH THE MERCHANT MARINE FUND
BRAZILIAN FLAG BENEFITS
Law 9.432-97 – Brazilian Jones Act - Exclusivity of Brazilian flag vessels or bareboat alternative.
Tonnage rights – BB double foreign flag during construction (10% built) in local shipyard and afterwards may use half for BB purposes.
REB - Second and supplementary domestic register.
Fiscal Privileges – Import Tax, ICMS, PIS, COFINS and Maritime Education Fund.
Other Benefits – FMM Interest Rates, Insurance, Fuel Price, La bor.
PETROBRAS – Recent Tenders for OSVS are restricting to new Brazilian flag vessels, therefore built in local yards.
In case of financing to projects with domestic contents over 60%, there will be a 0.5% p.y. reduction in interest rate. Computation of local contents should follow the BNDES System's standards in force.
ARREST AND JUDICIAL SALE OF VESSELS UNDER BRAZILIAN JURISDICTION
Applicable Legislation and International Treaties
The arrest of ships under Brazilian jurisdiction – well defined procedure – in personam (general non privileged creditors) or in rem (maritime privileged creditors) – First precedent case is 100 years old - 1908 – Argentinian flag vessel called San Lorenzo.
The international jurisdiction of the Brazilian courts (CPC, article 88) – act or fact occurred in Brazil or the obligation to be performed in Brazil
The arrest as a specific precautionary measure (CPC, articles 813 and 814): hypotheses and requirements.
The arrest as a non-specific precautionary measure (in limine order) – broader possibility and court´s discretion on “fumus boni iuris” and “periculum in mora” (CPC, article 798).
The arrest is a preliminary procedure of a future recovery claim – Brazilian jurisdiction should apply to both actions.
Choice of jurisdiction and applicable law – relevant issue when contracting the security package.
I) FIDUCIARY ALIENATION
Applicable Law - Fiduciary alienation is ruled by article 66 of Law 4.728/69, Decree-Law 911/69, Law 9.514/97 (unmoveable assets) and also articles 1361 and following of the Brazilian Civil Code – Law 10.406/2002 and the Brazilian Procedural Code.
Definition of fiduciary alienation - The contract through which the debtor, in order to guarantee the payment of a debt, transfers to the creditor the fiduciary property of an asset, while retaining the direct possession of same, under the “resolutive condition” to pay the debt. Therefore, the transfer of such fiduciary property to the creditor is only valid and effective as long as the debtor has not fully paid in his debt. After the payment of the debt, the fiduciary property returns to the debtor.
MORTGAGE X FIDUCIARY ALIENATION
Enforcement procedures and creditor’s rights
In the event of debtor’s default, the creditor may exercise the rights as fiduciary owner, repossessing the vessel and promoting a private sale of the same, and shall use the product of such sale recover its credit (including, outstanding debt, interests, penalties and any and all costs incurred by creditor to collect payment from debtor). In case the product of the sale is superior to the accrued debt, such balance shall be returned to debtor.
This instrument is more effective and less bureaucratic than the traditional mortgage, as creditor will not need to proceed with long mortgage enforcement procedures in Court, which may entail several years.
Contractual guarantees (cont.):
II) Bank Guarantees;
III) Corporate Guarantees;
IV) Assignment of contractual revenues (ex: charter hires);
V) Share Pledge Agreements;
VI) Performance Bond (seguro garantia).
LAW NO. 11.786 OF SEPTEMBER 26TH, 2008 (FGCN´S STRUCTURE) – IT IS STILL DEPENDING ON THE REGULATION BY DECREE.
The FGCN serves to guarantee the credit risk of finance operations to naval construction carried out by financial agents authorized to operate with resources of the Merchant Marine Fund - FMM and restricted to the period of building of the vessel.
THANK YOU ! (Federal Government Agency for Inland and Ocean Navigation). The Resolution 843 issued by Antaq states that to obtain an authorization to operate as a shipping company is necessary to fulfill the following requirements:
GODOFREDO MENDES VIANNA
AV. RIO BRANCO, 25 – 1º ANDAR
TEL. (21) 2223-4212
FAX: (21) 2253-4259
E-MAIL: [email protected]
WEB SITE: WWW.KINCAID.COM.BR