ENERGY AND ENVIRONMENT

FEATURES BY: LUIS A ERIZE ABELEDO GOTIHEIL ABOGADOS MITZI GILLIGAN, ANDREW BROOKES ANO PAUL JEFFREYS HIVE LEGAL AYKHAN ASADOV BM MORRISON PARTNERS

ROBERTO DI CILLO DI CILLO ADVOGADOS ROSILANE COSTA BARROS ANO WILLIAM LINS NBFIA

DAVID L MEILER ANO BÁRBARA N BITTENCOURT CAMPOS MELLO ADVOGADOS MARCIO PEREIRA ANO MARINA MACIEL BMA ADVOGADOS PETER DANNER ANO STEPHANIE STIMPSON TORYS AHAB ABDEL-AZIZ GOWLING WLG RAFAL HAJDUK ANO GRZEGORZ FILIPOWICZ DOMANSKI ZAKRZEWSKI PALINKA

MÔNICA CARNEIRO PACHECO CMS RUI PENA & ARNAUT MESUT CAKMAK, ERDEM BASGUt!AND NAZLI BASAK AYIK ÇAKMAK AVUKATLIK ORTAKLIGI SHAWN DAVIS ANO ADIJATU KAMARA KING & WOOD MALLESONS JOHN DEWAR MILBANK TW EED HADLEY & MCCLOY

SIMONE PASCHOAL NOGUEIRA SIQUEIRA CASTRO ADVOGADOS LAURENCE LANOY ANO CATHY MORALES FRENOV LAURENCE LANOY AVOCATS MANUEL DE ANDRADE NEVES, MADALENA BERNARDES COELHO ANO TELMO COUTINHO RODRIGUES ABREU ADVOGADOS MATTHEW BURNELL HERBERT SMITH FREEHILLS

BRAZIL

The Brazilian forest code and legal certainty for energy projects

Simone Paschoal Nogueira Siqueira Castro Advogados São Paulo

On Fcbruary 28, 2018, judgment ofthe constitutionality o f severa! key provisions ofthe Brazilian Forest Code (Law 12,651/2012) was con­cluded by the Suprem e Court, in deciding four direct actions for un­constitutionality (ADis 4901,4902,4903 and 4937) and one direct action for constitutionality (ADC 42), ali o f them filed in 2013.

The Code has had a major impact on activities in the Brazilian electricity sector. Since the actions were filed, sector representatives have been working incessantly on the matters at stake, including act­ing as amicus curiae in thc suits .

Despite these arguments, I believe that the Forest Code of2012 has a much more technical and comprehensive text than Lhe previous Code of 1965, resulting from lengthy discussions involving various entities about situations faced in that ínterim.

Therefore, except for a few points, the current Brazilian Forest Code is very technical and faces conceptual questions with sufficient clarity so as to bring legal certainty regarding some irnportant aspects that were lacking in the 1965 Forest Code.

Therefore, whether good o r bad fo r the different interests involved, the judgment was very important to make the Code's application de­fmitive.

The outcome was a greal victory for the Brazilian electric power sector, beca use the leading opinion of Justice Luiz Fux (the reporting judge assigned to the case) was in line with its in terests, desp i te some divergences o f interpretation.

Among the most important provisions ofthe Code ruled to be constitutional are Article 3, VIII, "b":

'1\rt. 3. For the effects ofthis Law, Lhe following definilions apply: (. .. ) VIII-public ut1lity: (. .. )

when there is an absence of a duly demonstrated alternative location. One of the most important victories for the sector, more specifi­

cally for hydropower, was to define that the permanent preservation areas arolmd new reservoirs covering a surface area o f more than one hectare formed by dams or dikes shall be established in the project's environmentallicense.

Without doubt, the licensing authority has the tcchnical expertise to defm e the width o f the area around artificial reservoirs for protec­tion of natural resources. These must be between 30 and 100 meters in ru ral areas and from 15 to 30 meters in urban areas, according to

the articles cited bclow: "Art. 4. For the effects of this Law, the Perma­

b) infrastructure works inlended for public concessions and services for transportation, road systems, including as necessary for urban subdivisions approved by Lhe Munici­palities, sanitation, energy, telecommunica­tions, radio transmission, as well as mining, except in this /ast case the extraction of sand, grave/ and pebbles;"

THEREFORE, WHETHER GOOD OR BAD FOR

nent Preservation Areais deemed to be, in rural or urban areas: (. . .)

This means that energy projects are con­sidered as having public utility, allowing the invocation o f eminent domain for the effect o f permission to intervene in permanent preservation areas, always in exceptional cases

THE DIFFERENT INTERESTS INVOLVED, THE JUDGMENT WAS VERY IMPORTANT TO MAKE THE CODE 'S

APPLICATION DEFINITIVE

62 EXPERTGUIDES ENERGY AND ENVIRONMENT

lll - the areas around artificial water reser­voirs resulting from dams o r dikes along nat­ural wntercourses, in the strip defined in the environmentallicense of the tmdertaking; Art. 5. In case of construction of artificial water reservoirs intended for energy genera­tion o r public water supply, the operator must acquire, expropria te o r establish an adminis­trative easement for the Permanent Preserva­tion Areas created arow1d them, as

r. est mt 111ê

me Th

consis with r

Aft defen< paragt

7. i prc for ing

;t

established in the enviromnental /icensing, with observance of a mini­mum strip of30 (thirty) meters and maximum of 100 (one hundred) meters in rural arcas anda minimum strip o f 15 (fifteen) meters and maximum of30 (thirty) meters in urban arcas." The last example mentioned is the modality oflegal reserve, which

consists o f a percentage of rural properties that must be preserved with na tive plant cover, as established by Article 12.

After much discussion and technical input from the electric sector defending the tcxt o f the Codc, the Supreme Court held Articlc 12, paragraph 7, to be constitutional, as follows:

7. No Legal Reserve shall be required related to areas acquired or ex­propriated by the holder of a concession, permission or authorization for exploitatior1 o f lhe hydraulic energy potential in which undertak­ings exist to generate e/ectricity, including substations, electricity

BRAZ IL

transmission or distribution /ines. In summary, the Supreme Court ruled that most of the activities of

the electric power sector are excused from establishing a legal reserve. This translates into a substantial reduction o f costs, such as those re­lated to the percentages o f the huge areas flooded by reservoirs.

This waiver is due to the fact that such areas can not be classified as rural, since they do not serve as venues for agriculture, stock breeding, vegetable extraction, forest ry or agro-industry, according to the legal concept o f rural arca established in the Land Statute, enacted in 1964.

In the final analysis, the final judgment o f the constitutionality o f the Forest Code o f 20 12 has brought an important measure o f legal ccrtainty, so that companies can develop their activities related to gen­eration of electricity along with protection of the environment in a balanced manner.

ENERGY AND ENVIRONMENT E.XPERTGUIDES 63

T

BELGIUM BRAZ IL CANADA lsabelle Larmuseau Alessandra Lehmen Yvan Biron LDR Juchem Advocacia PFD Avocais Ghent Porto Alegre Boisbriand

Jacqueline Mailly Roberto Danelon Leonhardt WallyBraul Hogan Lovells Machado Meyer Advogados Gowling W LG Brussels São Paulo Calgary

-- -Jean-Philippe Montfort Carlos Maurício Maia Ribeiro Bryan J Buttigieg Mayer Brown Vieira Rezende Advogados M il ler Thomson

Brussels Rio de Janeiro Toronto

Donatienne Ryckbost Édis Milaré Paul R Cassidy Ryckbost & Ryckbost Milaré Advogados McCarthy T étrault Oostende São Paulo Vancouver

-Ursula Schliessner Antonio José Monteiro Adam Chamberlain Jones Day Pinheiro Neto Advogados Gowling WLG Brussels São Paulo Toronto

-James H Searles Simone Paschoal Nogueira larryCobb Steptoe & Johnson Siqueira Castro Advogados Stikeman Elliott

Brussels São Paulo Toronto

Lieve Swartenbroux Márcio Pereira Rosalind H Cooper Linklaters BMA Advogados Fasken Martineau DuMoulin

Brussels Rio de Janeiro Toronto

Gauthier van Thuyne Renata Oliveira Pires Castanho Tony Crossman Allen & Overy Pires Castanho Advogados Blake Casseis & Graydon Brussels São Paulo Vancouver

Luiz Fernando Henry Sant' Anna Radha C Curpen

BRAZ IL Demarest Advogados Bennett Jones São Paulo Vancouver

Adriana Mathias Baptista Daniela Stump Harry Dahme TozziniFreire Advogados

São Paulo Machado Meyer Advogados Gowling W LG

- São Paulo Toronto Paulo de Bessa Antunes Tauil & Chequer Advogados Fernando Tabet Jennifer Danahy

Rio de Janeiro Tabet Bueno & Franco Advogados Gowling W LG

- São Paulo Toronto

Oscar Graça Couto Elisabeth (Lisa) DeMarco Graça Couto Advogados

São Paulo CA NA DA DeMarco Allan Toronto

Werner Grau Neto Brad Armstrong QC Pinheiro Neto Advogados Lawson Lundell Shawn Denstedt QC

São Paulo Vancouver Osler Hoskin & Harcourt Calgary

Alexandre O Jorge Richard Bereti Pinheiro Neto Advogados Harper Grey André Durocher

São Paulo Vancouver Fasken Martineau DuMoulin

- - Montréa l

Ana Claudia La Plata de Mello Franco Charles Birchall Tabet Bueno & Franco Advogados W illms & Shier Tyson Dyck

São Paulo Ottawa Torys Toronto

72 EXPERTGUIDES ENERGY AND ENVIRONMENT