A letter from Latin America - Brian Nicholson (April 2011)

 

Life presents lawyers with many challenges, not least of them concentrating on matters such as dispute resolution, import-export facilitation and public tender regulations while just yards away on Copacabana Beach, thousands of sun-worshippers reach for the comfort of ice-cold beer.

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Even worse for the 180 participants in the IBA Latin American Regional Forum conference in February, looking at business opportunities and the legal framework for the 2014 FIFA World Cup football competition and the 2016 Olympic Games, was the omnipresent pressure of time. These major events may be three or even five years off, but the clock is ticking. And while speed is of the essence, there can be no trade-off between doing things fast and doing them right.

Brazil will host the World Cup in 12 cities nationwide, from the Amazon forest and Pantanal wetlands to the economic powerhouse of São Paulo. The Olympics will be essentially a Rio de Janeiro showcase. New stadiums, highways, hotels and airports will cost tens of billions of dollars, creating huge investment and business opportunities.

‘People tend to get fixated on the question of venues, but equally important is having good airports to handle the anticipated crowds, good roads, high speed rail and so on,’ said Mark Lane of London-based Pinsent Masons, who co-chaired a panel on ‘Procurement and Construction’.

Sports facilities and some urban improvements will be largely financed and contracted by the government, either directly or indirectly, while many major infrastructure projects will involve concessions or public–private partnerships. Several participants at the Rio conference expressed concern about the potential for legal and regulatory delays. Federal legislators have admitted as much.

‘Everyone knows that the Public Tenders Law (Lei de Licitações) as it currently stands will delay projects for the Olympic Park in Rio and for the airports that will serve the Olympics and the World Cup,’ Paulo Teixeira, congressional leader of the governing Workers’ Party (PT) said in a debate this year. Government sources said new legislation was in the pipeline. Mexican lawyer Roberto Hernández García of Comad SC, a speaker at the Rio event, noted that there was ‘still a question mark about how the Brazilian Government will handle the procurement and construction of these major projects for the Olympics, considering the current regulations and the importance of timely completion’.

Conference Co-Chair Gilberto Giusti of Pinheiro Neto Advogados in São Paulo said one part of the solution was for authorities to act with maximum transparency at every step, from publication of tender details through to speedy announcement of the results: ‘All hiring and contracting must be done in public view, with very clear rules and criteria, so that any irregularity can be quickly spotted.’

Nobody was suggesting that legal safeguards should be reduced, Giusti said. The Accounts Court, the Public Attorney’s Office and established investigative systems must continue to operate. World Cup and Olympics contracts cannot be exempt, but wheels must turn faster if everything is to be ready on time.

Speed can also be achieved through enhanced dispute resolution. Giusti noted that major contracts for the London Olympics are monitored by a Dispute Resolution Board, meaning that any problems can be spotted and resolved at an early stage. In Brazil, projects can stop for months or even years as a result of contractual arguments or legal challenges to tenders. ‘This is a challenge we face here,’ Giusti acknowledged.

David W Rivkin of Debevoise & Plimpton, a New York firm, spoke on ‘Sports Arbitration’. ‘The most important point to come out of our panel is that each Olympic city has found a way to structure its contracts and dispute resolution mechanisms in a manner that avoided disputes and allowed constructions to be completed on time,’ Rifkin said. ‘I fully expect Rio will be able to accomplish the same thing.’

Some participants pointed to an additional source of potential delay in the perceived lack of clarity about the division of competencies between federal, state and municipal governments. A case study presented to the conference concerning a multi-billion dollar private industrial investment in Rio illustrated the potential for difficulties, particularly in the area of environmental licensing.

While the focus of the two-day conference was the World Cup and the Olympics, many of the problems discussed were matters that Brazil needs to address anyway, regardless of these major events. Reliable energy is essentialfor flood-lit Olympic Opening Ceremonies and World Cup football matches that will be televised around the world, but it’s just as necessary for a competitive economy. ‘Brazil’s challenge today is to ensure that current energy policies and regulations can attract enough investment and financing to guarantee supply for the world class sport events and for the next decades,’ said Colombian lawyer Jaime Herrera of Posse Herrera & Ruiz.

Slow customs clearance is another ongoing problem that is dragged into the spotlight by the World Cup and Olympics. ‘Substantial importations will be necessary for the World Cup and Olympic Games,’ said Gustavo Brigagão of Ulhôa Canto Rezende & Guerra, a Rio-based office. Brazil has pledged tax-free importation for items directly related to both events, but ‘this is not equivalent to hassle-free importation,’ Brigagão said. ‘I believe special procedures should be put in place for the events.’

Various panels touched on the question of legacy. Rio lawyer José Antonio Fichtner of Andrade & Fichtner noted that a major lasting benefit could lie in ensuring projects are sustainable: ‘Construction must be environmentally friendly,’ he said, ‘so that present and future generations can have their quality of life improved, and not worsened, by the Games.’ And Hendrik Haag, a finance lawyer with Hengeler Mueller of Frankfurt and another event co-chair, noted that apart from some football stadiums, virtually all sports facilities required public financing, given the difficulty in ensuring profitable use after the events. Nevertheless, the vast amount of general infrastructure would create ‘permanent value’ for the host cities.

‘Rio de Janeiro seems to have taken account of every possible aspect of the project, everyone was very impressed and I don’t think anyone had serious worries that Brazil will fail to live up to its commitments,’ said Haag, while local lawyer Daniela Ribeiro Dávila of Vieira Rezende Barbosa & Guerreiro pointed to another asset: ‘The enormous support and involvement of the Rio population.’

 

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Brian Nicholson is a freelance journalist. He can be contacted at brian@minimaxeditora.com.br.

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