Key Laws that Impact DG’s Business in Brazil

We are grateful to Beverly Tompkins for the invitation to contribute to the “Legal Bites” series. It is a pleasure for us to share a few insights from our side of the equator. Working across Brazil and the United States sometimes feels like running the same production line in two plants: the equipment is identical, but the way the system reacts to the local environment can surprise even the most experienced engineer.

Brazil and the U.S. share a strong engineering culture, a commitment to food safety and a tendency to keep projects moving despite the occasional regulatory storm. Yet the legal frameworks guiding construction and engineering projects in each country are shaped by distinct histories and institutional structures. This becomes especially visible in food and beverage projects, where the interface between construction, compliance, licensing and public oversight is constant.

The purpose of this “Legal Bite” is to highlight a few of the different elements of Brazilian law and regulatory practice. The information that follows reflects issues DG Brazil navigates daily on its projects ranging from dairy processing facilities to beverage plants, bakeries and thermal processing lines.

1. Labor and employment risk in engineering projects

Brazilian labor law is both general and complex. Reforms since 2017 have aimed to increase productivity, reduce employment costs and promote legal certainty. Although authorities have created specific rules for the construction sector, due to their people-intensive nature, construction and engineering projects remain heavily exposed to labor issues. Not unlike developers in the U.S., a contractor may register a construction site as an independent entity as a way to limit tax and labor liability linked to a particular project site.

One distinguishing feature of Brazilian law from U.S. law that directly affects people-intensive industries is the potential for subsidiary liability of contracting parties. In the context of a food processing facility, this means that if a subcontractor responsible for stainless steel piping or hygienic installation fails to comply with labor obligations, there is a risk that the main contractor (e.g., DG) and, in some cases, the project owner could be held vicariously responsible for the subcontractor’s acts or omissions and may be called upon to respond. To manage this risk, Brazilian construction contracts between owners and prime contractors and contracts between prime contractors and subcontractors typically require ongoing proof of payroll compliance, social security payments and adherence to health and safety standards on site.

Given the mixed nature of rights and obligations of stakeholders in this kind of arrangement, and taking into account that Brazilian law and authorities generally do not contemplate complex construction contracts, a thorough analysis of the project, the legal structure of its participants, and its contracts is necessary to establish and manage separate entities in accordance with local conditions.

2. Statutory five-year warranty on construction works (Article 618, Brazilian Civil Code)

For the most part, private construction and engineering projects in Brazil are not heavily regulated. Brazilian Civil Code contains some general provisions for less complex construction contracts which generally do not apply to more complex contracts such as those for Engineering, Procurement and Construction (EPC) projects.

That said, under Brazilian law, the most significant statutory obligation on construction projects is a rule in Article 618 of the Brazilian Civil Code. This provision establishes a minimum five-year constructor warranty period for any defects relating to the final project’s technical integrity or safety.

In practical terms, for a food or beverage facility, this statutory warranty can be triggered in situations where structural or safety issues compromise the plant. Examples include defects in the building structure that affect load-bearing capacity, failures in flooring systems that jeopardize drainage and hygiene in high-care zones, or problems in technical mezzanines that impact the safe installation of process utilities.

Even though contracting parties still negotiate contractual warranty clauses, notice procedures and remedial mechanisms around them, Brazilian doctrine and case law generally treat this warranty as a non-negotiable baseline for structural and safety defects. What his means in practice is that any attempt in the contract to depart from the application of this statute requires particular care in drafting and during contract negotiations.

To avoid liability under Article 618 of the Brazilian Civil Code, DG Brazil places significant emphasis on drafting appropriate warranty provisions in contracts, developing clear drawings, record drawings, and commissioning reports.

It is important to distinguish contractual service warranties from the five-year statutory period under Article 618 of the Brazilian Civil Code. Contractual warranties are defined by the parties to an agreement and regulate performance standards, correction of defects, and related procedures within the agreed timeframe. By contrast, the five-year period in Article 618 is a mandatory statutory deadline for asserting claims related to defects affecting the structural integrity or safety of the work. Once this period expires, the right to bring a claim is extinguished. Contractual warranties may coexist with this rule, but they cannot exclude or reduce this statutory protection.

3. Multi-layered health, safety and environmental licensing

Health and safety in Brazil are governed by a combination of laws, rules and regulations at federal, state and municipal levels. There is no single unified statute that covers all aspects of health and safety law. At the federal level, Ministry of Labor Act nº. 3,214/1978 compiles a set of technical notes for the work environment, including exposure to chemicals, noise, mechanical dangers, temperature and unsanitary conditions, which are enforced across all states.

In parallel, environmental protection law in Brazil is organized within a system of legislative and administrative codes established by the Federal Constitution, which establishes regulatory authority among the Union, the States, and the Municipalities. This constitutional framework allows each level of government to legislate and act within its respective sphere, often in a complementary and concurrent manner. Within this structure, Federal Law No. 6,938/1981 instituted the National Environmental Policy and established environmental licensing as a mandatory requirement throughout Brazil for activities capable of causing pollution or environmental degradation.

The process for environmental licensing usually involves three distinct types of licenses for a single project:

• Preliminary License (Licença Prévia), granted at the conception stage, which assesses environmental feasibility and may require studies and reports.
• Installation License (Licença de Instalação), which authorizes construction and installation of relevant equipment once the design is detailed and protection measures are defined.
• Operation License (Licença de Operação), granted after verification that environmental control measures have been effectively implemented, authorizing operation of the facility.

In a food or beverage plant, these licenses may cover issues such as wastewater from CIP systems, the handling of effluents with high organic load, the operation of boilers and refrigeration equipment, and air emissions from dryers or ovens. Even though the obligation to license originates in federal legislation, the licenses themselves are typically issued by state environmental agencies and are shaped by state and, in practice, municipal requirements. As a result, a dairy or beverage facility in the State of Bahia may encounter licensing conditions that differ substantially from those applicable to an equivalent facility in the State of São Paulo.

As a result of Brazil’s environmental regulatory regime, project schedules in Brazil tend to be more sensitive to regulatory milestones than comparable projects in the United States. The language in contracts for food and beverage construction projects often reflects the three licensing stages established under Federal Law No. 6,938/1981 and their corresponding environmental conditions or clearly allocate responsibility to the owner when it is the owner who is responsible for obtaining and maintaining licensure on a project.

4. Anti-corruption framework and strict corporate accountability

Brazil’s anti-corruption framework is based on international and domestic law. Its emphasis on corporate accountability is closely tied to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 17 December 1997, which establishes corporate responsibility for the corruption of foreign public officials.

Brazil’s legal system has taken this mission very seriously. In a country often stereotyped (fairly or not) as having a certain “talent” for creative problem-solving, the law responded by adopting one of the strictest models of corporate liability in the LATAM region.

Under Law No. 12,846/2013, companies may be held strictly liable for harmful acts against domestic or foreign public administration, regardless of intent or proof of actual corruption. In an engineering context, this may include, for example, a contractor disposing of construction waste in an unauthorized area or in breach of environmental licensing conditions, thereby triggering administrative action by a public authority. Even absent any bribery or undue advantage, such conduct may be characterized as an unlawful act under the statute. For this reason, companies operating in Brazil are expected to maintain robust compliance programs capable of preventing, detecting, and addressing regulatory violations.

Whether for environmental licensing, construction permits or operational authorizations, Brazil’s anti-corruption framework matters for food and beverage projects that depend on interactions with public authorities. Brazilian contracts frequently include express references to the Anti-Corruption Law and its decree on implementation, detailed compliance clauses, and audit rights.

Law No. 12,846/2013, known as the Anti-Corruption Law and regulated by Decree No. 8,420/2015, brought several changes to the Brazilian legal system:

• Introduced the possibility of strict liability of companies for corruption related acts.
• Explicitly encouraged preventive measures through effective compliance programs.
• Created the possibility of leniency for companies that cooperate with investigations of unlawful acts.

Although Brazil’s new anti-corruption law focuses on corruption in the public sector, other Brazilian statutes address corruption and related practices, including the Criminal Code (Decree-Law No. 2,848/1940), the Administrative Misconduct Law (Law No. 8,429/1992), the Public Officials Law (Law No. 8,112/1990), the Public Procurement Law (Law No. 8,666/1993) and the State-Owned Companies Law (Law No. 13,303/2016). Brazil has also ratified conventions such as the OECD Convention already mentioned, the Inter-American Convention against Corruption, the United Nations Convention against Transnational Organized Crime and the United Nations Convention against Corruption.

For food and beverage projects that interface with public authorities in Brazil, Brazil’s anti-corruption legal framework means that companies may face administrative – and, in certain cases, criminal – consequences for corrupt practices under strict liability standards, while public officials are subject to their own specific liability regimes. As a result, Brazilian construction contracts commonly include express references to anti-corruption statutes, together with detailed compliance obligations, representations, and audit rights designed to mitigate regulatory risk and demonstrate adherence to applicable integrity standards.

Final remarks

We hope that this overview of Brazilian law has strengthened DG US’s understanding of the legal framework in which DG Brazil operates. As we noted at the outset, comparing Brazil and the U.S. from a legal perspective is a bit like comparing two production lines that make the same product but run on entirely different utilities. The fundamentals are familiar, but the operating conditions make all the difference.

Brazilian law has many additional layers, and at times it feels as though each time you peel one back, another regulation has been enacted by a different level of government. For this reason, we do not intend for this Brazilian issue of “Legal Bites” to be the last word on this subject. It is our sincere hope that what we covered today will spark a continuing dialogue between DG US and DG Brazil.

Please reach out to Beverly with any comments or future topics you would like us to cover in a future issue.

 

Denizom Oliveira and Gustavo Manssur Santarosa represent the DFSP law firm located in São Paulo, Brazil.