Climate And Stakeholder Litigation: Why Does It Matter To Companies Operating In Brazil?

• Published date: 09 March 2021
• Subject Matter: Corporate/Commercial Law, Environment, Litigation, Mediation & Arbitration, Corporate and Company Law, Environmental Law, Trials & Appeals & Compensation, Climate Change, Shareholders
• Law Firm: Tauil & Chequer
• Author: Mr Luiz Gustavo Bezerra and Gedham M. Gomes

With the surge of climate and stakeholder litigation all over the globe-comprising climate, supply chain and human rights issues-not only should governments be concerned, but mainly the private sector. It is not new that, in addition to creating stakeholder engagement and pushing forward public policies, ESG concerns pose significant reputational and financial risks, particularly to corporations. This is not only true for those companies dedicated to carbon-intensive activities or exposed to supply chain liabilities, but also to financial institutions enabling the development and expansion of such activities.

This is a particularly relevant matter in Brazil, which already relies on a well-established legal and case law framework capable of supporting sanctions and prosecution against corporations and financial institutions deemed liable in connection with environmental degradation.

In this Blog Post, we discuss the existing legal framework in Brazil with respect to environmental degradation, and how that framework might apply to the broader range of ESG issues, from climate to supply chain and human rights liability.

The Framework

The cornerstone of this framework is a well-known precedent from the Brazilian Superior Court of Justice (STJ), in which the court held that any party who:

1. fails to prevent, or acts with indifference to, polluting activities;
2. fails to report such activities to authorities;
3. finances those that carry out such activities; or
4. benefits from such activities;

may be deemed to be an "indirect polluter", thereby becoming part of the pollution chain of causality and subject to joint and several liability for environmental degradation.

This precedent has been used to support several environmental liability cases against companies indirectly tied to environmental degradation, such as those hiring service providers that end up causing environmental pollution or those that are expected not to purchase products or inputs from noncompliant suppliers. However, with the increasing focus on ESG compliance, and cases of related litigation on the rise, one can reasonably argue that this existing framework-along with attribution science when applicable, of course-can be used as grounds for cases arguing climate, supply chain and human rights liability.

Existing Precedent

Even though this potential trend is yet to effectively set foot in Brazil, there are some noteworthy precedents of Brazilian companies entangled in this relatively new type of...