On March 19, 2020, Law No. 17,324/2020 (the “Law”) was published, which instituted the “de-judicialization” policy on the São Paulo Municipality Administration, to be coordinated by the Municipal Attorney General.
The Law provides measures focused on aiming litigation reduction, encouraging settlement of disputes, promoting—whenever possible—consensual conflicts resolution and improving the management of administrative and judicial demands volume.
I. Consensual Agreements on Tax Demands
The agreements for consensual settlement of disputes must follow this criteria:
(i) The claimed rights must be transaction available;
(ii) Debt age;
(iii) Equality of terms to other interested parties in a similar situation;
(iv) Contributory capacity; and
(v) Qualified level guarantee.
The agreements may be made with tax and non-tax debts totaling up to BRL 510,000 in successive monthly installments, not applying to agreements signed prior to publication of this Law under Special Amnesty Program (“PPI”), that remains governed by its own legislation.
Joining the installment plan, in any form, constitutes an irreversible confession of the debt and waives the right for administrative or judicial defense or appeal, observing municipal credits regulation, including in relation to legal fees.
In case of any unpaid installment, regardless of debt nature or origin, after 60 days, execution process will begin or will be resumed by the original consolidated balance, duly corrected, subtracting already paid amounts.
II. Mediation and Arbitration Possibility
The Law authorizes the Municipal Public Administration to include a mediation clause in administrative contracts, agreements, partnerships, management contracts and similar instruments.
In addition, the Municipal Public Administration is allowed to use arbitration on conflicts solutions related to available property rights, under the terms of Federal Law No. 9,307, of September 23, 1996.
III. Tax Transactions
The Law also establishes tax transactions in the São Paulo Municipality, as set in article 171 of National Tax Law (“CTN”), in the following modalities:
(i) An individual proposal or by choice in the collection of enrolled debt;
(ii) Adherence to other cases of judicial or administrative tax litigation; or
(iii) Adherence to tax administrative litigation of low value.
In the case of transactions by choice, the Municipality of São Paulo will issue a public notice with the factual and legal hypotheses covered in the transaction proposal in the Municipal Finance Department.
Notice that the transaction proposal does not suspend the credits enforceability mentioned by it, or the respective tax foreclosures continuation, and will be conditioned, at least, to the debtor’s compliance to the following commitments:
(i) Do not use the transaction abusively with the purpose of limiting, distorting or in any way harming free competition or free economic initiative;
(ii) Do not use a natural or legal person to conceal the origin or destination of assets, rights and values or to hide the real identity of the beneficiaries of their acts in Municipal Public Treasury detriment;
(iii) Do not sell or encumber assets or rights without proper communication to the competent municipal agent when required by law; and
(iv) Waive any claims with merit resolution, current or future, on which administrative proceedings, lawsuits—including class actions—or appeals related to the credits included in the transaction are grounded.
IV. Conflict Prevention and Resolution Chamber
Finally, the São Paulo Municipality is authorized to create the Chamber for the Prevention and Administrative Resolution of Conflicts, in connection to the Municipal Attorney General's Office, which will have the following duties:
(i) Settle, by self-composed means, conflicts between Municipal Public Administration offices and entities;
(ii) Evaluate the requests for conflict resolution through composition admissibility in the event of a dispute between private individuals and legal entities under public law; and
(iii) When applicable, promote the execution of a conduct adjustment term in cases submitted to self-composing means.
The Executive Municipal Branch must regulate the law in 180 days.
For more information about the topics raised in this Legal Update, please contact our Tax team.