On April 4, 2013, the Brazilian agency for petroleum, natural
gas and biofuels ("ANP") issued Directive No.
003/2013/SEP ("Directive"), by means of which it made
clear that the assignment of rights under concession agreements in
the exploration & production ("E&P") segment is
subject to the prior approval by CADE, the Brazilian antitrust
authority. The Directive is the most significant development
resulting from the cooperation agreement entered into by ANP and
CADE in December 2012.
Effective immediately (including with respect to transactions currently under ANP's review), requests for approval of the assignment of rights under concession agreements must be submitted to ANP together with one of the following documents:
- CADE's decision approving the relevant transaction; or
- A written statement by the parties to the transaction to the effect that they do not meet the revenue thresholds provided by the Brazilian Antitrust Law. The revenue thresholds are currently as follows:
- At least one of the groups involved in the proposed transaction (seller or buyer) registered gross revenues in Brazil equal to or in excess of R$750 million (approximately US$375 million) in the year prior to the transaction; and
- other group involved in the proposed transaction registered gross revenues in Brazil equal to or in excess of R$75 million (approximately US$37.5 million) in the year prior to the transaction.
CADE's Resolution No. 2/2012 provides the definition of
group that parties shall use in order to assess if they meet the
revenue thresholds referred to above. As a rule, the following
entities shall be viewed as part of the same group: (i) entities
subject to common control; and (ii) all entities in which any of
the entities subject to common control holds 20% or more of the
total share capital or the voting shares.
Under the Brazilian Antitrust Law, transactions that are subject to mandatory notification to CADE may not be closed before obtaining antitrust clearance. Failure to comply with the law exposes the parties to the following risks: (i) fines ranging from R$60 thousand to R$60 million (approximately US$30 thousand to US$30 million); (ii) investigation into the parties' behavior prior to obtaining CADE's approval; and (iii) the transaction being declared null and void.
Before the Directive was issued, CADE's review of transactions involving the assignment of rights under concession agreements was relatively uncommon. Yet CADE has already reviewed and approved several such transactions, including BP/Devon (Case No. 08012.003431/2010-81, approved on May, 19, 2005); Mersk/SK (Case No. 08012.000097/2011-94, approved on March 02, 2011); TNK/Petra (Case No. 08012.008374/2011-15, approved on September 14, 2011); Petrobras/BG (Case No. 08012.008348/2011-89, approved on September 28, 2011); and TNT/HRT (Case No. 08012.010312/2011-65, approved on 14 March, 2012). Since the new Brazilian Antitrust Law became effective in May 2012, CADE reviewed at least one transaction in the E&P segment (i.e., Vale/Statoil, Case No. 08700.000374/2013-72, approved on January 25, 2013).
Following the issuance of the Directive, the submission to CADE of transactions involving the assignment of rights under concession agreements has become the rule when the referred revenue thresholds are met. Failure to submit these transactions to antitrust approval will not only expose parties to the above mentioned risks under the Brazilian Antitrust Law, but may also jeopardize the regulatory approval process before ANP.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.