Brazil: The New Brazilian Law About Transportation Apps

This article examines the Law no. 13640, published on 3/27/2018. Said law amended the Law on the National Urban Mobility Policy (Law no. 12587/2012), regulating the paid individual private transportation of passengers. In other words, a transportation services contract made through apps.

Law no. 13640/2018 establishes that the individual private transportation of passengers is a paid service, not opened to the public, that offers individualized or shared rides and requested only by registered users of apps.

By inserting art. 11-A in Law no. 12587/2012, it also establishes that the Municipalities and the Federal District (Brazilian Capital) have exclusive competent jurisdiction to regulate the paid individual private transportation of passengers. However, the guidelines listed in the sole paragraph of that article 11-A must be followed.

And by inserting art. 11-B, the law establishes that this type of transportation service may be provided only by drivers who met the conditions listed in that article.

In this scenario, the first question to be clarified is whether the Federal Government has effective jurisdiction to legislate in this case.

The political and administrative organization of the Brazilian federation comprises the Federal Government, the States, the Federal District, and the Municipalities. All these entities, which are autonomous, according to the head provision of art. 18 of the Federal Constitution of 1988, are granted concomitant jurisdiction to legislate.

In this regard, art. 21, item XX, of the Federal Constitution prescribes that it is incumbent on the Federal Government to lay down guidelines on the urban development, including housing, basic sanitation, and urban transportation. And, in exercising this jurisdiction, the Federal Government instituted the National Urban Mobility Policy (Law no. 12587/2012).

However, the Municipalities, pursuant to art. 30 of the Federal Constitution, have jurisdiction to legislate on matters of local interest, and, also, to supplement the federal and state legislation where applicable.

In this fashion, the Federal Government, when conferring exclusive jurisdiction on the Municipalities to regulate the paid individual private transportation of passengers and setting only some requirements that must be met, acted within its constitutional competent jurisdictions. As a matter of fact, the criteria established by the Federal Government that must be contained in the regulation relates to aspects of other federal laws, such as, for example, the driver is required to be enrolled as an individual insured taxpayer in the National Institute of Social Security - INSS.

Notwithstanding, a potentially controversial issue arises from the joint analysis of art. 11-A and art. 11-B, sole paragraph, which provide as follows:

Art. 11-A. It is incumbent exclusively upon the Municipalities and the Federal District to regulate and supervise the services of paid individual private transportation of passengers provided in item X of art. 4 of this Law within the ambit of their territories.

Sole paragraph. The regulation and supervision of the paid individual private transportation of passengers by the Municipalities and the Federal District must observe the following guidelines, aiming at the efficiency, safety, and effectiveness of the service provision: 

I - effective collection of the municipal taxes levied on the service provision;

II - contracting of insurance covering Personal Accidents of Passengers (APP) and the Compulsory Insurance against Personal Injury caused by Land Vehicles (DPVAT).

III - the driver is required to be enrolled, as an individual taxpayer, in the INSS, in accordance with item V, subitem V, of art. 11 of Law no. 8213, of July 24, 1991.

Art. 11-B. The services of paid individual private transportation of passengers under item X of art. 4 of this Law provided in the Municipalities opting for their own regulation will be authorized only to drivers who meet the following conditions:

(...)

Sole paragraph. Any exploitation of paid services of individual private transportation of passenger that does not fulfill the requirements laid down in this Law and the regulation of the municipal and the Federal District governments will be considered illegal transportation of passengers.

In addition to establishing the exclusive competent jurisdiction of the municipalities to regulate the transportation services, the federal legislation also provides that they may or not exercise the jurisdiction at their discretion. In principle, there is nothing unusual about this, inasmuch as the Federal Government could not, through a federal law, require the Municipalities to regulate any matter of local interest, as mentioned above.

In other words, the prerogative of not regulating the activity in question cannot be removed from the Municipalities by a decision established in a normative policy.

But when determining that the exploitation of paid services of individual private transportation of passengers that does not fulfill the requirements laid down in law and the municipal regulation is illegal, the legislation indicates that, should the regulation not exist, the services will be illegal per se.

Indeed, the original draft of Bill no. 5587/2016 brought forward by Representative Carlos Zarattini (Workers Party/State of São Paulo) was more favorable to the taxi drivers' interest.

However, when it was being analyzed at the House of Representatives, Representative Daniel Coelho (Brazilian Social Democracy Party/State of Pernambuco), who was in charge of reporting on the background of bill, submitted opinion with a substitute text more favorable to the apps. The substitute text was approved, although with amendments made by Representative Carlos Zarattini.

It is to be observed that the substitute text established a concept of app-based transportation service as an activity of private nature. But, due to the amendments to the text, this part was initially eliminated and the public nature was attributed to the service, making it similar to the taxi services and attracting all accessory obligations provided for such services (payment of fees, licenses, and permits).

The importance of being a public or private service lies in the fact that, in the first case, the driver would need the municipal government's authorization to carry out the activity of paid individual private transportation of passengers. But in the second case, to the extent that in compliance with the law and the municipal regulation, the driver may join the app platform to work without the need for authorization from the public entities.

However, the approval process proceeded, and the text was sent to the Senate, which rejected the amendments made by Representative Carlos Zarattini. Therefore, the understanding that the app-based service is a private service prevailed, according to the concept provided in Law no. 13640/2018.

Although the private nature had prevailed, the condition laid down in the sole paragraph of the mentioned art. 11-B remains effective, that is, the lawfulness of the exploitation of the services under the conditions provided in the law depends on the regulation by the municipal government.

This is because the existence of a municipal law is not an alternative condition, such as, for example, the fulfillment of the conditions provided in the law or the regulation. Quite the opposite, the compliance with the regulation issued by the Municipality is also an additional condition for the compliance with the law.

In fact, this is also inferred from how the items of arts. 11-A 1 11-B were inserted as items of the legislation to be enacted by the municipality and not as independent requirements of a municipal legislation. And, certainly, it would be absurd to understand that, in the municipalities where there is no legislation, none of the requirements provided in the Law must be met by the private drivers.

Note that, apparently, what is written and what was intended to be written are disconnected. This is so because when the bill was being discussed, the legislators intended to allow the apps to continue operating as they operate currently after the approval of the law, provided that there is no specific legislation to the contrary in the municipality. Let's see an excerpt of the opinion of Representative Daniel Coelho when the substitute bill was submitted:

"This opinion was prepared after the several organized segments, the arguments advanced by the tax drivers, the professionals of UBER and other transportation apps having been heard and, above all, considering the users, but respecting the prerogatives of the Municipalities, because it will be incumbent on the Municipalities to prepare the specific regulation for the operation of the apps, moreover because, after the approval of the Law, the service will continue to be rendered as it is today, provided that there is no specific regulation in each Municipality to the contrary." (emphasis added)

That is, although the legislators intended to allow the continuance of the activity of paid individual private transportation of passengers in the cases in which there is no specific legislation to the contrary in the Municipalities, the wording of the law requires a regulation even to allow the continuance of the services as they were been rendered.

Even upon the determination that the paid individual private transportation of passengers is of private nature to imply that a prior municipal authorization for each driver is unnecessary, the need for the municipality's authorization, in the form of a regulation, for such services to be provided remains.

Naturally, such requirement will not prevent the apps from providing the transportation services, considering that the major urban centers of the country, where the largest consumer markets are, have already issued their regulations.

For the sake of example, Rio de Janeiro/RJ, which issued Decree no. 44399/2018 shortly after the enactment of Law no. 13640/2018), Brasília/FD (through Decree no. 38258, in 2017, therefore, before the enactment of the law), and São Paulo, which is still adapting the regulation issued in December 2017.

Despite these considerations, the regulation of the services of paid individual transportation of passengers, or, to put it another way, the app-based transportation services, came at a good time and was a topic that was demanding the urgent attention of our legislators.

A path that privileges the free competition and the economic development of the country is being followed, making it possible for the consumers to choose the means of transportation they want to use, and, at the same time, preventing that such services be left on the sidelines of the legality.

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