Which Provision Applies? Time-bar for Cargo Claims in Brazil

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It will perhaps be a surprise to those unfamiliar with Brazilian Maritime Law that the time bar for a cargo claim in Brazil can vary from one to five years.

This is because the relevant terms of Brazilian law provide:

1. Article 8 of Law Decree 116/1967 – one-year time bar from the date of cargo discharge.

2. Article 206, § 3rd, V, of the Civil Code 2002 – three-year time bar from the date of the incident.

3. Article 27 of the Consumer Code 1990 – five-year time bar from the date on which the claimant had knowledge of the damage. 

Leaving aside issues in relation to when time starts to run and notwithstanding the fact that these laws are well established, there are many compelling arguments for the application of each time bar in any particular claim.

The argument for the one-year time bar is that the Decree specifically applies to the Brazilian carriage of goods by sea. Moreover, the subsequent Civil Code did not revoke the 1967 Decree since general supervening laws do not revoke specific laws.

In relation to the Civil Code time bar, arguably this applies because the Civil Code incorporates a chapter concerning general carriage of goods. But as noted above, while the 2002 Civil Code supervened the 1967 Decree, it did not revoke that Decree.

Lastly, the Consumer Code time bar may be raised if the judge decides that the claimant should be considered as a consumer in relation to the contract of carriage. But how is a consumer defined? The wording of the Consumer Code (1990) is such that the interpretation of the term ‘consumer’ in the code has invariably been decided at the court’s discretion, but there are three contradicting legal theories: Maximalist, Finalist and Moderate Finalist.

The Maximalist Theory defines a consumer as a person or company that acquires goods or services from the market, irrespective of whether the product or service will be used to develop a commercial activity.

If the court rules that the Maximalist Theory should be applied to the Consumer Code, the carrier will be deemed to be the service provider for the shipper or consignee who acquired the services of the carrier for the transportation of the goods and the shipper and/or consignee will be considered to be consumers.

The definition of ‘consumer’ applied by Minimalist Theory (also known as the Finalist Theory) is subject to a more narrow interpretation. The consumer is deemed to be a person or a company that acquires a product or service from the market without the intention to reinsert the product into the production chain or to derive a profit from it. When this theory is applied, the cargo interests will not be deemed to be consumers in accordance with the terms of the Consumer Code.

The last theory is known as Moderate Finalist Theory. This is a development of the Finalist Theory and the Superior Court of Justice (STJ) has adopted it in its more recent decisions. In its application, the court should take into account:

1. The principle established in Article 4 of the Consumer Code 1990 which recognises the personal consumer’s vulnerability in the market.

2. The underlying principle of Brazilian Consumer Law that the relationship between consumers and merchants must be assessed on a case-by-case basis – i.e. the courts will analyse if the contractual relationship is balanced.

Hence, if the terms of the contract are considered to be unbalanced, the Consumer Code will be deemed to apply in order to bring equity in the contract and protect the consumer.

In an attempt to unify legislation on the subject, the Brazilian Law operators – a Special Committee formed by the House of Representatives (Camara dos Deputados) and Commercial Law Professionals – are discussing a new Commercial Code (Projeto de 1572/2011) which should address and solve this issue by prescribing a one-year time limit to bring a cargo claim.

While the new Commercial Code is not in force, members should be aware that until the law is clarified there is a continuing risk of cargo claims being brought up to five years after an alleged cargo incident. It remains important to collect evidence and to notify the Club of “every casualty claim or other event likely to lead to a claim upon the Club” – indeed the Clubs Rules (28i) require such notice – but the risk of claims being brought after the first anniversary of discharge underlines the importance of taking steps to not only ensure a good outcome for any such claim, but to ensure that the claim is covered.