Business in tune with
the digital economy

INNOVATION

Business in tune with the digital economy

Innovations drive changes throughout society, including companies, government agencies and Justice

I n an era where human connections have been expanded by technological innovations, by disruptive thinking and by people’s behavioral changes, knowing how to dialogue in this new ecosystem is what will determine survival in the corporate world.

Seeing as the new technologies serve humanity’s wellbeing, the challenge is to embrace the concept of innovation and put it into daily practice without violating existing rights and guarantees. Balancing the various interests is the main goal, while also avoiding legal pitfalls that can interrupt the processes of creating innovators.

On the part of the controlling agencies, there is the intent to refine regulations of these new digital economy market activities and to understand society’s desires, encouraging innovation and competition. In this new era, legal discussions center on regulations to protect and foster investment in new business models, such as startups, as well as the current labor and compensation relationships.

DIGITAL GOVERNANCE

The current moment is characterized by unpredictability, where nothing seems to be made to last.

P araphrasing Polish sociologist Zygmunt Bauman, we are living in a world of liquid times. This is the environment from which innovative people and companies emerge, making use of new technologies, proposing different services to the ones we have and causing revolutions that reflect onto the legal world.

“It is still very common to find great ideas with enormous financial leverage that are absolutely informal”, says Sólon Cunha, a partner at Mattos Filho. One of the big problems is lack of regulations for a series of new ways of working. In this context of entrepreneurship, there is still a lot of informality. In response, technology has made employment law swifter in the resolution of conflicts in Brazil.

Breaking paradigms also happens in other areas of law. Public authorities have being increasingly asked to legislate over new situations involving innovations – for example, app-based transportation services and data protection, both of which have been recently regulated. In the tax sphere, there is increasingly a crossing of data at operational levels and helping to reduce evasion.

This new attitude by the government provokes changes in companies. “We will not be able to control technological evolution; we will need to reinvent ourselves. This tendency has meant that the law is reinventing itself every day” predicts partner Paulo Brancher. It is a phase of transition in which the laws change and adapt, requiring organization from companies to be able to follow both the innovations and the law, at the same time.

Technology itself is one of the ways to more welcoming legislations and, in the future, Brazil will adapt based on legal decisions that have already been taken. According to Sólon, “companies need to be prepared for this by helping with internal digital processes and looking for bolder management”.

TECHNOLOGY TO SERVE THE LAW

Innovation is an ally of business.


Companies which work in the digital market have begun questioning the formal operational models we currently have.


“To innovate is to assume risk, but it is a risk where the context is the return it can bring. Not just dividends, but also market and brand positioning, being seen as a leader”, says Paulo.

The way to operate old functions with new methods is dictating consumer behavior and companies need to adapt to this reality. For partner Renata Correia Cubas, “the innovation market often wants to see its activities regulated in order to have legal certainty over taxes, but it is rare that the regulations arrive at the same time”.

This misstep between economic activities and legal framework provokes constant uncertainty over the safety of business decisions. “The first step is to face up to the fact that the digital revolution is happening, technology is coming faster and faster and will change the way we live. The second step is planning, looking at all the angles and seeing where there might be legal impacts” explains partner Luciana Pietro Lorenzo.

One of the highlights is the incentive provided to fintechs, where the legislation has been removing hurdles to digital operations and encouraging competition. Larissa Arruy, a partner at Mattos Filho, points out that, “this has allowed for new business models and players in various niches that, under the traditional model for the provision of financial services, would not have been possible”.

Another concern is intellectual property, which is better protected because of the many international treaties, as Paulo explains: “intellectual property regulations is no longer just a government wanting to understand how it should be regulated. There is a great dependence on international treaties, such that any change could position the country positively or negatively with regards to foreign investment”.

FIRST STEPS

The legal market has become much more sophisticated.

T he innovative development in the law due to recent technological advances, has never before been seen in Brazil’s legal system. One important step is the General Data Protection Law and we are now in the final phase of transition for companies to adapt. This new law will place Brazil among the most developed countries for this kind of legislation, putting power in individuals’ hands over their personal data.

 

General Data Protection Act

The General Data Protection Law (Law No. 13,709 of 2018, regulates activities that deal with the handling of personal data).


Read more here.

 
 

Complementary reading

Guide to the General Data Protection Law


Read more here.

Even so, important new events can be glimpsed on the horizon, ones that will provide innovative businesses and society as a whole with more certainty. Although still in the early stages of public consultation, the Legal Framework for Startups will provide these companies with greater security and, especially to accelerators and investors, whether in the form of funds or other companies.


 
 

Trends


The fintech market stands out for its expressive growth, as well as for having plenty of room for further expansion, due to the concentration of financial transactions held by a handful of players in Brazil. In addition to the General Data Protection Law, other themes to be discussed over the short and medium term, are:

Open banking: the making of personal financial data available by banks in a an authorized and secure manner, in order to speed up financial transactions
Instant payments with ever newer and more disruptive payment methods
Cyber security
Blockchain technology
Artificial Intelligence applied to the financial and banking sector

Another segment to be impacted by new technologies and ways of relating between people will be the area of employment law. The new generations and advent of artificial intelligence, together with new professions and positions, will mean that employment and contractual relationships will remain in constant discussion by legislators, companies and the labor courts.