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One of the largest disputes in the world of the decade, between the Brazilian Embraer and the American Boeing, if confirmed, will have the Justice of the United States, in particular the Southern District of New York, as the parties defined in the memorandum of understanding, signed a long time ago. more than two years and that was obtained by Broadcast. Tomorrow, the Brazilian aircraft maker already called investors for a conference call at 9 a.m., when it should raise the tone against Boeing, after the company canceled the $ 5.2 billion deal.
End of negotiation with Boeing catches Embraer at a delicate moment
Photo: Disclosure / Embraer / Content Estadão
The application of New York law in the dispute would be unfavorable for the Brazilian, according to sources, who spoke on condition of anonymity. “New York law tends to protect what is in the contract. It is much more difficult to declare a clause null and void. In Brazil, if it were shown that Boeing acted with serious fault or intent, there would be a very high possibility that the possible limiting clauses were reversed the damages, “said one of the sources. All the terms of the contract, however, are still unknown. “There are some contracts where even the costs of the M&A operation cannot be collected if the agreement is not followed,” the source explained.
In any case, according to experts, the expectation is a long litigation process between competitors, exactly at a time of great difficulties in the face of the consequences of the crisis caused by the Covid-19 pandemic, which completely affected the sector of the aviation. Wanted, Embraer said he would not comment on the court chosen for possible litigation. The company added that it closed 2019 with a solid cash position and that it does not have significant debt in the next two years. Still, we will begin to take additional steps to preserve our liquidity and keep our finances sound during these turbulent times, including adjustments to inventory and production, extension of payment cycles, reduced capital expenditures and expenses, and access to sources. complementary financing “.
Embraer had already started moving to complete the agreement and spent approximately R $ 485 million reais to segregate its commercial division. The company also moved its headquarters from Avenida Brigadeiro Faria Lima, in São José dos Campos, to the Eugênio de Melo neighborhood, in the same city. According to Embraer executives, in a conference call to present fourth-quarter figures, the delay in closing the deal represents an additional monthly cost between $ 10 million and $ 15 million.
Shortly after the deal was announced, the transaction model was widely criticized by Embraer’s minority shareholders, who accused the format of hiding the company’s change in control. At that time, minority shareholders turned to the European Commission to try to avoid the consummation of the sale of control of Embraer’s commercial aviation division as proposed by Boeing, since, according to the group, the most profitable part of the company would sell itself, leaving her breathless. the rest. The expectation, now, is that the Brazilian Investors Association will question Embraer in the Brazilian courts, mainly due to the expenses already disbursed due to the operation that the newspaper did not leave.
In canceling the operation, Boeing said Embraer did not meet the “necessary conditions” for the deal to be concluded. Asked by the report what questions these would be, Boeing just said they are “key elements of the association’s terms.”
Embraer, meanwhile, harshly criticized the Americans and showed signs that the dispute will be imminent by claiming that Boeing adopted a systematic pattern of delaying and violating the agreement due to its intention not to complete the operation due to its “problems of reputation “involving the 737 MAX crisis and financial difficulties.
According to Giamundo Neto Advogados’ partner and arbitration specialist Camillo Giamundo, the pandemic crisis would not be a justification for breaking the contract. “It is a long agreement. In these almost two years a series of costs have been taken into account,” he said.
According to Clyde & Co LLP, specialist in international commercial arbitration, Felipe Sperandio, there are still many doubts about the future of this dispute. The main lines of argument should be the precondition of the deal (which Boeing said Embraer failed to comply with, which it denies) and whether there was bad faith on Boeing’s part in allegedly postponing the process to justify the cancellation.
