PBR » Topics » a) Litigation

This excerpt taken from the PBR 6-K filed Sep 10, 2009.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At June 30, 2009 and December 31, 2008, the respective amounts accrued by type of claims are as follows:

    June 30,    December 
    2009    31, 2008 
     
 
Labor claims    60    50 
Tax claims    97    81 
Civil claims    244    220 
Commercials claims and other contingencies    40    28 
     
 
Total    441    379 
     
 
Current contingencies    (28)   (23)
     
 
Long-term contingencies    413    356 
     

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16. Commitments and Contingencies (Continued)

a) Litigation (Continued)

As of June 30, 2009 and December 31, 2008, in accordance with Brazilian law, the Company had paid US$939 and US$798, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

This excerpt taken from the PBR 6-K filed Jun 1, 2009.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At March 31, 2009 and December 31, 2008, the respective amounts accrued by type of claims are as follows:

    March 31,    December 31, 
    2009    2008 
     
 
Labor claims    50    50 
Tax claims    77    81 
Civil claims    232    220 
Commercials claims and other         
contingencies    27    28 
     
 
Total    386    379 
     
 
Current contingencies    (23)   (23)
     
 
Long-term contingencies    363    356 
     

As of March 31, 2009 and December 31, 2008, in accordance with Brazilian law, the Company had paid US$838 and US$798, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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16. Commitments and Contingencies (Continued)

This excerpt taken from the PBR 6-K filed Mar 30, 2009.

(a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. At December 31, 2008 and 2007, the respective amounts accrued by type of claims are as follows:

    As of December 31, 
   
    2008    2007 
     
Labor claims    50    58 
Tax claims    81    149 
Civil claims    220    155 
Commercials claims and other contingencies    28    20 
     
Total    379    382 
     
Current contingencies    (23)   (30)
     
Long-term contingencies    356    352 
     

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As of December 31, 2008 and 2007, in accordance with Brazilian law, the Company had paid US$798 and US$977, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

Brasoil and Petrobras participate in several contracts relating to the conversion and acquisition of P-36 Platform, which suffered a total loss in 2001 accident. Under these contracts, Brasoil and Petrobras has committed to depositing any insurance reimbursement, in the amount of US$175, in case of an accident, in favor of a Security Agent for the payment of creditors, in accordance with contractual terms. A legal action brought by companies that claim part of these payments is currently in progress in a London Court, since Brasoil and Petrobras understand to be entitled to such amounts in accordance with the distribution mechanism established in the contract.

At the current stage of the proceedings, Petromec, the contractual party involved, filed a claim against Brasoil and Petrobras in the amount of US$154 plus interest, on September 29, 2008. The defence for Brasoil and Petrobras should be filed in May 2009. The hearing of Petromec’s claim should take place in 2010.

This excerpt taken from the PBR 6-K filed Nov 28, 2008.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At September 30, 2008 and December 31, 2007, the respective amounts accrued by type of claims are as follows:

    September 30,    December 31, 
    2008    2007 
     
 
Labor claims    69    58 
Tax claims    109    149 
Civil claims    228    155 
Commercials claims and other contingencies    19    20 
     
 
Total    425    382 
     
 
Current contingencies    (28)   (30)
     
 
Long-term contingencies    397    352 
     

 

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As of September 30, 2008 and December 31, 2007, in accordance with Brazilian law, the Company had paid US$937 and US$977, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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16. Commitments and Contingencies (Continued)

This excerpt taken from the PBR 6-K filed Sep 4, 2008.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At June 30, 2008 and December 31, 2007, the respective amounts accrued by type of claims are as follows:

    June 30,    December 31, 
    2008    2007 
     
 
Labor claims    73    58 
Tax claims    126    149 
Civil claims    241    155 
Commercials claims and other contingencies    24    20 
     
 
Total    464    382 
     
 
Current contingencies    (34)   (30)
     
 
Long-term contingencies    430    352 
     

As of June 30, 2008 and December 31, 2007, in accordance with Brazilian law, the Company had paid US$1,110 and US$977, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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16. Commitments and Contingencies (Continued)

This excerpt taken from the PBR 6-K filed May 22, 2008.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At March 31, 2008 and December 31, 2007, the respective amounts accrued by type of claims are as follows:

    March 31,    December 31, 
    2008    2007 
     
 
Labor claims    57    58 
Tax claims    148    149 
Civil claims    235    155 
Commercials claims and other contingencies    16    20 
     
 
Total    456    382 
     
 
Current contingencies    (31)   (30)
     
 
Long-term contingencies    425    352 
     

As of March 31, 2008 and December 31, 2007, in accordance with Brazilian law, the Company had paid US$1,008 and US$977, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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16. Commitments and Contingencies (Continued)

This excerpt taken from the PBR 6-K filed Mar 18, 2008.

(a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. At December 31, 2007 and 2006, the respective amounts accrued by type of claims are as follows:

    As of December 31,
   
    2007   2006
     
 
Labor claims    58   38
Tax claims    149   47
Civil claims    155   97
Commercials claims and other contingencies    20   51
     
 
Total    382   233
     
 
Current contingencies    (30)   (25)
     
 
Long-term contingencies    352   208
     

As of December 31, 2007 and 2006, in accordance with Brazilian law, the Company had paid US$987 and US$816, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

The Company is a party to several contracts related to the acquisition and upgrade of production Platform P-36, which was lost in its entirety in 2001. Pursuant to those contracts, the Company had an obligation to pay the insurance proceeds to a Security Agent for distribution according to specified clauses established in the contracts. The Company contends that it is entitled to the insurance proceeds under the contractual arrangements, and other parties contend that they are also entitled to such proceeds. The issue is subject to international proceedings in a British court. Pending determination of the issue by the international court, the Company committed to deposit cash collateral in the amount of US$175, in order to facilitate the issuance of a guarantee by a Security Agent, for the payment of creditors. Pursuant to the verdict handed down by the foreign Court on December 15, 2005, payments were made to the Company, on account of the bank guarantee, amounting to US$171. On January 4, 2006, the guarantee provider confirmed that the guarantee was cancelled.

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19. Commitments and Contingencies (Continued)

(a) Litigation (Continued)

The trial was divided into two stages. The first stage was in October 2003, with a decision being handed down on February 2, 2004. The terms of the decision are complex and subject to appeal. In summary: (i) neither Petrobras nor Brasoil have been considered to have defaulted on their obligations; (ii) Petromec and Maritima are subject to reimbursing Brasoil for approximately US$58 plus interest; and (iii) Petromec and Maritima are not liable for delays or unfinished work.

On July 15, 2005, a verdict was handed down determining that the insurance indemnification belongs to Brasoil, except the amount of US$0.629 plus interest that is to be paid to the other parties in the litigation, as well as an additional amount of US$1.5 that is to be held on deposit until the result of certain ending matters.

Following the trial in February 2004, Petromec amended the legal suit claiming the amount of US$131 plus interest and/or financial costs up to the date of the trial in additional costs for upgrading work carried out and, alternatively, for damages for perjury, but without stipulating the amount of damages. The perjury trial took place between January 16 and February 09, 2006 and the verdict delivered on June 16, 2006 ruled Petromec’s claims to be without merit. Petromec did not submit an appeal and this decision is final.

A preliminary judgment on the method to be used to calculate the Petromec’s claim was held on June 26 and 27, 2007. On July 6, 2007 the Court handed down its decision in favor of the methodology defended by the Company. Petromec obtained permission to appeal the decision and the Court decided to suspend the process until the appeal is judged. On November 27, 2007 the appeal was heard and, on December 21, 2007 the Court rejected almost all of Petromec’s appeal. Judgment of the claim for additional costs is scheduled to take place in 2009.

This excerpt taken from the PBR 6-K filed Nov 29, 2007.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At September 30, 2007 and December 31, 2006, the respective amounts accrued by type of claims are as follows:

    September 30,    December 31, 
    2007    2006 
     
 
Labor claims    45    38 
Tax claims    121    47 
Civil claims    128    97 
Commercials claims and other contingencies    19    51 
     
 
Total    313    233 
     
 
Current contingencies    (29)   (25)
     
 
Long-term contingencies    284    208 
     
     

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16. Commitments and Contingencies (Continued)

a) Litigation (Continued)

As of September 30, 2007 and December 31, 2006, in accordance with Brazilian law, the Company had paid US$987 and US$816, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

This excerpt taken from the PBR 6-K filed Sep 6, 2007.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable.

At June 30, 2007 and December 31, 2006, the respective amounts accrued by type of claims are as follows:

    June 30,    December 31, 
    2007    2006 
     
Labor claims    43    38 
Tax claims    84    47 
Civil claims    111    97 
Commercials claims and other contingencies    37    51 
     
 
Total    275    233 
     
 
Current contingencies    (53)   (25)
     
 
Long-term contingencies    222    208 
     

As of June 30, 2007 and December 31, 2006, in accordance with Brazilian law, the Company had paid US$879 and US$816, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

This excerpt taken from the PBR 6-K filed Jun 13, 2007.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. At March 31, 2007 and December 31, 2006, the respective amounts accrued by type of claims are as follows:

    March 31,
2007
  December 31,
2006
     
       
Labor claims    39    38 
Tax claims    54    47 
Civil claims    100    97 
Commercials claims and other contingencies    37    51 
       
 
Total    230    233 
       
 
Current contingencies    (27)   (25)
       
 
Long-term contingencies    203    208 
       

As of March 31, 2007 and December 31, 2006, in accordance with Brazilian law, the Company had paid US$807 and US$816, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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This excerpt taken from the PBR 6-K filed Apr 10, 2007.

(a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. At December 31, 2006 and 2005, the respective amounts accrued by type of claims are as follows:

    As of December 31, 
   
    2006    2005 
     
 
Labor claims    38   
Tax claims    47    87 
Civil claims    97    79 
Commercials claims and other contingencies    51    62 
     
    233    235 
 
Contingencies for joint liability    -    75 
     
 
Total    233    310 
     
 
Current contingencies       (25)   (72)
     
 
Long-term contingencies    208    238 
     

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19. Commitments and Contingencies (Continued)

(a) Litigation (Continued)

As of December 31, 2006 and 2005, in accordance with Brazilian law, the Company had paid US$816 and US$775, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

The Company is a party to several contracts related to the acquisition and upgrade of production Platform P-36, which was lost in its entirety in 2001. Pursuant to those contracts, the Company had an obligation to pay the insurance proceeds to a Security Agent for distribution according to specified clauses established in the contracts. The Company contends that it is entitled to the insurance proceeds under the contractual arrangements, and other parties contend that they are also entitled to such proceeds. The issue is subject to international proceedings in a British court. Pending determination of the issue by the international court, the Company committed to deposit cash collateral in the amount of US$175, in order to facilitate the issuance of a guarantee by a Security Agent, for the payment of creditors. At December 31, 2006, this amount was included in the balance sheet as restricted deposits for legal proceedings and guarantees.

This excerpt taken from the PBR 6-K filed Nov 28, 2006.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. The following presents these accruals by nature of claim:

    September 30,    December 31, 
    2006    2005 
     
Labor claims    43   
Tax claims    89    87 
Civil claims    104    79 
Commercials claims and other contingencies    35    62 
     
    271    235 
 
Contingencies for joint liability    14    75 
     
 
Total    285    310 
     
 
Current contingencies    (39)   (72)
     
 
Long-term contingencies    246    238 
     

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a) Litigation (Continued)

As of September 30, 2006 and December 31, 2005, in accordance with Brazilian law, the Company had paid US$828 and US$775, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

b) Environmental matters

The Company is subject to various environmental laws and regulations. These laws regulate the discharge of oil, gas or other materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of such materials at various sites.

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This excerpt taken from the PBR 6-K filed Sep 6, 2006.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. The following presents these accruals by nature of claim:

    June 30,    December 31, 
    2006    2005 
     
Labor claims    40   
Tax claims    89    87 
Civil claims    98    79 
Commercials claims and other contingencies    36    62 
     
    263    235 
 
Contingencies for joint liability    65    75 
     
 
Total    328    310 
     
 
Current contingencies    (90)   (72)
     
 
Long-term contingencies    238    238 
     

As of June 30, 2006 and December 31, 2005, in accordance with Brazilian law, the Company had paid US$852 and US$775, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

This excerpt taken from the PBR 6-K filed Jun 28, 2006.

a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. The following presents these accruals by nature of claim:

    March 31,    December 31, 
    2006    2005 
     
Labor claims    33   
Tax claims    88    87 
Civil claims    79    79 
Commercials claims and other contingencies    36    62 
     
    236    235 
 
Contingencies for joint liability    64    75 
     
 
Total    300    310 
     
 
Current contingencies    (90)   (72)
     
 
Long-term contingencies    210    238 
     

As of March 31, 2006 and December 31, 2005, in accordance with Brazilian law, the Company had paid US$818 and US$775, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

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12. Commitments and Contingencies (Continued)

This excerpt taken from the PBR 6-K filed Mar 21, 2006.

(a) Litigation

The Company is a defendant in numerous legal actions involving civil, tax, labor, corporate and environment issues arising in the normal course of its business. Based on the advice of its internal legal counsel and management’s best judgment, the Company has recorded accruals in amounts sufficient to provide for losses that are considered probable and reasonably estimable. At December 31, 2005 and 2004, the respective claims by type are as follows:

    As of December 31, 
   
    2005    2004 
     
Labor claims    7    26 
Tax claims    87    73 
Civil claims    79    123 
Commercials claims and other contingencies    62    35 
     
    235    257 
Contingencies for joint liability    75    107 
     
Total    310    364 
     
Current contingencies    (72)   (131)
     
Long-term contingencies    238    233 
     

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21. Commitments and contingencies (Continued)

(a) Litigation (Continued)

As of December 31, 2005 and 2004, in accordance with Brazilian law, the Company had paid US$ 775 and US$ 699, respectively, into federal depositories to provide collateral for these and other claims until they are settled. These amounts are reflected in the balance sheet as restricted deposits for legal proceedings and guarantees.

The Company is a party to several contracts related to the acquisition and upgrade of production Platform P-36, which was lost in its entirety in 2001. Pursuant to those contracts, the Company had an obligation to pay the insurance proceeds to a Security Agent for distribution according to specified clauses established in the contracts. The Company contends that it is entitled to the insurance proceeds under the contractual arrangements, and other parties contend that they are also entitled to such proceeds. The issue is subject to international proceedings in a British court. Pending determination of the issue by the international court, the Company committed to deposit cash collateral in the amount of US$ 175, in order to facilitate the issuance of a guarantee by a Security Agent, for the payment of creditors. At December 31, 2005, this amount was included in the balance sheet as restricted deposits for legal proceedings and guarantees.

On May 28, 1981, Kallium Mineração S.A. brought an action against Petromisa, a former subsidiary of PETROBRAS, in the Federal Court of the State of Rio de Janeiro alleging damages of approximately US$ 450 relating to the rescission of a contract to develop a potassium salt mine. On August 10,1999, a decision was handed down that considered most of the plaintiff’s petitions to be without grounds (losses, damages and loss of profit), requiring only the Company to reimburse “all expenses incurred as a result of the prospecting research” carried out, in accordance with amounts to be calculated in the final award. No award for loss of profit was established in the decision. In September of 1999 both parties filed appeals with the appeals court in the state of Rio de Janeiro. Based on the opinion of its legal advisers, management does not expect an unfavorable outcome in this case and considers the risk of loss with respect to this lawsuit to be possible.

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21. Commitments and contingencies (Continued)

(a) Litigation (Continued)

On November 23, 1992, PORTO SEGURO IMÓVEIS LTDA., a minority shareholder of PETROQUISA, filed a suit against PETROBRAS in the State Court of Rio de Janeiro related to alleged losses resulting from the sale of a minority holding by PETROQUISA in various petrochemical companies included in the National Privatization Program introduced by Law No. 8,031/90.

In this suit, the plaintiff claims that PETROBRAS, as the majority shareholder in PETROQUISA, should be obliged to reinstate the “loss” caused to the net worth of PETROQUISA, as a result of the acts that approved the minimum sale price of its holding in the capital of privatized companies. A decision was handed down on January 14, 1997 that considered PETROBRAS liable with respect to PETROQUISA for losses and damages in an amount equivalent to US$ 3,406.

In addition to this amount, PETROBRAS was required to pay the plaintiff 5% of the value of the compensation as a premium (see art. 246, paragraph 2 of Law No. 6,404/76), in addition to attorneys’ fees of approximately 20% of the same amount. However, since the award would be payable to PETROQUISA and PETROBRAS holds 99.0% of its capital, the effective disbursement if the ruling is not reversed will be restricted to 25% of the total award. PETROBRAS filed an appeal with the State Court of Rio de Janeiro, and received a favorable decision from the Third Civil Court on February 11, 2003, which, by a majority vote, accepted PETROBRAS’ appeal to reverse the judgment and ruled the plaintiff’s case to be without grounds, the revising judge’s decision that held the case to be partially with grounds to reduce the amount of compensation to US$ 1,538 being overruled. Against this decision, Porto Seguro filed another appeal (motion to reverse or annul) with the State Court of Rio de Janeiro, and the Fourth Civil Court handed down a unanimous decision on March 30, 2004 requiring PETROBRAS to indemnify PETROQUISA and Porto Seguro the amounts of US$ 2,359 and US$ 590 respectively (the latter representing 5% in premium and 20% in attorney’s fees). Due to this result, PETROBRAS lodged appeal with high and supreme courts which was dismissed. In view of this decision, interlocutory appeal was filed with High Court - STJ and Supreme Court - STF, which was converted into Special Appeal by STJ.

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21. Commitments and contingencies (Continued)

(a) Litigation (Continued)

On May 6, 2005, the Superior Court of Justice (STJ) accepted the interlocutory appeal and determined that the special appeal was to be proceeded with. Porto Seguro lodged an appeal against the interlocutory decision which was accepted by a majority vote on December 15, 2005, and suspension of the special appeal filed by PETROBRAS was reinstated. The Company considers this last decision to be wrong and awaits its publication before filing an appeal. Based on the opinion of its legal advisers, the Company does not expect to obtain an unfavorable ruling in this case and considers the risk of loss with respect to this lawsuit to be possible.

The Fisherman’s Federation of the State of Rio de Janeiro (FEPERJ) filed a civil suit against the Company with the Rio de Janeiro State Court for compensation of miscellaneous damages amounting to US$ 224, which it is claiming in the name of its members, as a result of the oil spill in Guanabara Bay on January 18, 2000. A decision was handed down on February 7, 2002 which ruled the claim partially without grounds, rejecting pain and suffering, and requiring the Company to pay compensation for material damages and loss of profit to be calculated at the award phase. The ruling expressly declares that it is not reasonable to consider an award based on the amount claimed, since it was without economic base.

Based on its legal counsels opinion, the Company´s Administration believes it is possible that the Company will not prevail in this case, but that any possible negative judgment would be in an amount far below the originally filed complaint. As such, the Company assesses the risk of loss related to this case as possible.

The São Paulo tax authorities filed a tax suit against the Company, to demand payment of ICMS on naphta-petrochemical operations carried out in the state for the period from September 1984 to February 1989. The suit was tried at all levels and the legal system eventually opposed the argument defended by the Company, having understood that, in the specific case of these operations, ICMS would apply.

The case was settled and the Company entered into an agreement to pay US$ 122 plus interest, totaling US$ 151, in 60 equal successive installments beginning April 2005.

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21. Commitments and contingencies (Continued)

(a) Litigation (Continued)

PETROBRAS is a defendant in five labor claims filed by the UNIONS OF PETROLEUM WORKERS of three federal states (Rio de Janeiro, São Paulo and Sergipe), alleging that official inflation rates for 1987, 1989 and 1990 (understatement of the official inflation rate - Bresser, Summer and Collor Plans) were not fully included in the workers’ salaries.

The suits are in different procedural phases. based on previous favorable ruling on similar cases and TST abridgment of law, Company management does not expect an unfavorable outcome on the cases. PETROBRAS contested the expert report determining the amount of indemnification, which is pending judgment. Management assesses risk of loss to be possible.

The Company was sued in court by certain small oil distribution companies under the allegation that it does not pass on to state governments the State Value-Added Tax (ICMS) collected according to the legislation upon fuel sales. These suits were filed in the states of Goiás, Tocantins, Bahia, Pará, Maranhão and in the Federal District.

Of the total amount related to legal actions of approximately US$ 383, up to December 31, 2005 some US$ 34 (US$ 28 in 2004) had been withdrawn from the Company’s accounts as a result of judicial rulings of advance relief, which were annulled as a result of an appeal filed by the Company.

The Company, with the support of the state and federal authorities, has succeeded in stopping the execution of other withdrawals, and is making all possible efforts to obtain reimbursement of the amounts that were previously withdrawn from its accounts.

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21. Commitments and contingencies (Continued)

(b) Notification from the INSS - joint liability

The Company received various tax assessments related to social security amounts payable as a result of irregularities in presentation of documentation required by the INSS, to eliminate its joint liability in contracting civil construction and other services, stipulated in paragraphs 5 and 6 of article 219 and paragraphs 2 and 3 of article 220 of Decree No. 3,048/99.

Since 2002, the Company has been conservatively accruing a provision for this contingency which at December 31, 2005 totals US$ 75 (US$ 107 at December 31, 2004), as it considers the chance of success in a defense filed against the INSS to be remote.

PETROBRAS had disbursed during 2005 US$ 85 (US$ 137 in 2004), referring to administrative suits filed by the INSS claiming the Company’s joint liability.

Internally, procedures were revised to improve the inspection of contracts and require the presentation of documents, as stipulated in the legislation, to substantiate the payment of INSS amounts due by contractors. PETROBRAS continues to analyze each tax assessment received in order to recover amounts, as permitted through administrative processes of the INSS.

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