By: Giuseppe Giamundo Neto and Fernanda Leoni
On June 14, TCU Ordinance No. 370/2024 came into force, regulating the Federal Court of Auditors’ use of the precautionary measure of freezing assets in proceedings conducted by the federal court of auditors. Previously addressed very briefly in article 274 of the TCU Internal Rules, the precautionary asset freeze now has its own rules under the newly published regulation, which may help improve the procedures adopted by the court.
The asset freeze, a precautionary measure, is intended to ensure compensation for the damage under investigation and, for this reason, may only be adopted in proceedings already converted into special audits (tomadas de contas especiais), the procedural stage in which responsibilities are individualized and the damage is quantified (article 3, caput and §1). The measure may not last more than one year, and any transaction carried out during this period involving the frozen asset or right — sale, encumbrance, transfer, etc. — will be ineffective as against the TCU (article 3, §2).
Requirements, amount and scope
Given the precautionary nature of the measure, article 4 sets out the requirements for granting it, so that a freeze will only be authorized if there are (1) sufficient evidence of the existence of damage; (2) quantification of the damage; (3) evidence of the agent’s responsibility; and (4) risk to the useful outcome of the proceeding, characterized by circumstances indicating a well-founded fear that compensation will be frustrated.
These are, therefore, specifications of the fumus boni iuris and periculum in mora requirements established in the Code of Civil Procedure, whose subsidiary application is expressly authorized by the sole paragraph of article 1 of the regulation — as well as the rules on precautionary seizure of assets set out in the Administrative Misconduct Law and on precautionary tax actions and enforcement by the Public Treasury.
The amount frozen will correspond to the debt under investigation, monetarily adjusted and plus default interest, and may even be defined by estimate, without this amount binding the ongoing investigation (article 5). In proceedings with jointly liable parties, the amount may be secured by assets and rights of one or more of them, limited to the total amount of the debt under investigation (article 5).
In terms of scope, the freeze will cover “any asset of the responsible party, tangible or intangible, movable, immovable or livestock, or legal relationship relating to it, having economic value” (the definition of “asset” and “right” in article 2), including financial investments (article 13), except for assets considered unseizable or inalienable (articles 11 and 12). On the other hand, the measure does not reach public administration bodies or entities, or companies that have been declared bankrupt or are in judicial reorganization — in the latter case only regarding assets necessary to fulfill the approved reorganization plan (article 7).
Procedure
To process and monitor the freeze, a separate proceeding will be opened, linked to the main case, in which matters specifically related to the measure will be handled (article 8). Although not provided for in the Internal Rules — which, as mentioned, were very brief on the subject — this was already the procedure adopted by the TCU in such cases, now with much more complete rules on adversarial proceedings (defenses and appeals) consistent with the seriousness of the measure, including the possibility of participation by third parties affected by the precautionary measure (articles 22 to 31 deal with all matters related to processing defenses and appeals against the freeze).
The assets to be frozen will be located through due diligence and the use of databases containing financial information, which must be regularly informed if the measure is adopted (articles 9 and 10). For publicity purposes, the TCU will arrange for the freeze to be annotated and recorded in the competent registries — real estate, deeds and documents, etc. (article 14).
When the measure covers assets and rights without a previously identified value, the TCU may appraise them using non-exhaustive criteria ranging from the tax base of real estate used for assessing applicable taxes to the definition of the average market price (articles 15 and 16). This aspect will certainly require attention and debate in order to avoid undervaluation and seizures greater than the minimum necessary, especially in light of the principle of least burden, adopted through the authorized subsidiary application of the CPC rules and the administrative misconduct legislation [1].
Substitution of assets, cessation of effects and new measures
As is customary with provisional measures, there is ample room to modify the freeze while it is in force — for a maximum of one year, as mentioned (articles 17 to 21). Important rules were created for situations in which the party whose assets are frozen may request their substitution with other assets or even guarantees (surety bonds or performance bonds), which will carry a 30% surcharge on the amount of the debt under investigation — which may even discourage the use of this option, although it is less burdensome and very secure in terms of any need for enforcement.
In addition to the expiry of the one-year period, the measure also ceases to have effect upon its revocation, full compensation for the damage, recognition that there is no damage or exclusion of the responsible party from the proceeding, termination of the proceeding without a ruling on the merits, and installment payment of the debt — the latter gradually, as payments are made (article 34). The expiry of the period, however, does not prevent the TCU from adopting a new measure for an equal period, if there are new grounds, which requires the Court to justify the requirements for the freeze in a different way, not merely renewing previously stated grounds (article 34, §3).
Final considerations
Finally, the regulation also governs attachment (arresto), consisting of the “seizure and deposit of assets or the restriction of rights of the responsible party, through legal action brought by the body or entity entitled to compensation” (article 2, III). In this case, the measure will be requested by the Plenary, through the Public Prosecutor’s Office attached to the TCU, from the Office of the Attorney General or from the entity entitled to compensation, since it is a judicial instrument (articles 37 to 40).
Overall, by detailing asset freeze and attachment measures, TCU Ordinance No. 370/2024 represents a significant regulatory step forward that incorporates several practices already adopted by the TCU but not necessarily clear to those under its jurisdiction. Some challenges can already be seen regarding asset valuation criteria and the adoption of substitute measures with financial surcharges, which will only be confirmed in the practical application of the institution under these new rules. In our view, this is a good opportunity for the Federal Court of Auditors to rigorously assess the effectiveness of these measures, that is, whether they actually mitigate the risk to the recovery of any damage, or merely represent an empty reinforcement of institutional powers without practical function.
[1] On this subject, see the article by Mudrovitsch and Nóbrega published on this platform: MUDROVITSCH, Rodrigo de Bittencourt; NÓBREGA, Guilherme Pupe da. Bloqueio, execução e menor onerosidade. Available at:https://www.conjur.com.br/2024-jun-19/a-indisponibilidade-de-bens-regulamentada-pelo-tcu/#_ftnref1
