By: Giuseppe Giamundo Neto and Fernanda Leoni

The recent debate on the actual results of Operation Car Wash — which turned ten this year — and the conclusion that many of the agreements and investigations carried out were, at the very least, abusive, has brought to the fore an important discussion on the legal possibility and limits of reviewing the leniency agreements signed in the context of this operation.

In general, renegotiation seems feasible in light of factual or legal circumstances showing that the premises used to set the parties’ obligations are no longer sustainable in the current scenario. Changes in the factual context, legislative amendments, adaptation to new interpretive requirements and to the very conditions for complying with the obligations established are just a few examples of possible grounds for a legally justified review.

Although the possibility of such review is seldom questioned, the limits on the type of obligation that may be agreed, excluded or newly incorporated into the agreements under negotiation are still unclear. This text proposes a brief discussion on excluding from the agreements amounts allegedly owed to state-owned companies that have since been privatized, based on the premise that these amounts can no longer be labeled as public.

As discussed in an article previously published on this portal, the TCU, assessing the impact of the privatization of the special purpose company Norte Energia S.A. (Nesa) — then controlled by Eletrobras — which acted as the concessionaire responsible for building, operating and maintaining the Belo Monte Hydroelectric Plant, concluded that any jurisdiction it once had had ended, and that there was no interest or standing to pursue possible damage to a company that no longer had any state ownership.

For the TCU, which also cites several other precedents along the same lines, the requirements for validly and regularly opening a special audit to seek redress for the alleged damage would be absent, whether the damage was caused to the company or to its federal state-owned shareholder, since the matter would fall into the private sphere, removing its jurisdiction.

Jurisdiction

If the TCU, as the external oversight body, lacks jurisdiction over the accounts and contracts of such companies, for the same reason the CGU, as the internal oversight body, and the other parties authorized to enter into leniency agreements would lack powers to manage financial resources of a strictly private nature.

It is in this sense that we consider it entirely possible — and necessary — to exclude from the amounts recorded as compensation those that once belonged to a state-owned company or mixed-capital company later privatized, preventing these agreements from being used to manage essentially private resources.

Note that this would not prevent the privatized company from recovering compensation of any kind for losses it believes were caused to it; it would merely establish that such compensation would be pursued in the private sphere and not form part of the agreement, whose beneficiaries are only Public Administration bodies and entities, given the very nature of the instrument.

In addition, this type of review would not entail any relevant change to the terms of cooperation or to any applicable penalties — which would not even face any obstacle — but only the exclusion of the respective amounts specifically recorded in the agreement.

In the context of reviewing leniency agreements, therefore, it is essential to purge items or amounts that are no longer consistent with their original scope, ensuring the effectiveness and fairness of these agreements over time. Excluding compensation previously directed to state-owned companies that have since been privatized also prevents the government from protecting private interests and resources, when it should focus its efforts on preserving the public treasury.

Article originally published by Valor Econômico (in Portuguese)