On 07.05.2017, in Judgment 1,431/2017, with Justice Vital do Rêgo as reporting justice, the Federal Court of Accounts ruled on the possibility of economic and financial rebalancing of administrative contracts due to exchange rate fluctuations, establishing new parameters and definitions, specifically for contracts whose main object is the provision of services performed in Brazil involving imported goods or services.
In this decision, the TCU recognizes that an unexpected and significant exchange rate fluctuation may be sufficient to give rise to economic and financial rebalancing of the contract, with the limitation that such procedure applies exclusively to the human and material inputs acquired where the services are provided. Rebalancing, however, should not extend to items in the contract’s cost breakdown priced on the basis of indexes or percentages applied to other cost items (such as the administration fee) relating to services performed and goods supplied abroad.
According to the reporting justice, the understanding that exchange rate fluctuations may be considered an event capable of giving rise to an adjustment in contracts must follow these premises:
- it must be an event with incalculable consequences, that is, whose consequences could not be foreseen by the average manager when the contract was entered into,
- it must cause a severe disruption of the economic and financial equation, imposing an excessive burden on one of the parties. To this end, the exchange rate fluctuation must go beyond the typical fluctuation of a floating exchange rate regime; and
- it is not enough for the contract to become burdensome; the increase in costs must delay or prevent performance of the agreement, as provided for in art. 65, item II, subparagraph “d”, of Law 8,666/1993.
This understanding, representing a new line of analysis and interpretation of contractual risks, may become a new paradigm for the Court of Accounts in other contracts entered into in foreign currency.
