by Giuseppe Giamundo Neto and Fernanda Leoni

In April this year, without much public fanfare, Bill No. 2,263/2023 was introduced in the Federal Senate by Senator Jorge Kajuru, aimed at adding a paragraph to article 14 of Federal Law 8,987/1995 that would prohibit regulatory agencies from conducting tenders for the concession of services.

The bill’s justification stated that the legal system had assigned regulatory agencies functions related to sub-statutory rulemaking and oversight of conceded services, which would conflict with any role in tendering the concession of the activities they also regulate, in breach of the legal principles applicable to the matter.

Although it moved quickly in recent months, the bill was ultimately shelved on 9/28/2023, at the request of its own author, and, even without having advanced, it brought to light a debate that often remains superficial. Does the tendering of public services by regulatory agencies in fact create a technical conflict or conflict of interest capable of harming their activity or the service provided?

In general, the debate on the subject has two main opposing positions. According to the first line of thought, the exercise of the granting function by regulatory agencies would compromise their (typical) regulatory role. On the other hand, some argue that there would not even be an effective delegation of the granting power, since the agencies’ role would be limited to drafting tender notices and setting general contracting conditions, without a specific definition of how the policy formulated is to be implemented, which remains the responsibility of the direct administration [1].

It is known that the regulatory model adopted in Brazil, although based on the U.S. experience [2] like so many other systems, also has distinctive features of an experiment with its own history. One of the aspects characterizing the development of the subject in the country is that the creation of regulatory agencies coincided with the country’s own return to democracy and with a mindset of state reform through a comprehensive privatization process [3], so that the improvement of the agencies’ technical expertise and independence in Brazil seems to relate much more to the need to attract private investment, by increasing legal certainty, than necessarily to the regulation of public services.

The distinct context in which regulatory agencies developed in Brazil, however, does not diminish the important role of regulation as the agencies’ primary purpose. On the other hand, a reductionist discourse that disregards other important roles of these bodies — such as their relevant function of mediating conflicts — is also inconsistent with the reality of public services in our country.

Due to the absence of general regulation and the lack of definition also present in the scholarly debate, there is no single answer as to whether regulatory agencies may act in public service concessions. The matter thus ends up being regulated on a case-by-case basis, depending on the regulated sector [4].

From a pragmatic standpoint, there are many idiosyncrasies of the Brazilian public machinery that would justify keeping agencies as granting authorities. One such aspect is that some ministries and sector departments do not have permanent staff to conduct complex public service delegation processes. Agencies, on the other hand, usually have qualified teams, with permanent award committees whose members enjoy functional independence, which tends to provide greater stability for carrying out projects.

Since this is an established reality — not necessarily exclusive to our country [5] — rather than curbing this role without a broader debate with stakeholders from the different infrastructure sectors and from society itself, as the user of regulated services, it seems prudent to identify whether the risks actually exceed the opportunities and, on that basis, to consider legal models suited to reality, but also to the regulatory arrangements commonly used in our system.

In any event, thinking of an ideal institutional model, we believe it would be most appropriate for the central public administration to act as the granting authority. Assigning this task to regulatory bodies may both distance them from their nature and pose risks to their necessary independence. It is not in the essence of regulatory agencies to act as a contractual party, at the risk of compromising their neutrality in reconciling the interests involved in the regulated sector. This is certainly a subject to be debated more broadly, in order to ensure a fine balance between the soundness of the current legal and constitutional system and the individual and collective rights and guarantees ensured by the proper provision of public services.

[1] A summary of this debate is very well outlined in ARAGÃO, Alexandre Santos de. Direito dos Serviços Públicos. Rio de Janeiro: Forense, 2007. p. 590-593.

[2] Regulation emerged in the United States of America amid the crisis of capitalism, when there was demand for strong state regulation to prevent the dominance of private capital. For a more complete history of the subject, see FAJARDO, Gabriel Ribeiro. Agências reguladoras como poder concedente nos contratos de concessão. Master’s thesis (Law). Faculty of Law and State Sciences of the Federal University of Minas Gerais, 2023.

[3] BINENBOJM, Gustavo. Agências reguladoras independentes e democracia no Brasil. Revista de Direito Administrativo, v. 240, p. 147–167, 2005. Available at: https://bibliotecadigital.fgv.br/ojs/index.php/rda/article/view/43622. Accessed on 9/29/2023.

[4] By way of example, consider the port sector, where there is a clear distinction between the functions assumed by the Granting Authority, exercised by the Federal Government through the Ministry of Transportation, Ports and Civil Aviation, and the functions of the National Waterway Transportation Agency (Antaq), as provided in articles 1 to 3 of Federal Decree 8,033/2013.

[5] In Portugal, for example, the regulatory agency for mobility and transportation services is authorized to act as granting authority, as provided in article 3, item 4, subparagraph “r”, of Decree-Law No. 236/2012: “Art. 3. (…). 4 – The powers of IMT, I. P., regarding road infrastructure, including specific matters relating to the national road network, are: (…) r) To exercise, in the management and operation of the road network, the powers and competences assigned to the State as grantor, by law or by contract, unless these expressly provide for the intervention of the members of the Government responsible for finance and transport, without prejudice to the power of sub-delegation”. The authorization granted to this agency, however, seems to be isolated in the country, since agencies in other regulated sectors do not have such powers (see: Water and Waste Services Regulatory Authority, art. 24, 1, f, of Law 10/2014; National Civil Aviation Authority, Decree-Law 40/2015; Energy Services Regulatory Authority, art. 13 of Decree-Law 97/2002; National Communications Authority, art. 8, 2-“b” of Decree-Law 39/2015, among others).

Article originally published on the Consultor Jurídico portal (in Portuguese), on 10.04.2023.