By Daniel Almeida Stein

Sabesp’s change of control raises a number of legal questions that will be resolved over time, mainly due to the change in its legal regime, with the transition from the rules of Law 13,303/2016 to an exclusively private logic.

This is a thorny issue, especially in Sabesp’s relationships with third parties, particularly regarding tenders and contracts, which involve a variety of situations requiring parameters for action that, although they may be standardized, may sometimes require a specific solution depending on the circumstances of the case.

With regard to tenders, it is therefore necessary to assess those in progress as well as those already concluded but without the respective contract signed at the time of the change of control. With regard to contracts, the issues are whether contracts already signed will be maintained, whether they can be amended and the rules for any termination.

For tenders in progress, there is room for Sabesp to fully exercise its discretion to continue the procedure and sign the respective contract, while negotiating specific conditions regarding the contracting regime, mainly by removing the exorbitant clauses typical of the public regime. Alternatively, Sabesp may choose to revoke the procedure, without the participants having any rights.

Tenders already concluded but without a signed contract, on the other hand, may give rise to disputes in the event of revocation, as the winning bidder’s expectations will be weighed against Sabesp’s convenience.

Alternatively, the parties may converge on a negotiated solution regarding amounts and other contract terms, in order to adapt the contract to the new legal regime in force.

Signed contracts, extension of existing contracts and PPPs

As for contracts already signed, the trend is for them to be maintained on their terms, out of respect for legal certainty. However, there is nothing to prevent the parties from agreeing to adapt these contracts, by consensus, to Sabesp’s new legal regime. It should be noted that there is no obligation to make this adaptation; that is, if either party chooses to keep the originally contracted terms, it may do so.

Regarding the extension of contracts in force at the time of the change of control, a simple extension of the term is possible, keeping the original terms of the contract, even if this poses a challenge in Sabesp’s day-to-day operations. However, there is also nothing to prevent the parties from consensually establishing extension terms already adapted to the new legal regime.

Any termination of these contracts, whether unilateral or by mutual agreement, may give rise to greater debate, depending on how detailed the rules in the specific contract are, since the specific act will already be governed by private law rules.

A note is warranted regarding the Taiaçupeba and São Lourenço PPPs: as concessions, they are far more complex contracts than short-term supply or service contracts, and a prior standardized interpretation is not advisable. The approach must be case-by-case and comprehensive across the different aspects of contract performance, as the repercussions of the change of regime may affect certain points differently, which may or may not be interconnected.

However, this also presents a great opportunity for a possible renegotiation of these contracts, since instruments typical of private law can be applied in greater depth, bringing more flexibility to the process.

Originally published by Conjur (in Portuguese).