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On August 7, 2019, the Presidency of Republic enacted the Decree No. 9,957 (“Decree 9,957/2019“), regulating the proceeding to return public private partnerships and common concessions (“PPP”) in transport sectors (toll road, airport, railway), by mutual agreement between the private partner and the Government, for submission to a new bid (or “PPP return proceeding”), which refers the Law No. 13,448, June 5, 2017.

Decree 9,957/2019 seeks for the continuity, lawfulness and efficiency of the public services in transport sectors, as well as the clearness and suitableness of the government agencies’ decisions regarding the rebid proceeding.

In this sense, we highlight the main aspects of the Decree 9,957/2019:

(i) PPP return proceeding request: among other provisions, the first private partner shall submit a written request, considering  (a) technical  information to justify the convenience and opportunity to justify the PPP return (b) statement (irrevocable and irreversible) regarding the intention to start PPP return proceeding, (c) withdraw its participation in the new bid (including the direct and indirect shareholders), (d) information about the reversible assets, financing agreements, agreements with third parties and bankruptcy, extrajudicial or judicial recovery of the concessionaire.

(ii)  Qualifying process: (a) the regulatory agency shall assess the feasibility of the PPP return proceeding and declare its opinion; (b) after the regulatory agency’s declaration, the Ministry of Infrastructure shall assess the suitableness of the request regarding the public policy of the sector; (c) then, the Council of the Program of Partnership of Investments (“PPI Council”) shall receive and evaluate the declarations of the regulatory agency and Ministry of Infrastructure in order to give your opinion regarding the PPP return proceeding; (d) the Presidency of Republic shall decide about the PPP return based on the PPI Council’s opinion.        

(iii) The hiring of an independent audit company: the regulatory agency shall hire an independent audit company to support the PPP return proceeding.

(iv) The request of judicial recovery and bankruptcy: the amendment to the initial PPP agreement shall provide that the concessionaire will not request bankruptcy, extrajudicial or judicial recovery, until the termination of the PPP agreement. 

(v) Indemnification regarding the reversible assets, not yet amortized or depreciated: the Government shall discount (a) the fines and others non-tax amounts due to the granting authority not complied until the date of the indemnification payment, (b) payments due to the Government until the termination of the PPP agreement and the payments default until the date of the indemnification, (c) the excess tariff amount regarding the suspension of the non-essential investment obligations, upon the execution of the amendment to the PPP initial agreement.

(vi) Calculation of the indemnification: the complied and overdue payments due to the Government, including goodwill, shall not be considered to the calculation of the indemnification.

Decree 9,957/2019 is essential to the Government take a step forward regarding PPP returns ongoing (such as Viracopos Airport and the BR-153 highway), contributing to the fulfillment of the Government’s concession agenda.

The Law No. 13,848/2019 (“Regulatory Agencies’ Law”), which provides rules of management, organization and social control of regulatory agencies, was sanctioned.

The law intends to guarantee functional, administrative and financial autonomy and to provide a greater transparency to regulatory agencies. The Law also establishes requirements of certain professional experience in the area of the regulatory agency.

In addition, we highlight below a summary of the main innovations brought by the “Law of Agencies”.

• Establishment  of rules on decentralization of the activities of regulatory agencies;
• Regulation for agencies directors’ loss of mandate;
• Duty to adopt a periodic strategic plan;
• A five-year term to the Chairmen, without reappointment;
• Creation of an Ombudsman office, with a three-year term, without reappointment;
• A six month “quarantine” for ex-leaders to work in the regulated sector;
• Adoption of risk management and corruption prevention practices by agencies;
• Prohibition of delegating normative powers to state and municipal regulatory bodies when there is cooperation between them and the regulatory agencies;
• Provision of financial autonomy and the law extension for the Administrative Council of Economic Defense (“CADE”);
• A compulsory Regulatory Impact Analysis, for any normative act that interests economic agents, consumers or users of the services provided by the regulated sector.

Some provisions were vetoed by the Executive Branch. Among them, the three-name list for the agencies’ members selection. According to the government, the measure unduly restricted “the constitutional competence conferred to the head of the Executive Power” to indicate the Directors. 

Another veto imposed was to the provision for a mandatory annual submission of the agencies’ accounts to the Senate, for accountability purposes. The ban on reappointment of current directors was also rejected.

There was also a veto added to the section that determined a 12-month quarantine for the appointed Directors that were affiliated to private companies.

Now all the vetoes will be voted in a joint session of the National Congress, which holds the final decision.

The Law shall enter into force 90 (ninety) days after its sanction.

For more information, please contact the partners of the Infrastructure and Energy practice of Mattos Filho.