On August 26, 40 restatements of law were published, after approval at the 1st Working Group of Administrative Law, held by the Center for Judicial Studies (CEJ) of the Federal Judiciary Council (CJF) between August 3 and 7. Among them, three stand out regarding strategic partnerships entered into by state-owned companies, which help in understanding various legal issues that have arisen since the enactment of Law No. 13,303/16 (the State-Owned Enterprises Law).

The working group was held in a virtual format, due to the coronavirus pandemic (COVID-19) and aimed at consolidating interpretations of current administrative law rules. Hundreds of experts participated, including university professors, federal and state judges, members of the Public Prosecutor's Office and the Federal Auditing Court (TCU), as well as public and private lawyers. All the restatements of law approved are available for consultation at the CJF website.

The restatements on strategic partnerships entered into by state-owned companies are based on article 28, paragraph 3, subsection II, and paragraph 4 of the State-Owned Enterprises Law. The text expressly sets aside the public tender process “in cases where the choice of the partner is associated with its particular characteristics, linked to defined and specific business opportunities, justified by the unfeasibility of a competitive procedure.”

As a result of the work done during the event, three restatements on the subject were approved:

  • Restatement No. 30[1] establishes the understanding that the "unfeasibility of a competitive process" provided for in article 28, paragraph 3, subsection II, of Law No. 13,303/16, does not mean the existence of a single party interested in entering into the strategic partnership. The interpretation of the provision of law, with which one agrees, shows that plurality of competitors is irrelevant, because the state-owned company must choose the private partner capable of offering the business opportunity best suited to the purposes of the partnership intended.
  • Restatement No. 22,[2] in turn, expressly provides for a scenario of a "business opportunity": the participation of a state-owned company in the capital of a private company that is not a part of the Public Administration. To this end, the relevant provisions of the state-owned company’s bylaws must be observed.
  • On the other hand, Restatement No. 27[3] provides that, for the "unfeasibility of competition" resulting from a business opportunity to be established, it must be impossible for there to be an objective comparison between interested parties, in the case of a partnership and corporate restructuring proposals, or, further, the need for a competitive procedure, when the proposal can be offered to all interested parties.

The approval of such restatements signals a certain easing of the resistance that still exists in relation to the signing of strategic partnerships between state-owned and private enterprises, reinforcing the spirit of the State-Owned Enterprises Law: to innovate, to make the management of public enterprises and government-owned companies more flexible and efficient, especially in relation to the rules on bidding and contracting. Precisely because of the search for efficiency, the exploration of economic activity often demands a combination of efforts between public and private economic agents in a less hierarchical manner and with a more balanced allocation of risks between the parties, as occurs in strategic partnerships.

Moreover, the approval of such restatements indicates an effort to achieve the precise meaning of normative concepts that are often obscure for those applying the law, such as the terms "business opportunities" and "unfeasibility of the competitive procedure".

The issue related to the execution of strategic partnerships by state-owned companies was addressed by the TCU within the scope of Representation No. 022.981/2018-7, made by the Bureau of Inspection of Water Infrastructure, Communications, and Mining (SeinfraCOM) of the TCU and authored by Justice Benjamin Zymler. The purpose of the representation was to analyze the legality of the partnership agreement entered into by the state-owned company Telecomunicações Brasileiras S.A. (Telebras) and the Brazilian subsidiary of the American company Viasat,[4] to operate the Ka band (non-military) of the first national Geostationary Defense and Communication Satellite (SGDC-1).

The strategic partnership agreement was signed in accordance with the rules of private law, as provided for in article 68 of the State-Owned Enterprises Law, expanding Telebras' negotiating freedom, removing red tape from the public contracting system, and benefiting the parties in the pursuit of their particular objectives, also associated, however, with public purposes.

The TCU en banc found that the execution of a strategic partnership agremeent without a prior bidding procedure is supported by the State-Owned Enterprises Law, not because it was a case of waiver or unenforceability of bidding (provided for in articles 29 and 30), but due to the fact that the bidding procedure was unfeasible in the case, due to the existence of a defined business opportunity and the unique characteristics of the private partner, which would meet the interests of Telebras in the operation of the satellite.

Justice Benjamin Zymler highlighted that Telebras was able to establish objective criteria to evaluate the existence of a business opportunity, related to the achievement of the purposes of public policies involved in the scope of the partnership, such as the National Broadband Program (PNBL). The judgment, which took place on October 31, 2018,[5] marked a milestone in the TCU's confrontation of the issue and will certainly serve as a precedent for the analysis of issues related to strategic partnerships.

Combined with the unprecedented decision by the TCU in the judgment of the representation mentioned above, restatements No. 22, 27, and 30 further broadened the understanding regarding the possible application of private law rules in matters of public procurement, contributing to dispel the (non-existent) "general principle of bidding processes" and giving precedence to the efficiency of the Public Administration, through the dissemination of the understanding favorable to the application of direct contracting modalities.

[1]"The 'unfeasibility of a competitive procedure' provided for in article 28, paragraph 3, subsection II, of Law No. 13,303/2016, does not mean that, in order to establish a business opportunity, there can only be one party interested in establishing a partnership with the state-owned company. It is possible that, even in the presence of more than one interested party, a competitive procedure is unfeasible."

[2]"The participation of a state-owned company in the capital of a private company that is not a part of the Public Administration fits within the scenarios of 'business opportunities' provided for in article 28, paragraph 4, of Law No. 13,303/2016, and decisions in favor of such participation must comply with the legal dictates and regulations issued by the state-owned company regarding this possibility."

[3] "The contract for entering into business opportunities, as provided for in article 28, paragraph 3, II, and paragraph 4 of Law No. 13,303/2016 must be evaluated in accordance with the practices of the sector in which the state-owned company operates. The mention of the unfeasibility of competition for the realization of the business opportunity should be understood as being impossibility of objective comparison in the case of partnership and corporate restructuring proposals and as an unnecessary competitive procedure when the opportunity can be offered to all interested parties."

[4]Viasat Brasil Serviços de Telecomunicações Ltda. was represented by Machado Meyer before the TCU.

[5] Appellate Decision No. 2,488/2018.