By: Leonardo Neri

The Government of the State of São Paulo and the concessionaire Ecovias agreed, through a preliminary Amendment Amendment (TAM), to extend the concession contract for the Anchieta-Imigrantes System, which had a contractual term until 2024 and will now be valid until 2033.

The agreement provides for the termination of existing legal actions, proposed by the Government of the State of São Paulo against the concessionaire, which must invest R$1.1 billion in improvement works for the Baixada Santista region and, as a guarantee, will deposit R$613 million to the State.

The addendum or amendment is the instrument used to include appropriate and indispensable changes in the text of a contract. In this case, the amendment extended the term for execution of the concession contract.

This is not the first time that the State of São Paulo has used this procedure with the Concessionaire. In 2006, the Government of the State of São Paulo signed TAM No. 10 of 12/21/2006 of the Concession Contract CR/07/1998. This is the concession contract that had as its object Lot 22, Anchieta/Imigrantes Highway System, with the concession duration being 240 months, or 20 years.

At that time, the purpose of the addendum was to reestablish the economic-financial balance, by extending the term, extending the concession contract for another 70 months, changing the term of the contract to 310 months, increasing the concession from 20 to 25 years, due to the following factors:

(i) changes in the laws relating to the Tax on Services – ISS in the Municipalities through which these highways pass, which changed the ISS charge on concessions;

(ii) increase in the rates and calculation bases for contributions related to the Social Integration and Public Servant Asset Formation Programs (PIS/PASEP) and the Social Contribution for Social Security Financing (COFINS); and

(iii) loss of revenue resulting from installment payments of the tariff adjustment (adjustment lower than the contracted index for a few months).

After the signing of the Amendment with the concessionaire, in order to verify the accuracy of the calculations, in 2011 ARTESP hired the Fundação Instituto de Pesquisas Econômicas, concluding that the calculation of the amount of the imbalance was different from that carried out in the contractual years prior to 2006 and the concessionaire had been unduly benefited, with greater rebalancing than was due – according to FIPE studies, the losses to the treasury were close to R$$ 2 billion and, consequently, the contracts were extended unnecessarily.

Therefore, ARTESP instituted an administrative process against the concessionaire to invalidate TAM No. 10 of 2006, of the Concession Contract CR/07/1998, which was subsequently taken to court, requesting its annulment and that the economic-financial rebalancing of the concession contract be carried out:

(i) based on actual revenue, in accordance with the law and the contract; and

(ii) applying, with regard to environmental compensation, the appropriate deflation indicated by FIPE.

Since then, the State and ARTESP have been fighting for the application of the correction pointed out by FIPE, on real revenue, a unanimous understanding of the Court of Justice of São Paulo, according to appeals no. 1014902-54.2015.8.26.0053, 12th Ch., Rel. Souza Nery, j. 02/05/2020, vm 027267-77.2014.8.26.0053, 12th Ch., Rel. Osvaldo de Oliveira, j. 11/13/2019, vm; 1013617-60.2014.8.26.0053, 2nd Ch., Rel. Claudio Augusto Pedrassi, j. 06/25/2019, vu; 1017316-54.2017.8.26.0053, 13th C., Rel. Djalma Lofrano Filho, j. 03/27/2019, vu; 1040986-29.2014.8.26.0053, 3rd C., Rel. Camargo Pereira, j. 04/17/2018, vm;1014891-25.2015.8.26.0053, 10th C., Rel. Marcelo Semer, j. 05/21/2018, vu and ECOVIAS defended the maintenance of the application on the projected revenue.

As can be seen from the precedents, the request made by ARTESP and the Government of the State of São Paulo is justified. Furthermore, the evident damage caused to the public treasury is noted, since the concessions were extended unduly.

The issue gains relevance, since the Public Administration can use its power of self-protection to annul or revoke its acts, according to the Summaries nº 346 (“The Public Administration can declare the nullity of its own acts.”) and 473 (“The Administration can annul its own acts, when they are tainted with defects that make them illegal, because they do not originate rights; or revoke them, for reasons of convenience or opportunity, respecting the acquired rights, and reserving, in all cases, the judicial review.”) of the Federal Supreme Court and, in honor of the principle of legal certainty, it must do so within 10 years from their production, according to article 10, item I of State Law 10.177/98.

Furthermore, the unnecessary extension of 2006 revealed by FIPE is subject to annulment in the judicial sphere, given the damage to public coffers, based on the basic principle of Administrative Law, supremacy of public interest over private interest, since the criterion adopted in 2006 for the readjustment of the contract did not rebalance it, it only harmed the Administration to the benefit of the concessionaire.

Within the scope of the Judiciary, the issue was judged in the appeal filed by ARTESP and the State Government against the Concessionaire company and the Winning Vote is clear in deciding to review the addendum to reestablish the economic-financial balance of the contract, through studies, and it is not reasonable to maintain the loss to the Public Authority (Vote No. AC-23,900/20).

The dissenting vote, on the other hand, understands that if the actual revenue criterion – proposed by ARTESP – was used, the extension of the concession for economic-financial rebalancing would be 24 months, compared to 31 months for rebalancing by projected revenue, used in TAM 10/2006. For the Rapporteur, 7 months is not considered a long term when it comes to highway concessions, but in this contract with Ecovias alone, the loss to the Public Administration, calculated up to 2012, was R$$ 58.98 million.

Analyzing it in a simplistic way, in 2012 the loss that the concessionaire caused to the treasury was R$58.98 million, without updating.

However, vote 24696 of Appeal 1045799-02.2014.8.26.0053, which declared the State of São Paulo and ARTESP the winner, makes it clear that:

The current economic scenario differs substantially from that existing in 1998, when the bid won by the appellee was held. In that scenario, an internal rate of return (IRR) of 20.60%a.a. was contractually guaranteed, which continues to be guaranteed to the concessionaire in compliance with the constitutional principles of the perfect legal act, legal certainty, as well as the principle of the binding force of the contract and the theory of unpredictability. However, as determined, especially by the FIPE report, the database used to determine the 2006 imbalance increased the IRR of the Contract from 20.60% per year to 20.65% per year, which, if maintained, will imply the receipt of an undue advantage of approximately R$$58.98 million (values for 2012). The same principles that guarantee the concessionaire the IRR, combined with the principle of the supremacy of the public interest, allow the cancellation of the contractual addendum that, under the pretext of rebalancing the economic-financial equation of the original contract (then unfavorable to the Concessionaire), ended up causing a new imbalance, this time in the face of the granting authority. Reviewing illegal administrative acts is a power/duty of the government (Summary 473 of the Federal Supreme Court). There was an irreparable error in the execution of the 2006 TAM, consisting of the use of fictitious revenue data and not actual revenue to maintain the economic-financial equation of the contract, resulting in a very long contractual extension period that was longer than necessary.

In view of this, the new extension of the contract with Ecovias recently announced by the Government of the State of São Paulo is of interest, in which the Public Authority commits to closing the legal action that has a ruling from the Bandeirante Court of Justice in favor of the State's thesis.

Thus, contrary to the principle of free competition, the legal stability of administrative and judicial decisions, as well as section XXI of article 37 of the Federal Constitution, the Granting Authority intends to correct the error of 2006, through a new addendum that would make it impossible to refund amounts unduly paid to the Concessionaire.

Such amounts received unduly by the concessionaire violated the principles of public procurement, since the community was burdened by the actions of the Concessionaire and by the Public Authority, which made a mistake in 2006 and, trying to correct its mistake, made another one.

It indiscriminately violates the principle of free enterprise and free competition, which guide the economic order, which is based on the idea that state intervention in this area must be exclusively for the purpose of preventing the abuse of economic power. On the contrary, the Public Authority, by entering into a new addendum, privileges the private sector in the face of market competition, restricting it by extending the concession contract.

Furthermore, by failing to initiate a new bidding process, given that bidding is a competitive process that is based on free initiative, the Government, together with the concessionaire, limits and prevents the participation and access of other companies, which could present more advantageous proposals and with better techniques.

The hiring of a new company or the maintenance of the current one for the management of highways, through a new bidding process, is nothing more than a procedure that aims to exercise competition, so that companies capable of this work can present their proposals, be judged and qualified.

Despite the claim that investments in the order of R$1.1 billion will be made by the concessionaire until 2033, it is certain that other companies that could participate in a new bidding process would also have the possibility of making these or greater investments and the State would gain not only from a possible better offer, but from the maintenance of the legal actions.

The State Government's stance harms the Public Administration and potential competitors, and also violates the interests of consumers and society, who are harmed by the lack of freedom of choice in this case, since the Public Administration reserved the right to privilege a specific company or group, even with an important court decision favorable to the request for annulment of the 2006 TAM.