Amendment submits regulatory agencies to government-linked boards

An amendment under discussion in Congress seeks to reduce the power of regulatory agencies – which currently enjoy relative autonomy – and submit their decisions to a higher body: fiscal councils linked to the federal government.

The members of these councils would be appointed by the Executive and Legislative powers and also by civil society, represented by companies, consumers and academia.

Known as Amendment 54, the idea was proposed in the Provisional Measure (MP) 1.154/23, edited by President Luiz Inácio Lula da Silva (PT), which reorganized the Executive Branch and structured the ministerial team in the new government.

Because it has no direct relationship with the MP’s theme, the amendment has been called “jabuti”, which is rejected by its author, federal deputy Danilo Forte (União Brasil-CE). To enter into force, incorporation into the provisional measure will have to be approved by Congress, and then sanctioned by Lula.

Created during the government of Fernando Henrique Cardoso (PSDB), in the midst of the privatization process of companies in various sectors, the regulatory agencies are special regime autarchies, in charge of regulating, controlling and supervising the execution of public services.

The parliamentarian says that the objective of his amendment is to protect the consumer and give more transparency and representation to the agencies, which in his view concentrate “superpowers” and have their debates guided by business interests.

On the other hand, regulated sectors and agency representatives see the idea as an institutional setback, as it submits permanent state bodies to the logic of governments, which can push away investments and harm consumers and the economy.

The weakening of the agencies meets former demands of President Lula, for whom these agencies command more than the government – ​​a criticism that was also made by former President Jair Bolsonaro (PL).

In March 2022, Bolsonaro said that agencies often “can do much more” than ministers and that they create “difficulties”. In August of the same year, Lula made similar statements. “Many times we create an agency to make it easier and, when the citizen takes office in the agency, he thinks he commands more than the minister”, said the PT.

Forte says he has not yet had an “institutional conversation” with the government about the amendment he presented, but claims that PT parliamentarians were “sympathetic”. A PT deputy heard by the People’s Gazettehowever, called the amendment “foolish”, specifically criticizing the fact that it expands Congressional influence over the agencies’ work.

What the amendment provides for regulatory agencies

Danilo Forte’s amendment provides that all infralegal normative activities of regulatory agencies will be inspected and judged by a fiscal council with tripartite representation.

With members appointed by the government, Congress and civil society, each council would be formally linked to the ministry in the area. Thus, the supervisory board of the National Electric Energy Agency (Aneel), for example, would be linked to the Ministry of Mines and Energy.

The President of the Republic would remain responsible for nominating the agency’s board members, and they remain subject to Senate approval.

“They [as agências reguladoras] have the courts of accounts as the supervisory body over their administration, but none [fiscalização] about the activities and decisions they make. So, they can decide what they want and there is no supervisory body about it”, says Forte. “The consumer is 100% ignored. The lobby only works around companies, mainly the big ones”, adds the deputy.

What sectors regulated by the agencies say about the amendment

The regulated sectors say that the proposal is an “institutional setback”, which “empties the normative and decision-making powers” of the agencies.

In a note, national associations in the air, rail, road, communications and sanitation sectors maintain that municipalities have “increasingly improved their processes”, with “deep technical assessments and expansion of participation and social control”.

“To ensure an environment conducive to attracting investments in infrastructure and public services, it is necessary for regulators to be strong and independent”, states the note.

Entities from different segments of the health sector also repudiate the amendment. They claim, in a joint note, that the eventual approval of the amendment will cause “enormous destabilization of the health market in the country and will put the population at risk”.

“The transfer of regulatory competence from Anvisa [Agência Nacional de Vigilância Sanitária] for a council will represent a setback in health regulation and control policies”, says the text.

What regulatory agencies say about the fiscal council proposal

The Brazilian Association of Regulatory Agencies (Abar), which brings together 68 national and subnational authorities, says that the amendment “dehydrates the current regulatory model” and “practically nullifies the function of regulatory agencies in their main activity, that of regulating”.

For the entity, the quality of the current regulatory system is proven “by the significant amount of investments related to the regulated sectors, which represent an important portion of the national GDP”.

The approval of the amendment would, according to Abar, “serious consequences for consumers and for the economy, due to the regulatory risk and cost that would arise from the process of capture and exercise of regulation by councils linked to ministries, leaving the role of regulatory agencies reduced only to the inspection of concession contracts”.

The proposed model, according to the note, has no equivalent in the world and represents a high regulatory risk to the country’s infrastructure.

“The regulation of concession contracts would be exercised by councils linked to the government, which change every four years, and no longer by a State body, perennial, stable, highly qualified, with technical decisions, holder of administrative, financial autonomy and regulatory agency, which is the regulatory agency”, defends Abar.

The association also states that the proposal “compromises Brazil’s relationship with international organizations of financing, promotion, cooperation and economic development”.

Author of amendment cites England and USA to defend fiscal council

Deputy Danilo Forte refutes the thesis that his proposal has no equivalent in the world and maintains that the United States and England, considered by him as the “cradles” of the model of regulatory agencies, promoted “reformulations” to have some control over the agency’s performance against the strength of business lobbies.

According to him, the fiscal council’s proposal is related to the idea of ​​checks and balances and does not seek to promote an overlapping of powers, nor a monopolization of regulatory power.

The proposal, says Forte, is open to debate and improvement in the legislative process. For him, the amendment is not a “jabuti” because it is related to the reorganization of the Executive Branch promoted by MP 1,154/23.

“The amendment was presented within the legal deadline and is not something from the outside in, it is something related to the legislative process. We can make the improvement”, he says. A possible addition, according to him, may be the term of office for the members of the fiscal council.

Forte understands that parliamentarians, elected by the people, have the prerogative to improve the inspection process, including the appointment of members to the fiscal councils. According to him, the members of the “quota” of the Parliament would undergo a process of “screening” in the respective permanent commissions of the Congress, which would select members among three lists.

Regarding the members nominated by consumers, Forte says he has made contact with entities such as the Brazilian Institute of Consumer Defense (Idec), but he says that the space can also be occupied by representatives of the consumer law commission of the Brazilian Bar Association ( OAB).

How the regulatory agency amendment reverberated in Congress

Forte says that the debate with colleagues began in 2022 through the draft of a proposed amendment to the Constitution (PEC), but that, due to the lack of definition of the political scenario and to deal with the matter more quickly, he decided to make the proposal through amendment to an MP, which has a period of validity and processing.

The parliamentarian claims to have observed a “very strong feeling” in Congress that the agencies were “overriding the decisions of the Legislature”.

Federal deputy Evair Vieira de Melo (PP-ES) considers that the debate is “necessary and important” and that it is up to “improving” the role of the agencies. He defends, however, strict, transparent and objective rules.

“All of us are learning in a way the role of the agencies and they themselves are going through a process of maturation. I think that improvement is in order, but without changing the rules of competence. You have to be calm and, when in doubt, rigidity”, it says.

Deputy Carlos Zarattini (PT-SP) classifies as “madness” what he considers to be an attempt to submit regulatory agencies to Congress. For him, allowing Parliament to influence regulatory debates within the competence of the agencies could bring risks.

Zarattini cites the example of phosphoethanolamine, the “cancer pill”. In 2016, Congress approved a project that authorized cancer patients to use synthetic phosphoethanolamine before registering with Anvisa. Then-president Dilma Rousseff (PT) sanctioned it and, in 2020, the Federal Supreme Court (STF) declared the legislation unconstitutional.

Zarattini argues that technical issues should be discussed only by the agencies, since Congress, according to him, “will act in a way that is always trying to please the majority.”

The deputy understands that Parliament already offers its contribution to the agencies through the hearing and approval of nominations by the Senate.

“If he [Danilo Forte] thinks that the Chamber has to evaluate councilors, makes an amendment to the Constitution [PEC]. This current amendment is a tortoise, it is part of a government restructuring MP, it has nothing to do with it. It is a subject that should be discussed beforehand in commissions, as it is a matter of changing the agency’s own organizational philosophy,” he says.

What experts say about amending regulatory agencies

Rafael Arruda, a lawyer specializing in administrative law, understands that the amendment takes power away from regulatory agencies and should be evaluated with caution.

“Politics is important, but it is not everything. In terms of regulatory authorities, there is a space that deserves protection, so that regulatory activity does not suffer influences from political party colonization”, he says. For him, “expertise, technical knowledge, reputation and credibility must inform regulatory agencies, which presupposes insulation of governments, consumers, regulated and social councils”.

Political scientist Enrico Ribeiro, partner-director of Consillium Soluções Institucionais e Governmentamentais, assesses that the amendment requires a prior agreement between the government, Congress and the Federal Supreme Court (STF), which “fatally” will be triggered in case of approval. He believes that, if it does not prosper as an MP amendment, the idea tends to resurface in the future.

“It is a debate that, it seems to me, is on fertile soil, within a broader debate in Congress on the discussion of the powers of each of the bodies and Powers”, he says.

For Ribeiro, the new legislature demonstrates the intention to strengthen the institutional power and independence of Congress. “if [os parlamentares] they are openly willing to discuss the power of the Supreme, let alone the agencies. Within this rediscussion package, it makes sense and has strength within Congress, even more so since the Chamber would also have power over regulatory agencies, which today belongs only to the Senate”, he highlights.

Specialist in aeronautical law and in regulation of the National Civil Aviation Agency (Anac), the founding partner of Leal Andreoli Advogados, Roberta Andreoli, says that the proposal of the fiscal councils may seem democratic “at first glance”. However, it can cause difficulties.

“As far as Anac is concerned, it would be very complicated to consult these advices suggested in the entire edition of the norm, because there is a very dense norm. military aviation is regulated by the competent authority”, he says.

The lawyer points out that, in addition to board meetings being public and broadcast online, Anac publicizes regulatory discussions through consultations and public hearings, so that interested parties can present contributions – which happened, for example, with the regulation of drones and shared ownership of aircraft, a new business model in the country.