Lula counts on STF and Congress to change State-Owned Law – 01/26/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) is considering two alternatives to change the State-Owned Companies Law and, with that, pave the way for the appointment of politicians to positions on the boards and directors of public companies. The outputs pass through the National Congress and the STF (Federal Supreme Court).

The alternative via the STF can be a shortcut in the discussion. The government is currently awaiting the court’s response to an unconstitutionality action filed less than a month ago by PC do B —a historic ally of the PT— questioning the State-Owned Companies Law.

Meanwhile, the Civil House and AGU (Attorney General of the Union) are discussing the wording of a substitute for a project in progress in the Senate that changes the law. The presentation of this new text is linked, however, to the judgment of the STF, being unnecessary if the Judiciary manifests itself for the easing of the quarantine imposed for the appointment of politicians.

In theory, the government has until the end of April to define which strategy to adopt. Under Brazilian Corporate Law, shareholders’ meetings must be held annually within four months of the end of a company’s fiscal year, which generally ends on December 31.

At the end of 2022, the Chamber of Deputies approved, in a lightning vote, a project that reduces to 30 days the quarantine of nominees to occupy positions of president and director of public companies.

Currently, the law prohibits the appointment to the board of directors and to the positions of director, including president, director-general and director-president, of people who have acted, in the last 36 months, as a participant in the decision-making structure of a political party or in work linked to the organization, structuring and carrying out of an electoral campaign.

Government members argue that this rule is based on the criminalization of politics, having been born in response to Lava Jato.

The Chamber of Deputies approved the modification of this law and reduced the period of prohibition. The amendment was presented by deputy Felipe Carreras (PSB-PE), an ally of the mayor, Arthur Lira (PP-AL), and from the same party as vice-president Geraldo Alckmin.

In the approved project, a device was included that foresees that the person who has acted in politics —in the decision-making structure of a political party or in work linked to the electoral campaign— must prove his withdrawal from the incompatible activity at least 30 days in advance in relation to the possession.

This would be useful both for administrators of public companies or government-controlled companies, as well as for members of management boards.

In the Chamber, the proposal had supra-party support for allowing non-reelected deputies to hold positions in the federal administration or even in their electoral domiciles.

Despite being articulated by Centrão, the amendment was credited to the PT, which sought to appoint Aloizio Mercadante to the BNDES (National Bank for Economic and Social Development) and Jean Paul Prates to Petrobras.

The approval of the change in the Chamber took place on the same day that Lula announced Mercadante as president of the development bank. Advisors to the former senator, however, denied that the change took place to benefit him, and that Mercadante never held a paid position on Lula’s electoral committee.

Because of the negative repercussions, the text ran aground in the Senate. As the two, now, have already been approved by the respective boards of directors, the government feels more comfortable to articulate the changes in the law in Congress.

PC do B’s request to the Supreme Court was presented on December 28. The process was under the responsibility of Minister Ricardo Lewandowski, because he was already responsible for another action, by Fenaee (federation of Caixa staff associations), which also calls for the suspension of articles of the State-owned Law.

In the lawsuit filed with the STF, the party claims that the “supposed purpose” of the State-Owned Companies Law (ensuring the efficiency of the management of administrators of public companies) “is not achieved by preventing the appointment of a person who has political-professional ties with Public Administration or who has participated in party-electoral activities in the last 36 months”.

“This is because such elements do not necessarily result in impartial management by the appointed administrators. If that were the case, it would be necessary to recognize the automatic impartiality of judges, prosecutors, attorneys, and active-duty Armed Forces personnel who, before effectively entering their respective positions, have acted in a party or electoral structure”, says the action, signed by lawyer Gustavo Teixeira Gonet Branco.

The PC do B requests that, if the Supreme Court does not completely suspend the provision of the State-Owned Companies Law, that it at least establish the understanding that it is possible to appoint politicians to top positions in public companies as long as they terminate their party ties after of the effective exercise of the office.

Lewandowski determined the manifestation of the government and the Legislature regarding the action, and only after that should decide on the case. The expectation is that the AGU will pronounce in favor of the change in the law.

In a note, PC do B says that the contested norm in the ADI is in force and the party “considers it unconstitutional, which is why it decided to propose ADI 7331.”

“If the contested norm is changed, with sanction and publication of the new law in the Official Gazette of the Union, before the judgment of the precautionary measure or the final judgment of the ADI, this ADI will lose its object”, continues the note. “Otherwise, it will continue to proceed normally.”

Government ministers claim that the best instrument for changing the norm is still being analyzed.

3 YEARS
is the minimum time required for the nominee to cease carrying out activities in a political party or in an electoral campaign

25%
is the proportion of independent members that the board of directors must have

0.5%
is the maximum limit that advertising and sponsorship expenses may exceed the previous year’s revenue