Rapporteur Votes Against Redirecting Obligation to the State After Concessionaire’s Insolvency

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

The Fourth Panel of Brazil’s Superior Court of Justice is considering whether the State can be held liable for obligations originally assumed by a concessionaire declared insolvent. The initial vote opposes redirecting the debt to the State, and a request to review the case file has suspended the trial.

The Core of the Dispute

The panel must decide whether the granting authority (usually the Federal Government, a state, or a municipality) can be made to assume the unpaid monetary obligations of a public service concessionaire that becomes insolvent during the contract or after it ends. The question comes up often in Brazilian administrative law. Creditors and injured private parties look to the public entity that delegated the service as a guarantee that the debt will be paid.

The reporting justice in the case, Justice Raul Araújo, voted against automatic redirection. His position rests on the view that a public service concession, although the State remains the owner of the service, hands the private operator the task of running it at its own business risk. The State does not become an unlimited secondary debtor for every obligation the concessionaire takes on.

Justice Luís Felipe Salomão requested time to review the case file (pedido de vista), which suspended the trial. This procedural tool is common in Brazil’s higher courts. It lets a member of the panel study the case in depth before casting a vote, and no fixed deadline applies for returning the file.

The Legal Framework of Concessions and the Granting Authority’s Liability

Public service concessions are governed by Law 8.987/1995, which sets out the rules for concessions and permits granted to private parties to provide public services. Article 25 of that law makes the concessionaire responsible for all harm caused to the granting authority, to users, or to third parties. Oversight by the competent agency neither excludes nor reduces that responsibility.

Article 37, paragraph 6, of the Federal Constitution establishes strict liability (liability without proof of fault) for public entities and for private entities providing public services, for damage their agents cause to third parties. That provision, however, addresses the liability of the service provider. Whether the granting authority can be called directly to answer when the private operator becomes insolvent is debatable.

Settled case law accepts secondary liability of the granting authority in specific situations, especially where there was fault in oversight or a qualified failure by the State to act. There is, however, no automatic presumption that obligations transfer simply because the concessionaire is insolvent. Such a presumption would distort the concession model and shift the entire business risk to the public treasury.

The reporting justice in the case, Justice Raul Araújo, voted against automatic redirection.

Effects and Reach of the Ruling

The Fourth Panel’s decision will directly affect pending disputes involving concessionaires that have gone through judicial reorganization or bankruptcy, especially in the highway, sanitation, and energy sectors. Employee creditors, suppliers, and injured users are watching the outcome closely, because the ruling could set a pattern for similar cases.

If the reporting justice’s view prevails, creditors will have to seek payment first from the concessionaire’s remaining assets and from the contractual safeguards, such as performance guarantees, surety bonds, and reserve funds. Redirecting the claim to the State would require specific proof of direct liability or qualified secondary liability. The delegated operator’s lack of assets would not be enough.

On the other hand, if a dissenting view emerges once the case file comes back, the panel may look more closely at the particulars of each type of concession. The ruling could then be tailored depending on whether the case involves an ordinary concession, a sponsored or administrative public-private partnership, or a service permit.

The panel’s final decision could also lead to the matter being referred to the Second Section if the panel itself is divided, or even to the Special Court (Corte Especial), given the legal importance and economic impact of the decision.

Frequently Asked Questions

What does “redirecting an obligation” mean in the context of a public concession?

It means seeking to shift responsibility for obligations originally assumed by the private concessionaire of a public service to the granting authority, usually the Federal Government, a state, or a municipality. Redirection is typically raised when the concessionaire defaults or becomes insolvent and the creditor looks for another way to collect.

Under case law, when can the granting authority be held liable?

Case law accepts secondary liability of the granting authority in specific situations. Examples include qualified fault in overseeing the contract, a significant failure by the State to act despite known irregularities, and cases of early takeover of the concession by the State (encampação) or its termination for the concessionaire’s default (caducidade). A concessionaire’s lack of assets alone has not been considered enough to make the granting authority automatically liable.

How does a request to review the case file affect the progress of the trial?

The request suspends the panel’s consideration of the case and lets the requesting justice study the record in depth before voting. No single deadline applies uniformly to all cases, although the internal rules of the higher courts set guidelines for returning the file. Once it is returned, the trial resumes where it was suspended, and the other members of the panel may in turn request their own review.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.