For the royalties, Merval returns to being a "jurist"

247 - Brazilian journalist Merval Pereira, from Globo newspaper, still holds a seat on the Supreme Federal Court. After scheduling the trial of Criminal Action 470, the Globo columnist, Merval Pereira, is now providing new arguments to the Supreme Federal Court to override the National Congress and invalidate the decision on the distribution of oil revenues. Read below:

Democratic Constitutionalism - Merval Pereira

There are two distinct issues in the dispute over oil royalties: contracts already in force, including some in the pre-salt area, and those that will be signed in the future, in new bidding processes. Non-producing states treated both cases the same way, recreating a division that does not respect the compensatory nature given to royalties by the 1988 Constitution.

According to constitutional law expert Gustavo Binenbojm, regarding past contracts, both those signed in the past and those currently in progress, it is highly likely that, due to the earmarking of revenues, the financial and budgetary planning of the producing states and municipalities, and the long-term commitment, the Supreme Federal Court, where the matter is being judged, will apply rules of legal certainty and protection of legitimate expectations that will freeze this regime until the termination of these contracts.

According to him, the signal given by Minister Cármen Lúcia in the injunction she granted seems to indicate that the redistribution of funds among the states cannot be arbitrary, given the compensatory nature that the Constitution assigns to royalties and special participations. However, the context in which the issue was raised is more complex than that, Binenbojm points out.

"These contracts, because they generate revenues that the Supreme Federal Court has already stated originate from states and municipalities, and not merely voluntary transfers from the Union, are part of a time progression that leads states and municipalities to consider them in the medium and long term, especially since they were included in the debt refinancing equation accepted by the Union."

According to the lawyer, this is about legal certainty and the application of a principle that is normally used to protect individuals from abrupt changes made by the listed party. "In this case, it's about protecting the interests of the populations of states and municipalities that have committed to medium- and long-term projects."

Since the law did not contemplate a fair transition regime, a period of preparation for each state and municipality to migrate to a new budgetary reality, Binenbojm considers that "there is a violation of the constitutional rule of legal certainty and the principle of legitimate expectation."

Regarding forward contracts, the discussion revolves around the fact that the Constitution gives royalties and special participations in the sector a compensatory character, a point heavily emphasized in the preliminary injunction issued by Justice Cármen Lúcia.

"This requires a differentiation between producing states and others at the time of distribution due to environmental issues and the pressure for public services, since there is a population rush to these producing areas," Binenbojm points out.

Constitutional scholar Luís Roberto Barroso, author of the lawsuit filed in the Supreme Federal Court by the State of Rio, believes that we are "at a crucial point in the Brazilian institutional arrangement known as democratic constitutionalism."

He points out that "constitutionalism" and "democracy" are not synonymous concepts. Democracy means popular sovereignty, government by the majority.

Constitutionalism means respecting the rules of the game (rule of law) and fundamental rights.

This means, Barroso emphasizes, that majorities should govern "and that they can do a lot, but they can't do everything." For the constitutional scholar, majorities "must yield to the limits imposed by the Constitution, which is precisely the document that contains the rules of the game and defines fundamental rights. Including those of the states among themselves."

When the majority oversteps its bounds, it is up to the Supreme Federal Court (STF) to impose limits, and, according to Barroso, that is what the STF did – "and will possibly do again" – in the case of a constitutional amendment with the same purpose as the "ill-fated law that redistributed royalties."

The lawyer is keen to emphasize that "we all" sympathize with the difficult financial and budgetary situation of the states in general. In his view, the Brazilian Federation needs to be broadly rethought, including in terms of the resources collected by each state, "clearly insufficient for the obligations that the Constitution itself entrusted to them. Excessive centralization continues to be a Brazilian dysfunction."

However, Barroso points out, "the search for resources and the need to rethink the Federation do not authorize the unconstitutional attitude of forcibly taking away revenues that have always belonged to the producing states. For the same reasons that financial distress does not legitimize theft or fraud."