The Attorney General’s Office Requests Supreme Court to Declare Unconstitutionality of Precedent Payment Rule Change
On Monday, the Attorney General’s Office (AGU) sent a statement to the Supreme Federal Court (STF) requesting the declaration of unconstitutionality for an amendment to the Federal Constitution. This amendment modified the payment regime for judicial orders during the government of Jair Bolsonaro, which was known as PEC dos Precatório at the time.
The amendment allowed the federal government to limit the payment of court orders to the terms of the current fiscal rule – the spending ceiling. This rule determined that public spending for one year’s expenses could not grow above the accumulated inflation of the previous year. However, the AGU argues that this amendment violates constitutional principles and creates an imbalance in public accounts.
Unconstitutional Amendments
In the opinion of experts, the amendment created a kind of “default” on the part of the federal government. The court orders had already acquired a definitive character and couldn’t be revoked before the courts. The AGU argues that this payment limit and sub-ceiling resulted in an accumulation of unpaid court orders, reaching a total of R$ 150 billion.
Two amendments, No. 113/2021 and 114/2021, approved by the National Congress, stipulate that the annual cap for the payment of court orders would be in force until 2027. This could increase the Union’s liability for this concept. The AGU claims that the creation of these amendments not only violates constitutional principles but also creates a serious imbalance in public accounts.
Legal Challenges
In response to the amendments, legal challenges have been brought forward. The Democratic Labor Party (PDT) filed a Direct Action of Unconstitutionality (ADI) number 7047-DF, while a group of civil society entities, including the Brazilian Bar Association and the Association of Brazilian Magistrates, filed ADI number 7064-DF. These actions question the constitutionality of the regulations.
The AGU statement sent to the STF highlights that the government’s argument for approving the amendments was the risk of administrative collapse if the total amount of court orders planned for 2022 were paid. However, shortly after the approval of the amendments, additional mandatory expenses were created, estimated to cost an additional R$ 41 billion per year.
Government’s Proposal
In light of these challenges, the government proposes that the Supreme Court allow it to request the National Congress to open an extraordinary credit within 60 days. This credit would be used to settle the obligations of the current precatório regime. The proposal aims to distinguish the main amounts of securities from the financial charges resulting from interest and monetary correction. The government argues that the financial charges should not be subject to the primary result limit provided for in the new fiscal regime.
The Concerns
The government warns that the new precatório regime has resulted in a significant and growing volume of artificially withheld expenses. These expenses are not scheduled to be paid until 2027 and no solution has been presented to equalize the liabilities that will accumulate in the medium and long term. The government expresses concerns that the current precatório payment system has the potential to generate an unpayable stock, necessitating a new moratorium.
Conclusion
The request made by the government to the Supreme Court to declare the unconstitutionality of the amendment to the Federal Constitution aims to challenge the payment regime for court orders. The AGU argues that the amendments violate the constitution and create an imbalance in public accounts. Legal challenges have been filed, and the government proposes a solution involving an extraordinary credit to settle the obligations. The concerns raised by the government include the potential for an unpayable stock and the lack of a long-term solution. The outcome of this legal battle will have significant implications for the Brazilian government and its fiscal policies.
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The Attorney General’s Office (AGU) sent, this Monday (25), to the Supreme Federal Court (STF) a statement requesting the unconstitutionality of the amendment to the Federal Constitution that modified the payment regime for judicial orders during the government of Jair Bolsonaro. (PL) − which at that time was called PEC dos Precatório.
The device allowed the federal government to limit the payment of court orders (which are debts recognized by the Courts and without the possibility of new resources by public authorities) to the terms of the current fiscal rule – the spending ceiling, which determined that public spending One year’s expenses could not grow above the inflation accumulated the previous year.
According to the rule approved by the National Congress in constitutional amendments No. 113/2021 and 114/2021, the annual cap for the payment of court orders would be in force until 2027, which in practice could increase the Union’s liability for this concept. In the opinion of experts, the deferral of payments would also represent a kind of “default” on the part of the federal government, since these commitments would have already acquired a definitive character and, therefore, could no longer be revoked before the courts.
In the request, the AGU alleges that the creation of a payment limit and a sub-ceiling produced an accumulation of unpaid court orders reaching R$ 150 billion. The amount appears in a technical note signed by the Secretary of the National Treasury, Rogério Ceron, and the Attorney General of the National Treasury, Anelize de Almeida, also sent to the Court. The petition maintains that the two challenged amendments not only violate constitutional principles, but also create a serious imbalance in public accounts.
The demonstration was held within the scope of Direct Actions of Unconstitutionality (ADI) numbers 7047-DF and 7064-DF. The first was presented by the Democratic Labor Party (PDT). The second, by a group of civil society entities (Federal Council of the Brazilian Bar Association, Association of Brazilian Magistrates, Confederation of Public Servants of Brazil, National Confederation of Public Servants and Employees of Foundations, Authorities and Municipal Governments, National Confederation of State Careers and the Brazilian Confederation of Civil Police Workers) to question the constitutionality of the regulations.
The AGU statement sent to the STF highlights that, although the previous government used the risk of administrative collapse as justification for approving the modifications if the total amount of the court orders planned for 2022 – estimated at R$ 89.1 billion – were paid , R$ 33.7 billion more than In the previous year, shortly after the artificial and temporary opening of the fiscal space provided by the approval of both amendments, “mandatory expenses were created with an estimated additional cost of R$ 41 billion by year”.
In the same article, the government warns that the new precatório regime not only produced “a significant and growing volume of artificially withheld expenses” that should not begin to be paid until 2027, but that “it was not accompanied by any prospect of a solution.” in order to equalize the liabilities that will accumulate in the medium and long term, in order to enable their effective payment after the final date established for the validity of the aforementioned regime. And he points out that “the permanence of the current precatório payment system has the potential to generate an unpayable stock, which would result in the need for a new moratorium.”
The government of President Luiz Inácio Lula da Silva (PT) proposes that the Supreme Court give it the green light to request the National Congress to open an extraordinary credit, within a period of 60 days, to settle the obligations of the current precatório regime, distinguishing to the main amounts of securities (which should continue to be considered primary expenses) of the financial charges resulting from the incidence of interest and monetary correction (which, as financial expenses, should not be subject to the primary result limit provided for in the new fiscal regime, such as charges on public debt bonds are not).
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