A bill in course at the House of Representatives (PL 502/11) provides for the controversial the adaptation of terminals' and port areas' lease contracts entered into before the Ports Act (8.630/1993) was enacted.

Before the Ports Act came into force, port operations were carried out via lease without a public bidding process. Lease terms varied from 10 to 20 years. The new regulations changed the model in effect and introduced public bidding for the operation of terminals by the private sector, setting the maximum term at 50 years.

Following the transition between the old and the new regime, controversy emerged over the rules for the possible renewal of contracts entered into before the Ports Act was enacted. The Ministry of Transportation, the entity responsible for the sector, had adapted the process for leasing contracts for private use terminals in line with the new Ports Act, but the public terminals' lease contracts remained unaltered. The procedure for public terminals' leases did not change, as such leases had been entered with local port administration entities and the ministry therefore did not have the legal competence to enter into the contract addendums required.

The situation created great discomfort among those affected by the lack of definition regarding the contract adaptation. Therefore, with the purpose of mitigating this insecurity, on September 29 2010 the Brazilian Agency for Water Transportation (ANTAQ) published Resolution 1.837. The resolution established the criteria for the extension of leases that were entered into before the Ports Act was enacted, for the following types of contract:

  • those not establishing a limitation for the extension or those that do not have a clause allowing for the extension of the original contract instruments;
  • those entered into while Decree 59.832/1966 was still in force and that did not have a provision regarding a possible extension;
  • those with an extension addendum entered into on the basis of Article 111 of Decree 59.832/1966 or on the basis of Article 2 of Resolution 525/2005, regardless of an existing consent decree issued for the start of the bidding process; and
  • those entered into before the enactment of the Ports Act and governed by Decree 59.832/1966.

However, notwithstanding the possibility of an extension, the resolution demonstrates that the final decision on the appropriateness of renewing or holding a bidding process will rest with the port authorities, and such authorities must verify the existence of public interest when issuing the addendum.

In light of this situation, the bill aims to eliminate juridical uncertainty on the issue, determining that the Ports Administration must extend the lease contracts of areas or facilities that are located inside the area of public ports and entered by them before the Ports Act was enacted. The execution of the addendum is subject to the lessee's compliance with all obligations under the contract in effect. The addendum's term shall be such that when the future period is added to the years already elapsed since the execution of the original contract, the result does not exceed 50 years.

The bill stipulates that refusing to extend the contract or unjustifiably procrastinating will be deemed administrative dishonesty. The bill is in the final stages of being passed and will now be analysed by the Traffic and Transportation Commission, the Labour, Administration and Public Service Commission and the Constitution, Justice and Citizenship Commission.

For further information on this topic please contact Godofredo Mendes Vianna at Law Offices Carl Kincaid by telephone (+55 21 2276 6200), fax (+55 21 2253 4259) or email ([email protected]).