Given the relevance of the upcoming 5G mobile network auction, it is fair to expect that the bidding process might get entangled in disputes before administrative and judicial courts promptly after the Brazilian administration issues the bid rules. This is specially likely if the rules bar a given 5G technology from qualifying. Two potential battlegrounds are the Federal Audit Court – Tribunal de Contas da União (TCU) and the Judiciary.
TCU is an independent body linked to the Legislative branch and vested by the Constitution with broad powers to oversee the execution of the federal budget and the use of federal funds. TCU adopts a very generous stance on its own jurisdiction and interprets that it goes as far as to encompass the oversight of rules and parameters applicable to public bids for concession of all public goods, including the concession of frequencies.
In 2018, TCU issued Regulation No. 81/2018 setting forth its internal procedure for review of bid rules regarding concessions and sale of state assets. Specifically regarding the bid for 5G frequencies, under Regulation No. 81/2018 telecom watchdog Anatel will be required to submit to TCU the rules and parameters that it intends to adopt. (Reportedly, the board of Anatel will discuss and possibly approve the 5G bid rules at its first 2021 meeting, currently scheduled for February.)
TCU will evaluate not only the formal aspects concerning the organization of the auction, but also the economic rationale underlying the bid and, in particular, the minimum prices fixed for the licenses. TCU is to analyze the cost-effectiveness of the technical parameters elected by Anatel vis-à-vis the so-called principle of economy (economicidade). In doing so, in theory TCU might take issue with restrictions imposed on certain technologies if it finds that those restrictions could unduly drive up prices to the detriment of end users (e.g., because operators would have to make higher investments or access to the 5G network would be unduly limited). Should this be the case, TCU would then tend to prompt Anatel to re-draft the relevant rules.
Anatel will trigger the proceedings at TCU, but third parties may seek to intervene and submit requests or arguments once the proceedings are ongoing. Submissions could, naturally, address any technology requirements or restrictions proposed by Anatel or created by other rules issued by the Executive branch.
And there is the Judiciary. Parties may sue to challenge any 5G bid rules and parameters, and any other related decisions or measures taken by the administration; this can be done regardless of whether proceedings at the TCU have been initiated and are independent of TCU’s findings. Relief may be sought to void restrictions/requirements that have been effectively set out in the public auction rules; ultimately, parties may seek to void the entire bidding process on the grounds that there was a breach of statutory or constitutional provisions. (In theory, and conversely, relief may be sought to create additional restrictions/requirements as well). Injunctive relief may also be sought, including with a view to staying the bid or any administrative proceedings.
As far as causes of action in court go, the principle of prevalence of public interest seems plastic enough so as to support parties advocating either for a more stringent or for a more flexible 5G bidding process. As discussed in another article featured in this edition of LS Brazil Outlook, bid rules that might restrict the number of bidders or technologies could be challenged on the grounds that they violate the constitutional principles of free competition and free enterprise.
Procedurally speaking, two main paths are available in the Judiciary.
The narrower path is the Supreme Court. If the disputed rule is contained in a presidential decree, an executive order (medida provisória) or a legal statute passed by Congress (the latter, an unlikely scenario), and if plaintiff’s argument is based on a direct breach of the Constitution (as opposed to a breach of statute), then a claim may be brought directly before the Supreme Court. Companies and individuals lack the necessary legal standing, and may only walk down this road if they convince an entity with nationwide reach – such as the relevant national trade association or a political party – to take up the case.
Without prejudice, a lawsuit (whether in the form of an individual claim or, under certain conditions, a collective/class action) may be filed before a Federal Court at the lower level. Legal standing would most likely not be a hurdle for individual claims, provided that the plaintiff proves that its interests are affected by the administrative act being challenged; infrastructure providers, mobile network operators, and even end users could be in a position to bring their own individual claims, although the ability to commence a collective/class action is more limited.
Coordination among the relevant authorities – TCU, Anatel, the Supreme Court, and lower Federal Courts – is not mandatory, so the 5G auction may spawn multiple disputes in different venues. Unless a competent judicial court enters an injunction otherwise, conflicts of jurisdiction may arise and create legal uncertainty affecting the entire procedure. Even if one forgets the different technical solutions available, the sizeable investments required, the antagonizing international trade interests involved, the competition for 5G in Brazil may still prove an even riskier endeavor thanks to the multiple litigation scenarios it entails.
