The polemic trials that have happened at the STJ - Superior Court of Justice - as reported in the articles listed below and witnessed by the whole society, demonstrate how important it is that the judges’ decisions on the debts acknowledged within the balance sheets of ELETROBRÁS are reconsidered at the STJ or taken immediately, the STF – Supreme Federal Court (highest court of the Brazilian justice, that judges lawsuits on constitutional matters, and matters relating to the compliance to federal laws).

It is little by little becoming clear that the ministers of the STJ have realized the mistake of the rapporteur on the court’s decision, the honorable Minister Dr. Eliana Calmon, when she presented the historical decision that was favorable to Eletrobrás – voting on her report that the bonds of ELETROBRÁS, in particular those used to pay the debt owed by the controller partner of ELETROBRAS to the Brazilian taxpayers because of the “compulsory social loan”, that those “were not debentures but a kind of obligation consistent in the public debt”, stated the minister on her vote.

Despite of the fact that until today the ministers or judges have not explained or gone against the objective argument that the issuer of these bonds is a private company, of “mixed economy” (i.e. company partly owned by private investors and partly owned by the government) that has hundreds of Brazilian and foreign shareholders, and that the largest part of these shares belongs to the Federative Republic of Brazil, which directly owns 53.99% of shares.

Private companies, whether or not being of “mixed economy”, are all under direct constitutional jurisdiction of the art. 173rd of the Brazilian Federal Constitution, and they are not eligible to any special decaying term of 5 years. Indeed, not even foundations and state owned businesses take advantage of such special right, which is unique and relevant in legal relationships from taxation. Exactly this is the strongest argument on the decision of the former Minister of the STF, Dr. José Néri da Silveira, with the mentioning of several other judgments of the STJ by other ministers, which were listed by the Minister Néri da Silveira himself, confirming such characteristic.

Another argument, not rejected but also not addressed by the STJ on other decisions, refers to the undoubted fact of the existence of capital reserves that were originally and nominally intended to be used as payment of debentures, when due, and of dividends from these debentures, as recorded on the financial statements of ELETROBRÁS.

This acknowledgment of debt has been reported and published in the national and international press, with the balance sheets and financial statements of the holding Group Eletrobras, as the corporations held (by the force of law) are required to publish on mainstream newspapers information about their corporate and financial life.

This public acknowledgment of debt is official, of corporate and accounting nature and - among others - results in "formal and public acknowledgement of the consistent and consequent debt about the debentures."

This formal recognition of debt, plays against ELETROBRÁS because according to the Civil Code "once there is the acknowledgment of a debt, the decaying terms come to a stop" (Art. 325th of CC). The standard is so clear that it should be applied even on taxation situations. Neither the CTN (Brazilian Taxation Code), nor the Act No. 6830 (Act about Tax Executions) state the opposite. For Eletrobrás, this topic is merely raised as a curiosity, as long as the corporation does not have the legal capacity to establish taxes, much less to establish the legal relationship typical of the mandatory taxation nature.

The decision was accompanied - in situ - at the STJ - by the team of lawyers from Édison Freitas de Siqueira Associated Lawyers, which operates on this subject both in Brazil and the United States and they have been systematically consulted on the subject by the U.S. government departments such as the SEC - Securities and Exchange Commission, FBI - Federal Bureau of Investigation and PCAOB - and Public Company Account Oversight Board.

The votes of the ministers did not consider the whole of the grounds of the Special Appeals and its memorials, showing that, in Brazil, this issue has not yet been judged focusing its dominant aspect - an issue of the National Securities and Financial market on a corporation whose performance is under the rules of the U.S.A. market and government, once this company negotiates its shares, ADRs and bonds on the New York Stock Exchange and Market.

In this context, recently the World Bank itself, on its major annual report name ROSC - warned about the need of Brazilian Courts for further expertise in the complex securities market and international financial market, under the penalty of being discredited as reliable, the same way as the Brazilian market. The legal controversy of such magnitude shows off that the ministers participating lack of depth in the subject in the trials against Eletrobrás. In some cases these judges decide in a way and in other case in another to the contrary of grounds of the earlier decisions, as reported on the article of former Minister of the STF, Dr. José Néri da Silveira.

Édison Freitas de Siqueira