Regulation Enacted Pursuant to Supply Law Is Held Illegal

1. Introduction

On August 6, 2015, Tribunal I of the Federal Court of Appeals on Administrative Law Matters (the “Court of Appeals”) held that Resolution No. 25/2006 (the “Resolution 25”), issued by the former Secretary of Domestic Trade (the “Trade Secretariat”), was illegal.

2. Background

In October 2006, the former Trade Secretariat enacted Resolution 25, which ordered refiners and oil dispensers to continue to supply gas oil according to certain parameters throughout the territory of the Argentine Nation.

Shell challenged Resolution 25 by means of administrative remedy and then it brought a nullification action before the courts.[i]

Among other arguments, Shell claimed that Resolution 25 implied the application of provisions of Law No. 20,680 (the “Supply Law”) which were no longer in force. Moreover, Shell held for the nullity and unconstitutionality of Resolution 25.

The complaint was dismissed by the Court of First Instance on the grounds that the measures adopted by Resolution 25 fell within the powers granted by Section 2, paragraph c) of the Supply Law, which empowered the Trade Secretariat to issue “rules regarding the sale, brokerage, distribution and/or production” and that were not suspended by Decree No. 2284/1991 (the “Deregulation Decree”).

3. The ruling of the Court of Appeals

Upon considering Shell’s appeal, the Court of Appeals reversed the first instance ruling and upheld the claim.

The Court of Appeals concluded that the measures adopted in Resolution 25 actually implied the exercise by the Trade Secretariat of powers given in Section 2, paragraph d) of the Supply Law, which had in effect been suspended by the Deregulation Decree. Therefore, the Trade Secretariat had no power to enact the Resolution 25 imposing such obligations.

In its original text, Section 2 empowered the Administrative Authority to order to continue with the production, processing, marketing, distribution or provision of services.

The Court of Appeals held that Resolution 25 was based directly on regulation of Section 2, paragraph d) of the Supply Law. Therefore, it involved the exercise of powers that were no longer in force at the time Resolution 25 was issued.

4. Final Comments

The ruling of the Court of Appeals involves a regulation enacted under the Supply Law, before it was amended by Law No. 26,991 (Please see “The New Supply Law is in Force”, published in Marval News No. 143).

However, it is a precedent that shows a strict judicial review of the exercise of regulatory powers delegated by the Supply Law. Therefore, it may be relevant in the light of possible enforcement of the Supply Law in the future.
 

[i] Marval O’Farrell & Mairal represented Shell in both the administrative matter and the subsequent court proceedings.