Litigation against the Federal Government: Important Clarification of the Federal Supreme Court Regarding the “Lapsing Term”

On February 11, 2014, the Supreme Court of Justice (the “Supreme Court”), ruled in the "Biosystems SA v. Estado Nacional – Ministerio de Salud – Hospital Posadas" case and defined the scope of Section 31 of the Administrative Procedure Act (the "LPA"), regarding the application of the ninety-(90) business- day lapsing term provided in Section 25 of the LPA (the "Lapsing Term"; in Spanish, Plazo de Caducidad) to institute a complaint against the Federal Government or its decentralized entities.
The precedent laid down by the ruling is that the Lapsing Term applies only when the Administration expressly rules on the administrative claim (reclamo administrativo) presented by the aggrieved party. If the Administration, instead, does not rule on the administrative claim, even after the interested party has filed a petition for “prompt decision” on the matter (pedido de pronto despacho), the Lapsing Term is not applicable and the party may thus file a complaint at any time within the statute of limitations.

1. Section 31 of the LPA
Section 31 of the LPA, under the reform introduced in 2000 by Law No. 25,344, establishes that, in cases where an interested party files an administrative claim, the Federal Government must render a decision on said claim within ninety (90) business days.
It also provides that, upon the expiration of the aforementioned term, the party may file a petition for “prompt decision” and that, if another forty-five (45) business days elapse without a decision having been rendered by the Administration, the party may institute a complaint, adding that said complaint "shall be filed within the peremptory terms and subject to the effects specified in Section 25" of the LPA, which sets the Lapsing Term.
Since the amendment of Section 31 of the LPA by Law No. 25,344, it has been discussed among legal scholars and in case law if the Lapsing Term (i) is only applicable in cases where the administrative claim was expressly rejected by the Administration (as was the case prior to the aforementioned amendment) or (ii) if it is also applicable in cases where the Administration remained silent (i.e. did not rule on the claim) after a petition for “prompt decision”.
The latter has been rejected by several prominent legal scholars and in judicial decisions, but until now the matter had not been settled by the Supreme Court.

2. The case before the Supreme Court
In November 2004, the company Biosystems filed an administrative claim with the Ministry of Health in order to obtain payment of a number of unpaid bills arising from a contractual relationship from 1999-2000.
In March 2007 –considerably after the term that the Ministry had to rule on the claim– the company filed a petition for "prompt decision" to urge the Administration to render a decision on the matter. However, the Ministry did not issue a decision on the claim, and in April 2008, the company filed a complaint.
The Court of First Instance in Federal Administrative Law Matters No. 7 dismissed the complaint, holding that it had been initiated after expiration of the Lapsing Term (the term was deemed applicable even though the Administration had not rendered a decision regarding the company’s claim).
On appeal, Tribunal III of the Federal Court of Appeals on Administrative Law Matters (the "Court of Appeals") decided to reverse the ruling of the Court of First Instance and declared Section 31 of the LPA unconstitutional. The Court of Appeals concluded that this provision of the LPA unduly precludes access to judicial review by triggering the Lapsing Term as from the date of the implicit denial of the Administration, resulting from the filing of a petition for a "prompt decision" and the elapsing of the subsequent term.
The Federal Government filed an extraordinary appeal to the Supreme Court, which declared the appeal admissible and partially reversed the ruling of the Court of Appeals, with respect to the declaration of unconstitutionality of Section 31 of the LPA, but upheld such ruling in that it enabled the company to proceed with the lawsuit instituted against the Federal Government.

3. The Supreme Court’s interpretation of Section 31 of the LPA
The Supreme Court, unanimously and based on the opinion of the representative of the Public Ministry (Mrs. Laura Monti) (the “Opinion”), held Section 31 of the LPA constitutional, yet, at the same time, concluded that the Lapsing Term applies only to cases where an administrative claim has been expressly rejected by the Administration.
The Opinion, to which the Supreme Court adhered, concludes that, when an interested party files an administrative claim and the Administration remains silent on the matter (i.e. does not rule on the claim), it is optional for the applicant to assume that the claim has been tacitly denied and institute a lawsuit. Therefore, upon silence of the Administration, the Lapsing Term is not applicable and the applicant may bring a lawsuit at any time, within the term of the relevant statute of limitations.
As explained in the Opinion, this is the interpretation which best coincides with the wording of Section 31 of the LPA and the Supreme Court’s precedents in connection with these matters, issued in cases which involved similar legislation enacted by some Provinces.

4. Final comment
The interpretation adopted by the Supreme Court is consistent with its prior rulings on the matter and sets a relevant and valuable precedent for access to judicial review of administrative action and the right to effective judicial protection in litigation against the Federal Government.