Bill on State Liability Moves Forward in the Senate

In November 2013, the Federal Executive Branch (the “PEN”, after its Spanish acronym) submitted a bill on State and public officers’ tort liability (the “Bill”) to the Lower House. On November 27, 2013, the Bill was approved by the Lower House.
The Bill, as amended and approved by the Lower House, was sent to the Senate and on June 27, 2014 the Constitutional Affairs Committee of the Senate issued a favorable opinion without making any amendment.
The Bill follows many of the criteria laid down by the Federal Supreme Court (the “CSJN”, after its Spanish acronym) on State tort liability.
For example, the Bill provides for direct and objective liability, confirms the concept of faute de service applicable to cases of liability due to unlawful action, and the notion of “special sacrifice” for liability due to lawful action.
However, on the other hand the Bill departs from some well-established principles set by the CSJN and fails to regulate certain important matters.

1. Background
Traditionally, State liability has been governed by the Civil Code.
In June 2012, the PEN submitted a draft of a new National Civil and Commercial Code to Congress. This draft expressly provided that the State liability shall not be governed by the new code (applicable nationwide), but by administrative law (i.e., by special laws enacted by the Federal Government, applicable to the same Federal Government, and by the respective local jurisdictions, applicable to the local political subdivisions).
Despite the criticism made to this proposal, and with the alleged purpose of passing specific rules on State liability, the Bill was submitted to Congress. Consistent with the draft of the National Civil and Commercial Code, the Bill provides that State liability is not governed directly or as default rule by that code, since it is a matter of public law which must be regulated by the Federal Government and the provinces in their respective jurisdictions.
The Bill invites the Provinces and the City of Buenos Aires to adhere to its provisions, in order to provide for uniform legislation on this matter.

2. Main Provisions
Among other provisions, the Bill provides for the following:
a. Regarding State liability for unlawful action, the Bill (i) does not clearly state that compensation must be complete (i.e., covering both actual damages and lost profits); (ii) does not provide expressly for compensation of moral damages and (iii) only provides for State liability for failure to act in relation to specific and explicit legal duties.
b. Regarding State liability for lawful action, the Bill (i) requires a direct, immediate and exclusive causation, without providing any guidelines for cases of concurrent causes; and (ii) excludes compensation for loss of profits, contrary to precedents from the CSJN that have awarded such compensation.
c. Excludes State liability for damages caused by concession holders or contractors of public utilities, without expressly exempting from this rule those cases where the State or its decentralized entities have failed to exercise their regulatory and control powers.
d. Prohibits the application of fines (astreintes) against the State, its agents and officers, for failure to comply with judicial orders, and thus reduces, in practice, the binding force of court rulings.
e. Extends the statute of limitations from two to three years.
f. Does not regulate State liability for judicial action appropriately.
g. Provides that in the absence of specific regulations the Bill’s provisions will operate as default rules in cases involving State contractual liability.

3. Final Comments
If the Bill is passed by the Senate without further amendments, thus granting final approval, stringent requirements will have to be met in order to hold the State liable. Moreover, the extent of the compensation will be substantially limited in the case of State liability for lawful action.
However, since the principles currently governing State tort liability have been developed through decades of case law, it is to be expected that some of the restrictions established in the Bill might be mitigated by the courts. It would be important to follow the case law on this matter.