Public Services Contract Renegotiation: The Decision in re: “Transportadora Gas del Sur”

Since 2002, Argentina has been subject to economic emergency rules that remain in force. As a result, all public law contracts entered into by the Public Administration, whose tariffs were frozen and pesified as a consequence of Section 8 of Law 25,561 are subject to renegotiation.

During this extensive period, most of the holders of concessions and licenses for the provision of public services subject to the above mentioned rules have borne successive extensions of the emergency and of the term to complete the contracts’ renegotiation. 1  Moreover, in several cases, in spite of having reached agreements with the Federal State, the tariff increases committed under the renegotiation agreements were not made effective.

For instance, particular reference can be made to natural gas transport and distribution services’ licensees.  All these licensees (11) have entered into several renegotiation agreements with the Federal State – either transitional or definitive – none of the tariff increases included therein have been made effective to date, 2 except for one single case. 3

In this context, the judicial decision rendered in the case “Transportadora Gas Del Sur S.A. vs/ ENARGAS (note 11062/10) (Uniren Decree 1918) and other s/ amparo Law 16,986” is an important piece of news. 4  

In the case under analysis, the claimant was Transportadora de Gas del Sur S.A. (“TGS”), who had entered into a transitional agreement with the Public Services Contracts Renegotiation and Analysis Unit (the “UNIREN”) in October 2008, approved by Decree 1918/2009 of the National Executive Branch. Said agreement included a transitional tariff regime to be applied as from September 1, 2008, the income of which was supposed to enter into a trust for the performance of works in the zone of TGS’s provision of services.

TGS filed an injunction (‘acción de amparo’) against the Undersecretary of Coordination and Control of the Ministry of Federal Planning, Public Investment and Services (the “Undersecretary”) in order for this department to take the corresponding intervention as per Resolution 2000/2005 of the Ministry of Federal Planning, Public Investment and Services (the “Res. 2000”) and also against the National Entity of Gas Regulation (the “ENARGAS”) for it to issue and publish the resolution approving the new tariff chart in the Official Gazette.

Res. 2000 provided the prior intervention of the Undersecretary with regard to every administrative act to be issued involving the fixation, adjustment or increase of the tariffs brought out by official entities or agencies of the Ministry of Federal Planning, Public Investment and Services. The ENARGAS is the entity empowered to approve the tariff charts of natural gas transport and distribution licensees. 5 

The defendants, when answering the ‘acción de amparo’, indicated that the funds arising from the new tariffs would not enter into TGS’ assets and that no act had been unfulfilled. In addition, they both considered that Res. 2000 was applicable to the situation brought to court. In this regard, the ENARGAS pointed out that under Res. 2000 the Undersecretary’s intervention was not limited to statistical purposes but also to endorse whatever impact the tariff increases might have on the economy, employment level and income distribution.

In order to render the judicial decision, the judge pointed out that the  Undersecretary’s control powers are not autonomous and that the supervision purposes of said entity involved verifying the correct exercise of other dependant departments’ and agencies’ powers and also dealing with information regarding acts of the State which may have impact on the progress of the country's economy, and matters related to registration and data base.

The judge considered as manifestly arbitrary and illegal that the effectiveness of the agreements entered into by the highest authorities of the Public Administration had been suspended for such a long period by the intervention of the Undersecretary, provided that the financial matters had been already considered and evaluated previous to the agreement. 

As a consequence, the judge decided in favor of TGS and ordered the Undersecretary to return to ENARGAS, within the term of two days, all the documentation related to the transitional increase applicable to TGS; the judge also ordered ENARGAS that within two days of having received the documentation issue the new tariff chart and approve a method to apply the tariff chart stipulated in the agreement with TGS retroactively .

To summarize, the Judicial Branch ordered the Undersecretary and ENARGAS to fulfill the agreement entered into between TGS and the UNIREN, which had been approved by the National Executive Branch.