Regulatory News

The approval by the House of Representatives for the bill on redistributing oil royalties equally among all states and municipalities in Brazil caused great controversy and the discussion will now be fought in court. Lawmakers from the states of Espírito Santo and Rio de Janeiro, where most of the country's oil reserves are, have filed a lawsuit in the Supreme Court seeking suspension of the project, which still needs the signature of President Dilma Rousseff.

Representatives from Rio de Janeiro and Espírito Santo claim that the new division is unconstitutional because the law stipulates that royalties should be paid to compensate for possible damages caused by oil exploration. The project, they said, would also be a breach of contract, since it would change the rules for payments for already tendered fields. Moreover, it would represent a loss of income that would "break" the states and municipalities in terms of revenue that today receive large sums from royalties. In Rio de Janeiro, for example, there would be a loss of R$77 billion ($37 billion) by 2020, according to calculations by the state Department of Development, Energy, Industry and Services.

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