Today, after reading an article authored by the renowned legal scholar Wálter Maierovitch, I was taken aback by the way some authorities handle conflicts of interest.
While the term "conflict of interest" can have different meanings depending on the context, in the realm of government, it refers to situations where civil servants (both public and hired) prioritize secondary interests, often personal in nature, over their primary duty, which is to serve the public.
Subjectivity poses a significant challenge when addressing conflicts of interest, as the authority itself often holds the sole discretion in determining its existence. There is no validation process by internal Ethics Commissions of government bodies, agencies, or foundations, nor by the Brazilian Public Ethics Committee or the Brazilian Office of the Comptroller General, to ascertain the presence of a conflict of interest and whether it hinders the progress of a particular initiative.
In an attempt to address this issue, the Public Ethics Commission, regardless of partisan ideology, on September 25, 2003, edited Rule #08. This rule aims to identify situations that give rise to conflicts of interest and provides guidelines on how to prevent them. Therefore, it identifies the following activities that give rise to conflicts of interest:
PUBLIC ETHICS COMMITTEE’S RULE #08 OF SEPTEMBER, 25, 2003 – ACTIVITIES THAT GIVE RISE TO CONFLICTS OF INTEREST
1. Activities that, due to their nature, are incompatible with the responsibilities of the authority's position or public function, including those conducted in areas or subjects related to their functional competence;
2. Violation of the principle of full dedication, which requires the authority holding a position in a commission or a position of trust to prioritize the responsibilities of their position or public function over any other activities;
3. Activities that involve the provision of services to an individual or legal entity or the maintenance of a business relationship with an individual or legal entity that has an interest in an individual or collective decision by the authority;
4. Activities that, by their nature, involve the use of non-public information accessible to the authority by virtue of their position;
5. Activities that raise doubts in public opinion regarding the integrity, morality, clarity of positions, and decorum of the authority.
Importantly, the Public Ethics Committee emphasized that the existence of a conflict of interest does not depend on the authority receiving any form of gain or compensation. This clarification renders illegal several initiatives proposed by certain authorities, as they raise suspicions of potential irregularities rather than being based on legitimate grounds.
The Public Ethics Committee was also careful to provided guidelines on how authorities can prevent conflicts of interest by adopting one or more of the following measures:
PUBLIC ETHICS COMMITTEE’S RULE #08 OF SEPTEMBER 25, 2003 – HOW TO PREVENT CONFLICTS OF INTEREST
1. Abstain from engaging in the activity or take a leave of absence from the position while the situation prone to a conflict of interest persists;
2. Divest themselves of assets and rights that are associated with their official position and the maintenance of which could give rise to conflicts of interest;
3. Transfer the management of assets and rights that could lead to conflicts of interest to a financial institution or securities portfolio manager authorized by the Central Bank or Brazilian Securities and Exchange Committee, and the transfer should be done through a contractual agreement that prohibits the authority's involvement in investment decisions and restricts their prior knowledge of the managing institution's decisions regarding asset management;
4. Notify hierarchical superiors or other members of the governing body in cases of specific and temporary conflicts of interest, and in situations involving collective decision-making, the authority should refrain from voting or participating in discussions related to the matter;
5. Publicly disclose their schedule of commitments, clearly identifying activities that are unrelated to their position or public function.
Furthermore, the Public Ethics Committee emphasizes that authorities should inform the committee about their measures, which will issue opinions on their sufficiency. However, it seems that this provision has been largely overlooked. In response to a growing wave of ethical concerns in Brazil, the Brazilian Congress enacted Law #12,813, on May 16, 2013, known as the Conflict of Interests Act. This act specifically addresses conflict of interest scenarios involving authorities during their tenure in public office or employment within the Executive Branch of the government. What follows is the hypotheses with the authority in the exercise of public office or employment:
LAW #12,813/2013 – HYPOTHESIS OF CONFLICT OF INTEREST WITH THE AUTHORITY IN THE EXERCISE OF THE POSITION
1. Disclosing or utilizing privileged information, either for personal gain or for the benefit of a third party, obtained as a result of their activities;
2. Engaging in activities that involve providing services or maintaining business relationships with individuals or legal entities that have a vested interest in decisions made by the public agent or the governing body in which they participate;
3. Engaging, either directly or indirectly, in activities that are incompatible with the responsibilities of their position or job, including activities carried out in related areas or subjects;
4. Acting, even in an informal capacity, as an attorney, consultant, advisor, or intermediary for private interests in governmental bodies or entities within the direct or indirect public administration at any level of the Federal Government, States, Federal District, or Municipalities;
5. Undertaking actions that benefit the interests of a legal entity in which the public agent, their spouse, partner, or relatives, whether consanguineous or not, up to the third degree, have a direct or indirect involvement that could lead to personal gain or influence in their managerial decisions;
6. Accepting gifts from individuals or entities with an interest in the decisions made by the public agent or the governing body, beyond the limits and conditions established by regulations; and
7. Providing services, even on an occasional basis, to a company whose activities are controlled, inspected, or regulated by the entity to which the public agent is affiliated.
With this in mind, the following are other hypotheses that configure conflicts of interests with the authority after the exercise of public office or employment:
LAW #12,813/2013 – HYPOTHESIS OF CONFLICT OF INTEREST WITH THE AUTHORITY AFTER THE EXERCISE OF THE POSITION
1. At any point in time, disclosing or utilizing privileged information obtained as a result of their previous activities; and
2. Within a period of 6 (six) months following dismissal, resignation, discharge, termination, or retirement, unless expressly authorized by the Public Ethics Committee or the Brazilian Comptroller General:
a) Providing any form of service, directly or indirectly, to an individual or legal entity with whom the authority had a significant relationship due to the exercise of their previous position or employment.
b) Accepting a role as an administrator or counselor, or establishing a professional relationship with an individual or legal entity involved in activities related to the authority's former area of responsibility.
c) Engaging in service, consultancy, advisory, or similar activities with bodies or entities within the government's Executive Branch, directly or indirectly linked to the body or entity in which the authority previously held their position or employment.
d) Intervening, directly or indirectly, in favor of private interests before the body or entity in which the authority previously served or had a significant relationship due to their previous position or employment.
In addition, the Conflict of Interests Act, building upon the Public Ethics Committee's Rule #08, clarified that the occurrence of conflicts of interest does not depend on the presence of damage to public property or the receipt of any form of advantage or gain by the public agent or any third party involved.
It is important to note the limitations and scope of this act, as outlined below:
LAW 12,813/2013 – LIMITATIONS
1. The provisions of this Statute apply to individuals holding the following positions and jobs:
b. Those in special positions or equivalent roles;
c. The President, Vice-President, Director, or equivalent positions in agencies, public foundations, public companies, or mixed economy companies;
d. Higher Management and Advisory Group – DAS, levels 6 and 5 or equivalent;
e. Occupants of positions or jobs that provide access to privileged information capable of bringing economic or financial advantages to public agents or third parties, as defined by regulations.
2. The Act exclusively applies to the Federal Executive Branch.
3. The responsibility for establishing norms, assessing and supervising conflicts of interest, providing guidance and resolving doubts, issuing opinions on the existence of conflicts of interest, authorizing private activities, regulating the reporting of changes in equity, and overseeing the disclosure of the agenda lies primarily with the Public Ethics Committee, based on the positions held. The Brazilian Comptroller General also plays a residual role in these matters.
Within the scope of the Judiciary Branch, the Brazilian Council of Justice enacted Rule #125 of November 29, 2010. This rule aimed to establish a policy for handling conflicts of interest within the Judiciary. However, the content of this rule is rather disappointing as it fails to provide clear definitions and criteria to make the assessment of conflicts of interest more objective, also lacking the requirement for validation by a collegiate body. The proposed dispute resolution mechanisms outlined in the rule, such as conciliators, mediators, coordinators, and chambers, prove to be ineffective without said definitions and criteria. Moreover, the focus of the rule seems to be primarily on conflicts of interest between litigating parties, rather than addressing conflicts experienced by judges themselves.
It is evident that while many companies have internal regulations to manage actual, potential, or apparent conflicts of interest, the same cannot be said for the Federal Government, and apparent conflicts of interest, in particular, do not appear to be a significant concern.
Consequently, there is an urgent need for improvement in addressing conflicts of interest across the Executive, Legislative, and Judiciary Branches. Clear rules, well-defined definitions and criteria, in addition to efficient disciplinary measures, can avoid abuses by some authorities and would be very welcome to safeguard the public sector against undue influence from the private sector.