Federal Court rejects trillion-real claim filed by construction company Mendes Júnior in a rescission action over alleged financial losses
Por Redação
The attempt by construction company Mendes Júnior to reopen a case involving the largest compensation claim in the country’s history—R$ 1.7 trillion (US$ 309 B - 2010 values)—over alleged financial losses during the construction of the Itaparica Hydroelectric Plant (now called Luiz Gonzaga) in Pernambuco has failed.
Last week (June 18), the Federal Regional Court of the 5th Region (TRF5) upheld arguments from the AGU (Brazil's Federal Attorney General's Office) and Chesf and confirmed its 2010 decision rejecting the claim.
Federal judges of the 1st Section of TRF5 ruled against the rescission action filed by Mendes Júnior, which aimed to overturn the 2010 ruling that dismissed the trillion-real lawsuit the company had brought against Chesf, the Federal Government, and the Federal Public Prosecutor’s Office due to lack of evidence. At the time, the claimed amount represented nearly half of the Gross Domestic Product (GDP) and would have been enough to build “51 hydroelectric plants much larger than Itaparica or at least 10 Itaipu-sized plants,” according to the court decision.
Understanding the Case
The story of Brazil’s highest-value lawsuit dates back to 1988, when Mendes Júnior filed a declaratory action in the Pernambuco state court, which recognized the company’s right to compensation for additional costs incurred from loans allegedly taken to finance construction at Itaparica.
The company had been contracted in 1981 and completed the project in 1986. During this period, Chesf delayed some payments, and the contractor claimed it had to seek financing in the market to continue the work.
Based on that earlier ruling, the company filed a compensation claim in 1993, also in state court. “The Federal Government then requested to join the case, which resulted in the transfer of the proceedings to Federal Court in Pernambuco.
After a partially favorable ruling for the plaintiff, the TRF5 overturned the decision in 2010 and ruled the compensation claim unfounded, citing lack of evidence regarding the alleged loans, their costs, and actual application to fund the project,” explained Carolina Scheidegger, Regional Attorney of the Union for the 5th Region. The company appealed to higher courts, but the ruling was upheld and became final in 2020.
Two years later, the contractor filed a rescission suit, arguing that the 2010 judgment violated the declaratory ruling from 1988, which had supposedly acknowledged its right to compensation for market-rate interest accrued while financing the project. It also claimed violations of constitutional and legal provisions governing the economic-financial balance of public contracts.