On October 26, 2021, the president sanction signed Bill N. 2.505/2021 into Law N. 14.230/21 substantially amending the Administrative Improbity Law (Law N. 8.429/92). The Administrative Improbity Law, amended by Law N. 14.230/21, provides for a series of changes, both substantively (related, for example, to whom may perform acts of improbity, which conducts are qualified as such, the applicable sanctions and statutes of limitations) and procedural (such standing for enforcement, length of the civil investigation, changes in the procedure, loss of suit expenses, among others).

Among the main changes approved, there is the suppression of the unintentional conduct from Article 10 of Law N. 8.429/92, which provides for acts of administrative improbity related to damages to the public treasury. With the end of the non-intentional liability, the requirement of proof of intent for all types of acts of administrative improbity provided for in the Administrative Improbity Law is standardized, and it is necessary to demonstrate the effective intent to achieve the illicit result so that public officials can be held liable, according to Article 1, §2º of Law N. 8.429/92. Therefore, damages to the public treasury caused by recklessness, malpractice, or negligence of the public agent, which could previously be constructed as an act of improbity, can no longer qualify as such, even though they are still subject to sanctions by audit courts and other administrative sanctions. Furthermore, by explicitly citing the United Nations Convention against Corruption, the Administrative Improbity Law clarifies that there will only be an act of administrative improbity, whether provided in the Administrative Improbity Law or any other special law, when it can be proved that the public agent had the purpose of obtaining an unwarranted advantage or benefit for themselves f or for another person or entity (Article 11, §1º and § 2º of Law N. 14.230/21).

The reform of the Administrative Improbity Law established a comprehensive list of administrative improbity conducts. Therefore, if a conduct is not listed in the law, it cannot be considered an act of administrative improbity subject to the conviction and enforcement of sanctions provided for by Law N. 8.429/92, amended by Law N. 14.230/21. Another highlight is that nepotism, which is the act of favoring family members or relatives up to the third degree to a commissioned or trusted position or a gratified function within the public administration, directly or indirectly, in any branch of government, was included as an act of improbity, in line with the Binding Precedent N. 13 of the Federal Supreme Court (“STF”), which already deemed such practices unconstitutional.

Political agents (such as holders of elective offices) are now explicitly included in the definition of public agents (amended in Article 2 of the Administrative Improbity Law), therefore also being subject to liability for acts of administrative improbity, in addition to being subject to the special regime of liability of political agents (Law N. 1.079/50 and Decree-Law N. 201/67).

The Administrative Improbity Law remains applicable to those who, even if not regarded as public agents, intentionally induce, or maliciously contribute for the practice of an administrative improbity act. However, Article 3, §1, introduced by Law N. 14.230/2 in the Administrative Improbity Law, includes a specific provision stating that partners, shareholders, directors and employees of a legal entity governed by private law are not liable for the improbity conduct of the legal entity, unless their involvement and direct benefits in and from these actions can be proved, in which case liability will be limited to their participation.

In the case an act of administrative improbity is also deemed as unlawful under Law N. 12.846, of August 1, 2013, the sanctions provided in the Administrative Improbity Law will not be applied to the legal entity, removing the risk of double jeopardy for the same facts, in compliance with the constitutional principle of ne bis in idem (Article 3, §2º and Article 12, §7º added to the Administrative Improbity Law by Law N. 14.230/21).

Another interesting update refers to “civil non-prosecution agreement” to be entered into with the Public Prosecutor’s Office in the course of the investigation of the improbity action or at the time of the conviction, for purposes of full restitution for the damages and reverting unlawfully obtained advantages back to the damaged legal entity. According to paragraph six §6º of Article 17-B, such agreement may contemplate the adoption of mechanisms and internal procedures of integrity and audit, as well as incentives to reporting irregularities and the effective application of legal entity’s codes of ethics and conduct, in addition to other measures in favor of the public interest and best administrative practices.

Regarding sanctions related to administrative improbity conducts, Law N. 14.230/21 maintains as possible sanctions, to be applied separately or cumulatively: the full compensation of the damage, the loss of assets and values illicitly obtained, the loss of public employment, suspension of political rights, payment of fine and prohibition of contracting with the public administration or receiving tax or credit benefits or incentives (amended by Article 12 of Law N. 8.429/92). On the other hand, the maximum period of suspension of political rights was increased from 8 (eight) years to 14 (fourteen) and the prohibition of contracting with the public administration is increased from 10 (ten) to 14 (fourteen) years. However, the maximum amount of the fines has been decreased in all cases, being equivalent to: the amount of the increase in assets in the case of acts of improbity that involve illicit enrichment (previously it was up to three times this amount); the amount of the damages in the case of acts of improbity that caused losses to the treasury (previously it was up to twice that amount) and  up to twenty-four times the amount of the compensation perceived by the agent in the case of acts of improbity that violate the principles of public administration (previously it was up to one hundred times such value). In addition, as a rule, the loss of public employment will only affect the employment held by the public agent at the time of the improbity act.

Regarding the statute of limitations, the Prosecutor’s Office can file a lawsuit within eight (8) years (as opposed to 5) from the occurrence of the fact or, in the case of permanent infractions, from the day on which its practice ceased (new wording of Article 23 of Law N. 8.429/92). However, lawsuits for restitution to the public treasury against public agents for acts of administrative improbity remain not subject to the statute of limitations, under the terms of Article 37, §5º, of the Brazilian Federal Constitution, as decided by the Brazilian Supreme Court in the trial of RE 852.475/SP, with recognized general repercussion, as this matter has not been addressed by Law N. 14.230/21.

In relation to procedural rules, one of the most important changes brought by Law N. 14.230/21 refers to the legal standing to prosecute administrative improbity lawsuits. According to the amendment of Article 17of the Administrative Improbity Law, the Public Prosecutor’s Office will now have exclusive standing to prosecute such lawsuits, contrary to the previous text, which stipulated the concurrent standing to sue of the Public Prosecutor’s Office and the damaged legal entity. In view of such change, a period of one year was set, after the enactment of the law, for the Public Prosecutor’s Office to inform whether or not it has an interest in the continuance of ongoing lawsuits, including those on appeal, filed by public attorneys (Article 3 of Law N. 14.230/21). During this period, the proceedings will be suspended, and any administrative improbity lawsuits in which there is no submission by the public prosecutor’s will be extinguished without decision on its merits.

Furthermore, the improbity lawsuit will follow the common procedure provided for in the Civil Procedure Code (Article 17, caput of Law N. 14.230/21), no longer being considered a public civil action. The preliminary defense phase has also been eliminated, with the extension of the response period to 30 days after summons (Article 17, §7 of Law N. 14.230/21).

Other changes introduced by Law N. 14.230/21 to the Administrative Improbity Law include: (i) classification of the conduct of self-promotion of public officials in actions, programs, works, services and campaigns of public agencies as administrative improbity (amended by Article 11, item XII of Law N. 8.429/92); (ii) increase of the maximum term for the conclusion of civil investigations regarding acts of improbity to one year (as opposed to 180 days), extendable for one equal term (amended by Article 23, §2º of Law N. 8.429/92); (iii) conviction for the payment of attorney fees will only be applied in cases of proven bad faith (amended by Article 23-B, §2º of Law N. 8.429/92); (iv) the determination that action or omission resulting from a divergence in the interpretation of the law cannot be punished as improbity (amended by Article 1, §8 of Law N. 8.429/92); and (v) for acts of administrative improbity that violate the principles of public administration, proof of relevant damage will be required for them to be punishable (amended by Article 11, §4º of Law N. 8.429/92).

The repercussion of the changes brought by Law N. 14.230/21 to the Law N. 8.429/2, including the retrospective applicability of the more lenient rules, will certainly require intervention of the superior courts in order to standardize the jurisprudence and guarantee equality in interpretation and enforcement.

For more information, please contact Saud Advogados.