* Payments will be made under terms of prior framework
* Lawmakers overrode presidential veto
By Ana Flor and Guillermo Parra-Bernal
BRASILIA/SAO PAULO, March 18 A justice at
Brazil's supreme court postponed late on Monday the
implementation of a new law for the distribution of oil
royalties to regional governments after three states claimed the
rule breached the country's Constitution.
Justice Cármen Lúcia ordered that the new royalty payments
system be suspended until the Supreme Federal Court decides the
issue. Rio de Janeiro, São Paulo and Espírito Santo - Brazil's
three largest oil producing states - filed lawsuits last week to
prevent the law from being implemented until a ruling is made by
the entire court.
Thus, this week's payments will be made under terms of a
prior regulatory framework for royalties, which lawmakers
revoked late in 2010. The new law will be suspended "until the
final ruling of the current lawsuits," Lúcia said in a stateme
Lúcia's decision means that a legal battle could be
prolongued for a few more months, generating regulatory noise in
Latin America's largest economy. The distribution of royalties
does not directly affect oil companies in Brazil but the
government may not resume auctions of oil concessions until the
issue is resolved.
The new royalty law, which was the subject of a presidential
veto that lawmakers overrode on March 7, strips the three states
of billions of dollars in proceeds levied on the output of rich
offshore oil fields.
Rio, São Paulo and Espírito Santo maintain that only
royalties from future oil contracts should be shared, while
non-producing states - which have a majority in congress - want
to grant themselves a bigger share of royalties from existing
The legislation was originally meant to more widely
distribute the nation's future oil wealth as it developed giant
crude resources off its Atlantic coast.
If the Supreme Court upholds the new royalty rules, states
and municipalities are expected to start receiving their royalty
checks in May.