The case uncovers the rich legal and governance developments following the privatization of the chemical subsidiary of oil giant Petrobras in the 1990s: from the outcome of a shareholder derivative suit claiming billions of dollars in damages for controlling shareholder abuse to Petrobras’s subsequent 49% reinvestment in the private conglomerate to whom it had sold most of Petroquisa’s assets.
The dispute, in turn, reveals how Brazil’s development bank came to play a key, though ultimately unsuccessful, role in a control contest between a well-connected local businessman and a foreign investor.
Finally, as the episode made clear, the law is not the only available check on the exercise of state discretion.
In a democratic regime, media coverage and popular pressure can serve as antidotes against at least the most egregious instances of governmental abuse. Still, the promise of democratic accountability hinges critically on the availability of information on state action.
It begins to approach this theme by outlining the basic legal framework for state involvement in corporate governance.
It then shifts gears to examine the relationship between law and state capitalism in action by scrutinizing two high-profile transactions involving state actors.
To put it mildly, the overly broad exercise of discretion by the state as enterprise owner is in tension with the rule of law.