Berkeley Program in Law and Economics

This paper has the purpose of analyzing the case law of Brazilian Courts and appointing the “paternalist” decisions that, in order to protect the consumers from the effects of their defaults, brings uncertainty to the companies that render public services in Brazil. The water and sewage sector will be emphasized because of the high positive externalities of this service, which demands intensive capital and long-term investments, and also because of the new regulatory framework (Law nr. 11,445/2007), that establishes that, in case of default, the interruption or restriction of water supply to certain institutions (health, educational) and to low-class users must follow certain terms and minimum criteria. Once the harmful effects on the level of investment in the water and sewage sector caused by the judicial decisions referred to above are demonstrated, it will be proposed a way of regulating the legal provision mentioned above.