By means of a preliminary injunction, the Federal Supreme Court (“STF”) justice André Mendonça stayed the processing of all actions in Brazil that challenge the legality of Federal Law No. 5.709 of October 7, 1971 (“Law 5.709/1971”) and of Decree No. 74.965 of November 26, 1974, which govern the purchase of rural properties by foreigners.
The decision was rendered in attention to a claim made by the Federal Council of the Brazilian Bar Association, which requested staying of the proceedings until final judgment of two actions that are being processed in the STF, Original Civil Action (ACO) 2463 and Action against the Violation of a Constitutional Fundamental Right (ADPF) 342. According to that entity, this would avoid conflicting decisions and preserve the legal certainty with respect to the matter.
ADPF 342, which was filed by the Brazilian Rural Association (SRB), discusses the reception by the 1988 Federal Constitution of article 1, paragraph 1 of Law 5.709/1971, which extends the legal system applicable to the purchase of rural properties by foreigners, established in the same law, to Brazilian legal entities a majority of the capital stock of which is held by foreign individuals or legal entities resident or with principal place of business abroad.
In ACO 2463, in turn, the Federal Government and the National Institute for Settlement and Agrarian Reform (Incra) claim the declaration of nullity of an opinion rendered by the Disciplinary Board of the Courts of the State of São Paulo that exempts notary publics and registrars of that State from imposing the rules to the cases in question.
In 2021, ACO 2463 was placed on the virtual full bench trial docket. On that occasion, the now retired reporting justice Marco Aurélio expressed his opinion on the necessary submission of all Brazilian foreign capital companies to the legal system provided by law for the purchase of land.
Subsequently, justice Alexandre de Moraes expressed a dissenting opinion, pursuant to which article 1, paragraph 1 of Law 5.709/1971 has not been received by the 1988 Constitution, because as from Amendment to Constitution 6/1995, there was no longer legal differentiation between Brazilian companies based on the nationality of the capital stock.
Justice André Mendonça reminds, in his decision, that the Court has opinions with solid legal grounds, but which reach opposite conclusions on the constitutionality of the rule, for which reason still the STF definitively pronounces on the matter, there is a risk that conflicting judicial decisions be rendered, which is contrary to the principle of isonomy, considering that some companies will be subject to the conditions set forth in Law 5.709/1971, while others, which are in the same legal situation, will not.
* * * * * * * *
This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice foreign subsidiary as a comprehensive analysis of the matters referred to herein.