Fachin expands precatório scrutiny as fellow justices demand a deeper audit

Fachin expands precatório scrutiny as fellow justices demand a deeper audit
Edson Fachin, president of Brazil’s National Justice Council (CNJ), has said the judicial watchdog will broaden scrutiny of precatórios—court-ordered government debts—following concerns over payments issued before cases were definitively resolved.

In a response to Supreme Court Justice Gilmar Mendes, Fachin said the review should identify “issuances before final judgment, inconsistencies in amounts and other indications of non-compliance,” while observing due process in each case. He also said courts nationwide would be asked to report any potentially irregular precatórios. The CNJ plans to introduce a public calculator in October to help creditors check updated values of their claims.

Mendes has framed the issue more sharply, arguing that investigations involving Banco Master exposed a business model in which judicial credits were bought at steep discounts, booked at much higher values and used to raise market funds. He has called for stronger rules on trading precatórios and an end to payment orders issued before final judgment, highlighting disputes involving sugar-and-ethanol sector claims and the Federal Regional Court of the 1st Region.

Flávio Dino, another Supreme Court justice, has aligned himself with Mendes while pressing for a broader audit. In a letter to Fachin, Dino argued that the review should cover not only unpaid precatórios but sums already disbursed, so authorities can identify improper payments and pursue reimbursement where warranted. He cited what he called “apparent illegalities” in the issuance of claims benefiting sugar-and-ethanol companies and linked to atypical Banco Master-related transactions.

The dispute has also moved into financial regulation. The National Monetary Council has restricted investment funds from purchasing judicial credits while they remain subject to appeal, seeking to ensure the assets have finality before they are traded. A law firm involved in one cited contract has said precatório transactions are lawful and that its fee would be payable only if the underlying case succeeded.

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