A new development in the judgment of two relevant lawsuits concerning the acquisition of rural properties by foreigners generated significant repercussions: the voting to decide about the entry of the OAB, through its Federal Council (CFOAB), in the Claim for Noncompliance with Fundamental Precept 342 (ADPF 342) and in the Original Civil Lawsuit 2,463  (ACO 2,463).

The cases refer to the same theme: the validity and constitutionality of paragraph 1 of article 1 of Law 5,709/71 (rule that regulates the acquisition and lease of rural properties by foreigners). This provision determines that, for the purpose of land acquisition by foreigners, the Brazilian company considered "controlled" by foreigners, whether by individuals or legal entities, will be subject to the same rules as a foreign legal entity.

The Brazilian Rural Society (SRB) proposed ADPF 342, arguing that the promulgation of the Federal Constitution (CF) of 1988 repealed article 1, paragraph 1, of Law 5,709/71 and, therefore, the interpretation of the Attorney General of the Union (AGU) expressed  in Opinion LA/01 –  currently in force – is erroneous and does not comply with a fundamental precept.

According to Opinion LA/01, by repealing article 171 of the CF, the Constitutional Amendment 6 of 1995 extinguished the unconstitutionality of Law 5,709/71. Thus, the equalization of Brazilian companies to foreign companies can be considered constitutional, as determined by this law (since article 171 of the CF considered as "Brazilian company the one constituted under Brazilian laws and that has its headquarters and administration in the country").

This opinion, endorsed by the Union and the National Institute of Colonization and Agrarian Reform (Incra), is still the object of ACO 2,463. The action was brought by these same authorities against the Internal Affairs of Justice of the State of São Paulo (Corregedoria-Geral de Justiça do Estado de São Paulo), which adopted in its rules regulating the performance of notaries and registration officers the understanding that Law 5,709/71 is repealed – there would be, therefore, no impediment for Brazilian companies controlled by foreigners to acquire or lease rural properties.

Because of the similarity in the controversies, these two actions are being jointly tried by the Brazilian Supreme Court.

In this context, on March 29 of this year, the CFOAB petitioned in the files of ADPF 342 and ACO 2,463 to request its entry as amicus curiae. It was argued that the matter is key for the defense of national sovereignty and the constitutional order and, therefore, the manifestation of the Council would be relevant.

In addition, because it is a sensitive issue with complex implications, the CFOAB also requested, on a preliminary basis, the suspension:

  • of all court cases that have a dispute on the same subject as ACO 2,463 and ADPF 342; and
  • of transactions that apply, in any form, paragraph 1 of article 1 of Law 5,709/1971.

Minister André Mendonça, in a monocratic decision published on April 26 of this year, had partially granted the injunction request made by the CFOAB. The minister determined that, until the final judgment of these processes by the STF, all actions involving the equalization to foreigners of Brazilian companies controlled by foreigners, individuals or legal entities, for the purpose of acquiring rural properties, would be suspended. In addition, it granted the CFOAB's request to join the case as amicus curiae.

The request for suspension of transactions was considered unnecessary and, therefore, rejected, pursuant to the decision of Minister André Mendonça, who partially accepted the CFOAB's requests.

This preliminary decision, however, was not endorsed by the plenary of the STF. In a vote that ended in a 5-5 tie, the plenary, bereft of Minister Ricardo Lewandowski, due to his retirement, chose not to endorse the decision of Minister André Mendonça.

The confirmation of the minister's decision depended on the approval of the absolute majority of the plenary, which did not occur. In view of the tie, under the terms of its bylaws, the Supreme Court could:

  • suspend the trial until the arrival of a new minister to untie;
  • have a tie-breaking vote by the casting vote of the president of the Supreme Court; or
  • Apply article 146 of the Supreme Court Internal Bylaws and decide that, in case of a tie, the request will be denied.

The Court, following the trend of the most recent judgments, decided for the third alternative. As a result, the CFOAB's preliminary injunctions were denied.

Although this was the outcome, the CFOAB's requests did not address the merits of the lawsuits and, therefore, ACO 2,463 and ADPF 342 remain on the agenda for final judgment.

The monitoring of the trial of these two lawsuits is key to understand the directions of foreign investments in Brazilian rural properties. If a decision overturns the equalization of Brazilian companies to foreign ones, the process of acquisition of rural properties by foreigners in Brazil may be simplified.