The president of Brazil's Supreme Federal Court (STF) and of the National Council of Justice (CNJ), Justice Edson Fachin, ordered on Tuesday (Sept. 29) that every court in the country tighten control and inspection of the issuance of precatórios, the court-ordered debt certificates that federal, state and municipal governments must pay when they lose lawsuits. One main target of the decision is to block the early issuance of irregular precatórios, issued before a case becomes final and unappealable, a stage known in Brazil as trânsito em julgado.

According to the newspaper Folha de S.Paulo, courts will have to report any precatórios irregularly issued before final judgment was confirmed. The inspection is to identify issuances that predate final rulings, inconsistencies in amounts and other signs of noncompliance with due process. Fachin also sent the council's inspector general a proposal to expand audits of the regional federal appeals courts, especially cases involving the sugar and ethanol sector and lawsuits over revisions of the public health system's (SUS) payment table.

The order responds to a letter sent on Monday (28) by Justice Gilmar Mendes, who said investigations into the former Banco Master had revealed a "parasitic business model". In his account, judicial credits against the federal government were bought at a steep discount, booked at much higher values and used as collateral to raise funds in the market. On that basis the bank issued time deposits (CDBs) with yields well above average, distributed by large brokerages "in exchange for hefty commissions".

Gilmar also said many sugar and ethanol mills won rulings against the government based on prices set by the former Instituto do Açúcar e do Álcool (IAA) in the 1980s and 1990s, relying on generic studies rather than the case-by-case expert appraisals the Supreme Court requires under its Tema 826 precedent. He asked for special attention to the TRF-1, the federal appeals court seated in Brasília, where a large share of the credits in liquidation is concentrated. Brazil's 2026 budget guidelines law estimated the potential impact of these lawsuits at more than R$ 100 billion. A similar letter went to the president of the Superior Court of Justice (STJ), Justice Luis Felipe Salomão, asking for an extraordinary inspection of the regional courts.

At a CNJ session on Tuesday, Fachin called for traceability in the secondary market for precatórios. "The objective is very simple, direct and important: security, transparency and, even more important, traceability to a market that moves rights", he said, according to the state news agency Agência Brasil. In his written reply to Gilmar, the STF president stated that "the situations reported demand rigorous investigation, with respect for the powers of the institutions able to prevent the repetition of irregularities".

"We are building, step by step, a true national policy for the proper treatment of precatórios, based on regulation, technology, data and transparency."

Fachin, at the CNJ session

How the case got here

• The former Banco Master was placed in liquidation by the Central Bank over suspected fraudulent management. The Federal Police is investigating the ties of former banker Daniel Vorcaro, the bank's controlling partner, with members of the judiciary. Investigators suspect illegal favoritism in the release of precatórios so they could be sold at a discount.
• Folha reported that Vorcaro had at least R$ 14.3 billion riding on lawsuits against the government, in 16 cases tied to compensation claims by sugar and ethanol mills.
• The case became public through a report by the news site Metrópoles on a R$ 427 million contract between Master and the law firm of lawyer Camilla Ramos, wife of TRF-1 appeals judge Newton Ramos.
• Last week, the national justice inspector general, STJ Justice Benedito Gonçalves, ordered the cancellation of R$ 4.7 billion in precatórios from mills that traded certificates with Master, in a case brought by the federal government's legal office (AGU), and ordered a council inspection, with Federal Police support, at Newton Ramos's chambers. The judge said he received the measure with "naturalness" and is fully cooperating with the inquiries.
• On Monday (28), Gilmar sent his letters to Fachin and Salomão. On Tuesday (29), Fachin ordered the tighter controls for all courts.

The next step comes in October. According to Folha, the CNJ's full bench is to review rules for a new judicial policy on precatórios, the regulation of the transfer of such credits and a full revision of the council's resolution on the matter. Also planned for next month, the newspaper reported, is the launch of a "precatório credit calculator" that will let anyone check the updated value of a credit. At Tuesday's session, according to Agência Brasil, Gilmar also pressed for progress in the criminal investigations involving members of the judiciary and the legal profession.