By Paulo Guilherme de Mendonça Lopes and Alexandre Paranhos, published in the International Law Office (ILO) platform
This article outlines the legal provisions that regulate fines (also known as astreintes) in Brazilian law.
Article 536 of the Code of Civil Procedure (CCP) establishes that:
[In] the enforcement of a judgment that recognizes the enforceability of an obligation to do or not to do, the judge may, ex officio or upon request, in order to effect specific relief or to obtain relief for the equivalent practical result, determine the measures necessary to satisfy the plaintiff.
In addition, article 537 of the CCP states that:
Art. 537: The fine does not need to be requested by the party and may be applied in the discovery phase, in a provisional injunction or in the judgment, or in the execution phase, provided that it is sufficient and compatible with the obligation and that a reasonable deadline is set for compliance with the precept.
§ Paragraph 1 The judge may, ex officio or on request, modify the amount or frequency of the fine that is due or exclude it if he finds that:
I – has become insufficient or excessive;
II – the obligor has demonstrated supervening partial fulfillment of the obligation or just cause for non-compliance.
§ Paragraph 2 The amount of the fine shall be due to the creditor.
§ Paragraph 3 The decision that sets the fine is subject to provisional compliance, and must be deposited in court, allowing the amount to be withdrawn after the judgment in favor of the party has become final and unappealable.
§ Paragraph 4 The fine shall be due from the day on which non-compliance with the decision is established and shall be in force for as long as the decision that imposed it is not complied with.
§ Paragraph 5 The provisions of this article shall apply, where applicable, to the enforcement of judgments recognizing duties to do or not to do of a non-binding nature.
Article 814 of the CCP also establishes that:
[In] the enforcement of an obligation to do or not to do based on an extrajudicial instrument, the judge shall, when ruling on the application, set a fine for the period of delay in complying with the obligation and the date from which it will be due”, and the sole paragraph of this legal provision states that “[If] the amount of the fine is provided for in the instrument and is excessive, the judge may reduce it”.
These legal provisions have a wide application, including in injunctions or similar measures.
In a recent decision, the third panel of the Superior Court of Justice (STJ) recognised the validity of the assignment of credit to a third party. This validity originated from the total number of days of non-compliance with the fine to the non-compliant party in complying with the court order. This stands despite the facts that the judgment that benefited it has not become final.
This occurred on 8 August 2023 at the judgment of special appeal No. 1999671 – PR by Justice Marco Aurélio Bellizze.
In this judgment, several issues were discussed within the scope of the STJ. This discussion ended with an unanimous recognition of the possibility of assigning the credit arising from the imposition of comminatory fines in the following decision:
SPECIAL APPEAL. ENFORCEMENT OF JUDGMENT. ASSIGNMENT OF CREDIT. AMOUNTS ARISING FROM ASTREINTES. POSSIBILITY. DUAL NATURE OF THE PROCEDURAL SANCTION. INCORPORATION INTO THE CREDITOR’S ASSETS FROM THE MOMENT OF ITS INCIDENCE. POSSIBILITY OF ASSIGNING THE RIGHT TO THE CREDIT. SPECIAL APPEAL PARTIALLY RECEIVED AND, TO THAT EXTENT, DISMISSED.
1. The purpose of the appeal is to define whether the assignment of the right to credit arising from astreintes is valid.
2. The fine is eminently coercive in nature, since it is set even before the damage occurs and its main purpose is precisely to prevent it from being imposed, since the debtor’s expected and desirable behavior is that he voluntarily complies with the obligation and that the fine acts only on his will.
. . .
4. Astreintes have features of both substantive and procedural law, since their value will revert to the holder of the right sought in the action and, precisely for this reason, their fate is linked to the success of the claim in which the main obligation or substantive right sought in court is sought, being incorporated into their sphere of availability as a property right, and their credit nature is evident.
5. Therefore, the assignment of the credit arising from the astreintes is valid, since the creditor can assign their credit if the nature of the obligation, the law or the agreement with the debtor does not prevent it and, contrary to what the appellant claims, there is no question of the accessory and very personal nature of the fine.
6. The credit arising from the fine is part of the creditor’s assets from the moment the court order is breached, and can be assigned from that moment on.
It is true that there was disagreement when special appeal No. 1999671 – PR was judged, notably regarding the legal nature of or fines, as well as other issues briefly discussed below. However, this did not alter the outcome of the judgment, which is that the assignment of the right to the original credit for fines is valid.
The STJ unanimously decided that the assignment of the right to the original comminatory fine to a third party was valid.
To reach this conclusion, the STJ dismissed, without any disagreement, the allegation that “the credit arising from astreintes cannot be assigned due to its accessory and very personal nature, which is why the Assignment of Credit is irremediably null and void”.
Justice Nancy Andrighi’s voted, and was followed by Justice Humberto Martins, that based the most authoritative Brazilian doctrine, fines do not have an indemnity nature, since “unlike indemnity, which aims to recover damage caused to the patrimonial sector of the legal sphere of a given subject of law, fines are aimed at defending the authority of the State itself”. This is a position that is reinforced by article 500 of the CCP, which establishes that “compensation for losses and damages shall be without prejudice to the fine fixed from time to time to compel the defendant to comply specifically with the obligation”.
Justice Nancy Andrighi’s vote also made clear that:
it has already been emphasized in several precedents [of the Superior Court of Justice] the understanding that the fine is not to be confused with compensation, having an inhibitory or coercive character (REsp 1.862.279/SP, Third Panel, DJe 25/5/2020; AgInt in REsp 1.761.086/SP, Second Panel, DJe 25/11/2020; AgInt no REsp 1.685.060/RS, Fourth Panel, DJe 27/11/2019).
Even with the assignment of the claim relating to the mandatory fine, other claims remain with the assignee of that claim.
With the exception of this issue (ie, the legal nature of the fine), the Court converged on the understanding that the freedom to assign credit in Brazilian law is the general rule and article 286 of the CCP(1) establishes the situations in which it would not be possible. These situations are if the following do not preclude this freedom:
- the nature of the obligation;
- the law; or
- the agreement with the debtor.
As Justice Nancy Andrighi made clear in her opinion, there would be no need to talk about:
the very personal nature of astreintes in relation to the creditor, since even if this is changed, the purpose of the fine to sanction the adverse party for non-compliance with a court order will remain intact.
This is why it is much more linked to the debtor than to the creditor.
Furthermore, the fine, given its coercive legal nature, does not have the same nature as the legal relationship that is the subject of the claim where it was determined, and the latter may be non-transferable but the fine is not.
Thus, the credit originating in the fine is part of the creditor’s assets, which is why it could be assigned to third parties, in whole or in part, according to Brazilian law.
Third-party assignees run all the risks of the claim that has been assigned to them, including the very fact that it will not exist at the end of the proceedings, due to the judgment of the proceedings in the opposite direction to that benefited by the fine.(2)
Marco Aurélio Bellizze was right to point out the risks that the assignee of the credit runs in his vote as:
- the debtor may oppose to the assignee the exceptions that are incumbent on them, as well as those that, at the time they became aware of the assignment, they had against the assignor;(3)
- in the case of assignment for consideration, the assignor, even if they are not liable, is liable to the assignee for the existence of the credit at the time they assigned it to them, and the same liability applies to gratuitous assignments if they have acted in bad faith(4) just as the assignor is not liable for the debtor’s solvency, unless otherwise stipulated;(5) and
- the judge may, at any time and even ex officio, modify the amount or periodicity of the fine or exclude it if it has become insufficient or excessive and when the debtor demonstrates the supervening partial fulfillment of the obligation or just cause for non-compliance.(6)
Given the importance of the decision handed down by the Superior Court of Justice in special appeal No. 1999671 – PR, it is important to disseminate it to support the heated legal and negotiation market for judicialised credits.
A creditor may assign their credit if the nature of the obligation, the law or the agreement with the debtor does not prevent it; a clause prohibiting assignment may not be objected to by the assignee in good faith if it is not included in the instrument of obligation.
(3) Article 294 of the CCP states, “The debtor may oppose to the assignee the exceptions that are incumbent upon them, as well as those that, at the time he became aware of the assignment, they had against the assignor”.
In the case of assignment for consideration, the assignor, even if they are not liable, shall be liable to the assignee for the existence of the credit at the time they assigned it to them; they shall be equally liable in the case of assignment free of charge, if they have acted in bad faith.