STF determines that mills need to prove their actual damages resulting from the IAA pricing

On August 18, 2020, the Supreme Court concluded the trial of an appeal filed by Usina Matary S.A against a decision issued by the Federal Courts – First Region regarding the criteria for the calculation of the indemnification amount to be paid by the Federal Government to the mills as a result of the sugar and ethanol pricing in the eighties by the extinct Sugar and Ethanol Institute (IAA).

With 5 votes against 4, the STF determined that, despite being entitled to indemnification for the prices below production costs, the mills must prove to have suffered actual losses as a result of the IAA pricing. This means that the mills must prove, by means of a technical expert analysis, that their actual production cost was higher in a certain period of time than the prices set by IAA.

The STF’s decision confirms the position previously taken by the Superior Court of Justice that the indemnification amount could not be calculated based in the average of production costs estimated by Fundação Getúlio Vargas – FGV.

Justice Edson Fachin was the rapporteur of the prevailing vote, followed by Justices Alexandre de Moraes, Gilmar Mendes, Cármen Lúcia and Rosa Weber. Justices Ricardo Lewandowski, Luiz Fux, Roberto Barroso and Marco Aurélio diverged from the prevailing position.

Santos Neto Advogados continues to monitor the most relevant issues discussed in the Brazilian courts and remain available for any clarification.

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