Brazil Lower House Votes to Force State to Pay Court Judgments

Nov. 4 (Bloomberg) — Brazil’s lower house approved, on a first-round vote, a change in the Constitution for rules on the way federal, state and city governments must handle paying off court judgments against them for monetary damages.

The judgments, known in Portuguese as “precatorios,” are often sold to banks because Brazilian governments, especially state and local ones, can take years to meet the obligations.

The amendment would require governments to set aside a percentage of revenue to comply with court-ordered payments. The measure still needs a second-round vote in the lower house and two rounds of approval in the Senate.

The amendment also sets up an auction system to help clear unpaid judgments. Holders of most judgments who are willing to take the deepest discounts on their claims will be paid first.

Claims by people older than 60 and those with serious diseases get first priority without participating in the auction. Claims involving pensions, wages and benefits get second priority outside the auction.

To contact the reporters on this story: Maria Luiza Rabello in Brasilia at; Heloiza Canassa in Sao Paulo at

Last Updated: November 4, 2009 20:09 EST


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