An injunction issued by the Court of Appeals of Santa Catarina (TJSC) has frozen Brazilian assets of a foreign businessman who is facing a cross-border insolvency process of an individual. Recognition of this type of measure is unprecedented in the country. The innovation was brought in by the reform of the Judicial Recovery and Bankruptcy Law, which has been in force since 2021, but had not yet been used by the Courts, say experts.
In the decision, Judge Osmar Mohr, of the 6th Chamber of Commercial Law, ordered the freezing of three assets of Scottish businessman Jason Hector Blain, a former BBC executive, who was declared insolvent by the Scottish courts in 2023.
The estimated debt is more than 95 million pounds (R$590 million), distributed among 33 creditors from four different countries. The bankruptcy judgment has already been recognized in England and is in the process of being validated in the United States, where there are also assets in his name.
The properties owned by him in Brazil are in a luxury condominium in Balneário Camboriú (SC). Together, they have an estimated market value of R$20 million, equivalent to around 3.2 million pounds, which would pay just over 3% of the total debt.
What the injunction says
According to the lawsuit, the debtor intended to sell the properties. For this reason, the judge ordered their freezing. In Mohr’s assessment, there is “danger of damage or risk to the useful outcome of the process” due to the possibility of “dilapidation of assets and the consequent frustration of his creditors”.
“It is more prudent to make the assets in the case unavailable in an attempt to guarantee payment of the defendant’s creditors”, said the judge in his decision (Lawsuit No. 5076905-15.2023.8.24.0000).
Cross-border insolvency
According to experts, homologation by the Superior Court of Justice (STJ) can take months and is limited to the express enforcement of the foreign judgment in Brazil. The recognition of the process — change brought about by Law No. 14,112, of 2020 — can be submitted directly to the trial judge, who has the freedom to proceed with the action, hear witnesses and freeze assets. He can even collaborate directly with judicial authorities in other countries.
For lawyer Tiago Schreiner Lopes, a partner at the law firm Lollato, Lopes, Rangel e Ribeiro Advogados, focused on judicial recovery and corporate restructuring, “requiring prior approval goes against the purpose of the law, which is to speed things up and generate effective cooperation between jurisdictions.”
For this reason, the change in legislation brought about by article 167 of Law 14.112/2020 has facilitated the processing of these types of actions. “In the past, we had to get the [foreign] judgment, take it to the STJ to authorize it and then take it to the first instance. Now, the process is recognized without the bureaucracy of the STJ. The aim of the law is to be simple and quick to apply, otherwise it ends up not finding assets”, says lawyer Henrique Forssell, a partner at Duarte Forssell Advogados, who worked on the case. He represented the bankruptcy trustee in the original case, from Scotland, James Bernard Stephen.
The opposite has already happened, says Forssell, who acted in the homologation of the bankruptcy of Banco Santos, in the United States, and 50 other similar cases. “Brazil has already made use of the model law, but there was no reverse path. And now it can help”, he says.
“Correct application of the law brings legal certainty to investors”
– Henrique Forssell
In his understanding, the correct application of the law must demonstrate legal certainty for investors. “He will know that if he puts money into a structure here that eventually goes into insolvency, the credit will be treated efficiently, because the legislation allows this.”
In the main case, Lawyers are still appealing against the need to wait for Blain’s defense, since, in their view, there is no opposing party in actions for recognition of cross-border insolvency in foreign proceedings. The injunction, however, should have positive effects. “The court has already signaled, on the substantive issue, that it understands the differentiation between homologation of a judgment and recognition of proceedings”, says Forssell.
In any case, there is still a lack of awareness of this possibility among both lawyers and the Courts, says lawyer Rafael Rebola, a partner at Rebola, Valdívia, Faria e Figueiredo (RVF) Advogados. “It’s still not widely known and there are very few cases applying this new provision. That’s why the Santa Catarina court’s decision is so emblematic. People are afraid to try a new theory, but once it’s recognized, it has a herd behavior effect.”
In the view of lawyer Camila Crespi, from Luchesi Advogados and vice-president of the International Relations Commission of the São Paulo branch of the Brazilian Bar Association (OAB-SP), recognition is a less bureaucratic route than going to the STJ. “The change came about to reduce bureaucracy in Brazilian law and make international legal cooperation possible, as long as it doesn’t violate public order or constitutional principles”, she says.
History
Blain’s request for insolvency was made by a five-star hotel in London, England, the Mandarin Oriental Hyde Park Hotel, for an unpaid bill of 740,000 pounds (R$4.5 million). The Scot booked a penthouse for around eight months. He also has debts with another five-star hotel in the city, The Dorchester London. The story was published by local press outlets, such as Britain’s Daily Mail and The Sun, at the time.
According to Duarte Forssell Advogados, the Scotsman has not contributed to the progress of the lawsuits and, so far, it is not known who his legal representative in Brazil is.