A little over a month after Brazil’s federal prosecutor’s office (MPF) announced the end of the Lava Jato task force (see our recent post), its legacy suffered two separate blows by Brazil’s Supreme Court (STF) over a two-day period this week, both in connection with habeas corpus petitions filed by former president Luiz Inácio Lula da Silva (Lula).

In the first ruling, on March 8, 2021, Justice Edson Fachin issued a decision overturning Lula’s two criminal convictions, more than three years after they were first handed down by then-Judge Sergio Moro and his successor (Judge Gabriela Hard), finding that the trial court in Curitiba, Paraná had lacked jurisdiction to hear Lula’s cases in the first place. Prior to the initial convictions, higher courts had ruled that Judge Moro and the court in Curitiba had jurisdiction to try the Lula cases, primarily due to the nexus between Petrobras and improper payments made to Lula. In his decision, Justice Fachin ruled that the connection between the benefits allegedly received by Lula—which included improvements to Lula’s country house and the purchase of an oceanfront apartment—and the Petrobras scheme were too tenuous to provide a basis for jurisdiction. Justice Fachin ordered that the cases be retried by a new trial court in Brasília. On March 12, 2021, prosecutors appealed Justice Fachin’s decision to a full panel of five STF justices.

If the decision stands, among other implications, it would mean that Lula will be eligible to run as a candidate in the upcoming presidential elections in 2022—unless a trial court in Brasilía reaches a speedy verdict against Lula and that verdict is upheld on appeal before the election. That prospect appears unlikely as a practical matter, and there may be other, legal questions around a number of issues, including whether the statute of limitations have already lapsed with respect to the conduct at issue.  

The second, potentially more wide-reaching, blow to Lava Jato’s legacy came the following day, when two STF justices issued opinions in a separate habeas case brought by Lula to overturn his convictions on the grounds that Judge Moro lacked impartiality. The case had not progressed since 2019, when two of the five justices on the STF panel, including Justice Fachin, had issued opinions ruling against Lula’s habeas petition. On March 9, 2021, the day after Justice Fachin’s decision overturning Lula’s convictions on other grounds, the other four justices on the panel voted to resume the second habeas case, overruling the objections of Justice Fachin. On that same day, Justices Gilmar Mendes and Ricardo Lewanowski issued sharply worded opinions in favor of Lula’s habeas claim, finding that Judge Moro had violated multiple judicial norms and exhibited clear bias against the defendant. Justice Mendes called Judge Moro’s conduct in the Lula cases “the biggest judicial scandal in Brazilian history” and cited seven evidentiary bases supporting the finding of bias. These included then-Judge Moro’s:

• authorizing indiscriminate tapping of Lula’s phone, including the former president’s conversations with his legal team and then-president Dilma Rousseff;
• subsequently leaking recordings of conversations between Lula and Dilma during the impeachment process against Dilma in 2016;
• improperly coordinating with MPF prosecutors, as revealed in hacked messages over the Telegram app that received widespread coverage in the Brazilian press;
• leaking damaging leniency testimony of Lula’s former Finance Minister, Antonio Palocci, during the presidential elections in 2018 with the intent of prejudicing the PT candidate running against Bolsonaro; and
• subsequently accepting a cabinet position in the Bolsonaro administration.

With the opinions from Justices Mendes and Lewanowski, the STF panel is currently deadlocked, with two votes for each conflicting outcome. The fifth justice who will cast the deciding vote, Justice Nuno Marques, has requested additional time to study the matter. If Justice Marques (a Bolsonaro appointee) sides with Justices Mendes and Lewanowski, the outcome could potentially have far-reaching consequences and call into question many of the high-profile convictions of politicians handed down by then-Judge Moro.

Lava Jato was once broadly viewed as a watershed in Brazil’s fight against corruption and as an example for other countries in the region. The STF’s decisions this week may cast a shadow over Lava Jato’s legacy. While some may interpret these developments as a blow to anti-corruption efforts or Lava Jato’s work, others—including practitioners at the criminal defense bar—may see signs of more robust protections for high-profile criminal defendants. How the decisions will ultimately be perceived by the Brazilian public remains to be seen. Whether viewed as undercutting anti-corruption efforts or as a sign of institutional maturity, the political landscape in Brazil changed dramatically overnight—and markets reacted accordingly.

Many will be watching how the Bolsonaro administration responds to these decisions and whether Bolsonaro makes anti-corruption efforts a central component of his re-election campaign. Companies doing business in Brazil will be well served to stay apprised of how these developments alter anti-corruption enforcement domestically within Brazil, and the corresponding implications externally (e.g., if foreign authorities become more active to “pick up the slack”) and internally (e.g., if changes in employees’ attitudes lead to negative impacts on corporate cultures of compliance).