In a recent decision favorable to foreign lenders, the Brazilian Superior Court of Justice (STJ) recognized the validity of a Brazilian law Promissory Note of 130% of the principal amount.
In the case in which the creditor was assisted by Feijó Lopes Advogados, the parties entered in to an Export Prepayment Agreement to finance the export of sugar, with subsequent debt confession instrument as a result of the debtor’s default, guaranteed by the Promissory Note.
Upon default, the foreign creditor executed the Promissory Note and the debtor claimed the note nullity on the grounds that the Promissory Note was issued in an amount equivalent to 130% of the debt.
Accepting the creditor’s arguments, the lower court and Sao Paulo State Court (TJSP) understood the Promissory Note to be valid, due to the fact that (i) there was no lack of consent in concluding the deal, with the debtor agreeing with the issuance of the note of 130% of the confessed debt and (ii) the “excess” of 30% corresponds to any interest and penalties for the default. The debtor’s appeal to the Superior Court of Justice was not admitted.
In addition to recognizing the validity of Promissory Notes in an amount higher than the principal amount, which is common practice in international financing to Brazilian borrowers, the decision is also important because it reinforces the possibility of executing, in Brazil, a Promissory Note issued in dollars and linked to a foreign contract.