The Brazilian Supreme Court (STF) will review whether the Selic rate should remain as the standard index for updating civil debts, after the Superior Court of Justice (STJ) admitted an extraordinary appeal.
The decision could impact contracts, compensation, and how amounts owed in private relations are calculated across the country.
1. What’s Under Discussion: Selic as Index for Civil Debt Correction: In August 2024, the Superior Court of Justice (STJ) ruled by majority that the Selic rate should be used for monetary correction of civil debts—those arising from private law between individuals or companies. This understanding is based on the Civil Code, since Selic is the prevailing index for monetary correction and default interest in federal tax obligations.
2. Specific Arguments for Civil Debts: STJ’s Special Court held that the default interest rate under the National Tax Code applies only to tax debts, not civil obligations. Thus, for private debts, correction by Selic becomes the general rule, moving away from other indices traditionally used in the civil context.
3. Why the Issue Has Reached the Supreme Court: STJ Vice-President, Justice Luis Felipe Salomão, accepted the extraordinary appeal, emphasizing the merit in arguments that applying Selic—depending on the calculation method used (monthly accumulation or daily multiplication)—could erode the total debt, infringing the constitutional principle of full repair of damages. He also noted that while STF has previously allowed Selic for tax and labor debts, those cases focused on public law. This controversy, however, involves civil debts (private law), distinguishing it from earlier precedents.
4. Potential Impacts for Market and Private Relations: (i) For creditors and debtors: The STF’s decision could significantly increase or decrease the updated value of civil debts, depending on which index is chosen. (ii) For the legal and financial market: Any change could impact compensation, credit contracts, debt instruments, and settlements, affecting predictability and negotiations in private transactions. (iii) For the justice system: An STF decision will set a nationwide standard for updating civil debts, reinforcing legal certainty across private relations.
The appeal will now be examined by the Brazilian Supreme Court, which will decide whether Selic remains mandatory for civil debt correction. The verdict will determine the benchmark for updating amounts owed and affect countless contractual and compensation scenarios in the private sector.
