Repetitive-Appeals Ruling Will Decide Who Pays Attorney’s Fees and Whether Refunds Are Owed After the Modulation in Theme 986

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

The First Section of the Superior Court of Justice has designated Special Appeals 2.245.146 and 2.245.144 for the repetitive-appeals procedure, creating Theme 1.429. The court will decide who bears the losing-party attorney’s fees and whether a refund of undue payments is available in the situations covered by the modulation of effects set in Theme 986, which concerns Tust and Tusd (electricity transmission and distribution system use tariffs) in the ICMS (Brazil’s state tax on goods and services) tax base.

What the First Section Has Taken Up

Under Justice Maria Thereza de Assis Moura as rapporteur, the First Section of the STJ (Brazil’s Superior Court of Justice) decided to submit the issue registered as Theme 1.429 to the repetitive-appeals procedure. The dispute involves two central questions. First, who must bear the losing-party costs for the period in which the taxpayer is excused from paying the tax because of the modulation applied in Theme 986. Second, whether a plaintiff who paid the ICMS in full is entitled to a refund of the undue payment, even though the payment falls within the period protected by the modulation.

Along with the designation, the panel ordered a stay of all pending cases on the same subject before the courts of appeals and the STJ itself, provided that a special appeal (recurso especial) or an appeal against the denial of a special appeal (agravo em recurso especial) has been filed in them. The goal is to concentrate the solution in a single leading decision and avoid contradictory rulings until the legal thesis is set.

Why the Issue Calls for a Uniform Rule

In proposing the designation, the rapporteur stressed the mass nature of the litigation. Data gathered by the court’s Management Committee on Precedents, Case Law, and Collective Actions show that, as early as 2017, in the state of São Paulo alone, there were 57.354 additional lawsuits over including the Transmission System Use Tariff and the Distribution System Use Tariff in the ICMS tax base. That volume alone justifies using the sampling method of adjudication.

The rapporteur also pointed to internal disagreement in the STJ’s case law on whether attorney’s fees can be awarded against the Public Treasury (Fazenda Pública) in modulation cases. Some precedents apply the general rule that the losing party pays, allowing fee awards even in rescissory actions (actions to annul a final judgment). Others take the opposite view and reject the fee award under the causation principle, arguing that the taxpayer’s defeat stems from a supervening factor unrelated to the merits: the modulation of the precedent’s effects itself.

The second point of the designation (the right to a refund of the undue payment) moves the debate to the substantive level. The question is whether a taxpayer who paid ICMS calculated on Tust and Tusd in a period before the cutoff date set in Theme 986 can recover what it paid, or whether the modulation also acts as a barrier to repayment, and not only to future enforceability of the tax.

The second point of the designation (the right to a refund of the undue payment) moves the debate to the substantive level.

How the Repetitive-Appeals Procedure Works

Articles 1.036 and following of the Code of Civil Procedure govern sampling-based adjudication. Once representative appeals are selected, the thesis the court sets binds the resolution of all identical cases pending anywhere in the country, whether filed before or after the leading decision. That is why the mechanism is well suited to promoting procedural efficiency and legal certainty in mass disputes.

Until the judgment is issued, the stay imposed by the First Section blocks the progress of special appeals and appeals against the denial of special appeals that concern the matter. In the lower courts, proceedings continue until the admissibility review of the appeal, at which point the stay applies. Lawyers, taxpayers, and government attorneys’ offices should therefore monitor the procedural status of their cases to avoid missed deadlines or hasty measures before the thesis is set.

Frequently Asked Questions

What does STJ Theme 1.429 decide?

The theme will set two theses: who is responsible for the losing-party attorney’s fees in the period in which the taxpayer was excused from paying ICMS on Tust and Tusd because of the modulation adopted in Theme 986, and whether a refund of the undue payment is available to a taxpayer who paid the tax in full within the period protected by the modulation.

Which cases are stayed as a result of the designation?

All cases pending before the courts of appeals and the STJ that involve the same issue, and in which a special appeal or an appeal against the denial of a special appeal has already been filed, remain stayed. Cases at earlier stages continue as normal, and the stay is triggered only when the special appeal is admitted by the lower court.

Why is there internal disagreement in the STJ over attorney’s fees?

On one side, precedents apply the general rule that the losing party pays and order the Public Treasury to pay attorney’s fees whenever the taxpayer wins, including in rescissory actions. On the other, rulings invoke the causation principle to reject the fees when the government’s defeat results from the modulation of effects, a factor external to the merits of the case. The designation aims to settle this inconsistency.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.