1) Introduction
Prospective overruling has been acquiring significance, even in civil law jurisdictions, a system where judges have to decide according to the statutes.
The progressive complexity of societies, accompanied by the will of the legislator to regulate everyone's conduct, in each and every role people can play, has created a paradoxical situation: statutes – which are increasingly numerous - cannot by themselves guarantee equality, predictability, and legal certainty.
The quantity of statutes and mainly the way they are written, usually in broad language, adopting vague concepts and principles, open the door to different judicial interpretations, and lead to the creation of legal tools to standardise case law, and even to create binding precedents, as happened in Brazil when the new civil procedural code came into force.
The undeniably creative role of the judicial branch begins to be recognised by scholars and by legislators themselves. This is why ways were found to prevent the new law, judge-made law, from having a retrospective effect, thereby affecting situations which are already consolidated according to the predominant orientation of the court.
Even if civil law countries do not ordinarily admit that judges base their decisions only on other judicial decisions as their main source of law, it is undeniable that one of the possible interpretations of statutory law texts has to be chosen, and it will probably be the one given by superior courts.
The ratio essendi of superior courts is to have the last say on the interpretation of the constitution and of the infra constitutional law.
So, as the judicial branch, to a certain extent, creates law, it can also change it. In Brazil, admittedly this happens at a very undesirable speed or frequency. Theoretically, everybody knows that law must be created by a joint action of the legislative and the judicial branches, and it has to be stable. But, in practice, case law changes much more frequently than it should, and this is one of the main reasons why the concern with the retrospective effect of case law became so important.
The natural retrospective effect of case law has then to be neutralised, and the method brought by the prospective overruling is not to allow that the new orientation of the court be the basis of decisions that solved past disputes. Prior to the overruling, parties acted in accordance with the previous precedent, relying on the fact that it was the law. The reliance that society has on old precedents has to be respected. An overruling which has only prospective effects respects the good faith principle and protects those who relied on the previous orientation given by the court.
The clear and explicit provision in our new civil procedural code saying that courts can give their overrulings prospective effects (art. 927, § 3) should not be interpreted as a stimulus for judges to change case law frequently. Case law has to be stable because it also has a normative role, it produces effects not only related to the case at hand but to society as a whole. Prospective effect of overruling serves to neutralise negative impacts that can emerge from the changing of orientation, and not to stimulate Courts to be unstable.
The prospective overruling clearly has its roots in the constitution. It exists to implement the principle of legal certainty, in its subjective dimension, which consists of the protection of trust.
The principle of legal certainty, in this context, is connected with the need to honour the trust placed by individuals in the acts of state. In our view, this topic is very closely linked to the rule of law, whose raison d’être is now also acknowledged to be to foster the well-being and tranquillity of all members of society.
The government that dictates the rules must not backtrack, contradict itself or contribute towards an atmosphere of uncertainty or lack of predictability. This result is the opposite of what must be provided by the state.
2) Legal certainty from the subjective perspective and activities of the judiciary
In its preamble, the Brazilian Federal Constitution defines legal certainty as “one of the SUPREME values of a fraternal, pluralistic and unprejudiced society”.
Important authors such as José Afonso da Silva raised awareness of the subjective aspect of legal certainty which is precisely the principle of trust.[1]
One of the pillars of the democratic state governed by the rule of law is that legal rules precede human conduct so that people may be able to plan their activities in conformity with the existing law. Therefore, one can say that laws are not normally retroactive. As a rule, situations that occurred in the past are protected from the retroactive application of the law. Said situations, as we all know, are behind a sort of “curtain” that separates the past from the present, the “curtain” comprising res judicata, “perfected legal act”[2] and vested rights. All three abovementioned legal situations are deemed to be in the past and are therefore not affected by new statutes.
Nevertheless, there is increasing awareness that the code of conduct on which individuals rely on to guide their actions arises not only from the work of the Legislative Branch but also from the Judicial Branch. By this we mean that the courts have an active role in the construction of laws through their merely interpretative activity. The idea that the interpretative activity is not a declaratory activity in which the interpreter “discovers” the meaning of the law, but is rather an activity that builds meaning, is increasingly widespread.[3] That is another way of saying that: judges, to a certain extent, create law.
In effect, the 2015 Code contains various indications that the legislator was fully aware of this. When the Code governs the way a court ruling should be reasoned (arts. 489, § 1, V and VI), it says that a judge may substantiate it with a precedent, and this simply means that a precedent is a source of law. That is the only impression you get when you analyse art. 966, § 5, of the new Code, which allows a decision on the merits to be vacated when it is based on a precedent that was not applicable to the case at hand. A contrario sensu, it also allows a decision to be vacated in the event that a precedent, which should obligatorily have been applied, was not.
3) The efficacy of a rule created by judges
Having acknowledged this creative role in the activities of judges as being connatural to their activity, it is natural to expect the emergence of intertemporal law problems. The reason being that case law has a retroactive effect.[4] This sentence may sound odd, but it merely portrays the reality: when a court changes a previously settled guideline, adopted in a binding precedent, the overruled precedent had already earned the trust of individuals and was the code of conduct considered when their activities were planned. If the new rule is applied, this means that the actions will be tried in accordance with a standard that did not exist at the time they were carried out. In practical terms, it is as if there were a new law governing something that had occurred before said law had come into effect.
Having perceived this phenomenon, in 2015, the legislator created the mechanism of adjustment that aims precisely at neutralising the retroactive effect of changing case law in some cases: it is the prospective overruling.
The purpose of prospective overruling is to assure the non-retroactivity of the law. Thus, if article 6 of Statute 13.655/18 states that the law does not retroact, having immediate and general effect (it does not retroact because it does not affect vested rights, perfected legal act and res judicata), it must be read in combination with article 24: neither the law nor the interpretation of the law retroacts.
The law makes it clear that if the decisions of the government are to inspire trust and expectations in individuals, these must not be frustrated by changing the rules in the middle of the game.
The perception of the need to protect the trust of individuals in the acts of the government arose in the sphere of Administrative Law and is very closely associated with the notion of good faith. Prospective overruling aims to protect the trust of the individual in the previously existing standard (statutes + interpretation of Superior Courts).
Thus, the mechanism of adjustment puts in the hands of the judicial branch the power to create inter temporal legal rules for when case law changes, turning into reality the rule that not only statutory law, but case law too, is retroactive. As is well known, case law is statutory law interpreted by the courts in light of legal writings. Law is a phenomenon whose existence arises from three fundamental pillars, namely: statutory law, the way the courts understand said law, and legal writings regarding the rule.
4) How should the courts adjust the temporal effects of their decisions?
The legislator was, nevertheless, rather timid regarding the regulation of prospective overruling. For the mechanism to have the power to more fully achieve the constitutional principles that inspired it, some topics should have been expressly regulated.
It was not made clear which court has jurisdiction to adjust the efficacy of its precedent, and nothing was said regarding the criteria that must be considered to make the adjustment. A court’s duty to render a statement regarding the overruling was never established.
This could undoubtedly have been the legislators’ main concern: to affirm that it is up to the court that changes an existing guideline to state whether or not prospective effects should be given to the overruling.[5] Legislators could also have said that there is no need for the guideline to be changed by the same court so that trust will have to be protected: the STF frequently changes case law settled by the STJ, and which won the individual’s trust in that rule, given that the STJ’s decisions, while not formally binding precedent, clearly carry significant normative weight. The reason being that, under the constitution, the STJ has jurisdiction to have the final say on matters of ordinary law. However, this does not prevent a different direction from being taken in the understanding adopted by the STJ, when the matter also has a constitutional dimension and will, therefore, also be decided by the Federal Supreme Court.
The need for legal scholars to define the criteria which indicate when the overruling must have prospective effects, arises from the fact that one cannot consider that consequentialist grounds can, in themselves, suffice to substantiate a decision to that effect. This absence has been leading Courts to use these arguments! This is not to say that consequentialist grounds should not be admitted, but only that they should not be the sole grounds for legal decisions.
There is a certain affinity between consequentialism and pragmatism that, on a legal level, consists of also considering the projection of the outcome of the interpretation in the empirical world, as a criterion for the assessment of the interpreter’s option from among the meanings that a legal text can have. In our specific case, if, in a due situation, prospective effects should be given to an overruling.
In general, one perceives that there are extremist opinions: some deem that they can use consequentialist arguments as the sole basis of the decision. There are many decisions that do so when deciding on giving or not prospective effects to an overruling, mainly in the field of tax law. At the opposite extreme, there are those who think that consequentialist arguments can never be used because they are not legal arguments.
In 2018, significant changes were made to the Lei de Introdução às Normas de Direito Brasileiro, openly authorising those who decided in the name of the government to use consequentialist arguments in their decisions.
The possibility of using consequentialist arguments in judicial decisions gives rise to the duty of a judge to substantiate their decision (not only but also) describing, in detail, the impact of the decision on the world of facts. The parties, on the other hand, have the burden of proving that these consequences would very probably come about, by means of technical or documentary evidence. Thus, the “burdens of proof of the parties and the judge’s duty of substantiation” have been amplified.[6]
Nevertheless, consequentialist arguments cannot be used indiscriminately. They derive from other social systems, other spheres: for example, from the economic or political sphere. These other spheres function based on other principles, different to the legal ones.
It is crucial, as Alexandre Pereira Dutra correctly asserts, for consequentialist arguments to be led back to the legal sphere. The law protects expectations, which cannot be frustrated by consequentialist arguments that cannot be accommodated by the law.[7]
Lines of thought regarding the need, or lack thereof, for prospective overruling involve the analysis of the projection of facts that did not occur. The examination of “future facts” (= consequences of the application of the rule) is inevitable.
The consequences projected as being likely to happen as a result of the efficacy of the decision (as a precedent) can obviously not be those that arise from the mere projection of the judge’s “personal” impressions or from the harmful consequences that, from the perspective of each of the parties, could occur: it is a matter of establishing what would probably occur in the empirical world, as arising from one interpretation or another.
It is highly laudable that, in Brazil, there is the possibility that the decision that overrules a precedent with prospective effects be done based on data obtained from public hearings and the intervention of amici curiae (art. 927, § 2, CPC).
When one considers the Superior Courts, one realises that the hearing of amici curiae and the holding of public hearings, as an outcome of the possibility of using consequentialist arguments in judicial rulings, have become absolutely indispensable: in our view, there is nothing that would impede the production of expert evidence.
In the context of consequentialism, the “facts” that must be proved characterise the probable impact that the ruling will be able to generate in the real world. This circumstance may result in the decision being X rather than Y, also on the grounds of consequentialist arguments, but only on those, as previously mentioned, that can be reconducted to the legal sphere.
Hence, one perceives that there are limitations to the use of consequentialist arguments: this projection cannot be the product of the intuition or subjectivity of those who decide. Empirical data and reliable studies are necessary so that the impacts of a decision can be estimated and can legitimately interfere in the MANNER in which the decision is taken.
To be able to be used as grounds for court decisions, consequentialist arguments must also be capable of being seen as legal arguments, that is, they must also “fit” into the field of law. Therefore, decisions must always be made “in accordance with the system”.[8] This is the second limitation that must be considered to gauge the lawfulness of the usage of consequentialist arguments in judicial decisions.
A perfect example was found by Alexandre Pereira Dutra:[9]
“But it was not only in the case of the adjustment of effects that the STF had the opportunity of considering consequences. A good example that should be recalled refers to the trial of ADI 1.946, in which the court decided that the ceiling of pension benefit payments provided for in art. 14 of the EC no. 20/98 should be interpreted pursuant to the Constitution, in such a way as to exclude from its scope of application the maternity leave payment set forth in art. 7, XVIII. It was deemed that obliging employers to bear the costs of the salary of a pregnant woman during the maternity leave period would constitute a negative incentive for the hiring of women in the labour market. As Justice Rapporteur Sydney Sanches said, ‘In fact, if it is understood that Social Security will, henceforth, be liable only for R$ 1,200.00 per month, during the pregnant woman’s maternity leave, and that the employer will be solely liable for the remainder, the latter’s option for male workers, over female workers, will be greatly facilitated and encouraged. This will then foster the very discrimination that the Constitution sought to counter, when it prohibited differences in salaries, performance of duties and hiring criteria based on gender. (...)
As can be seen, the consequence taken into consideration (the deterrent to the hiring of women) was reconducted to the principle of equality, which seeks to counter the differences in salaries, performance of duties and hiring criteria between men and women. It was considering this constitutional law that this consequence was selected and assessed as being legally relevant ".
For this reason, no judicial decision can be based solely, for example, on the risk of emptying the public coffers, on the imminent bankruptcy of the treasury, on likely cashflow concerns, etc.
Thus, if on one hand the statutes cannot be ignored, on the other hand, they frequently admit more than one interpretation: then the consequentialist arguments can, in a way, be the “tiebreakers” provided they can be accommodated in the legal sphere.
Of all the possible interpretations, the “best” will be the one that has the most positive impact in the real world. The only correct one.
5) In which situations should there be prospective overrulings?
In a recently published work,[10] we suggested criteria that can solve some of the problems that one has to face to find out whether an adjustment should be made.
The first criterion that indicates that the overruling should have prospective effects is closely linked to the meaning and reason for being of the mechanism of adjustment, which is to safeguard the trust that the individual deposited in the previous code of conduct, as a result of the actions of the courts themselves, and which was able to generate sufficient trust for individuals to conduct themselves in accordance with the guideline that has now been changed. Precisely because what led the legislator to create was the need to protect the trust of the individual in the previous code of conduct, it is perfectly natural to expect that the previous situation was, in fact, able to foster the feeling that one was acting appropriately, in accordance with the guidelines of the government itself.
The second criterion pertains to the branch of the law under which the change in the understanding of the court takes place. That is a strong indication of whether prospective effects should be given to the overruling. There are areas of law in which significant value is attributed to legal certainty and predictability, such as Tax Law. Therefore, ideally, the change in tax law should be brought about by the legislative branch rather than by the courts.
Nevertheless, the courts frequently change their stance regarding tax matters. This circumstance alone strongly indicates that merely prospective effects must be attributed to the change in stance.
The third indication that an adjustment must be made is if the new understanding harms the individual. This is what happens, for instance, if a tax, previously held by the courts to be unconstitutional, is deemed to be due. The use of an adjustment means that the new understanding, to the effect that the tax will now be considered due, must not affect past situations because those who did not pay taxes in conformity with the settled case law of an appeal court cannot now be deemed to be debtors![11]
Prospective overruling is a tool for individuals to protect themselves against the state. A sudden change of the rule by the courts without adequate justification, obviously constitutes venire contra factum proprium, i.e., in such cases the state in fact engages in conduct that can be characterised as objective bad faith.[12] Therefore, the possibility that the individual could be harmed because of this type of conduct would be entirely devoid of legal rationality.
6) Conclusion
The legislator of the 2015 Civil Procedural Code was bold to allow the changing of stable case law (or of a binding precedent) to apply exclusively in future cases. It arises from an awareness that the judiciary, also in civil law jurisdictions, plays a creative role.
In view of the frequency with which changes in the prevailing case law (and even in binding precedents) occur in Brazil, the legislator deemed convenient to protect the trust that the individual deposited in the previous guideline, even after it had been changed by the courts. This is the judiciary creating intertemporal legal rules for the effects of its own decisions, as precedents.
[1] “Under the Constitution, legal certainty can be interpreted in a broader and narrower sense. In a broad sense, it takes on the general meaning of the guarantee, protection, stability of a situation or person in various fields, depending on the adjective that qualifies it. In a narrow sense, legal certainty consists of the guarantee of stability and certainty of legal transactions, such that people know beforehand that, once involved in a certain legal transaction, it will remain stable even if the legal basis on which it was established changes”. (SILVA, José Afonso da. Teoria do Conhecimento Constitucional. São Paulo: Malheiros, 2014, p. 488).
[2] Ato Jurídico perfeito or “Perfected legal act” is a legal act which that was practised and finished according to the law in force: the act is complete, finished, enforceable.
[3] Some references to the literature: “Firstly, even in the simplest and most restrictive interpretation of pre-existing rules there is – inevitably – creative activity. A court ruling, whatever it may be, always adds something to the rule applied as, ‘when the decision has been given, the law is not precisely what it was before’. [W. M. Geldart, Elements of English law. New York, Henry Holt and Company, s. d. p., p. 27.] Actually, in effect, ‘judicial law-making is an inseparable facet of law-applying’ [Gidon Gottlieb. The logic of choice – An investigation of the concepts of rule and rationality. London, George Allen and Unwin, 1968, p. 88]. The quotes could go on indefinitely, but we need go no further. In conclusion, one notes the remark by Pontes de Miranda: ‘one should not doubt the creative (or, at the very least, revealing) acts of the judge: they do not merely subsume, but also render value judgments’. [Sistema de ciência positiva do direito. Rio de Janeiro, Borsoi, 1972, II, p. 205.].
[4] Andrew J. Wistrich explains: “Adjudication is inherently backward-looking. It addresses past events, and it does so primarily in light of previously existing law. As Aristotle observed, ‘a juryman [is] an example of one judging the past…’ Jeremy Bentham said that judges make law after the fact ‘just as a man makes laws for his dog. When your dog does anything you want to break him of, you wait till he does it, and then beat him for it’” (WISTRICH, Andrew J. The evolving temporality of lawmaking. Connecticut Law Review, v. 44, n. 3, February 2012, p. 17).
[5] In this respect, Ricardo Villas Bôas Cueva. A modulação dos efeitos das decisões que alteram a jurisprudência dominante do STJ (art. 927, § 3º do NCPC). In: ARAUJO, Raul; LIMA, Tiago Asfor Rocha; SOUZA, Cid Marconi Gurgel de (Org.). Temas atuais e polêmicos na Justiça Federal. Salvador: JusPodivm, 2018. p. 115. However, Hermes Zaneti Jr. argues, in the Comments on art. 927, § 3, that the adjustment need not be made by the court that changed the previously prevailing stance, an obsolete precedent. Should it not be made, the judge hearing the next case can evaluate whether ruling in line with the new precedent would violate the principle of the protection of trust (ZANETI JR., Hermes. In: CABRAL, Antônio do Passo; CRAMER, Ronaldo (Coord.) Comentários ao novo Código de Processo Civil. 2. ed. Rio de Janeiro: Forense, 2016. p. 1329).
[6] ABBOUD, Georges. Processo constitucional brasileiro. 5. ed. São Paulo: Thomson Reuters Brasil, 2021. item 1.16.2.1, p. 403.
[7] DUTRA, Alexandre Pereira. Argumentação consequencialista no direito: modelo teórico e exemplos de aplicação. Revista de Doutrina TRF4. Available at: https://revistadoutrina.trf4.jus.br/index.htm?https://revistadoutrina.trf4.jus.br/artigos/edicao064/Alexandre_Dutra.html. Access: Oct. 30. 2023.
[8] ABBOUD, Georges. Processo constitucional brasileiro. 5. ed. São Paulo: Thomson Reuters Brasil, 2021. item 1.16.2.1, p. 402.
[9] DUTRA, Alexandre Pereira. Argumentação consequencialista no direito: modelo teórico e exemplos de aplicação. Revista de Doutrina TRF4. Available at: https://revistadoutrina.trf4.jus.br/index.htm?https://revistadoutrina.trf4.jus.br/artigos/edicao064/Alexandre_Dutra.html. Access: Oct. 30, 2023.
[10] ARRUDA ALVIM, Teresa. Modulação: na alteração da jurisprudência firme ou de precedentes vinculantes. 2. ed. São Paulo: Thomson Reuters Brasil, 2021, p. 223 e ss.
[11] Regarding the often harmful effects of the change in case law: “The change in case law can, in itself, be favourable: it can reflect a better understanding of the matter by the judiciary; it can correct mistakes made in previous decisions; it can evaluate facts or arguments that had not previously been duly evaluated (…) The problem, however, is not the change per se, but its effects. If it takes the individual who intensively exercised his/her freedom and property rights by surprise, while trusting and being able to trust its permanence, the change in case law can have significant negative effects. (…) As the previously existing case law guideline, and which the individual trusted, was abandoned, said individual is unlikely to allow himself/herself to be guided by the other case law, fearing that it too may come to be abandoned in future. A change in case law proves that there is a lack of reliability and calculability in the legal system: if the previous case law rule is not maintained, there will be surprise and frustration, shaking the ideals of stability and credibility of the legal system”. (ÁVILA, Humberto. Op. cit., p. 479-480).
[12] Nelson Nery Jr. elucidates: “This means that the government must be consistent with its conduct and, if it, provided the individual with the certainty that a certain act could be performed or a certain conduct adopted because in the eyes of the government it was correct, the government cannot, abruptly and inconsistently with its prior conduct, change its understanding to the detriment of the individual”. (NERY JR., Nelson. Boa-fé e segurança jurídica – eficácia da decisão judicial que altera jurisprudência anterior do mesmo Tribunal Superior. In: FERRAZ JR., Tercio Sampaio; CARRAZZA, Roque Antonio; NERY JR., Nelson. Efeitos ex nunc e as decisões do STJ. 2. ed. Barueri: Manole, 2009. p. 86.).