Elon Musk’s five-month standoff with Brazil’s judiciary over his social media platform took its first steps towards resolution this week, with X bowing to the court’s demands. 

With an end in sight to X’s four-week blackout in the country, experts say it’s a stark reminder of foreign investors’ need to comply with local law, despite questions over the tactics used by the supreme court judge overseeing the case.

Since August, X has been offline in the country and its offices closed after failing to appoint a local legal representative, as is required of all foreign companies operating in Brazil. However on September 21, the country’s supreme court stated that X was willing to comply with its order, and gave the company five days to formalise the appointment before the site can return online. 

Legal and risk consultants have praised the development as a win for emerging market rulebooks threatened by large foreign firms. “This is about national sovereignty, respecting legislation and the national institutions,” says Luca Belli, a professor at FGV law school, Rio de Janeiro.

“This is a struggle between an individual and a corporation that thinks they are above the law — and can decide which norms to comply with — and a country reasserting its sovereign right to legislate and to implement law,” he adds.

X’s situation in Brazil has parallels with challenges in Scandinavia faced by another company led by Mr Musk. Tesla has entered its 11th month of industrial action in the region following the electric vehicle giant’s refusal to sign collective bargaining agreements — a backbone of the Nordic labour model — with its workers in Sweden.

Judicial activism 

However the situation is mired by Brazil’s political polarisation and questions over the enforcement tactics used by Alexandre de Moraes, the progressive supreme court judge overseeing the case.

The legal dispute officially concerns X’s need for an executive in the country, but it follows a feud beginning in April between the company and Mr de Moraes over the platform’s refusal to take down accounts allegedly spreading misinformation and which are linked to supporters of right-wing ex-president Jair Bolsonaro. 

Since Mr Bolsonaro’s election in 2018, Brazil’s political polarisation has stepped up a notch. Mr de Moraes has publicly opposed the former president, and had his actions regarding X have been endorsed by current leftist president Luiz Inácio Lula da Silva. It has led the judge’s actions to be labelled by some as judicial activism.

“The judiciary’s decision may carry a political undercurrent, particularly considering the broader context of political polarisation we are facing in Brazil,” says Vinicius Bitencourt, a lawyer at Silva Schütz Advogados in Santa Catarina and a partner at Flow Vista consultancy. Particularly “given the influence of the platform on public discourse”, he adds.

The Brazilian judiciary’s governance has been called into question by risk consultancies. Verisk Maplecroft’s principal Americas analyst, Mariano Machado, says rule of law in the country is “dragged down by a poor integrity landscape” of the judiciary, and that its “once strong anti-corruption stance” has changed as many justices have reversed prior rulings.

Luis Losada Simón-Ricart, head of Latin America and Iberia at risk consultancy Aperio Intelligence, draws parallels between Mr de Moraes’s actions, and those of the judges heading the landmark anti-corruption investigation Operation Carwash — which saw dozens of political and business leaders jailed from 2014 — with some rulings criticised as being politically motivated. “It is [quite] common in Brazil to have activist judges … [who] use their positions to also present their political views,” says Mr Losada. 

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Questionable tactics

Such claims are reinforced by legal scholars’ questioning Mr de Moraes’s actions in relation to X. He summoned Mr Musk to appoint a legal representative via a post on the social media platform, which is questionable under procedural law, but became legal once Mr Musk publicly acknowledged it. “He essentially tricked him,” says Mr Belli. 

In addition, the judge froze Starlink’s local bank accounts, forcing it to block X’s availability in Brazil. While Mr Musk is the majority shareholder of both companies, that alone is not a strong enough connection to hold one accountable for the other’s actions under Brazilian law.

Irrespective of where fault lies between X and Brazil’s judiciary, Mr Losada says the dispute reveals Brazil’s highly politicised environment, and “is a good example for foreign companies to think twice before making public statements or taking insights when it comes to politics.”

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