By Chris Arsenault

RIO DE JANEIRO (Thomson Reuters Foundation) - Campaigners in Brazil on Wednesday hailed a court decision to cancel a major land acquisition deal because investors had illegally acquired territory from small-scale farmers.

A state court in Piaui in Brazil's poor northeast issued an order canceling the deal for a tract of land larger than Los Angeles earlier this month.

The 124,000 hectare land concession in the area of Santa Filomena in the south of Piaui State was acquired illegally by Brazilian businessmen, according to court documents.

"This is a very important case," said Fabio Pitta from the Social Network for Justice and Human Rights, a Sao Paulo-based advocacy group.

"People who had been living on these lands were being evicted, sometimes violently," Pitta told the Thomson Reuters Foundation.

Pitta said it was unclear how many small-scale farmers, most of whom grow rice, beans or yucca, would be affected by the court decision.

In order to seize the land, businessmen in Piaui illegally registered ownership of farms with the help of lawyers or corrupt officials at local land registry offices, Pitta said.

He said prosecutors in Piaui have been trying to crack down on these kinds of illegal land seizures, which are known as "grilagem" in Brazil.

Local businessmen involved in these seizures have been increasingly seeking foreign investors to be partners in developing the illegally registered lands, he said.

Pension funds and hedge funds from western Europe, Canada and the United States have been accused by campaign groups of benefiting from land seized in Piaui.

Described by the U.S. Department of Agriculture as a "new agriculture frontier" Piaui is part of Brazil's MATOPIBA region which has seen a flurry of large-scale investment in recent years.

Business leaders and some politicians believe increased farming investment will help reduce poverty in the region, boosting growth in recession-hit Brazil.

But campaigners worry that some of the savannah land being used for soy or sugar plantations has been taken unlawfully from small-scale farmers.

"Local communities in the MATOPIBA region have voiced their opposition to the recent expansion of large-scale soybean farming in the area," a coalition of Brazilian and international campaign groups including the U.S.-based National Family Farm Coalition said in a statement responding to the court decision.

The coalition also called on pension funds investing in Brazilian agriculture to disclose the exact locations of their farms to make sure they are not benefiting from illegally seized land in Piaui and other states.

(Reporting By Chris Arsenault; Editing by Katie Nguyen.; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking and climate change. Visit news.trust.org)