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Parana I--Full Bench decision). The reporting Brazilian Supreme
Court Justice agreed with the Parana I--1st Panel decision's
reasoning that the remitter's immunity from taxation under Article
19 of the Brazilian Constitution should not prevent the imposition
of the withholding tax on gross loan interest remittances abroad,
because a contrary holding would allow the foreign creditor, and
not the State, to be the beneficiary of the immunity. He concluded
by stating that "As this was the foundation of the challenged
ruling, and since this issue did not consider the ruling cited for
comparison, the claimed divergence does not exist in the present
case."27
On June 17, 1988, a panel of the Brazilian Supreme Court
issued its unanimous decision in Municipality of Santo Andre v.
Federal Union (hereinafter for convenience referred to as the Santo
27 An expert witness for petitioner, Joao Guerra (Guerra),
explained that the State Highway Department appealed the Parana
I--1st Panel decision to the full Brazilian Supreme Court because
the decision's holding appeared to conflict with the Parana II
decision's holding. Although Guerra acknowledged that the
reporting Justice in Parana I--Full Bench concluded that there
was no actual conflict between the two decisions, Guerra
maintained that this did not necessarily mean the reporting
Justice accepted the Parana II decision's net-loan-versus-gross-
loan rationale. Guerra claimed that (1) any points relating to
whether the particular loan in Parana I--Full Bench was a gross
loan or net loan may not have been brought to the Supreme Court's
attention, and (2) the reporting Justice may not have understood
the distinction between a net loan and a gross loan. While we
agree that, in all likelihood, the Brazilian Supreme Court in
Parana I--Full Bench was aware of the holding it reached in
Parana II, we do not accept Guerra's other contentions. If the
Highway Department's appeal were based on Parana II's holding, as
Guerra propounded, then the Supreme Court in Parana I--Full
Bench, in all substantial likelihood, would have had to have
considered Parana II's net-loan-versus-gross-loan rationale.
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