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The act of state doctrine applies to acts such as constitutional
amendments, statutes, decrees, and proclamations, and in certain
circumstances, to physical acts. 1 Restatement, supra sec. 443,
cmt. i & reporter's note 3.
In the instant case, the March 1984 Brazilian IRS ruling
issued to the Central Bank was a private ruling. Petitioner's
experts did not elaborate on whether the Central Bank, under
Brazilian law, was legally compelled to accept and follow the
ruling. Thus, it appears that the Central Bank possibly could have
disputed that it was subject to withholding tax on its
restructuring debt interest remittances during the relending
periods of the DFA's and CGA's, and sought review in the Brazilian
courts. In light of favorable existing Brazilian Supreme Court
precedents, such as the Parana II decision, in all substantial
likelihood, any effort by the Central Bank to dispute the ruling by
resorting to the Brazilian judicial system would have been
successful, particularly since even petitioner's own experts
generally acknowledged that there was no such legal doctrine as the
borrowers-to-be theory under Brazilian law. The borrowers-to-be
theory itself contravened a number of rules of Brazilian taxation.
The record further reflects that although Brazil was under a
military regime until about 1985, the Brazilian courts still
functioned during this period of military rule.43 Moreover, the
43 Although petitioner's expert da Silva testified that
SRF 368 was issued in June 1980, when Brazil was under a military
(continued...)
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