1 As decided in the Clarification Request in Bill of Review no

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1 GUIDELINES FOR UNDERSTANDING THE STF S ANALYSIS AND JUDGMENT OF GENERAL REPERCUSSION (and the tax topics in which it has been accepted) Date 12/03/2008 The purpose of these guidelines is to show, step by step, how the analysis and judgment of the general repercussion of the topics subject matter of extraordinary reviews are performed. 1) Which laws and legal provisions deal with the general repercussion? The Federal Constitution was amended in December 2004, by Constitutional Amendment no. 45, which set forth that in extraordinary reviews, the appellant must show the general repercussion of the constitutional issues discussed in the case, under the law, so that the Federal Supreme Court ( STF ) may examine the acceptability of the appeal (article 102, paragraph 3). Law no. 11,418 was then enacted in December 2006, which introduced articles 543-A and their paragraphs as well as article 543-B and paragraphs to the Civil Procedural Code, ( CPC ), determining the limits of the general repercussion, how to produce it in appeals and the for whereby the STF would start judging it. Furthermore, the Internal Bylaws of the STF were amended through Regulatory Amendment 21, dated April 30, 2007, which, according to the STF s Justices, has brought applicability (efficiency) to the provisions of the CPC 1, and the repercussion topic was dealt with in articles 13, 21, 322 to 329 (later, Regulatory Amendments nos. 22, dated November 30, 2007, no. 23, dated March 11, 2008; 24, dated May 20, 2008, and Ruling (Portaria) no. 177, dated November 26, 2007). 2) What is meant by general repercussion? General repercussion means that the topic dealt with in the concrete case must be relevant from an economic, political, social or legal standpoint, that is, the issue to be examined by the STF must surpass the merely subjective interest of a party and be inserted into a wider scope of discussion. Thus, the STF will no longer analyze reviews dealing with individual topics, even if those deal with constitutional matters. In addition, general repercussion is presumed whenever the decision subject matter of the extraordinary review is contrary to prevailing STF precedents or case laws. In such case, the general repercussion will not take place due to the relevance of the matter, but instead, due to the form in which it was resolved in the STF, that is, if there are case laws on the matter in this Court. 1 As decided in the Clarification Request in Bill of Review no

2 3) Where and how is the general repercussion to be produced? The general repercussion is to be addressed in a separate topic in a preliminary in extraordinary reviews, in a founded manner. Such separate preliminary is to be made even in cases in which there are prevalent precedents or case laws in the STF on the matter, in which event there is a legal presumption of the existence of a general repercussion. 4) When does the rule determining that the general repercussion be produced in extraordinary reviews comes into effect? The requirement to address a formal and founded preliminary general repercussion in extraordinary reviews is imposed for cases wherein the notice of the appellate decision subject matter of the appeal took place as of May 3, 2007 (date Regulatory Amendment no. 21, of April 30, 2007, came into force) 2. 5) Who analyzes whether the appeal contains a general repercussion preliminary? The courts or origin, wherein the appeals were filed, will analyze whether these appeals contain a general repercussion preliminary, a formal and indispensable requirement for its continuance, under penalty of not being accepted 3. When the proceeding reaches the STF, the Chief Justice will verify, prior to the distribution to the reporting justice, if the general repercussion preliminary was discussed in the appeal or whether the very Court expresses that this is not a general percussion case. The same analysis is made by the selected reporting Justice, in case the appeal has not been dismissed by the Chief Justice. A review can be filed against the decision which denies the appeal. 6) Which case shall be subject of a general repercussion analysis when there are multiple appeals of identical topics? It is up to the Court of origin to select one or more appeals representing the dispute and send them to the STF. Once that is done, the Chief Justice of the STF or the reporting Justice (when the appeal has been distributed) will select one or more appeals and determine the remand of all others to the Court of origin. 7) Once the analysis of the general repercussion has commenced, what happens to the appeals discussing similar matters? They will be suspended, awaiting an analysis from the STF, and the Courts of origin will not render their ruling on the acceptance of such suspended appeals, nor on those to be brought. 2 As decided in the Clarification Request in Bill of Review no As decided in the Clarification Request in Bill of Review no

3 Moreover, the STF will remand to the Courts of origin those proceedings whose appeals are with the STF but have been distributed to the reporting Justices, as well as those which said Justices have determined the case be remanded 4. Therefore, the STF has taken the position that, in this situation, it is no longer possible to file preliminary injunctions for purposes of granting stays of executions to extraordinary reviews, the jurisdiction for that remaining with the Court of origin. 8) Is it possible for interested third parties to express their position on the general repercussion issue? Yes, the reporting Justice, in the analysis of the general repercussion, may accept that others express themselves on the matter, within a period set by said Justice, the decision not being appealable. 9) Who is to judge whether the matter discussed in the case has general repercussion and how does this take place? The STF has exclusive jurisdiction on this analysis. In addition, according to case law construction on this new precept, two events can be verified: a) When the STF has not yet ruled on the merit of the appeal (meaning the STF has never analyzed the matter), the voting may be made by a virtual Plenary, that is, the reporting Justice of the case may submit to the other Justices his/her position on the general repercussion, and the other Justices will have up to 20 days to submit their position on the repercussion to the reporting Justice. Upon the elapse of this period, without any position from the others, the general repercussion will be deemed as existing. If the reporting Justice, however, deems it necessary, he/she may submit the analysis of the general repercussion to the in loco Plenary (through clarification request to be presented). b) When the STF has ruled on the merit of the appeal (in other words, when there are prevalent case laws in the Court on the matter) although articles 543-A, paragraph 3, and article 323 of the STF Bylaws assume the existence of general repercussion in the situation wherein there are established case laws and the appealed decision of the appellate court opposes it, exempting, in this case, the examination of the general repercussion (as it is a presumed event), the STF may still analyze wither a given case has general repercussion, in case the constitutional matter is relevant and transcends the subjective limits of the party, through a clarification request to be judged by the in loco (not online) Plenary, at which time, if it is accepted, the STF shall once more examine the merit of the claim and may reaffirm the consolidated case law or reform it 5. Therefore, it is possible to apply the same mechanism of the general 4 Ruling no. 177/07, issued by the STF. 5 As decided in the Clarification Request for Extraordinary Review no

4 repercussion to the events in which the appealed decision of the appellate court is in accordance with the Court s case laws. 10) What happens to the other appeals discussing the same matter as that in which the STF has accepted the existence of the general repercussion and has judged the merit in the extraordinary review? What if my appeal was brought prior to the general repercussion system, will it still be affected by the decision? One first observation is that, if the STF has accepted the existence of the general repercussion, the mechanism provided for in item 7 above (on the suspension of the other appeals) will be applied even if the extraordinary review was filed against the decision whose notification was made prior to May 3, 2007, and even if it was sent to the reporting Justices in the STF 6. If the general repercussion is accepted and the merit of the appeal is judged, the Courts of origin may, depending on the outcome of the judgment, deem it as having no grounds (if it opposes the decision rendered by the STF) or reverse it (modify the previously rendered). This mechanism is also valid for extraordinary reviews filed against appellate decisions whose summons took place prior to May 3, ) In the event the existence of a general repercussion is accepted, what if it is the case of re-discussing the matter of the merit which the STF has already decided on, that is, on the matter in which there was a prevalent case law in the Court? What happens to the filed appeals? a) In case the Court s previous case law is maintained (reaffirmed) the Chief Justice of the STF will refuse the distribution of the appeals and remand them to the court of origin, so that the appeals may be deemed as having no grounds or a decision be reversed. b) In the case the previous consolidated case law is altered, the appeals will be regularly distributed to the reporting Justices of the STF, to be judged. 12) What happens to the appeals if the STF has dismissed the general repercussion? When it is the case repetitive appeals, if the existence of a general repercussion is dismissed, such decision shall be valid for all identical cases, and the filed appeals will not be accepted. 6 As decided in the Clarification Request for Bill of Review no

5 13) What are the tax topics in which the existence of the general repercussion was recognized? (though the merit was not judged) Tax Social Contribution on the Net Income CSL Contribution to the Social Security Funding COFINS Employee Profit Sharing Program PIS Social Contributions (in general) Special Contributions Provisional Contribution on Financial Activities CPMF Tax on Financial Transactions IOF Constitutional issues to be discusses export revenues; tax basis deduction from the amount corresponding to the very CSL; offsetting of negative bases; Tax rate increase by EC no. 10/96 (financial institutions) compliance with the ninety-day antecedence period exclusion of the ICMS and ISS from the respective tax basis; exemption (Law no. 9,430/96); non-accumulation set for in Law no. 10,833/03; charge on import (tax basis considered the customs value) Law no. 10,865/04; levy on unfulfilled revenues exclusion of the ICMS and ISS from the respective tax basis; charge on imports (tax basis considered the customs value) Law no. 10,865/04; levy on unfulfilled revenues managing partner liability (limited liability company article 135 of the CTN); inclusion into the tax basis of amounts paid as maternity salary; immunity to social welfare organizations; tax basis formation (sums of damages nature have no remuneration nature) contribution to the funding of public illumination; blackout insurance export revenues levied on the transfer of stock from publicly-held companies and from issued bonuses; charged on the loans made between legal entities or between legal entities and individuals pursuant to the same rules applicable to transactions

6 Tax on Manufactured Products IPI Income Tax IR Export Tax IE Tax on the Circulation of Goods, Interstate and Intercity Transportation and Communications Services ICMS Tax on Services ISS Others performed by financial institutions to zero tax rate; unconditional discounts; premium credit deduction from the tax basis of the amounts related to the CSL; offsetting of tax losses power to increase tax rate tax rate increase and compliance with retroactive/priory principle levied on leasing contracts article 4 of LC 118/05 (period to recover the tax withheld in error).