## Facts

- A.C. Israel Commodity Co., Inc., a New York-based importer, bought Brazilian coffee from a Brazilian exporter under contracts calling for payment in U.S. dollars in New York.
- Brazilian exchange-control law required exporters who received foreign currency to sell those dollars to the Brazilian government (through Banco do Brasil) at an official fixed rate.
- Banco do Brasil alleged the exporter and the importer arranged for the exporter to dispose of the dollars outside the official channel and instead sell them in Brazil’s free market at a much higher rate.
- Banco do Brasil alleged the arrangement let the exporter capture the spread between the official rate and free-market rate and let the importer pay fewer dollars for the coffee than it otherwise would have paid.
- The alleged evasion was said to be concealed through forged documents reflecting that Banco do Brasil had received the dollars, documents needed to complete export of the coffee.
- Banco do Brasil sued in New York for damages framed as a conspiracy to defraud Brazil of foreign exchange and obtained an attachment against the importer’s New York property.
- Lower courts vacated the attachment; Banco do Brasil appealed.

## Issues

1. Whether New York courts may entertain a damages action that, in substance, seeks to enforce a foreign sovereign’s exchange-control regime and protect its fiscal/foreign-exchange interests.
2. Whether IMF Articles of Agreement, Article VIII, § 2(b) supplies an affirmative basis for civil recovery for violations of a member’s exchange-control regulations, beyond rendering certain exchange contracts unenforceable.

## Decision

- The Court of Appeals affirmed the order vacating the attachment.
- The court held the underlying claim was not cognizable in New York because it functioned as enforcement of a foreign sovereign’s revenue/public laws.
- The court held Article VIII, § 2(b) does not create an affirmative damages remedy; its effect is to make covered exchange contracts unenforceable in member territories.

## Legal Principles

- New York courts will not enforce the revenue, penal, or other public laws of a foreign sovereign, and will look to the substance of the claim rather than its pleading label.
- A claim seeking damages measured by the foreign state’s lost benefit from compliance with its exchange controls is treated as an attempt to vindicate sovereign fiscal/monetary policy, not a private-law right enforceable in New York.
- IMF Article VIII, § 2(b) operates as a non-enforcement rule: exchange contracts contrary to qualifying exchange-control regulations are unenforceable in member territories.
- Article VIII, § 2(b) does not, by its text, imply an affirmative cause of action for damages based on evasion of exchange-control regulations, even if the challenged transaction would fall within the provision.

## Conclusion

The court refused to sustain an attachment because the asserted damages theory effectively sought New York enforcement of Brazil’s exchange-control and fiscal laws, and the IMF Agreement provision invoked by the plaintiff provides only a defensive sanction of unenforceability, not a basis for affirmative recovery.


Banco Do Brasil, S.A. v. A.C. Israel Commodity Co., 12 N.Y.2d 371, 190 N.E.2d 235 (N.Y. 1963)