Diplomacy restricted by city's laws (4,4)
I believe the answer is:
riot acts
'laws' is the definition.
(Riot Act is an example)
'diplomacy restricted by city's' is the wordplay.
'diplomacy' becomes 'tact' (tact can mean diplomacy or sensitivity).
'restricted by' indicates putting letters inside (inserted letters are restricted or trapped).
'city's' becomes 'Rio's' (Rio de Janeiro).
'tact' put inside 'rios' is 'RIOT ACTS'.
I've seen this clue in The Independent.
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