*1 v. REPUB OF LONDON, ALFRED DUNHILL INC. LIC OF CUBA et al. 19, Reargued January Argued
No. 73-1288. December May 24, 1976 Decided *2 Court, Burger, White, opinion of the which J., delivered III), Rehnquist, Part Powell, (except for and Stevens J., and C. post, p. concurring opinion, Powell, filed a 715. joined. J., JJ., Marshall, post, p. 715. statement, concurring Stevens, J., filed a Brennan, Stewart, dissenting in which J., opinion filed a post, JJ., joined, p. 715. Blackmun, and filed a reargued 8. Friedman cause
Victor him on the petitioner. for the With brief supplemental Peter argument was D. original brief on the Ehrenhaft. for respondents. Rabinowitz the cause reargued Victor *3 Michael him on were reargument With on briefs Krinsky Dorian With him on the brief and Bowman. original argument on the was Mr. Bowman.
Antonin Scalia for the United States argued cause On the brief urging as amicus curiae reversal. were Bork, Lee, Attorney General Solicitor General Assistant Jones, Bruno Deputy Solicitor General A. Ristau.* of the opinion delivered the Mr. Justice White Court.† re- in this case is the failure of
The issue whether spondents petitioner to return to Alfred Dunhill Dun- mistakenly by paid Inc. funds London, (Dunhill), hill for had beén sold to Dunhill certain cigars that an expropriated cigar Cuban businesses was “act precluding judgment state” Cuba an affirmative against respondents.
I legal The rather involved factual and context in which fully this arises is out in litigation set the District Court’s Hastings Fiske, Jr., B. *Robert and Wilmot B. filed brief for curiae as amicus urging Bank of Boston reversal. International joined Justice, opinion only III of this †Part Chief Rehnquist. Powell, Mr. Justice and Mr. Justice
685 Gregg, Menendez Coe & Faber, opinion ease, v. Inc., closely 345 Supp. (SDNY F. and in re 1972), Brush, y A. Compania, F. Palicio S. litigation, lated v. 256 F. Supp. (SDNY 1966), 2dF. aff’d, (CA2), present cert. For denied, (1967). 389 U. purposes, following recitation will suffice.
the Cuban Government confiscated business and as leading sets of the five cigars. manufacturers Havana These companies, corporations partner and two three ships, organized were under Virtually Cuban law. all of their owners were Cuban None were Ameri nationals. can, companies quantities These large cigars sold customers other including the United countries, States, principal where the three importers were Saks Dunhill, (Saks), & Co. Faber, (Faber). Coe & Gregg, Inc. The Cuban Government named “interventors” take of and possession operate the business the seized Cuban ship concerns. Interventors to for cigars continued to eign including importers. United States purchasers,
This litigation began when the former owners *4 Cuban most whom companies, had fled to the United States, brought various actions against the three Ameri importers can for trademark infringement and for the purchase price any cigars shipped that had been to importers from the seized plants Cuban and that bore United States trademarks claimed the former owners to property. be their Following the conclusion of the y F. Palicio litigation in A. related Compania, S. v. Brush, supra,1 the Cuban Republic interventor 2 and the prior importers, owners When sued the the interventors Republic brought separate litigation against and of Cuba attorneys prior seeking owners’ prosecution to restrain the further brought by prior actions owners. The interventors actions, in these to intervene were allowed Cuba Both the former own- for trial. consolidated which were to some right their had asserted and the interventora ers postinterven- for importers three from the due $700,000 Dunhill, $92,949.70; $582,588.86; Faber, tion shipments: the date developed that as of It also Saks, $24,250. and totaling sums importers the three owed intervention, Faber, shipped prior to intervention: $477,200 cigars $6,600. These $322,000; Saks, Dunhill, $148,600; subse- paid to interventora importers had latter sums assumption that inter- on the to intervention quent receivable to the accounts ventora were entitled collect claimed The former owners of the intervened businesses. payment title and demanded these accounts. to been which had Based on “act of state” doctrine Sabbatino, 376 v. in Banco Nacional de Cuba reaffirmed y Palicio the District Court held F. U. S. (1964), was Compania, Brush, here, S. A. v. supra, to effect to the 1960 confiscation required give legal full companies purported as it to take cigar five insofar property of Cuban nationals located within Cuba. from accordingly Interventora entitled were to collect importers unpaid all amounts due and shipments after the date of intervention. The made contrary conclusion owing was reached as the accounts at the intervention: Because the United time States proceeds were there held entitled to the of sales made American buyers prior litigation after intervention but owners' trademark y Compania, F. A. Palicio Brush. permitted to continue. was v. lawsuit, intervening interventor-respondent in this Prior Pinera companies replaced original interventora had as to the five *5 pursued on behalf he has this suit. For convenience’ sake whose representing to we will refer those the tobacco businesses “inter- as discussing prior in their ventors” both conduct to the lawsuit and discussing single in party interventor’s conduct as a lawsuit.
courts will not give
to foreign government
effect
confis
cations without compensation
property
located in the
United
Republic
States
Iraq
and because under
v. First
City Bank,
Nat.
(CA2
F.
1965),
denied,
2d
cert.
This conclusion to brought importers’ the fore the claim that payment preintervention their accounts had been they made in error and that were entitled to recover these payments by way from interventors of set- off and Although position their counterclaim.
1960 confiscation entitled them to the sums due for pre- rejected intervention sales had been and the District Court had they right ruled that "had no receive retain such payment,” claimed pay- interventors those ments on the ground additional if obligation, any, repay quasi-contractual having was a debt situs in Cuba and that their refusal honor obliga- subject tion was an act of state our rejected courts. The Court this position District for two repayment First, obligated reasons. prop- was more erly situated in the deemed United States and re- hence by any unaffected purported confiscatory mained act of Cuban Government. Second, District Court’s disagreed The District Court also with interventors that there they actually was insufficient evidence to show that had received assertedly importers. paid them the the sums Neither could importers, agree they if District Court were entitled to the all, only repaid pesos. to be funds at were entitled The Court of holdings. Appeals not disturb these did *6 recogni- for qualified which had occurred nothing
view, of state: an act tion as obliga- these repudiation was no formal
“[TJhere appli- general decree tions Cuban Government Here, occurred was . all that cation or otherwise. . . interventors, during for by counsel a statement the inter- Cuban Government trial, liability to make denied and had refused ventors This was made after repayment. statement of this jurisdiction interventors invoked the had against in order to their claims pursue Court importers post-intervention shipments. for It to if can be how, hard conceive such a statement any refusal state, elevated to status an act of any time any obligation any state to honor at anything Supp., could considered 345 F. else.” at 545. off importers accordingly were held entitled to set payments preinterven-
their for mistaken interventors against shipments tion the amounts due from them for post-intervention purchases. their be- Saks, Faber and they cause owed more obligated than interventors were to return them, completely right were satisfied But setoff. Dunhill —and we at last arrive issue in this case—was entitled more from interven- $148,000—than postintervention owed for tors — shipments $93,000—and to be made asked for whole, — granted judgment against was interventors full amount its from claim, which would be deducted judgment against smaller entered it. Menendez v. Saks & The Court of Co., Appeals, F. 2d (CA2 agreed that the former owners 1973), were entitled to from the importers recover full preintervention amount accounts receivable. It also held payments by mistaken importers to inter- *7 quasi-contractual obligation rise to a gave ventors contrary Court, sums. to the District repay these But, Appeals obligation Court of of view that the was repudiated repay a situs in Cuba and had been had by sufficiently of litigation in the course conduct that was official to be an act of state: deemed absence “[I]n acting of evidence that interventors were not within scope authority of as of the agents gov- their Cuban repudiation their was an act state even ernment, 4 though embodied in Id., a formal 1371. decree.” repudiation Although the interventors' obligation was considered an act of of Appeals the Court went state, on City to hold that First Bank v. Banco Nacional Nat. Cuba, de 406 759 (1972), importers U. S. entitled to re- cover the sums due them from way interventors by set- off against amounts due from them for postinterven- shipments. tion act state doctrine was said to bar judgment the affirmative awarded Dunhill to the extent its claim exceeded its judgment debt. The District Court was reversed in respect, this and it is this action which was subject of the petition for certio- filed rari Dunhill. In granting the petition, 416 U. S. 981 (1974), we requested the parties to address certain questions,5 being the first whether the statement rejected Appeals The Court of importers’ contention that the Hickenlooper Amendment Foreign Assistance Act of (e)(2), precluded U. S. C. invoking interventors from §2370 act of state judgment doctrine. The correctness of that not be i^' litigation. fore us granting Our order certiorari directed argue brief counsel to $nd questions: two “1. Can Republic Cuba, statements counsel for the petitioner’s unjust honored, enrichment counterclaim would not f>e constitute an act of state? so, exception
“2. If created, is an to the act of state doctrine City Cuba, under First National Bank v. Banco Nacional de (1972), U. petitioner’s S. 759 where counterclaim does not exceed unjust- that Dunhill’s Republic Cuba for the counsel not be honored constituted an claim would enrichment argued twice in this Court. The case was of state. re- nothing the record concluded that have now We obliga- to interventors’ veals an act mistakenly to them. Accord- paid to return monies tion Appeals. the Court of judgment reverse the ingly we II *8 Appeals held and the Court of The District Court interventors were not purposes litigation this that to accounts receivable preintervention entitled the despite other virtue of the 1960 confiscation and that, claim nothing to the based on their arguments contrary, to to those accounts entitled interventors retain monies mistakenly paid by importers. on those accounts We do disturb of Appeals not these conclusions.6 The Court observed “ignored” nevertheless interventors had for the return of demands the monies and had “fail[ed] by petitioner’s the net balance owed to Cuba on its claims codefend- ants, subject and where and all claims counterclaims arise out litigation matter in this case?” the case reargument,
When was restored to the calendar for (1975), U. Court directed: questions “In presented by case, addition to other counsel are
requested during argument: to brief and discuss oral Should this in Banco Sabbatino, Nacional de holding Court’s Cuba v. 376 U. S. (1964), be reconsidered?” present In addition petition the Court has before it the Republic petition Co., Cuba v. Saks & interventors. 73-1287, challenging, ground No. on the the intervention suc cessfully $477,000 seized the accounts receivable and that prop erly them, belonged propriety to permitting setoff, even a cross-petition the conditional Saks & Co. v. importers, Republic Cuba, 73-1289, challenging propriety No. judgment against $477,000 them and in favor of the owners for preintervention shipments. Today due on deny petitions, we these post, p. 991. confirmed (which was importers’ demand to honor the This trial).” counsel at government’s the Cuban “the government’s to be Cuban conduct was considered to the funds” and to return repudiation obligation of its subject to our constitute an act of state v. Saks & 1369, courts.7 Menendez 485 F. Co., 2d; 1371. agree. We cannot adjudicated liability having
If had their interventors, the claimed act including and various defenses rejected, repre- state, preintervention accounts, to never- sented Cuban confiscation in were escape claiming repayment by theless a second paid involving mistakenly later act of state the funds act., prove Concededly, it was their burden to them, they pay funds; repay declined over but refusal not necessarily does assert more than what anything they interventors had from claimed the outset and what pre- have continued to claim in this Court —that accounts intervention receivable were theirs and that they had no on obligation payments return those *9 accounts.8 Neither it does demonstrate in addition that
7The traditional formulation of the act of state doctrine is that Hernandez, (1897) in Underhill v. 168 U. : “Every sovereign respect independence State is bound to every State, country sovereign other and the courts one not will judgment government sit in on acts of the of another done within territory. grievances by its own Redress of reason of such acts through by must be open obtained the means to be availed sov- ereign powers as between themselves.” 1477,000 theory Their entitlement to the derived under this e., from the initial act of state —i. the intervention of the owners' parties agree All given business. intervention is to effect be property with tangible to all of the owners' Cuba held, however, Appeals time of intervention. The Court since the accounts receivable were in Cuba at time of inter not vention, points the intervention did not reach them. The dissent by money to a statement trial counsel that when Dunhill's arrived government the intervention this Cuba “the Cuban took after businesses, pay commercial to authority operate to to inter- receivable, their accounts their and to collect bills sovereign authority to had been invested ventors belongs money doctrine it to the Cuban and under the act of state during closing made counsel's government,” The statement was purport is and does not argument in the Court and not District representation that a second act of state occurred. be a {actual counsel states “coun- in his brief in this Court same Indeed litigat- a were 'no more than statements of in-court statements sel’s ” Respondents 16, ing position,’ Brief for and “The statement , lawyer Id., Indeed, proof anything.” at 17 8. a is n. of . . proof petitioner have anything, statements were would if counsel’s argu- legal a to cross-examine him under oath. As been entitled automatically original ment act of matured when money Dunhill’s arrived in Cuba and transformed the account tangible asset, intangible to receivable from an a statement was rejected original Appeals, Court of which held that the inter- did prior vention not seize the accounts receivable from the owners paid by Finally, respect to later Dunhill. we even with accounts proof, unwilling, absent to infer fact that are from the Cuba seized cigar the assets of the business from Cuban nationals that it necessarily must have intended to make did make a later discriminatory confiscatory money belonging seizure companies. Indeed, vigor- respondents argued United States have ously pre- before Court that no international law issue is raised cisely 11of the because acts of the Cuban have been “[a] . directed at its nationals . .” and “there was no intent divest ownership.” Respondents Reargument Dunhill of Brief for on supporting necessarily 4r-5. its conclusion that Cuba did money Cuba, intend to seize Dunhill’s when arrived in the dis- quotes sent a remark counsel—in third brief filed in this by respondents they Court had contended below that —that acquiesce quasi-contractual obligation sought “refusal in the court, imposed was an act of state.” Once ... merely again, this respondents’ litigating statement of incorrect *10 position pay by that Dunhill the failure to established a refusal acquiesce Cuba to in obligation an admitted and was therefore an litigating position act of state. The incorrect as because, is stated supra, 691, respondents at obligation have never admitted an to Dun- Dunhill, and pay more, hill therefore their failure to without is inadequate sovereign repudiation to establish a obligation. of such an
693 incurred those any of the debts part repudiate all they had believe that it is difficult to Indeed, businesses. of selectively payment legitimate power refuse commercial of those arising operation from the debts enterprises. Djemal,” supplier a (1924), The “Gul U. Djemal, of Gul a steam- and caused the arrest
libeled by the purposes for commercial ship operated owned and supplies Turkish recover for Government, an effort to The performed ship. for the and services sold Turkish ship’s duly “a commissioned officer master, Navy,” id., appeared in court asserted sov- 94-95, claiming that such an assertion de- ereign immunity, A jurisdiction. appeal feated the court’s' direct was this Court, taken to where it was held that the master’s sovereign immunity assertion of was insufficient because representation his his government mere as master ship furnished no he was assuming a commercial basis for represent capacities.9 entitled to in other sovereign is no suppose Here there more reason to the inter- possess ventors governmental, opposed as to commercial, authority suppose than there was to the master Gul Djemal possessed authority. such The master Djemal Gul authority claimed the to assert sover- eign immunity while the they interventors claim that Anne, 435, “The Vicente, Wheat. reaffirmed Sao enough immunity U. S. to show that not have could successfully up representative duly recognized consul, been set sovereign matters, ordinary his in commercial in the course duties, adequate his official presume and there seems no reason Djemal any greater the master authority Gul had Although Navy, thereto. an officer of the Turkish he was performing military duty, serving upon no naval or and was functioning military capacity engaged vessel naval or but any authority commerce .... He was not shown to have represent position his other than can be inferred from his (Emphasis added.) S., as master ...” 264 U. at 95.
694 the but state, act of an authority commit to the
had party In both cases, unimportant. difference authority exercise to the have had to claimed is commercial shown only authority the power. both, authority. the Appeals the Court disagree with
We thus to funds followed repay interventors refusal the mere acting “were interventors prove to by a failure agents authority their as scope of within the respondents’ burden satisfied government” Cuban v. Menendez act of state defense. establishing their do consider Co., 2d, & 485 at 1371. Nor we Saks F. Hernandez, heavily S. 250 Underhill v. 168 U. (1897), con upon require relied the Court of Appeals, Oetjen trary In that Central conclusion.10 case and v. Co., v. (1918), and Ricaud Leather U. S. ap American Metal it was Co., (1918), S.U. parently concluded that the facts were sufficient public that the conduct in demonstrate was authority powers act to exercise sovereign those and was entitled our courts. draw no We such conclusion from the facts of the case before us now. As the only District Court of an evidence found, of state nonpayment by other than the act of inter ventors was “a statement by counsel for the interventors, during trial, the Cuban Government interventors denied liability had refused make repayment.” Faber, Inc., Menendez Gregg, Coe & v. 345 F. at 545. But this merely restated re- Supp., 10There revolution, of a commander successful in control of city Bolivar, a passport refused Upon to Underhill. suit detention, Underhill for his inquire this Court refused to into propriety complained detention because acts “[t]he military were acts of a representing authority commander revolutionary party government, as which afterwards succeeded recognized by and was S., United States.” 168 U. at 254. *12 any- adds if legal position and spondents’ original little, decree, of an act of No proof to the state. statute, thing, itself was or resolution of Cuban Government order, repudiated in evidence that Cuba had indicating offered any class thereof or that it general its obligations sovereign a matter determined to confiscate had as importers. foreign amounts due three Ill If with that the Appeals we assume the Court of Cuban purported sovereign itself had to exercise Government power payments belonging the mistaken confiscate foreign three to repudiate creditors and interventors’ ad- judicated obligation to return we are never- funds, those by persuaded arguments petitioner of and theless of concept those of United that the an act States of repudiation should not be extended to include of purely obligation commercial a owed by one sovereign or of its commercial instrumentalities. yet Our gone far, cases have so and we decline necessary expand their reach to the extent to affirm Court Appeals. governmental
Distinguishing public between the and sovereign acts private states on the one hand and their and approach. commercial acts on the other is not a novel As the Court stated through Chief Justice Marshall Mr. Bank long ago in the United States Planters’ Bank v. Georgia, (1824): 904, Wheat. “It is, think, we a sound that when a principle, government partner any trading becomes a com- pany, divests so itself, far as concerns trans- actions of its company, character, and that of a private takes citizen. Instead com- municating privileges its company and its prerogatives, it descends to a with those level takes the character itself, it associates
whom to the business its belongs associates, which is to be transacted.” which Corp., United States Fleet Shipyards
Cf. Sloan v. South (1922). tradition, In this same U. 567-568 S. States, 199 U. drew (1905), v. United Carolina the histori immunity of tax between purposes line recognized functions a State and cally governmental by a kind which engaged in State businesses private enterprise. pursued had been theretofore *13 Helvering, (1934), v. 292 369 Similarly, in Ohio S.U. 360, “If to go the Court chooses into the busi said: a state right to so buying selling of its do commodities, ness is may be conceded so far as the Federal Constitution right of is not the concerned; per the exercise but of governmental formance a function When a state .... place seeking enters the market customers it divests itself tanto, quasi sovereignty of pro its and takes on the char concept of It is acter a trader . .” thus a familiar .. “there is a constitutional line gov between the State as ernment New York v. and the State as trader . . . .” States, United 572, (1946). 326 U. 579 See also Co., Par den v. Terminal R. 184, 377 189-190 U. S. (1964); Taylor, (1957); v. 353 U. S. 564 553, California United California, (1936). States 297 175, v. U. S. 183
It is the position of the United stated an States, by amicus brief filed the Solicitor such General, that a should defining line be drawn in of outer limits of concept repudiations state and that foreign of its commercial debts should not consid- ered to be beyond acts of state legal question in our courts. Attached to of the brief the United States and to this opinion Appendix as is the letter of November 26, in which 1975, Department of speaking State, through Legal its agrees Adviser with the brief filed the Solicitor General and, more declares that specifically, the Dunhill ease an act of “we do not believe that raises because the involves act which is case an commercial,11 public, and not in nature.” major underpinning The the act of state doctrine involving policy foreclosing adjudications is the court foreign their soil legality acts states on own might Branch our embarrass the Executive Gov- ernment foreign the conduct of our relations. Banco Nacional de Sabbatino, Cuba v. 427- U. S., presently But on the expressed 431-433. based foreign views those who conduct our relations with countries, compelled recognize we are no sense as dissent, assuming The Republic purported that the of Cuba sovereign powers money, refusing exercise to return Dunhill’s asserts that there no distinction refusal to honor its between the obligation money original expropria return DunhilPs and the cigar businesses; tion of the and that the case therefore does not purely wrong. involve a commercial act. dissent is Cuba’s agents debt to Dunhill arose of the conduct of a out Cuba’s profit. may commercial business The same not be said con expropriations ventional assets located ab initio inside country’s continuing buy territorial borders. Dunhill was *14 cigars from the interventora after intervention and Dunhill knew payments when the were made that the interventora would receive Co., 1355, (CA2 Menendez v. them. Saks & 485 F. 2d 1367-1368 1973). agents The debt would have arisen if Cuba’s had not never gone cigar case is there into business and sold Dunhill. This buyer any overpays goods fore no from different case which a for by operated foreign government sold a commercial business a —a commonplace event international commerce. sovereign immunity, position The letter also that as takes such, entry judgment prevent not of an affirmative on a does arising out of the same “transaction or occurrence that counterclaim state,” subject foreign and infer matter of the claim entially as a that the act of state doctrine is likewise unavailable avoiding judgment. light such an affirmative of our method of repudiation sovereign of a debt is that commercial conclusion state, Department’s an do not reach the State alter not we position position. The letter takes the that over native also subject Sabbatino, hereafter be ruling of that acts of would so foreign conduct purely commercial state the act of an embarrassing conflicts to avoid in order governments contrary, On the Branch. Executive with we fear that embarrass- turn, now to which we reasons if we were likely ensue conflict more ment would and foreign government’s aof repudiation that require commercial purely of a arising operation from its debts immunized of state and recognized as an act be business in our courts. from years gone 1952, by, had other views
Although it letter) attached (the Tate Appendix as evidenced abandoned absolute opinion, to this the United States immunity and embraced the restric- theory sovereign immunity be which in our courts should tive view under only out granted respect arising to causes action foreign governmental actions and public state’s arising out of its commercial or not with those policy proprietary This has been official actions. time the attached letter our Government since as of November confirms: 26,1975, Department since of State
“Moreover, position has adhered the commercial private activities do foreign give states not immunity. rise to Implicit position in this adjudications is a determination that of commercial liability against foreign impede states do conduct of adjudica- such relations, tions are consistent with sov- international law on ereign immunity.”
Repudiation of a commercial debt cannot, consistent with approach restrictive to sovereign immunity, *15 treated as an of state; if it foreign were, govern- adjudication in American courts under law, international would not result in embarrassment to the foreign conduct of United States policy. We need not this resolve issue either. its by merely repudiating the debt before or after merits, enjoy which our Gov- immunity would an adjudication, prevailing sov- ernment would not extend them under immunity ereign country. in this This would principles policy supporting undermine the the restrictive view which is to assure in commer- engaging those immunity, cial foreign sovereignties transactions with their rights will be in the possible. determined courts whenever
Although at one time this Court ordered immunity extended to a commercial vessel country suggestion immunity absent a from the Execu tive Branch although policy the United States ships to its own merchant was then other Berizzi Pesaro, Bros. Co. v. wise, S. S. U. S. 562 authority severely that case has (1926), been diminished later Ex parte cases such as Peru, U. 578 (1943), Hoffman, and Mexico v. 324 U. 30S. (1945). In the latter case the Court unanimously de nied immunity to a ship commercial owned but not possessed by the Mexican Government. The decision rested on the fact Mexican was Government not but the Court declared, id., possession, at 35-36:
“Every judicial action exercising or relinquishing jurisdiction over the vessel of a foreign government has its effect upon our relations govern- with that ment. Hence it is a guiding principle in determin- ing whether a court should exercise surrender its jurisdiction in such that the cases, courts should not so act as to embarrass the executive arm in its con- duct of foreign affairs. 'In judicial such cases the department of government follows the action of the political branch, will embarrass latter by assuming an antagonistic jurisdiction.' United States Lee, v. supra, 209; parte Peru, Ex supra, 588.
“It is therefore not for the courts to deny an *16 fit seen has government our immunity which immunity grounds new on an or to allow allow, recognize. fit to not seen has government which friendly of a property judicial seizure The dig- to its such an affront as may be regarded that so affect our relations nity may it, and governing law rule accepted substantive it is an courts that of the jurisdiction the exercise determination follow the executive accept and they Ex immune. shall be treated as the vessel by But Peru, supra, recognition 588. parte which the immunity upon principles of an courts has not sanc- government political department securing may to it equally embarrassing tioned interests and their protection of our national omitted.) by (Footnote other recognition nations.” expressly the Berizzi questioned footnote the Court Bros, holding,13 concurring and Justices asserted that two effectively the Court had overruled that case.14 salutary principle “This was not in Berizzi Bros. Co. followed Pesaro, immunity, The where the v. U. court allowed the time, by foreign govern- for the first to a merchant owned vessel possession although Depart- service, ment and in its the State recognize immunity. ment had declined to The propriety extending immunity political thus where the branch of the government had refused act was not considered. here, although
“Since
vessel
the Mexican
owned
Govern-
ment,
service,
possession
was not in its
we have no occasion to
questions presented
enough
consider the
in the Berizzi case.
It
ground
persuasive
immunity
find no
allowing
we
in this
case,
important
being
an
Department
reason
State
has
S.,
recognize
declined to
it.” 324
1.
U.
at 35 n.
Frankfurter,
joined
Black,
Mr. Justice
Mr. Justice
said:
“The
fact of the matter
is that
result in
Bros. Co. v.
Berizzi
Pesaro, supra,
reached
Depart
was
without submission
ment
policies
of State of its
relevant
in the conduct of our
largely
relations and
on the basis of considerations which have
steadily
validity they may
lost
Compare
then have
whatever
had.
*17
said, the United States
time,
as we have
Since
to ex
declining
adopted
policy
and adhered to the
has
dealings
to
commercial
sovereign immunity
tend
Jefferson,
(1825),
overruling of
The Thomas
Wheat.
by
(185[2]).
of our
Chief,
“ century ago foreign very a ‘Half seldom embarked Governments ordinary though they infrequently in trade with ships, owned public uses, vessels, particular hospital vessels destined for in and supply ships surveying exploring and doubt- vessels. These were very strong extending long possessed less reasons for the privilege by ships ships public mentioned; war to of the nature there but very large has development ships been a of State-owned commercial War, since the immunity Great and the whether the should given ordinary continue to be to trading ships has become acute. Is with dignity acquire consistent tramp steamer compete and to ordinary shippers with ship-owners and in the Doing markets of the so, world? is up it consistent set immunity sovereign if, of a owing captain to the want of skill of crew, and damage country? serious is ship caused to the of another Is it also right risk, salvage consistent vessel in another refuse country?’ services permit rendered, perhaps [1938] proceedings A. C. 485, 521-522. to enforce a great my view,
“It short, in juris- that courts should not disclaim diction belongs which otherwise to them in relation to owned vessels by foreign governments operated however except depart- ‘the when ment of government charged foreign conduct of our relations,’ or of Congress, explicitly course proper asserts that judicial conduct of these relations calls Thereby abstention. responsibility for foreign the conduct of placed our relations will be power where lies. And unless constrained policy the established of our Department, State courts will discharge responsi- best their part It in policy based that
foreign governments. has by a accepted has been approach on the fact the international large increasing foreign number of states in on the fact nity;15 part commu already adopted policy of consent United had States in connection with suits ing foreign to be sued courts against vessels; part its merchant because extent to which sov enormous increase ereigns had become involved in international trade made *18 doing practice persons essential “a which will enable rights business their determined in with them have infra, 2 to this 714. Appendix opinion, courts.” at In the last 20 lower courts concluded, have years, Id., bility by judicial regular processes.” enforcement of the 40-42. 15 Foreign Austria: Collision with Government-Owned Motor Car “Socobel” v. slavia E. R. 78 v. Europe Tapioca 1485 Brussels). (Austria) (Civ. [1970] Philippine (C. A.). Trib. 8 D. Kafr Case, (P. C.). Canada: Penthouse Alexandria) L. Greek R. El-Zayat v. Government Service [1961] 3d Federated Egypt: State, 686 40 Cotton (Quebec Admiral v. France: Int'l [1951] Studios, L. Co., Ct. Administration des 18 Rep. Wallem App., of [1951] Inc. v. Int’l L. People’s Republic Pakistan, 73 1969). England: Shipping, (Sup. Republic 18 Rep. Int’l L. [1975] Ct.). 3 of [1976] Chemins de (Trib. Venezuela, 1 Rep. Belgium: of W. Yugo Thai- L. R. 1 All Civ. 225 Express Transport, Fer Iraniens v. Levant Société 73 Revue Générale de Droit Claim (Fed. Const. against International Public 883 Ct.). Empire Greece: of Papaevangelou v. Iran Case, (Sup. [1963] Ct. United 45 1969). Germany: Int’l L. States Rep. Gov 57 23, 1960). ernment (Athens Ct., Hong Kong: Apr. First Instance Midland Investment en 40 H. K. States banc, Soc. v. Mar. L. Rep. I. 13, 1963). R. 42, S. Co., 23 Int’l A., 86 v. Ltd. Pakistan: II Foro Italiano L. Rep. 234 Bank Gammon-Layton of Communications, (S. Ct.). Part I, 1405 Italy: v. (Sup. Secretary United [1956] Ct., State, A., (W. P.) Philippines: U. S. Karachi D. 1965 425. P. L. of Manila, States America (Ct. App. Carried Lumber Co. v. United of International Trade Yugoslavia: Zarko v. Officeof 24, 1974). Sept. (Dist. Department Zagreb, 10, Fairs, U. Commerce June Ct. S. 1966).
703
Peru,
light
parte
supra,
of this
in Ex
Court’s decisions
Hoffman, supra,
and Mexico
and from the Tate letter
v.
Berizzi
changed international environment,
correctly
Pesaro,
Bros.
supra,
longer
Co. v. S. S.
no
law;
sovereign
states the
they
have declined to extend
foreign sovereigns
in cases
out
immunity
arising
Inc.
Transport,
commercial transactions. Victory
purely
General,
(CA2
v. Comisaria
Participation substantially in commercial market recent has increased years. Report Cf. Economic of the Presi- International (1975). injury busi- private dent 56 to potential ultimately itself— nessmen —and to international trade system a in the participants from which some subject of international market are not to the rule law correspondingly. above, has therefore increased As noted recently adopted other courts of countries have also theory sovereign immunity. equal restrictive of Of im- subjecting is portance foreign governments the fact that to the rule of law in their dealings presents commercial risk affronting sovereignty a much smaller their than gov- legality of their pass to on attempt would an capacities, In their commercial acts.16 ernmental sovereigns. powers peculiar do not exercise governments can also only powers those they exercise Instead, them con- private Subjecting citizens. exercised of law that acts to same rules with such nection unlikely very sharply is to touch citizens private apply has noted: Moreover, as Court nerves.” on “national or consen- degree greater codification “[T]he particular area of international law, concerning sus render judiciary is appropriate it the more it, then focus regarding since courts can decisions circum- agreed principle of an application on on the rather than sensitive task of fact stances principle not inconsistent with establishing a justice.” with interest or national international Sabbatino, S., de Cuba 376 U. v. Banco Nacional at 428. n. 34. There codifica- id., may be little
See also as to the rules international con- tion or consensus law governmental mili- powers, including exercises cerning expropriations, within state's tary powers aliens, How- persons affecting property borders of international law have ever, more discernible rules pri- regard dealings commercial emerged in the international market.17 The restric- parties vate de Sabbatino, Nacional Cuba v. In Banco 376 U. S. noted the context of (1964), the Court the act of state doctrine: aspects that some much evident international law touch “It also *20 others; nerves important national than sharply do the less more on relations, an issue foreign are our the weaker implications the exclusivity political in justification for the branches.” 17Schmitthoff, by The Unification or Means Harmonisation of Law Conditions, Comp. and General 17 Int’l & Contracts of Standard (1968). Lowenfeld, Q. 551, See also A. International 563-564 L. (1975); Gal, The Law of Nations 1-2 Commercial Private Trade immunity that these suggests approach sovereign tive commercial applied be established rules should states. sovereign transactions pleaded not been immunity has
Of course, sovereign of the for- part in but cavil that beyond it is case; is States eign by United recognized relations law government of a foreign obligations the commercial may adjudicated having those courts otherwise jurisdiction in our judgments. Nothing to enter such as an policy recognize national calls on us to repudiation by obligation adjudicated of an Cuba operation our courts and out of a commer- arising cial business of its For one instrumentalities. all adopt reasons which led Executive Branch to theory sovereign restrictive we hold that immunity, the mere assertion of as sovereignty a defense a claim arising purely out commercial acts sov- is more ereign given no effective if “Act of label if it given State” than label “sovereign immunity.”18 Trade, and the Law of International Com. Int’l L. J.
(1972); Trammer, Foreign H. The Law of Trade Legal in the Systems Economy, Countries of Planned in The Sources of (Schmitthoff the Law of 1964) (herein- International Trade 41 ed. after Sehmitthoff); Knapp, Function, Organization V. The and Foreign Activities of Corporations European Trade in the Socialist Countries, Goldstajn, 52; Schmitthoff A. International Conventions and Standard Escaping Contracts as Means of Application from the Municipal I, 103; Nestor, Sehmitthoff I. T. lonasco & Law— Party Autonomy I, Limits of 167; Schmitthoff, Schmitthoff — Introduction, Schmitthoff ix. 18The dissent states that sovereign immunity the doctrines of act of state are conferring distinct —the former on a “ex emption “merely from suit virtue of its status” and the latter [telling] apply a court Post, what law to a 725-726, case.” may 726. It be true ju one doctrine has been described may risdictional terms and the terms; other in choice-of-law and it point be that the doctrines to different results certain cases. It gainsaid, however, cannot be proper application of each *21 we past in the of doctrine the act state describing country the courts of “precludes it have said recog validity public of acts into the inquiring from its own within committed sovereign power foreign nized Sabbatino, de Cuba v. Nacional Banco territory.” applies (emphasis at 401 supra, added), in the exercise own their done within to “acts States, Hernandez, Underhill v. governmental authority.” of added). ex We decline (emphasis S., 168 U. at 252 to for committed of doctrine acts tend the act purely of commercial the course their sovereigns in eign respondents relied on operations. Because out of the conduct arising this case was an act operation cigar in the agents Cuba’s businesses the act was not an act state. profit,
Reversed. THE APPENDIX TO OPINION OF COURT Legal
The Adviser, Department of State, SB, Washington, November 1975. Dear Mr. Solicitor General:
In the Dunhill case Inc. v. London, Alfred balancing injury foreign policy, involves to our the conduct primarily Branch, through which committed to the Executive judicial Hoffman, powers, compare affronts Mexico v. S., (sovereign immunity), U. at 35-36 Banco Nacional de Sabbatino, supra, (act Cuba v. state), 427-428 against injury private party, justice judicial who is denied through consequent deference to a sovereignty, injury raw assertion of and a to international trade. Department The State has concluded in the commercial area the need for merchants "to have their rights any injury determined in outweighs courts” policy. This conclusion was reached in jurisdictional prob- the context of the sovereign immunity. lem of reach the We same one in the choice- of-law context act of state doctrine. *22 on Cuba, Supreme Court
Republic which is before the Court petition for a writ of No. certiorari, 73-1288, parties holding to discuss whether its requested has 398, 376 Sabbatino, in Banco Nacional de Cuba v. U. should be reconsidered. Department question believes that State
of whether case be reconsidered the Sabbatino should importance foreign policy involves matters of to the views requests interests United States and that its be conveyed Supreme to the Court. expressed
The views herein are addition presented arguments in the brief amicus curiae which the United States is filing in the Dunhill case. As urged in brief, we do not the Dunhill believe case raises an act because case involves an act which is and not public, commercial, nature. Moreover, since Department of State 1952, has adhered to the position that the commercial and private activities of foreign states do not give rise to sovereign immunity. Implicit position de- adjudications termination that liability commercial against foreign impede states do not conduct relations, adjudications that such con- are sistent with international law on sovereign immunity.
In the however, Court event, reaches the question whether the Sabbatino holding should be re- considered, we believe that the following considerations should be called to the Court's attention:
Since Sabbatino was decided in the Depart- 1964, ment of State has on two occasions expressed to courts in the United States its views concerning act of state adjudications. in the Sabbatino First, case on itself, remand, the Executive Branch declined to make a deter- mination under the Hickenlooper 22 U. S. Amendment, C. 2370 "that (e)(2), application of the act of state doc- trine is required in this case the foreign policy de Nacional Banco States.” United interests Y.), (S. D. N. Supp. 272 F. Farr, Cuba v. certiorari denied, (C. 2d 166 2), F. A. aff’d, Branch’s the Executive note of taken Having S. 956. U. Hicken applied in Farr court the district position, decree Cuban held that a looper Amendment law. international customary violated confiscation *23 838. F. at Supp., Nacional City Bank v. Banco First National
Second, of State Cuba, Department the 759, U. de 406 S. rela- general foreign Supreme the Court informed of the application require did not tions considerations adjudication of counter- bar act of state doctrine to from a foreign the state’s claim arises rela- when claim the parties existing the when act tionship between of relief to be and when the amount state occurred, foreign is limited to the amount the state’s granted on the precedent of Bernstein v. Relying claim.1 Etc., Amerikaanshe, Nederlandsche 2d N. V. F. Department (C. A. where the had advised that 2), the doctrine not apply state need to a class of involving Department cases Nazi confiscations, City First National Bank concluded that the act of applied state not be “in or doctrine need like cases.” City decided, First National Bank Department Since was position has immunity
State taken in the area that foreign even where a counterclaim exceeds claim, state’s may adjudicate courts if counterclaim arises from the same "transaction subject or occurrence that is the matter of the claim foreign 566, of the Cong., Sess., (1); see, state.” 93d 1st § ALI, Foreign Restatement, States, Relations Law of United Second, (2) (b). adjudication view, In our of counter §70 against foreign claims state, arising from the transaction, same subject occurrence or foreign matter as the claim state, does pose foreign relations difficulties. First National Bernstein and Farr,
Significantly, City Bank an Executive Branch cases each involved opened way which courts determination S.U. inter- review an act of state on the merits under national cases, law. each of these the claim counterclaim in alleged that an act customary violated law. least international Thus, case-by-case on a trend in Executive Branch basis, pronouncements has relations con- been siderations do not require application of the act of state doctrine adjudications to bar under international law.
This trend is mirrored in other Apart countries. from the cases cited Mr. in Sabba Justice White tino, 376 U. at 440 n. there have been S., several recent decisions where foreign courts have reviewed state acts under international law.2 English from law, 2See, g., e. In The *24 Teniente, A., Matter El Minera 12 Int’l of Legal (Superior 1973) (a Materials 251 Hamburg, foreign Ct. state’s expropriation act of that violates international law will not be recognized subject German courts if the litigation matter of the has a substantial Germany); Copper contact with Braden Co. v. Groupement d’Importation Le Métaux, Legal des 12 Int’l Materials (Ct. 187 of 1972) Extended Paris, (rejecting sovereign Jurisdiction immunity trading company of a state expropriated that marketed Compagnie copper); Française Banque de Crédit et de v. Consorts Atard, Clunet, Int’l, (1971), p. (France: J. du Droit 98 86 Cour d’Appel 1970) Amiens, expropriation decrees will (foreign not be recognized in adequate France payment prompt, absent the of compensation); effective d’Algerie Crédit Foncier et de Tunisie v. Narbonne, Clunet, (1969), p. (France: J. du Droit Int’l 912 96 1969) Cassation, (acts expropriation recognized de of not in Cou[r] equitable compensation France determined); unless is first Obe[r]sfer (Austrian Supreme Court), 22 decision of December Gerichtshof Juristenzeitung (1966), p. 204, Clunet, Osterr. 21 J. du Int’l, (1967), p. (an Droit expropriation 94 941 without com pensation law, recovery against pur violates international but no expropriated property); chasers of Maatschappij N. Assurantie V. not re does derives, doctrine state our act which state reviewing from abstain to British courts quire deter as can be As far law.3 international under acts foreign function judicial this exercise mined, relations foreign serious has not caused jurisdictions concerned. for countries consequences Farr Bernstein, is similar present case The Bank, is of the Department City First National This no be embarrassment opinion that there would decide if the Court should foreign policy the conduct any adjudicate legality in this case such place and to make found to have taken any inter- adjudication principle in accordance with found to be relevant. law national provides Department’s experience general presumption adjudication support little with relevant foreign acts of states accordance principles international law would embarrass policy. our view that conduct Thus, if holding the Court should decide to overrule Sabbatino so that acts of state would thereafter subject adjudication under American courts anticipate would international we embarrass- law, Escomptobank, de T. Rep. Nederlanden van v. P. Int’l L. (D. 1962) Hague, (rejecting Ct. act of where state defense there is a violation of international 1 K. B. Banco 140, de 50 Vizcaya T. L. R. v. Don 284; Alfonso Re Helbert law). de Borbon Wagg & Co. y Austria, *25 Ltd., [1935] [1956] 323, 346; Oppenheim’s Ch. 1 Lauterpacht, Law, International 267- & Co., Co. (8th [1887] [1888] ed. 1955). Ch. D. 489 and Ch. D. See also 348, Republic Republic where British of Peru Peru v. Peruvian Guano courts, v. Dreyfus under Brothers inter law, give national refused to annulling effect to Peruvian laws acts preceding of the government; Peruvian cf. Buttes Gas and Oil Co. v. Hammer [1975] L.W. R. 425, at 434-435. foreign policy of the ment to the conduct United States.
Sincerely, Leigh.
Monroe 2 TO THE COURT* APPENDIX OPINION OF
May 1952. My Attorney dear Mr. General : Department
The of State has for some time had under consideration practice whether Government from granting immunity suit to governments parties made defendant the courts United without be States their consent should not changed. Department now has reached the con- clusion that such immunity should no longer granted be in certain types cases. In view of the obvious interest your Department I point this matter should like to briefly out some of the facts which influenced the De- partment’s decision.
A study of the law of sovereign immunity reveals the existence of two conflicting concepts of immu- sovereign each widely nity, firmly held and established. Accord- ing to the classical or absolute theory sovereign immunity, a sovereign without cannot, his consent, respondent made a in the courts of sovereign. another According newer or restrictive theory sovereign immunity, immunity recognized with regard to sovereign public (jure acts imperii) of but not state, with respect private (jure acts gestionis). agreement There is by proponents of both supported by theories, that sovereign immunity practice, should not be claimed or granted in actions with property real (diplomatic perhaps consular prop- erty excepted) or with respect to the disposition of the
*26 Dept. State (1952). Bull. 98A-985 *26 though a person even deceased of a property beneficiary. is the sovereign theory of virtually absolute
The classical of by the courts been followed immunity generally has Czecho- Commonwealth, the British the United States, probably Poland. Estonia, and slovakia, of Chile, courts Brazil, China, The decisions Portugal and Norway, Japan, Hungary, Luxembourg, theory immu- may support the classical deemed anterior most two old decisions nity if one or at may theory be considered of the restrictive development base a conclusion. sufficient on which to Sweden, Argen- position the Netherlands, immunity has been although is less clear since tina before the courts those granted coming recent cases immunity facts were such that would have countries, been under or restrictive granted either the absolute theory. constant references the courts However, public these three countries to the distinction between private acts of the though even state, the distinction may was involved the result of the indicate case, way open an intention to possible leave for a appli- theory cation the restrictive if immunity and when presents occasion itself. A trend to theory the restrictive already evident the Netherlands where the lower courts have started to apply that theory .following Supreme a Court decision to immunity the effect that would have applicable been the case under consideration under either theory.
The German after period courts, hesitation end of the century nineteenth have held the classical but theory, should be noted that the refusal of the Supreme Court in 1921 yield to pressure by the lower courts for the theory newer was on based the view that theory yet had not developed sufficiently to justify change. view the growth of the restrictive *27 take a might courts time the German theory since that today. view different immunity of theory sovereign
The newer restrictive of and always supported by Belgium been courts has Egypt in the courts of Italy. adopted It was turn of France, In the courts and of addition, Switzerland. traditionally supporters which were Greece, Austria, position of the reversed their in the 20jg classical theory, theory. embrace the restrictive Rumania, Peru, possibly appear theory. Denmark also to follow this it should be observed that in most
Furthermore, theory the countries still following the classical there favoring school influential writers the restrictive theory and the views at least in civil law writers, countries, major are a factor in development law. of the lower leanings courts civil Moreover, law countries are more significant shaping the law they than are common law countries where the rule precedent prevails and the trend in these lower courts is to theory. the restrictive
Of related interest to this is the fact that ten of the thirteen countries which have been classified above as supporters of the theory classical have ratified the Brussels Convention of 1926 under which immunity for government owned merchant vessels is waived. addi- tion the United which party is not a Con- States, years some vention, ago announced and has since fol- lowed, policy of not claiming immunity for public its operated owned or merchant vessels. Keeping in mind importance played by cases involving public vessels in the field of sovereign it is thus immunity, noteworthy these ten countries (Brazil, Ger- Chile, Estonia, Hungary, many, Netherlands, Poland, Norway, Portugal, Sweden) and the United States already have relinquished by treaty or practice an important part of the immu- nity which they claim under the classical theory. exception possible that with evident
It is thus except found has been support little Kingdom United con- its satellites Union and the Soviet part on theory absolute acceptance full tinued that British authorities immunity. There evidences are ready change. for a deficiencies and of its are aware *28 countries obviously trading motivate state which reasons increasing theory perhaps rigidity with adhering change should that the United States persuasive are most of im- policy. granting its Furthermore, of in the courts munity foreign governments to with the action of the is most inconsistent United States of itself to subjecting the United States Government in both contract tort and suit in these same courts immunity long policy claiming with its established of not jurisdictions in foreign for its merchant vessels. Finally, Department widespread increasing feels that the part practice on the of governments engaging com- necessary activities practice mercial makes which will persons doing enable with business them to their have rights determined the courts. For these it will reasons be the Department’s policy hereafter to follow the re- theory strictive sovereign immunity in the considera- requests tion of of foreign governments for grant sovereign immunity.
It is realized in policy by that a shift the executive cannot control the courts but it is felt that the courts likely are less plea allow a of sovereign immunity where the executive has declined to do so. have There been indications that at least some Justices the Su- preme Court that in feel this matter courts should follow the branch of the Government charged responsi- bility for the conduct of foreign relations. your order that Department, which is charged with
representing the interests of the Government before the may be courts, adequately it informed will Depart- be the practice ment’s you advise of all requests by foreign from suit and of governments immunity grant the Department’s action thereon.
Sincerely yours, Secretary of State:
For the Jack Tate B. Acting Legal Adviser Mr. Justice Powell, concurring.
I join opinion the line between Court. Since political commercial and acts of a often will be difficult I my write reaffirm view delineate, that even in purely political cases involve deemed to duty to decide for acts, judiciary itself whether political deference to the branches Govern- ment requires I City abstention. As in First Nat. stated Bank v. Banco Cuba, Nacional de 775- U. 776 (1972) (concurring in judgment): *29 appears jurisdiction
“Unless it exercise of an would foreign relations con- interfere with delicate ducted I political conclude that branches, federal obligation courts have an hear cases such as this.” I requiring judicial
Just as saw no circumstances absten- tion in that I none I case, any see here. Nor can foresee in only cases involving commercial acts of a state. Justice concurring.
Mr. Stevens, I II For reasons stated Parts and of the Court’s I the act of state agree that doctrine does not opinion, entry judgment bar the of favor Dunhill. Marshall, Mr. Justice with whom Mr. Justice Mr. Justice and Brennan, Mr. Justice Stewart, Blackmun dissenting. join,
The act of state doctrine commits the this courts of on country judgment not to sit acts a foreign territory.1 own Under within its performed government the interven- of the facts view any case, realistic paid funds to return refusal of and tors' retention and no affirm- state, an act by Dunhill constitute them invalidity on the recovery by Dunhill can rest ative I Appeals concluded, so The Court that conduct. judgment. would affirm its
I the Cuban Govern September when 15, 1960, As of “intervened,” five Cuban-owned nationalized, ment Dunhill received manufacturers, petitioner had cigar yet for $148,600 cigars some worth of which had not February paid. period between intervention and 1961, delivery $93,000 Dunhill took of an additional shipments. worth of Both District Court Court of Appeals concluded that intervention was given legal property full effect Cuban nationals located and that the Cuba, interven payment tors entitled to postinterven were therefore shipments. Brush, y tion F. Palicio Compania, S. A. v. 256 F. Supp. (SDNY 486-490 1966), aff’d, (CA2), F. 2d 1011 cert. denied sub Re nom. Brush v. Cuba, public (1967). 389 U. It quite clear result correct, was and that it would have been no different had the intervened firms been owned by United States citizens. Banco Nacional de v. Cuba *30 Sabbatino, (1964). 376 U. 398 S. doctrine,
1 The classic American formulation see Banco Sabbatino, Nacional de Cuba v. 398, (1964), appears 376 U. Hernandez, Underhill v. (1897): U. S. “Every sovereign independence State is bound to the every sovereign State, country other and the courts of one will not in judgment sit government on the acts of the of another done territory. within its grievances by own Redress of reason of such acts must be through obtained the open means to be availed of sovereign powers as between themselves.” have the interventors the date intervention,
Since
to
entitled
receive
they
also
position
that
were
taken
preinterven
for
to the intervened firms
the amounts due
And
$148,600.
shipments
tion
the case of Dunhill,
—in
the interventors
throughout
respondents,
this litigation,
act of
and
Republic
have insisted
Cuba,
effect
requires
legal
doctrine
our
full
give
state
courts
purported
the intervention
insofar as it
decree
nationalize the accounts receivable of the intervened
Appeals
Both the District Court
the Court of
firms.
here
that the accounts
involved
receivable
held, however,
had their situs in New
of state doc
York,
trine did not
and that
confiscation
attempted
apply,
Inc.,
was ineffective. Menendez
Gregg,
&
Faber,
v.
Coe
Supp.
(SDNY
345 F.
v.
527, 536-540
Menendez
1972);
Co.,
Saks &
2Actually only Court; party one of the in this interventors is a apparently designated he single has been as interventor for companies. convenience, five intervened tobacco For the sake I shall continue to refer to “the interventors.” 3Republic post, p. Co., 73-1287, Cuba v. Saks & No. 991. 4Payment collecting previously was made to banks that had agents acted as the former for owners. The District Court ex importers pressly [including found that “the well knew Dunhill] that, following intervention, collecting acting banks were as agents owners, the interventors and not the also [former] *31 claim for Dunhill’s Appeals held
The Court pre- interventors paid to the monies return quasi-contract; in sounds shipments intervention Dunhill’s contractual from court not arises, the observed, in York, is New which situated to the obligation owners, re- appropriation, and but from the interventors’ receipt, apart have occurred funds, to return the all of which fusal in If interventors’ Cuba. from the contract and there therefore, an act course of conduct is itself state, applies. no doubt that act of state doctrine can be any The interventors have taken overt discrete, for which of an of state. action to claim status act they long money have received and retained the Rather, paid they for preintervention to them shipments, Dunhill’s for its ignored have demands return. view this reflecting
Court declines to course of conduct as sovereign power exercise of issue an retain funds at they Cuba, explaining part: after arrived decree, order,
“No statute, or resolution the Cuban indicating Government itself was offered in evidence repudiated that Cuba had her obligations general or class or any thereof that she had as a matter determined confiscate the amounts due Ante, foreign importers.” [Dunhill other] at 695.
I do not understand the Court to suggest, however, the act state doctrine only by can be triggered decree, order, or resolution” of foreign gov- “statute, presence that the only of an act of ernment, state can by demonstrated some affirmative action the for- eign While it sovereign. an true that payments knew that they were making collecting banks ultimately were received interventors F. Cuba.” 345 Supp., findings at 542. These were sustained the Court of Appeals. 2d, F. 1367-1368.
719 or legislative of an executive the form takes generally Banco see, g., e. measure, in a decree step formalized 376 U. 403-405, Cuba Nacional de v. Sabbatino, Asiatic Petroleum Co. v. 7 States (1964); Eastern n. that is (SDNY 1939), Corp., Supp. 28 F. Petroleum generally governments duly constituted only because do their they not, formal means. When through the doctrine, state, no less the acts of a acts are and in applicable. no practical less being one, Thus, v. where Hernandez, (1897), Underhill 168 U. S. in
plaintiff recovery for his detention Venezuela sought revolutionary reason then forces’ refusal of the grant passport him a out of Ciudad the Court Bolivar, necessarily held that the act of doctrine state “must extend to agents governments ruling para mount force as matter of fact.” at 252. The Id., [a] Oetjen cases Central Leather v. 246 U. S. Co., Ricaud American Metal v. 246 U. S. (1918), Co., further practical are illustrations of the (1918), approach the Court has always taken in determining whether an act of present. state is each case plaintiff claimed title to goods purchased from Mexican sellers but confiscated generals of the Constitution- alist delivery Carranza forces before plaintiffs. to Pereyra The Generals, Villa and respectively, had sold goods to purchasers intermediate for the furtherance of and the revolution, goods thereafter came into the United possession States in the the defendant- assignees. The Court held that the seizures must be viewed as the action, time civil of a war, duly agent commissioned prevailing Mexican Gov subjected not be ernment, could scrutiny another sovereign’s courts. only
These cases demonstrate not that an act of any particular need not be formalized in manner, but also not take the form need of active, rather than accidentally Villa come conduct. General Had passive, sought replevied of the hides to be possession into them, simply and then refused Oetjen, seizing instead the result could not plaintiff's possession, demand any report so Indeed, have been different. far as re- seeking the Underhill case reveals, plaintiff, *33 covery challenged for his no more than detention, Gen- anything eral Hernandez’ to do when he refusal his passport. demanded no foreign sovereign
That a has issued formal decree performed and act is not fatal, then, no “affirmative” If an act of state state has exercised a claim. sovereign power either to act or to refrain from acting, very there is an act of In a case to this state. similar York of Appeals the New Court held that Cuban one, exemption bank’s re- dishonoring certificates, tax demption suspended by of which had been a decision of Currency the Cuban an Fund, Stabilization was Cuba, French de state. v. Banco Nacional 23 N. 2dY. 242 46, (1968). N. E. 2d 704 The act of state, the court wrote, “was the refusal to perform; defendant’s the cur- rency though equally the regulations, product of an act 5 simply justification state, were for the refusal.” I
The Court, it, dispute take does not that a refusal to act constitutes an act of state when shown to reflect the power. exercise the Court Rather, finds no of sovereign power exercise retain funds at issue they after arrived Cuba. Refusal to repay, the Court suggests, necessarily does not reflect anything more than rejected the interventora’ initial contention, by the Dis- quoted appears concurring statement in the opinion of Judge Hopkins, 2d, 66, 2d, 717, N. Y. at N. at E. which joined by majority was opinion same that subscribed to the Judge Fuld, Chief in which the court held: breach of con “[T]he tract, plaintiff complains, from, of which the and, indeed, resulted it Id., constitutes, 53, self N. E. 2d, act of state.” at an at 709. Septem- trict Court and the Court of Appeals, ber 15, operated intervention to seize decree And the accounts receivable intervened firms. Court is unwilling “to infer from Cuba the fact seized cigar the assets business from Cuban na- they tionals necessarily must . made a later . . have discriminatory confiscatory money belong- and seizure of ing Ante, companies.” the United 692 n. 8. States
IAs already respondents’ have indicated, however, the position has not need not limited to the been, be, and September contention that operated 15 decree seize the preintervention accounts receivable. Counsel Republic the interventors Cuba stated at trial, in Court, again his brief to oral ar- his gument this Court: *34 gov- act of state Cuban doctrine
“[U]nder in nation- ernment, accepting, expropriating, seizing, you this alizing, want, whatever other words to take money, pursuant regulation, law, has done to a a so government and therefore Cuba, decree courts of this will not look into the matter nor will the federal court. I
“Now, talking am not about extraterritorial I terri- talking effect an act of state. am about a acceptance effect, namely, torial the seizure or the money got or the of this it down appropriation when to not now concerned with whether Cuba. We are they expropriated debts on 15th. September on happened 1st, what October and 15th on October November 8th and December money when the came down. And that 12th, government money time the Cuban took this belongs the act of state doctrine it under Tr. government.” 854-856; Respond- Brief for Cuban Brief for Amicus Reply ents in to United States as 5 n. 38. 3; Rearg. Curiae Tr. Oral retention of This statement confirms that while Cuba’s they to return the funds once arrived and refusal to” the “pursuant September decree, Cuba was it to regard would, was without whether that decree eyes of a United States have entitled court, to collect the interventors the accounts in the receivable And while the Court place.6 appears suggest first money Cuba would be more hesitant be- that seize longing companies to United States than would be belonging to property seize Cuban the fact is nationals, case Cuba has made in this known its intent in question the funds even if retain a United States funds to court declares the have been taken from Dunhill from former Speaking rather than owners. once his again client, Republic on behalf coun- Cuba, Cuba’s “refusal to acquiesce sel announced in the has obligation quasi-contractual sought to be [to Dunhill] court.” Brief for imposed Respondents for United to Brief States as Amicus 5.7 Reply Curiae Court, respondents’ brief filed In another counsel observed: may eyes wrong
“It the interventor matters in the claiming States court September United [in preintervention decree nationalized accounts .. . receivable]. *35 by taken the Cuba, the monies he was Since interventor were and representative sovereign, hardly of the a it can denied that his taking territory property to 'a conduct amounted within its own sovereign government.’ by foreign de v. Nacional Cuba [Banco S., Sabbatino, at Respondents 376 U. Brief for 18. 428.]” acknowledges that this an Court statement reflects alterna The by respondents that, assuming the contention ineffectiveness tive reaching preintervention 15 decree the accounts September the quasi-contractual obligation re the existence to receivable and Dunhill, repudiation at issue to their of that obli- turn the monies above-quoted counsel are not them- The statements of representations But as selves acts state. authoritative and position clients, of the of counsel’s the interventors Republic the to the monies in their Cuba, possession, statements do to confirm that the these serve continued retention of those monies has been undertaken sovereign power.8 as an exercise of gation Ante, an the em- was act of state. at 692 n. 8. But Court phasizes respondents the that the fact have not admitted existence obligation Dunhill, of an to that it remains unclear concludes respondents if whether determined to retain monies even have the very obligation a United court declares the to exist. The States argument respondents making fact that are alternative referred herein, however, any to as to their intentions. should remove doubt Espanola Navegacion Navemar, Compania The de Maritima v. (1938), contrary. 303 U. is That was a suit in not to admiralty by alleged Spanish of a merchant owner vessel Spanish sought possession. recover The Ambassador leave to inter produced Acting Spanish vene as a claimant and “affidavit of the an suggesting brought when Consul General the suit was the vessel property Republic Spain, was the of the decree of virtue of a promulgated Republic, appro attachment President of the priating public use, vessel and that it then in the was possession Spanish Id., of the 70. Government.” at The District Court, held, accept “was not allegations we bound ... of the suggestion possession, id., 75, as on conclusive” at proof where there was no whatever that the had possession alleged ever held and no claim “the seizure [of by the members of the crew was an act of or in behalf vessel] Id., Spanish Government.” at 72. By contrast, present in the case is settled that the interventors payments preintervention shipments received on behalf of Government, Faber, Gregg the Cuban Inc., Menendez v. Coe & any F. Supp., lingering doubt that their retention was right dispelled by virtue of a claim of was counsel for Cuba and possession the interventors at trial. Had been established in The Navemar, doubt, appropriation and the decree of been the case point, contrary would be but in fact the true and the was case inapposite. response suggestion It was in Navemar case con-
II contention, advances a White Mr. Justice the Cuban Govern- that even if adopted the Court, con- sovereign power purported ment exercise “had ante, the act issue, the monies at fiscate” “purely of the inapplicable because doctrine is I confiscation. While am nature of the commercial” on the suggested make several observations prompted to exception act” for a broad “commercial rationale is con- ultimately there no need to state doctrine, excep- an and under what sider whether, circumstances, It might appropriate. tion for will commercial acts say exception appropriate suffice to that no such is this case. A
I
exception
at the
the commercial act
note
outset that
supported by
Depart
to the act of state
is
doctrine
Bernstein letter,9
ment
State.
its most recent
Department
expressed
opinion
has
the conduct
no
foreign policy
would suffer
embarrassment
if the
Court
apply
declined to
the act
state doctrine to this
if it
case,
apply
declined to
the doctrine to commercial
cases in
general, or, indeed, if
overruled Banco Na
Sabbatino,
cional de Cuba v.
(1964).
B of state that the act doctrine should not concluding to the apply purely sovereign nations, commercial acts upon heavily widespread relies Justice White Mr. theory” acceptance of the immu- sovereign “restrictive nity, immunity foreign gov- which declines to extend acting “private,” commercial, capacity. ernments in a or sovereign immunity theory restrictive has not adopted by been but if even we assume Court, it is in this the law does not follow that country, there exception should be a commercial act to the act of state doctrine.
It true, of course, particular litigant’s that a claim may be effectively as by application defeated of the act foreign state doctrine government’s as a invocation of sovereign immunity. But the doctrines of sovereign immunity state, and act of related, while differ funda- mentally in their operation. focus and in their Sov- ereign immunity exemption accords defendant a from noteworthy Department It is that while the of State now takes position that Sabbatino can be overruled without embarrassment policy, conduct of result Sabbatino had been urged the Solicitor General at the time. See Brief for United Sabbatino, States Curiae as O. T. No. 16. Amicus By the act of state contrast, status. by virtue its suit process of the court. no one from the exempts doctrine party a whether a nation is Equally applicable court what merely tells act of state doctrine not, deter- case; it “concerns the limits for apply law to *38 rule of validity applicable of an otherwise mining the Sabbatino, at 438.11 the absence law.” 376 U. S., “unambiguous agreement controlling . . regarding . id., the act of international at principles” law, sovereign na- state doctrine commands that the acts of a territory presump- tion committed in its be accorded own validity. tive “ it doctrine, ‘although The act shares immunity sovereign states,’ a for serves doctrine important policies entirely independent rule.” of that Citibank, supra, quot- J., dissenting), (Brennan-, Sabbatino, ing supra, at 438. The of state doctrine is not mandated the text but Constitution, “ Sabbatino, does underpinnings.” have ‘constitutional’ supra, at 423.
“It arises out of relationships the basic between branches government system separation a powers. It concerns competency of dissimilar institutions make implement particular kinds of decisions in the area of international relations. The doctrine past as formulated decisions ex- presses strong sense of the Judicial Branch that its engagement in passing validity the task of on the of foreign may acts of state fur- hinder rather than country’s ther this pursuit goals both for itself and 11See Falk, also R. The Role of Domestic Courts in the Inter Legal (1964); national Order 96-102 Henkin, Today: Act of State Tranquility, Recollections in 175, 178-180, 6 Col. J. Transnat'l L. (1967). 187-188 community a of nations as whole in
for Ibid.12 sphere.” international As Me. the act of state observed, has Brennan Justice validity doctrine reflects of an act of the notion that the a foreign sovereign circumstances, “politi- under some is, The circum- question” cognizable cal our courts. “political question” stances the existence of a indicating in Sabbatino sum- Me. as Beennan Justice included, on applicable “the absence of consensus marized, unavailability of from international standards rules, treaty or other and recogni- the existence agreement, tion of sensitivity the Cuban Government, issues to power national and the of the Execu- concerns, tive remedy alone to effect a fair all United States
12 WhileSabbatino found the act of state doctrine to reflect *39 judicial political “distribution of functions the between branches Government,” of the S., 427-428, sug 376 U. at it has also been gested that a upon doctrine of deference the con based absence of sensus as controlling principles to of international law allocates legal competence among promotes in a the nations manner that growth of generally Falk, international The law. See R. Status of Law in Society (1970); Falk, International 403-442 The R. Role of Legal (1964). Domestic in the Courts International Order 64r-138 development Whether considerations of its the of contribution to international provide law a basis for the act state inde of doctrine pendent of the separation powers notion of of is a that the Court has not addressed and that need not consider. It is we noting, however, worth the Court sensitive to Sabbatino was sovereign's fact that a court's of a on invalidation acts principles subject the basis of of international law that are not the “unambiguous agreement,” S., 428, unlikely of 376 U. is to be at impartial. Id., regarded as at 434^-435. In the area of state re sponsibility expropriations, potential the Court viewed growth contribution of United of States courts international conjectural,” “highly id., “progress law as at and concluded that goal among establishing of the rule of law nations toward [is] by maintaining Id., served intact of state at best the act doctrine.” 437. Citibank, supra, at been harmed.” who have
citizens Sabbatino, 427-437. at supra, see 788; only concerned sovereign immunity, of doctrine The not focus does lawsuit, to a party of a with the status simply mentioned; it just circumstances on the other particular considera- responsive to the to be designed doctrine. Whatever the act of state underlying tions immunity may ought be to exceptions there act of automatically, not be transferred therefore, doctrine.13 state
C I attempting wisdom articulation question the doctrine within any exception broad act Sabbatino, the confines of a case. Court single variety of state presenting aware situations complexity and the of the relevant considera- questions any case-by- eschewed inflexible rule favor tions, approach. carving case U. 428. The out S., exceptions broad to the doctrine is fundamentally at case-by-case odds with the approach careful adopted Sabbatino. it is difficult to discern precise scope
Indeed, “commercial exception contemplated by act” Mr. Jus- In the final tice is un- White.14 analysis, however, one proposed least commentator discarding At has the doctrine sovereign immunity (except diplomatic and mili tary activity), retaining nonreviewability while accorded *40 act of state doctrine to sovereign official acts a performed of within territory. Falk, its R. The Role of Domestic the Courts in Interna Legal 139-145, Order (1964). tional 164-169 precise The theory contours of the restrictive of im munity, on which the exception based, commercial act is are them See, g., Victory Transport, selves unclear. e. Inc. v. Comisaria Gen eral, 354, (CA2 336 F. 2d 1964); Falk, 359-360 Immunity Foreign Sovereigns in Proposed Legislation, U. S. 6 N. Y. Courts — 473, U. J. Int’l L. (1973); & Pol. Lauterpacht, The Problem of Jurisdictional of Foreign States, Immunities Y. Brit. B. of Int’l L. 220, (1951). 222-226 exception the would to whether necessary consider the act underlying responsive to the concerns If it every might apply.15 to which case doctrine unresponsive. is exception covers this it case, repay the funds at retention and refusal to Cuba’s background of place against in this case took issue of the businesses intervention, nationalization, I already cigar assets of five manufacturers. As have seizure and retention of the Dunhill funds indicated, pursuant For were initial intervention decree. all practical purposes, they the seizure of the funds once arrived in from indistinguishable Cuba the seizure of cigar the remainder manufacturers’ businesses. The seizure of funds, like the initial seizures on September 15, reflected purpose to exert sovereign power to its territorial limits in order to effectuate intervention of ongoing cigar manufacturing businesses. It matters not funds have been determined United court States in this case have belonged Dunhill the cigar rather than manufacturers. What does matter is that Cuba money retained the in the course its program of expropriating what part viewed as parcel of the businesses.16
The applicability of act of state doctrine in these circumstances Sabbatino itself. As the is controlled Court there noted: if any “There are few issues in inter- 15The general observation that discernible rules of inter “more emerged national law regard have with dealings commercial private parties in the international market” than regard governmental “exercises powers,” ante, not, at however, does approach finding “unambiguous agreement regarding con trolling legal principles” contemplated by S., Sabbatino. U. 428. 16Quite apart significance may from the be attached to the label, I find it accept difficult to Mr. Justice White’s characteriza tion of the course of "purely conduct involved here as commercial.” *41 to be so seems opinion on which today national law expropri power on state’s divided the limitations as 428.' Indeed, of aliens.” 376 U. property S., ate the any that Cuba’s intervention suggestion the absence of citi discriminatory United States program against was applicable lack consensus as to zens renders the than in Sab principles apparent even more here law Citibank, dissenting). at 785 J., batino. See (Brennan, position And unless takes the amount one materially affects money property or the value seized in this sensitivity issues, guided of the we are case following observation Sabbatino: country “It is difficult to courts of this imagine the embarking adjudication on which touches an area sensitively practical ideological goals more community of the various members of the (footnote omitted). nations.” 376 U. at 430 S., Regardless, then, presence of whether the of consensus as to circum- controlling legal any or other principles, would stances, inappli- render the act of state doctrine some, cable even acts that could be char- most, “purely acterized as commercial,” the doctrine is fully applicable in this case.
Ill my repay Since view the retention of and refusal the funds at issue constitute an act state that would ordinarily preclude an judgment affirmative against Cuba the interventors, necessary it is proceed for me to
17Under case, its view case as a run-of-the-mill commercial Dunhill does assert that the retention of the monies constitutes a discriminatory taking evidently being notion that Cuba has —the generally repudiated Supplemental its commercial debts. Brief for Petitioner 15-17. But there been no has claim that Cuba has only preintervention-shipment payments retained those made citizens, program any United States or that the intervention inwas discriminatory. other sense *42 second granted on which we certiorari— may
whether Dunhill nonetheless secure an affirmative judgment peculiar in the circumstances this case.
A A recapitulation necessary brief of the facts is understand Dunhill’s contention that is entitled to an affirmative recovery spite presence of the of an state. Dunhill was one of three had at importers that the time of cigars the intervention received for which it yet had not paid. following months During three intervention, importers paid each of the the interventors the amounts preintervention shipments. due for And in period February between intervention each importers delivery shipments, took of additional payment for which was not made.
This suit
brought against
stems from nine suits
importers by the former owners of the
intervened
five
alia,
inter
payment
restrain
else for
firms,
anyone
goods
bearing
manufactured
their
mark,
firms or
their
and to recover for
such goods
importers
all
that the
had
already
The
in the
brought
received.
interventors
suit
names of the intervened firms to
the former
enjoin
own
ers’ counsel from
pursuing the nine actions
the firms’
names,
attorneys
and to
their own
for those of
substitute
the former owners in the
District
same nine suits. The
Court ruled as preliminary
matter that the interventors
and not the
pay
former owners were entitled to sue for
shipments. F. Palicio y
postintervention
ment for the
Compania,
Brush,
S. A. v.
(SDNY
The Court of
found an act
preintervention ship
paid
retention of the
for
monies
expressed
the various views
interpreted
ments.
It
nevertheless
indicating
this Court would
Citibank as
up to the limits
uphold the
counterclaims
importers’
against
by the in-
them
respective claims asserted
judgment
reversed
terventors. But
the court
granted Dunhill affirma
insofar as it
District Court
Co.,
Saks &
B the act of doc- in Citibank held that state The Court entry judgment against for the interventors This done was against $93,000 Dunhill the interventors favor of Dunhill for $148,000. for necessarily
trine does not bar a defendant from litigating merits of a against limited counterclaim suing country. the courts of this Petitioner there was an American bank whose in Cuba branches had been responded by nationalized. The bank selling the collateral securing $10 its loan million to the respond- ent Banco Nacional de an Cuba, instrumentality of the Banco state. Nacional then for proceeds sued the excess realized from sale, and First National counterclaimed equal an amount in from damages resulting expro- priation its property. For various reasons asserted separate opinions, a majority three of the Court bare prosecution allowed counterclaim, limited as it to the amount against was recoverable First National. only Because we are concerned here with the status *44 counterclaim in a excess of a foreign principal state’s precise question the the Court claim, addressed in Citi by bank —whether a counterclaim limited the amount of the foreign may state’s claim be barred the act of state present doctrine —does not cover the situation.19 The approach adopted in Me. Justice Brennan’s dissent in Citibank, which would have barred a counterclaim lim by the ited amount of foreign a claim, state’s would be fortiori, a to bar sufficient, Dunhill’s counter excessive claim. But putting even approach aside, judg the ment of the Court of Appeals denying affirmative relief to Dunhill should be affirmed.
An affirmative judgment for the a excess of counter- a claim over foreign principal state’s claim is indistin- in guishable any important ordinary from an affirmative judgment. the situation pre- is case, cisely as it would be if voluntarily Cuba had recognized validity of Dunhill’s claim in an amount equal to its approval Whether of a Citibank’s applicable setoff is to the litigation questioned facts of this is petition Republic Co., v. Saks & Cuba No. 73-1287. to consider judicially extra agreed had parties own, tanto, and pro other out each canceling claims as remainder unsettled for the then sued Cuba had Dunhill presented be then courts would of its claim. barred foreign sovereign, a against suit an unadorned judg- But an affirmative doctrine.20 of state by the act from inter- judicial abstention policy offends ment equal degree, to an relations in international ference a against suit upon is founded a naked whether counterclaim.21 or an excessive state of the act the nature Dunhill however, contends, its fortuity that is affected of state claim principal while Cuba’s counterclaim, exceeding the sum is for a lesser amount than against it, three against entered favor Cuba judgments sovereign immunity, yields extent of The bar which further, National against plaintiff and no counterclaim City Republic China, Bank v. (1955), would 348 U. S. defense, availability quite apart from absolute of the act of theory sovereign immunity followed unless restrictive purely the case is considered commercial. initially argued, at case Dunhill When this was briefed tempted simple distinguish an excessive counterclaim from a ground principal claim on the covered the former was Citibank, Bernstein letter in Department advised which the State require applica foreign policy did Court that considerations a defend tion of the act of state doctrine "to bar consideration of *45 S., U. at 764. ant's counterclaim ... or like cases.” 406 [that] The letter in Citibank Dunhill, it provided support little for since qualifications to its determination that the act of contained several “the applied, not be which was that state doctrine need one of the granted is limited the amount of amount of the relief be City de v. First Nat. foreign state's claim.” Banco Nacional Cuba 1971). Bank, (CA2 Department 442 F. 2d 530, the Since State need its view that the act of state doctrine not has now made known case, necessary rely longer in this it is for Dunhill applied no already noted, signifi But, on the letter in Citibank. I as have minimal any Department is expressed views State cance after Citibank.
importers for whose eases were consolidated trial. This contention suffers from two flaws. fatal
First, against the actions Dunhill and the other importers not they simply were were consoli- merged; for economy.22 dated trial the interest of The inter- as ventors, plaintiffs substituted originally actions filed separate asserted of action causes owners, against each no transaction involved or importer; single gave against rise to a claim importer. more than one The actions thus separate did not lose their identities because In ruling consolidation.23 circumstances, these allowing for a theory counterclaim on does exceed the foreign judgments state's total against those parties happen to be before the District Court would be capricious indeed. limitation on counterclaims would presence then be determined or absence of actions suitable consolidation particular at a time in particular court,24 upon their outcomes. any event it become quite has clear that execution of Dunhill’s judgment against affirmative judgment debts other importers owe to the interventors prohibited would be by the Cuban Control Regu- Assets lations, pt. 31 CFR (1975), promulgated by the Treasury Department's Office Foreign Assets Control pursuant to the Trading Enemy With the 50 U. Act, S. C. permitted as a matter of convenience and “[C]onsolidation economy in administration, merge but does not into a suits single cause, change rights parties, or make who those parties are parties one suit in another.” Johnson v. Manhattan Co., R. (1933) (footnote omitted). 289 U. S. 496-497 Wright See 9 C. & Federal Miller, A. Practice and Procedure §2382, (1971). pp. 254-256 24We are informed pending that the interventors had at least four against other cases importers tobacco in the District Court at the the present time Respondents cases were tried. See Brief for 26. they The reason present were not consolidated with the case is not *46 a matter of record here. except as authorized prohibit, regulations The
App. § 5. involving property transactions by all Secretary, including direct or which Cuba has an interest, indirect, any decree, judgment, attachment, “the of or under levy or process judicial or administrative execution, or other has Executive by which the order.”25 This scheme to designed United is in the States frozen Cuban assets orderly satisfaction ultimate, for the preserve a fund diplomatic if by American nationals against claims Cuba Citibank, S., at unavailing. See prove U. alternatives of this dissenting). furtherance 794 (Brennan, J., it will Treasury stated that policy, Department has exe- judgment refuse “to authorize creditor Cuba a frozen” against of Cuba which have been cute assets An regulations.26 judgment under affirmative (b) (1975) prohibits CFR all Title 31 515.201 transactions § [Cuba], any or national property transfers that in which “involve thereof, [July 8, any any interest has at time on or since had 1963] any whatsoever, indirect.” “Transfer” is defined nature direct or any intent, purpose, to mean or effect of which or transaction release, transfer, alter, directly or in “create, surrender, directly, any remedy, right, power, privilege, or interest with any judgment. 515.310. property,” including execution of a § Discharge of Property judgment. include a 515.311. is defined to § judg a judgment Cuba, a if execution of debt on behalf of even prohibited. against Cuba, ment would thus case, respondents this counsel for granted After certiorari was Foreign corresponded Acting Director of the Office of with the Control, stating: Assets Cuba, judgment against
“Dunhill had that if it secured assumed money against owing to from judgment it could Cuba execute that owing attempted other and it in fact to attach funds creditors had cigar by Faber, Gregg, importer claim another whose Cuba Coe & in litigation. is likewise . . . you my understanding helpful that, if would confirm
“It would be you judgment- generally speaking, permit not issue a will license to against assets creditor of Cuba to execute Cuba which have been Foreign regulations. pursuant Assets . frozen Control . .” Acting responded confirming a letter under- Director *47 favor of Dunhill could of not, therefore, be out satisfied importers’ other judgment debts to which are Cuba, frozen for the benefit of for all creditors or such other disposition as future To diplomatic negotiations direct.27 entry allow of judgment against an Cuba affirmative in these circumstances would significant thus mark a departure from our policy avoiding po- consistent tential interference with through the executive channels which our Nation deals with while others, secur- ing to Dunhill only the very speculative prospect ob- taining a preference over other United States claimants should policy national on subject Cuban assets change in the future.
IV I In conclusion, would hold that the conduct course undertaken payments interventors with to preintervention made for shipments constitutes an act state, and Dunhill that is not entitled to an affirmative judgment on relating its payments. counterclaim those I would affirm judgment Appeals. of the Court standing licensing policy. appear Both letters Brief for Respondents, App. B. would, course, judgment Execution of an affirmative presence barred judgment whether the basis was the parties judgment other Cuba, with of a sov debts the absence ereign act, application exception of a commercial act point act of state doctrine. The how particularly appropriate, ever, response presence parties contention of other judgment justifies debts to Cuba judgment an affirmative case; proceeds this contention assumption on the policies behind act of state doctrine would otherwise bar affirma recovery by Dunhill, tive permits recovery only affirmative purported because of the unfairness that would if result Cuba’s recovery debt to Dunhill were from not deducted its from the other importers. shown, granting As has been judgment an affirmative way Dunhill in this would not affect the fairness of the disposition, judgment since execution of the Treasury would be barred Department’s freezing of Cuban for the of all Amer benefit assets against ican nationals with claims Cuba.