*1 FIRST NATIONAL CITY BANK PARA BANCO
EL DE COMERCIO EXTERIOR CUBA No. Argued 81-984. March 1983 Decided June *2 Court, Burger, O’Connor, in which J., opinion delivered Powell, Rehnquist, JJ., joined, J., White, Marshall, and and and C. Blackmun, Brennan, I, II, III-A, III-B of which and in Parts and Stevens, J., opinion concurring part Stevens, JJ., joined. filed an Brennan, Blackmun, JJ., joined, dissenting part, in which and post, p. 634.
Henry With him petitioner. the cause for argued Harfield B. Jr., John E. and Charles Hoffman, on the briefs were Manuel, Jr. pro hac vice for the
Richard G. Wilkins cause argued amicus curiae him reversal. With urging United States as Attorney Lee, Assistant Solicitor General on brief were Geoffrey Deputy McGrath, Geller, Solicitor General General L. Robinson, Morrison, R. Fred Stewart, S. Davis Kleinman. Ronald W. Krinsky the cause for
Michael With argued respondent. Levin, Rabinowitz, Victor Judith him the brief were Jules Lobel.* McGrath, Jr., Spice Co. J. for Extraction
*John filed a brief Kalamazoo as amicus curiae urging reversal. for Law in
Richard F. Bellman filed a brief for the International Center amicus curiae urging Development affirmance. as Justice delivered the opinion O’Connor of the Court. In 1960 the Government of the of Cuba estab- respondent lished Banco Para el Comercio de Cuba Exterior (Bancec) “[a]n to serve as officialautonomous credit institu- juridical capacity . tion for trade . . with full ... of its (1960), App. . .” . . own Law No. Art. Pet. September sought Cert. 2d. 1960Bancec to collect on a by petitioner City letter of credit issued First National Bank (now Citibank) support its favor of a contract for deliv- ery sugar buyer of Cuban in the United States. Within *3 days request after received the collection, Citibank for all of by in its assets Cuba were seized and nationalized the Cuban brought Government. Bancec When suit on letter of Court, credit in United States District Citibank counter- right asserting claimed, a to set the value of off its seized question Cuban assets. The before us is whether Citibank notwithstanding setoff, obtain such a the fact that Bancec separate juridical entity. Applying a was established as principles equity common to international law and federal may apply law, common we conclude that a setoff. Citibank h-t by question presented requires Resolution of case giving in to the us to describe some detail events rise controversy. current April by 25, 1960, No.
Bancec was established Law legal Banco Cubano del Comercio as the successor to the (Cuban Bank), Foreign trading estab- Exterior Trade bank jointly by owned lished Government 1954 and Cuban private con- the Government and banks. Law No. 793 “By-laws” specifying purpose, struc- tains detailed Bancec’s purpose “to was ture, and administration. Bancec’s stated trade with, the international to, contribute and collaborate application policy of the meas- and the Government adopted concerning the ‘BancoNacional ures trade Nacional). (Banco Art. 1, Cuba,”’ de Cuba’s central bank App. empow- to Pet. VIII, No. for Cert. 4d. Bancec was agent ered to as the Cuban exclusive act Government’s for- eign supplied capital trade. The Government all of its Treasury owned all of its stock. General profits, received all of Bancec’s after deduction of amounts consisting capital Governing A reserves. Board of dele- gates governmental governed from Cuban ministries managed president Guevara, Bancec. Its was Ernesto Che president of who also was Minister of State and Banco Manager appointed by Governing Nacional. A General directing day-to-day charged opera- Board with Bancec’s was enabling in a tions manner consistent with statute. signed August agreed on 12, 1960, contracts Bancec
purchase quantity sugar from El Institutio Nacional de Agraria (INRA), instrumentality of Reforma an the Cuban operated which owned and Cuba’s nationalized Government sugar industry, Sugar and to sell it to the Cuban Canadian Company. agreement supported by The latter sale was irrevocable letter of credit favor of Bancec issued August assigned which Bancec to Banco 18,1960, Citibank Nacional for collection. July 1960 the Cuban
Meanwhile, *4 Government enacted provided which for the nationalization of the 851, Law No. By properties States citizens. Resolution Cuban United September 17, 1960, No. of the Government ordered that property in- banks, all of Cuban three United States through expropria- cluding nationalized forced Citibank, be 891, Law,” tion. The “Bank Nationalization Law No. banking function could 13, 1960, declared that the October only by by State, instrumentalities created be carried and ordered Banco Nacional to effect the nationalization. September 15, 1960, the banks were
On or about before presented for nationalized, Bancec’s draft was to Citibank by sought payment The amount was Banco Nacional. Pascagoula, sugar for Miss. On $193,280.30 September delivered nationalized, 1960, after its branches were 20, requested Citibank credited the amount to Banco National's applied and account balance Banco National's account as a setoff the value of its Cuban branches. February brought diversity 1, 1961, On Bancec action to recover on the letter credit in the United States District Court for the Southern District of New York. February by 23, 1961,
On Law 930, No. Bancec was dis- capital split solved and its was between Banco and Nacional foreign enterprises Ministry “the trade or houses of the Foreign Trade,” were established Law No. 934 the day.1 App. same for to Pet. All Cert. 16d. of Bancec's rights, “peculiar banking claims, assets to the business” were Nacional, vested Banco which also succeeded to its banking obligations. “trading Ibid. All of Bancec’s func- foreign enterprises were tions” to be assumed “the trade Foreign Ministry By or houses of the Trade.” Resolution Ministry Foreign 1, No. dated March 1, 1961, Trade (Cuban Empresa Exportaciones created Cubana de Enter- prise Exports) (Empresa), empowered which was to con- export formerly duct all commercial transactions conducted “remaining subrogated rights obliga- Bancec regards export [Bancec] of said tions bank as the commercial App. activities.” to Pet. for hundred Cert. 26d. Three pesos Ministry thousand of the million two distributed to the Foreign assigned Trade when Bancec was dissolved were By Empresa. 102, at 27d. Resolution No. dated January 1, December No. 31, 1961, Resolution dated Empresa rights relating was and Bancec’s dissolved sugar assigned Empresa commerce were Cu- provides Law No. 934 the functions of a mercantile character “[a]ll *5 assigned hereby heretofore to and vested in the [Bancec] are transferred hereunder, enterprises up trade or houses set which are subro- rights obligations pursuance gated to the and former Bank of said assignment by App. to Pet. for those functions ordered Minister.” Cert. 24d.
616 y (Cubazucar), Exportadora Azúcar sus baña de Derivados apparently trading company, which is still in existence. state 1961, dissolved, On March after Bancec had been Citi- 8, sought answer, bank a setoff for the value of filed its recovery damages.2 not an affirmative branches, its seized signed by July stipulation par- 7, 1961, On Bancec filed a stating had been dissolved and that its claim ties that Bancec Foreign Ministry Trade, and had been transferred to the Republic agreeing as that the Cuba be substituted plaintiff. approved stipulation, The District Court but complaint no was filed. amended May lay
Apparently 1975, the case dormant until when seeking substituting respondent filed a motion an order plaintiff. supported by The motion was an Cubazucar as stating passed affidavit counsel that Bancec’s claim had Ministry Foreign Empresa through the Trade to Cu- and by operation all of the laws and resolutions cited bazucar, petitioner opposed the stating and motion, above. Counsel for August per- “to Court denied it that District only multiply complications ... mit such a substitution would already complicated litigation.” App. 160. the District 1977,3 A trial was held after which bench ben alleged “brought that the suit was and Citibank’s answer through agent wholly-owned Republic of Cuba efit instrumentality, . is in fact and law and in form and function . . which indistinguishable App. integral part from the of Cuba.” 113. whether question bulk of the evidence at trial was directed the amount Citibank the value of Citibank’s confiscated branches exceeded successfully already Cuba, including it had as recovered from a setoff had Bank, City Nacional de Cuba v. First National F. 2d serted in Banco (Banco I), (CA2 1978) deci on remand from this Court’s decision Cuba, City Bank Banco Nacional de sion in First National 406 U. S. touching Only witness, Lopez, testified on matters one Raul (A witness, Sanchez, presented. described upon question second Juan 185-186.) Lopez, who was operations predecessor. App. of Bancec’s by Bancec, lawyer for from 1953 served as a Banco Nacional called Foreign Ministry. he Trade He testified when went work for *6 F. in favor of Citibank. Supp. granted judgment Court4 (1980). Bancec’s contention rejected The court for liability shielded it from the acts status separate juridical of the Cuban Government. relevant circumstances shown in this all of the
“Under that Bancec lacked an record, independent ... it is clear mere of the Cuban Govern- existence, and was a arm function. The ment, purely governmental performing in the hands of the exclusively control of Bancec was fur- solely and Bancec was established Government, Moreover, ther Governmental Bancec was purposes. on the totally Government and dependent financing to remit all of its to the Government. profits required a mere the stock of private corporation, “Bancec not Government, which is the Cuban but an by owned the Cuban Government the conduct of the agency in country by sort of matters which even characterized private tend to be capitalism, supervised managed equities Government. Where the are so by strong organization supervised “Bancec was an autonomous that was Id., According Cuban Government but not controlled it.” at 197. Lopez, independent status, legal under law Bancec had could Cuban capital be Lopez supplied sue and sued. stated that Bancec’s was reserves, profits, paid Cuban Government and that its net after were Treasury, pay that Bancec not Cuba’s but did taxes to Government. Id., at 196. The District into Court also took evidence translations of the Cuban stat- resolutions, July stipulation utes and as well as the for leave to file a complaint file substituting motion to an amended as Cuba plaintiff. The court stipulation stated that the would be taken “for what worth,” acknowledged respondent’s representation that it was based interpretation on an “erroneous” of Cuba’s law. at 207-209. 4Judge Bryan, tried, van Pelt before whom the case was died before issu ing parties’ consent, Judge a decision. With the Brieant decided the case proceedings. based on the record of the earlier Supp. 505 F. 412. 418 *7 are defendants, as they the counter-claiming favor of of should recognize practicalities the Court case, this that Bancee . . . The Court concludes the transactions. ego Id., at is an alter of the Cuban Government.” 427-428. the exact value of Citibank’s assets determining
Without
“the value of the confis
the court held that
by Cuba,
seized
already
. . .
exceeds
sums
substantially
cated branches
here
be
pleaded
therefore the set-off
recovered, and
Id.,
of
at
It there
in full in favor
467.
Citibank.”
granted
dismissing
fore entered judgment
complaint.5
of
for the Second Circuit
Appeals
United States Court
“[T]he [Bancec’s] however Nacional, ego each an alter of the Cuban Ministry, hands of the or Banco accept present plaintiff’s Government. . . . [W]e contention of counsel that the order of this Court July 6th [1961] permitting, but apparently requiring, complaint not the service of an amended in which the appear party plaintiff Cuba itself would as a in lieu of Bancec was based on assumption, interpretation counsel’s erroneous or an erroneous the laws providing and resolutions for the devolution of the assets of Bancec. As- suming true, Foreign no Ministry be it is of moment. The Trade is no different than the Government of which its minister is member.” Supp., (emphasis F. original). at 425 ego government purpose of for the
not an alter Cuban [Citibank’s] at 917. It as a Id., that, counterclaims.” stated general respect independent matter, courts would iden tity instrumentality governmental created as “a juridical entity and distinct under the laws of the state that subject except matter of the owns “when the counter it”— claim assertible state state conduct which key had a role.” at 918. As exam ple Appeals Na of such situation Court cited Banco City v. First F. Bank, cional de Cuba National 2d 191 *8 (CA2 1973),in it which had ruled that Banco Nacional could by way held value of
be liable setoff for the Citibank’s played expro of the in the seized Cuban assets because role priations. trading But court to that “a declined hold cor poration wholly by government, foreign owned a but created operating juridical entity, ego as a is an alter government purpose recovery wrongs for that totally government operations, unrelated to the conduct authority instrumentality.” or 2d, 658 F. at 920.6 rehearing, arguing,
Citibank moved for inter that the alia, panel ignored had the fact that Bancec had been dissolved February suggestion rehearing 1961. motion, The and a granted en banc, were denied. This Court certiorari. 459 U. S. 942 We and remand the reverse, case for proceedings. further
II A Foreign As an initial matter, Bancec contends that the Sovereign §§ Immunities Act of 28 U. C. S. 1602-1611 (FSIA), by foreign immunizes an owned a government from suit on a counterclaim on based actions footnote, In a Appeals Court of referred to Bancec’s dissolution and successors, opinion listed its but its significance no attached to that event. 2d, F. n. 4. correctly government. that, by Bancec concedes that taken foreign 1607(c),7 instrumentality § a 28 U. S. C. under bringing is not entitled court suit a United States state any immunity respect ... to to counterclaim “with exceeding relief not seek does that the counterclaim extent sought differing in kind from that in amount or [instrumentality].” substan- however, that as a contends, It holding foreign prohibits a instru- the FSIA tive matter foreign government mentality owned and controlled government. responsible that for actions taken language history disagree. FSIA We clearly to affect the that the Act was not intended establish liability foreign determining state law substantive among liability instrumentality, instru- or the attribution pro- foreign 1606 the FSIA mentalities of a state. Section any part “[a]s claim for relief with vides in relevant immunity respect foreign state not entitled to . . . state shall be the same manner and , liable private like circum- as a individual under to the same extent Report stances . . . .” The House FSIA states: *9 “The is the bill not intended to affect substantive law liability. . Nor is it intended to affect. . the attribu- of among responsibility a for- tion of between or entities of eign example, proper entity state; for whether the of a entity foreign is sued, state has been or whether an sued 7 part, § provides: relevant 28 U. S. C. 1607 any “In brought by foreign action state in a a ... court United State, foreign immunity States or of a with state shall not be accorded respect any to counterclaim—
“(c)
exceeding
to the extent that the
in
counterclaim does not seek relief
differing
sought by
foreign
amount or
in
from that
kind
state.”
1607,
§
As
“foreign
"agency
used
28 U.
C.
a
S.
state” includes
or
1608(a).
foreign
§
.
.”
state
. .
28 U. S. C.
1607(c)
City
decision National
Bank Section
codifies our
(1955).
China,
(1976).
94-1487,
Rep.
621 part wrong.” in whole H. R. liable for the claimed (1976).8 p. Rep. No. 94-1487, conclude that the FSIA does not control the Thus, we determination of whether Citibank set offthe value of its Nevertheless, seized assets Bancec’s claim. Cuban question guided policies our resolution of that artic- by Congress enacting ulated FSIA. See at infra, body We next decide must of law determines the given separate juridical effect be Bancec’s status. internationally recognized Bancec contends that conflict-of- principles require application law of the law of state government instrumentality a that establishes Cuba— —here instrumentality may to determine whether the be held liable sovereign. for actions taken agree. general matter, cannot As a We law incorporation normally relating state determines issues corporation. Application the internal affairs body certainty predictability of law achieves the need for justified generally protecting expectations of result while parties corporation. with interests in the See Restate- (Second) § ment of Conflict Laws Comments a and e (1975). Ash, Cf. Cort v. U. Different S. principles apply, rights conflicts third however, where parties corporation external to the are issue. See Re- (Second) §301.9 supra, statement To Laws, of Conflict (in id., deciding property also at 28 in the United whether States from state immune attachment and execution under U. S. C. 1610(a)(2), § property courts will have to determine ‘in the “[t]he whether *10 custody agency instrumentality property agency of’ an ‘of’ the or instrumentality, property agency whether held one should be deemed another, property property agency to of held an [and] be whether state”). foreign property of the 9 Hadari, Applicable also The of to Choice National Law the Multi Enterprise Nationality Enterprises, Duke national Such 1974 1, L. J. 15-19.
622 chartering
give state effect to the law of conclusive separate juridical in- determining of its status whether permit strumentality respected to would state should be parties rights impunity under inter- third violate with insulating liability effectively from itself law while national permit foreign a to such result.11 We decline courts.10 that international law in the alternative Bancec contends presented. question the resolution must determine suggests that federal common hand, the other Citibank, on governs. expropriation claim which Bancec law 10 (1944) 349, (declining Abbott, apply 321 to Anderson v. U. S. 365 Cf. banking a cor incorporation to determine whether the law of the State of poration complied requirements banking of federal laws because with the corporate power place its creatures with the to them “no endow State pol defeat the Congress selves above the of the United States and federal announced”). Congress icy concerning national which has banks 11 1606, 620, § Pointing supra, lan out that U. S. C. see contains (FTCA), 2674, § guage identical to the Federal Tort Act 28 U. S. C. Claims FTCA, FSIA, requires alternatively that the like the Bancec also contends including application the law the forum State —here New York — any principles. provides disagree. “[a]s conflicts We Section respect foreign claim is not entitled to immu for relief with state nity , foreign . . . state shall be liable in the same manner and to the Thus, private same like extent as individual under circumstances.” provides liability private individuals, governing where state law a rule of requires application foreign the FSIA of that rule in like cir states silent, however, govern cumstances. The concerning statute is the rule ing liability among foreign of a In Banco attribution entities state. Sabbatino, (1964), Nacional de Cuba v. de 376 U. S. Court apply diversity clined to the State New York’s act of state doctrine in a foreign action between a of a United States national state, concluding bearing that matters on the Nation’s relations divergent not perhaps parochial interpreta “should be left to state FSIA, Congress tions.” expressly acknowledged When enacted the importance developing “the body concerning a uniform of law” amenability foreign sovereign R. to suit United States courts. H. (1976). Rep. 94-1487, p. No. See Verlinden B. V. v. Bank Central Nigeria, view, 461 U. S. our these same considerations preclude application of New York law here.
623 juridical interpose separate seeks to status arises under frequently which, international as we have law, reiterated, part Paquete . “is of our law . . The Habana, U. S. 677, below, As we set forth see at 624- infra, principles governing 19, 20, and nn. this case are law, to both international law and federal common common necessarily which these circumstances is informed both principles congressional international law articulated policies.
Ill A examining controlling principles, preliminary Before appropriate. parties observation and amici have repeatedly phrases referred to that have tended to domi- independent separately nate discussion about the status juridical debating pierce entities, constituted whether “to corporate ego” veil,” and whether Bancec an “alter instrumentality” a “mere of the Cuban Government. Berkey Co., v. Third Avenue R. 244 N. E. 84,Y. 155 N. (then (1926), Judge) Justice Cardozo warned circumstances presented permitting similar to those here worn epithets rigorous analysis. to substitute for problem parent
“The whole of the relation between subsidiary corporations enveloped is one that is still metaphor. Metaphors in the mists of in law are to be narrowly starting watched, as devices to liberate they thought, enslaving end often it.” E., N. at 61. briefly govern-
With this in mind, we examine the nature of ment instrumentalities.12
12Although this
required
Court has never been
to consider the
foreign instrumentality,
status
it has
legal
considered the
status under
federal law United
Government
States
in a number of
instrumentalities
contexts,
See,
g.,
e.
none of which
&
are relevant here.
Keifer Keifer
(1939)
Corp.,
Reconstruction Finance
(determining
These distinctive features instrumen- manage operations enterprise their on an basis talities granting greater degree flexibility while them a and inde- political pendence generally from control than close en- Congress corporations did not intend to endow chartered the Recon- suit). Corporation immunity struction Finance with from 13Friedmann, Enterprise: Comparative Analysis, Government A in Gov (W. Enterprise: Study Comparative ernment A 306-307 Friedmann & 1970). Coombes, Enterprise: J. Garner eds. D. State Business (1971) (United Dallmayr, Kingdom); Politics? Public and Semi-Public Cor porations France, Contemp. (1961); Quigley, 26 Law & Prob. 755 The J. Foreign 48-49, Monopoly (1974); Seidman, Soviet Trade 119-120 Govern ment-sponsored Enterprise States, in the United in The Political New (B. Economy 83, 1975); Supranowitz, Smith ed. The Law of State- Enterprises Owned State, in a Contemp. Socialist 26 Law & Prob. 794 (1961); Nations, Department Affairs, United Orga Economic and Social nization, Management Supervision Enterprises Developing Public (1974) (hereinafter Countries 63-69 Study); Walsh, United Nations A. Public’s Business: Corporations The Politics and Practices of Government (1978) 313-321 (Europe). 14Friedmann, supra, 334; Study United Nations 63-65.
joyed by government agencies.15 These same features fre- quently prompt governments developing countries to separate juridical through establish entities as the vehicles large- which to obtain the financial resources needed make scale national investments. enterprise, largely
“[PJublic development in the form of corporations, has become an essential instrument eco- development economically nomic in the backward coun- private capital tries which have insufficient venture *13 develop given the utilities and industries which are priority development plan. in the national Not infre- quently, public development corporations these . . . directly through partnerships or into subsidiaries, enter foreign private they enterprises, with national or public.” offer shares to the Friedmann, Government Comparative Analysis, Enterprise: A in En- Government (W. terprise: Comparative Study A 303, 333-334 Fried- 1970). mann & J. Garner eds.
Separate legal personality has been described as “an
indispensable aspect
public corporation.” Id.,
almost
the
corporate
stating
at 314. Provisions in the
charter
that
instrumentality may sue and be sued have been construed
sovereign immunity
many govern-
to waive
accorded to
thereby enabling
parties
mental activities,
third
to deal with
instrumentality knowing
they may
in the
seek relief
Similarly,
instrumentality’s
courts.16
assets and liabil-
sovereign ities must be treated as distinct from those of
Valley
Franklin D.
Au
President
Roosevelt described
Tennessee
thority, perhaps
public
“a
corporations,
the best known of the American
as
corporation
power
possessed
clothed with
Government but
flexibility
private enterprise.”
Cong.
Rec. 1423
and initiative
(1933).
Thurston,
Corporations
Proprietary
also
Government
J.
English-Speaking Countries 7
16 Id.,
principle
long
recognized
at
This
has
been
courts in
43-44.
common-law nations.
Georgia,
(C. A.).
Freely ignoring status instru- uncertainty in substantial over mentalities would result instrumentality’s whether an isfy assets would be diverted sat- sovereign, might thereby claim cause extending parties govern- third to hesitate before credit to a government’s guarantee.17 ment without the sovereign As a nations to structure their result, the efforts of necessary governmental activities a manner deemed promote development and administration economic efficient surely respect be frustrated. Due for the actions would sovereigns by foreign principles comity and for taken be- Guyot, see Hilton v. 163-164 nations, tween 159 U. S. *14 (1895), the courts of Great Britain leads us to conclude—as government in circumstances18—that have concluded other Posner, Rights Corporations, of of Creditors Affiliated 17 See (1976) 499, (discussing private corporations). Chi. L. Rev. 516-617 U. courts, applying principles we have not uni 18 TheBritish embraced as versally acceptable, to the of have shown marked reluctance attribute acts a In I foreign Congreso government del Partido, to an [1983] instrumentality A. C. 244, owned a decision that discussing government. the so- sovereign immunity application of and its called “restrictive” doctrine enterprises, including Cubazucar, three Cuban state-owned Lord Wilber legal government of force described status instrumentalities: ability enterprises, legal personality, with to trade and to “State-controlled private law, though wholly subject of enter into contracts of control state, their are a well-known feature commercial scene. modem them, governing state, may appear arti The distinction between and their accepted England and other ficial: but is an distinction the law juridical instrumentalities established as entities distinct and independent sovereign normally from their should be treated as such. support legislative for
We find conclusion his- tory During Congress clearly deliberations, FSIA. expressed duly its intention that created instrumentalities of foreign presumption independ- state are to be accorded a §1610(b), provision ent status. In its discussion of FSIA dealing judgment with the circumstances under which a cred- upon instrumentality itor execute the assets of an foreign government, Report the House states: 1610(b) permit
“Section will not execution property agency satisfy one or Quite apply states. different considerations to a state-controlled enter- prise acting government hand, state, directions on the one and a ex- Id., (citation omitted). ercising sovereign functions, on the other.” at 258 opinion,
Later in his rejected Lord Wilberforce the contention com- that mercial transactions organizations entered into state-owned could be attributed to the Cuban “The organisations Government. status of these courts, is familiar our and it has never been held that the relevant state Id., at 271. See also Trendtex is in law answerable for their actions.” Trading Corp. Court of Appeal v. Central Bank ruled that the Central Bank of Nigeria, [1977] Nigeria Q. B. was not an “alter ego organ” Nigerian determining purpose Government for the sovereign immunity. whether it could assert 559.
In Czarnikow Ltd. C. Rolimpex, [1979] A. C. House of Lords holding Rolimpex, trading enterprise affirmed a decision a Polish state overseas, successfully sugar that sold Polish could assert a defense offorce majeure sugar. Rolimpex in an had action breach of a contract to sell ground defended on the that the Polish had instituted a ban on Government sugar. agreed sale of Polish Lord Wilberforce with the conclu that, sion of the court in the evidence and definite below absence “clear *15 findings” foreign government “purely the in order to that the took action enterprise liability,” enterprise can extricate a state from contractual the concluded, regarded organ Rolimpex, of the he “is not not be as an state. closely government precluded it so connected with the Poland that relying government [on sales] from ban as intervention. Id., . ." at 364. .
628 another, unrelated or instru- agency
judgment against If There are reasons for this. mentality. compelling not identities respect separate juridical U. S. law did or en- instrumentalities, might agencies of different jurisdictions disregard juridical courage foreign or be- divisions between different U. S. corporations independent tween a U. S. and its subsid- corporation a court find that held However, might property iary. H. R. of another.” agency really property one (1976) (citation omitted). 29-30 94-1487, pp. No. Rep. that a deter- foreign government’s Thus, presumption is to be accorded mination that its instrumentality separate this determina- congressional status is buttressed legal be may next examine whether presumption tion. We overcome certain circumstances.
B legal status discussing corporations, private abroad,20 States19 and have recognized courts in United § Fletcher, Corporations Cyclopedia of the Law Private See 1W. (rev. 1983): perm. ed. upon legal entity general rule, and looked as a as a corporation “[A] will be but, legal contrary when the notion of appears; reason to the until sufficient fraud, convenience, justify entity public wrong, protect is used to defeat regard corporation crime, the will as association defend law (footnote omitted). persons.” at 389 (2d § ed. generally Henn, Corporations H. Handbook Law Wormser, Corporate Corpora- Allied 1970); Disregard I. Fiction and tion Problems 42-85 Traction, Co., Light Concerning & Power In Case The Barcelona that, acknowledged as a I. the International Court Justice C. J. entity incorporated law, the status of an matter of international exceptional circumstances: disregarded certain be not have sometimes incorporation legal personality and their “Forms they intended to originally employed purposes sole were been rights protect the serve; corporate entity has been unable to sometimes
629 entity that an Chief incorporated Justice Mar- —described as “an invisible, shall artificial being, intangible, and existing of law”21—is not to only contemplation be as regarded from its owners in all legally separate Thus, circumstances. where a is so corporate entity controlled extensively owner that a of relationship created, principal agent we have held that one held be liable for the actions Artware, See NLRB v. Deena other. Inc., 398, 361 U. S. (1960). 402-404 In addition, our cases have long recognized “the broader that equitable principle the doctrine of cor- porate entity, and for most recognized generally purposes, not be will when to do so would work fraud or regarded Co., Standard Gas v. Taylor injustice.” 307, 306 U. 322 S. (1939). Litton, (1939). v. 310 Pepper U. S. it; inevitably of those who entrusted their financial resources thus there abuse, dangers many have arisen as in the of case other institutions of Here, then, elsewhere, law, law. as the confronted with economic reali- ties, provide protective has had to measures and remedies the interests corporate entity of those within the as well outside who as those have dealings recognized independent with it: law has that existence of entity legal cannot be is in context treated as an absolute. It process ‘lifting corporate ‘disregarding legal entity’ veil’ for justified equitable has found in certain circumstances or cer- been purposes. practice already subject on the tain The wealth of accumulated instance, municipal lifted, prevent law indicates that the veil is privileges legal personality, cases of fraud or misuse of the as certain malfeasance, protect persons purchaser, third such as a creditor or or to prevent legal requirements obligations. the evasion of or of above, lifting principle expounded process
“In with accordance respect veil, by municipal law in being exceptional an one admitted play making, equally of its admissible to a similar role institution own in international law. ...” at 38-39. courts, by European see Cohn & application principles
On the
these
Simitis,
Company
European Conti-
“Lifting the Veil” in the
Laws of the
(1963);Hadari,
the Pri-
nent,
Comp. Q.
12 Int’l
The Structure of
&
L.
(1973).
729, 771,
Enterprise, 71 Mich.
n. 260
vate Multinational
L. Rev.
College Woodward,
Trustees Dartmouth
4 Wheat.
*17
particular,
consistently
give
has
Court
refused
effect
corporate
interposed
legis-
form
it is
to the
where
to defeat
g.,
policies.
Abbott,
E.
at
S.,
lative
Anderson
U.
Bangor
Operations,
Bangor
Punta
Inc. v.
362-363. And
(1974),
Aroostook R.
C today equitable principles We conclude that similar must City applied Bank v. be here. National (1955), China, 348 S. 356 the Court ruled that when a for- U. eign sovereign court, in a “the asserts a claim United States asserting dealing” of fair state from consideration bars the sovereign immunity to a setoff or counter- defense of defeat 1607(c). § general claim. 365. As Id., at See 28 U. S. C. bring matter, therefore, could not Cuban Government subjecting suit in a United court without also itself States adversary’s apparently no counterclaim. Here there dispute found, as the District Court that, Court agreed, Appeals apparently n. F. “the 2d, see 658 brings [Bancec’s] viewed, claim, devolution of however Ministry Foreign [of Trade], or Banco into the hands of the expro- party liable for the each a be held Nacional,” F. priation Citibank’s assets. at 425.22 Supp., City Banco Nacional de v. First Cuba National Bank, F. at 194. 2d, Bancec was dissolved even before Citibank filed its case, answer in order to apparently effect “the consolidation and of the economic and operation social con Revolution,” quests particularly nationalization of ordered by Thus, banks Law No. 891.23 the Cuban Gov ernment and Banco Nacional, not third any parties that may
22 Pointing parties’ findings the of to failure to seek fact in the District concerning aftermath, Court Bancec’s dissolution and its Bancec contends denying that the order motion District Court’s its to substitute Cubazucar plaintiff precludes as further consideration of the of effect the dissolution. concerning While it is true that the District Court did not hear evidence Government, agency which of the Cuban under Cuban law, against credit, succeeded to Bancec’s claim on the of Citibank letter question bearing rely that inquiry. only resolution of has no on our We by the that Bancec was dissolved fact the Cuban Government and its assets transferred to entities that be held liable on Citibank’s counter undisputed readily facts from the ascertainable statutes and orders claim— offered in the District Court by support in Bancec of its motion to substi tute Cubazucar. Bancec, dissolving following No. the
23 Law law contains the recitations:
“WHEREAS, by Revolutionary adopted the measures the Government pursuance Program resulted, in of the Revolution have within a time, profound changes trans- short social considerable institutional economy. formations of the national
“WHEREAS, among these transformations there is one institutional specially significant which is to its transcendence in economic and due fields, by Law financial which is the nationalization of the banks ordered 13,1960, by banking No. of October virtue of which the functions will province Government. hereafter be exclusive of the Cuban “WHEREAS, operation of the economic and the consolidation require into sole conquests social of the Revolution the restructuration system, State, banking operated constituted and centralized all Nacional], development which will foster the and stimulation [Banco productive through the accumulation the finan- activities the Nation thereof, utilization.” and their most economic and reasonable cial resources App. to Pet. for 14d-15d. Cert. juridical identity, separate relied on Bancec’s would be
have any recovery.24 only beneficiaries Republic this situation is similar view, our China case. foreign government invoking our law but “We have a fairly resisting a would curtail claim any litigant, recovery. law, It our like other wants justice.” but it our law free from the claims of wants (footnote omitted).25 361-362 S.,U. Giving juridical effect to Bancec’s status these though long it has been circumstances, dissolved, even would beneficiary permit action, such an Government the real relief in that it Cuba, to obtain our courts right waiving without its sover- could not obtain its own answering eign immunity for the seizure Citibank’s previously Appeals seizure held Court of assets —a to have violated international law.26 We decline blindly adhere doing corporate form where so would cause injustice. Bangor Operations, Punta Inc. v. such an *19 Bangor supra, R. Co., Aroostook at 713. &
Respondent
however,
the transfer of
contends,
Ministry Foreign
Bancec’s assets from the
Trade or Banco
effectively
Empresa
it
Nacional to
insulates
Cubazucar
24
that,
Regulations,
parties agree
under the Cuban Assets Control
instrumentality
(1982), any
in
pt.
judgment
515
entered
favor of an
31 CFR
pending
of claims
would be frozen
settlement
Cuban Government
between the United States and Cuba.
25
Cuba,
City
de
also First National
Bank v. Banco Nacional
406
See
Republic
Federal
S.,
result);
(Douglas, J., concurring in
U.
at 770-773
(EDNY 1972), aff’d,
Elicofon,
Germany
638 dis disagree. Having from counterclaim. We Citibank’s to entities that may Bancec and transferred its assets solved counterclaim, Cuba cannot escape be held liable on Citibank’s in violation of international law acts liability simply by assets entities. To retransferring separate juridical hold otherwise would to avoid the re permit governments of international law quirements simply by creating juridical whenever the need arises. Cf. Federal entities Germany (EDNY Elicofon, F. 358 757 Supp. 1972), (CA2 F. aff’d, 1973), 2d 231 cert. 415 U. denied, S. supra. n. 25, We therefore hold that Citibank off set the value of its assets seized Cuban Government the amount sought by Bancec.
I—I< Our decision announces no today mechanical formula for determining circumstances under which the normally separate juridical status of a government instrumentality to be Instead, disregarded.27 product ap- plication internationally recognized equitable principles injustice to avoid the that would result from a permitting adopted, The District Court both Citibank and the Solicitor Gen urge Court, upon eral standard which the determination whether give separate juridical or not to effect to the government status of a instru mentality part per turns on whether the question “governmental adopt formed function.” We decline to such a standard case, grounds. as our decision is based on other We do observe that concept of “proper” governmental changes a “usual” or a function over States, time and varies from nation to nation. Cf. New York v. United (1946) J.) (“To (opinion Frankfurter, U. S. rest federal taxing power ‘normally’ by private on what is *20 enterprise conducted in con governmental tradiction ‘usual’ shifting functions is too a basis for determining power entangled expediency constitutional and too to serve dependable legal criterion”); id., (Stone, J., as a id., concurring); C. J., (Douglas, Friedmann, at 591 dissenting). Legal also The Status Organization Corporation, and Contemp. Public Law & Prob. 589-591 avoiding reap while courts the benefits our state to obligations law.28 of international determined that the value Citibank’s The Court District challenged Bancec’s claim. Bancec exceeded Cuban assets Appeals appeal, did but the Court this determination open question. remains on re- It therefore not reach Appeals judgment reversed, of the Court mand. proceedings for further consistent case is remanded and the opinion. with this
It is so ordered. Stevens, with whom Justice Brennan and Justice and concurring part dissenting Blackmun join, Justice in part. correctly rejects
Today the Court the contention that readily “pierce corporate veils” American courts should by foreign govern- separate juridical entities established governmental Accordingly, perform I functions. ments join opinion. III-B I, II, III-A, Parts of the Court’s respectfully C, But I from Part in which the dissent III— general apply principles it Court endeavors to has enunci- judgment ated. I would vacate the and remand the Instead Appeals proceedings. case to the Court of for further acknowledges, presented the evidence to the As Court not on the that the District Court did focus factual issue dispositive. Only single Court now determines to be wit- relating legal ness testified on matters Bancec’s status and operational autonomy. The record before the District Court English various also included translations of Cuban statutes expert testimony resolutions, but there was no on the suggest, believe, Bancec does not we do not that the act of state g., Sabbatino, e. see, Banco Nacional de Cuba doctrine, 376 U. S. (1964), precludes determining this Court from whether Citibank set off the value of its seized Cuban assets Baneec’s claim. Bancec prohibits inquiring does contend that the doctrine from Court into incorporating motives Cuban Government Bancec. Brief for Respondent contention, however, 16-18. not We need reach this because any our conclusion does not rest on assessment. such *21 significance foreign legal Finally, of those documents. as the July stipulation the notes, Court record includes of the parties May by respondent. 1975 affidavit for and a counsel Ante, at n. 3. It is clear to me that the 616-617, materials record that have been made available to this Court are not rights parties. sufficient to enable us to determine the heavily the Court relies on District Court’s statement [Bancec’s] claim, that “the devolution however viewed, brings Ministry Foreign [of into hands of the or Trade], given Banco Nacional.” But that statement should not be dispositive significance, District Court made no in- quiry capacity entity might into the in either have Ministry Foreign taken Bancec’s claim. If Trade held arguably the claim its account, on own Cuban Govern- subject ment could be to Citibank’s setoff. But it is clear Ministry days during that the claim for most, held six promulgation the interval between the of Laws No. 930 and February No. 934 on 23, 1961,and of Resolution issuance possible legal 1No. on March 1. It is thus that these docu- single, integrated plan corporate reorga- ments reflected a 6-day period, nization carried out over a in which resulted vesting specified juridically new, assets Bancec corporation, Empresa.1 Respondent argues autonomous provided, part, Law No. 930 that Bancec’s “trade functions will be foreign enterprises assumed trade Ministry or houses of the of For eign Trade,” App. 16d; App. to Pet. for Cert. 104. Law No. cor respondingly, stated: “All the functions of a mercantile character hereto assigned Foreign fore hereby said Trade Bank of are Cuba transferred foreign enterprises and vested in the up hereunder, trade or houses set subrogated which are rights obligations to the of said former Bank in pursuance assignment of those functions ordered the Minister.” App. to Pet. for preamble Cert. 24d. The of Resolution No. 1,1961, explained issued March provided Law No. 934 had “that all functions of a commercial assigned nature that were to the former Cuban Foreign Bank for enterprises Trade are attributed to the or trade houses subrogated rights which are obligations of said Bank.” Nothing in May the affidavit respondent pre filed 1975 elucidates the cise transactions, explains nature these trading how Bancec’s former during 6-day functions were exercised App. 132-137. interval. *22 “entrusted and trustee, the role the Ministry played that to the new empresa transfer Bancec’s assets bound to legally . acted as Republic having . . The trade enterprise]. [foreign its acts no counterclaim based trustee, upon there could be 57. Brief for Respondent in an individual capacity.” have reached a correct assess- course, the Court Of IBut continue to believe ment at issue. of the transactions that can be should not decide factual issues the Court other effectively by more federal accurately resolved the record Court presented when to this judges, particularly uninformative.2 is so sparse agree contrary injustice.” Nor do I that a result “would cause such an
Ante, many only at 632. Petitioner is one American citizens whose property was nationalized the Cuban Government. It seeks to mini $193,280.30 mize its retaining purchaser sugar losses that a of Cuban deposited merchandise, purpose paying had with it for the for the Having lawsuit, petitioner was delivered in due course. won this will sim ply money. petitioner’s retain that If contentions in this case had been rejected, money placed comprised would be in a fund of frozen Cuban assets, equitably among to be distributed all the American victims of Ante, though petitioner Cuban nationalizations. n. 24. Even has injustice Government, suffered a spe serious at the hands of the no Cuban cial equities giving petitioner preference militate in favor over all discrete, other simply participation completed, victims because of its in a commercial involving sugar. transaction the sale of a load Cuban