Laws & Legal Resources.

Banco Nacional de Cuba v. Sabbatino,

376 U.S. 398 (1964)

Justia Opinion Summary and Annotations

Annotation

Primary Holding
If there is no treaty or other agreement governing the matter, federal courts do not have
jurisdiction over a dispute concerning another country taking property within its own
territory, even if it violates international law.

Facts
A New York corporation arranged to buy sugar from a subsidiary of a Cuban corporation, of
which Americans owned most of the stock. However, the Cuban government issued a
decree that passed title of the sugar to a Cuban governmental agency. The New York
company agreed to pay the proceeds for the sugar to Banco Nacional as a condition of
obtaining a Cuban export license. Once it had received the sugar, the New York company
broke this promise and instead transferred the funds to Sabbatino, a receiver for the sugar
company in Cuba. Banco Nacional pursued a claim in a federal court under diversity
jurisdiction for conversion of the proceeds. The lower court ruled that a taking does not
convey valid title if it is invalid under international law. It then found that Cuba had
violated international law by issuing the expropriation decree and granted summary
judgment for Banco Nacional.
Opinions

Majority
John Marshall Harlan II (Author)
Earl Warren
Hugo Lafayette Black
William Orville Douglas
William Joseph Brennan, Jr.
Potter Stewart
Arthur Joseph Goldberg
Tom C. Clark

The act of state doctrine, articulated in the Primary Holding above, controls both federal
and state courts, even though it does not arise from the Constitution or international law.
Instead, it arises from the far greater authority of the political branches of government
relative to the judicial branches in the area of foreign affairs. If there is a substantial degree
of codification or consensus in a certain area of international law, courts may be able to
resolve matters arising under it because clear principles can be identified and applied to
specific facts. But courts should not develop a principle independently while trying to avoid
conflicting with the national interest or international justice. Sovereign immunity and
sovereign authority are not the only situations in which the act of state doctrine may arise.

Dissent
Byron Raymond White (Author)

Parties are entitled to have a full determination on the merits, and courts may not fail to
enforce rights that are granted under international law. The political branches may have
greater control over foreign affairs than the judicial branches, but their control is not so
absolute that every issue regarding the validity of a foreign act of state is always a political
question. The Constitution expressly permits courts to resolve disputes between citizens
and non-citizens, between two non-citizens, or between foreign nations and American
parties.

Case Commentary
Courts generally reserve matters of foreign relations for the executive branch, since this is a
core power of the President under the Constitution. However, matters of international law
that are less central to foreign relations may be more susceptible for the judiciary to handle.
 Syllabus Case

U.S. Supreme Court

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)

Banco Nacional de Cuba v. Sabbatino

No. 16

Argued October 22-23, 1963

Decided March 23, 1964

376 U.S. 398

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Respondent American commodity broker contracted with a Cuban corporation largely

owned by United States residents to buy Cuban sugar. Thereafter, subsequent to the United
States Government's reduction of the Cuban sugar quota, the Cuban Government
expropriated the corporation's property and rights. To secure consent for shipment of the
sugar, the broker, by a new contract, agreed to make payment for the sugar to a Cuban
instrumentality which thereafter assigned the bills of lading to petitioner, another Cuban
instrumentality, and petitioner instructed its agent in New York to deliver to the broker the
bills of lading and sight draft in return for payment. The broker accepted the documents,
received payment for the sugar from its customer, but refused to deliver the proceeds to
petitioner's agent. Petitioner brought this action for conversion of the bills of lading to
recover payment from the broker and to enjoin from exercising dominion over the
proceeds a receiver who had been appointed by a state court to protect the New York assets
of the corporation. The District Court concluded that the corporation's property interest in
the sugar was subject to Cuba's territorial jurisdiction, and acknowledged the "act of state"
doctrine, which precludes judicial inquiry in this country respecting the public acts of a
recognized foreign sovereign power committed within its own territory. The court
nevertheless rendered summary judgment against the petitioner, ruling that the act of state
doctrine was inapplicable when the questioned act violated international law, which the
District Court found had been the case here. The Court of Appeals affirmed, additionally
relying upon two State Department letters which it took as evidencing willingness by the
Executive Branch to a judicial testing of the validity of the expropriation.

Held:

1. The privilege of resorting to United States courts being available to a recognized

sovereign power not at war with the United States, and not being dependent upon
reciprocity of treatment, petitioner has access to the federal courts. Pp. 376 U. S. 408408-
412.

Page 376 U. S. 399

2. The propriety of the taking was not governed by New York law, since the sugar itself was
expropriated. P. 376 U. S. 413.

3. This suit is not uncognizable in American courts as being one to enforce the "public" acts
of a foreign state, since the expropriation law here involved had been fully executed within
Cuba. Pp. 376 U. S. 413-415.

4. The Government's uncontested assertion that the two State Department letters
expressed only the then wish of the Department to avoid commenting on the litigation,
obviates the need for this Court to pass upon the "Bernstein exception" to the act of state
doctrine, under which a court may respond to a representation by the Executive Branch
that, in particular circumstances, it does not oppose judicial consideration of the foreign
state's act. Pp. 376 U. S. 418-420.

5. The scope of the act of state doctrine must be determined according to federal law. Pp.
376 U. S. 421-427.

6. The act of state doctrine applies and is desirable with regard to a foreign expropriation
even though the expropriation allegedly violates customary international law. Pp. 376 U. S.
427-437.

(a) Disagreement exists as to relevant standards of international law concerning a State's

responsibility toward aliens. P. 376 U. S. 430.

(b) The political branch can more effectively deal with expropriation than can the Judicial
Branch. Pp. 376 U. S. 431-432.

( )C fli t b t th J di i l dE ti B h ld h dl b id d th
(c) Conflicts between the Judicial and Executive Branches could hardly be avoided were the
judiciary to adjudicate with respect to the validity of expropriations. Even if the
combination alleged in this case of retaliation, discrimination, and inadequate
compensation made the expropriation here violative of international law, a judicial
determination to that effect would still be unwise as involving potential conflict with or
embarrassment to the Executive Branch in later litigation. Pp. 376 U. S. 432-433.

7. A foreign country's status as a plaintiff does not make the act of state doctrine
inapplicable. Pp. 376 U. S. 437-438.

307 F.2d 845 reversed and remanded.

Page 376 U. S. 400

MR. JUSTICE HARLAN delivered the opinion of the Court.

The question which brought this case here, and is now found to be the dispositive issue, is
whether the so-called act of state doctrine serves to sustain petitioner's claims in this
litigation. Such claims are ultimately founded on a decree of the Government of Cuba
expropriating certain

Page 376 U. S. 401

property, the right to the proceeds of which is here in controversy. The act of state doctrine
in its traditional formulation precludes the courts of this country from inquiring into the
validity of the public acts a recognized foreign sovereign power committed within its own
territory.

In February and July of 1960, respondent Farr, Whitlock & Co., an American commodity
broker, contracted to purchase Cuban sugar, free alongside the steamer, from a wholly
owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.), a
corporation organized under Cuban law whose capital stock was owned principally by
United States residents. Farr, Whitlock agreed to pay for the sugar in New York upon
presentation of the shipping documents and a sight draft.

On July 6, 1960, the Congress of the United States amended the Sugar Act of 1948 to
permit a presidentially directed reduction of the sugar quota for Cuba. [Footnote 1] On the
same day, President Eisenhower exercised the granted power. [Footnote 2] The day of the
congressional enactment, the Cuban Council of Ministers adopted "Law No. 851," which
characterized this reduction in the Cuban sugar quota as an act of "aggression, for political
purposes" on the part of the United States, justifying the taking of countermeasures by
Cuba. The law gave the Cuban President and Prime Minister discretionary power to
nationalize by forced expropriation property or enterprises in which American nationals
had an interest. [Footnote 3] Although

Page 376 U. S. 402

a system of compensation was formally provided, the possibility of payment under it may
well be deemed illusory. [Footnote 4] Our State Department has described the Cuban law
as

"manifestly in violation of those principles

Page 376 U. S. 403

of international law which have long been accepted by the free countries of the West. It is in
its essence discriminatory, arbitrary and confiscatory. [Footnote 5]"

Between August 6 and August 9, 1960, the sugar covered by the contract between Farr,
Whitlock and C.A.V. [Footnote 6] was loaded, destined for Morocco, onto the S.S. Hornfels,
which was standing offshore at the Cuban port of Jucaro (Santa Maria). On the day loading
commenced, the Cuban President and Prime Minister, acting pursuant to Law No. 851,
issued Executive Power Resolution No. 1. It provided for the compulsory expropriation of
all property and enterprises, and of rights and interests arising therefrom, of certain listed
companies, including C.A.V., wholly or principally owned by American nationals. The
preamble reiterated the alleged injustice of the American reduction of the Cuban sugar
quota and emphasized the importance of Cuba's serving as an example for other countries
to follow "in their struggle to free themselves from the brutal claws of Imperialism."
[Footnote 7] In consequence

Page 376 U. S. 404

of the resolution, the consent of the Cuban Government was necessary before a ship
carrying sugar of a named company could leave Cuban waters. In order to obtain this
consent, Farr, Whitlock, on August 11, entered into contracts, identical to those it had made
with C.A.V.,

Page 376 U. S. 405

with the Banco Para el Comercio Exterior de Cuba, an instrumentality of the Cuban
Government. The S.S. Hornfels sailed for Morocco on August 12.

Banco Exterior assigned the bills of lading to petitioner, also an instrumentality of the
Cuban Government, which instructed its agent in New York, Societe Generale, to deliver
the bills and a sight draft in the sum of $175,250.69 to Farr, Whitlock in return for
payment. Societe Generale's initial tender of the documents was refused by Farr, Whitlock,
which on the same day was notified of C.A.V.'s claim that, as rightful owner of the sugar, it
was entitled to the proceeds. In return for a promise not to turn the funds over to petitioner
or its agent, C.A.V. agreed to indemnify Farr, Whitlock for any loss. [Footnote 8] Farr,
Whitlock subsequently accepted the shipping documents, negotiated the bills of lading to
its customer, and

Page 376 U. S. 406

received payment for the sugar. It refused, however, to hand over the proceeds to Societe
Generale. Shortly thereafter, Farr, Whitlock was served with an order of the New York
Supreme Court, which had appointed Sabbatino as Temporary Receiver of C.A.V.'s New
York assets, enjoining it from taking any action in regard to the money claimed by C.A.V.
that might result in its removal from the State. Following this, Farr, Whitlock, pursuant to
court order, transferred the funds to Sabbatino, to abide the event of a judicial
determination as to their ownership.

Petitioner then instituted this action in the Federal District Court for the Southern District
of New York. Alleging conversion of the bills of lading it sought to recover the proceeds
thereof from Farr, Whitlock and to enjoin the receiver from exercising any dominion over
such proceeds. Upon motions to dismiss and for summary judgment, the District Court,
193 F. Supp. 375, sustained federal in personam jurisdiction despite state control of the
funds. It found that the sugar was located within Cuban territory at the time of
expropriation, and determined that, under merchant law common to civilized countries,
Farr, Whitlock could not have asserted ownership of the sugar against C.A.V. before
making payment. It concluded that C.A.V. had a property interest in the sugar subject to
the territorial jurisdiction of Cuba. The court then dealt with the question of Cuba's title to
the sugar, on which rested petitioner's claim of conversion. While acknowledging the
continuing vitality of the act of state doctrine, the court believed it inapplicable when the
questioned foreign act is in violation of international law. Proceeding on the basis that a
taking invalid under international law does not convey good title, the District Court found
the Cuban expropriation decree to violate such law in three

Page 376 U. S. 407

separate respects: it was motivated by a retaliatory, and not a public, purpose; it
discriminated against American nationals; and it failed to provide adequate compensation.
Summary judgment against petitioner was accordingly granted.

The Court of Appeals, 307 F.2d 845, affirming the decision on similar grounds, relied on
two letters (not before the District Court) written by State Department officers which it
took as evidence that the Executive Branch had no objection to a judicial testing of the
Cuban decree's validity. The court was unwilling to declare that any one of the infirmities
found by the District Court rendered the taking invalid under international law, but was
satisfied that, in combination, they had that effect. We granted certiorari because the issues
involved bear importantly on the conduct of the country's foreign relations and, more
particularly, on the proper role of the Judicial Branch in this sensitive area. 372 U.S. 905.
For reasons to follow, we decide that the judgment below must be reversed.

Subsequent to the decision of the Court of Appeals, the C.A.V. receivership was terminated
by the State Supreme Court; the funds in question were placed in escrow, pending the
outcome of this suit. C.A.V. has moved in this Court to be substituted as a party in the place
of Sabbatino. Although it is true that Sabbatino's defensive interest in this litigation has
largely, if not entirely, reflected that of C.A.V., this is true also of Farr, Whitlock's position.
There is no indication that Farr, Whitlock has not adequately represented C.A.V.'s interest
or that it will not continue to do so. Moreover, insofar as disposition of the case here is
concerned, C.A.V. has been permitted as amicus to brief and argue its position before this
Court. In these circumstances, we are not persuaded that the admission of C.A.V. as a party
is

Page 376 U. S. 408

necessary at this stage to safeguard any claim either that it has already presented or that it
may present in the future course of this litigation. Accordingly, we are constrained to deny
C.A.V.'s motion to be admitted as a party, [Footnote 9] without prejudice however to the
renewal of such a motion in the lower courts if it appears that C.A.V.'s interests are not
adequately represented by Farr, Whitlock, and that the granting of such a motion will not
disturb federal jurisdiction. Cf. 7 U. S. Curtiss, 3 Cranch 267; City of Indianapolis v. Chase
Nat'l Bank, 314 U. S. 63, at 314 U. S. 69; Ex parte Edelstein, 30 F.2d 636, at 638.

Before considering the holding below with respect to the act of state doctrine, we must deal
with narrower grounds urged for dismissal of the action or for a judgment on the merits in
favor of respondents.
II

It is first contended that this petitioner, an instrumentality of the Cuban Government,

should be denied access to American courts because Cuba is an unfriendly power, and does
not permit nationals of this country to obtain relief in its courts. Even though the
respondents did not raise this point in the lower courts, we think it should be considered
here. If the courts of this country should be closed to the government of a foreign state, the
underlying reason is one of national policy transcending the interests of the parties to the
action, and this Court should give effect to that policy sua sponte, even at this stage of the
litigation.

Under principles of comity governing this country's relations with other nations, sovereign
states and allowed

Page 376 U. S. 409

to sue in the courts of the United States, The Sapphire, 11 Wall. 164, 78 U. S. 167; Guaranty
Trust Co. v. United States, 304 U. S. 126, 304 U. S. 134. This Court has called "comity" in
the legal sense "neither a matter of absolute obligation, on the one hand, nor of mere
courtesy and good will, upon the other." Hilton v. Guyot, 159 U. S. 113, 159 U. S. 163-164.
Although comity is often associated with the existence of friendly relations between states,
e.g., 38 U. S. Earle, 13 Pet. 519, 38 U. S. 589; Russian Republic v. Cibrario, 235 N.Y. 255,
258, 139 N.E. 259, 260, prior to some recent lower court cases which have questioned the
right of instrumentalities of the Cuban Government to sue in our courts, [Footnote 10] the
privilege of suit has been denied only to governments at war with the United States, Ex
parte Don Ascanio Colonna, 314 U. S. 510; see § 7 of the Trading with the Enemy Act, 40
Stat. 416, 417, 50 U.S.C.App. § 7; cf. 73 U. S. Abbott, 6 Wall. 532; Caperton v. Bowyer, 14
Wall. 216, 81 U. S. 236, or to those not recognized by this country, The Penza, 277 F. 91;
Russian Republic v. Cibrario, supra. [Footnote 11]

Page 376 U. S. 410

Respondents, pointing to the severance of diplomatic relations, commercial embargo, and

freezing of Cuban assets in this country, contend that relations between the United States
and Cuba manifest such animosity that unfriendliness is clear, and that the courts should
be closed to the Cuban Government. We do not agree. This Court would hardly be
competent to undertake assessments of varying degrees of friendliness or its absence, and,
lacking some definite touchstone for determination, we are constrained to consider any
relationship, short of war, with a recognized sovereign power as embracing the privilege of
resorting to United States courts. Although the severance of diplomatic relations is an overt
 g g p
act with objective significance in the dealings of sovereign states, we are unwilling to say
that it should inevitably result in the withdrawal of the privilege of bringing suit. Severance
may take place for any number of political reasons, its duration is unpredictable, and
whatever expression of animosity it may imply does not approach that implicit in a
declaration of war.

It is perhaps true that nonrecognition of a government in certain circumstances may reflect

no greater unfriendliness than the severance of diplomatic relations with a recognized
government, but the refusal to recognize has a unique legal aspect. It signifies this country's
unwillingness to acknowledge that the government in question speaks as the sovereign
authority for the territory it purports to control, see Russian Republic v. Cibrario, supra,
235 N.Y. at 260-263, 139 N.E. at 261-263. Political recognition is exclusively a function of
the Executive. The possible incongruity of judicial "recognition," by permitting suit, of a
government not recognized by the Executive is completely

Page 376 U. S. 411

absent when merely diplomatic relations are broken. [Footnote 12]

The view that the existing situation between the United States and Cuba should not lead to
a denial of status to sue is buttressed by the circumstance that none of the acts of our
Government has been aimed at closing the courts of this country to Cuba, and more
particularly by the fact that the Government has come to the support of Cuba's "act of
state" claim in this very litigation.

Respondents further urge that reciprocity of treatment is an essential ingredient of comity

generally, and, therefore, of the privilege of foreign states to bring suit here. Although
Hilton v. Guyot, 159 U. S. 113, contains some broad language about the relationship of
reciprocity to comity, the case in fact imposed a requirement of reciprocity only in regard to
conclusiveness of judgments, and even then only in limited circumstances. Id. at 159 U. S.
170-171. In Direction der Disconto-Gesellschaft v. United States Steel Corp., 300 F. 741,
747 (D.C.S.D.N.Y.), Judge Learned Hand pointed out that the doctrine of reciprocity has
apparently been confined to foreign judgments.

Page 376 U. S. 412

There are good reasons for declining to extend the principle to the question of standing of
sovereign states to sue. Whether a foreign sovereign will be permitted to sue involves a
problem more sensitive politically than whether the judgments of its courts may be
reexamined, and the possibility of embarrassment to the Executive Branch in handling
 , p y g
foreign relations is substantially more acute. Reexamination of judgments, in principle,
reduces, rather than enhances, the possibility of injustice's being done in a particular case;
refusal to allow suit makes it impossible for a court to see that a particular dispute is fairly
resolved. The freezing of Cuban assets exemplifies the capacity of the political branches to
assure, through a variety of techniques (see infra, pp. 376 U. S. 431, 376 U. S. 435-436),
that the national interest is protected against a country which is thought to be improperly
denying the rights of United States citizens.

Furthermore, the question whether a country gives res judicata effect to United States
judgments presents a relatively simple inquiry. The precise status of the United States
Government and its nationals before foreign courts is much more difficult to determine. To
make such an investigation significant, a court would have to discover not only what is
provided by the formal structure of the foreign judicial system, but also what the practical
possibilities of fair treatment are. The courts, whose powers to further the national interest
in foreign affairs are necessarily circumscribed as compared with those of the political
branches, can best serve the rule of law by not excluding otherwise proper suitors because
of deficiencies in their legal systems.

We hold that this petitioner is not barred from access to the federal courts. [Footnote 13]

Page 376 U. S. 413

III

Respondents claimed in the lower courts that Cuba had expropriated merely contractual
rights the situs of which was in New York, and that the propriety of the taking was,
therefore, governed by New York law. The District Court rejected this contention on the
basis of the right of ownership possessed by C.A.V. against Farr, Whitlock prior to payment
for the sugar. That the sugar itself was expropriated, rather than a contractual claim, is
further supported by Cuba's refusal to let the S.S. Hornfels sail until a new contract had
been signed. Had the Cuban decree represented only an attempt to expropriate a
contractual right of C.A.V., the forced delay of shipment and Farr, Whitlock's subsequent
contract with petitioner's assignor would have been meaningless. [Footnote 14] Neither the
District Court's finding concerning the location of the S.S. Hornfels nor its conclusion that
Cuba had territorial jurisdiction to expropriate the sugar, acquiesced in by the Court of
Appeals, is seriously challenged here. Respondents' limited view of the expropriation must
be rejected.

Respondents further contend that, if the expropriation was of the sugar itself, this suit then
becomes one to enforce the public law of a foreign state, and, as such, is not cognizable in
the courts of this country. They rely on the principle enunciated in federal and state cases
that a

Page 376 U. S. 414

court need not give effect to the penal or revenue laws of foreign countries or sister states.
See, e.g., 23 U. S. 10 Wheat. 66, 23 U. S. 123; Wisconsin v. Pelican Ins. Co., 127 U. S. 265;
Huntington v. Attrill, 146 U. S. 657 (all relating to penal laws); [Footnote 15] Moore v.
Mitchell, 30 F.2d 600, aff'd on other grounds, 281 U. S. 281 U.S. 18; City of Detroit v.
Proctor, 44 Del. 193, 61 A.2d 412; City of Philadelphia v. Cohen, 11 N.Y.2d 401, 230
N.Y.S.2d 188, 184 N.E.2d 167 (all relating to revenue laws).

The extent to which this doctrine may apply to other kinds of public laws, though perhaps
still an open question, [Footnote 16] need not be decided in this case. For we have been
referred to no authority which suggests that the doctrine reaches a public law which, as
here, has been fully executed within the foreign state. Cuba's restraint of the S.S. Hornfels
must be regarded for these purposes to have constituted an effective taking of the sugar,
vesting in Cuba C.A.V.'s property right in it. Farr, Whitlock's

Page 376 U. S. 415

contract with the Cuban bank, however compelled to sign Farr, Whitlock may have felt,
represented indeed a recognition of Cuba's dominion over the property.

In these circumstances the question whether the rights acquired by Cuba are enforceable in
our courts depends not upon the doctrine here invoked, but upon the act of state doctrine
discussed in the succeeding sections of this opinion. [Footnote 17]

Page 376 U. S. 416

IV

The classic American statement of the act of state doctrine, which appears to have taken
root in England as early as 1674, Blad v. Bamfield, 3 Swans. 604, 36 Eng.Rep. 992, and
began to emerge in the jurisprudence of this country in the late eighteenth and early
nineteenth centuries, see e.g., 3 U. S. Hylton, 3 Dall. 199, 3 U. S. 230; Hudson v. Guestier,
4 Cranch 293, 8 U. S. 294; The Schooner Exchange v. M'Faddon, 7 Cranch 116, 11 U. S.
135-136; L'Invincible, 1 Wheat. 238, 14 U. S. 253; The Santissima Trinidad, 7 Wheat. 283,
20 U. S. 336, is found in Underhill v. Hernandez, 168 U. S. 250, where Chief Justice Fuller
said for a unanimous Court (p 168 U S 252):
said for a unanimous Court (p. 168 U. S. 252):

"Every sovereign state is bound to respect the independence of every other sovereign state,
and the courts of one country will not sit in judgment on the acts of the government of
another, done within its own territory. Redress of grievances by reason of such acts must be
obtained through the means open to be availed of by sovereign powers as between
themselves."

Following this precept, the Court in that case refused to inquire into acts of Hernandez, a
revolutionary Venezuelan military commander whose government had been later
recognized by the United States, which were made the basis of a damage action in this
country by Underhill, an American citizen, who claimed that he had had unlawfully
assaulted, coerced, and detained in Venezuela by Hernandez.

None of this Court's subsequent cases in which the act of state doctrine was directly or
peripherally involved manifest any retreat from Underhill. See American Banana Co. v.
United Fruit Co., 213 U. S. 347; Oetjen v. Central Leather Co., 246 U. S. 297; Ricaud v.
American Metal Co., 246 U. S. 304; Shapleigh v. Mier, 299 U.S.

Page 376 U. S. 417

468; United States v. Belmont, 301 U. S. 324; United States v. Pink, 315 U. S. 203. On the
contrary, in two of these cases, Oetjen and Ricaud, the doctrine as announced in Underhill
was reaffirmed in unequivocal terms.

Oetjen involved a seizure of hides from a Mexican citizen as a military levy by General Villa,
acting for the forces of General Carranza, whose government was recognized by this
country subsequent to the trial but prior to decision by this Court. The hides were sold to a
Texas corporation which shipped them to the United States and assigned them to
defendant. As assignee of the original owner, plaintiff replevied the hides, claiming that
they had been seized in violation of the Hague Conventions. In affirming a judgment for
defendant, the Court suggested that the rules of the Conventions did not apply to civil war,
and that, even if they did, the relevant seizure was not in violation of them. 246 U.S. at 246
U. S. 301-302. Nevertheless, it chose to rest its decision on other grounds. It described the
designation of the sovereign as a political question to be determined by the Legislative and
Executive Departments, rather than the Judicial Department, invoked the established rule
that such recognition operates retroactively to validate past acts, and found the basic tenet
of Underhill to be applicable to the case before it.

"The principle that the conduct of one independent government cannot be successfully
questioned in the courts of another is as applicable to a case involving the title to property
questioned in the courts of another is as applicable to a case involving the title to property
brought within the custody of a court, such as we have here, as it was held to be to the cases
cited, in which claims for damages were based upon acts done in a foreign country, for its
rests at last upon the highest considerations of international comity and expediency. To
permit the validity of the acts of one sovereign state to be reexamined and perhaps
condemned by

Page 376 U. S. 418

the courts of another would very certainly 'imperil the amicable relations between
governments and vex the peace of nations.'"

Id. at 246 U. S. 303-304.

In Ricaud, the facts were similar -- another general of the Carranza forces seized lead
bullion as a military levy -- except that the property taken belonged to an American citizen.
The Court found Underhill, American Banana, and Oetjen controlling. Commenting on the
nature of the principle established by those cases, the opinion stated that the rule

"does not deprive the courts of jurisdiction once acquired over a case. It requires only that
when it is made to appear that the foreign government has acted in a given way on the
subject matter of the litigation, the details of such action or the merit of the result cannot
be questioned, but must be accepted by our courts as a rule for their decision. To accept a
ruling authority and to decide accordingly is not a surrender or abandonment of
jurisdiction, but is an exercise of it. It results that the title to the property in this case must
be determined by the result of the action taken by the military authorities of Mexico. . . ."

246 U.S. at 246 U. S. 309. To the same effect is the language of Mr. Justice Cardozo in the
Shapleigh case, supra, where, in commenting on the validity of a Mexican land
expropriation, he said (299 U.S. at 299 U. S. 471):

"The question is not here whether the proceeding was so conducted as to be a wrong to our
nationals under the doctrines of international law, though valid under the law of the situs
of the land. For wrongs of that order, the remedy to be followed is along the channels of
diplomacy."

In deciding the present case, the Court of Appeals relied in part upon an exception to the
unqualified teachings

Page 376 U. S. 419

of Underhill Oetjen and Ricaud which that court had earlier indicated In Bernstein v
of Underhill, Oetjen, and Ricaud which that court had earlier indicated. In Bernstein v.
Van Heyghen Freres Societe Anonyme, 163 F.2d 246, suit was brought to recover from an
assignee property allegedly taken, in effect, by the Nazi Government because plaintiff was
Jewish. Recognizing the odious nature of this act of state, the court, through Judge Learned
Hand, nonetheless refused to consider it invalid on that ground. Rather, it looked to see if
the Executive had acted in any manner that would indicate that United States Courts
should refuse to give effect to such a foreign decree. Finding no such evidence, the court
sustained dismissal of the complaint. In a later case involving similar facts, the same court
again assumed examination of the German acts improper, Bernstein v. N.V.
Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 173 F.2d 71, but, quite
evidently following the implications of Judge Hand's opinion in the earlier case, amended
its mandate to permit evidence of alleged invalidity, 210 F.2d 375, subsequent to receipt by
plaintiff's attorney of a letter from the Acting Legal Adviser to the State Department written
for the purpose of relieving the court from any constraint upon the exercise of its
jurisdiction to pass on that question. [Footnote 18]

Page 376 U. S. 420

This Court has never had occasion to pass upon the so-called Bernstein exception, nor need
it do so now. For whatever ambiguity may be thought to exist in the two letters from State
Department officials on which the Court of Appeals relied, [Footnote 19] 307 F.2d at 858, is
now removed by the position which the Executive has taken in this Court on the act of state
claim; respondents do not, indeed, contest the view that these letters were intended to
reflect no more than the Department's then wish not to make any statement bearing on this
litigation.

The outcome of this case, therefore, turns upon whether any of the contentions urged by
respondents against the application of the act of state doctrine in the premises is
acceptable: (1) that the doctrine does not apply to acts of state which violate international
law, as is claimed to be the case here; (2) that the doctrine is inapplicable unless the
Executive specifically interposes it in a particular case; and (3) that, in any event, the
doctrine may not be invoked by a foreign government plaintiff in our courts.

Page 376 U. S. 421

Preliminarily, we discuss the foundations on which we deem the act of state doctrine to
rest, and more particularly the question of whether state or federal law governs its
application in a federal diversity case. [Footnote 20]
We do not believe that this doctrine is compelled either by the inherent nature of sovereign
authority, as some of the earlier decision seem to imply, see Underhill, supra; American
Banana, supra; Oetjen, supra, 246 U.S. at 246 U. S. 303, or by some principle of
international law. If a transaction takes place in one jurisdiction and the forum is in
another, the forum does not, by dismissing an action or by applying its own law, purport to
divest the first jurisdiction of its territorial sovereignty; it merely declines to adjudicate, or
makes applicable its own law to parties or property before it. The refusal of one country to
enforce the penal laws of another (supra, pp. 376 U. S. 413-414) is a typical example of an
instance when a court will not entertain a cause of action arising in another jurisdiction.
While historic notions of sovereign authority do bear upon the wisdom or employing the
act of state doctrine, they do not dictate its existence.

That international law does not require application of the doctrine is evidenced by the
practice of nations. Most of the countries rendering decisions on the subject to follow the
rule rigidly. [Footnote 21] No international arbitral

Page 376 U. S. 422

or judicial decision discovered suggests that international law prescribes recognition of

sovereign acts of foreign governments, see 1 Oppenheim's International Law, § 115aa
(Lauterpacht, 8th ed. 1955), and apparently no claim has ever been raised before an
international tribunal that failure to apply the act of state doctrine constitutes a breach of
international obligation. If international law does not prescribe use of the doctrine, neither
does it forbid application of the rule even if it is claimed that the act of state in question
violated international law. The traditional view of international law is that it establishes
substantive principles for determining whether one country has wronged another. Because
of its peculiar "nation to nation" character, the usual method for an individual

Page 376 U. S. 423

to seek relief is to exhaust local remedies and then repair to the executive authorities of his
own state to persuade them to champion his claim in diplomacy or before an international
tribunal. See United States v. Diekelman, 92 U. S. 520, 92 U. S. 524. Although it is, of
course, true that United States courts apply international law as a part of our own in
appropriate circumstances, Ware v. Hylton, 3 Dall. 199, 3 U. S. 281; The Nereide, 9 Cranch
388, 13 U. S. 423; The Paquete Habana, 175 U. S. 677, 175 U. S. 700, the public law of
nations can hardly dictate to a country which is, in theory, wronged how to treat that wrong
within its domestic borders.
Despite the broad statement in Oetjen that

"The conduct of the foreign relations of our government is committed by the Constitution
to the Executive and Legislative . . . departments,"

246 U.S. at 246 U. S. 302, it cannot, of course, be thought that "every case or controversy
which touches foreign relations lies beyond judicial cognizance." Baker v. Carr, 369 U. S.
186, 369 U. S. 211. The text of the Constitution does not require the act of state doctrine; it
does not irrevocably remove from the judiciary the capacity to review the validity of foreign
acts of state.

The act of state doctrine does, however, have "constitutional" underpinnings. It arises out
of the basic relationships between branches of government in a system of separation of
powers. It concerns the competency of dissimilar institutions to make and implement
particular kinds of decisions in the area of international relations. The doctrine, as
formulated in past decisions, expresses the strong sense of the Judicial Branch that its
engagement in the task of passing on the validity of foreign acts of state may hinder, rather
than further, this country's pursuit of goals both for itself and for the community of nations
as a whole in the international sphere. Many

Page 376 U. S. 424

commentators disagree with this view; [Footnote 22] they have striven, by means of
distinguishing and limiting past decisions and by advancing various considerations of
policy, to stimulate a narrowing of the apparent scope of the rule. Whatever considerations
are thought to predominate, it is plain that the problems involved are uniquely federal in
nature. If federal authority, in this instance, this Court, orders the field of judicial
competence in this area for the federal courts, and the state courts are left free to formulate
their own rules, the purposes behind the doctrine could be as effectively undermined as if
there had been no federal pronouncement on the subject.

We could, perhaps, in this diversity action, avoid the question of deciding whether federal
or state law is applicable to this aspect of the litigation. New York has enunciated the act of
state doctrine in terms that echo those of federal decisions decided during the reign of
Swift v. Tyson, 16 Pet. 1. In Hatch v. Baez, 7 Hun 596, 599 (N.Y.Sup.Ct.), Underhill was
foreshadowed by the words,

"the courts of one country are bound to abstain from sitting in judgment on the acts of
another government done within its own territory."

M tl th C t fA l i S li ff & C St d d Oil C 6 NY
More recently, the Court of Appeals, in Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220,
224, 186 N.E. 679, 681, has declared,

"The courts of one independent government will not sit in judgment upon the validity of
the acts of another done

Page 376 U. S. 425

within its own territory, even when such government seizes and sells the property of an
American citizen within its boundaries."

Cf. Dougherty v. Equitable Life Assurance Society, 266 N.Y. 71, 193 N.E. 897; Holzer v.
Deutsche Reichsbahn-Gesellschaft, 277 N.Y. 474, 14 N.E.2d 798. But cf. Frenkel & Co. v.
L'Urbaine Fire Ins. Co., 251 N.Y. 243, 167 N.E. 430. Thus, our conclusions might well be
the same whether we dealt with this problem as one of state law, see Erie R. Co. v.
Tompkins, 304 U. S. 64; Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U. S. 487; Griffin v.
McCoach, 313 U. S. 498, or federal law.

However, we are constrained to make it clear that an issue concerned with a basic choice
regarding the competence and function of the Judiciary and the National Executive in
ordering our relationships with other members of the international community must be
treated exclusively as an aspect of federal law. [Footnote 23] It seems fair to assume that
the Court did not have rules like the act of state doctrine in mind when it decided Erie R.
Co. v. Tompkins. Soon thereafter, Professor Philip C. Jessup, now a judge of the
International Court of Justice, recognized the potential dangers were Erie extended to legal
problems affecting international relations. [Footnote 24] He cautioned that rules of
international law should not be left to divergent and perhaps parochial state
interpretations. His basic rationale is equally applicable to the act of state doctrine.

Page 376 U. S. 426

The Court, in the pre-Erie act of state cases, although not burdened by the problem of the
source of applicable law, used language sufficiently strong and broad-sweeping to suggest
that state courts were not left free to develop their own doctrines (as they would have been
had this Court merely been interpreting common law under Swift v. Tyson, supra). The
Court of Appeals, in the first Bernstein case, supra, a diversity suit, plainly considered the
decisions of this Court, despite the intervention of Erie, to be controlling in regard to the
act of state question, at the same time indicating that New York law governed other aspects
of the case. We are not without other precedent for a determination that federal law
governs; there are enclaves of federal judge-made law which bind the States. A national
b d ff d l t b ilt l h b h ld t h b t l t db § f th
body of federal-court-built law has been held to have been contemplated by § 301 of the
Labor Management Relations Act, Textile Workers v. Lincoln Mills, 353 U. S. 448.
Principles formulated by federal judicial law have been thought by this Court to be
necessary to protect uniquely federal interests, D'Oench, Duhme & Co. v. Federal Deposit
Ins. Corp., 315 U. S. 447; Clearfield Trust Co. v. United States, 318 U. S. 363. Of course, the
federal interest guarded in all these cases is one the ultimate statement of which is derived
from a federal statute. Perhaps more directly in point are the bodies of law applied between
States over boundaries and in regard to the apportionment of interstate waters.

In Hinderlider v. La Plata River Co., 304 U. S. 92, 304 U. S. 110, in an opinion handed
down the same day as Erie and by the same author, Mr. Justice Brandeis, the Court
declared,

"For whether the water of an interstate stream must be apportioned between the two States
is a question of 'federal common law' upon which neither the statutes nor the decisions of
either State can be conclusive."

Although the suit was between two private litigants, and

Page 376 U. S. 427

the relevant States could not be made parties, the Court considered itself free to determine
the effect of an interstate compact regulating water apportionment. The decision implies
that no State can undermine the federal interest in equitably apportioned interstate waters,
even if it deals with private parties. This would not mean that, absent a compact, the
apportionment scheme could not be changed judicially, or by Congress, but only that
apportionment is a matter of federal law. Cf. Arizona v. California, 373 U. S. 546, 373 U. S.
597-598. The problems surrounding the act of state doctrine are, albeit for different
reasons, as intrinsically federal as are those involved in water apportionment or boundary
disputes. The considerations supporting exclusion of state authority here are much like
those which led the Court, in United States v. California, 332 U. S. 19, to hold that the
Federal Government possessed paramount rights in submerged lands though within the
three-mile limit of coastal States. We conclude that the scope of the act of state doctrine
must be determined according to federal law. [Footnote 25]

VI

If the act of state doctrine is a principle of decision binding on federal and state courts
alike, but compelled by neither international law nor the Constitution, its continuing
vitality depends on its capacity to reflect the proper distribution of functions between the
judicial and

Page 376 U. S. 428

political branches of the Government on matters bearing upon foreign affairs. It should be
apparent that the greater the degree of codification or consensus concerning a particular
area of international law, the more appropriate it is for the judiciary to render decisions
regarding it, since the courts can then focus on the application of an agreed principle to
circumstances of fact, rather than on the sensitive task of establishing a principle not
inconsistent with the national interest or with international justice. It is also evident that
some aspects of international law touch much more sharply on national nerves than do
others; the less important the implications of an issue are for our foreign relations, the
weaker the justification for exclusivity in the political branches. The balance of relevant
considerations may also be shifted if the government which perpetrated the challenged act
of state is no longer in existence, as in the Bernstein case, for the political interest of this
country may, as a result, be measurably altered. Therefore, rather than laying down or
reaffirming an inflexible and all-encompassing rule in this case, we decide only that the
Judicial Branch will not examine the validity of a taking of property within its own territory
by a foreign sovereign government, extant and recognized by this country at the time of
suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal
principles, even if the complaint alleges that the taking violates customary international
law.

There are few if any issues in international law today on which opinion seems to be so
divided as the limitations on a state's power to expropriate the property of aliens. [Footnote
26]

Page 376 U. S. 429

There is, of course, authority, in international judicial [Footnote 27] and arbitral [Footnote
28] decisions, in the expressions of national governments, [Footnote 29] and among
commentators [Footnote 30] for the view that a taking is improper under international law
if it is not for a public purpose, is discriminatory, or is without provision for prompt,
adequate, and effective compensation. However, Communist countries, although they have
in fact provided a degree of compensation after diplomatic efforts, commonly recognize no
obligation on the part of the taking country. [Footnote 31] Certain representatives of the
newly independent and underdeveloped countries

Page 376 U. S. 430

have questioned whether rules of state responsibility toward aliens can bind nations that
have not consented to them, [Footnote 32] and it is argued that the traditionally articulated
standards governing expropriation of property reflect "imperialist" interests, and are
inappropriate to the circumstances of emergent states. [Footnote 33]

The disagreement as to relevant international law standards reflects an even more basic
divergence between the national interests of capital importing and capital exporting
nations, and between the social ideologies of those countries that favor state control of a
considerable portion of the means of production and those that adhere to a free enterprise
system. It is difficult to imagine the courts of this country embarking on adjudication in an
area which touches more sensitively the practical and ideological goals of the various
members of the community of nations. [Footnote 34]

When we consider the prospect of the courts' characterizing foreign expropriations,

however justifiably, as invalid under international law and ineffective to pass title, the
wisdom of the precedents is confirmed. While each of the leading cases in this Court may
be argued to be distinguishable in its facts from this one -- Underhill because sovereign
immunity provided an independent ground, and Oetjen, Ricaud, and Shapleigh because
there

Page 376 U. S. 431

was actually no violation of international law -- the plain implication of all these opinions,
and the import of express statements in Oetjen, 246 U.S. at 246 U. S. 304, and Shapleigh,
299 U.S. at 299 U. S. 471, is that the act of state doctrine is applicable even if international
law has been violated. In Ricaud, the one case of the three most plausibly involving an
international law violation, the possibility of an exception to the act of state doctrine was
not discussed. Some commentators have concluded that it was not brought to the Court's
attention, [Footnote 35] but Justice Clarke delivered both the Oetjen and Ricaud opinions
on the same day, so we can assume that principles stated in the former were applicable to
the latter case.

The possible adverse consequences of a conclusion to the contrary of that implicit in these
cases in highlighted by contrasting the practices of the political branch with the limitations
of the judicial process in matters of this kind. Following an expropriation of any
significance, the Executive engages in diplomacy aimed to assure that United States
citizens who are harmed are compensated fairly. Representing all claimants of this country,
it will often be able, either by bilateral or multilateral talks, by submission to the United
Nations, or by the employment of economic and political sanctions, to achieve some degree
of general redress Judicial determinations of invalidity of title can on the other hand have
of general redress. Judicial determinations of invalidity of title can, on the other hand, have
only an occasional impact, since they depend on the fortuitous circumstance of the
property in question being brought into this country. [Footnote 36] Such decisions would,
if the acts involved

Page 376 U. S. 432

were declared invalid, often be likely to give offense to the expropriating country; since the
concept of territorial sovereignty is so deep-seated, any state may resent the refusal of the
courts of another sovereign to accord validity to acts within its territorial borders.
Piecemeal dispositions of this sort involving the probability of affront to another state
could seriously interfere with negotiations being carried on by the Executive Branch, and
might prevent or render less favorable the terms of an agreement that could otherwise be
reached. Relations with third countries which have engaged in similar expropriations
would not be immune from effect.

The dangers of such adjudication are present regardless of whether the State Department
has, as it did in this case, asserted that the relevant act violated international law. If the
Executive Branch has undertaken negotiations with an expropriating country, but has
refrained from claims of violation of the law of nations, a determination to that effect by a
court might be regarded as a serious insult, while a finding of compliance with
international law would greatly strengthen the bargaining hand of the other state with
consequent detriment to American interests.

Even if the State Department has proclaimed the impropriety of the expropriation, the
stamp of approval of its view by a judicial tribunal, however, impartial, might increase any
affront, and the judicial decision might occur at a time, almost always well after the taking,
when such an impact would be contrary to our national interest. Considerably more serious
and far-reaching consequences would flow from a judicial finding that international law
standards had been met if that determination flew in the face of a State Department
proclamation to the contrary. When articulating principles of international law in its
relations with other states, the Executive Branch speaks not only as an interpreter of
generally accepted and traditional

Page 376 U. S. 433

rules, as would the courts, but also as an advocate of standards it believes desirable for the
community of nations and protective of national concerns. In short, whatever way the
matter is cut, the possibility of conflict between the Judicial and Executive Branches could
hardly be avoided.
Respondents contend that, even if there is not agreement regarding general standards for
determining the validity of expropriations, the alleged combination of retaliation,
discrimination, and inadequate compensation makes it patently clear that this particular
expropriation was in violation of international law. [Footnote 37] If this view is accurate, it
would still be unwise for the courts so to determine. Such a decision now would require the
drawing of more difficult lines in subsequent cases, and these would involve the possibility
of conflict with the Executive view. Even if the courts avoided this course, either by
presuming the validity of an act of state whenever the international law standard was
thought unclear or by following the State Department declaration in such a situation, the
very expression of judicial uncertainty might provide embarrassment to the Executive
Branch.

Another serious consequence of the exception pressed by respondents would be to render

uncertain titles in foreign commerce, with the possible consequence of altering the flow of
international trade. [Footnote 38] If the attitude of the

Page 376 U. S. 434

United States courts were unclear, one buying expropriated goods would not know if he
could safely import them into this country. Even were takings known to be invalid, one
would have difficulty determining, after goods had changed hands several times, whether
the particular articles in question were the product of an ineffective state act. [Footnote 39]

Against the force of such considerations, we find respondents' countervailing arguments

quite unpersuasive. Their basic contention is that United States courts could make a
significant contribution to the growth of international law, a contribution whose
importance, it is said, would be magnified by the relative paucity of decisional law by
international bodies. But, given the fluidity of present world conditions, the effectiveness of
such a patchwork approach toward the formulation of an acceptable body of law
concerning state responsibility for expropriations is, to say the least, highly conjectural.
Moreover, it rests upon the sanguine presupposition that the decisions of the courts of the
world's major capital exporting country and principal exponent of the free

Page 376 U. S. 435

enterprise system would be accepted as disinterested expressions of sound legal principle

by those adhering to widely different ideologies.

It is contended that, regardless of the fortuitous circumstances necessary for United States
jurisdiction over a case involving a foreign act of state and the resultant isolated application
jurisdiction over a case involving a foreign act of state and the resultant isolated application
to any expropriation program taken as a whole, it is the function of the courts to justly
decide individual disputes before them. Perhaps the most typical act of state case involves
the original owner or his assignee suing one not in association with the expropriating state
who has had "title" transferred to him. But it is difficult to regard the claim of the original
owner, who otherwise may be recompensed through diplomatic channels, as more
demanding of judicial cognizance than the claim of title by the innocent third party
purchaser, who, if the property is taken from him, is without any remedy.

Respondents claim that the economic pressure resulting from the proposed exception to
the act of state doctrine will materially add to the protection of United States investors. We
are not convinced, even assuming the relevance of this contention. Expropriations take
place for a variety of reasons, political and ideological, as well as economic. When one
considers the variety of means possessed by this country to make secure foreign
investment, the persuasive or coercive effect of judicial invalidation of acts of expropriation
dwindles in comparison. The newly independent states are in need of continuing foreign
investment; the creation of a climate unfavorable to such investment by wholesale
confiscations may well work to their long-run economic disadvantage. Foreign aid given to
many of these countries provides a powerful lever in the hands of the political branches to
ensure fair treatment of United States nationals. Ultimately, the sanctions of economic
embargo and the freezing of assets in this country may be

Page 376 U. S. 436

employed. Any country willing to brave any or all of these consequences is unlikely to be
deterred by sporadic judicial decisions directly affecting only property brought to our
shores. If the political branches are unwilling to exercise their ample powers to effect
compensation, this reflects a judgment of the national interest which the judiciary would be
ill advised to undermine indirectly.

It is suggested that, if the act of state doctrine is applicable to violations of international

law, it should only be so when the Executive Branch expressly stipulates that it does not
wish the courts to pass on the question of validity. See Association of the Bar of the City of
New York, Committee on International Law, A Reconsideration of the Act of State Doctrine
in United States Courts (1959). We should be slow to reject the representations of the
Government that such a reversal of the Bernstein principle would work serious inroads on
the maximum effectiveness of United States diplomacy. Often, the State Department will
wish to refrain from taking an official position, particularly at a moment that would be
dictated by the development of private litigation but might be inopportune diplomatically.
Adverse domestic consequences might flow from an official stand which could be assuaged
Adverse domestic consequences might flow from an official stand which could be assuaged,
if at all, only by revealing matters best kept secret. Of course, a relevant consideration for
the State Department would be the position contemplated in the court to hear the case. It is
highly questionable whether the examination of validity by the judiciary should depend on
an educated guess by the Executive as to probable result, and, at any rate, should a
prediction be wrong, the Executive might be embarrassed in its dealings with other
countries. We do not now pass on the Bernstein exception, but, even if it were deemed
valid, its suggested extension is unwarranted.

However offensive to the public policy of this country and its constituent States an
expropriation of this kind

Page 376 U. S. 437

may be, we conclude that both the national interest and progress toward the goal of
establishing the rule of law among nations are best served by maintaining intact the act of
state doctrine in this realm of its application.

VII

Finally, we must determine whether Cuba's status as a plaintiff in this case dictates a result
at variance with the conclusions reached above. If the Court were to distinguish between
suits brought by sovereign states and those of assignees, the rule would have little effect
unless a careful examination were made in each case to determine if the private party suing
had taken property in good faith. Such an inquiry would be exceptionally difficult, since the
relevant transaction would almost invariably have occurred outside our borders. If such an
investigation were deemed irrelevant, a state could always assign its claim.

It is true that the problem of security of title is not directly presented in the instance of a
sovereign plaintiff, although, were such a plaintiff denied relief, it would ship its goods
elsewhere, thereby creating an alteration in the flow of trade. The sensitivity in regard to
foreign relations and the possibility of embarrassment of the Executive are, of course,
heightened by the presence of a sovereign plaintiff. The rebuke to a recognized power
would be more pointed were it a suitor in our courts. In discussing the rule against
enforcement of foreign penal and revenue laws, the Eire High Court of Justice, in Peter
Buchanan Ltd. v. McVey, [1955] A.C. 516, 529-530, aff'd, id. at 530, emphasized that its
justification was in large degree the desire to avoid embarrassing another state by
scrutinizing its penal and revenue laws. Although that rule presumes invalidity in the
forum whereas the act of state principle presumes the contrary, the doctrines have a
common rationale, a rationale that negates
 , g

Page 376 U. S. 438

the wisdom of discarding the act of state rule when the plaintiff is a state which is not
seeking enforcement of a public act.

Certainly the distinction proposed would sanction self-help remedies, something hardly
conducive to a peaceful international order. Had Farr, Whitlock not converted the bills of
lading, or alternatively breached its contract, Cuba could have relied on the act of state
doctrine in defense of a claim brought by C.A.V. for the proceeds. It would be anomalous to
preclude reliance on the act of state doctrine because of Farr, Whitlock's unilateral action,
however justified such action may have been under the circumstances.

Respondents offer another theory for treating the case differently because of Cuba's
participation. It is claimed that the forum should simply apply its own law to all the
relevant transactions. An analogy is drawn to the area of sovereign immunity, National
City Bank v. Republic of China, 348 U. S. 356, in which, if a foreign country seeks redress
in our courts, counterclaims are permissible. But immunity relates to the prerogative right
not to have sovereign property subject to suit; fairness has been thought to require that,
when the sovereign seeks recovery, it be subject to legitimate counterclaims against it. The
act of state doctrine, however, although it shares with the immunity doctrine a respect for
sovereign states, concerns the limits for determining the validity of an otherwise applicable
rule of law. It is plain that, if a recognized government sued on a contract with a United
States citizen, concededly legitimate by the locus of its making, performance, and most
significant contacts, the forum would not apply its own substantive law of contracts. Since
the act of state doctrine reflects the desirability of presuming the relevant transaction valid,
the same result follows; the forum may not apply its local law regarding foreign
expropriations.

Page 376 U. S. 439

Since the act of state doctrine proscribes a challenge to the validity of the Cuban
expropriation decree in this case, any counterclaim based on asserted invalidity must fail.
Whether a theory of conversion or breach of contract is the proper cause of action under
New York law, the presumed validity of the expropriation is unaffected. Although we
discern no remaining litigable issues of fact in this case, the District Court may hear and
decide them if they develop.

The judgment of the Court of Appeals is reversed, and the case is remanded to the District
Court for proceedings consistent with this opinion.
 p g p

It is so ordered.

[Footnote 1]

74 Stat. 330.

[Footnote 2]

Proclamation No. 3355, 74 Stat. c72, effective upon publication in the Federal Register,
July 8, 1960, 25 Fed.Reg. 6414.

[Footnote 3]

"WHEREAS, the attitude assumed by the government and the Legislative Power of the
United States of North America, which constitutes an aggression, for political purposes,
against the basic interests of the Cuban economy, as recently evidenced by the Amendment
to the Sugar Act just enacted by the United States Congress at the request of the Chief
Executive of that country, whereby exceptional powers are conferred upon the President of
the United States to reduce American sugar market as a threat of the participation of
Cuban sugars in the political action against Cuba, forces the Revolutionary Government to
adopt, without hesitation, all and whatever measures it may deem appropriate or desirable
for the due defense of the national sovereignty and protection of our economic
development process."

"* * * *"

"WHEREAS, it is advisable, with a view to the ends referred to in the first Whereas of this
Law, to confer upon the President and Prime Minister of the Republic full authority to
carry out the nationalization of the enterprises and property owned by physical and
corporate persons who are nationals of the United States of North America, or of
enterprises which have majority interest or participations in such enterprises, even though
they be organized under the Cuban laws, so that the required measures may be adopted in
future cases with a view to the ends pursued."

"NOW, THEREFORE, in pursuance of the powers vested in it, the Council of Ministers has
resolved to enact and promulgate the following."

"LAW No. 851"

"ARTICLE 1. Full authority is hereby conferred upon the President and the Prime Minister
of the Republic in order that acting jointly through appropriate resolutions whenever they
of the Republic in order that, acting jointly through appropriate resolutions whenever they
shall deem it advisable or desirable for the protection of the national interests, they may
proceed to nationalize, through forced expropriations, the properties or enterprises owned
by physical and corporate persons who are nationals of the United States of North America,
or of the enterprises in which such physical and corporate persons have an interest, even
though they be organized under the Cuban laws."

Record at 98-99.

[Footnote 4]

See id., Articles 4-7. Payment for expropriated property would consist of bonds with terms
of at least 30 years and bearing 2% annual interest. The interest was not to be cumulative
from year to year, and was to be paid only out of 25% of the yearly foreign exchange
received by sales of Cuban sugar to the United States in excess of 3,000,000 Spanish long
tons at a minimum price of 5.75 cents per English pound. (In the preceding 10 years, the
annual average price had never been that high, and in only one of those years had as many
as 3,000,000 Spanish long tons been sold. 307 F.2d at 862.) The bonds were to be
amortized only upon the authority of the President of the National Bank. The President and
Prime Minister of the Cuban state were empowered to choose the appraisers. It is not clear
whether the bonds were to be paid at maturity if funds were insufficient at that time.

[Footnote 5]

See State Dept. Note No. 397, July 16, 1960 (to Cuban Ministry of Foreign Relations).

[Footnote 6]

The parties have treated the interest of the wholly owned subsidiary as if it were identical
with that of C.A.V.; hence, no distinction between the two companies will be drawn in the
remainder of this opinion.

[Footnote 7]

"WHEREAS, the attitude assumed by the Government and the Legislative Power of the
United States of North America, of continued aggression, for political purposes, against the
basic interests of the Cuban economy, as evidenced by the amendment to the Sugar Act
adopted by the Congress of said country, whereby exceptional powers were conferred upon
the President of said nation to reduce the participation of Cuban sugars in the sugar market
of said country, as a weapon of political action against Cuba, was considered as the
fundamental justification of said law."
"WHEREAS, the Chief Executive of the Government of the United States of North America,
making use of said exceptional powers, and assuming an obvious attitude of economic and
political aggression against our country, has reduced the participation of Cuban sugars in
the North American market with the unquestionable design to attack Cuba and its
revolutionary process."

"WHEREAS, this action constitutes a reiteration of the continued conduct of the

government of the United States of North America, intended to prevent the exercise of its
sovereignty and its integral development by our people thereby serving the base interests of
the North American trusts, which have hindered the growth of our economy and the
consolidation of our political freedom."

"WHEREAS, in the face of such developments the undersigned, being fully conscious of
their great historical responsibility and in legitimate defense of the national economy are
duty bound to adopt the measures deemed necessary to counteract the harm done by the
aggression inflicted upon our nation."

"WHEREAS, it is the duty of the peoples of Latin America to strive for the recovery of their
native wealth by wrestling it from the hands of the foreign monopolies and interests which
prevent their development, promote political interference, and impair the sovereignty of
the underdeveloped countries of America."

"WHEREAS, the Cuban Revolution will not stop until it shall have totally and definitely
liberated its fatherland."

"WHEREAS, Cuba must be a luminous and stimulating example for the sister nations of
America and all the underdeveloped countries of the world to follow in their struggle to free
themselves from the brutal claws of Imperialism."

"NOW, THEREFORE: In pursuance of the powers vested in us, in accordance with the
provisions of Law No. 851, of July 6, 1960, we hereby,"

"RESOLVE:"

"FIRST. To order the nationalization, through compulsory expropriation, and, therefore,

the adjudication in fee simple to the Cuban State, of all the property and enterprises
located in the national territory, and the rights and interests resulting from the exploitation
of such property and enterprises, owned by the juridical persons who are nationals of the
United States of North America, or operators of enterprises in which nationals of said
country have a predominating interest, as listed below, to-wit:"
 y p g , ,

"* * * *"

"22. Compana Azucarera Vertientes Camaguey de Cuba."

"* * * *"

"SECOND. Consequently, the Cuban State is hereby subrogated in the place and stead of
the juridical persons listed in the preceding section, in respect of the property, rights and
interests aforesaid, and of the assets and liabilities constituting the capital of said
enterprises."

Record at 102-105.

[Footnote 8]

C.A.V. also agreed to pay Farr, Whitlock 10% of the $175,000 if C.A.V. ever obtained that
sum. 307 F.2d at 851.

[Footnote 9]

Because of C.A.V.'s amicus position in this Court, and because its arguments have been
presented separately from those of Farr, Whitlock, even though each has adopted the
other's contentions, this opinion refers to "respondents" although Farr, Whitlock is the
only formal party-respondent.

[Footnote 10]

In P & E Shipping Corp. v. Banco Para El Comercio Exterior de Cuba, 307 F.2d 415
(C.A.1st Cir.), the court sua sponte questioned the right of Cuba to sue. It concluded that
the matter was one for the Executive Branch to decide, and remanded the case to the
District Court to elicit the views of the State Department. The trial court in Dade Drydock
Corp. v. M/T Mar Caribe, 199 F. Supp. 871 (S.D.Tex.), apparently equated the severance of
diplomatic relations with the withdrawal of recognition and suspended the action "until the
Government of the Republic of Cuba is again recognized by the United States of America,"
id., 199 F. Supp. at 874. In two other cases, however, Pons v. Republic of Cuba, 111
U.S.A.pp.D.C. 141, 294 F.2d 925; Republic of Cuba v. Mayan Lines, S.A., 145 So. 2d 679
(Ct.App., 4th Cir., La.), courts have upheld the right of Cuba to sue despite the severance of
diplomatic relations.

[Footnote 11]
The District Court in The Gul Djemal, 296 F. 563, 296 F. 567, did refuse to permit the
invocation of sovereign immunity by the Turkish Government, with whom the United
States had broken diplomatic relations, on the theory that, under such circumstances,
comity did not require the granting of immunity. The case was affirmed, 264 U. S. 90, but
on another ground.

[Footnote 12]

The doctrine that nonrecognition precludes suit by the foreign government in every
circumstance has been the subject of discussion and criticism. See, e.g., Hervey, The Legal
Effects of Recognition in International Law (1928) 112-119; Jaffe, Judicial Aspects of
Foreign Relations (1933) 148-156; Borchard, The Unrecognized Government in American
Courts, 26 Am.J.Int'l L. 261 (1932); Dickinson, The Unrecognized Government or State in
English and American Law, 22 Mich.L.Rev. 118 (1923); Fraenkel, The Juristic Status of
Foreign States, Their Property and Their Acts, 25 Col.L.Rev. 544, 547-552 (1925); Lubman,
The Unrecognized Government in American Courts: Upright v. Mercury Business
Machines, 62 Col.L.Rev. 275 (1962). In this litigation, we need intimate no view on the
possibility of access by an unrecognized government to United States courts except to point
out that even the most inhospitable attitude on the matter does not dictate denial of
standing here.

[Footnote 13]

Respondents suggest that suit may be brought, if at all, only by an authorized agent of the
Cuban Government. Decisions establishing that privilege based on sovereign prerogatives
may be evoked only by such agents, e.g., 16 U. S. 3 Wheat. 435; Ex parte Muir, 254 U. S.
522, 254 U. S. 532-533; The Sao Vicente, 260 U. S. 151; The "Gul Djemal," 264 U. S. 90, are
not apposite to cases in which a state merely sues in our Courts without claiming any right
uniquely appertaining to sovereigns.

[Footnote 14]

If Cuba had jurisdiction to expropriate the contractual right, it would have been
unnecessary for it to compel the signing of a new contract. If Cuba did not have
jurisdiction, any action which it took in regard to Farr, Whitlock or the sugar would have
been ineffective to transfer C.A.V.'s claim.

[Footnote 15]

As appears from the cases cited, a penal law for the purposes of this doctrine is one which
seeks to redress a public, rather than a private, wrong.

[Footnote 16]

The doctrine may have a broader reach in Great Britain, see Don Alonso v. Cornero, Hob.
212a, Hobart's King's Bench Reps. 372; Banco de Vizcaya v. Don Alfonso de Borbon y
Austria, [1935] 1 K.B. 140; Attorney-General for Canada v. William Schulze & Co., [1901]
9 Scots L.T.Reps. 4 (Outer House); Dicey's Conflict of Laws, 162 (Morris ed. 1958); Mann,
Prerogative Rights of Foreign States and the Conflict of Laws, 40 Grotius Society 25 (1955);
but see Lepage v. San Paulo Coffee Estates Co., [1917] W.N. 216 (High Ct. of Justice,
Ch.Div.); Lorentzen v. Lydden & Co., [1942] 2 K.B. 202; F. & K. Jabbour v. Custodian of
Israeli Absentee Property, [1954] 1 Weekly L.R. 139 (Q.B.), than in the United States, cf.
United States v. Belmont, 85 F.2d 542, rev'd, 301 U. S. 301 U.S. 324 (possibility of broad
rule against enforceability of public acts not discussed in either court), United States v.
Pink, 284 N.Y. 555, 32 N.E.2d 552, rev'd, 315 U. S. 315 U.S. 203 (same); Anderson v. N.V.
Transandine Handelmaatschappij, 289 N.Y. 9, 43 N.E.2d 502; but see Leflar, Extrastate
Enforcement of Penal and Governmental Claims, 46 Harv.L.Rev. 193, 194 (1932).

[Footnote 17]

The courts below properly declined to determine if issuance of the expropriation decree
complied with the formal requisites of Cuban law. In dictum in Hudson v. Guestier, 4
Cranch 293, 8 U. S. 294, Chief Justice Marshall declared that one nation must recognize
the act of the sovereign power of another, so long as it has jurisdiction under international
law, even if it is improper according to the internal law of the latter state. This principle has
been followed in a number of cases. See, e.g., Banco de Espana v. Federal Reserve Bank,
114 F.2d 438, 443, 444 (C.A.2d Cir.); Bernstein v. Van Heyghen Freres Societe Anonyme,
163 F.2d 246, 249 (C.A.2d Cir.); Eastern States Petroleum Co. v. Asiatic Petroleum
Corp., 28 F. Supp. 279 (D.C.S.D.N.Y.). But see Canada Southern R. Co. v. Gebhard, 109 U.
S. 527; cf. 58 U. S. United States, 17 How. 542 (United States successor sovereign over
land); Sabariego v. Maverick, 124 U. S. 261 (same); Shapleigh v. Mier, 299 U. S. 468
(same). An inquiry by United States courts into the validity of an act of an official of a
foreign state under the law of that state would not only be exceedingly difficult, but, if
wrongly made, would be likely to be highly offensive to the state in question. Of course,
such review can take place between States in our federal system, but, in that instance, there
is similarity of legal structure, and an impartial arbiter, this Court, applying the full faith
and credit provision of the Federal Constitution.

Another ground supports the resolution of this problem in the courts below. Were any test
to be applied it would have to be what effect the decree would have if challenged in Cuba
to be applied, it would have to be what effect the decree would have if challenged in Cuba.
If no institution of legal authority would refuse to effectuate the decree, its "formal" status -
- here, its argued invalidity if not properly published in the Official Gazette in Cuba -- is
irrelevant. It has not been seriously contended that the judicial institutions of Cuba would
declare the decree invalid.

[Footnote 18]

The letter stated:

"1. This government has consistently opposed the forcible acts of dispossession of a
discriminatory and confiscatory nature practiced by the Germans on the countries or
peoples subject to their controls."

"* * * *"

"3. The policy of the Executive, with respect to claims asserted in the United States for the
restitution of identifiable property (or compensation in lieu thereof) lost through force,
coercion, or duress as a result of Nazi persecution in Germany, is to relieve American
courts from any restraint upon the exercise of their jurisdiction to pass upon the validity of
the acts of Nazi officials."

State Department Press Release, April 27, 1949, 20 Dept. State Bull. 592.

[Footnote 19]

Abram Chayes, the Legal Adviser to the State Department, wrote on October 18, 1961, in
answer to an inquiry regarding the position of the Department by Mr. John Laylin, attorney
for amici:

"The Department of State has not, in the Bahia de Nipe case or elsewhere, done anything
inconsistent with the position taken on the Cuban nationalizations by Secretary Herter.
Whether or not these nationalizations will in the future be given effect in the United States
is, of course, for the courts to determine. Since the Sabbatino case and other similar cases
are at present before the courts, any comments on this question by the Department of State
would be out of place at this time. As you yourself point out, statements by the Executive
Branch are highly susceptible of misconstruction."

A letter dated November 14, 1961, from George Ball, Under Secretary for Economic Affairs,
responded to a similar inquiry by the same attorney:

"I have carefully considered your letter, and have discussed it with the Legal Adviser. Our
 y y , g
conclusion, in which the Secretary concurs, is that the Department should not comment on
matters pending before the courts."

[Footnote 20]

Although the complaint in this case alleged both diversity and federal question jurisdiction,
the Court of Appeals reached jurisdiction only on the former ground, 307 F.2d at 852. We
need not decide, for reasons appearing hereafter, whether federal question jurisdiction also
existed.

[Footnote 21]

In English jurisprudence, in the classic case of Luther v. James Sagor & Co., [1921] 3 K.B.
532, the act of state doctrine is articulated in terms not unlike those of the United States
cases. See Princess Paley Olga v. Weisz, [1929] 1 K.B. 718. But see Anglo-Iranian Oil Co. v.
Jaffrate, [1953] 1 Weekly L.R. 246, (1953) Int'l L.Rep. 316 (Aden Sup.Ct.) (exception to
doctrine if foreign act violates international law). Civil law countries, however, which apply
the rule make exceptions for acts contrary to their sense of public order. See, e.g., Ropit
case, Cour de Cassation (France), [1929] Recueil General Des Lois et Des Arrets (Sirey)
Part I, 217; 55 Journal Du Droit International (Clunet) 674 (1928), [1927-1928] Ann.Dig.,
No. 43; Graue, Germany: Recognition of Foreign Expropriations, 3 Am.J.Comp.L. 93
(1954); Domke, Indonesian Nationalization Measures Before Foreign Court, 54 Am.J.Int'l
L. 305 (1960) (discussion of and excerpts from opinions of the District Court in Bremen
and the Hanseatic Court of Appeals in N.V. Verenigde Deli-Maatschapijen v. Deutsch-
Indonesische Tabak-Handelsgesellschaft m.b.H., and of the Amsterdam District Court and
Appellate Court in Senembah Maatschappij N.V. v. Republiek Indonesie Bank Indonesia);
Massouridis, The Effects of Confiscation, Expropriation, and Requisition by a Foreign
Authority, 3 Revue Hellenique De Droit International 62, 68 (1950) (recounting a decision
of the court of the first instance of Piraeus); Anglo-Iranian Oil Co. v. S.U.P.O.R. Co., [1955]
Int'l L.Rep. 19, (Ct. of Venice), 78 Il Foro Italiano Part I, 719; 40 Blatter fur Zurcherische
Rechtsprechung No. 65, 172-173 (Switzerland). See also Anglo-Iranian Oil Co. v. Idemitsu
Kosan Kabushiki Kaisha, [1953] Int'l L.Rep. 312 (High Ct. of Tokyo).

[Footnote 22]

See, e.g., Association of the Bar of the City of New York, Committee on International Law,
A Reconsideration of the Act of State Doctrine in United States Courts (1959); Domke,
supra, note 21; Mann International Delinquencies Before Municipal Courts, 70 L.Q.Rev.
181 (1954); Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826 (1959). But see, e.g.,
Falk Toward a Theory of the Participation of Domestic Courts in the International Legal
Falk, Toward a Theory of the Participation of Domestic Courts in the International Legal
Order: A Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L.Rev. 1 (1961);
Reeves, Act of State Doctrine and the Rule of Law -- A Reply, 54 Am.J.Int'l L. 141 (1960).

[Footnote 23]

At least this is true when the Court limits the scope of judicial inquiry. We need not now
consider whether a state court might, in certain circumstances, adhere to a more restrictive
view concerning the scope of examination of foreign acts than that required by this Court.

[Footnote 24]

The Doctrine of Erie Railroad v. Tompkins Applied to International Law, 33 Am.J.Int'l L.

740 (1939).

[Footnote 25]

Various constitutional and statutory provisions indirectly support this determination, see
U.S.Const., Art, I, § 8, cls. 3, 10; Art. II, §§ 2, 3; Art. III, § 2; 28 U.S.C. §§ 1251(a)(2), (b)(1),
(b)(3), 1332(a)(2), 1333, 1350, 1351, by reflecting a concern for uniformity in this country's
dealings with foreign nations and indicating a desire to give matters of international
significance to the jurisdiction of federal institutions. See Comment, The Act of State
Doctrine -- Its Relation to Private and Public International Law, 62 Col.L.Rev. 1278, 1297,
n. 123; cf. United States v. Belmont, supra; United States v. Pink, supra.

[Footnote 26]

Compare, e.g., Friedman, Expropriation in International Law 206-211 (1953); Dawson and
Weston, "Prompt, Adequate and Effective": A Universal Standard of Compensation? 30
Fordham L.Rev. 727 (1962), with Note from Secretary of State Hull to Mexican
Ambassador, August 22, 1938, V Foreign Relations of the United States 685 (1938);
Doman, Post-war Nationalization of Foreign Property in Europe, 48 Col.L.Rev. 1125, 1127
(1948). We do not, of course, mean to say that there is no international standard in this
area; we conclude only that the matter is not meet for adjudication by domestic tribunals.

[Footnote 27]

See Oscar Chinn Case, P.C.I.J., ser. A/B, No. 63 at 87 (1934); Chorzow Factory Case,
P.C.I.J., ser. A., No. 17 at 46, 47 (1928).

[Footnote 28]
See, e.g., Norwegian Shipowners' Case (Norway/United States) (Perm.Ct.Arb.) (1922), 1
U.N.Rep.Int'l Arb.Awards 307, 334, 339 (1948), Hague Court Reports, 2d Series, 39, 69, 74
(1932); Marguerite de Joly de Sabla, American and Panamanian General Claims
Arbitration 379, 447, 6 U.N.Rep.Int'l Arb.Awards 358, 366 (1955).

[Footnote 29]

See, e.g., Dispatch from Lord Palmerston to British Envoy at Athens, Aug. 7, 1846, 39
British and Foreign State Papers 1849-1850, 431-432. Note from Secretary of State Hull to
Mexican Ambassador, July 21, 1938, V Foreign Relations of the United States 674 (1938);
Note to the Cuban Government, July 16, 1960, 43 Dept. State Bull 171 (1960).

[Footnote 30]

See, e.g., McNair, The Seizure of Property and Enterprises in Indonesia, 6 Netherlands Int'l
L.Rev. 218, 243-253 (1959); Restatement, Foreign Relations Law of the United States
(Proposed Official Draft 1962), §§ 190-195.

[Footnote 31]

See Doman, supra, note 26 at 1143-1158; Fleming States, Contracts and Progress, 62-63
(1960); Bystricky, Notes on Certain International Legal Problems Relating to Socialist
Nationalisation, in International Assn. of Democratic Lawyers, Proceedings of the
Commission on Private International Law, Sixth Congress (1956), 15.

[Footnote 32]

See Anand, Role of the "New" Asian-African Countries in the Present International Legal
Order, 56 Am.J.Int'l L. 383 (1962); Roy, Is the Law of Responsibility of States for Injuries
to Aliens a Part of Universal International Law? 55 Am.J.Int'l L. 863 (1961).

[Footnote 33]

See 1957 Yb.U.N.Int'l L.Comm'n (Vol. 1) 155, 158 (statements of Mr. Padilla Nervo (Mexico)
and Mr. Pal (India)).

[Footnote 34]

There are, of course, areas of international law in which consensus as to standards is

greater and which do not represent a battleground for conflicting ideologies. This decision
in no way intimates that the courts of this country are broadly foreclosed from considering
questions of international law.
q

[Footnote 35]

See Restatement, Foreign Relations Law of the United States, Reporters' Notes (Proposed
Official Draft 1962), § 43, note 3.

[Footnote 36]

It is, of course, true that such determinations might influence others not to bring
expropriated property into the country, see pp. 376 U. S. 433-434, infra, so there indirect
impact might extend beyond the actual invalidations of title.

[Footnote 37]

Of course, to assist respondents in this suit, such a determination would have to include a
decision that, for the purpose of judging this expropriation under international law, C.A.V.
is not to be regarded as Cuban, and an acceptance of the principle that international law
provides other remedies for breaches of international standards of expropriation than suits
for damages before international tribunals. See 307 F.2d at 861, 868, for discussion of
these questions by the Court of Appeals.

[Footnote 38]

This possibility is consistent with the view that the deterrent effect of court invalidations
would not ordinarily be great. If the expropriating country could find other buyers for its
products at roughly the same price, the deterrent effect might be minimal, although
patterns of trade would be significantly changed.

[Footnote 39]

Were respondents' position adopted, the courts might be engaged in the difficult tasks of
ascertaining the origin of fungible goods, of considering the effect of improvements made
in a third country on expropriated raw materials, and of determining the title to
commodities subsequently grown on expropriated land or produced with expropriated
machinery.

By discouraging import to this country by traders certain or apprehensive of

nonrecognition of ownership, judicial findings of invalidity of title might limit competition
among sellers; if the excluded goods constituted a significant portion of the market, prices
for United States purchasers might rise with a consequent economic burden on United
States consumers. Balancing the undesirability of such a result against the likelihood of
furthering other national concerns is plainly a function best left in the hands of the political
branches.

MR. JUSTICE WHITE, dissenting.

I am dismayed that the Court has, with one broad stroke, declared the ascertainment and
application of international law beyond the competence of the courts of the United States
in a large and important category of cases. I am also disappointed in the Court's declaration
that the acts of a sovereign state with regard to the property of aliens within its borders are
beyond the reach of international law in the courts of this country. However clearly
established that law may be, a sovereign may violate it with impunity, except insofar as the
political branches of the government may provide a remedy. This backward-looking
doctrine, never before declared in this Court, is carried a disconcerting step further: not
only are the courts powerless to question acts of state proscribed by international law, but
they are likewise powerless to refuse to adjudicate the claim founded upon a foreign law;
they must render judgment, and thereby validate the lawless act. Since the Court expressly
extends its ruling to all acts of state expropriating property, however clearly inconsistent
with the international community,

Page 376 U. S. 440

all discriminatory expropriations of the property of aliens, as for example the taking of
properties of persons belonging to certain races, religions or nationalities, are entitled to
automatic validation in the courts of the United States. No other civilized country has
found such a rigid rule necessary for the survival of the Executive Branch of its
government; the Executive of no other government seems to require such insulation from
international law adjudications in its courts; and no other judiciary is apparently so
incompetent to ascertain and apply international law. [Footnote 2/1]

Page 376 U. S. 441

I do not believe that the act of state doctrine, as judicially fashioned in this Court, and the
reasons underlying it, require American courts to decide cases in disregard of international
law and of the rights of litigants to a full determination on the merits.

Prior decisions of this Court in which the act of state doctrine was deemed controlling do
not support the assertion that foreign acts of state must be enforced or recognized or
applied in American courts when they violate the law of nations. These cases do hold that a
f f l d h b d b d d
foreign act of state applied to persons or property within its borders may not be denied
effect in our courts on the ground that it violates the public policy of the forum. Also, the
broad language in some of these cases does evince

Page 376 U. S. 442

an attitude of caution and self-imposed restraint in dealing with the laws of a foreign
nation. But violations of international law were either not presented in these cases, because
the parties or predecessors in title were nationals of the acting state, or the claimed
violation was insubstantial in light of the facts presented to the Court and the principles of
international law applicable at the time. [Footnote 2/2]

Page 376 U. S. 443

These cases do not strongly imply or even suggest that the Court would woodenly apply the
act of state doctrine and grant enforcement to a foreign act where the act was a clear and
flagrant violation of international law,

Page 376 U. S. 444

as the District Court and the Court of Appeals have found in respect to the Cuban law
challenged herein. 193 F. Supp. 375, aff'd, 307 F.2d 845.

II

Though not a principle of international law, the doctrine of restraint, as formulated by this
Court, has its roots in sound policy reasons, and it is to these we must turn to decide
whether the act of state doctrine should

Page 376 U. S. 445

be extended to cover wrongs cognizable under international law.

Whatever may be said to constitute an act of state, [Footnote 2/3] our decisions make clear
that the doctrine of nonreview ordinarily applies to foreign laws affecting tangible property
located within the territory of a government which is recognized by the United States.
Oetjen v. Central Leather Co., 246 U. S. 297; Ricaud v. American Metal Co., 246 U. S. 304.
This judicially fashioned doctrine of nonreview is a corollary of the principle that,
ordinarily, a state has jurisdiction to prescribe the rules governing the title to property
within its territorial sovereignty, see Clarke v. Clarke, 178 U. S. 186; De Vaughn v.
Hutchinson, 165 U. S. 566, a principle reflected in the conflict of laws rule, adopted in
i t ll ll ti th t th l l i i th l i titl t t [F t t / ]
virtually all nations, that the lex loci is the law governing title to property. [Footnote 2/4]
This conflict rule would have been enough in itself to have controlled the outcome of most
of the act of state cases decided by this Court. Both of these rules rest on the deeply
imbedded postulate in international law of the territorial supremacy of the sovereign, a
postulate that has

Page 376 U. S. 446

been characterized as the touchstone of private and public international law. [Footnote
2/5] That the act of state doctrine is rooted in a well established concept of international
law is evidenced by the practice of other countries. These countries, without employing any
act of state doctrine, afford substantial respect to acts of foreign states occurring within
their territorial confines. [Footnote 2/6] Our act of state doctrine, as formulated in past
decisions of the Court, carries the territorial concept one step further. It precludes a
challenge to the validity of foreign law on the ordinary conflict of laws ground of
repugnancy to the public policy of the forum. Against the objection that the foreign act
violates domestic public policy, it has been said that the foreign law provides the rule of
decision where the lex loci rule would so indicate, in American courts. Bernstein v. Van
Heyghen Freres Societe Anonyme, 163 F.2d 246, 249 (C.A.2d Cir.); Holzer v. Deutsche
Reichsbahn-Gesellschaft, 277 N.Y. 474, 14 N.E.2d 798; McCarthy v. Reichsbank, 259
App.Div. 1016, 20 N.Y.S.2d 450, aff'd, 284 N.Y. 739, 31 N.E.2d 508. But cf. Sulyok v.
Penzintezeti Kozpont Budapest, 279 App.Div.

Page 376 U. S. 447

528, 111 N.Y.S.2d 75, aff'd, 304 N.Y. 704, 107 N.E.2d 604. See also Perutz v. Bohemian
Discount Bank, 304 N.Y. 533, 537, 110 N.E.2d 6, 7.

The reasons that underlie the deference afforded to foreign acts affecting property in the
acting country are several; such deference reflects an effort to maintain a certain stability
and predictability in transnational transactions, to avoid friction between nations, to
encourage settlement of these disputes through diplomatic means, and to avoid
interference with the Executive control of foreign relations. To adduce sound reasons for a
policy of nonreview is not to resolve the problem at hand, but to delineate some of the
considerations that are pertinent to its resolution.

Contrary to the assumption underlying the Court's opinion, these considerations are
relative, their strength varies from case to case, and they are by no means controlling in all
litigation involving the public acts of a foreign government. This is made abundantly clear
by numerous cases in which the validity of a foreign act of state is drawn in question and in
which these identical considerations are present in the same or a greater degree. American
courts have denied recognition or effect to foreign law, otherwise applicable under the
conflict of laws rules of the forum, to many foreign laws where these laws are deeply
inconsistent with the policy of the forum, notwithstanding that these laws were of obvious
political and social importance to the acting country. For example, foreign confiscatory
decrees purporting to divest nationals and corporations of the foreign sovereign of property
located in the United States uniformly have been denied effect in our courts, including this
Court; [Footnote 2/7]

Page 376 U. S. 448

courts continued to recognize private property rights of Russian corporations owning

property within the United States long after the Russian Government, recognized by the
United States, confiscated all such property and had rescinded the laws on which corporate
identity depended. [Footnote 2/8] Furthermore, our courts customarily refuse to enforce
the revenue and penal laws of a foreign state, since no country has an obligation to further
the governmental interests of a foreign sovereign. [Footnote 2/9] And the judgments of

Page 376 U. S. 449

foreign courts are denied conclusive or prima facie effect where the judgment is based on a
statute unenforceable in the forum, where the procedures of the rendering court markedly
depart from our notions of fair procedure, and generally where enforcement would be
contrary to the public policy of the forum. [Footnote 2/10] These rules demonstrate that
our courts have never been bound to pay unlimited deference to foreign acts of state,
defined as an act or law in which the sovereign's governmental interest is involved; they
simultaneously cast doubt on the proposition that the additional element in the case at bar,
that the property may have been within the territorial confines of Cuba when the
expropriation decree was promulgated,

Page 376 U. S. 450

requires automatic deference to the decree, regardless of whether the foreign act violates
international law. [Footnote 2/11]

III

I start with what I thought to be unassailable propositions: that our courts are obliged to
determine controversies

P 376 U S 451
Page 376 U. S. 451

on their merits, in accordance with the applicable law; and that part of the law American
courts are bound to administer is international law.

Article III, § 2, of the Constitutional states that

"[t]he judicial Power shall extend to all Cases . . . affecting Ambassadors, other public
Ministers and Consuls; -- to all Cases of admiralty and maritime Jurisdiction; -- to
Controversies . . . between a State, or the Citizens thereof, and foreign States, Citizens or
Subjects."

And § 1332 of the Judicial Code gives the courts jurisdiction over all civil actions between
citizens of a State and foreign states or citizens or subjects thereof. The doctrine that the
law of nations is a part of the law of the land, originally formulated in England and brought
to America as part of our legal heritage, is reflected in the debates during the Constitutional
Convention [Footnote 2/12] and in the Constitution itself. [Footnote 2/13] This Court has
time and again

Page 376 U. S. 452

effectuated the clear understanding of the Framers, as embodied in the Constitution, by

applying the law of nations to resolve cases and controversies. [Footnote 2/14] As stated in
The Paquete Habana, 175 U. S. 677, 175 U. S. 700:

"[i]nternational law

Page 376 U. S. 453

is part of our law, and must be ascertained and administered by the courts of justice of
appropriate jurisdiction as often as questions of right depending upon it are duly presented
for their determination."

Principles of international law have been applied in our courts to resolve controversies not
merely because they provide a convenient rule for decision, but because they represent a
consensus among civilized nations on the proper ordering of relations between nations and
the citizens thereof. Fundamental fairness to litigants, as well as the interest in stability of
relationships and preservation of reasonable expectations, call for their application
whenever international law is controlling in a case or controversy. [Footnote 2/15]

Page 376 U. S. 454

The relevance of international law to a just resolution of this case is apparent from the
impact of international law on other aspects of this controversy. Indeed, it is only because
of the application of international rules to resolve other issues that the act of state doctrine
becomes the determinative issue in this case. The basic rule that the law of the situs of
property is the proper law to be applied in determining title in other forums, whether styled
a rule of private international law or domestic conflict of law, is rooted in concepts firmly
embedded in a consensus of nations on territorial sovereignty. Without such a consensus
and the conflict of laws rule derived therefrom, the question of whether Cuba's decree can
be measured against the norms of international law would never arise in this litigation,
since, then, a court presumably would be free to apply its own rules governing the
acquisition of title to property. Furthermore, the contention that the sugar in question was
within the territorial confines of Cuba when the Cuban decree was enacted itself rests on
widely accepted principles of international law, namely, that the bays or inlets contiguous
to a country are within its boundaries, and that territorial jurisdiction extends at least three
miles beyond these boundaries. See Oppenheim, International Law, §§ 186, 190-191
(Lauterpacht, 8th ed. 1955). Without these rules derived from international law, this
confiscation could be characterized as extraterritorial, and therefore -- unless the Court
also intends to change this rule -- subject to the public policy test traditionally applied to
extraterritorial takings of property, even though embarrassing to foreign affairs. Further, in
response to the contention

Page 376 U. S. 455

that title to the sugar had already passed to Farr, Whitlock by virtue of the contract with
C.A.V. when the nationalization decree took effect, it was held below that, under "the law
merchant common to civilized countries" (emphasis supplied), Farr, Whitlock could not
acquire title to the shipment until payment was made in New York. Thus, the central issue
in this litigation is posed only because of numerous other applications of the law of nations
and domestic rules derived therefrom in respect to subsidiary, but otherwise controlling,
legal issues in the controversy.

The Court accepts the application of rules of international law to other aspects of this
litigation, accepts the relevance of international law in other cases, and announces that,
when there is an appropriate degree of

"consensus concerning a particular area of international law, the more appropriate it is for
the judiciary to render decisions regarding it, since the courts can then focus on the
application of an agreed principle to circumstances of fact, rather than on the sensitive task
of establishing a principle not inconsistent with the national interest or with international
justice."

Ante, p. 376 U. S. 428. The Court then, rather lightly, in my view, dispenses with its
obligation to resolve controversies in accordance with "international justice" and the
"national interest" by assuming and declaring that there are no areas of agreement between
nations in respect to expropriations. There may not be. But, without critical examination,
which the Court fails to provide, I would not conclude that a confiscatory taking which
discriminates against nationals of another country to retaliate against the government of
that country falls within that area of issues in international law "on which opinion seems to
be so divided." Nor would I assume, as the ironclad rule of the Court necessarily implies,
that there is not likely to be a consensus among nations in this area, as for example upon
the illegality of discriminatory takings of alien property based upon race,

Page 376 U. S. 456

religion or nationality. [Footnote 2/16] But, most of all, I would not declare that, even if
there were a clear consensus in the international community, the courts must close their
eyes to a lawless act and validate the transgression by rendering judgment for the foreign
state at its own request. This is an unfortunate declaration for this Court to make. It is, of
course, wholly inconsistent with the premise from which the Court starts, and, under it,
banishment of international law from the courts is complete and final in cases like this. I
cannot so cavalierly ignore the obligations of a court to dispense justice to the litigants
before it. [Footnote 2/17]

Page 376 U. S. 457

IV

The reasons for nonreview, based as they are on traditional concepts of territorial
sovereignty, lose much of their force when the foreign act of state is shown to be a violation
of international law. All legitimate exercises of sovereign power, whether territorial or
otherwise, should be exercised consistently with rules of international law, including those
rules which mark the bounds of lawful state action against aliens or their property located
within the territorial confines of the foreign state. Although a state may reasonably expect
that the validity of its laws operating on property within its jurisdiction will not be defined
by local notions of public policy of numerous other states (although a different situation
may well be presented when courts of another state are asked to lend their enforcement
machinery to effectuate the foreign act), [Footnote 2/18] it cannot with impunity ignore the
rules governing the conduct of all nations and expect that other nations and tribunals will
view its acts as within the permissible scope of territorial sovereignty Contrariwise to
view its acts as within the permissible scope of territorial sovereignty. Contrariwise, to
refuse inquiry into the question of whether norms of the international community have
been contravened by the act of state under review would seem to deny the existence or
purport of such norms, a view that seems inconsistent with the role of international law in
ordering the relations between nations. Finally, the impartial application of international
law would not only be an

Page 376 U. S. 458

affirmation of the existence and binding effect of international rules of order, but also a
refutation of the notion that this body of law consists of no more than the divergent and
parochial views of the capital importing and exporting nations, the socialist and free
enterprise nations.

The Court puts these considerations to rest with the assumption that the decisions of the
courts "of the world's major capital exporting country and principal exponent of the free
enterprise system" would hardly be accepted as impartial expressions of sound legal
principle. The assumption, if sound, would apply to any other problem arising from
transactions that cross state lines, and is tantamount to a declaration excusing this Court
from any future consequential role in the clarification and application of international law.
See National City Bank of New York v. Republic of China, 348 U. S. 356, 348 U. S. 363.
This declaration ignores the historic role which this Court and other American courts have
played in applying and maintaining principles of international law.

Of course, there are many unsettled areas of international law, as there are of domestic law,
and these areas present sensitive problems of accommodating the interests of nations that
subscribe to divergent economic and political systems. It may be that certain
nationalizations of property for a public purpose fall within this area. Also, it may be that
domestic courts, as compared to international tribunals or arbitral commissions, have a
different and less active role to play in formulating new rules of international law or in
choosing between rules not yet adhered to by any substantial group of nations. Where a
clear violation of international law is not demonstrated, I would agree that principles of
comity underlying the act of state doctrine warrant recognition and enforcement of the
foreign act. But none of these considerations relieves a court of the obligation to make an

Page 376 U. S. 459

inquiry into the validity of the foreign act, none of them warrants a flat rule of no inquiry at
all. The vice of the act of state doctrine, as formulated by the Court and applied in this case,
where the decree is alleged not only to be confiscatory, but also retaliatory and
discriminatory, and has been found by two courts to be a flagrant violation of international
law, is that it precludes any such examination, and proscribes any decision on whether
Cuban Law No. 851 contravenes an accepted principle of international law.

The other objections to reviewing the act challenged herein, save for the alleged
interference with the Executive's conduct of foreign affairs, seem without substance, both
in theory and as applied to the facts of the instant case. The achievement of a minimum
amount of stability and predictability in international commercial transactions is not
assured by a rule of nonreviewability which permits any act of a foreign state, regardless of
its validity under international law, to pass muster in the courts of other states. The very
act of a foreign state against aliens which contravenes rules of international law, the
purpose of which is to support and foster an order upon which people can rely, is at odds
with the achievement of stability and predictability in international transactions. And the
infrequency of cases in American courts involving foreign acts of state challenged as invalid
under international law furnishes no basis at all for treating the matter as unimportant and
for erecting the rule the Court announces today. [Footnote 2/19]

Page 376 U. S. 460

There is also the contention that the act of state doctrine serves to channel these disputes
through the processes designed to rectify wrongs of an international magnitude, see Oetjen
v. Central Leather Co., supra; Shapleigh v. Mier, supra. The result of the doctrine, it is
said, requires an alien to seek relief in the courts or through the executive of the
expropriating country, to seek relief through diplomatic channels of his own country and to
seek review in an international tribunal. These are factors an American court should
consider when asked to examine a foreign act of state, although the availability and
effectiveness of these modes of accommodation may more often be illusory than real.
Where alternative modes are available and are likely to be effective, our courts might well
stay their hand and direct a litigant to exhaust or attempt to utilize them before
adjudicating the validity of the foreign act of state. But the possibility of alternative
remedies, without more, is frail support for a rule of automatic deference to the foreign act
in all cases. The Court's rule is peculiarly inappropriate in the instant case, where no one
has argued that C.A.V. can obtain relief in the courts of Cuba, where the United States has
broken off diplomatic relations with Cuba, and

Page 376 U. S. 461

where the United States, although protesting the illegality of the Cuban decrees, has not
sought to institute any action against Cuba in an international tribunal.
V

There remains for consideration the relationship between the act of state doctrine and the
power of the executive over matters touching upon the foreign affairs of the Nation. It is
urged that the act of state doctrine is a necessary corollary of the executive's authority to
direct the foreign relations of the United States, and, accordingly, any exception in the
doctrine, even if limited to clear violations of international law, would impede or embarrass
the executive in discharging his constitutional responsibilities. Thus, according to the
Court, even if principles of comity do not preclude inquiry into the validity of a foreign act
under international law, due regard for the executive function forbids such examination in
the courts.

Without doubt, political matters in the realm of foreign affairs are within the exclusive
domain of the Executive Branch, as, for example, issues for which there are no available
standards or which are textually committed by the Constitution to the executive. [Footnote
2/20] But this is far from saying that the Constitution vests in the executive exclusive
absolute control of foreign affairs, or that the validity of a foreign act of state is necessarily
a political question. International law, as well as a treaty or executive agreement,

Page 376 U. S. 462

see United States v. Pink, 315 U. S. 203, provides an ascertainable standard for
adjudicating the validity of some foreign acts, and courts are competent to apply this body
of law notwithstanding that there may be some cases where comity dictates giving effect to
the foreign act because it is not clearly condemned under generally accepted principles of
international law. And it cannot be contended that the Constitution allocates this area to
the exclusive jurisdiction of the Executive, for the judicial power is expressly extended by
that document to controversies between aliens and citizens or States, aliens and aliens, and
foreign states and American citizens or States.

A valid statute, treaty or executive agreement could, I assume, confine the power of federal
courts to review or award relief in respect of foreign acts or otherwise displace
international law as the rule of decision. I would not disregard a declaration by the
Secretary of State or the President that an adjudication in the courts of the validity of a
foreign expropriation would impede relations between the United States and the foreign
government or the settlement of the controversy through diplomatic channels. But I reject
the presumption that these undesirable consequences would follow from adjudication in
every case, regardless of the circumstances. Certainly the presumption is inappropriate
here.
Soon after the promulgation of Cuban Law No. 851, the State Department of the United
States delivered a note of protest to the Cuban Government declaring this nationalization
law to be in violation of international law. [Footnote 2/21] Since the nationalization of the
property in question,

Page 376 U. S. 463

the United States has broken off diplomatic relations with the present Government of
Cuba. And in response to inquiries by counsel for the respondent in the instant case,
officials of the State Department nowhere alleged that adjudication of the validity of the
Cuban decree nationalizing C.V.A. would embarrass our relations with Cuba or impede
settlement on an international level. In 1963, the United States Government issued a freeze
order on all Cuban assets located in the United Sates. On these facts -- although there may
be others of which we are not aware -- it is wholly unwarranted to assume that an
examination of the validity of Cuban Law No. 851 and a finding of invalidity would intrude
upon the relations between the United States and Cuba.

But the Court is moved by the spectre of another possibility; it is said that an examination
of the validity of the Cuban law in this case might lead to a finding that the Act is not in
violation of widely accepted international norms, or that an adjudication here would
require a similar examination in other more difficult cases, in one of which it would be
found that the foreign law is not in breach of international law. The finding, either in this
case or subsequent ones, that a foreign act does not violate widely accepted international
principles might differ from the executive's view of the act and international law, might
thereby seriously impede the executive's functions in negotiating a settlement of the
controversy, and would therefore be inconsistent with the national interest. "[T]he very
expression of judicial

Page 376 U. S. 464

uncertainty might provide embarrassment to the Executive Branch." Ante, p. 376 U. S. 433.
These speculations, founded on the supposed impact of a judicial decision on diplomatic
relations, seem contrary to the Court's view of the arsenal of weapons possessed by this
country to make secure foreign investment, and the "ample powers [of the political
branches] to effect compensation," ante, p. 376 U. S. 436, and wholly inconsistent with its
view of the limited competence and knowledge of the judiciary in the area of foreign affairs
and diplomacy. Moreover, the expression of uncertainty feared by the Court is inevitable
under the Court's approach, as is well exemplified by the ex cathedra pronouncements in
the instant case While premising that a judicial expression of uncertainty on whether a
the instant case. While premising that a judicial expression of uncertainty on whether a
particular act clearly violates international law would be embarrassing to the Executive,
this Court, in this very case, announces as an underpinning of its decision that

"[t]here are few if any issues in international law today on which opinion seems to be so
divided as the limitations on a State's power to expropriate the property of aliens,"

and proceeds to demonstrate the absence of international standards by cataloguing the

divergent views of the "capital exporting," "free enterprise" nations, of the "newly
independent and underdeveloped countries," and of the "Communist countries" toward
both the issue of expropriation and international law generally. The act of state doctrine
formulated by the Court bars review in this case, and will do so in all others involving
expropriation of alien property precisely because of the lack of a consensus in the
international community on rules of law governing foreign expropriations. [Footnote 2/22]
Contrariwise, it

Page 376 U. S. 465

would seem that the act of state doctrine will not apply to a foreign act if it concerns an area
in which there is unusual agreement among nations, ante, p. 376 U. S. 428, which is not the
case with the broad area of expropriations. [Footnote 2/23] I fail to see how greater
embarrassment flows from saying that the foreign act does not violate clear and widely
accepted principles of international law than from saying, as the Court does, that
nonexamination and validation are required because there are no widely accepted
principles to which to subject the foreign act. [Footnote 2/24] As to potential

Page 376 U. S. 466

embarrassment, the difference is semantic, but, as to determining the issue on its merits
and as to upholding a regime of law, the difference is vast.

These assertions might find much more support in the authorities relied on by the Court
and others if the issue under discussion was not the undefined category -- expropriation --
but the clearly discrete issue of adequate and effective compensation. It strains credulity to
accept the proposition that newly emerging nations or their spokesmen denounce all rules
of state responsibility -- reject international law in regard to foreign nationals generally --
rather than reject the traditional rule of international law requiring prompt, adequate, and
effective compensation.

There is a further possibility of embarrassment to the executive from the blanket

presumption of validity applicable to all foreign expropriations, which the Court chooses to
p p y pp g p p
ignore, and which, in my view, is far more self-evident than those adduced by the Court.
That embarrassment stems from the requirement that all courts, including this Court,
approve, validate, and enforce any foreign act expropriating property at the behest of the
foreign state or a private suitor, regardless of whether the act arbitrarily discriminates
against aliens on the basis of race, religion, or nationality, and regardless of the position the
executive has taken in respect to the act. I would think that an adjudication by this Court
that the foreign act, as to which the executive is protesting and attempting to secure relief
for American citizens, is valid and beyond question enforceable in the courts of the United
States would indeed prove embarrassing to the Executive Branch of our Government in
many situations, much more so than a declaration of invalidity or a refusal to adjudicate
the controversy at all. For the likelihood that validation and enforcement of a foreign act
which is condemned by the executive will be inconsistent with national policy as well as the
goals of the international community is great. [Footnote 2/25] This result is precisely

Page 376 U. S. 467

because the Court, notwithstanding its protestations to the contrary, ante, p. 376 U. S. 428,
has laid down "an inflexible and all-encompassing rule in this case." [Footnote 2/26]

VI

Obviously there are cases where an examination of the foreign act and declaration of
invalidity or validity might

Page 376 U. S. 468

undermine the foreign policy of the Executive Branch and its attempts at negotiating a
settlement for a nationalization of the property of Americans. The respect ordinarily due to
a foreign state, as reflected in the decisions of this Court, rests upon a desire not to disturb
the relations between countries and on a view that other means, more effective than
piecemeal adjudications of claims arising out of a large-scale nationalization program of
settling the dispute, may be available. Precisely because these considerations are more or
less present or absent in any given situation, and because the Department of our
Government primarily responsible for the formulation of foreign policy and settling these
matters on a state-to-state basis is more competent than courts to determine the extent to
which they are involved, a blanket presumption of nonreview in each case is inappropriate,
and a requirement that the State Department render a determination after reasonable
notice, in each case, is necessary. Such an examination would permit the Department to
evaluate whether adjudication would "vex the peace of nations," whether a friendly foreign
i i i l d d h h l h h di l h h
sovereign is involved, and whether settlement through diplomacy or through an
international tribunal or arbitration is impending. Based upon such an evaluation, the
Department may recommend to the court that adjudication should not proceed at the
present time. Such a request I would accord considerable deference, and I would not
require a full statement of reasons underlying it. But I reject the contention that the
recommendation itself would somehow impede the foreign relations of the United States,
or unduly burden the Department. The Court notes that "[a]dverse domestic consequences
might flow from an official stand," by which I take it to mean that it might be politically
embarrassing on the domestic front for the Department of State to interpose an objection

Page 376 U. S. 469

in a particular case which has attracted public attention. But an official stand is what the
Department must take under the so-called Bernstein exception, which the Court declines to
disapprove. Assuming that there is a difference between an express official objection to
examination and the Executive's refusal to relieve "the court from any constraint upon the
exercise of its jurisdiction," it is not fair to allow the fate of a litigant to turn on the possible
political embarrassment of the Department of State, and it is not this Court's role to
encourage or require nonexamination by bottoming a rule of law on the domestic public
relations of the Department of State. The Court also rejects this procedure, because it
makes the examination of validity turn on an educated guess by the Executive as to the
probable result, and such a guess might turn out to be erroneous. The United States, in its
brief, has disclaimed any such interest in the result in these cases, either in the ultimate
outcome or the determination of validity, and I would take the Government at its word in
this matter, without second-guessing the wisdom of its view.

This is precisely the procedure that the Department of State adopted voluntarily in the
situation where a foreign government seeks to invoke the defense of immunity in our
courts. [Footnote 2/27] If it is not unduly disruptive for

Page 376 U. S. 470

the Department to determine whether to issue a certificate of immunity to a foreign

government itself when it seeks one, a recommendation by the Department in cases where
generally the sovereign is not a party can hardly be deemed embarrassing to our foreign
relations. Moreover, such a procedure would be consonant with the obligation of courts to
adjudicate cases on the merits except for reasons wholly sufficient in the particular case. As
I understand it, the executive has not yet said that adjudication in this case would impede
his functions in the premises; rather, it has asked us to adopt a rule of law foreclosing
inquiry into the subject unless the executive affirmatively allows the courts to adjudicate on
inquiry into the subject unless the executive affirmatively allows the courts to adjudicate on
the merits.

Where the courts are requested to apply the act of state doctrine at the behest of the State
Department, it does not follow that the courts are to proceed to adjudicate the action
without examining the validity of the foreign act under international law. The foreign
relations considerations and potential of embarrassment to the Executive inhere in
examination of the foreign act and in the result following from such an examination, not in
the matter of who wins. Thus, all the Department of State can legitimately request is
nonexamination of the foreign act. It has no proper interest or authority in having courts
decide a controversy upon anything less than all of the applicable law or to decide it in
accordance with the Executive's view of the outcome that best comports with the foreign or
domestic affairs of the day. We are not dealing here with those cases where a court refuses
to measure a foreign statute against public policy of the forum or against the fundamental
law of the foreign

Page 376 U. S. 471

state itself. In those cases, the judicially created act of state doctrine is an aspect of the
conflicts of law rules of the forum, and renders the foreign law controlling. But where a
court refuses to examine foreign law under principles of international law, which it is
required to do, solely because the Executive Branch requests the court, for its own reasons,
to abstain from deciding the controlling issue in the controversy, then, in my view, the
Executive has removed the case from the realm of the law to the realm of politics, and a
court must decline to proceed with the case. The proper disposition is to stay the
proceedings until circumstances permit an adjudication or to dismiss the action where an
adjudication within a reasonable time does not seem feasible. To do otherwise would not be
in accordance with the obligation of courts to decide controversies justly and in accordance
with the law applicable to the case.

It is argued that abstention in the case at bar would allow C.A.V. to retain possession of the
proceeds from the sugar and would encourage wrongfully deprived owners to engage in
devious conduct or "self-help" in order to compel the sovereign or one deriving title from
him into the position of plaintiff. The short answer to this is that it begs the question;
negotiation of the documents by Farr and retention of the proceeds by C.A.V. is unlawful if,
but only if, Cuba acquired title to the shipment by virtue of the nationalization decree. This
is the issue that cannot be decided in the case if deference to the State Department's
recommendation is paid (assuming for the moment that such a recommendation has been
made). Nor is it apparent that "self-help," if such it be deemed, in the form of refusing to
recognize title derived from unlawful paramount force is disruptful of or contrary to a
recognize title derived from unlawful paramount force is disruptful of or contrary to a
peaceful international order. Furthermore, a court has ample means at its disposal to
prevent a party who has engaged in wrongful conduct from

Page 376 U. S. 472

setting up defenses which would allow him to profit from the wrongdoing. Where the act of
state doctrine becomes a rule of judicial abstention, rather than a rule of decision for the
courts, the proper disposition is dismissal of the complaint or staying the litigation until
the bar is lifted, regardless of who has possession of the property whose title is in dispute.

VII

The position of the Executive Branch of the Government charged with foreign affairs with
respect to this case is not entirely clear. As I see it, no specific objection by the Secretary of
State to examination of the validity of Cuba's law has been interposed at any stage in these
proceedings, which would ordinarily lead to an adjudication on the merits. Disclaiming,
rightfully, I think, any interest in the outcome of the case, the United States has simply
argued for a rule of nonexamination in every case, which literally, I suppose, includes this
one. If my view had prevailed, I would have stayed further resolution of the issues in this
Court to afford the Department of State reasonable time to clarify its views in light of the
opinion. In the absence of a specific objection to an examination of the validity of Cuba's
law under international law, I would have proceeded to determine the issue and resolve
this litigation on the merits.

[Footnote 2/1]

The courts of the following countries, among others, and their territories, have examined a
fully "executed" foreign act of state expropriating property:

England: Anglo-Iranian Oil Co. v. Jaffrate, [1953] Int'l L.Rep. 316 (Aden Sup.Ct.); N.V. de
Bataafsche Petroleum Maatschappij v. The War Damage Comm'n [1956] Int'l L.Rep. 810
(Singapore Ct.App.).

Netherlands: Senembah Maatschappij N.V. v. Rupubliek Indonesie Bank Indonesia,

Nederlandse Jurisprudentie 1959, No. 73, p. 218 (Amsterdam Ct.App.), excerpts reprinted
in Domke, Indonesian Nationalization Measures Before Foreign Courts, 54 Am.J.Int'l 305,
307-315 (1960).

Germany: N.V. Verenigde Deli-Maatschapijen v. Deutsch-Indonesische Tabak-

Handelsgesellschaft m.b. H. (Bremen Ct. m.b. H. (Bremen Ct.App.)), excerpts reprinted in
Domke, of Property of Sudeten Germans Case, [1948] Am.Dig. 24, 25 (No. 12) (Amtsgericht
of Dingolfing).

Japan: Anglo-Iranian Oil Co. v. Indemitsu Kosan Kabushiki Kaisha, [1953] Int'l L.Rep.
305 (Dist.Ct. of Tokyo), aff'd, [1953] Int'l L.Rep. 312 (High Ct. of Tokyo).

Italy: Anglo-Iranian Oil Co. v. S.U.P.O.R. Co., [1955] Int'l L.Rep. 19 (Ct. of Venice); Anglo-
Iranian Oil Co. v. S.U.P.O.R. Co., [1955] Int'l L.Rep. 23 (Civ.Ct. of Rome).

France: Volatron v. Moulin, [1938-1940] Ann.Dig. 24 (Ct. of App. of Aix); Societe Potasas
Ibericas v. Nathan Bloch, [1938-1940] Ann.Dig. 150 (Ct. of Cassation).

The Court does not refer to any country which has applied the act of state doctrine in a case
where a substantial international law issue is sought to be raised by an alien whose
property has been expropriated. This country and this Court stand alone among the
civilized nations of the world in ruling that such an issue is not cognizable in a court of law.

The Court notes that the courts of both New York and Great Britain have articulated the act
of state doctrine in broad language similar to that used by this Court in Underhill v.
Hernandez, 168 U. S. 250, and from this it infers that these courts recognize no
international law exception to the act of state doctrine. The cases relied on by the Court
involved no international law issue. For, in these cases, the party objecting to the validity of
the foreign act was a citizen of the foreign state. It is significant that courts of both New
York and Great Britain, in apparently the first cases in which an international law issue was
squarely posed, ruled that the act of state doctrine was no bar to examination of the validity
of the foreign act. Anglo-Iranian Oil Co. v. Jaffrate, [1953] Int'l L.Rep. 316 (Aden Sup.Ct.):

"[T]he Iranian Laws of 1951 were invalid by international law, for, by them, the property of
the company was expropriated without any compensation."

Sulyok v. Penzintezeti Kozpont Budapest, 279 App.Div. 528, 111 N.Y.S.2d 75, aff'd, 304
N.Y. 704, 107 N.E.2d 604 (foreign expropriation of intangible property denied effect as
contrary to New York public policy).

[Footnote 2/2]

In one of the earliest decisions of this Court even arguably invoking the act of state
doctrine, Hudson v. Guestier, 4 Cranch 293, Chief Justice Marshall held that the validity of
a seizure by a foreign power of a vessel within the jurisdiction of the sentencing court could
not be reviewed "unless the court passing the sentence loses its jurisdiction by some
circumstance which the law of nations can notice." (Emphasis added.) Underhill v.
circumstance which the law of nations can notice. (Emphasis added.) Underhill v.
Hernandez, 168 U. S. 250, where the Court stated the act of state doctrine in its oft-quoted
form, was a suit in tort by an American citizen against an officer of the Venezuelan
Government for an unlawful detention and compelled operation of the plaintiff's water
facilities during the course of a revolution in that country. Well established principles of
immunity precluded the plaintiff's suit, and this was one of the grounds for dismissal.
However, as noted above, the Court did invoke the act of state doctrine in dismissing the
suit, and arguably the forced detention of a foreign citizen posed a claim cognizable under
international law. But the Court did not ignore this possibility of a violation of international
law; rather, in distinguishing cases involving arrests by military authorities in the absence
of war and those concerning the right of revolutionary bodies to interfere with commerce,
the Court passed on the merits of plaintiff's claim under international law, and deemed the
claim without merit under then existing doctrines. "[A]cts of legitimate warfare cannot be
made the basis of individual liability." (Emphasis added.) 168 U.S. at 168 U. S. 253. Indeed,
the Court cited Dow v. Johnson, 100 U. S. 158, a suit arising from seizures by American
officers in the South during the Civil War, in which it was held, without any reliance on the
act of state doctrine, that the law of nations precluded making acts of legitimate warfare a
basis for liability after the cessation of hostilities, and Ford v. Surget, 97 U. S. 594, which
held an officer of the Confederacy immune from damages for the destruction of property
during the war. American Banana Co. v. United Fruit Co., 213 U. S. 347, a case often
invoked for the blanket prohibition of the act of state doctrine, held only that the antitrust
laws did not extend to acts committed by a private individual in a foreign country with the
assistance of a foreign government. Most of the language in that case is in response to the
issue of how far legislative jurisdiction should be presumed to extend in the absence of an
express declaration. The Court held that the ordinary understandings of sovereignty
warranted the proposition that conduct of an American citizen should ordinarily be
adjudged under the law where the acts occurred. Rather than ignoring international law,
the law of nations was relied on for this rule of statutory construction.

More directly in point are the Mexican seizures passed upon in Oetjen v. Central Leather
Co., 246 U. S. 297, and Ricaud v. American Metal Co., 246 U. S. 304. In Oetjen, the
plaintiff claimed title from a Mexican owner who was divested of his property during the
Mexican revolution. The terms of the expropriation are not clear, but it appears that a
promise of compensation was made by the revolutionary government, and that the
property was to be used for the war effort. The only international law issue arguably
present in the case was by virtue of a treaty of the Hague Convention, to which both Mexico
and the United States were signatories, governing customs of war on land; although the
Court did not rest the decision on the treaty, it took care to point out that this seizure was
probably lawful under the treaty as a compelled contribution in time of war for the needs of
probably lawful under the treaty as a compelled contribution in time of war for the needs of
the occupying army. Moreover, the Court stressed the fact that the title challenged was
derived from a Mexican law governing the relations between the Mexican Government and
Mexican citizens. Aside from the citizenship of the plaintiff's predecessor in title, the
property seized was to satisfy an assessment of the revolutionary government which the
Mexican owner had failed to pay. It is doubtful that this measure, even as applied to non-
Mexicans, would constitute a violation of international law. Dow v. Johnson, supra. In
Ricaud, the titleholder was an American, and the Court deemed this difference irrelevant
"for the reasons given" in Oetjen. In Ricaud, there was a promise to pay for the property
seized during the revolution upon the cessation of hostilities and the seizure was to meet
exigencies created by the revolution, which was permissible under the provisions of the
Hague Convention considered in Oetjen. This declaration of legality in the Hague
Convention, and the international rules of war on seizures, rendered the allegation of an
international law violation in Ricaud sufficiently frivolous so that consideration on the
merits was unnecessary. The sole question presented in Shapleigh v. Mier, 299 U. S. 468,
concerned the legality of certain action under Mexican law, and the parties expressly
declined to press the question of legality under international law. And the Court's language
in that case -- "[f]or wrongs of that order, the remedy to be followed is along the channels
of diplomacy" -- must be read against the background of an arbitral claims commission
that had been set up to determine compensation for claimants in the position of Shapleigh,
the existence of which the Court was well aware.

"[A] tribunal is in existence, the International Claims Commission, established by

convention between the United States and Mexico, to which the plaintiffs are at liberty to
submit and have long ago submitted a claim for reparation."

299 U.S. at 299 U. S. 471.

In the other cases cited in the Court's opinion, ante, pp. 376 U. S. 416-417, the act of state
doctrine was not even peripherally involved; the law applicable in both United States v.
Belmont, 301 U. S. 324, and United States v. Pink, 315 U. S. 203, was a compact between
the United States and Russia regarding the effect of Russian nationalization decrees on
property located in the United States. No one seriously argued that the act of state doctrine
precludes reliance on a bi-national compact dealing with the effect to be afforded or denied
a foreign act of state.

[Footnote 2/3]

An act of state has been said to be any governmental act in which the sovereign's interest
qua sovereign is involved.
"The expression 'act of State' usually denotes 'an executive or administrative exercise of
sovereign power by an independent State or potentate, or by its or his duly authorized
agents or officers.' The expression, however, is not a term of art, and it obviously may, and
is in fact often intended to, include legislative and judicial acts such as a statute, decree or
order, or a judgment of a superior Court."

Mann, The Sacrosanctity of the Foreign Act of State, 59 L.Q.Rev. 42 (1943).

[Footnote 2/4]

IV Rabel, The Conflict of Laws: A Comparative Study, 30-69 (1958); Ehrenzweig, Conflict
of Laws, 607-633 (1962); Rest. (2d ed.) Conflict of Laws § 254a (Tent.Draft No. 5 (1959));
Baade, Indonesian Nationalization Measures Before Foreign Courts -- A Reply, 54
Am.J.Int'l L. 801 (1960); Re, Foreign Confiscations in Anglo-American Law -- A Study of
the "Rule of Decision" Principle, 49-50 (1951).

[Footnote 2/5]

See generally Kaplan and Katzenbach, The Political Foundations of International Law, 135-
172 (1961); Herz, International Politics in the Atomic Age 58-62 (1959).

[Footnote 2/6]

Anglo-Iranian Oil Co. v. Idemitsu Kosan Kabushiki Kaisha, [1953] Int'l L.Rep. 305
(Dist.Ct. of Tokyo), aff'd, [1953] Int'l L.Rep. 312 (High Ct. of Tokyo); Anglo-Iranian Oil Co.
v. S.U.P.O.R. Co., [1955] Int'l L.Rep. 19 (Ct. of Venice (1953)); Anglo-Iranian Oil Co. v.
S.U.P.O.R. Co., [1955] Int'l L.Rep. 23, 39-43 (Civ.Ct. of Rome); compare N.V. Verenigde
Deli-Maatschapijen v. Deutsch-Indonesische Tabak-Handelsgesellschaft m.b. H. (Bremen
Ct.App.), excerpts reprinted in Domke, Indonesian Nationalization Measures Before
Foreign Courts, 54 Am.J.Int'l L. 305, 313-314 (1960), with Confiscation of Property of
Sudeten Germans Case, [1948] Ann.Dig. 24, 25 (No. 12) (Amtsgericht of Dingolfing)
(discriminatory confiscatory decrees). See also West Rand Central Gold Mining Co. v. The
King, [1905] 2 K.B. 391.

[Footnote 2/7]

Moscow Fire Ins. Co. v. Bank of New York, 280 N.Y. 286, 20 N.E.2d 758 (1939), aff'd, sub
nom. United States v. Moscow Fire Ins. Co., 309 U.S. 624; Vladikavkazsky R. Co. v. New
York Trust Co., 263 N.Y. 369, 189 N.E. 456; Plesch v. Banque Nationale de la Republique
D'Haiti, 273 App.Div. 224, 77 N.Y.S.2d 43, aff'd, 298 N.Y. 573, 81 N.E.2d 106; Bollack v.
Societe Generale, 263 App.Div. 601, 33 N.Y.S.2d 986; Latvian State Cargo & Passenger
S.S. Line v. McGrath, 88 U.S.App.D.C. 226, 188 F.2d 1000.

[Footnote 2/8]

Second Russian Ins. Co. v. Miller, 297 F. 404 (C.A.2d Cir.); James & Co. v. Second Russian
Ins. Co., 239 N.Y. 248, 146 N.E. 369; Sokoloff v. National City Bank, 239 N.Y. 158, 145
N.E. 917; A/S Merilaid & Co. v. Chase Nat'l Bank, 189 Misc. 285, 71 N.Y.S.2d 377
(Sup.Ct.N.Y.). See also Compania Ron Bacardi v. Bank of Nova Scotia, 193 F. Supp. 814
(D.C.S.D.N.Y.) (normal conflict of laws rule superseded by a national policy against
recognition of Cuban confiscatory decrees).

Similarly, it has been held that nationalization of shares of a foreign corporation or

partnership owning property in the United States will not affect the title of former
shareholders or partners; the prior owners are deemed to retain their equitable rights in
assets located in the United States. Vladikavkazsky R. Co. v. New York Trust Co., 263 N.Y.
369, 189 N.E. 456. The acts of a belligerent occupant of a friendly nation in respect to
contracts made within the occupied nation have been denied application in our courts.
Aboitiz & Co. v. Price, 99 F. Supp. 602 (D.C.Utah). Compare Werfel v. Zivnostenska
Banka, 260 App.Div. 747, 752, 23 N.Y.S.2d 1001, 1005.

[Footnote 2/9]

See the recent affirmation of this doctrine in Banco do Brasil, S.A., v. Israel Commodity
Co., holding that an action by Brazil against a New York coffee importer for fraudulently
circumventing Brazilian foreign exchange regulations by forging documents in New York
was contrary to New York public policy, notwithstanding that the Bretton Woods
agreement, to which both the United States and Brazil are parties, expresses a policy
favorable to such exchange laws, 12 N.Y.2d 371, 239 N.Y.S.2d 872, 190 N.E.2d 235, cert.
denied, 376 U.S. 906. See also The Antelope, 10 Wheat. 66, 23 U. S. 123; Huntington v.
Attrill, 146 U. S. 657; Moore v. Mitchell, 30 F.2d 600, aff'd on other grounds, 281 U. S. 281
U.S. 18; Dicey, Conflict of Laws (Morris ed., 7th ed. 1958), 667; Wolff, Private International
Law (2d ed. 1950), 525.

[Footnote 2/10]

Hilton v. Guyot, 159 U. S. 113 (lack of reciprocity in the foreign state renders the judgment
only prima facie evidence of the justice of the plaintiff's claim); cf. Venezuelan Meat
Export Co. v. United States, 12 F. Supp. 379 (D.C.D.Md.); The W. Talbot Dodge, 15 F.2d
459 (D.C.S.D.N.Y.) (fraud is a defense to the enforcement of foreign judgments); Title Ins.
& Trust Co. v. California Development Co., 171 Cal. 173, 152 P. 542 (fraud); Banco Minero
v. Ross, 106 Tex. 522, 172 S.W. 711 (procedure of Mexican court offensive to natural
justice); De Brimont v. Penniman, 7 Fed.Cas. p. 309, No. 3,715 (C.C.S.D.N.Y.) (judgment
founded on a cause of action contrary to the "policy of our law, and does violence to what
we deem the rights of our own citizen"); other cases indicate that American courts will
refuse enforcement where protection of American citizens or institutions requires
reexamination. Williams v. Armroyd, 7 Cranch 423; MacDonald v. Grand Trunk R. Co., 71
N.H. 448, 52 A. 982; Caruso v. Caruso, 106 N.J.Eq. 130, 148 A. 882; Hohner v. Gratz, 50
F. 369 (C.C.S.D.N.Y.) (alternative holding). See generally Reese, The Status In This
Country of Judgments Rendered Abroad, 50 Col.L.Rev. 783 (1950).

[Footnote 2/11]

The Court attempts to distinguish between these foreign acts on the ground that all foreign
penal and revenue, and perhaps other public laws, are irrebuttably presumed invalid to
avoid the embarrassment stemming from examination of some acts, and that all foreign
expropriations are presumed valid for the same reason. This distinction fails to explain why
it may be more embarrassing to refuse recognition to an extraterritorial confiscatory law
directed at nationals of the confiscating state than it would be to refuse effect to a territorial
confiscatory law. From the viewpoint of the confiscating state, the need to affect property
beyond its borders may be as significant as the need to take title to property within its
borders. And it would appear more offensive to notions of sovereignty for an American
court to deny enforcement of a foreign law because it is deemed contrary to justice, morals,
or public policy than to deny enforcement because of principles of international law. It will
not do to say that the foreign state has no jurisdiction to affect title to property beyond its
borders, since other jurisdictional bases, such as citizenship, are invariably present. But for
the policy of the forum state, doubtless the foreign law would be given effect under
ordinary conflict of laws principles. Compare Sokoloff v. National City Bank, 239 N.Y. 158,
145 N.E. 917; Second Russian Ins. Co. v. Miller, 297 F. 404 (C.A.2d Cir.), with Werfel v.
Zivnostenska Banka, 260 App.Div. 747, 23 N.Y.S.2d 1001.

The refusal to enforce foreign penal and tax laws and foreign judgments is wholly at odds
with the presumption of validity and requirement of enforcement under the act of state
doctrine; the political realms of the acting country are clearly involved, the enacting
country has a large stake in the decision, and, when enforcement is against nationals of the
enacting country, jurisdictional bases are clearly present. Moreover, it is difficult,
conceptually or otherwise, to distinguish between the situation where a tax judgment
secured in a foreign country against one who is in the country at the time of judgment is
presented to an American court and the situation where a confiscatory decree is sought to
presented to an American court and the situation where a confiscatory decree is sought to
be enforced in American courts.

[Footnote 2/12]

For the extent to which the Framers contemplated the application of international law in
American courts and their concern that this body of law be administered uniformly in the
federal courts, see The Federalist: No. 3 at 22, by John Jay (Bourne ed. 1947, Book I); No.
80 at 112 and 114; No. 83 at 144, and No. 82, by Alexander Hamilton (Bourne ed. 1947,
Book II); No. 42, by James Madison (Bourne ed. 1947, Book I).

Thomas Jefferson, speaking as Secretary of State, wrote to M. Genet, French Minister, in

1793: "The law of nations makes an integral part . . . of the laws of the land." I Moore,
Digest of International Law (1906), 10. And see the opinion of Attorney General Randolph,
given in 1792: "The law of nations, although not specially adopted by the Constitution or
any municipal act, is essentially a part of the law of the land." 1 Op.Atty.Gen. 27. Also see
Warren, The Making of the Constitution, Pt. II, c. I at 116; Madison's Notes in 1 Farrand 21,
22, 244, 316. See generally Dickinson, The Law of Nations as Part of the National Law of
the United States, 101 U. of Pa.L.Rev.26 (1952).

[Footnote 2/13]

This intention was reflected and implemented in the Articles of the Constitution. Article I, §
8, empowers the Congress "[t]o define and punish Piracies and Felonies committed on the
high Seas, and Offences against the Law of Nations." Article III, § 2, extends the judicial
power

"to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United
States, and Treaties made, or which shall be made, under their Authority; -- to all Cases
affecting Ambassadors, other public Ministers and Consuls; -- to all Cases of admiralty and
maritime Jurisdiction; -- to Controversies to which the United States shall be a Party; -- to
Controversies between two or more States; -- between a State and Citizens of another State;
-- between Citizens of different States; -- between Citizens of the same State claiming Lands
under Grants of different States, and between a State, or the Citizens thereof, and foreign
States, Citizens or Subjects."

[Footnote 2/14]

As early as 1793, Chief Justice Jay stated in Chisholm v. Georgia that,

"Prior . . . to that period [the date of the Constitution], the United States had, by taking a
l th ti f th th b bl t th l f ti "
place among the nations of the earth, become amenable to the law of nations."

2 U. S. 2 Dall. 419 at 2 U. S. 474. And, in 1796, Justice Wilson stated in Ware v. Hylton:

"When the United States declared their independence, they were bound to receive the law
of nations, in its modern state of purity and refinement."

3 U. S. 3 Dall. 199 at 3 U. S. 281. Chief Justice Marshall was even more explicit in The
Nereide when he said:

"If it be the will of the Government to apply to Spain any rule respecting captures which
Spain is supposed to apply to us, the Government will manifest that will by passing an act
for the purpose. Till such an act be passed, the Court is bound by the law of nations, which
is a part of the law of the land."

13 U. S. 9 Cranch 388 at 13 U. S. 423.

As to the effect such an Act of Congress would have on international law, the Court has
ruled that an Act of Congress ought never to be construed to violate the law of nations if
any other possible construction remains. MacLeod v. United States, 229 U. S. 416, 229 U.
S. 434 (1913).

As was well stated in Hilton v. Guyot:

"International law, in its widest and most comprehensive sense -- including not only
questions of right between nations, governed by what has been appropriately called the 'law
of nations,' but also questions arising under what is usually called 'private international
law,' or the 'conflict of laws,' and concerning the rights of persons within the territory and
dominion of one nation, by reason of acts, private or public, done within the dominions of
another nation -- is part of our law, and must be ascertained and administered by the
courts of justice as often as such questions are presented in litigation between man and
man, duly submitted to their determination."

"The most certain guide, no doubt, for the decision of such questions is a treaty or a statute
of this country. But when, as is the case here, there is no written law upon the subject, the
duty still rests upon the judicial tribunals of ascertaining and declaring what the law is,
whenever it becomes necessary to do so, in order to determine the rights of parties to suits
regularly brought before them. In doing this, the courts must obtain such aid as they can
from judicial decisions, from the works of jurists and commentators, and from the acts and
usages of civilized nations."

U S US U S 6 ( 8 ) F th hi h li itl i k th
159 U. S. 159 U.S. 113, 159 U. S. 163 (1895). For other cases which explicitly invoke the
principle that international law is a part of the law of the land, see, for example: 3 U. S.
Janson, 3 Dall. 133, 3 U.S. 161; Respublica v. De Longchamps, 1 Dall. 111, 1 U.S. 116; The
Rapid, 8 Cranch 155, 12 U. S. 162; Fremont v. United States, 17 How. 542, 58 U. S. 557;
United States v. Arjona, 120 U. S. 479.

[Footnote 2/15]

Among others, international law has been relied upon in cases concerning the acquisition
and control of territory, Jones v. United States, 137 U. S. 202; Mormon Church v. United
States, 136 U. S. 1; Dorr v. United States, 195 U. S. 138; the resolution of boundary
disputes, Iowa v. Illinois, 147 U. S. 1; Arkansas v. Tennessee, 246 U. S. 158; questions of
nationality, United States v. Wong Kim Ark, 169 U. S. 649; Inglis v. The Trustees of the
Sailor's Snug Harbour, 3 Pet. 99; principles of war and neutrality and their effect on
private rights, The Steamship Appam, 243 U. S. 124; Dow v. Johnson, 100 U. S. 158; Ford
v. Surget, 97 U. S. 594; and private property rights generally, The Schooner Exchange v.
McFaddon, 7 Cranch 116; United States v. Percheman, 7 Pet. 51.

[Footnote 2/16]

"[D]iscriminatory laws enacted out of hatred, against aliens or against persons of any
particular race or category or against persons belonging to specified social or political
groups . . . , run counter to the internationally accepted principle of the equality of
individuals before the law."

Anglo-Iranian Oil Co. v. S.U.P.O.R. Co., [1955] Int'l L.Rep. 23, 40 (Civ.Ct. of Rome); see
also Friedman, Expropriation in International Law (1953), 189-192; Wortley,
Expropriation In Public International Law 120-121, (1959); Cheng, The Rationale of
Compensation for Expropriation, 44 Grotius Society 267, 281, 289 (1959); Seidl-
Hohenveldern, Title to Confiscated Foreign Property and Public International Law, 56
Am.J.Int'l L. 507, 509-510 (1962).

[Footnote 2/17]

In the only reference in the Court's opinion to fairness between the litigants, and a court's
obligation to resolve disputes justly, ante, p. 376 U. S. 435, the Court quickly disposes of
this consideration by assuming that the typical act of state case is between an original
owner and an "innocent" purchaser, so that it is not unjust to leave the purchaser's title
undisturbed by applying the act of state doctrine. Beside the obvious fact that this
assumption is wholly inapplicable to the case where the foreign sovereign itself, or its
t k t h it titl lid t d i t th tb it i f f
agent, seeks to have its title validated in our courts -- the case at bar -- it is far from
apparent that most cases represent suits between the original owner and an innocent
purchaser. The "innocence" of a purchaser who buys goods from a government with
knowledge that possession or apparent title was derived from an act patently in violation of
international law is highly questionable. More fundamentally, doctrines of commercial law
designed to protect the title of a bona fide purchaser can serve to resolve this question
without reliance upon a broad irrebuttable presumption of validity.

[Footnote 2/18]

Another situation was also presented by the Nazi decrees challenged in the Bernstein
litigation; these racial and religious expropriations, while involving nationals of the foreign
state and therefore customarily not cognizable under international law, had been
condemned in multinational agreements and declarations as crimes against humanity. The
acts could thus be measured in local courts against widely held principle, rather than
judged by the parochial views of the forum.

[Footnote 2/19]

The Court argues that an international law exception to the act of state doctrine would fail
to deter violations of international law, since judicial intervention would, at best, be
sporadic. At the same time, proceeding on a contradictory assumption as to the impact of
such an exception, the Court argues that the exception would render titles uncertain, and
upset the flow of international trade. The Court attempts to reconcile these conclusions by
distinguishing between "direct" and "indirect" impacts of a declaration of invalidity, and by
assuming that the exporting nation need only find other buyers for its products at the same
price. From the point of view of the exporting nation, the distinction between indirect and
direct impact is meaningless, and the facile assumption that other buyers at the same price
are available, and the further unstated assumption that purchase price is the only pertinent
consideration to the exporting country, are based on an oversimplified view of
international trade.

There is no evidence that either the absence of an act of state doctrine in the law of
numerous European countries or the uncertainty of our own law on this question, until
today's decision, has worked havoc with titles in international commerce or presented the
nice questions the Court sets out on p. 434, n 39, ante, or has substantially affected the flow
of international commerce.

[Footnote 2/20]

Th i i l d h th f i t t i t i i d b th U it d St t
These issues include whether a foreign state exists or is recognized by the United States,
Gelston v. Hoyt, 3 Wheat. 246; The Sapphire, 11 Wall. 164, 78 U. S. 168; the status that a
foreign state or its representatives shall have in this country (sovereign immunity), Ex
parte Muir, 254 U. S. 522; Ex parte Peru, 318 U. S. 578; the territorial boundaries of a
foreign state, Jones v. United States, 137 U. S. 202; and the authorization of its
representatives for state-to-state negotiation, Ex parte Hitz, 111 U. S. 766; In re Baiz, 135
U. S. 403.

[Footnote 2/21]

"[T]he Government of the United States considers this law to be manifestly in violation of
those principles of international law which have long been accepted by the free countries of
the West. It is, in its essence, discriminatory, arbitrary and confiscatory."

Press Release No. 397, Dept. of State, July 16, 1960.

The United States Ambassador to Cuba condemned this decree, stating to the Cuban
Ministry of Foreign Relations:

"Under instructions from my Government, I wish to express to Your Excellency the

indignant protest of my Government against this resolution and its effects upon the
legitimate rights which American citizens have acquired under the laws of Cuba and under
International Law."

Press Release No. 441, Dept. of State, Aug. 9, 1960.

[Footnote 2/22]

The Court disclaims saying that there is no governing international standard in this area,
but only that the matter is not meet for adjudication. Ante, p. 429, n 26. But since the
Court's view is that there are only the divergent views of nations that subscribe to different
ideologies and practical goals on "expropriations," the matter is not meet for adjudication,
according to the Court, because of the lack of any agreement among nations on standards
governing expropriations, i.e., there is no international law in this area, but only the
political views of the political branches of the various nations.

[Footnote 2/23]

There is another implication in the Court's opinion: the act of state doctrine applies to all
expropriations, not only because of the lack of a consensus among nations on any
standards, but because the issue of validity under international law "touches . . . the
ti l d id l i l l f th i b f th it f ti " If thi
practical and ideological goals of the various members of the community of nations." If this
statement means something other than that there is no agreement on international
standards governing expropriations, it must mean that the doctrine applies because the
issue is important politically to the foreign state. If this is what the Court means, the act of
state doctrine has been expanded to unprecedented scope. No foreign act is subject to
challenge where the foreign nation demonstrates that the act is in furtherance of its
practical or ideological goals. What foreign acts would not be so characterized?

[Footnote 2/24]

"A refusal of courts to consider foreign acts of State in the light of the law of nations is not .
. . merely a neutral doctrine of abstention. On the contrary, the effect of such a doctrine is
to lend the full protection of the United States courts, police and governmental agencies to
commercial property transactions which are contrary to the minimum standard of civilized
conduct. . . ."

The Association of the Bar of the City of New York, Committee on International Law, A
Reconsideration of the Act of State Doctrine In United States Courts (1959) 8.

[Footnote 2/25]

That embarrassment results from a rigid rule of act of state immunity is well demonstrated
by the judicial enforcement of German racial decrees after the war. The pronouncements by
United States courts that these decrees vest title beyond question was wholly at odds with
the executive's official policy, embodied in representations to other governments, that
property taken through racial decrees by the Nazi Government should be returned to the
original owners, and thus not be subject to reparation claims. Compare statements by
Secretary of State Marshall, reprinted in 16 Dept. State Bull. 653, 793 (1947), with
Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246 (C.A.2d Cir.). This
embarrassing divergence of governmental opinion was eliminated only after the executive
intervened and requested the courts to adjudicate the matter on the merits. Bernstein v.
Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375 (C.A.2d Cir.).

[Footnote 2/26]

It is difficult to reconcile the Court's statement that rules pertaining to expropriations are
unsettled or unclear with the Court's pronounced desire to avoid making any statements on
the proper or accepted principles of international law lest it embarrass the Executive, who
may have a different view in respect to this particular expropriation or this particular
expropriating country. Is not the Court's limitation of the act of state doctrine to the area of
i ti b d th t i t d fl idit f th i l i thi
expropriations -- based upon the uncertainty and fluidity of the governing law in this area -
- an admission that may prove to be embarrassing to the Executive at some later date? And
the very line drawing that the Court stresses as potentially disruptive of the Executive's
conduct of foreign affairs is inevitable under the Court's approach, since subsequent cases
not involving expropriations will require us to determine if the act of state doctrine applies
and the Court's standard is the strength and clarity of the principles of international law
thought to govern the issue. Again, our view of the clarity of these principles and the extent
to which they are really rules of international law may not be identical with the views of the
Department of State. These are some of the inherent difficulties of establishing a rule of law
on the basis of speculations about possible but unidentified embarrassment to the
Executive at some unknown and unknowable future date.

[Footnote 2/27]

The procedure was instituted as far back as The Schooner Exchange v. McFaddon, 7
Cranch 116 (1812), when a United States Attorney, on the initiative of the Executive Branch,
entered an appearance in a case involving the immunity of a foreign vessel, and was further
defined in Ex parte Muir, 254 U. S. 522, 254 U. S. 533 (1921), when the Court stated that
the request by the foreign suitor to the Executive Department was an acceptable and well
established manner of interposing a claim of immunity. Under the procedure outlined in
Muir, each of the contesting parties may raise the immunity issue by obtaining an official
statement from the State Department, or by encouraging the executive to set forth
appropriate suggestions to the Court through the Attorney General. See Compania
Espanola de Navegacion Maritima, S.A. v. The Navemar, 303 U. S. 68, 303 U. S. 74. See
generally Dickinson, The Law of Nations As National Law: "Political Questions," 104 U. of
Pa.L.Rev. 451, 470-475 (1956).

Oral Argument - October 22, 1963 (Part 1)

Oral Argument - October 23, 1963
Oral Argument - October 22, 1963 (Part 2)

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