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
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.
Between August 6 and August 9, 1960, the sugar covered by the contract between Farr, Whitlock and C. A. V.
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.
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
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
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.
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 are allowed
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, 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
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 have 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 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.
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.
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.
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
The extent to which this doctrine may apply to other kinds of public laws, though perhaps still an open question,
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.
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., Ware v. Hylton, 3 Dall. 199, 230; Hudson v. Guestier, 4 Cranch 293, 294; The Schooner Exchange v. M'Faddon, 7 Cranch 116, 135, 136; L'Invincible, 1 Wheat. 238, 253; The Santissima Trinidad, 7 Wheat. 283, 336, is found in Underhill v. Hernandez, 168 U.S. 250, where Chief Justice Fuller said for a unanimous Court (p. 252):
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 been 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. 468;
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 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.
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
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 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
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.
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.
We do not believe that this doctrine is compelled either by the inherent nature of sovereign authority, as some of the earlier decisions seem to imply, see Underhill, supra; American Banana, supra; Oetjen, supra, at 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. 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 of 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 fail to follow the rule rigidly.
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 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, 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
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." 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
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.
In Hinderlider v. La Plata River Co., 304 U.S. 92, 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
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
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.
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.
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 on its facts from this one—Underhill because sovereign immunity provided an independent ground and Oetjen, Ricaud, and Shapleigh because there
The possible adverse consequences of a conclusion to the contrary of that implicit in these cases is 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 only an occasional impact, since they depend on the fortuitous circumstance of the property in question being brought into this country.
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
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.
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.
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
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 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
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, 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
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 alternation 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,  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
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.
The judgment of the Court of Appeals is reversed and the case is remanded to the District Court for proceedings consistent with this opinion.
It is so ordered.
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,
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 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
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
Whatever may be said to constitute an act of state,
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;
I start with what I thought to be unassailable propositions: that our courts are obliged to determine controversies
Article III, § 2, of the Constitution 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
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. 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,
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),
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, 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 relieve a court of the obligation to make an
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.
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.
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.
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
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 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 enforcible 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.
Obviously there are cases where an examination of the foreign act and declaration of invalidity or validity might
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.
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
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 it into the position of plaintiff. The short answer to this is that it begs the question; negotiation of the documents by Farr, Whitlock 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 disruptive 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
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.
"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 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.
"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 wresting 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,
"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:
"22 Compañà Azucarera Vertientes Camagüey 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.
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. 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.
"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.
"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 conclusion, in which the Secretary concurs, is that the Department should not comment on matters pending before the courts."
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.
England: Anglo-Iranian Oil Co. v. Jaffrate,  Int'l L. Rep. 316 (Aden Sup. Ct.); N. V. de Bataafsche Petroleum Maatschappij v. The War Damage Comm'n,  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 L. 305, 307-315 (1960).
Germany: N. V. Verenigde Deli-Maatschapijen v. Deutsch-Indonesische Tabak-Handelsgesellschaft m. b. H. (Bremen Ct. App.), excerpts reprinted in Domke, supra, at 313-314 (1960); Confiscation of Property of Sudeten Germans Case,  Ann. Dig. 24, 25 (No. 12) (Amtsgericht of Dingolfing).
Japan: Anglo-Iranian Oil Co. v. Idemitsu Kosan Kabushiki Kaisha.  Int'l L. Rep. 305 (Dist. Ct. of Tokyo), aff'd  Int'l L. Rep. 312 (High Ct. of Tokyo).
Italy: Anglo-Iranian Oil Co. v. S. U. P. O. R. Co.,  Int'l L. Rep. 19 (Ct. of Venice); Anglo-Iranian Oil Co. v. S. U. P. O. R. Co.,  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,  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).
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 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—"For 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 471.
In the other cases cited in the Court's opinion, ante pp. 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 binational compact dealing with the effect to be afforded or denied a foreign act of state.
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.
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 be enforced in American courts.
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).
"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." 9 Cranch 388, at 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, 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." 159 U.S. 113, 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: Talbot v. Janson, 3 Dall. 133, 161; Respublica v. De Longchamps, 1 Dall. 111, 116; The Rapid, 8 Cranch 155, 162; Fremont v. United States. 17 How. 542, 557; United States v. Arjona, 120 U.S. 479.
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.
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.
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.