MR. JUSTICE WHITE delivered the opinion of the Court.
The issue in this case is whether the failure of respondents to return to petitioner Alfred Dunhill of London, Inc. (Dunhill), funds mistakenly paid by Dunhill for cigars that had been sold to Dunhill by certain expropriated Cuban cigar businesses was an "act of state" by Cuba precluding an affirmative judgment against respondents.
The rather involved factual and legal context in which this litigation arises is fully set out in the District Court's
This litigation began when the former owners of the Cuban companies, most of whom had fled to the United States, brought various actions against the three American importers for trademark infringement and for the purchase price of any cigars that had been shipped to importers from the seized Cuban plants and that bore United States trademarks claimed by the former owners to be their property. Following the conclusion of the related litigation in F. Palicio y Compania, S. A. v. Brush, supra,
Based on the "act of state" doctrine which had been reaffirmed in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), the District Court held in F. Palicio y Compania, S. A. v. Brush, supra, and here, that it was required to give full legal effect to the 1960 confiscation of the five cigar companies insofar as it purported to take the property of Cuban nationals located within Cuba. Interventors were accordingly entitled to collect from the importers all amounts due and unpaid with respect to shipments made after the date of intervention. The contrary conclusion was reached as to the accounts owing at the time of intervention: Because the United States
This conclusion brought to the fore the importers' claim that their payment of the preintervention accounts had been made in error and that they were entitled to recover these payments from interventors by way of setoff and counterclaim. Although their position that the 1960 confiscation entitled them to the sums due for preintervention sales had been rejected and the District Court had ruled that they "had no right to receive or retain such payment,"
The importers were accordingly held entitled to set off their mistaken payments to interventors for preintervention shipments against the amounts due from them for their post-intervention purchases. Faber and Saks, because they owed more than interventors were obligated to return to them, were satisfied completely by the right to setoff. But Dunhill—and at last we arrive at the issue in this case—was entitled to more from interventors —$148,000—than it owed for postintervention shipments—$93,000—and to be made whole, asked for and was granted judgment against interventors for the full amount of its claim, from which would be deducted the smaller judgment entered against it.
The Court of Appeals, Menendez v. Saks & Co., 485 F.2d 1355 (CA2 1973), agreed that the former owners were entitled to recover from the importers the full amount of preintervention accounts receivable. It also held that the mistaken payments by importers to interventors
The District Court and the Court of Appeals held that for purposes of this litigation interventors were not entitled to the preintervention accounts receivable by virtue of the 1960 confiscation and that, despite other arguments to the contrary, nothing based on their claim to those accounts entitled interventors to retain monies mistakenly paid on those accounts by importers. We do not disturb these conclusions.
If interventors, having had their liability adjudicated and various defenses rejected, including the claimed act of state, with respect to preintervention accounts, represented by the Cuban confiscation in 1960, were nevertheless to escape repayment by claiming a second and later act of state involving the funds mistakenly paid them, it was their burden to prove that act. Concededly, they declined to pay over the funds; but refusal to repay does not necessarily assert anything more than what interventors had claimed from the outset and what they have continued to claim in this Court—that the preintervention accounts receivable were theirs and that they had no obligation to return payments on those accounts.
In The "Gul Djemal," 264 U.S. 90 (1924), a supplier libeled and caused the arrest of the Gul Djemal, a steamship owned and operated for commercial purposes by the Turkish Government, in an effort to recover for supplies and services sold to and performed for the ship. The ship's master, "a duly commissioned officer of the Turkish Navy," id., at 94-95, appeared in court and asserted sovereign immunity, claiming that such an assertion defeated the court's jurisdiction. A direct appeal was taken to this Court, where it was held that the master's assertion of sovereign immunity was insufficient because his mere representation of his government as master of a commercial ship furnished no basis for assuming he was entitled to represent the sovereign in other capacities.
We thus disagree with the Court of Appeals that the mere refusal of the interventors to repay funds followed by a failure to prove that interventors "were not acting within the scope of their authority as agents of the Cuban government" satisfied respondents' burden of establishing their act of state defense. Menendez v. Saks & Co., 485 F. 2d, at 1371. Nor do we consider Underhill v. Hernandez, 168 U.S. 250 (1897), heavily relied upon by the Court of Appeals, to require a contrary conclusion.
If we assume with the Court of Appeals that the Cuban Government itself had purported to exercise sovereign power to confiscate the mistaken payments belonging to three foreign creditors and to repudiate interventors' adjudicated obligation to return those funds, we are nevertheless persuaded by the arguments of petitioner and by those of the United States that the concept of an act of state should not be extended to included the repudiation of a purely commercial obligation owed by a foreign sovereign or by one of its commercial instrumentalities. Our cases have not yet gone so far, and we decline to expand their reach to the extent necessary to affirm the Court of Appeals.
Distinguishing between the public and governmental acts of sovereign states on the one hand and their private and commercial acts on the other is not a novel approach. As the Court stated through Mr. Chief Justice Marshall long ago in Bank of the United States v. Planters' Bank of Georgia, 9 Wheat. 904, 907 (1824):
Cf. Sloan Shipyards v. United States Fleet Corp., 258 U.S. 549, 567-568 (1922). In this same tradition, South Carolina v. United States, 199 U.S. 437 (1905), drew a line for purposes of tax immunity between the historically recognized governmental functions of a State and businesses engaged in by a State of the kind which theretofore had been pursued by private enterprise. Similarly, in Ohio v. Helvering, 292 U.S. 360, 369 (1934), the Court said: "If a state chooses to go into the business of buying and selling commodities, its right to do so may be conceded so far as the Federal Constitution is concerned; but the exercise of the right is not the performance of a governmental function . . . . When a state enters the market place seeking customers it divests itself of its quasi sovereignty pro tanto, and takes on the character of a trader . . . ." It is thus a familiar concept that "there is a constitutional line between the State as government and the State as trader . . . ." New York v. United States, 326 U.S. 572, 579 (1946). See also Parden v. Terminal R. Co., 377 U.S. 184, 189-190 (1964); California v. Taylor, 353 U.S. 553, 564 (1957); United States v. California, 297 U.S. 175, 183 (1936).
It is the position of the United States, stated in an amicus brief filed by the Solicitor General, that such a line should be drawn in defining the outer limits of the act of state concept and that repudiations by a foreign sovereign of its commercial debts should not be considered to be acts of state beyond legal question in our courts. Attached to the brief of the United States and to this opinion as Appendix 1 is the letter of November 26, 1975, in which the Department of State, speaking through its Legal Adviser agrees with the brief filed by the Solicitor General and, more specifically, declares that
The major underpinning of the act of state doctrine is the policy of foreclosing court adjudications involving the legality of acts of foreign states on their own soil that might embarrass the Executive Branch of our Government in the conduct of our foreign relations. Banco Nacional de Cuba v. Sabbatino, 376 U. S., at 427-428, 431-433. But based on the presently expressed views of those who conduct our relations with foreign countries, we are in no sense compelled to recognize as
Although it had other views in years gone by, in 1952, as evidenced by Appendix 2 (the Tate letter) attached to this opinion, the United States abandoned the absolute theory of sovereign immunity and embraced the restrictive view under which immunity in our courts should be granted only with respect to causes of action arising out of a foreign state's public or governmental actions and not with respect to those arising out of its commercial or proprietary actions. This has been the official policy of our Government since that time as the attached letter of November 26, 1975, confirms:
Repudiation of a commercial debt cannot, consistent with this restrictive approach to sovereign immunity, be treated as an act of state; for if it were, foreign governments,
Although at one time this Court ordered sovereign immunity extended to a commercial vessel of a foreign country absent a suggestion of immunity from the Executive Branch and although the policy of the United States with respect to its own merchant ships was then otherwise, Berizzi Bros. Co. v. S. S. Pesaro, 271 U.S. 562 (1926), the authority of that case has been severely diminished by later cases such as Ex parte Peru, 318 U.S. 578 (1943), and Mexico v. Hoffman, 324 U.S. 30 (1945). In the latter case the Court unanimously denied immunity to a commercial ship owned but not possessed by the Mexican Government. The decision rested on the fact that the Mexican Government was not in possession, but the Court declared, id., at 35-36:
In a footnote the Court expressly questioned the Berizzi Bros. holding,
In the last 20 years, lower courts have concluded, in
Participation by foreign sovereigns in the international commercial market has increased substantially in recent years. Cf. International Economic Report of the President 56 (1975). The potential injury to private businessmen —and ultimately to international trade itself— from a system in which some of the participants in the international market are not subject to the rule of law has therefore increased correspondingly. As noted above, courts of other countries have also recently adopted the restrictive theory of sovereign immunity. Of equal importance is the fact that subjecting foreign governments to the rule of law in their commercial dealings presents a much smaller risk of affronting their sovereignty than
See also id., at 430 n. 34. There may be little codification or consensus as to the rules of international law concerning exercises of governmental powers, including military powers and expropriations, within a sovereign state's borders affecting the property or persons of aliens. However, more discernible rules of international law have emerged with regard to the commercial dealings of private parties in the international market.
Of course, sovereign immunity has not been pleaded in this case; but it is beyond cavil that part of the foreign relations law recognized by the United States is that the commercial obligations of a foreign government may be adjudicated in those courts otherwise having jurisdiction to enter such judgments. Nothing in our national policy calls on us to recognize as an act of state a repudiation by Cuba of an obligation adjudicated in our courts and arising out of the operation of a commercial business by one of its instrumentalities. For all the reasons which led the Executive Branch to adopt the restrictive theory of sovereign immunity, we hold that the mere assertion of sovereignty as a defense to a claim arising out of purely commercial acts by a foreign sovereign is no more effective if given the label "Act of State" than if it is given the label "sovereign immunity."
APPENDIX 1 TO OPINION OF THE COURT
THE LEGAL ADVISER, DEPARTMENT OF STATE, Washington, November 26, 1975.
DEAR MR. SOLICITOR GENERAL:
In the case of Alfred Dunhill of London, Inc. v. The
The Department of State believes that the question of whether the Sabbatino case should be reconsidered involves matters of importance to the foreign policy interests of the United States and requests that its views be conveyed to the Supreme Court.
The views expressed herein are in addition to the arguments presented in the brief amicus curiae which the United States is filing in the Dunhill case. As urged in that brief, we do not believe that the Dunhill case raises an act of state question because the case involves an act which is commercial, and not public, in nature. Moreover, since 1952, the Department of State has adhered to the position that the commercial and private activities of foreign states do not give rise to sovereign immunity. Implicit in this position is a determination that adjudications of commercial liability against foreign states do not impede the conduct of foreign relations, and that such adjudications are consistent with international law on sovereign immunity.
In the event, however, that the Court reaches the question whether the Sabbatino holding should be reconsidered, we believe that the following considerations should be called to the Court's attention:
Since Sabbatino was decided in 1964, the Department of State has on two occasions expressed to courts in the United States its views concerning act of state adjudications. First, in the Sabbatino case itself, on remand, the Executive Branch declined to make a determination under the Hickenlooper Amendment, 22 U. S. C. 2370 (e) (2), "that application of the act of state doctrine is required in this case by the foreign policy
Second, in First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, the Department of State informed the Supreme Court that general foreign relations considerations did not require application of the act of state doctrine to bar adjudication of a counterclaim when the foreign state's claim arises from a relationship between the parties existing when the act of state occurred, and when the amount of relief to be granted is limited to the amount of the foreign state's claim.
This trend is mirrored in other countries. Apart from the cases cited by Mr. Justice White in Sabbatino, 376 U. S., at 440 n. 1, there have been several recent decisions where foreign courts have reviewed state acts under international law.
The present case is similar to Bernstein, Farr and First National City Bank. This Department is of the opinion that there would be no embarrassment to the conduct of foreign policy if the Court should decide in this case to adjudicate the legality of any act of state found to have taken place and to make such adjudication in accordance with any principle of international law found to be relevant.
In general this Department's experience provides little support for a presumption that adjudication of acts of foreign states in accordance with relevant principles of international law would embarrass the conduct of foreign policy. Thus, it is our view that if the Court should decide to overrule the holding in Sabbatino so that acts of state would thereafter be subject to adjudication in American courts under international law, we would not anticipate embarrassment
APPENDIX 2 TO OPINION OF THE COURT
May 19, 1952.
MY DEAR MR. ATTORNEY GENERAL:
The Department of State has for some time had under consideration the question whether the practice of the Government in granting immunity from suit to foreign governments made parties defendant in the courts of the United States without their consent should not be changed. The Department has now reached the conclusion that such immunity should no longer be granted in certain types of cases. In view of the obvious interest of your Department in this matter I should like to point out briefly some of the facts which influenced the Department's decision.
A study of the law of sovereign immunity reveals the existence of two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the classical or absolute theory of sovereign immunity, a sovereign cannot, without his consent, be made a respondent in the courts of another sovereign. According to the newer or restrictive theory of sovereign immunity, the immunity of the sovereign is recognized with regard to sovereign or public acts (jure imperii) of a state, but not with respect to private acts (jure gestionis). There is agreement by proponents of both theories, supported by practice, that sovereign immunity should not be claimed or granted in actions with respect to real property (diplomatic and perhaps consular property excepted) or with respect to the disposition of the
The classical or virtually absolute theory of sovereign immunity has generally been followed by the courts of the United States, the British Commonwealth, Czechoslovakia, Estonia, and probably Poland.
The decisions of the courts of Brazil, Chile, China, Hungary, Japan, Luxembourg, Norway, and Portugal may be deemed to support the classical theory of immunity if one or at most two old decisions anterior to the development of the restrictive theory may be considered sufficient on which to base a conclusion.
The position of the Netherlands, Sweden, and Argentina is less clear since although immunity has been granted in recent cases coming before the courts of those countries, the facts were such that immunity would have been granted under either the absolute or restrictive theory. However, constant references by the courts of these three countries to the distinction between public and private acts of the state, even though the distinction was not involved in the result of the case, may indicate an intention to leave the way open for a possible application of the restrictive theory of immunity if and when the occasion presents itself.
A trend to the restrictive theory is already evident in the Netherlands where the lower courts have started to apply that theory following a Supreme Court decision to the effect that immunity would have been applicable in the case under consideration under either theory.
The German courts, after a period of hesitation at the end of the nineteenth century have held to the classical theory, but it should be noted that the refusal of the Supreme Court in 1921 to yield to pressure by the lower courts for the newer theory was based on the view that that theory had not yet developed sufficiently to justify a change. In view of the growth of the restrictive
The newer or restrictive theory of sovereign immunity has always been supported by the courts of Belgium and Italy. It was adopted in turn by the courts of Egypt and of Switzerland. In addition, the courts of France, Austria, and Greece, which were traditionally supporters of the classical theory, reversed their position in the 20's to embrace the restrictive theory. Rumania, Peru, and possibly Denmark also appear to follow this theory.
Furthermore, it should be observed that in most of the countries still following the classical theory there is a school of influential writers favoring the restrictive theory and the views of writers, at least in civil law countries, are a major factor in the development of the law. Moreover, the leanings of the lower courts in civil law countries are more significant in shaping the law than they are in common law countries where the rule of precedent prevails and the trend in these lower courts is to the restrictive theory.
Of related interest to this question is the fact that ten of the thirteen countries which have been classified above as supporters of the classical theory have ratified the Brussels Convention of 1926 under which immunity for government owned merchant vessels is waived. In addition the United States, which is not a party to the Convention, some years ago announced and has since followed, a policy of not claiming immunity for its public owned or operated merchant vessels. Keeping in mind the importance played by cases involving public vessels in the field of sovereign immunity, it is thus noteworthy that these ten countries (Brazil, Chile, Estonia, Germany, Hungary, Netherlands, Norway, Poland, Portugal, Sweden) and the United States have already relinquished by treaty or in practice an important part of the immunity which they claim under the classical theory.
It is realized that a shift in policy by the executive cannot control the courts but it is felt that the courts are less likely to allow a plea of sovereign immunity where the executive has declined to do so. There have been indications that at least some Justices of the Supreme Court feel that in this matter courts should follow the branch of the Government charged with responsibility for the conduct of foreign relations.
In order that your Department, which is charged with representing the interests of the Government before the courts, may be adequately informed it will be the Department's practice to advise you of all requests by foreign
MR. JUSTICE POWELL, concurring.
I join the opinion of the Court. Since the line between commercial and political acts of a foreign state often will be difficult to delineate, I write to reaffirm my view that even in cases deemed to involve purely political acts, it is the duty of the judiciary to decide for itself whether deference to the political branches of Government requires abstention. As I stated in First Nat. City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 775-776 (1972) (concurring in judgment):
Just as I saw no circumstances requiring judicial abstention in that case, I see none here. Nor can I foresee any in cases involving only the commercial acts of a foreign state.
MR. JUSTICE STEVENS, concurring.
For reasons stated in Parts I and II of the Court's opinion, I agree that the act of state doctrine does not bar the entry of the judgment in favor of Dunhill.
MR. JUSTICE MARSHALL, with whom MR. JUSTICE BRENNAN, MR. JUSTICE STEWART, and MR. JUSTICE BLACKMUN join, dissenting.
The act of state doctrine commits the courts of this country not to sit in judgment on the acts of a foreign
As of September 15, 1960, when the Cuban Government "intervened," or nationalized, five Cuban-owned cigar manufacturers, petitioner Dunhill had received some $148,600 worth of cigars for which it had not yet paid. In the period between intervention and February 1961, Dunhill took delivery of an additional $93,000 worth of shipments. Both the District Court and the Court of Appeals concluded that the intervention was to be given full legal effect with respect to the property of Cuban nationals located in Cuba, and that the interventors were therefore entitled to payment for postintervention shipments. F. Palicio y Compania, S. A. v. Brush, 256 F.Supp. 481, 486-490 (SDNY 1966), aff'd, 375 F.2d 1011 (CA2), cert. denied sub nom. Brush v. Republic of Cuba, 389 U.S. 830 (1967). It is quite clear that that result was correct, and that it would have been no different had the intervened firms been owned by United States citizens. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964).
The interventors have not taken any discrete, overt action for which to claim the status of an act of state. Rather, they have received and long retained the money paid to them for preintervention shipments, and they have ignored Dunhill's demands for its return. The Court declines to view this course of conduct as reflecting an exercise of sovereign power to retain the funds at issue after they arrived in Cuba, explaining in part:
I do not understand the Court to suggest, however, that the act of state doctrine can be triggered only by a "statute, decree, order, or resolution" of a foreign government, or that the presence of an act of state can only be demonstrated by some affirmative action by the foreign sovereign. While it is true that an act of state
These cases demonstrate not only that an act of state need not be formalized in any particular manner, but also that it need not take the form of active, rather than
That a foreign sovereign has issued no formal decree and performed no "affirmative" act is not fatal, then, to an act of state claim. If the foreign state has exercised a sovereign power either to act or to refrain from acting, there is an act of state. In a case very similar to this one, the New York Court of Appeals held that the Cuban bank's dishonoring of tax exemption certificates, the redemption of which had been suspended by a decision of the Cuban Currency Stabilization Fund, was an act of state. French v. Banco Nacional de Cuba, 23 N.Y.2d 46, 242 N.E.2d 704 (1968). The act of state, the court wrote, "was the defendant's refusal to perform; the currency regulations, though equally the product of an act of state, were simply the justification for the refusal."
The Court, I take it, does not dispute that a refusal to act constitutes an act of state when shown to reflect the exercise of sovereign power. Rather, the Court finds no exercise of sovereign power to retain the funds at issue after they arrived in Cuba. Refusal to repay, the Court suggests, does not necessarily reflect anything more than the interventors' initial contention, rejected by the District
As I have already indicated, however, the respondents' position has not been, and need not be, limited to the contention that the September 15 decree operated to seize the preintervention accounts receivable. Counsel for the interventors and the Republic of Cuba stated at trial, in his brief to this Court, and again in his oral argument in this Court:
This statement confirms that while Cuba's retention of and refusal to return the funds once they arrived in Cuba was "pursuant to" the September 15 decree, it was without regard to whether that decree would, in the eyes of a United States court, have entitled the interventors to collect the accounts receivable in the first place.
MR. JUSTICE WHITE advances a contention, not adopted by the Court, that even if the Cuban Government "had purported to exercise sovereign power to confiscate" the monies at issue, ante, at 695, the act of state doctrine is inapplicable because of the "purely commercial" nature of the confiscation. While I am prompted to make several observations on the suggested rationale for a broad "commercial act" exception to the act of state doctrine, ultimately there is no need to consider whether, and under what circumstances, an exception for commercial acts might be appropriate. It will suffice to say that no such exception is appropriate in this case.
I note at the outset that the commercial act exception to the act of state doctrine is supported by the Department of State. In its most recent Bernstein letter,
In concluding that the act of state doctrine should not apply to the purely commercial acts of sovereign nations, MR. JUSTICE WHITE relies heavily upon the widespread acceptance of the "restrictive theory" of sovereign immunity, which declines to extend immunity to foreign governments acting in a "private," or commercial, capacity. The restrictive theory of sovereign immunity has not been adopted by this Court, but even if we assume that it is the law in this country, it does not follow that there should be a commercial act exception to the act of state doctrine.
It is true, of course, that a particular litigant's claim may be as effectively defeated by application of the act of state doctrine as by a foreign government's invocation of sovereign immunity. But the doctrines of sovereign immunity and act of state, while related, differ fundamentally in their focus and in their operation. Sovereign immunity accords a defendant exemption from
The act of state doctrine, "`although it shares with the immunity doctrine a respect for sovereign states,' serves important policies entirely independent of that rule." Citibank, supra, at 795 (BRENNAN, J., dissenting), quoting Sabbatino, supra, at 438. The act of state doctrine is not mandated by the text of the Constitution, but it does have "`constitutional' underpinnings." Sabbatino, supra, at 423.
As MR. JUSTICE BRENNAN has observed, the act of state doctrine reflects the notion that the validity of an act of a foreign sovereign is, under some circumstances, a "political question" not cognizable in our courts. The circumstances indicating the existence of a "political question" in Sabbatino included, as MR. JUSTICE BRENNAN summarized, "the absence of consensus on the applicable international rules, the unavailability of standards from a treaty or other agreement, the existence and recognition of the Cuban Government, the sensitivity of the issues to national concerns, and the power of the Executive alone to effect a fair remedy for all United States
The doctrine of sovereign immunity, concerned only with the status of a party to a lawsuit, does not focus on the other circumstances just mentioned; it is simply not designed to be responsive to the particular considerations underlying the act of state doctrine. Whatever exceptions there may be to sovereign immunity ought not be transferred automatically, therefore, to the act of state doctrine.
I question the wisdom of attempting the articulation of any broad exception to the act of state doctrine within the confines of a single case. The Court in Sabbatino, aware of the variety of situations presenting act of state questions and the complexity of the relevant considerations, eschewed any inflexible rule in favor of a case-by-case approach. 376 U. S., at 428. The carving out of broad exceptions to the doctrine is fundamentally at odds with the careful case-by-case approach adopted in Sabbatino.
Indeed, it is difficult to discern the precise scope of the "commercial act" exception contemplated by MR. JUSTICE WHITE.
Cuba's retention of and refusal to repay the funds at issue in this case took place against the background of the intervention, or nationalization, of the businesses and assets of five cigar manufacturers. As I have already indicated, the seizure and retention of the Dunhill funds were pursuant to the initial intervention decree. For all practical purposes, the seizure of the funds once they arrived in Cuba is indistinguishable from the seizure of the remainder of the cigar manufacturers' businesses. The seizure of the funds, like the initial seizures on September 15, reflected a purpose to exert sovereign power to its territorial limits in order to effectuate the intervention of ongoing cigar manufacturing businesses. It matters not that the funds have been determined by a United States court in this case to have belonged to Dunhill rather than the cigar manufacturers. What does matter is that Cuba retained the money in the course of its program of expropriating what it viewed as part and parcel of the businesses.
The applicability of the act of state doctrine in these circumstances is controlled by Sabbatino itself. As the Court there noted: "There are few if any issues in international
Regardless, then, of whether the presence of consensus as to controlling legal principles, or any other circumstances, would render the act of state doctrine inapplicable to some, or even most, acts that could be characterized as "purely commercial," the doctrine is fully applicable in this case.
Since in my view the retention of and refusal to repay the funds at issue constitute an act of state that would ordinarily preclude an affirmative judgment against Cuba and the interventors, it is necessary for me to proceed to
A brief recapitulation of the facts is necessary to understand Dunhill's contention that it is entitled to an affirmative recovery in spite of the presence of an act of state. Dunhill was one of three importers that had at the time of the intervention received cigars for which it had not yet paid. During the three months following intervention, each of the importers paid the interventors the amounts due for preintervention shipments. And in the period between intervention and February 1961, each of the importers took delivery of additional shipments, for which payment was not made.
This suit stems from nine suits brought against the importers by the former owners of the five intervened firms, inter alia, to restrain payment to anyone else for goods manufactured by their firms or bearing their mark, and to recover for all such goods that the importers had already received. The interventors brought suit in the names of the intervened firms to enjoin the former owners' counsel from pursuing the nine actions in the firms' names, and to substitute their own attorneys for those of the former owners in the same nine suits. The District Court ruled as a preliminary matter that the interventors and not the former owners were entitled to sue for payment for the postintervention shipments. F. Palicio y Compania, S. A. v. Brush, 256 F.Supp. 481 (SDNY 1966), aff'd, 375 F.2d 1011 (CA2), cert. denied sub nom. Brush v. Republic of Cuba, 389 U.S. 830 (1967). The original nine actions were then consolidated for trial, with the interventors pursuing their claim for payments for post-intervention shipments, and both the former owners and the interventors pursuing their claims to the payments for preintervention shipments.
The Court of Appeals found an act of state in Cuba's retention of the monies paid for preintervention shipments. It interpreted the various views expressed in Citibank as indicating that this Court would nevertheless uphold the importers' counterclaims up to the limits of the respective claims asserted against them by the interventors. But the court reversed the judgment of the District Court insofar as it granted Dunhill affirmative recovery. Menendez v. Saks & Co., 485 F.2d 1355 (CA2 1973). The second question on which we granted certiorari is whether, if Cuba's conduct constitutes an act of state, Dunhill may nonetheless assert its full counterclaim in the circumstances of this case, where the counterclaim exceeds Cuba's claim against it but is less than the amount owed to Cuba by the importers as a group.
The Court in Citibank held that the act of state doctrine
Because we are concerned here only with the status of a counterclaim in excess of a foreign state's principal claim, the precise question the Court addressed in Citibank —whether a counterclaim limited by the amount of the foreign state's claim may be barred by the act of state doctrine—does not cover the present situation.
An affirmative judgment for the excess of a counterclaim over a foreign state's principal claim is indistinguishable in any important respect from an ordinary affirmative judgment. In this case, the situation is precisely as it would be if Cuba had voluntarily recognized the validity of Dunhill's claim in an amount equal to its
Dunhill contends, however, that the nature of the act of state question is affected by the fortuity that its counterclaim, while exceeding Cuba's principal claim against it, is for a lesser amount than the sum of the judgments entered in favor of Cuba against the three
First, the actions against Dunhill and the other importers were not merged; they were simply consolidated for trial in the interest of economy.
In any event it has become quite clear that execution of Dunhill's affirmative judgment against the judgment debts that the other importers owe to the interventors would be prohibited by the Cuban Assets Control Regulations, 31 CFR pt. 515 (1975), promulgated by the Treasury Department's Office of Foreign Assets Control pursuant to the Trading With the Enemy Act, 50 U. S. C.
In conclusion, I would hold that the course of conduct undertaken by the interventors with respect to payments made for preintervention shipments constitutes an act of state, and that Dunhill is not entitled to an affirmative judgment on its counterclaim relating to those payments. I would affirm the judgment of the Court of Appeals.
"1. Can statements by counsel for the Republic of Cuba, that petitioner's unjust enrichment counterclaim would not be honored, constitute an act of state?
"2. If so, is an exception to the act of state doctrine created, under First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972), where petitioner's counterclaim does not exceed the net balance owed to Cuba on its claims by petitioner's codefendants, and where all claims and counterclaims arise out of the subject matter in litigation in this case?"
When the case was restored to the calendar for reargument, 422 U.S. 1005 (1975), the Court directed:
"In addition to other questions presented by this case, counsel are requested to brief and discuss during oral argument: Should this Court's holding in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), be reconsidered?"
"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."
"Since the vessel here, although owned by the Mexican Government, was not in its possession and service, we have no occasion to consider the questions presented in the Berizzi case. It is enough that we find no persuasive ground for allowing the immunity in this case, an important reason being that the State Department has declined to recognize it." 324 U. S., at 35 n. 1.
"The fact of the matter is that the result in Berizzi Bros. Co. v. The Pesaro, supra, was reached without submission by the Department of State of its relevant policies in the conduct of our foreign relations and largely on the basis of considerations which have steadily lost whatever validity they may then have had. Compare the overruling of The Thomas Jefferson, 10 Wheat. 428 (1825), by The Genesee Chief, 12 How. 443 (185). The views of our State Department against immunity for commercial ships owned by foreign governments have been strongly supported by international conferences, some held after the decision in the Pesaro case. See Lord Maugham in Compania Naviera Vascongado v. The Cristina  A. C. 485, 521-523. But the real change has been the enormous growth, particularly in recent years, of `ordinary merchandising' activity by governments. See The Western Maid, 257 U.S. 419, 432. Lord Maugham in the Cristina thus put the matter:
"`Half a century ago foreign Governments very seldom embarked in trade with ordinary ships, though they not infrequently owned vessels destined for public uses, and in particular hospital vessels, supply ships and surveying or exploring vessels. These were doubtless very strong reasons for extending the privilege long possessed by ships of war to public ships of the nature mentioned; but there has been a very large development of State-owned commercial ships since the Great War, and the question whether the immunity should continue to be given to ordinary trading ships has become acute. Is it consistent with sovereign dignity to acquire a tramp steamer and to compete with ordinary shippers and ship-owners in the markets of the world? Doing so, is it consistent to set up the immunity of a sovereign if, owing to the want of skill of captain and crew, serious damage is caused to the ship of another country? Is it also consistent to refuse to permit proceedings to enforce a right of salvage in respect of services rendered, perhaps at great risk, by the vessel of another country?'  A. C. 485, 521-522.
"It is my view, in short, that courts should not disclaim jurisdiction which otherwise belongs to them in relation to vessels owned by foreign governments however operated except when `the department of the government charged with the conduct of our foreign relations,' or of course Congress, explicitly asserts that the proper conduct of these relations calls for judicial abstention. Thereby responsibility for the conduct of our foreign relations will be placed where power lies. And unless constrained by the established policy of our State Department, courts will best discharge their responsibility by enforcement of the regular judicial processes." Id., at 40-42.
"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."
"It matters not that the interventor may be wrong in the eyes of the United States court [in claiming that the September 15 decree nationalized the preintervention accounts receivable]. . . . Since the monies taken by the interventor were in Cuba, and he was a representative of the sovereign, it can hardly be denied that his conduct amounted to `a taking of property within its own territory by a foreign sovereign government.' [Banco Nacional de Cuba v. Sabbatino, 376 U. S., at 428.]" Brief for Respondents 18.
By contrast, in the present case it is settled that the interventors received the payments for preintervention shipments on behalf of the Cuban Government, Menendez v. Faber, Coe & Gregg Inc., 345 F. Supp., at 532, and any lingering doubt that their retention was by virtue of a claim of right was dispelled by counsel for Cuba and the interventors at trial. Had possession been established in The Navemar, and the decree of appropriation been in doubt, the case would be in point, but in fact the contrary was true and the case is inapposite.
It was in response to the suggestion that The Navemar case controlled this one that counsel for respondents made the statement, relied upon by the Court, ante, at 692 n. 8: "The statement of an ambassador, like the statement of a lawyer, is not proof of anything. It is merely an assertion made by the representative of a sovereign as to the position taken by that sovereign in litigation." Brief for Respondent 17 n. 8. In this case, unlike in The Navemar case, it is precisely the position of the foreign sovereign with respect to property in its possession that is significant.
"Dunhill had assumed that if it secured a judgment against Cuba, it could execute that judgment against money owing to Cuba from other creditors and it had in fact attempted to attach funds owing to Cuba by Faber, Coe & Gregg, another cigar importer whose claim is likewise in litigation. . . .
"It would be helpful if you would confirm my understanding that, generally speaking, you will not issue a license to permit a judgment-creditor of Cuba to execute against assets of Cuba which have been frozen pursuant to the Foreign Assets Control regulations. . . ."
The Acting Director responded by a letter confirming this understanding of the licensing policy. Both letters appear in Brief for Respondents, App. B.