CHOY, Circuit Judge:
The members of the International Association of Machinists and Aerospace Workers (IAM) were disturbed by the high price of oil and petroleum-derived products in the United States. They believed the actions of the Organization of the Petroleum Exporting Countries, popularly known as OPEC, were the cause of this burden on the American public. Accordingly, IAM sued OPEC and its member nations in December of 1978, alleging that their price-setting activities violated United States anti-trust laws. IAM sought injunctive relief and damages. The district court entered a final judgment in favor of the defendants, holding that it lacked jurisdiction and that IAM had no valid anti-trust claim.
II. Factual Background
IAM is a non-profit labor association. Its members work in petroleum-using industries, and like most Americans, they are consumers of gasoline and other petroleum-derived products. They object to the high and rising cost of such products.
OPEC is an organization of the petroleum-producing and exporting nations of what is sometimes referred to as the Third World. The OPEC nations have organized to obtain the greatest possible economic returns for a special resource which they hope will remove them from the ranks of the underdeveloped and the poverty-plagued. OPEC was formed in 1960 by the defendants Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. The other defendants, Algeria, Ecuador, Gabon, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates, joined thereafter.
The OPEC nations produce and export oil either through government-owned companies or through government participation in private companies. Prior to the formation of OPEC, these diverse and sometimes antagonistic countries were plagued with fluctuating oil prices. Without coordination among them, oil was often in oversupply on the world market resulting in low prices. The OPEC nations realized that self-interest dictated that they "formulate a system to ensure the stabilisation (sic) of prices by, among other means, the regulation of production, with due regard to the interests of the producing and of the consuming nations, and to the necessity of securing a steady income to the producing countries, an efficient economic and regular supply of this source of energy to consuming nations...." OPEC Resolution of the First Conference, Resolution 1.1(3), September 1960.
OPEC achieves its goals by a system of production limits and royalties which its members unanimously adopt. There is no enforcement arm of OPEC. The force behind OPEC decrees is the collective self-interest of the 13 nations.
After formation of OPEC, it is alleged, the price of crude oil increased tenfold and more. Whether or not a causal relation exists, there is no doubt that the price of oil has risen dramatically in recent years, and
Detractors accuse OPEC of price-fixing and worse in its deliberate manipulation of the world market and withholding of a resource which many world citizens have not learned to do without.
In December 1978, IAM brought suit against OPEC and its member nations. IAM's complaint alleged price fixing in violation of the Sherman Act, 15 U.S.C. § 1, and requested treble damages and injunctive relief under the Clayton Act, 15 U.S.C. §§ 15, 16. IAM claimed a deliberate targeting and victimization of the United States market, directly resulting in higher prices for Americans.
The defendants refused to recognize the jurisdiction of the district court, and they did not appear in the proceedings below. Their cause was argued by various amici, with additional information provided by court-appointed experts. The district court ordered a full hearing, noting that the Foreign Sovereign Immunities Act (FSIA) prohibits the entry of a default judgment against a foreign sovereignty "unless the claimant establishes his claim or right to relief by evidence satisfactory to the court." 28 U.S.C. § 1608(e).
The district court initially dismissed OPEC, the organization, since it had not been properly served. It also determined at an early stage in the proceedings that monetary damages were foreclosed by the indirect-purchaser rule of Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). Thus the testimony at trial was directed to what remained of the complaint — a suit for injunctive relief against the 13 OPEC nations individually.
The testimony was extensive. Experts in economics and international relations were examined and cross-examined. Exhibits, including masses of statistical and technical data, were received. A full day of legal argument concluded the proceedings below.
The record reflects an outstanding effort on the part of the district judge to amass the information necessary to understand the international politics and economy of oil and to marshal the legal arguments for and against IAM's requested relief.
At the close of the trial, the district judge granted judgment in favor of the defendants. The court held, first, that it lacked jurisdiction over the defendant nations under the Foreign Sovereign Immunities Act.
A. Sovereign Immunity
In the international sphere each state
In 1976, Congress enacted the FSIA and declared that the federal courts will apply an objective nature-of-the-act test
A critical step in characterizing the nature of a given activity is defining exactly what that activity is. The immunity question may be determined by how broadly or narrowly that activity is defined. In this case, IAM insists on a very narrow focus on the specific activity of "price fixing." IAM argues that the FSIA does not give immunity to this activity. Under the FSIA a commercial activity is one which an individual might "customarily carr[y] on for profit." H.R.Rep.No.94-1487, 94th Cong., 2d Sess. 16, reprinted in  U.S.Code Cong. & Ad.News 6604, 6615. OPEC's activity,
The court below defined OPEC's activity in a different way: "[I]t is clear that the nature of the activity engaged in by each of these OPEC member countries is the establishment by a sovereign state of the terms and conditions for the removal of a prime natural resource — to wit, crude oil — from its territory." 477 F.Supp. at 567. The trial judge reasoned that, according to international law, the development and control of natural resources is a prime governmental function. Id. at 567-78. The opinion cites several resolutions of the United Nations' General Assembly, which the United States supported, and the United States Constitution, Art. 4, § 3, cl. 2, which treat the control of natural resources as governmental acts.
IAM argues that the district court's analysis strays from the path set forth in the FSIA. The control of natural resources is the purpose behind OPEC's actions, but the act complained of here is a conspiracy to fix prices. The FSIA instructs us to look upon the act itself rather than underlying sovereign motivations.
The district court was understandably troubled by the broader implications of an anti-trust action against the OPEC nations. The importance of the alleged price-fixing activity to the OPEC nations cannot be ignored. Oil revenues represent their only significant source of income. Consideration of their sovereignty cannot be separated from their near total dependence upon oil. We find that these concerns are appropriately addressed by application of the act of state doctrine. While we do not apply the doctrine of sovereign immunity, its elements remain relevant to our discussion of the act of state doctrine.
B. The Act of State Doctrine
The act of state doctrine declares that a United States court will not adjudicate a politically sensitive dispute which would require the court to judge the legality of the sovereign act of a foreign state. This doctrine was expressed by the Supreme Court in Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456 (1897):
The doctrine recognizes the institutional limitations of the courts and the peculiar requirements of successful foreign relations. To participate adeptly in the global community, the United States must speak with one voice and pursue a careful and deliberate foreign policy. The political branches of our government are able to consider the competing economic and political considerations and respond to the public will in order to carry on foreign relations in accordance with the best interests of the country as a whole. The courts, in contrast, focus on single disputes and make decisions on the basis of legal principles. The timing of our decisions is largely a result of our caseload and of the random tactical considerations which motivate parties to bring lawsuits and to seek delay or expedition. When the courts engage in piecemeal adjudication of the legality of the sovereign acts of states, they risk disruption of our country's international diplomacy. The executive may utilize protocol, economic sanction, compromise, delay, and persuasion to achieve international objectives. Ill-timed judicial decisions challenging the acts of foreign states could nullify these tools and embarrass the United States in the eyes of the world.
The act of state doctrine is similar to the political question doctrine in domestic law. It requires that the courts defer to the legislative and executive branches when those branches are better equipped to resolve a politically sensitive question. Like
While the act of state doctrine has no explicit source in our Constitution or statutes, it does have "constitutional underpinnings." Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. 923, 937, 11 L.Ed.2d 804 (1964). The Supreme Court has stated that the act of state doctrine
The principle of separation of powers is central to our form of democratic government. Just as the courts have carefully guarded their primary role as interpreters of the Constitution and the laws of the United States, so have they recognized the primary role of the President and Congress in resolution of political conflict and the adoption of foreign policy. Compare Marbury v. Madison, 1 Cranch 137, 5 U.S. 137, 2 L.Ed. 60 (1803); Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962); Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964).
The doctrine of sovereign immunity is similar to the act of state doctrine in that it also represents the need to respect the sovereignty of foreign states. The two doctrines differ, however, in significant respects. The law of sovereign immunity goes to the jurisdiction of the court. The act of state doctrine is not jurisdictional. Ricaud v. American Metal Co., 246 U.S. 304, 309, 38 S.Ct. 312, 313, 62 L.Ed. 733 (1918). Rather, it is a prudential doctrine designed to avoid judicial action in sensitive areas. Sovereign immunity is a principle of international law, recognized in the United States by statute. It is the states themselves, as defendants, who may claim sovereign immunity. The act of state doctrine is a domestic legal principle, arising from the peculiar role of American courts. It recognizes not only the sovereignty of foreign states, but also the spheres of power of the co-equal branches of our government. Thus a private litigant may raise the act of state doctrine, even when no sovereign state is a party to the action. See, e. g., Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 606 (9th Cir. 1976). The act of state doctrine is apposite whenever the federal courts must question the legality of the sovereign acts of foreign states.
It has been suggested that the FSIA supersedes the act of state doctrine, or that the amorphous doctrine is limited by modern jurisprudence.
Congress in enacting the FSIA recognized the distinction between sovereign immunity and the act of state doctrine. See, e. g., H.R.Rep.No.94-1487, 94th Cong., 2d Sess. 20 n.1, reprinted in  U.S.Code Cong. & Ad.News 6619 n.1 ("The Committee has found it unnecessary to address the act of state doctrine in this legislation"); see generally Jurisdiction of U.S. Courts in Suits Against Foreign States: Hearings on H.R.11315 Before the Subcomm. on Admin.Law and Governmental Relations of the House Comm. on the Judiciary, 94th Cong., 2d Sess. 29-57 (1976); Immunities of Foreign States: Hearings on H.R.3493 Before the Subcomm. on Claims & Governmental Relations of the Committee on the Judiciary, 93d Cong., 1st Sess. 20 (1973) (the FSIA "in no way affects existing law concerning
The act of state doctrine is not diluted by the commercial activity exception which limits the doctrine of sovereign immunity. While purely commercial
In addition to the public interest factor, a federal court must heed other indications which call for act of state deference. The doctrine does not suggest a rigid rule of application. In the Sabbatino case, the Supreme Court suggested a balancing approach:
The decision to deny access to judicial relief is not one we make lightly. In Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 606 (9th Cir. 1976), this court noted that "not every case is identical in its potential impact on our relations with other nations." The "touchstone" or "crucial element" is the potential for interference with our foreign relations. Timberlane, 549 F.2d at 607. This court has stated:
There is no question that the availability of oil has become a significant factor in international relations. The growing world energy crisis has been judicially recognized in other cases. See, e. g., Occidental of UMM al Qaywayn, Inc. v. A Certain Cargo of Petroleum, 577 F.2d 1196 (5th Cir. 1978), cert. denied, 442 U.S. 928, 99 S.Ct. 2857, 61 L.Ed.2d 296 (1979) (dismissing an action to determine rights to oil in the Persian Gulf as raising a nonjusticiable political question); Hunt v. Mobil Oil Corp., 550 F.2d 68, 78 (2d Cir.) cert. denied, 434 U.S. 984, 98 S.Ct. 608, 54 L.Ed.2d 477 (1977) (affirming, on the basis of the act of state doctrine, dismissal of anti-trust claim where the act complained of was part of "a continuing and broadened confrontation between the East and West in an oil crisis which has implications and complications far transcending
The remedy IAM seeks is an injunction against the OPEC nations. The possibility of insult to the OPEC states and of interference with the efforts of the political branches to seek favorable relations with them is apparent from the very nature of this action and the remedy sought. While the case is formulated as an anti-trust action, the granting of any relief would in effect amount to an order from a domestic court instructing a foreign sovereign to alter its chosen means of allocating and profiting from its own valuable natural resources. On the other hand, should the court hold that OPEC's actions are legal, this "would greatly strengthen the bargaining hand" of the OPEC nations in the event that Congress or the executive chooses to condemn OPEC's actions. Sabbatino, 376 U.S. at 432, 84 S.Ct. at 942.
A further consideration is the availability of internationally-accepted legal principles which would render the issues appropriate for judicial disposition. As the Supreme Court stated in Sabbatino,
While conspiracies in restraint of trade are clearly illegal under domestic law, the record reveals no international consensus condemning cartels, royalties, and production agreements.
The district court was understandably reluctant to proceed on the complaint below and the act of state doctrine provides sound jurisprudential support for such reluctance. While the act of state doctrine does not compel dismissal as a matter of course, in a case such as this where the controlling issue is the legality of a sovereign act and where the only remedy sought is barred by act of state considerations dismissal is appropriate.
The act of state doctrine is applicable in this case. The courts should not enter at the will of litigants into a delicate area of foreign policy which the executive and legislative branches have chosen to approach with restraint. The issue of whether the
The decision of the district court dismissing this action is AFFIRMED.
and 28 U.S.C. §§ 1602, et seq., which states in relevant part: