GOLDBERG, Circuit Judge:
This suit is one of several arising from the promulgation by Mexico of exchange control regulations on August 13, 1982, and from the subsequent nationalization of privately-owned Mexican banks on September 1, 1982. The exchange control regulations mandated that all deposits in Mexican banks, however denominated, be repaid in Mexican pesos at specified rates of change. Because the dollar rate of exchange was well below the market rate, the regulations constituted a Montezuma's revenge on American investors who had dollar deposits in Mexican banks. A number of these indisposed investors, including the plaintiffs in the present suit, have brought claims against Mexican banks for breach of contract.
Thus far, the courts that have passed on these cases have been unanimous in dismissing the plaintiffs' claims, either on the ground that the banks are immune from suit under the doctrine of sovereign immunity, Braka v. Nacional Financiera, No. 83-4161 (S.D.N.Y. July 9, 1984); Frankel v. Banco Nacional de Mexico, No. 82-6457 (S.D.N.Y. May 31, 1983), or on the ground that suit is barred by the act of state doctrine, Braka v. Bancomer, S.A., 589 F.Supp. 1465 (S.D.N.Y.1984), aff'd, 762 F.2d 222 (2d Cir.1985); Braka v. Multibanco Comermex, 589 F.Supp. 802 (S.D.N.Y.1984). In the present case, the district court relied on sovereign immunity, holding that Bancomer is an instrumentality of the Mexican Government, that the Callejos' suit is based on sovereign not commercial activities, and that therefore Bancomer is immune from suit under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C.
We agree with the result reached by the district court, but disagree with its rationale. We believe that Bancomer is not immune from suit under the FSIA and that the case is properly analyzed in act of state terms. Because we are barred under the act of state doctrine from inquiring into the validity of acts of foreign states performed in their own territory — including the validity of Mexico's exchange control regulations — we affirm the district court's dismissal of the present suit.
William Callejo and his wife Adelfa are United States citizens who reside in Texas. Beginning in 1979 or 1980, the Callejos purchased certificates of deposit ("CDs") issued by Bancomer, S.A., a then privately-owned Mexican bank.
The procedure used by the Callejos and Bancomer to make deposits and payments, although labyrinthine in course, is fairly clear in broad outline. To make deposits, the Callejos would direct their bank in Dallas to wire funds to Laredo National Bank in Laredo, Texas, where they would be credited to Bancomer's account. Bancomer would then direct Laredo National to debit Bancomer's account in the same amount, and would credit the amount to the Callejos' account at Bancomer's branch in Nuevo Laredo, Mexico. To cover this credit by Bancomer to the Callejos' account, Laredo National would transfer the funds (by an undisclosed mechanism) to Bancomer's Nuevo Laredo branch. It is undisputed that Laredo National acted as a correspondent bank in effectuating these deposits, that Bancomer's account with Laredo National did not show a net increase as a result of the transactions, and that the Callejos' money ultimately was deposited in an account in Bancomer's Nuevo Laredo branch, where the certificates of deposit were issued.
The means by which Bancomer paid interest and principal to the Callejos are the subject of somewhat greater dispute. The Callejos claim that Bancomer effectuated the payments by directing Laredo National to draw funds from Bancomer's Laredo National account and to transfer them to the Callejos' bank in Dallas. According to the Callejos, this method of payment was established specifically to ensure that they would receive the payments in Texas rather than Mexico. Bancomer, in contrast, claims that it would issue cashier's checks in Mexico payable to the Callejos and would hold the checks at its Nuevo Laredo branch pending receipt of instructions from the Callejos as to how the funds should be remitted. Usually, the funds would be remitted by means of interbank transfers; on occasion, however, they would be redeposited in Mexico, or would be sent in the form of a cashier's check to a third person, or would be remitted to one of the Callejos' accounts with another Mexican bank. Although these descriptions of the method of payment differ in emphasis, they are not directly contradictory; the payments drawn on Bancomer's account with Laredo National, which the Callejos highlight, were merely one link in a larger chain by which Bancomer transferred funds from its Nuevo Laredo branch to the Callejos' American accounts. As with the method of making deposits, Laredo National's role appears to
The four certificates of deposit at issue in the present suit were purchased by the Callejos on May 31 and June 3, 1982. Two were renewals of prior certificates and two were new certificates; all had terms of three months, were denominated in United States dollars, and called for payment of principal and interest in United States dollars. Together, they had a value of approximately $300,000. Like the other certificates of deposit purchased by the Callejos, they specified on their face Mexico City as the place of payment.
In August 1982, facing a severe monetary crisis brought on by a decline in the world price of oil, the Government of Mexico promulgated exchange control regulations. These were supplemented by further regulations in September 1982. The regulations required Mexican banks to pay principal and interest on U.S. dollar-denominated certificates of deposit in pesos rather than dollars, at a specified rate of exchange.
Pursuant to the new exchange control regulations, on August 13, 1982, Bancomer notified the Callejos that it would pay the principal and interest on the Callejos' four certificates of deposit in pesos at a rate of exchange substantially below the market rate. To forestall this, the Callejos renewed the two certificates of deposit due to mature on August 31, 1982, and filed the present suit.
As amended, the Callejos' complaint alleged breach of contract and securities act violations
II. SOVEREIGN IMMUNITY
Along with other privately-owned Mexican banks, Bancomer was nationalized by the Mexican Government on September 1, 1982. Consequently, Bancomer is now an "agency or instrumentality of a foreign state" within the meaning of 28 U.S.C. § 1603(b)(2), and would ordinarily be entitled to immunity from the jurisdiction of American courts under the FSIA, 28 U.S.C. § 1604. The FSIA, however, contains a number of exceptions to the jurisdictional immunity of foreign states. One of these is found in 28 U.S.C. § 1605(a)(2), which states:
The Callejos claim that this exception applies in the present case, since their suit is based upon a commercial activity by Bancomer that was both carried on and caused a direct effect in the United States.
The FSIA has aptly been called a "remarkably obtuse" document, a "statutory labyrinth that, owing to the numerous interpretive questions engendered by its bizarre structure and its many deliberately vague provisions, has during its brief lifetime been a financial boon for the private bar but a constant bane of the federal judiciary." Gibbons v. Udaras na Gaeltachta, 549 F.Supp. 1094, 1105, 1106 (S.D.N.Y.1982), quoted in Vencedora Oceanica Navigacion v. Compagnie Nationale Algerienne de Navigation, 730 F.2d 195, 205 (5th Cir.1984) (Higginbotham, J., dissenting). Although the FSIA was intended to introduce uniformity into the process of granting sovereign immunity, see H.R.Rep. No. 1487, 94th Cong., 2d Sess. 7, reprinted in 1976 U.S.Code Cong. & Ad.News 6604, 6605-06 ("House Report"), Congress, rather than provide explicit direction, paradoxically put its faith in the courts to develop guidelines on a case-by-case basis. Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 308-09 (2d Cir.1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982). Thus, while the outer limits of our analysis are defined by the Act itself, the specific path we take must be guided by the general purposes underlying the Act.
In determining whether Section 1605(a)(2) applies, two questions are relevant:
In the present case, the district court answered the first of these questions in the negative and therefore never reached the second. It held that the action was "based upon" the promulgation by Mexico of exchange control regulations — a sovereign act — not upon Bancomer's banking activities. We disagree. In our view, the Callejos' action arose as a result of Bancomer's commercial banking activities. Moreover, these banking activities had a direct effect in the United States, thus satisfying the jurisdictional-nexus requirement of Section 1605(a)(2). For these reasons, we hold that Bancomer is not entitled to sovereign immunity under the FSIA.
A. Commercial Activity
In determining whether the commercial activity exception applies, the critical question is usually whether the relevant activity is commercial or sovereign in nature — whether it is a jure gestionis or a jure imperii, a private or a public act.
The district courts that have considered this question have given different answers. The court below followed Frankel v. Banco Nacional de Mexico, No. 82-6457 (S.D.N.Y. May 31, 1983), in finding that the relevant activity was the promulgation by Mexico of exchange control regulations. As the Frankel court noted,
At 5. In contrast, the court in Braka v. Bancomer focused on the defendant bank's actions in selling the certificates of deposit:
589 F.Supp. at 1469. Applying this test, the Braka court concluded, "Here, the activity at issue is Bancomer's issuance of CDs to attract time deposits. The act that gave rise to plaintiffs' claim was Bancomer's breach of its contractual obligation to repay the deposit and any interest due in United States dollars." Id.
We agree with the conclusion of the Braka court rather than the conclusion
Bancomer nevertheless contends that the Callejos' suit was based upon the Mexican exchange regulations since, but for these regulations, it would not have breached the terms of the CDs and the Callejos' suit would not have arisen. We do not read Section 1605(a)(2)'s "based upon" requirement, however, to be equivalent merely to a requirement of causation. In most instances, a suit results from a variety of factors; it is no more the result of a single cause than was the Civil War. To say that the commercial activity exception does not apply whenever a suit is caused by a sovereign act would, in large measure, read the exception out of the law. We believe, instead, that the focus should be on the elements of the cause of action itself: Is the gravamen of the complaint a sovereign activity by the defendant? Here, the answer is clearly no: The activities of Bancomer that are the basis of the Callejos' complaint — the sale of the certificates of deposit and the subsequent payments in pesos rather than dollars — were commercial in nature.
Nor does Bancomer acquire any derivative immunity by virtue of the fact that, in breaching the terms of the certificates of deposit, it was merely complying with the sovereign decrees of the Mexican Government. In Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371 (5th Cir.1980), we rejected this view of derivative immunity. There, the plaintiffs brought breach of contract, negligence, battery, and false imprisonment claims against the Dominican national airline after they had been denied entry as vacationers into the Dominican Republic. We held that the airline was not entitled to sovereign immunity on the breach of contract and tort claims, even though, in breaching the tour contract, it was merely complying with the government's sovereign decision to exclude the plaintiffs. Id. at 1379-80. Instead, the airline was entitled to sovereign immunity only on the battery and false imprisonment claims, where it had acted "as an arm or agent of the Dominican government." Id. at 1379. The airline acquired immunity not derivately from the government's sovereign acts, but only by participating directly
589 F.Supp. at 1470.
Because we hold that Bancomer's activities were neither themselves sovereign nor entitled to derivative immunity by virtue of being compelled by Mexican law, we conclude that the district court erred in dismissing the suit on the ground that the suit was based on sovereign, not commercial, activity. We therefore turn to the other prong of Section 1605(a)(2): that the commercial activity have the required jurisdictional nexus with the United States.
B. Jurisdictional Nexus
Section 1605(a)(2) grants an exception from sovereign immunity for suits based upon a commercial activity by an instrumentality of a foreign state, but only if the commercial activity had a sufficient connection with the United States. Section 1605(a)(2) identifies three such connections:
The Callejos claim that Bancomer's commercial activities were carried on and had direct effects in the United States, and that therefore the first and third of these jurisdictional bases exist. We agree with the latter claim — namely, that the breach of the certificates of deposit had direct effects in the United States — and therefore do not address whether Bancomer's activities in connection with the certificates were "carried on in the United States" within the meaning of the FSIA.
The legislative history of the FSIA directs us to look to Section 18 of the Restatement (Second) of Foreign Relations Law of the United States (1965), when interpreting the "direct effects" clause. House Report, supra, at 6618. This section governs the extent to which American law may be applied to conduct overseas, and states that the conduct must have a "substantial" effect in the United States "as a direct and foreseeable result of the conduct outside the territory" of the United States. Restatement, supra, at § 18(b)(ii)-(iii).
However, where the effects in the United States of an activity abroad are less fortuitous, courts have been much more willing to characterize them as "direct." For example, nonpayment of a note payable in the United States to a United States company has been held to cause a direct effect in the United States for the purposes of Section 1605(a)(2). Texas Trading, 647 F.2d at 312; Exchange National Bank v. Empresa Minera del Centro del Peru, 595 F.Supp. 502, 505 (S.D.N.Y.1984); Schmidt v. Polish People's Republic, 579 F.Supp. 23, 27 (S.D.N.Y.), aff'd, 742 F.2d 67 (2d Cir.1984); Goodsons & Co. v. Federal Republic of Nigeria, 558 F.Supp. 1204, 1206 (S.D.N.Y.1983); Reale International, Inc. v. Federal Republic of Nigeria, 562 F.Supp. 54, 56 (S.D.N.Y.1982). Similarly, a demand for payment on a letter of credit issued by an American bank has been held to have a direct effect in the United States since it causes a depletion of funds in the American bank. Harris Corp. v. National Iranian Radio & Television, 691 F.2d 1344, 1351 (11th Cir.1982); see also Wyle v. Bank Melli, 577 F.Supp. 1148, 1158-59 (N.D.Cal.1983) (financial loss to American plaintiffs sufficient to constitute a direct effect in the United States).
Here there is considerable controversy over where the certificates of deposit were payable. The Callejos claim that the place of payment was Texas, where they received the funds; Bancomer claims that it was Mexico, as specified on the certificates themselves. In the present context, however, the question of whether there was a
Our conclusion that the place of payment is not decisive is supported by the policies underlying the FSIA. The doctrine of sovereign immunity is one of a number of doctrines that attempt to regulate the relations between sovereign states. The essence of sovereignty is supremacy of authority — one sovereign rarely likes to be told what to do by another. Consequently, the exercise of jurisdiction over a foreign state is, as Chief Justice Marshall recognized when introducing the doctrine of sovereign immunity into American jurisprudence, a "delicate and important inquiry." Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116, 3 L.Ed. 287 (1812). By declining to exercise jurisdiction over foreign states where the activities in question either are sovereign in nature or have an insufficient connection with the United States, the United States recognizes that its interest in providing a forum for litigation by aggrieved parties must often yield to the foreign state's interest in its independence. Where either the foreign state's interest in independence is great or the United States's interest in asserting jurisdiction is weak, the FSIA grants sovereign immunity in order to serve our larger interest in preserving international amity.
In weighing these competing interests, arcane doctrines regarding the place of payment are largely irrelevant. In the ever more complex world of international banking, these doctrines doubtless serve a useful function. However, in ordering relations between sovereign states, a larger perspective is appropriate. As the court in Texas Trading noted, "Congress in writing the FSIA did not intend to incorporate into modern law every ancient sophistry concerning `where' an act or omission occurs. Conduct crucial to modern commerce — telephone calls, telexes, electronic transfers of intangible debits and credits — can take place in several jurisdictions. Outmoded rules placing such activity `in' one jurisdiction or another are not helpful here." 647 F.2d at 311 n. 30.
In the present case, we fail to perceive why jurisdiction should not be exercised.
III. ACT OF STATE
Like the doctrine of sovereign immunity, the act of state doctrine springs
The act of state doctrine received its classic expression in Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456 (1897):
Id. at 252, 18 S.Ct. at 84. As elaborated in Sabbatino, the basis of the doctrine is not jurisdictional but prudential. 376 U.S. at 421-423, 84 S.Ct. at 936-38; see also Ricaud v. American Metal Co., 246 U.S. 304, 309, 38 S.Ct. 312, 314, 62 L.Ed. 733 (1918). Under the doctrine, the courts exercise jurisdiction but decline to decide certain issues. Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1380 (5th Cir.1980) (act of state doctrine "operates as an issue preclusion device, foreclosing judicial
In essence, the act of state doctrine operates as a super-choice-of-law rule, requiring that foreign law be applied in certain circumstances. Occidental of Umm al Qaywayn, Inc. v. A Certain Cargo of Petroleum Laden Aboard the Tanker Dauntless Colocotronis, 577 F.2d 1196, 1200 n. 4 (5th Cir.1978), cert. denied, 442 U.S. 928, 99 S.Ct. 2857, 61 L.Ed.2d 296 (1979); Henkin, Act of State Today: Recollections in Tranquility, 6 Colum. J. Transnat'l L. 175, 178-80 (1967). Normally, a court will only apply foreign law if it is compatible with the public policy of the forum. See Restatement (Second) of Conflict of Laws § 90 (1971). The act of state doctrine recognizes, however, that in the international context, refusing to enforce foreign law because it is contrary to U.S. conceptions of public policy is unduly parochial and is likely to insult the foreign sovereign, thereby embarassing the foreign policy of the United States.
Id. at 303-04, 38 S.Ct. at 311.
In the present case, Bancomer claims that Mexico's promulgation of exchange control regulations constituted an act of state, and that consideration of the Callejos' claims would require us to inquire into the validity of those regulations. The Callejos argue, in response, that the act of state doctrine is inapplicable for three reasons: (1) Mexico's promulgation of the exchange control regulations was a commercial act, not an act of state; (2) the "treaty exception" to the act of state doctrine applies, since the exchange control regulations violate Mexico's obligations under the Articles of Agreement of the International Monetary Fund; and (3) the situs of the certificates of deposit was Texas rather than Mexico, and therefore the certificates are not governed by the Mexican decrees. We consider each of these arguments in turn.
A. The Commercial Activity Exception
In Part III of Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976), a
In the present case, we need not decide whether to adopt the commercial activity exception, since Mexico's actions were clearly sovereign and not commercial in nature.
The power to issue exchange control regulations is paradigmatically sovereign in nature; it is not of a type that a private person can exercise. Unlike in Dunhill, where Cuba repudiated a single debt, here Mexico promulgated comprehensive, national decrees in response to a national monetary crisis. As the court noted in Braka v. Bancomer, S.A., 589 F.Supp. 1465 (S.D.N.Y.1984), aff'd, 762 F.2d 222 (2d Cir.1985),
Id. at 1472. Were we to disregard the exchange regulations by enforcing the Callejos' certificates of deposit, we would render nugatory the attempts by Mexico to protect its foreign exchange reserves. While we are doubtful of our ability to foresee what will vex the peace of nations, we have no doubt that disregarding the Mexican regulations would be very vexing indeed. We therefore reject the Callejos' commercial activity argument. Accord Braka v. Bancomer, 589 F.Supp. at 1472; cf. Garcia v. Chase Manhattan Bank, 735 F.2d 645, 650 (2d Cir.1984) ("[I]f the situs of Chase's debt to Garcia were in Cuba, the Cuban government could validly seize it."); French v. Banco Nacional de Cuba, 23 N.Y.2d 46, 55, 295 N.Y.S.2d 433, 443, 242 N.E.2d 704 (1968) ("[T]he currency regulations of a foreign state ... are not appropriate subjects for evaluation by state courts applying local conceptions of public policy.").
B. The Treaty Exception
The act of state doctrine is premised not only on an unwillingness to apply American public policy to invalidate foreign laws but also on a pessimism about the competence of the judiciary to ascertain norms of international law. Potentially, international law as well as American public policy could serve as a touchstone for evaluating foreign acts of state: if an act of state were contrary to international law we could treat the act as invalid and adjudicate the plaintiff's claim. This approach would allow us to review foreign acts of state without engaging in the dubious practice of evaluating these acts against the potentially parochial norms of American public policy.
The Court, however, in large part foreclosed this avenue of review in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964). There the Court was asked to review the validity of Cuba's expropriation of a Cuban sugar company owned by United States residents. The Court declined to do so, holding that this country's response to Cuba's acts should be fashioned and implemented by the executive, not the judiciary. Id. at 431-32, 84 S.Ct. at 942. Although the Court admitted that Cuba's acts might have violated international law, it held that international opinion was sufficiently divided that international law did not provide a firm basis for adjudicating the validity of Cuba's acts. Id. at 428-31, 84 S.Ct. at 940-42.
In Sabbatino, however, the Court recognized that "the greater the degree of codification or consensus concerning a particular area of international law, the more appropriate it is for the judiciary to render decisions regarding it, since the courts can then focus on the application of an agreed upon principle to circumstances of fact rather than on the sensitive task of establishing a principle not inconsistent with national interest or with international justice." Sabbatino, 376 U.S. at 428, 84 S.Ct. at 940. On this basis, the Court elaborated an exception to the act of state doctrine under which the doctrine may not apply if there is "a treaty or other unambiguous agreement regarding controlling legal principles." Id.
Here, the Callejos claim that the Mexican exchange control regulations violate the Articles of Agreement of the International Monetary Fund ("Fund Agreement"), Dec. 27, 1945, 60 Stat. 1401, T.I.A.S. No. 1501, 2 U.N.T.S. 39, as amended April 30, 1976, 29 U.S.T. 2203, T.I.A.S. No. 8937, ___ U.N.T.S. ___ (amendments effective April 1, 1978), to which Mexico is a party. In particular, they claim that the regulations violate Article VIII, Section 2(a), which forbids members from imposing exchange control regulations on "current international transactions"
In determining whether the Fund Agreement — and Article VIII, Section 2(a) in particular — warrant application of the treaty exception, we tread upon uncharted ground. Thus far, no court has passed on this issue, and commentators have made, at best, ambiguous pronouncements. See, e.g., 2 J. Gold, The Fund Agreement in the Courts 138-39 (1982) ("The Articles of Agreement [of the IMF] could come within" the treaty exception.); Paradise, Cuban Refugee Insureds and the Articles of Agreement of the International Monetary Fund, 18 U.Fla.L.Rev. 29, 67 (1965). Initially, we note that it is unclear to what extent the Fund Agreement is unclear. Article VIII, Section 2(a) applies by its terms only to exchange control regulations governing "current international transactions" (as opposed to "capital transfers"). Under Article VI, Section 3 of the Fund Agreement, members may validly impose restrictions on international capital movements. Thus, determining whether a set of exchange control regulations requires approval by the Fund pursuant to Article VIII, Section 2(a) depends in part on determining whether they apply to "current" or "capital" transactions. Given the substantial uncertainty regarding the meanings of these terms,
In the context of the present case, however, we need not pass on this question in the abstract, since the IMF has itself clarified the meaning of the Fund Agreement as it applies to the Mexican regulations by indicating that they are consistent with the Agreement. On May 3, 1983, in response to an inquiry from Bancomer's counsel, the Director of the Legal Department of the Fund specifically stated that "the `provisions of Mexico's Currency Regulations (enacted in August and continuing in effect today) which require repayment of deposits in Mexican banks to be made in Mexican pesos regardless of the currency in which the deposits are denominated' ... do not violate and are not inconsistent with the Articles of Agreement of the International Monetary Fund." 2 Rec. at 428.
We consider the Fund's interpretations to be persuasive authority on the meaning of the Fund Agreement.
The exact basis for the Fund's conclusion that the Mexican regulations are consistent with the Fund Agreement is somewhat unclear. The Fund's conclusion could be based (1) on its view that the Mexican regulations govern capital rather than current transactions, in which case Article VIII, Section 2(a) approval was not required, and/or (2) on its granting approval of the regulations pursuant to Article VIII, Section 2(a). If the Fund's conclusion is based on the first ground, then, at most, we can only review the Fund's interpretation to determine whether it is reasonable, since we consider the Fund's interpretation to be highly persuasive authority. Here this standard is clearly met, particularly given the uncertainty that exists regarding the dividing line between current and capital transactions. If, however, the Fund's conclusion rests on the latter ground, then we are precluded from exercising even this limited level of review. Article VIII, Section 2(a) only requires that exchange control regulations receive the approval of the Fund; once such approval is given, the regulations are by definition valid. The decision whether to approve exchange control regulations is committed to the discretion of the Fund. We have no power to review the Fund's exercise of this discretion. Thus, even if we did not accept the Fund's interpretation of the Fund Agreement as persuasive authority, its decision to approve exchange control regulations
The Callejos attempt to avoid this result by arguing that even if the Fund did approve the Mexican regulations, it failed to do so prior to their promulgation. See Reply Brief of Appellants at 15-16. While such prior approval is technically required by Article VIII, Section 2(a), we do not believe that the violation of this requirement is of a magnitude sufficient to justify disregarding the act of state doctrine, particularly where approval is later given by the Fund.
For these reasons, we hold that the treaty exception does not render the act of state doctrine inapplicable to the Callejos' claims.
C. The Situs of the Deposits
The final argument advanced by the Callejos for not applying the act of state doctrine is that the situs of their CDs was Texas rather than Mexico. The Callejos argue that under traditional choice-of-law rules pegging the choice of law to the situs of the property, Texas law should govern the certificates. Application of the act of state doctrine, they contend, would improperly give extraterritorial effect to the Mexican decrees.
In Sabbatino, the Court limited the act of state doctrine to takings of property "within its own territory by a foreign sovereign government." 376 U.S. at 428, 84 S.Ct. at 940. Consistent with this limitation, we have refused to give effect to foreign acts of state that affected property whose situs was the United States. See Maltina Corp. v. Cawy Bottling Co., 462 F.2d 1021 (5th Cir.), cert. denied, 409 U.S. 1060, 93 S.Ct. 555, 34 L.Ed.2d 512 (1972); Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706 (5th Cir.), cert. denied, 393 U.S. 924, 89 S.Ct. 255, 21 L.Ed.2d 260 (1968).
The theory underlying the territorial limitation to the act of state doctrine is that a foreign state is less concerned about the effects of its acts on property outside of its
462 F.2d at 1028-29.
In determining whether the situs of property is the United States or a foreign state, federal rather than state law governs. Tabacalera, 392 F.2d at 715; cf. Sabbatino, 376 U.S. at 425, 84 S.Ct. at 939 (issues regarding application of act of state doctrine must be treated as aspects of federal law). This is true even if the plaintiff's underlying claim is based on state law. As Judge Friendly noted in Republic of Iraq v. First National City Bank, 353 F.2d 47 (2d Cir.1965), cert. denied, 382 U.S. 1027, 86 S.Ct. 648, 15 L.Ed.2d 540 (1966):
353 F.2d at 50-51 (citations omitted).
On a previous occasion, we noted that "[t]he situs of intangible property is about as intangible a concept as is known to the law." Tabacalera, 392 F.2d at 714. "The situs may be in one place for ad valorem tax purposes, ...; it may be in another place for venue purposes, i.e., garnishment ...; it may be in more than one place for tax purposes in certain circumstances ...; it may be in still a different place when the need for establishing its true situs is to determine whether an overriding national concern, like the application of the Act of State Doctrine is involved." Id. at 714-15 (citations omitted). In determining the situs of an obligation, we take as our guide the general policies of the act of state doctrine rather than narrow rules developed in other contexts. See Maltina, 462 F.2d at 1027 ("[T]he federal courts are to take a pragmatic view of what constitutes an extraterritorial action by a foreign state.").
Over the years, several tests have been developed to determine the situs of intangible property. One was elaborated by this court in Tabacalera, where we stated,
392 F.2d at 715-16 (emphasis in original). Under this test, the situs of an obligation is determined not by the domicile of the creditor, as it is in other contexts, but by whether the foreign state is in a position to perform a fait accompli. Id. The policy considerations underlying this conclusion were elaborated by the court as follows: "[W]hen a foreign government performs an act of state which is an accomplished fact, that is when it has the parties and the res before it and acts in such a manner as to change the relationship between the parties touching the res, it would be an affront to such foreign government for courts of the United States to hold that such act was a
Although the Tabacalera test has been applied in a number of cases, e.g., Allied Bank International v. Banco Credito Agricola, 757 F.2d 516, 521 (2d Cir.1985) (on rehearing) (holding that debt is not located in foreign state unless foreign state has power to enforce or collect it); United Bank Ltd. v. Cosmic International, Inc., 542 F.2d 868, 873-74 (2d Cir.1976) (same); Menendez v. Saks & Co., 485 F.2d 1355, 1364 (2d Cir.1973) (same), rev'd on other grounds sub nom., Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976), we do not find it helpful here. In Tabacalera, the foreign government was attempting to collect a debt rather than attempting to avoid paying it; the question was whether the foreign decrees applied to an obligation owed by an American debtor. Here, in contrast, the situation is reversed: the foreign national is the debtor and the American national the creditor. If we simply applied the Tabacalera test, the situs of the certificates would clearly be Mexico, since Mexico can enforce the collection of debts owed by Bancomer, a Mexican domiciliary. See Libra Bank Ltd. v. Banco Nacional de Costa Rica, 570 F.Supp. 870, 881 (S.D.N.Y.1983). In that event, the act of state doctrine would apply whenever a foreign state seized debts owed by its banks, no matter how many ties the debts had to this country.
We do not think that Tabacalera intended such results. The power to collect a debt is for the benefit of the creditor, not the debtor; the fact that a debt can be enforced by the creditor in one forum should not be the basis of depriving him of his ability to enforce the debt in a different forum. Otherwise, the sword of the creditor would become a shield for the debtor. Since we do not believe that debts owed by foreign banks to American nationals are always sitused in the foreign country — and consequently do not believe that the act of state doctrine always applies to such debts — we do not apply the Tabacalera test here. See Libra Bank, 570 F.Supp. at 881. But cf. Garcia v. Chase Manhattan Bank, 735 F.2d 645, 651-52 (2d Cir.1984) (Kearse, J., dissenting) (arguing that situs of certificate of deposit owed by Cuban branch bank was Cuba, since debt could be collected there); Vishipco Line v. Chase Manhattan Bank, 660 F.2d 854, 862 (2d Cir.1981) ("`The situs of a bank's debt on a deposit is considered to be where the deposit is carried.'"), cert. denied, 459 U.S. 976, 103 S.Ct. 313, 74 L.Ed.2d 291 (1982).
Instead, for debts owed by foreign banks to American nationals, the proper test for determining situs is where the incidents of the debt, as a whole, place it. One relevant factor is the place where the deposit is carried, but this is not the only factor. In addition, we must examine the place of payment, the intent of the parties (if any) regarding the applicable law, and the involvement of the American banking system in the transaction.
Here, the incidents of the certificates of deposit clearly place them in Mexico. The certificates of deposit were issued by Bancomer's Nuevo Laredo branch, where the Callejos' deposits were carried, and called for payment in Mexico. This grouping of contacts, when viewed through the gloss of the policies underlying the act of state doctrine, places the debt in Mexico and calls for the application of Mexican law.
The Callejos contend, however, that although the specified place of payment was Mexico, the course of conduct of the parties altered this agreement since the Callejos regularly received their payments in Texas. The Callejos, however, mistake remittances for payments. Although Bancomer remitted its payments to the Callejos in Texas, this did not mean that the place of payment was Texas. Unlike in Garcia, where the certificates of deposit issued by the Cuban branch bank were guaranteed by Chase Manhattan's New York office and payable upon presentation at any Chase Manhattan branch worldwide, 735 F.2d at 646, here the Callejos could not receive payment simply by presenting the certificates at one of Bancomer's correspondent banks in Texas. They had no right to draw directly upon Bancomer's accounts with Texas banks. Although the money was transferred to them through the services of a Texas correspondent bank, and although they were in Texas when they actually received the payments, this does not alter the fact that the only place where they had a legal right to be paid was at Bancomer's office in Mexico. Accord Braka v. Bancomer, S.N.C., 762 F.2d 222, 224 (2d Cir.1985) ("[T]he accomplishment of interbank transfers, which was the extent of the New York agency's participation, does not change the contractually mandated situs of plaintiffs' property."); cf. United States v. First National City Bank, 321 F.2d 14, 19-22 (2d Cir.1963) (no legal right against main office of bank to demand payment for deposit in branch bank abroad), aff'd on rehearing en banc, 325 F.2d 1020 (2d Cir.1964), rev'd on other grounds, 379 U.S. 378, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965).
The Callejos make much of the fact that when they made deposits, the money was in the first instance transferred to Bancomer's account at Laredo National
For these reasons, therefore, we reject the view that the situs of these deposits was Texas rather than Mexico. Indeed, we note that under Texas law, Bancomer, as a foreign bank, did not even have the power to receive deposits in Texas. Texas Const. art. 16, § 16; Tex.Rev.Civ.Stat.Ann. art. 342-902 to -903 (Vernon 1973 & Supp.1985). Moreover, holding that Mexico rather than Texas was the situs of the deposits furthers the general policies of the act of state doctrine. Given Mexico's interest in these certificates of deposit, which were issued by a Mexican bank and payable in Mexico, disregarding Mexico's exchange regulations would be a serious affront. We decline to take this course. Instead, we apply the act of state doctrine and affirm the dismissal of the suit.
Both the sovereign immunity and act of state doctrines are rooted in principles of international comity; both involve a balancing of our interest in providing a forum to injured parties against our interest in maintaining amicable relations with other nations by respecting their sovereign acts. However, the balance struck in regard to each doctrine may be different.
Here we hold that the act of state doctrine applies but that the doctrine of sovereign immunity does not; we hold both that
We express no opinion as to which of these interests is greater. The act of state doctrine reserves that question for the political branches. It reflects the view that where competing sovereign interests are at stake, the delicate task of resolving disputes is best handled through diplomatic channels.
The judgment of the district court dismissing the present case is AFFIRMED.
Here, Bancomer appears to concede that, if subject matter jurisdiction exists, then personal jurisdiction also exists. Although Bancomer initially claimed that the Callejos failed to serve process in compliance with 28 U.S.C. § 1608, the Callejos re-served Bancomer by delivering a summons and a copy of their complaint both to the manager of Bancomer's New York agency and to the Subdirector/General Manager of Bancomer's Los Angeles branch office. On appeal, Bancomer has not reiterated its claim that the Callejos failed to comply with 28 U.S.C. § 1608, nor has it raised as a separate defense the argument that the exercise of personal jurisdiction would violate due process. To the extent that Bancomer contends that there are insufficient contacts for the exercise of personal jurisdiction, see Brief for Appellee at 18 n. 12, we hold that the contacts discussed in Part II(B) below are sufficient to satisfy the requirements of due process.
While this is helpful so far as it goes, it is somewhat circular, since it defines "commercial activity" in terms of "commercial conduct" and "commercial transaction" but contains no independent definition of "commercial." Generally, however, if an activity is of a type that a private person would customarily engage in for profit, it is clearly commercial. See Letelier v. Republic of Chile, 748 F.2d 790, 796-97 (2d Cir.1984); International Ass'n of Machinists & Aerospace Workers v. OPEC, 649 F.2d 1354, 1357 (9th Cir.1981), cert. denied, 454 U.S. 1163, 102 S.Ct. 1036, 71 L.Ed.2d 319 (1982); House Report, supra, at 6614-15.
Although we have cited Dunhill on a number of occasions, see Compania de Gas de Nuevo Laredo v. Entex, Inc., 686 F.2d 322, 326 (5th Cir.1982), cert. denied, 460 U.S. 1041, 103 S.Ct. 1435, 75 L.Ed.2d 794 (1983); Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1380 n. 11 (5th Cir.1980); Industrial Inv. Dev. Corp. v. Mitsui & Co., 594 F.2d 48, 52 (5th Cir.1979), cert. denied, 445 U.S. 903, 100 S.Ct. 1078, 63 L.Ed.2d 318 (1980), thus far we have not actually adopted the commercial activity exception, Airline Pilots Ass'n v. Taca Int'l Airlines, 748 F.2d 965, 970 n. 2 (5th Cir.1984), cert. denied, ___ U.S. ___, 105 S.Ct. 2324, 85 L.Ed.2d 842 (1985). In Entex, we held that the actions in question were governmental rather than commercial, and thus never had the opportunity to determine whether, if they were commercial, the act of state doctrine would apply. 686 F.2d at 326. Similarly, we held in Mitsui that the act of state doctrine did not apply for other reasons and thus did not reach the commercial activity exception issue. 594 F.2d at 52. Finally, in Arango, the commercial activities in question were not invested with the sovereign authority of the state; they consisted merely of the sale of airline tickets and tourist cards, and the activities in connection therewith. 621 F.2d at 1380 n. 11.
Although the May 3 letter is not dispositive of the Fund's position, we believe that it is prima facie evidence. Because the Callejos failed to offer any evidence to rebut or otherwise undermine the letter, we believe that they failed to raise a genuine issue of fact regarding the Fund's approval of the Mexican regulations. This result is buttressed by the IMF's general interpretive view that currency regulations should be presumed to be in conformity with the Fund Agreement unless the Fund indicates otherwise. See 1 J. Horsefield, The International Monetary Fund, 1945-1965, at 210 (1969) (discussing the Legal Department's opinion letter of Oct. 29, 1948). Under this view, it is the plaintiff's burden to demonstrate that the IMF disapproved the currency regulations in question, rather than the defendant's burden to prove the converse. Here, the Callejos introduced no evidence that the Fund has disapproved the Mexican regulations.