U.S.

Supreme Court

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

376 U.S. 398

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

Held:

1. The privilege of resorting to United States courts being available to a recognized sovereign power not at war with the United
States, and not being dependent upon reciprocity of treatment, petitioner has access to the federal courts.

2. The propriety of the taking was not governed by New York law, since the sugar itself was expropriated.

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

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

5. The scope of the act of state doctrine must be determined according to federal law.

6. The act of state doctrine applies and is desirable with regard to a foreign expropriation even though the expropriation allegedly
violates customary international law.

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

(b) The political branch can more effectively deal with expropriation than can the Judicial Branch.

(c) Conflicts between the Judicial and Executive Branches could hardly be avoided were the judiciary to adjudicate with respect
to the validity of expropriations. Even if the combination alleged in this case of retaliation, discrimination, and inadequate
compensation made the expropriation here violative of international law, a judicial determination to that effect would still be
unwise as involving potential conflict with or embarrassment to the Executive Branch in later litigation.

7. A foreign country's status as a plaintiff does not make the act of state doctrine inapplicable.