4/25/2021 Banco Nacional de Cuba v.

Sabbatino - Oral Argument - October 22, 1963 (Part 1)

Banco Nacional de
Cuba v. Sabbatino
Oral Argument - October 22, 1963
(Part 1)
Earl Warren
Number 16, Banco Nacional De Cuba versus Peter L. F. Sabbatino.

Mr. Rabinowitz.

Victor Rabinowitz
May it please the Court.

I notice that, although the Court does supply quill pens to counsel, it
does not supply inkwells as well.

This case is here on a writ of certiorari --

William J. Brennan, Jr.

Does that bear on this issue?

Victor Rabinowitz
No sir.

It's just a reference to the last case.

This case is here on a writ of certiorari to the Court of Appeals for the
Second Circuit to review that court's a rmance of a judgment of the
District Court for the Southern District of New York.

The District Court had entered an order dismissing the complaint on a

motion by plainti for summary judgment.

We think both of the courts below were in error and that summary
judgment should have been entered in favor of plainti against the
defendant, Farr Whitlock.

The facts are somewhat complex, but I shall take the liberty of sketching
them in rather quickly and only in broad outline because the details are

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really not necessary for a full understanding of the critical issue that
confronts the Court on this record.

Some time prior to 19-- to July of 1960 and about April or May, a sugar
brokerage rm in New York by the name of Farr Whitlock entered into
two contracts with a wholly owned subsidiary of a Cuban corporation,
Compania Azucarera Vertientes-Ca Aguey, which is referred to in this
proceeding by the initials C.A.V.

Although Farr Whitlock was a sugar broker, it was buying this sugar on
its own account.

Under the terms of the contract, the sugar was to be shipped to

Morocco, but payment was to be made in New York upon presentation of
the bill of ladings and other shipping documents accompanied by a sight
draft for the purchase price of the sugar in accordance with normal
commercial practice.

The price of the sugar was approximately $175,000.

The record shows that C.A.V. was incorporated in Cuba and that about
90% or in excess of 90% of its stockholders are said to be residents of
the United States.

There is nothing into the -- in the record as to the nationality of those

stockholders.

On July 6, the Republic of Cuba adopted a decree authorizing the

nationalization of property owned by nationals of the United States or
properties in which the United States nationals had an interest.

Under the terms of the decree, compensation was to be paid by the

issuance of 20-year-bonds and the funds behind the bonds were to
come from the proceeds of sales of sugar to the United States.

On that very same day, the President of the United States signed the
Sugar Act of 1960, which sharply curtailed the purchases of sugar by the
United States from Cuba, although the Act, of course, had been passed
by Congress a few days previously.

One month later, on August 6, by a resolution made pursuant to the

decree that I have mentioned, the property of C.A.V. and 25 other
corporations were nationalized.

This was one of a long series of decrees, which are -- some of which are
referred to in a footnote at page 39 of petitioner's brief, which began in

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May of 1959 and which, in the end, transformed Cuba from a capitalist
to a socialist economy.

On the day of the decree, the sugar was being loaded on a freighter
which was anchored in territorial waters of Cuba.

Actually, the loading was not completed until August 9.

The ship remained in territorial waters until August 11 and, on that day,
new contracts were signed by Farr Whitlock with a Cuban governmental
bank.

These contracts were identical in terms, even as to the date, with the
original contract signed between Farr Whitlock and C.A.V. and we
contend that this contract recognized the ownership of the Cuban
government in this sugar.

A day or two later, the sugar went o to Morocco.

The bills of lading were assigned to the petitioner which is the National
Bank of Cuba and they were sent to Societe General, a French bank which
acted as the New York agent of the petitioner, together with a sight
draft in the sum of $175,000.

While the bills of lading were in transit and, on August 16, 1960, in a
proceeding commenced in the New York State Supreme Court, a receiver
was appointed over the New York assets of C.A.V. pursuant to Section
977 (b) of the Civil Practice Act.

As a result of subsequent proceedings, that receivership was set aside

and vacated.

That happened after the Court of Appeals decision on this case, the
court-- Supreme Court in Kings County New York holding that the
receivership was improper in the rst place.

On August 26, Farr Whitlock and C.A.V. entered into a contract.

By the terms of which, Farr Whitlock agreed that if it could get

possession of the sugar or of the proceeds, it would hold those proceeds
for C.A.V., instead of turning them over to Societe General.

In return, C.A.V. agreed to hold Farr Whitlock harmless for any loss it
might su er as a result of this transaction and also agreed to pay it 10%
of the proceeds so that, although Farr Whitlock has been referred to in
this proceeding on a number of occasions as only as stakeholder,

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actually, it stands to gain some of the sum of $17,500 if it should prevail

in this lawsuit.

On August 29, by means of a trick which we think equaled fraud, it

certainly resembles fraud, Farr Whitlock managed to get possession of
the bills of lading without actually honoring the sight draft.

Using the bills of lading, it negotiated them, sold the sugar, and received
$175,000 for it.

It refused to pay that $175,000 over to Societe General and this lawsuit,
which alleges a conversion of the bills of lading and the sugar that they
represented, was commenced.

A day or two later, the money was turned over to the receiver and, upon
determination of the receivership, the money which, together with
interest in course, now amounts to something over $200,000 was
turned up to a-- over to an escrow agent who now holds those funds
awaiting the decision of this Court.

Potter Stewart
Societe General, if I got it right, is the instrument of the Government of
Cuba?

Victor Rabinowitz
No, it's a French bank.

It's a private bank which is owned by French Interest.

It has an agency in New York and it engages in normal commercial

business and it was acting as an agent here, not an agency of, but a
commercial agent for the Government of Cuba in the transaction of
these businesses.

Potter Stewart
Then, how did Banco Nacional De Cuba come into the picture?

Victor Rabinowitz
Well, Banco Nacional was the assignee--

Potter Stewart
Of Societe?

Victor Rabinowitz
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Of the Cuban Government or the Cuban bank which entered into the
contract in the rst place.

Societe Generale was merely an agent of the petitioner and the

petitioner sued here.

Societe Generale was perhaps liable to Banco Nacional for negligence in

handing over the bills of lading without getting the draft, but Banco
Nacional chose not to sue Societe Generale, its agent, but rather sue
directly for its--

Is Banco an instrumentality of the Cuban Government?

Victor Rabinowitz
Yes.

Potter Stewart
It is?

Victor Rabinowitz
Yes.

There's no question about that.

Byron R. White
Is there a (Inaudible) obligation (Inaudible)?

Victor Rabinowitz
No, there was no negotiation--

Byron R. White
A collection agent --

Victor Rabinowitz
It was purely a collection agent.

There seem to be no question of fact in this case and, accordingly,

petitioner moved for summary judgment.

Farr Whitlock defended on two grounds.

First, it claimed that the federal court did not have jurisdiction because
of the pendency of the New York State receivership and, second, it raised
the series of issues of fact.

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Neither of those grounds is raised in this Court and we assume that they
have been abandoned.

The district court rst considered the question of jurisdiction and

decided in favor of the petitioner.

It then considered the factual questions and decided those in favor of

petitioner, holding that there were no triable issues of fact.

We would have thought that, under these circumstances, summary

judgment would have resulted in favor of the petitioner that the Court
then went on to decide the case on a ground that had not been urged
before it, that had not been argued before it, that had not been briefed
before it, and that I don't think that any counsel had even thought
about it because, to us at least, the law seemed so clear that there was
no point in arguing the matter.

Despite a long line of cases of this Court and the federal courts known
generally as the act of state cases, and I shall of course refer to them
again later in my argument, it held that there was an exception to the
act of state case, namely that they did not apply where the decree of a
foreign government violated international law.

It then examined the decree of the Cuban Government in this case and it
found that violation of international law had indeed existed in three
respects.

First, that the Cuban decree was discriminatory against citizens of the
United States; second, that it was retaliatory and third, that it
con scated a property without adequate compensation.

The Court of Appeals a rmed on somewhat di erent ground.

It held that the Act of State Doctrine was subject to another exception.

This was the exception which it, the same court, had found, in about
1947 I think, in the second Bernstein case, and that's reported in 210
F.2d 375.

I shall refer to that again later, although I think that the major burden of
the argument, at least the major burden of the brief on this subject, will
probably be carried by the Solicitor General.

In any event, the court found that the Bernstein exception was present
here, relying on fragments of correspondents which were submitted to

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it, not by us of course and not by Farr Whitlock, but by an amicus which
had sought and received leave to le an amicus brief.

And, these fragments of correspondents were handed up to the court

and the court relied on these to hold that the Bernstein exception
applied in this case.

It then went on to decide that the Cuban decree had violated

international law and, while it didn't nd the same three violations of
international law that the district court had nd, it sort of grouped all of
them together and, to use its language, it held that there was a violation
of international law for a company to fail to pay adequate compensation
for the property it seizes from a particular class of aliens when the
purpose for the seizure of the property is to retaliate against the
homeland of those aliens and when the result of such seizure is to
discriminate against them only.

In another words, it took the three grounds that the Court of Appeals
said had found and locked them all together to make one single ground.

In our opinion, the basic question before the Court here is the Act of
State Doctrine.

Both our brief and, to an even greater extent, the brief of the Solicitor
General enters into a rather extensive consideration of the history of the
Act of State Doctrine.

Both of us say that this doctrine really dates from 1674 in an English
case.

But, in modern times, it may be said to date from Underhill against

Hernandez, although there's some language in the Schooner Exchange
which does seem to foreshadow this same doctrine.

Now, there are many, many formulations of the Act of State Doctrine in
the decision for this Court.

In Oetjen against Central Leather Company, for example, this Court said
the conduct of one independent government cannot be successfully
questioned in the course of another.

Mr. Justice Holmes earlier, in the American Banana Company case, had
said “the general and almost universal rule is that the character of an act
as lawful or unlawful must be determined wholly by the law of the
country in which the act is done.

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”There is similar language in Shapleigh against Mier, in the Belmont

case, in the Pink case, all of them in this Court and, most recently, in the
case of Pons against the Republic of Cuba which was decided by the
Court of Appeals for the District of Columbia and certiorari was denied
by this Court, I believe, in 1961 and it presents a Cuba situation.

The others, of course, represented either Latin American

nationalizations or Russian nationalizations.

The New York courts hold to the same e ect, and this is of some
signi cance because there are some suggestion both in the Court of
Appeals and in the decisions of the -- in the briefs of -- the many briefs
that have been submitted in opposition to the petitioner, that perhaps,
under the Erie against Tompkins case, the New York law applies, but it
really doesn't matter because the New York cases are in complete
agreement.

Salimo against Standard Oil, in 1933, is perhaps typical.

It says “the courts of one independent government will not sit in

judgment upon the validity of the acts of another done within its own
territory, even when such government seizes and sells the property of
an American citizen within its boundaries and, to the same e ect, the
Dougherty case and Holzer against Deutsche Reichsbahn, the last one
being a case involving actions by the Nazi Government of Germany.

Arthur J. Goldberg
There's a bit of (Inaudible) it appears the law of (Inaudible).

At some point, the objection is (Inaudible) and they appear to have

reached to de ne, regardless of how this case goes, (Inaudible) of our
Act as it appear here.

This is on the (Inaudible) giving him advice when you're treating it as an

act of state.

Victor Rabinowitz
I'll be glad to come to that, Your Honor.

I hope I remember it, and if I don't--

Arthur J. Goldberg
I hope (Inaudible)

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Victor Rabinowitz
Mr. Boudin will remind me if I forget.

I certainly shall.

We, and the Solicitor General, say that this doctrine, the Act of States
Doctrine is generally accepted throughout the world by the courts of
most other countries.

There's no doubt that it's accepted it in England in Luther against Sagor.

C.A.V. disagrees and so do some of the other amicus briefs.

And, frankly, I see no particular point in spending the time of this Court
in discussing decisions in Bremen, Turin, Singapore, Nuremberg, Venice,
Aden, and many other cases throu-- many other similar points
throughout the world.

All of them are discussed in the brief and to be honest, I really don't see
why they make very much di erence because the law in the United
States and England is identical and I have just stated it, and I don't know
why it should make very much di erence what the Court of Venice
thinks about this question.

Potter Stewart
Now, in the ultimate e ect, it doesn't really make much di erence what
the courts of England think about it.

This is a--

Victor Rabinowitz
Exactly.

Potter Stewart
Question of what --

Victor Rabinowitz
Exactly.

Potter Stewart
The law is --

Victor Rabinowitz
Except --

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Potter Stewart
In the United States.

Victor Rabinowitz
Except that we are in what is sometimes referred to as Anglo-American
--

Potter Stewart
Well, I understand that.

Victor Rabinowitz
System of law and I just want to get the Anglo in.

Potter Stewart
It's the United States court --

Victor Rabinowitz
I think --

Potter Stewart
The United States court --

Victor Rabinowitz
That's so, Your Honor.

The --

Potter Stewart
Now -- well, I've -- since I've interrupted you, may I ask you whether
the -- or not this doctrine applies in case the foreign government has
not been recognized diplomatically by our nation?

Victor Rabinowitz
Well, there is some suggestion that the doctrine does apply even where
the foreign government has not been recognized but that, of course, is
not before us because the foreign government has been recognized in
this case.

There are no diplomatic relations, but the foreign government has been
recognized and there is material, I think it's in this record, but certainly
in Ricoeur and many other cases in the United States in which the
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Secretary of State has written letters to various courts throughout the

country saying “the Cuba -- the Cuban Government has been
recognized by the United States.”

Potter Stewart
Throughout the --

Victor Rabinowitz
And still is.

Potter Stewart
Series of transactions involved.

Victor Rabinowitz
Yes, throughout the period of transactions --

Potter Stewart
And now.

Victor Rabinowitz
And including today.

The C.A.V. brief says that the Court of Appeals' decision is supported by
commentators and decisions of courts in other countries and that may
be true, but I don't consider it to be decisive.

Not only is there no legal authority to support the respondent here, but I
submit that there are no policy considerations either.

Now, I'm not going to argue that extensively because I think that the
brief of the Solicitor General handles this matter rather fully and is --
I'm sure, plans to consider these policy considerations.

I would like just to mention two points, however, which are relevant.

C.A.V. and many of the amicus briefs make quite a point of an argument
which we don't make.

They make quite a point in answering an argument that we don't make

and that, I believe, the Solicitor General makes either and they say that
this Court has the power to decide cases even though they a ect foreign
relations and it quotes cases like the Familiar Ground against Canal and
other similar cases.

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Now, I certainly would not argue that this Court doesn't have any power
to decide cases which involve foreign relations.

The Court has done so many times, and I would not argue for any such
broad proposition.

For example, there is a citation -- there is a reference to Mr. Justice

Brennan's decision in Baker against Carr in which the opinion makes
some reference to the language in the Ricoeur case, I believe, and says
that this language is too broad that the court frequently does handle
problems involving foreign relations.

Now, I'm not arguing that question.

I don't think it has anything to do with this case.

All we are saying, so far as this case in concerned, that our court should
recognize the validity of the Acts of other states disposing of title to
property within their territorial jurisdiction.

That's all I have to say in this case and that's all that I am asking the
Court to rule on.

If we have other problems in other cases, we will consider them in due

course.

To hold otherwise is to challenge or to question the sovereignty of other

nations, as Mr. Justice Holmes said “what is sovereignty, but the right to
make decisions as to property within your own territory.”

Arthur J. Goldberg
Do you decide to argue that as it leaves international law if the Court
holds that?

Victor Rabinowitz
I think it's a rule of international law, Mr. Justice Goldberg, but whether
it is or not.

I think it's a rule of this Court and I'm willing to rely on this Court.

I think that most courts hold that way.

You see, the di culty with the whole feel of international law, and we'll
come to this a little later, is that there is a general tendency on the part
of our courts, and it's natural enough, under the circumstances, to

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regard international law as being something that the courts of the

United States and Western Europe hold.

Now, the fact is that most of the people in the world don't live in United
States or Western Europe.

They live in Africa and they live in Asia and they live in Latin America and
we do not have from those courts a body of opinion of judicial decisions
which enable us to tell at this time what Indonesia or Pakistan or India or
China think about these issues.

Most of the people in the world live in those countries, not in the United
States and Great Britain and Germany and so the whole question of
international law on issues like this is really a matter which is of very,
very great value.

So, I can't say “the court say international law is the practice of most
civilized nations.

”I don't know and I don't believe that anybody knows what

international law is in this rapidly expanding world of today with so
many new nations being created almost everyday.

So, it's a pretty hard thing to tell.

Arthur J. Goldberg
(Inaudible) I hope it's in the record that you're taking (Inaudible) and
the Court ask you not to stay and (Inaudible)

Victor Rabinowitz
I have never considered this to be a rule of abstention, Your Honor.

I have always considered this to be a rule of positive law.

Arthur J. Goldberg
And, therefore, a rule of positive law and call it the National Law of
Parliament.

Victor Rabinowitz
It's our law.

Arthur J. Goldberg
Would you, therefore, argue the law using your rule?

Do you have to take the rule?

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In our point, (Inaudible) is the nationalization of property (Inaudible)

consider your example (Inaudible)

Victor Rabinowitz
I would say that with one quali cation.

I am now talking about nationalization of property within the territorial

limits of the nationalizing country.

Now, there are other cases where property in New York is nationalized,
and there are other Cuban cases raising tat issue, but we haven't
reached those yet.

We may someday, but I am not -- I am not extending myself to that

question at the moment because this property was in Cuba.

William J. Brennan, Jr.

Well, may I ask Mr. Rabinowitz.

You're not arguing either, are you that this is the kind of subject matter
which the Constitution commits to the Executive and, in that sense, is
nonjusticiable?

In other words, you're not arguing that this is a matter of lack of power
in the judiciary.

Victor Rabinowitz
I should think not, Your Honor.

I don't know what the Solicitor General says about that, but I don't think
I am arguing that this is not justiciable in that sense.

I think it's not justiciable for other reasons, but not in that sense.

Byron R. White
Then you must -- you would probably also argue the Executive then has
no business questioning the act of a foreign sovereignty.

Victor Rabinowitz
Whether the Executive may do it is a diplomatic matter. The Executive
frequently questions the validity of acts of foreign countries.

This is the --

Byron R. White
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We may need to break international law.

Victor Rabinowitz
This is -- well, I don't know whether it's a question of breaking
international law. The Executive frequently --

Byron R. White
Well, they recognized them.

Victor Rabinowitz
Signs a note saying that this is a violation of international law.

This is all on the give and take of diplomacy and speeches are made and
arguments are made and, in diplomatic negotiations.

I think the Executive is entitled to a freehand in this and I certainly

would not limit the or -- seek to limit the Executive, even if I could, in
any question as to what kind of position the Executive is going to take in
the give and take of the politics of the modern world.

I think this is for the Executive to determine and I think that the
Executive has a freehand, but I don't believe that it has any role in
determining what this Court will decide.

The second point I would like to make in connection with this problem of
the policy behind the Act of State Doctrine is an illustration that I would
like to present to Your Honors which is not a hypothetical illustration,
but is an actual one and which I think is an excellent illustration of why
the Court ought to stay out of this area and why the Act of State Doctrine
is a sound one and it arose under these circumstances.

On July 24, 1961, an Eastern Airline plane was hijacked by an armed

passenger who took the plane from Miami to Havana together with all of
the passengers.

The passengers came back the next day but, on August 16th, the plane
was returned by the Cuban Government after a great deal of diplomatic
negotiation between the Swiss and Czech as these things are handled
now.

On the very next day, August 17th, a Cuban freighter was hijacked and
was brought into Norfolk harbor.

This presented a political situation of, I think, considerable importance

and it was made even more critical by the fact that, on board that
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freighter, there was a cargo of sugar and it was owned by United Fruit
Company or at least United Fruit Company claimed to own it.

It was a cargo of sugar that had been nationalized by the very same
decree that we are here considering, and United Fruit came in and said
“we don't care about the freighter, but the sugar belongs to us.

” Now, the case of United Fruit was just as strong and just as weak as the
case of C.A.V. in this re -- in this circumstance. Every single word of the
C.A. brief -- C.A.V. brief, between page 12 and page 58, could have been
written by United Fruit merely with a substitution of the name United
Fruit for C.A.V.

Earl Warren
We'll recess now.

Victor Rabinowitz
Thank you.

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