Court of Appeals of the State of New York
French v. Banco Nacional de Cuba
23 N.Y.2d 46 (N.Y. 1968) • 295 N.Y.S.2d 433
Decided Oct 15, 1968
Argued January 4, 1968 Reargued September 24,
1968
47 Decided October 15, 1968 *47
Appeal from the Appellate Division of the
Supreme Court in the First Judicial Department,
48 *48 ARTHUR MARKEWICH, J.
Victor Rabinowitz and Leonard B. Boudin for
49 appellant. *49 Edward G. Bathon and John N.
Regan for respondent.
Chief Judge FULD.
On this appeal from a judgment in favor of the
plaintiff in an action for a breach of contract, two
questions were originally briefed and argued —
first, whether the defendant is entitled to sovereign
immunity and, second, whether the defendant may
invoke the "act of state" doctrine. We ordered
reargument, requesting the parties to address
themselves to further questions, the primary one
being whether the Hickenlooper Amendment to
the Federal Foreign Assistance Act of 1961
(hereafter referred to as the Hickenlooper
Amendment)1 covers this case and bars
50 application of the act of state doctrine. *50
1 U.S. Code, tit. 22, § 2370, subd. (e), par.
(2); 78 U.S. Stat. 1009 (1964), as amd. 79
U.S. Stat. 653 (1965).
The case stems from a regulation of the Cuban
Government — adopted after Fidel Castro's
accession to power in January of 1959 — which,
in effect, prevented American and other foreign
investors from receiving currency other than
Cuban pesos on their Cuban investments. The
•
242 N.E.2d 704
investor here involved was the plaintiff's assignor,
Alexander Ritter, an American citizen, now living
in Florida, who resided in Cuba at the time of the
events from which this lawsuit arises. In 1957,
some two years before the events in question, he
invested about $350,000 in a Cuban farm. At that
time, the Cuban Government permitted foreign
investors to turn the proceeds from their
enterprises into American dollars, or other foreign
currency, and exempted such proceeds from
Cuba's tax on the exportation of money. To this
end, the Currency Stabilization Fund of the Cuban
Government was authorized to issue "certificates
of tax exemption." In June, 1959, six months after
the inception of the Castro regime, Ritter acquired
eight such certificates, aggregating $150,000.2
2 These certificates alone, and no other
property of Ritter's, are the subject of this
action.
Each certificate recites that
"ALEXANDER S. RITTER or a member
Bank of the System, as endorsee hereof,
will receive from Banco Nacional de Cuba
[defendant herein] against delivery to said
Bank of $ ____ Cuban Pesos and surrender
of this Certificate, a check on New York
for an equal amount of United States
Dollars, exempt from the Tax on
Exportation of Money.
1
 French v. Banco Nacional de Cuba
"This Certificate is issued and delivered
inasmuch as the importation and
investment in Cuba of the said funds have
been duly accredited in accordance with
the provisions of Law-Decree No. 548 of
November 20, 1952 and its Regulations."
Although the certificates state that their owner
"will receive from [defendant bank]" the
appropriate "amount" of American dollars, they
are signed by both the defendant and the Cuban
51 Government's Currency Stabilization Fund. *51
On July 15, 1959, the Currency Stabilization Fund
issued "Decision No. 346." Aimed at stopping the
flow of foreign currency from Cuba and thereby
preventing a situation "very dangerous" to that
country, the Decision suspended "for the time
being processing of" tax exemption certificates
"until reorganization of the system of
exemptions". The redemption of such outstanding
certificates, according to the president of
52
defendant bank, would have wiped out Cuba's
dollar reserves. When, in December of 1959,
Ritter tendered his certificates for redemption,
together with the appropriate number of pesos,
payment in American dollars was refused under
the mandate of the Decision.
The plaintiff, Ritter's assignee, brought the present
action, late in 1960, in Supreme Court, New York
County, and obtained a judgment against
defendant bank in the amount of $150,000, with
interest.3 A closely divided Appellate Division
affirmed, rejecting the defendant's claims (1) that
it was entitled to sovereign immunity from suit as
an agency of the Cuban Government and (2) that
the Decision in question "had the force of law"
and was an act of the sovereign Government of
Cuba to which our courts will not deny legal
effect.
3 Jurisdiction over the defendant was
acquired by attaching an account which it
maintained in a bank in New York City.
23 N.Y.2d 46 (N.Y. 1968)
On the first of these questions, that of sovereign
immunity, the entire court is in agreement with the
Appellate Division, and we dispose of the point
very quickly. In view of the State Department's
conclusion (set forth in a note not included in the
record) that the activities out of which the present
action arose "were of a jure gestionis
[commercial] * * * nature" and its position that
immunity should not be granted in such cases, we
must decline to accord the defendant sovereign
immunity from suit. It is "not for the courts to
allow immunity" on grounds "which the
government has not seen fit to recognize." (
Republic of Mexico v. Hoffman, 324 U.S. 30, 35;
see, also, National Bank v. Republic of China, 348
U.S. 356, 360; Victory Transp. v. Comisaria
General, 336 F.2d 354, 360, cert. den. 381 U.S.
934.)
This brings us to the second question presented,
namely, whether the act of state doctrine bars the
plaintiff's claim. *52
It has long been settled,4 and recently reaffirmed
by the Supreme Court in Banco Nacional de Cuba
v. Sabbatino ( 376 U.S. 398, 416 et seq.), that the
courts in the United States will not inquire into the
validity of the acts of a foreign government done
within its own territory. As the Supreme Court
stated in Underhill v. Hernandez ( 168 U.S. 250,
252) — quoted in Sabbatino (376 U.S., at p. 416)
— "[e]very 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."
4 See Underhill v. Hernandez, 168 U.S. 250;
Oetjen v. Central Leather Co., 246 U.S.
297, 303; Ricaud v. American Metal Co.,
246 U.S. 304, 310; Hewitt v. Speyer, 250 F.
367; Banco de Espana v. Federal Reserve
Bank, 114 F.2d 438, 443; Bernstein v. Van
Heyghen Freres, 163 F.2d 246, cert. den.
2
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

332 U.S. 772; Salimoff Co. v. Standard Oil instrumentality of the Cuban Government.
Co., 262 N.Y. 220; Dougherty v. Equitable Moreover, in compliance with that Decision — or
Life Assur. Soc., 266 N.Y. 71; Holzer v. even if only in purported compliance — Banco
Deutsche Reichsbahn-Gesellschaft, 277
Nacional, also an agency of the Cuban
N.Y. 474. The decision in Banco Nacional
Government, refused and continues to refuse to
de Cuba v. Sabbatino ( 376 U.S. 398, 427)
exchange pesos for dollars as the certificates had
establishes that the scope of the act of state
required. These undisputed facts establish, as
doctrine "must be determined according to
matter of law, that the breach of contract, of which
federal law".
the plaintiff complains, resulted from, and, indeed,
Our courts will not examine a foreign law to itself constitutes, an act of state.5
determine whether it was adopted in conformity
5 It is immaterial what form an act of state
with the internal procedures and requirements of
takes — whether it be an expropriation or
the enacting state. The act of state doctrine, it has
confiscation, a conversion or a breach of
been well said, is not limited to situations in which
contract (see, e.g., Hewitt v. Speyer, 250 F.
"the foreign act is committed in a manner 367; Holzer v. Deutsche Reichsbahn-
`colorably valid' under foreign law. It should make Gesellschaft, 277 N.Y. 474, 479;
no difference whether the foreign act is, under Dougherty v. Equitable Life Assur. Soc.,
local law, partially or wholly, technically or 266 N.Y. 71, 87-88) — as long as such act
fundamentally, illegal. * * * So long as the act is is committed by the foreign government
the act of the foreign sovereign, it matters not how within its own territory.
grossly the sovereign has transgressed its own
On this analysis, there is no issue of burden of
laws." ( Banco de Espana v. Federal Reserve
proof. Rather, the question is, what need be
Bank, 114 F.2d 438, 444; emphasis supplied.) The
proved. The defendant introduced evidence
opinion in Sabbatino itself is unequivocal on this
showing that Decision No. 346 had been issued by
point. "The courts below", the Supreme Court
the Currency Stabilization Fund, that it was
wrote (376 U.S., at p. 415, n. 17), "properly
adopted as a measure to control currency and
declined to determine if issuance of the
foreign exchange and that defendant bank had
expropriation decree complied with the formal
regarded the Decision as binding upon it and as
requisites of Cuban law. * * * If no institution of
prohibiting performance of the agreement in the
legal authority would refuse to effectuate the
tax exemption certificates. The plaintiff adduced
decree, its `formal' status — here its argued
evidence to the effect that the Decision did not
invalidity if not properly published in the Official
conform to Cuba's fundamental law and that it had
53 Gazette in Cuba — is irrelevant. It has *53 not
not been published in the "Official Gazette." But
been seriously contended that the judicial
that was insufficient, as matter of law, to establish
institutions of Cuba would declare the decree
that the action dishonoring and repudiating the
invalid." Nor, it should be noted, does the plaintiff
certificates was not an act of state. It was
before us make any such claim.
incumbent on the plaintiff to prove that the Cuban
Consequently, there is no basis whatever for the authorities themselves would deem Decision No.
plaintiff's contention that the action dishonoring 346 invalid and would disregard it. This she was
and repudiating the certificates held by Ritter was obviously unable to do.
not an "act of state." Regardless of whether or not
Since it is thus apparent that there was an act of
Decision No. 346 was published in the Official
state, it follows — unless the Hickenlooper
Gazette or otherwise complied with internal
54 Amendment requires the *54 court not to apply the
Cuban standards of regularity, it was issued by the
act of state doctrine ( infra, pp. 57-62) — that we
Currency Stabilization Fund, an official

3
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

are barred from all further inquiry in this case claim its benefits. In the absence of any
concerning Cuba's action and, in particular, from such compact by which the court may be

any inquiry that would test such action by the guided, we must conclude that the case is
precisely within the sensitive area of fluid
standards of international law or the public policy
and uncertain foreign relations which
of this forum.
Sabbatino declared to be outside the
In Sabbatino, where the Supreme Court most province of the judicial branch.
recently considered the act of state doctrine, it was
Indeed, if the act of state doctrine was decisive in
confronted with a complete and outright
the situation presented in the Sabbatino case, then,
expropriation of American property, a quantity of
it must surely be so here — again, unless the
sugar, by Cuba. Nevertheless, taking into
Hickenlooper Amendment requires a different
consideration the "fluidity of present world
result. In the present case, although there are
conditions" and the division of opinion upon the
circumstances which undoubtedly imposed serious
"limitations on a state's power to expropriate the
55 losses upon the *55 plaintiff's assignor, manifestly,
property of aliens", the court was of the opinion
they do not reach the level of an outright "taking"
that, whether or not an "international standard in
or "expropriation" with which the court was
this area" might be discerned, the "matter is not
confronted in Sabbatino.
meet for adjudication by domestic tribunals" (376
U.S., at pp. 428, 429, 434). Accordingly, and The Government of Cuba, by its Decision No.
having in view the particular facts of the case 346, has actually done nothing more than enact an
before it, the Supreme Court said (376 U.S., at p. exchange control regulation similar to regulations
428): enacted or promulgated by many other countries,
including our own. (See, infra, pp. 63-64.) A
"Therefore, rather than laying down or
currency regulation which alters either the value
reaffirming an inflexible and all-
or character of the money to be paid in satisfaction
encompassing rule in this case, we decide
of contracts is not a "confiscation" or "taking."
only that the Judicial Branch will not
(Cf. Norman v. B. O.R.R. Co., 294 U.S. 240, Nortz
examine the validity of a taking of
v. United States, 294 U.S. 317, and Perry v.
property within its own territory by a
United States, 294 U.S. 330 [Gold Clause Cases].)
foreign sovereign government, extant and
As one authoritative writer in the field has stated
recognized by this country at the time of
(Mann, Money in Public International Law, 96
suit, in the absence of a treaty or other
Recueil Des Cours 1, 90), "A legislator who
unambiguous agreement regarding
reduces rates of interest or renders agreements
controlling legal principles, even if the
invalid or incapable of being performed or
complaint alleges that the taking violates
prohibits exports, or renders performance more
customary international law."6
expensive by the imposition of taxes or tariffs
6 We may note, initially, that we have not does not take property. Nor does he take property
been cited to any "treaty or other if he depreciates currency or prohibits payment in
unambiguous agreement regarding foreign currency or abrogates gold clauses.
controlling legal principles" to which the Expectations relating to the continuing intrinsic
Supreme Court's reservation in Sabbatino
value of all currency or contractual terms such as
might apply. In point of fact, Cuba
the gold clause are, like favorable business
withdrew, in 1964, from the International
conditions and good will, `transient circumstances,
Monetary Fund Agreement, the only
subject to changes', and suffer from `congenital
arguably applicable international
infirmity' that they may be changed by the
instrument, and the defendant does not

4
 French v. Banco Nacional de Cuba
competent legislator. They are not property, their
change is not deprivation." (See, also, 1 Hyde,
International Law Chiefly as Interpreted and
Applied by the United States [2d rev. ed., 1945],
pp. 690-691.)
In the light of Sabbatino, we must recognize that
the currency regulations of a foreign state — at
least when presented in a context such as this one
— are not appropriate subjects for evaluation by
state courts applying local conceptions of public
policy. The "continuing vitality" of the act of state
doctrine, the Supreme Court wrote in Sabbatino
(376 U.S., at pp. 427-428), "depends on its
capacity to reflect the proper distribution of
functions between the judicial and political
branches of the Government on matters bearing
upon foreign affairs." As Mr. Justice HARLAN
observed (p. 432), "Piecemeal dispositions" by
courts which refuse to accord validity to the acts
56 of a foreign *56 sovereign within its borders
"could seriously interfere with negotiations being
carried on by the Executive Branch and might
prevent or render less favorable the terms of an
agreement that could otherwise be reached." (See,
also, Zschernig v. Miller, 389 U.S. 429, rehearing
den. 390 U.S. 974.)
In an area of international law where, for instance,
there is a wide divergence "between the national
interests of capital importing and capital exporting
nations and between the social ideologies of those
countries that favor state control of a considerable
portion of the means of production and those that
adhere to a free enterprise system", judicial
restraint is surely indicated (376 U.S., at p. 430):
"It is difficult to imagine the courts of this country
embarking on adjudication in an area which
touches more sensitively the practical and
ideological goals of the various members of the
community of nations." Even if, therefore, we
were to assume that the decision of the Cuban
instrumentality here involved was contrary to our
public policy, such considerations would not affect
our determination. As the Supreme Court
observed in the far harsher context of Sabbatino
23 N.Y.2d 46 (N.Y. 1968)
(pp. 436-437), "However offensive to the public
policy of this country and its constituent States an
expropriation of this kind may be, we conclude
that both the national interest and progress toward
the goal of establishing the rule of law among
nations are best served by maintaining intact the
act of state doctrine in this realm of its
application."
We might properly conclude at this point. The
parties themselves raised no other issues in the
courts below or on the original argument of this
appeal. However, in deference to the views of
some of the members of this court, we directed
reargument and, as noted above (p. 49), requested
the parties to address themselves, in essence, to
the further question whether the Hickenlooper
Amendment covers this case and bars the court
57 from applying the act of state doctrine.7 *57
7 This is the full text of the questions which
we asked the parties to discuss on
reargument:
"(1) Whether or not the
suspension of redemption of the
tax exemption certificates here
involved constituted or now
constitutes a confiscation or
taking within the meaning of the
Hickenlooper Amendment to the
Federal Foreign Assistance Act of
1961 * * * so as to bar the
defense of `act of state'; and
5
 French v. Banco Nacional de Cuba
"(2) Assuming that the first
question be answered in the
affirmative, whether or not,
applying principles of
international law, the suspension
above referred to constituted a
reasonable currency control
regulation aimed at the protection
of foreign exchange reserves or
was otherwise valid under the
Hickenlooper Amendment and
whether or not the continued
suspension of redemption
constitutes a reasonable currency
control regulation aimed at the
protection of foreign exchange
reserves which conforms with
principles of international law."
In our view, the Hickenlooper Amendment is
inapplicable. The statute was enacted to "reverse
in part" the decision in Sabbatino (S. Rep. No.
1188, Pt. I, 88th Cong., 2d Sess., p. 24 [1964]). So
far as relevant, the amendment declares that "no
court in the United States shall decline on the
ground of the federal act of state doctrine to make
a determination on the merits giving effect to the
principles of international law in a case in which a
claim of title or other right to property is asserted
by any party including a foreign state * * * based
upon (or traced through) a confiscation or other
taking * * * by an act of that state in violation of
the principles of international law". (Emphasis
supplied.)8
8 In somewhat greater detail,
Hickenlooper Amendment recites (U.S.
Code, tit. 22, § 2370, subd. [e], par. [2]; 78
U.S. Stat. 1009, 1013 [1964], as amd. 79
U.S. Stat. 653 [1965]):
23 N.Y.2d 46 (N.Y. 1968)
"Notwithstanding any other
provision of law, no court in the
United States shall decline on the
ground of the federal act of state
doctrine to make a determination
on the merits giving effect to the
principles of international law in
a case in which a claim of title or
other right to property is asserted
by any party including a foreign
state ( or a party claiming
through such state) based upon (
or traced through) a confiscation
or other taking after January 1,
1959, by an act of that state in
violation of the principles of
international law including the
principles of compensation and
the other standards set out in this
subsection: Provided, That this
subparagraph shall not be
applicable (1) in any case in
which an act of a foreign state is
not contrary to international law *
* * or (2) in any case with respect
to which the President determines
that application of the act of state
doctrine is required in that
particular case by the foreign
policy interests of the United
States and a suggestion to this
effect is filed on his behalf in that
case with the court." (Emphasis
supplied.)
It is plain enough upon the face of the statute —
the
and abundantly clear from its legislative history —
that Congress was not attempting to assure a
remedy in American courts for every kind of
monetary loss resulting from actions, even unjust
58 actions, *58 of foreign governments. The law is
restricted, manifestly, to the kind of problem
exemplified by the Sabbatino case itself, a claim
of title or other right to specific property which
had been expropriated abroad. (See Henkin, Act of
State Today: Recollections in Tranquility, 6
Colum. J. of Transnatl. L. 175, 185, 186.)
6
 French v. Banco Nacional de Cuba
The basic terms of the statute — to come directly
to its wording — simply cannot be made to fit the
present case. The amendment applies only if there
is a "claim of title or other right to property" and
that claim is "based upon (or traced through) a
confiscation or other taking" of such property. 9
9 It has been suggested (opn. of KEATING,
J., p. 86) that the phrase, "a claim of title or
other right to property", should be
construed broadly to include any property
of a confiscating state which comes into
the possession or control of our courts —
even though that property is not itself the
subject of the lawsuit but has simply been
attached in this country for the purpose of
acquiring jurisdiction. We find no basis for 59
such a suggestion. It seems plain that the
Hickenlooper Amendment comes into
operation only where there has been a
confiscation of the very property to which
a claim (of title or other right) is asserted.
The Federal District Court Judge's decision
in Banco Nacional de Cuba v. First Nat.
City Bank of N.Y. ( 270 F. Supp. 1004) —
to which Judge KEATING points — is not
to the contrary. The fact is that the claim to
which the amendment was held applicable
in that case was not the plaintiff's claim for
bank deposits and other funds held by the
defendant First National — which,
concededly, were at all times owing to the
plaintiff — but, rather, the defendant's
claim for its own property in Cuba which
had been confiscated by the Cuban
Government and the value of which First
National demanded as a setoff in the
action. Consequently, the Federal District
Court actually had no occasion to express
any opinion in the First National City Bank
case as to whether the monies held by the
defendant First National were covered by
the language, "right to property".
Moreover, the confiscation alleged in the
First National case included a divesting of
the defendant bank's contracts, not a
breach of them, by the Cuban Government.
Indeed, the District Court Judge did not
23 N.Y.2d 46 (N.Y. 1968)
hold that First National could recover
compensation for the loss of these contract
rights. Not even referring expressly to the
subject of contract rights, he merely noted
that "[t]he actual amount of the set-off
which can be asserted here poses delicate
questions of fact and law requiring further
careful consideration" (270 F. Supp., at p.
1011).
We must thus attempt to identify the "property" —
or the proceeds of such property — which was
allegedly "confiscated or taken" from Ritter by the
action of the Cuban Government. It is quite
evident that, before the issuance of Decision No.
346, Ritter had only two things that are relevant to
this action — *59 (1) some 150,000 pesos or the
means of obtaining them and (2) a contract made
in Cuba, to be performed in Cuba (by delivery
there of a check), and subject, from its inception
and at all times since, to the laws of Cuba.10 He
did not, it must be emphasized, have any fund of
dollars with which this action is concerned nor did
he have rights to any specific fund of dollars in the
possession of any other party. What, then, was
"taken"?
10 There can be no doubt that this would be
the appropriate choice of law, under
"traditional" as well as more recently
formulated standards. (See, e.g., Auten v.
Auten, 308 N.Y. 155, 160; Matter of
Havemeyer, 17 N.Y.2d 216.)
Ritter's loss is due not to a taking of property but,
rather, to the breach of a promise upon which he
had relied. What had happened — and
undoubtedly to Ritter's financial loss — was that
the Cuban law which governed the contract had
been changed by the adoption of a government
regulation which "suspended," perhaps
permanently, the conversion of pesos into dollars.
In the strictest sense, and within the terms of the
statute we are construing, just as no one has
"taken" the pesos from Ritter, so no one has
"taken" the contract from him; it is still his or his
assignee's to enforce, or attempt to enforce, as the
7
 French v. Banco Nacional de Cuba
present action bears witness. No other party claims
to be possessed of the contract rights that Ritter
had acquired. It is not as though the Cuban
Government had assumed title to a contract right
or other chose in action that had belonged to Ritter
and had then sought to enforce it against the
obligor. Indeed, as will shortly appear ( infra, p.
61), even if a true, outright confiscation of this
kind had occurred — that is, an actual divesting of
ownership of a contract right — it would still be
outside the compass of the Hickenlooper
Amendment.
If there could be any doubt that the amendment is
inapplicable to claims for breach of contract, that
doubt is dispelled by reference to the legislative
history, both of the original enactment in 1964 and
the change in wording adopted in 1965.
Throughout the committee hearings and
proceedings in Congress, the supporters of the bill
and those who commented upon it were quite
explicit about the intended purpose of the
proposal. That purpose was simply to permit an
adjudication "on the merits", despite the holding in
Sabbatino, in those cases in which a party asserts
"a claim of title or other right" to property which
has been confiscated or taken and such property
60 *60 becomes the subject of a lawsuit in the United
States. Indeed, Senator Hickenlooper himself
expressly declared, at one point, that the purpose
of his proposal was to require our American courts
to apply international law "whenever expropriated
property comes within the territorial jurisdiction
of the United States", noting that, unless his
proposal was accepted and the Sabbatino decision
overruled, this country might become "an
international `thieves market'" (110 Cong. Rec.
19548).11
11 In addition, Congressman Adair, who
spoke in support of the enactment, pointed
out that it was designed to permit a party
who had suffered an "expropriation" in
violation of international law to bring suit
"to assert his claim to the expropriated
property if there is an attempt to market it
61
23 N.Y.2d 46 (N.Y. 1968)
in the United States" or to enable him to
"resist a suit by the expropriating
government to seize the property"
(Congressman Adair, 110 Cong. Rec.
23680) and the Attorney General of the
United States (Mr. Katzenbach), who spoke
in opposition to the bill, noted in the course
of his remarks that the amendment dealt
with a "very isolated, infrequent
occurrence * * * when American property
that has been nationalized * * * finds its
way back in the United States." (Hearings
Before House Committee on Foreign
Affairs on H.R. 7750, 89th Cong., 1st Sess.
[1965], p. 1235; see, also, Prof. Olmstead,
Hearings Before House Committee, ibid.,
578; Prof. Metzger, ibid., 1025, 1026,
1028, 1030-1031.)
The words "confiscation" and "taking", the
debates and committee hearings established, were
used synonymously with "expropriation" and
"nationalization." (See, e.g., Hearings Before
Senate Committee on Foreign Relations on S. Bill
2659, 2660, 2662, 88th Cong., 2d Sess. [1964], p.
619; S. Rep. No. 1188, Pt. I, 88th Cong., 2d Sess.
[1964], p. 24; 110 Cong. Rec. 19548, 19557-
19559, 23680, 24076-24077.) Nothing in the
lengthy record of the congressional proceedings
suggests that the amendment was designed to
cover claims of breach of contracts by a foreign
government such as the one in this case. Nor was
there any intimation that Congress had in view the
highly complex problems of exchange control
regulations, repudiation of debts or depreciation of
currency. Conspicuously absent from the hearings
was the kind of expert testimony on international
monetary problems which surely would have been
sought if the Congress had been addressing itself
to problems of that nature.
Further proof of the limited scope intended for the
exemption from the act of state doctrine is found
in the Senate's refusal to enact Senator
Hickenlooper's original, broadly worded, draft of
the amendment which would have made the act of
state doctrine *61 inapplicable to any case "in
8
 French v. Banco Nacional de Cuba
which an act of a foreign state occurring after
January 1, 1959 is alleged to be contrary to
international law".12 The statute, as actually
adopted in 1964, contained the far more restrictive
wording which we have already discussed.
12 Senator Hickenlooper's proposal, made as
an amendment to the Foreign Assistance
62
Act of 1964 (H.R. 11380), was included in
the full bill as reported out of the Senate
Committee on Foreign Relations (S. Rep.
1188 [July 10, 1964], at pp. 24, 37).
In point of fact, to eliminate any possibility that
the original language, adopted in 1964, might be
construed to cover or encompass ordinary contract
rights, or anything other than specific and
identifiable and "traceable" property, Congress
amended the statute in 1965. In its original form,
the amendment referred to cases in which "a claim
of title or other right is asserted * * * based upon
(or traced through) a confiscation or other taking."
By the 1965 modification, the words, "to
property", were inserted after the words "other
right", so that the clarified provision now reads, as
already noted, "a claim of title or other right to
property". As the Senate Report explains, the
words were inserted "to make it clear that the law
does not prevent banks, insurance companies and
other financial institutions from using the act of
state as a defense to multiple liability upon any
contract, deposit or insurance policy in any case
where such liability [ sic] has been taken over or
expropriated by a foreign state." (S. Rep. No. 170
on S. 1837, 89th Cong., 1st Sess. [1965], p. 19;
emphasis supplied.) Thus, not even contract rights
which are taken over and are sought to be
enforced in this country are covered by the
Hickenlooper Amendment, much less claims for
breach of a contract in a suit between the original
parties to the agreement.
We may not ignore, or leave unexplained — as
Judge KEATING does — the fact that, when
Congress, in 1965, wished to assure the
preservation of the act of state defense for the
benefit of American insurance companies and
23 N.Y.2d 46 (N.Y. 1968)
banks who were sued on contract claims, it chose
to do so not by adding a carefully limited
exception, but — as noted in the text above — by
inserting the words, "to property", after the words,
"claim of title or other right" (see supra, p. 61).
The use of these unqualified words can only
signify that Congress decided to eliminate all
contract *62 claims from the statute rather than
attempt the more subtle task of distinguishing
between contract cases in which the act of state
defense might be asserted and those in which it
might not. Judge KEATING may disapprove of
Congress' choice of a method for accomplishing
its purpose, but that choice — by the plain
evidence of the 1965 amendment and of the
accompanying Senate Report — is the one that
was made, and it is binding upon us.
In short, although, as Judge KEATING observes,
the statute may be "inexpertly drafted" or
"inarticulately expressed" (opn., pp. 80, 85), it
does not follow, as he intimates, that the court is
relieved of the necessity of reading the language
of the statute closely or of drawing plain
inferences from its legislative history. Despite its
evident defects of draftsmanship, we must treat the
Hickenlooper Amendment as nothing less than a
serious attempt by Congress to define what it did
mean and what it did not mean in a complex and
important area of law.
From all that has been said, it is apparent that the
Hickenlooper Amendment has no application to
the present case. The present lawsuit does not
involve the assertion of a claim of title to property
and, just as clearly, the Cuban Government's
action did not involve a confiscation or taking of
property. Certainly, it is not a case in which title or
other right to a specific res (or its proceeds)
confiscated by a foreign government is disputed
on a claim either asserted by the original owner
and defended by the government or asserted by the
government and defended by the original owner.
9
 French v. Banco Nacional de Cuba
It follows that the Hickenlooper Amendment is
not applicable, that the act of state doctrine is
decisive and that the defendant must prevail. This
being so, it is not necessary to reach the further
question whether the action of the Cuban
Government offended principles of international
law. Since, however, our dissenting brethren have
concluded that such action did constitute a taking
of property to which a claim of title or other right
is asserted and have gone on to urge that it
violated international law, we treat that question
63 — of international law — briefly.13 *63
13 The plaintiff, in order to prevail under the
Hickenlooper Amendment ( supra, n. 8, p.
57), must show not only that the action
complained of constituted a taking of
property but also that it violated principles
of international law.
This is not an era, surely, in which there is
anything novel or internationally reprehensible 64
about even the most stringent regulation of
national currencies and the flow of foreign
exchange. Such practices have been followed, as
the exigencies of international economics have
required — and despite resulting losses to
individuals — by capitalist countries and
communist countries alike, by the United States
and its allies as well as by those with whom our
country has had profound differences. They are
practices which are not even of recent origin but
which have been recognized as a normal measure
of government for hundreds of years, if not,
indeed, as long as currency has been used as the
medium of international exchange. (See Winkler,
Foreign Bonds, an Autopsy — A Study of
Defaults and Repudiations of Government
Obligations [1933], p. 21; Mann, The Legal
Aspects of Money [2d ed., 1953], p. 337.)
In short, the control of national currency and of
foreign exchange is an essential governmental
function; the state which coins money has "power
to prevent its outflow" ( Ling Su Fan v. United
States, 218 U.S. 302, 311; see, also, Nortz v.
United States, 294 U.S. 317, 330, supra); and, as
23 N.Y.2d 46 (N.Y. 1968)
the court observed in Perry v. United States ( 294
U.S. 330, 356, supra), "[t]he same reasoning is
applicable to the imposition of restraints upon
transactions in foreign exchange." (See, also,
Restatement, 2d, Foreign Relations Law of the
United States, § 198, Comment b.)14 The
Restatement finds no violation of international law
in such a currency measure "if it is reasonably
necessary in order to control the value of the
currency or to protect the foreign exchange
resources of the state" (§ 198). The Restatement
goes on to recite that "the application to an alien
of a requirement that foreign funds held within the
territory of the state be surrendered against
payment in local currency at the official rate of
exchange is not wrongful under international law,
even though the local currency is less valuable on
the free market than the foreign funds
surrendered." Thus, if the Cuban Government
could, under the example cited, have properly
required *64 an alien within its borders to
surrender American dollars "against payment" in
pesos, as a measure "reasonably necessary * * * to
protect the foreign exchange resources of the
state" (Restatement, 2d, Foreign Relations Law of
the United States, § 198), the present refusal of the
Cuban Government to surrender American dollars
in order to protect its dollar reserves, though harsh
in its effect, would also seem to be within the
limits of international legality.
14 It may be noted that this country's Cuban
Assets Control Regulations (Code of Fed.
Reg., tit. 31, Pt. 515) — promulgated by
the Secretary of the Treasury — provide
that all transactions in foreign exchange
between the United States and Cuba or the
citizens of those countries are prohibited
unless licensed by the Treasury
Department.
In the case before us — whatever other economic
measures the Cuban Government may have taken
(and they are not reflected by evidence in the
record) — there is no question that the actions
complained of were aimed at protecting Cuba's
10
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

scarce "foreign exchange resources." The of state was committed, Sabbatino, as a statement
testimony of the defendant's president that these of Federal law from which the States may not
actions were essential to prevent the wiping out of dissent ( id., p. 427), obliges us to observe the rule
Cuba's foreign currency reserves is that we may not inquire into the plaintiff's cause,
uncontradicted. Accordingly, that country's refusal no matter how meritorious it may be.
to exchange Ritter's pesos for dollars, though it
Sabbatino did not pronounce a sweeping and
may be deplored, may not be characterized as so
compendious rule; it dealt with a taking of
unreasonable or unjust as to outrage current
property by a foreign sovereign within the latter's
international standards of governmental conduct.
territory, and expressly limited its holding to the
Even if the present case, then, involved "a claim of
presence of these circumstances, in the absence of
title or other right to property" within the meaning
a pertinent treaty or agreement (p. 428). No
of the Hickenlooper Amendment, the amendment
operative treaty or agreement has been asserted by
would not permit us to disregard the act of state
the parties to be decisive of the issues here. On the
doctrine since the Cuban action did not violate
other hand, it is true that no taking of plaintiff's
international law.
property has occurred — for the same reasons
In sum, then, it is our conclusion that the actions which support the conclusion that the
complained of constituted an act of state; that, Hickenlooper Amendment does not govern the
under the rule announced in Sabbatino, we are case.
required to give effect to that act of state; and that,
The question then is whether the breach of
since the record before us establishes that there
contract which is plaintiff's grievance constitutes
was no taking of property to which a claim of title
an act of a sovereign within its territory. In the
or other right is asserted, the Hickenlooper
setting of this litigation, the defendant was an
Amendment does not apply to require us to
instrumentality of the sovereign, though involved
disregard the act of state doctrine. Consequently,
in a purely commercial transaction, and, therefore,
the plaintiff or her assignor may seek a remedy in
unshielded by any immunity from the jurisdiction
this country only through diplomatic efforts by the
of our courts (cf. Victory Transp. v. Comisaria
United States and arrangements established by
General, 336 F.2d 354, cert. den. 381 U.S. 934;
Congress for the protection of the interests of all
Petrol Shipping Corp. v. Kingdom of Greece, 360
American claimants against Cuba.
F.2d 103, cert. den. 385 U.S. 931). In the issuance
The order of the Appellate Division should be of the tax exemption certificates to the plaintiff's
reversed, with costs, and the complaint dismissed. assignor, whether accomplished during or before
the Castro regime, the defendant was performing a
HOPKINS, J. (concurring). power delegated to it, and discharging a duty cast
upon it, by the Cuban Government for the
I concur wholly in the comprehensive opinion of
advancement of Cuban interests. Quite clearly,
Chief Judge FULD. Only because certain aspects
what the defendant did vis-a-vis the plaintiff's
of the case possess particular emphasis for me do I
assignor in this case served not its concerns but
65 add the following. *65
the concerns of Cuba.
For the reasons so admirably stated by Chief
Moreover, the contract was made by the parties in
Judge FULD I do not find that the Hickenlooper
Cuba, and the performance of the contract — the
Amendment controls the disposition of this case.
delivery of the check — was due to occur in Cuba.
We must then return to Banco Nacional de Cuba
Indeed, the breach of the contract occurred in
v. Sabbatino ( 376 U.S. 398) to determine whether
Cuba. At the time the defendant refused to
the act of state doctrine applies. If, indeed, an act

11
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

perform its obligation, that refusal was an act of court. Plaintiff, a German Jew, sued on an
66 state committed within *66 the territory of Cuba. employment contract made before the accession of
Thus, when the plaintiff proved the breach of Hitler with the defendant, a German corporation
contract as an essential element of her case, at the and an instrumentality of the German Government
same time her proof established the commission of formed for the purpose of operating the
the act of state; and no burden rested on the governmental railroad system. Plaintiff alleged
defendant to do more. two causes of action, the first of which asserted
that he had been discharged prior to the terminal
The defendant did, however, do more by proving
date of the contract on the sole ground that he was
the existence of currency regulations adopted by
a Jew. Damages for the breach of contract were
governmental agencies to preserve the economic
demanded. In the second cause of action plaintiff
stability of Cuba. Those regulations prohibited the
67 alleged that he had been seized and held in a *67
consummation of the contract. But from my view,
concentration camp, so that he had been prevented
the act of state was the defendant's refusal to
from continuing his employment. He claimed that
perform; the currency regulations, though equally
the contract provided that, if he were unable,
the product of an act of state, were simply the
without fault on his part, to serve during the
justification for the refusal.1 Under this analysis,
period of the contract, the defendant would pay
whether the defendant honored its obligation
him a stipulated sum in satisfaction of its
under some of the tax exemption certificates after
obligations. The defendant interposed a defense
the adoption of the currency regulations becomes
that under a German law enacted in 1933 persons
immaterial: the sovereign might waive the
of non-Aryan descent employed in the government
regulations on occasion, and on another occasion
and governmental corporations were required to
enforce them. However it exercised its power, the
be retired, and that the contract was, therefore,
exercise remained an act of state.
lawfully terminated.
1 If the defendant had been a private
After consideration of the complaint and the
institution and not an instrumentality of
defense, upon certified questions, it was held that
Cuba, then the defendant would have been
required to establish the act of state — the
in the face of the defense the first cause of action
currency regulations — which prevented could not survive, since the act of state rule
performance and sustained its refusal to intervened. "Within its own territory every
deliver the check. But that is not the fact in government is supreme ( United States v. Belmont,
this litigation. Here, in effect, the defendant 301 U.S. 324) and our courts are not competent to
was executing the will of Cuba. review its actions." ( Holzer v. Deutsche
Reichsbahn-Gesellschaft, 277 N.Y. 474, 479,
Before Sabbatino a breach of contract was
supra.) As to the second cause of action the court
considered an act of state both in the Federal
held that questions of fact arose concerning the
courts and in our courts ( Hewitt v. Speyer, 250 F.
meaning of the German words used in the contract
367; Holzer v. Deutsche Reichsbahn-Gesellschaft,
providing for payment of the stipulated sum and
277 N.Y. 474; Dougherty v. Equitable Life Assur.
concerning the interpretation of German law to be
Soc., 266 N.Y. 71). In Holzer, for example, the act
applied to the contract. That is to say, it might be
of state rule was recognized, even though the
found as a fact after a trial that the contract
abrogation of the contract by the defendant was
contemplated payment of the agreed sum upon the
based on a foreign law particularly odious and
occurrence of the very act of state which
offensive to our institutions. A question of the
prevented plaintiff's performance.2
sufficiency of plaintiff's complaint and of a
defense in the defendant's answer was before the

12
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

2 It should be observed that nothing turns on I concur in Judge KEATING's dissent and agree
the circumstance that in Holzer the plaintiff with his analysis of the Hickenlooper Amendment.
was a German national. The act of state However, cognizant of the limited jurisdiction of
doctrine applies equally to an alien or a
this court, I do not find it necessary to reach that
national with respect to action of the state
issue.
as to local assets. ( Ricaud v. American
Metal Co., 246 U.S. 304, 310.) It has been long settled by our court ( Holzer v.
Deutsche Reichsbahn-Gesellschaft, 277 N.Y. 474,
The case before us, of course, does not present the
cited in Banco Nacional de Cuba v. Sabbatino,
latter contingency, for the certificates owned by
376 U.S. 398, 425) that the applicability of the act
Ritter contained no provision for payment of any
of state doctrine in a particular litigation may be a
sum in the event of a dishonor by the defendant
question of fact. It is also well established that an
for any reason. Thus, no question of fact, either as
affirmed finding of fact, based upon substantial
to an act of state or as to the meaning of the
evidence, will not be reviewed by this court. (See,
language of the contract became material here.
e.g., the majority and dissenting opinions in
Rather, the case resembles the fact pattern in the
Matter of City of New York [ Fifth Ave. Coach
first cause of action alleged in Holzer, which was
Lines], 22 N.Y.2d 613.) Considering the present
declared to be vulnerable under the act of state
appeal in this context, I would affirm the order of
rule.
the Appellate Division.
Both Holzer and Dougherty ( 266 N.Y. 71, supra)
Before showing that the finding of the Trial Judge,
were cited in Sabbatino as expressions of the law
as affirmed by the Appellate Division — that the
of New York which "echo those of federal
act of state defense was not established — is
decisions" ( Banco Nacional de Cuba v.
nonreviewable, it is first essential that the entire
Sabbatino, 376 U.S. 398, 424-425, supra), which
factual background of this case be fully described.
68 recognized the act *68 of state doctrine. To this
Rather than duplicate the majority's recitation of
limited degree, then, Sabbatino treated a breach of
the "undisputed facts" of this case, I begin by
contract as an act of state. Nor is it without
supplementing that effort with additional
significance that Sabbatino enforced the doctrine
"undisputed facts".
even where the sovereign invoked the drastic
course of confiscation, whereas we deal here with Alexander Ritter, at the invitation of Cuba's
the exercise of a less extreme measure of Agricultural Department, purchased a 350-acre
sovereign power. farm in Cuba in 1957. In August of that year, he
obtained certificates of tax exemption for
Accordingly, I think that Federal law may fairly be
$345,000 from the Currency Stabilization Fund of
said to direct the application of the act of state
69 the Cuban *69 Government.1 In January, 1959,
rule, denying us a review of the merits of the case.
Fidel Castro's revolutionary forces seized control
Once "it is made to appear that the foreign
of the Cuban Government. On January 7, 1959,
government has acted in a given way on the
the United States extended recognition to the
subject-matter of the litigation, the details of such
Castro regime as the "provisional government of
action or the merits of the result cannot be
the Republic of Cuba." Such recognition merely
questioned but must be accepted by our courts as a
noted that Castro had seized control of the country
rule for their decision." ( Ricaud v. American
and that he had indicated his intention to comply
Metal Co., 246 U.S. 304, 309.)
with the international obligations and agreements
of Cuba.2 In extending recognition in this manner,
BURKE, J. (dissenting).
we in effect insured the revolutionary forces of an

13
 French v. Banco Nacional de Cuba
ample supply of American dollars as a result of
our continued underwriting of the sugar subsidy
and through the virtually uninterrupted patronage 70
of American tourists. Shortly thereafter, in either
February or March of 1959, Ritter approached Mr.
Betancourt, director of the afore-mentioned
Currency Stabilization Fund, to ascertain whether
Banco Nacional was going to fulfill its contractual
agreement with him, as embodied in the
certificates of August, 1957. In uncontroverted
testimony, he related that Mr. Betancourt advised
him that Banco Nacional would "definitely honor
the obligation" IF UPON INVESTIGATION he
was found not to be politically implicated
(presumably with the overthrown government)
and if his business was conducted without graft. In
June, 1959, the eight certificates involved in this
litigation were given to Ritter by the Currency
Stabilization Fund in exchange for his 1957
certificates, purportedly conveying a "guarantee"
that Banco Nacional would indeed honor its
obligation.
1 Law Decree 548, authorizing the issuance
of these tax exemption certificates,
specifically limits the circumstances under
which they may be obtained.
"ARTICLE 1. A total exemption * * * is
hereby granted for all exportations of
money imported into Cuba from foreign
countries in order to invest it in industrial,
agricultural or other production
enterprises". (Emphasis added.)
2 Edward D. Re, The Foreign Claims
Settlement Commission and the Cuban
Claims Program, 1 International Lawyer 81
(Oct., 1966). In 1959, the United States
"made known its willingness to discuss the
economic needs of Cuba." (Edward D. Re,
op. cit., p. 81.)
On July 23, 1959, eight days after Decision No.
346 was enacted by the Fund, Ritter presented one
of his "guaranteed certificates" and immediately
received payment on it, thus confirming the
guarantee given him by Mr. Betancourt. On
23 N.Y.2d 46 (N.Y. 1968)
December 11, he tendered his remaining
certificates to Mr. Betancourt. As he recalled the
event at trial, "Mr. Betancourt *70 then said to me
that he was sorry * * * he thought he would be
able to give us [he and his representative bank] the
dollars for the certificates but that he could not."
He further testified that the only reason then
offered by Mr. Betancourt for not making the
payment was that "he didn't have the money." He
also noted that he had waited until December to
tender his certificates at the request of the
Currency Stabilization Fund. "In the early Fall of
1959 [after Decision No. 346 was enacted] Mr.
Betancourt said to me that the dollar account of
the Banco Nacional was low on funds and that he
would appreciate it if I would wait until the sugar
harvest * * * they would have more funds
available later in the year."
While Ritter patiently waited for Banco Nacional
to acquire these funds, the economic condition of
Cuba was continuously deteriorating as Castro
repeatedly indicated his willingness to accept
Communist assistance with its attached
philosophy. Thus, the economic crisis which
precipitated Decision No. 346 was brought about
by the government itself. This self-imposed
financial plight was not lessened by Decision No.
346. Indeed, the Cuban Government effectively
seized all property of the United States and its
nationals, with the exception of our naval base at
Guantanamo Bay, by the end of 1960.3 It was in
accordance with this general policy of confiscation
that they first informed Ritter, in a letter dated
January 8, 1960, that his certificates were within
the ambit of Decision No. 346.
3 Edward D. Re, op. cit., n. 2.
I now turn to the two claims advanced by
defendant in this litigation — (1) that it was
entitled to sovereign immunity from suit as an
agency of the Cuban Government and (2) that
Decision No. 346 was an act of the sovereign
Government of Cuba, an act of state immune from
examination by our court.
14
 French v. Banco Nacional de Cuba
As the majority quite properly declares (p. 51),
"the entire court is in agreement" in rejecting the
sovereign immunity claim. I am opposed,
however, to the majority's acceptance of the act of
state claim as a matter of law in this litigation.
Their conclusion, in effect, contradicts even the
position adopted by the defendant at the time of
the trial. At that time defendant presented only one
witness, a Cuban lawyer, who gave expert
testimony concerning both Decision No. 346 and
its applicability to Ritter. It would, therefore,
71 appear that *71 even the defendant considered the
applicability to be a question of fact. Moreover,
while testimony was presented by an expert
witness, it cannot be said that this alone proved
conclusively that Decision No. 346 applied here as
a matter of law. As Judge BERGAN stated so
recently in another case "few things are better
settled than that the trier of the fact is not bound
72
helplessly by opinion evidence offered by a party
having the burden [of proof]." ( Matter of City of
New York [ Fifth Ave. Coach Lines], 22 N.Y.2d
613, 629, supra.)
It is plaintiff's contention that Decision No. 346,
an act of the Cuban Government, was not intended
to and did not apply to these eight "guaranteed
certificates".
While plaintiff's certificates bear the legend that
they were issued "in accordance with the
provisions of Law-Decree No. 548 of November
20, 1952" plaintiff has distinguished them from
the other certificates in many ways. Thus, Law-
Decree No. 548 and Decision No. 346 both
specifically limit their applicability to money
imported into Cuba for the purpose of investment.
Ritter's certificates were not issued as a direct
result of such investment. Rather, they were issued
by the Currency Stabilization Fund solely because,
upon investigation, Ritter was found free from
political implication and because his business was
conducted without graft. Plaintiff has shown that
nothing was invested at the time these certificates
were issued. She intimates that, had this guarantee
not been given by the Castro officials of the
23 N.Y.2d 46 (N.Y. 1968)
Currency Stabilization Fund, Ritter would have
redeemed his certificates in February or March of
1959 — prior to the proclamation of Decision No.
346.
Whether or not these specific eight certificates are
within the ambit of Decision No. 346 as stated
above is and was treated by all parties at the trial,
as a question of fact. Thus, when Supreme Court
Justice MARKEWICH dismissed the act of state
defense for failure of proof, he concluded that the
record before him which included expert
testimony was inadequate to establish defendant's
claim that Decision No. 346 applied to these eight
certificates. The singular issue before this court
with respect to the act of state defense is whether
there is sufficient evidence in this record to sustain
the determination of our lower courts. If there is,
then we, an appellate court, possessing very
limited jurisdiction, must affirm. *72
The significance of determining who has the
burden of proof in this case is now academic,
since proof has been presented. The majority
nevertheless takes issue with the lower court's
determination that defendant had the burden of
proof by stating that "It was incumbent on the
plaintiff to prove that the Cuban authorities
themselves would deem Decision No. 346 invalid
and would disregard it. This she was obviously
unable to do." (Emphasis added.) Employing the
majority's criteria, the act of state claim will hinge
upon whether plaintiff has shown that the Cuban
authorities — in this case, the Currency
Stabilization Fund — had treated Decision No.
346 as either invalid or inapplicable to her eight
certificates. The record, I submit, establishes that
the Cuban authorities did disregard Decision No.
346 when dealing with the plaintiff's certificates.
On July 23, 1959, eight days after Decision No.
346 was enacted, Ritter received a check for
$45,000, as payment for a certificate of that
amount. Plaintiff has established that payment.
Defendant has not denied that the payment was
made, it has not suggested that the payment was
15
 French v. Banco Nacional de Cuba
made in error. Is this evidence that the Cuban
authorities did disregard Decision No. 346 insofar
as Ritter was concerned? Could this indicate that
his certificates were unaffected by Decision No.
346? Can we then say that the trial court had
sufficient evidence before it to consider the
application of the act of state doctrine as a
question of fact? The answer in each instance must
be in the affirmative.
Other acts of the Fund raise doubts regarding the
genuineness of the act of state defense, tardily
invoked by the defendant.
Five months after his first certificate was honored
by the Currency Stabilization Fund, Ritter
tendered his remaining certificates to Mr.
Betancourt of the Currency Stabilization Fund.
According to Ritter's undisputed testimony, he
waited until December to tender his certificates at
the request of the Currency Stabilization Fund.
This Fund is the official instrumentality of the
Cuban Government. This Fund issued the first set
of certificates in 1957, and later replaced them
with new certificates at Ritter's insistence. This
Fund issued Decision No. 346 temporarily
suspending the "processing of certificates of
exemption". Nevertheless, despite the clear terms
of Decision No. 346, this is the Fund that honored
73 one of *73 Ritter's certificates on July 23, and
then, in the fall, expressed an intention to honor
his remaining certificates. Thus plaintiff has
shown how the Cuban authorities, specifically the
Currency Stabilization Fund, at times did
disregard Decision No. 346 in dealing with Ritter's
certificates.
The majority has assumed that because the courts
74
in the United States will not inquire into the
validity of the acts of a foreign sovereign done
within its own territory, then a fortiori, neither can
it question whether a conceded act of state applies
in a particular instance. If this be so, then prior
decisions of our courts, cited with approval by the
Federal courts, are this day overruled.
23 N.Y.2d 46 (N.Y. 1968)
A prior decision of this court, cited at the outset of
this opinion, Holzer v. Deutsche Reichsbahn-
Gesellschaft ( 277 N.Y. 474, supra) seems directly
in point with this present litigation. The plaintiff in
that case, a German Jew, was employed by a
German corporation which was an instrumentality
of the German Government, under a contract of
employment which provided that "in the event the
plaintiff should die or become unable, without
fault on his part, to serve during the period of the
contract the defendants would pay to him or to his
heirs the sum of 120,000 marks, in discharge of
their obligations, under the hiring aforesaid". On
April 7, 1933, the German Government issued a
law, allegedly intended to "purify" the Civil
Service System of that country. In effect, that law
required that persons of non-Aryan descent,
engaged in any of the leading commercial,
industrial or transportation enterprises, be retired
immediately. Plaintiff spent his first months of
retirement in prison, and was then removed to a
concentration camp. Upon his release, he brought
an action in this country, against his employer,
acquiring jurisdiction by attaching property.
Plaintiff's complaint set forth alternative causes of
action. In his first cause of action, he stated that he
had fulfilled all the requirements of this contract
and that "defendants discharged [him] * * * upon
the sole ground that [he] is a Jew." He further
pleaded that "As a result of such discharge the
plaintiff was damaged in the sum of upwards of
$50,000, no part of which has been paid although
duly demanded." His second cause of action stated
in part that he "became unable, without any fault
on his part, to continue his services from the
month of April, 1933, when he was imprisoned
*74 * * * The plaintiff accordingly became entitled
under his contract to the sum of 120,000 marks,
the payment of which was prescribed in the terms
of his hiring for that event, no part of which has
been paid to him although duly demanded. * * *
By reason of the premises the plaintiff was
damaged in the sum of about $50,000."
16
 French v. Banco Nacional de Cuba
The responsive pleadings in that case are also
significant. The second separate defense,
interposed against both causes of action, was as
follows: "The plaintiff was of non-Aryan descent
and was within the classes specified and required
to be retired by said laws and decrees of said
Government, and the plaintiff was duly retired * *
* and the plaintiff's employment thereunder [was]
duly and lawfully terminated * * * under and
pursuant to said Law * * * and the further
performance of the plaintiff's alleged contract of
employment by all parties thereto was thereby
prohibited and made unlawful". (Emphasis
added.) In sum, defendant argues that they were
relieved entirely from further performance of the
contract by an act of state. The case came before
this court solely on the sufficiency of the
complaint and the effect of the second defense
upon the entire action. It was the unanimous
opinion of this court that "in respect to the first
cause of action, we are bound to decide, as a
matter of pleading, that the complaint does not
state facts sufficient to constitute a cause of action
and that the second separate defense of the answer
is sufficient in law upon its face. Defendants did
not breach their contract with plaintiff. They were
forced by operation of law to discharge him." (
277 N.Y., p. 479; emphasis added.) The court then
proceeded to sustain the second cause of action,
noting the existence "of questions of fact which
must be determined on the trial." ( 277 N.Y., p.
480; emphasis added.) Thus, the mere allegation
that the act of state defense applied to all the
clauses of the German contract did not preclude
this court from requiring proof that the act of state
did in fact apply in a particular situation. Hence,
the reference in Holzer to "questions of fact which
must be determined". To require a determination
of whether the act of state defense applied to the
severance provision of this German contract seems
identical to the burden imposed on the respondent
in this case; specifically to show by credible
evidence that the act of state defense applied to
Ritter's eight certificates. As the Supreme Court
75 clearly stated in *75 Ricaud v. American Metal Co.
23 N.Y.2d 46 (N.Y. 1968)
( 246 U.S. 304, 309): "When it is made to appear
that the foreign government has acted in a given
way on the subject-matter of the litigation, the
details of such action or the merit of the result
cannot be questioned but must be accepted by our
courts as a rule for their decision." By concluding
that Ritter cannot recover on his certificates
because there was no provision for payment of any
sum in the event of dishonor, Justice HOPKINS
has misapplied the test. The sole factual question
here to be determined is whether the act of state
applied to the subject matter of the litigation —
Ritter's eight certificates. The interpretation of
Holzer, proposed in the concurring opinion, that it
"might be found as a fact * * * that the contract
contemplated payment of the agreed sum upon the
occurrence of the very act of state which
prevented plaintiff's performance" seems illogical
as the act of the German Government prohibited
and made unlawful any further performance of the
contract BY EITHER PARTY and directed that its
provisions be enforced "without recourse to courts
and other legal remedies". Moreover, it appears to
conflict with the act of state doctrine, as expressed
in the majority opinion.
Here we do not have mere pleadings, as in Holzer.
The case is before us after a trial where plaintiff
proved part performance of the guarantee given
Ritter when his replacement certificates were
issued in 1959. Thus, it was shown that after
Decision No. 346 was enacted, payment was made
on one certificate by defendant and that Ritter was
thereafter requested twice to refrain from
presenting his remaining certificates for payment
for reasons altogether unrelated to, and
inconsistent with, Decision No. 346. This
evidence presented a triable issue of fact, i.e.,
whether Decision No. 346 was at all relevant to
these specific certificates. To establish its
relevancy, the defendant relied on the testimony of
an expert witness. The Trial Judge, who passes on
both the credibility of a witness and the weight of
the evidence in general, found this testimony
insufficient. In so doing, he acted within the
17
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

bounds of his authority. While the concurring half, this principle, however, is then used to thwart
opinion acknowledges the present vitality of both the will of a Congress which regarded the fears
Holzer and Ricard, it has failed to apply the expressed by the Supreme Court in Sabbatino (
principle of those cases in this instance. Banco Nacional de Cuba v. Sabbatino, 376 U.S.
398), as unjustified, if not groundless, and,
In summary, I am of the opinion that a question of
therefore, sought to overrule Sabbatino and to
fact was presented as to the applicability of the act
demand that, absent an expressed indication by the
76 of state defense to *76 the subject matter of this
President to the contrary, the courts should "make
litigation; that there is evidence to support the
a determination on the merits" where an act of
finding of the trial court, and that, in reviewing the
state defense is raised. We should strive to give
record, this court may not review this affirmed
full and fair effect to the congressional design.
finding of fact. The words of Chief Judge CRANE
Because Congress' adoption of the Hickenlooper
in Dougherty v. Equitable Life Assur. Soc. ( 266
Amendment was considered unwise by many is no
N.Y. 71, 88), another decision by this court
justification to rely on Sabbatino as if
involving the act of state defense, seem
Hickenlooper — whatever it covers — had never
particularly pertinent: "The language of any
been passed (see pp. 53-57 of the majority
opinion must be confined to the facts before the
77 opinion). *77
court."
Why the word "property" in the Hickenlooper
KEATING, J. (dissenting). Amendment should not include contractual rights
remains a complete mystery. Nowhere does the
I am in agreement with Judge BURKE that the
majority explain what social policy is of such
evidence does not establish that Decision No. 346
grave importance that plaintiff must be deprived
was applicable to plaintiff's certificates because of
of her just judgment to further that policy.
their unique character. But even if these
certificates were within the ambit of Decision No. Also, I cannot endorse a view which treats
346, it seems unalterably established that the act Decision No. 346 as legitimate under international
of state defense is inapplicable because what is law when it is nothing other than an act of
involved here is no mere "breach of contract", but confiscation. "[M]ost of all I would not declare
a confiscation clothed in the disguise of a valid that if ever there were a clear consensus in the
currency regulation. international community, the courts must close
their eyes to a lawless act and validate the
Whatever may be said of the interpretation in the
transgression by rendering judgment for the
majority opinion of the Hickenlooper-Sparkman
foreign state at its own request * * * I cannot so
Amendment and the approval of a confiscation in
cavalierly ignore the obligation of a court to
violation of international law, the view that the
dispense justice to the litigants before it." ( Banco
right to receive $150,000 is something other than
Nacional de Cuba v. Sabbatino, 376 U.S. 398,
"property" and the dismissal of the evaporation of
456, supra [Justice WHITE'S dissent].)
plaintiff's money simply as a "serious loss" is
difficult to comprehend. Nor can I endorse a result which both consigns the
plaintiff to nonexistent remedies she might obtain
There is a strong element of irony in the majority's
through the intervention of the Federal
approach. The first half of the opinion dwells on
Government and which asks us to complete the
the need to avoid any judicial intrusion into the
process of confiscation commenced a decade ago
prerogatives of the President and the Congress in
by the Castro Government.
the area of international relations. There can be no
possible quarrel with this argument. In the second I.

18
 French v. Banco Nacional de Cuba
Before proceeding to outline my approach to the
questions raised here, I feel compelled to analyze
some of the techniques by which the majority
reaches the conclusion that the Hickenlooper
Amendment is inapplicable here.
The majority opinion defines the scope of the
Hickenlooper Amendment in one of two ways. It
encompasses situations "exemplified by the
Sabbatino case itself" (p. 58) where confiscated
property is brought to the United States and the
original owner seeks to assert his rights to the
property (see, also, p. 61). The alternative position
is that it covers "a claim to the very property
which has been confiscated." This definition, if
literally read, is applicable here, except that the
majority has excluded "contractual rights" from its
definition of property. The ambiguity in the
majority's definition of "property" results from the
fact, as we shall see, that either definition alone
creates impossible problems of statutory
construction.
1. The majority opens its discussion of the
Hickenlooper Amendment with a brief quote from
78 the statute in which the *78 words upon which the
majority rely — "claim of title or other right to
property" — are italicized. This is preceded by a
brief quotation from the Senate Foreign Relations
Committee Report on the Hickenlooper
Amendment to the effect that the statute was
enacted to "reverse in part" the decision in
Sabbatino (S. Rep. No. 1188, Pt. I, 88th Cong., 2d 79
Sess., p. 24 [1964]). One might assume that, if this
reference to the Senate Report is examined, one
would find there a statement supporting the
majority's interpretation of the reach of the
Hickenlooper Amendment. Such is not the case,
however. The bill the Senate was reporting out of
committee did not even contain the phrase "claim
of title or other right to property". That phrase did
not come into the statute until much later in the
legislative process.1 The full context in which the
statement appears is most instructive and presents
quite a different picture from that suggested by the
majority (see post, p. 84).
23 N.Y.2d 46 (N.Y. 1968)
1 In fact, the words "to property" were not
added until 1965.
2. Next, the majority argues that "In the strictest
sense, and within the terms of the [Hickenlooper
Amendment], just as no one has `taken' the pesos
from Ritter, so no one has `taken' the contract
from him" (p. 59). If the majority means that the
pesos or the certificates have not been physically
taken from Ritter's possession, no one will dispute
this. Since when, however, must there be a
physical taking for there to be a "confiscation"?
Likewise the majority's argument that a breach of
contract by a foreign state cannot constitute a
confiscation is surely incorrect. ( Sulyok v.
Penzintezeti Kozpont Budapest, 279 App. Div.
528, mod. on other grounds 304 N.Y. 704; see,
also, Matter of Wa-Wa-Yanda v. Dickerson, 18
A.D.2d 251.) The majority's strict definition of
taking could never have been intended by the
Congress since such a limited definition of
confiscation is unknown in our law ( Perry v.
United States, 294 U.S. 330 [holding
unconstitutional the repudiation of the Gold
Clause insofar as it affected obligations of the
United States Government]). Nor does it exist in
international law (Restatement, 2d, Foreign
Relations Law of the United States, §§ 192, 195).
When a zoning law has been held unconstitutional
as confiscatory, there is never an actual taking (
Arverne Bay Constr. Co. v. Thatcher, 278 N.Y.
222). The zoning analogy here is perfect. *79 The
police power may not be used to deprive a
property owner of all enjoyment of his property.
Likewise, the need to preserve a country's
international economic position does not permit
the destruction of all benefits of contractual rights
without limit.
3. In its discussion of Banco Nacional de Cuba v.
First Nat. City Bank of N.Y. ( 270 F. Supp. 1004)
the difficulties in the majority's definition of
"property" become manifest. First of all, the
money which was the res of the lawsuit was not
expropriated property. Thus, the first definition of
"property" offered by the majority fails. Secondly,
19
 French v. Banco Nacional de Cuba
the confiscation decree in First Nat. City Bank
involved the taking of contractual rights, precisely
contrary to the majority's position here (see supra,
pp. 1009-1010, n. 6).
We could go on to point out the other similar
errors in the majority's analysis, but it would be a
pointless exercise. The most grievous error is that
it completely fails to give one reason why it finds
it so absolutely necessary to interpret the statute so
as to exclude "contractual rights". It certainly is
not required by the statutory language nor policy.
A natural reading of the amendment, giving every
word its normal value, would certainly result in its
application here.
II.
Immediately after the Supreme Court's decision in
Sabbatino, an amendment to the Foreign
Assistance Act of 1961 was cosponsored by
Senators Hickenlooper and Sparkman. It sought to
reverse the effect of the Supreme Court's
Sabbatino decision. Strong opposition to the
proposal was immediately expressed by the
Department of State. (See Hearings of Senate
Committee on Foreign Relations on Foreign
Assistance Act of 1964, pp. 618-619.)
The State Department pointed out that, under the
terms of the proposal, unless the President
interposed an objection, the courts would be
required to pass on the validity under international
law of an act of a foreign state within its own
borders. This, said the department, would greatly
embarrass the President in his conduct of the
nation's foreign affairs because his decision to or
not to intervene would subject him to a charge of
discrimination by United States nationals or the
80 foreign governments *80 involved. Also,
important foreign policy considerations could be
adversely affected by the happenstance of private
litigation.
Other critics of the proposal and of the amendment
later adopted have argued vigorously that the
proposal was based upon a misunderstanding of
the act of state doctrine and upon the erroneous
23 N.Y.2d 46 (N.Y. 1968)
belief that the Supreme Court had gone far beyond
any foreign decision in expanding the scope of the
doctrine. (See Reeves, The Sabbatino Case and the
Sabbatino Amendment: Comedy — or Tragedy —
of Errors, 20 Vand. L. Rev. 429 [1967].) There
were, however, many eminent scholars who
supported the proposal, believing that Senators
Hickenlooper and Sparkman's proposal was sound
in principle and would advance the "rule of law"
in international affairs (see 110 Cong. Record
19548 [1964]).
Whatever the merits of the controversy, Congress
rejected the view of the State Department, the
Hickenlooper Amendment was adopted and its
constitutionality sustained ( Banco Nacional de
Cuba v. Farr, 243 F. Supp. 957 [S.D.N.Y., 1965],
affd. 383 F.2d 166 [2d Cir. 1967], cert. den. 390
U.S. 956).
At the outset, it is readily apparent that the statute
is inexpertly drafted. Nevertheless, we are
required to interpret the statute in a manner which
is both sensible and consistent with the policy
expressed in the amendment's language and its
legislative history. The majority proposes to do
complete violence to the intent of Congress.
In its original form, Senator Hickenlooper's
proposal provided that it covered a case in which
"an act of a foreign state occurring after January 1,
1959 is alleged to be contrary to international
law".
Had this proposal been enacted, there would be no
question that the act of state defense could not be
invoked here.
The Congress, however, was troubled by certain
practical problems created by the broad language
of the initial proposal. When the problems were
brought to its attention, it set out to correct them
but in doing so, it created other difficulties in
interpretation. But at no time did the Congress
intend to limit the effect of the statute to the cases
81 where the confiscating state *81 itself seeks to
gain or retain control over property it had
20
 French v. Banco Nacional de Cuba
previously confiscated. The particular language of
the amendment which became law was a result of
Congress' desire to protect innocent third parties
— which is not the case here. (See 110 Cong.
Record 19557, Ques. 6.) 82
Senator Hickenlooper's original proposal was
tacked onto the House-passed Foreign Assistance
Act of 1964 (H.R. 11380), and was reported out of
the Senate Committee on Foreign Relations on
July 10, 1964 (S. Rep. 1188, p. 24). The Senate
Report contained the following statement (U.S.
Code Cong. and Adm. News, 1964, p. 3852):
"The amendment is intended to reverse in part the
recent decision of the Supreme Court in Banco
Nacional de Cuba v. Sabbatino, D.C.N.Y., 193 F.
Supp. 375. The act-of-state doctrine has been
applied by U.S. courts to determine that the
actions of a foreign sovereign cannot be
challenged in private litigation. The Supreme
Court extended this doctrine in the Sabbatino
decision so as to preclude U.S. courts from
inquiring into acts of foreign states, even though
these acts had been denounced by the State
Department as contrary to international law.
***
"The effect of the amendment is to achieve a
reversal of presumptions. Under the Sabbatino
decision, the courts would presume that any
adjudication as to the lawfulness under
international law of the act of a foreign state
would embarrass the conduct of foreign policy
unless the President says it would not. Under the
amendment, the Court would presume that it may
proceed with an adjudication on the merits unless
the President states officially that such an
adjudication in the particular case would
embarrass the conduct of foreign policy."
Thus, when the Senate Committee stated the
proposal was intended "to reverse in part"
Sabbatino, it was referring to its intent to overrule
the Supreme Court where the act of state is alleged
to have violated international law. In those cases,
23 N.Y.2d 46 (N.Y. 1968)
the Senate Report clearly indicates a purpose that
the courts declare the act unlawful if it violates
international law and give effect to that
declaration of illegality. Only where the President
*82 explicitly states that an "adjudication on the
merits" would embarrass his conduct of foreign
policy should the courts refrain from inquiring
into the acts of foreign states.
Up to this point, therefore, there is no question
that, in a case such as the one at bar, we would be
required under the original proposal to determine
whether Decision No. 346 violates international
law and, if it does, to give no effect to the act of
state defense here. This at a minimum is what
Congress intended.
The question immediately arises whether the
subsequent history of the proposal and the change
in language was intended to change this result.
After H.R. 11380 passed the Senate on September
24, 1964, a Senate-House conference was held to
iron out differences between the two versions of
the bill. In conference, changes were made in the
language of the original Hickenlooper proposal,
which became law. The Conference Report sets
forth the purposes of the change in the following
language (H.R. Rep. No. 1925, 88th Cong., 2d
Sess., p. 16 [1964]):
"AMENDMENT NO. 39: EXPROPRIATIONS
BY FOREIGN STATES
"The Senate amendment added a new paragraph
(2) to subsection 620(e) of the act, providing that
no U.S. court shall refuse, on the ground of the
`act of state' doctrine, to examine the validity of
acts of foreign states occurring after January 1,
1959, which are alleged to be contrary to
international law, unless the President determines
and notifies the court that application of the `act of
state' doctrine is required by U.S. foreign policy
interests.
"The House bill did not contain a comparable
provision.
"The House recedes with an amendment.
21
 French v. Banco Nacional de Cuba
"The managers on the part of the House regretted
that there had not been an opportunity for
thorough study and full hearings on the subject.
The committee of conference amended the Senate
language to pinpoint its precise effect, making it
clear that it does not apply if no violation of
international law principles is found, or if the case
involves a short term irrevocable letter of credit
issued in good faith prior to the taking of property
by a foreign state." (Italics supplied.)
The purpose of the second change, therefore, was
to protect innocent third parties. What troubled the
83 Congress was a possible *83 suit brought against
an innocent third party who seeks to raise the act
of state defense to avoid suffering an unjust loss.
That this is what concerned Congress is confirmed
by the Congressional Record (110 Cong. Rec.
19557, Ques. 6) and by the later 1965
amendments. Thus, nothing in the Conference
Report can justify the conclusion that we should
not apply principles of international law here
where we have the wrongdoer or its agent before
our courts. 84
The particular concern of Congress, of course, was
that the United States should not become a
"thieves market" for confiscated or expropriated
property (110 Cong. Rec. 19548).2 But there was
also broader motivation which was a strong desire
to give added protection to American citizens
from expropriation without compensation by
seeking to nullify wherever possible the effects of
such expropriation. Finally, there was the thought
that the amendment would strengthen the
development of international law. For this reason,
the amendment was often referred to as the "rule
of law" amendment.
2 There is no doubt that the Sabbatino case
precipitated the amendment, but to read the
final version as an overturning of the
Sabbatino result only is to ignore most of
the legislative history.
23 N.Y.2d 46 (N.Y. 1968)
In general, the congressional design was to
overrule Sabbatino in accordance with Justice
WHITE'S view that the act of state doctrine
should not apply where there has been a violation
of international law (Bleicher, The Sabbatino
Amendment in Court: Bitter Fruit, 20 Stan. L.
Rev. 858 [1968]). This can be seen from the
debates in the Senate on the Hickenlooper
Amendment (110 Cong. Rec. 19546-19560;
23674-23682). Justice WHITE's dissent is
recorded in the Congressional Record in full (110
Cong. Rec. 19548-19554). It is evident from the
repeated references to it that the Congress was
adopting Justice WHITE'S views.
In 1965 the Committee on Foreign Relations of
the House of Representatives held hearings on the
amendment which was scheduled to expire on
January 1, 1966. The Committee's Report contains
the following statement indicating its
understanding of the effect of the amendment
(Report on Foreign Affairs on H.R. 7750; H.R.
Rep. No. 321, 89th Cong., 1st Sess., p. 31 [1965]):
*84
"Section 301(c)(2) amends section 620(e)(2) of
the act which relates to the application of the
Federal act of state doctrine by extending for an
additional year the provisions of a Senate
amendment added to the Foreign Assistance Act
of 1964, which provide that no U.S. court shall
refuse, on the ground of the act of state doctrine,
to examine the validity of acts of foreign states
occurring after January 1, 1959, which are alleged
to be contrary to international law, unless the
President determines and notifies the court that
application of the act of state docrine is required
by U.S. foreign policy interests."
Again, there is not a hint that the court will
examine the validity of foreign acts only where the
expropriated property comes to our shores or that
it applies only to specific property as distinguished
from contractual rights.
22
 French v. Banco Nacional de Cuba
During that session, the amendment was made
permanent. The second change is described in the
Senate Report as follows (S. Rep. No. 170, 89th
Cong., 1st Sess., p. 19 [1965]):
"The existing law applies to cases pending at the
time of its enactment or brought since then in
which `a claim of title or other right' is asserted
based upon a confiscation or other taking after
January 1, 1959, by an act of a foreign state in
violation of the principles of international law. The
bill amends this so that it will apply only to cases
in which `a claim of title or other right to property'
is asserted. The same change is made in the
proviso in existing law which exempts cases with
respect to such claims acquired pursuant to an
irrevocable letter of credit of not more than 180
days issued in good faith prior to the time of the
confiscation.
"The words `to property' have been inserted to
make it clear that the law does not prevent banks,
insurance companies, and other financial
institutions from using the act of state doctrine as
a defense to multiple liability upon any contract or
deposit or insurance policy in any case where such
liability has been taken over or expropriated by a
foreign state. In such cases, it is not intended to
affect any defense previously available to such
institutions."
Congress thus contemplated lawsuits in which
third parties might assert claims against banks,
insurance companies and other financial
85 institutions. If no effect at all were given to *85 act
of state defenses, there would be a strong
possibility of multiple liability. The explicit desire
was to protect persons from this hazard. There is
no such possibility here since the defendant here is
an arm of the Cuban Government.
According to the majority, if Cuba were now to
sue in our courts to enforce a contractual right
which it had taken over through an act of
expropriation, we would be required to enforce
that act of confiscation. If this is an accurate
statement of the net effect of Congress' attempt to
23 N.Y.2d 46 (N.Y. 1968)
legislate in this area, and if indeed Hickenlooper
has the narrow scope which the majority claim,
the Congress has surely labored in vain.
The only fair reading of the amendment and the
only one which will give effect to the clear intent
of Congress, however inarticulately expressed, is
to construe the key phrase "right to property"
broadly to include any property of the confiscating
state now in the control or possession of our
courts. The majority state that it was the manifest
intent of Congress to exclude "all" contract claims
when it added the words "to property". Nowhere
in the entire Senate Report upon which the
majority rely so heavily is there the remotest
implication that Congress desired that an arm of
the Cuban Government should be able to raise an
act of state defense.
Property is a term that is normally used both in
law and in everyday language in its broadest
sense. Why there should be a presumption in favor
of a definition limiting the term to "specific"
property is never explained. To protect innocent
parties from multiple liability, there is no need to
narrow the definition of property.
In this connection, a footnote in Justice WHITE'S
dissent in Sabbatino is most relevant ( 376 U.S., p.
456, n. 17):
"In the only reference in the Court's opinion to
fairness between the litigants, and a court's
obligation to resolve disputes justly, ante, p. 435,
the Court quickly disposes of this consideration by
assuming that the typical act of state case is
between an original owner and an `innocent'
purchaser, so that it is not unjust to leave the
purchaser's title undisturbed by applying the act of
state doctrine. Beside the obvious fact that this
assumption is wholly inapplicable to the case
where the foreign sovereign itself or its agent
86 seeks to have its title *86 validated in our courts
— the case at bar — it is far from apparent that
most cases represent suits between the original
owner and an innocent purchaser. The `innocence'
of a purchaser who buys goods from a government
23
 French v. Banco Nacional de Cuba
with knowledge that possession or apparent title 87
was derived from an act patently in violation of
international law is highly questionable. More
fundamentally, doctrines of commercial law
designed to protect the title of a bona fide
purchaser can serve to resolve this question
without reliance upon a broad irrebuttable
presumption of validity."
In my view, Justice WHITE'S approach should be
applied here.
As noted above, the limited reading which the
majority places on the phrase "claim of title or
other right to property" has already been rejected
in the one Federal case interpreting the statute. In
Banco Nacional de Cuba v. First Nat. City Bank
of N Y ( 270 F. Supp. 1004 [U.S. Dist. Ct.,
S.D.N.Y., 1967]) the Banco Nacional, the
defendant here, sued the First National City Bank
to recover, first, the excess realized by the bank on
the sale of collateral held as security for a loan
and, second, the deposits of nationalized Cuban
banks which First National City Bank held.
First National's defense was that the Banco
Nacional was only an agent for the Republic of
Cuba, the real party in interest, that Cuba had
expropriated its property in Cuba without
compensation and that the bank was, therefore,
entitled to set off the amount of its claim against
Cuba against the excess on the collateral. Banco
Nacional argued in part that the setoff was not
permitted by the Federal act of state doctrine as
defined in the Supreme Court's decision in
Sabbatino. Judge BRYAN held that "the holding
in Sabbatino was for all practical purposes
overruled by the Hickenlooper amendment" ( 270
F. Supp. 1004, 1007).
In reaching his conclusion Judge BRYAN
necessarily gave the phrase "claim of title or other
right to property" a broad reading since it is
apparent that the property which the First National
had in its possession was not and had never been
confiscated property. Banco Nacional's claim to
the excess was not based upon a confiscation, but
23 N.Y.2d 46 (N.Y. 1968)
the normal rights of a debtor to *87 recover his
collateral. Moreover, part of the confiscated res
included contractual rights.
Judge BRYAN'S opinion correctly states that the
"ultimate act of state doctrine issue boils down to
whether the confiscation of First National City's
Cuban property violated principles of international
law" ( 270 F. Supp. 1004, 1007-1008, supra).
It is also evident that the nub of the issue here is
whether Decision No. 346 is a legitimate exercise
of a sovereign nation's right to protect its
international economic position, in which case we
are here dealing with a simple breach of contract,
or whether it is rather a disguised act of
confiscation. If it is the former, then there is no
problem here, since our law has always recognized
the validity of regulations by foreign countries to
protect their economies. If it is the latter, however,
then Hickenlooper applies, and the conflict of laws
question is also automatically resolved for we
have never given effect to a nation's act of
confiscation insofar as that nation seeks to raise
that act either by way of offense or defense.
Briefly stated, the ultimate issue is whether the
defendant's refusal to give the plaintiff "a check on
New York for an equal amount of United States
dollars, exempt from the Tax on Exportation of
Money" constitutes a confiscation and, if so,
whether it is a violation of international law.
We all accept the defendant's strenuously urged
position that it is a "governmental instrumentality"
of Cuba. In fact, no one disputes this. It has been
nationalized by the Cuban Government and all its
property is that of the Government of Cuba. Being
an instrumentality of the Cuban Government, it is
not an innocent third party, which — under the
clear intent of the Congress — can invoke the act
of state doctrine to protect itself from multiple
liability or to plead impossibility of performance.
Decision No. 346 is an act of defendant's master
and, if that act constitutes a confiscation in
contravention of international law, it should be no
24
 French v. Banco Nacional de Cuba
defense here.
III.
There is sufficient authority in international law
for the proposition that a taking of property can
occur without first depriving the owner of legal
88 title if the foreigner is effectively deprived *88 of
all benefit of the property. (Restatement, 2d,
Foreign Relations Law of the United States, § 192
[1965].) Moreover, simply because Decision No.
346 was initially necessitated by Cuba's need to
protect its foreign exchange, it does not follow
that it remains valid under international law
permanently. (Restatement, 2d, Foreign Relations
Law of the United States, § 192, Reporters' Note 2
[1965].) I see no reason to determine the validity
89
of Decision No. 346 by a simple reference to the
date it was enacted, July 15, 1959. Though this
might be justified when the currency regulations
of a country are in accord with the principles of
the International Monetary Fund, even though the
enacting country is not a member or has
subsequently withdrawn, this view is not justified
when these monetary policies are inconsistent with
the purpose of the Fund. (International Monetary
Fund [U.S. Stat. 1401, 1409], art. VI, § 3. This
section contains the limitation that "no member
may exercise these controls in a manner which
will restrict payments for current transactions or
which will unduly delay transfers of funds in
settlement of commitments".)
In determining the correct character of Decision
No. 346, it must be examined along with a host of
other fiscal and economic regulations presently in
force in Cuba, which are inextricably intertwined
with the Cuban currency laws, in order to
ascertain their true effect on respondent's property.
When these other regulations are taken into
account, the pernicious character of Decision No.
346 becomes apparent. It is in line with Cuba's
consistent quest to acquire the last remnants of
foreign private capital in the country.
23 N.Y.2d 46 (N.Y. 1968)
As the majority points out, currency regulations
which only purport to protect a country's balance
of payments problem by preventing the flight of
capital which could be usefully invested
domestically or devaluation of the national
currency are not violations of international law.
But the Cuban monetary and economic regulations
we are forced to consider in this case cannot be
classified within the ambit of the afore-mentioned
category.
The history of the Cuban regime in the last eight
years discloses that investment in whatever
remains of the private sector of the economy has
become impossible. The Cuban Government, by
rescinding the tax certificates, has simply added to
its currency *89 reserves by this ploy. This, of
course, distinguishes this case from the situations
considered by the majority (pp. 55-56).3
3 In the so-called "Gold Clause" cases (
Norman v. B. O.R.R. Co., 294 U.S. 240;
Nortz v. United States, 294 U.S. 317; Perry
v. United States, 294 U.S. 330) the
Supreme Court upheld the action of the
Congress in nullifying the provisions of
private contracts which sought to protect
creditors from a devaluation. These cases
would seem to be clear authority for the
action of the Cuban Government to issue
Decision No. 346.
Yet to compare the action of the United
States in going off the gold standard to the
history of Decision No. 346 is to ask that
we ignore the obvious. Although the
creditors in the Gold Clause Cases received
payment in devalued dollars, their
expectations at the time the contracts were
made were fully satisfied. The severe
deflations of the early 1930's meant that in
fact the devalued dollars had a much
greater purchasing power. Here Cuba has
not paid anything; nor is there any
likelihood that she will.
None of the cases cited by the appellant refute the
contention that the currency control regulations of
a country must be viewed together with its other
25
 French v. Banco Nacional de Cuba
fiscal regulations in order to determine the actual
effect of one regulation and in fact appellant's
counsel on oral argument conceded that this must
be done. Appellant cites four cases arising out of
Czech currency regulations. However, there is no
discussion in these cases of the effect of Czech
nationalization orders on these currency controls.
These cases were merely decided without
reference to other fiscal regulations in force at the
time on the basis that the contracts were controlled
by the law of the state with the most meaningful
contacts ( Kahler v. Midland Bank, 2 All E.R. 621
[House of Lords, 1949]; Zivnostenska Banka Nat.
Corp. v. Frankman, 2 All E.R. 671 [House of
Lords, 1949]; Kraus v. Zivnostenska Banka, 187
Misc. 681 [Sup. Ct. 1946]).
In Perutz v. Bohemian Discount Bank ( 304 N.Y.
533), this court states: "A contract made in a
foreign country by citizens thereof and intended
by them to be there performed is governed by the
law of that country. * * * Our courts may,
however, refuse to give effect to a foreign law that
is contrary to our public policy. * * * But the
Czechoslovakian currency control laws in
question cannot here be deemed to be offensive on
that score, since our Federal Government and the
90 *90 Czechoslovakian Government are members of
the International Monetary Fund" (p. 537;
emphasis added).4
4 See, also, Matter of Heddy Brecher-Wolff,
Title Claim No. 41668, Docket No. 1698
and Matter of Helbert Wagg Co., 1 All E.R.
129 (Chancery Ct., 1955) both involving
German currency restrictions. These cases
similarly are not in point. In Heddy Brecker
the opinion of the tribunal included a
statement that there is nothing to show that
in this case it (the currency controls) had
been applied in a discriminatory or
confiscatory way. And in Helbert Wagg the
court's opinion included this remark:
"English law will not recognize the validity
of foreign legislation intended to
discriminate against nationals of this
country in time of war by legislation which
23 N.Y.2d 46 (N.Y. 1968)
purports to confiscate wholly or in part
moveable property situated in the foreign
state. As long ago as 1817 such
confiscation was described by Lord
ELLENBOROUGH, C.J., in Wolff v.
Oxholm * * * as `not conformable to the
usage of nations'". ( Id., p. 138.) In Helbert
Wagg the German currency regulations
prohibited the payment of foreign creditors
in any other currency than German marks
which were to be deposited for their
account in the central bank. Though there
was no discussion of the point in the case
at this time it appears that German
currency regulations permitted blocked
funds to be utilized for investing in the
domestic economy. Thus we have not been
directed to any opinion in which a court
has properly analyzed the effect of
currency restrictions by investigating the
purpose these restrictions served for the
regimes which imposed them.
A case more nearly in point perhaps than the cases
cited in footnote 4 is Matter of Claim of
Schwartzenbach Huber Co. (Claim No. Cu-21
[Foreign Claims Settlement Comm., Nov. 30,
1966]; Foreign Claims Settlement Comm., 23
Semiannual Report 58 [1967]). In this case United
States goods were shipped to Cuba prior to the
passage of Currency Law No. 568. A sight draft
attached to the shipment was not honored on the
basis of the law. The commission stated: "after
having considered this matter, the Commission
holds that Cuban Law 568 and the Cuban
Government's implementation thereof with respect
to the rights of the claimants herein was not in
reality a legitimate exercise of its sovereign
authority to regulate its foreign exchange. Rather,
the Commission concludes that the application of
this law insofar as the rights of claimant are
concerned constituted an intervention by the
Government of Cuba into the contractual rights
which, in effect, resulted in the taking of
American owned property" (emphasis added).
26
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

Cuba's currency restrictions, when analyzed, make official exchange rate.

it abundantly clear that no funds can be taken out (7) Prior authorization is required of the
91 of Cuba by a foreigner *91 to be exchanged for national bank for all exports and transfers
another foreign currency nor can he purchase to foreign countries of foreign exchange

goods for export and sell them abroad and thereby checks, securities, and other kinds of

get his pesos exchanged into some other currency.5 foreign monetary instruments.

92 It is also equally *92 clear that no blocked funds (8) No exchange control requirements exist
for incoming capital payments by either
can be invested by an American in Cuban
residents or nonresidents. Outgoing capital
industry, and that Decision No. 346 is part of a
payments, however, need the approval of
scheme started March 4, 1959 to purge all
the national bank, the granting of which is
American ownership from the Cuban economy.6
subject to indefinite delay.
5 The Cuban Government is presently (9) On August 6 and 7, 1960 a monetary
stringently enforcing the following reform was carried out in Cuba providing,
currency regulations beside Decision No. among other things, for the replacement of
346: existing Cuban banknotes by new notes.

(1) By virtue of section 9 of article I of Each family was permitted to exchange up

Law 567, banks in Cuba are prohibited to 200 old pesos for new pesos on a one to

from accepting deposits for the credit of or one basis. Larger holdings had to be

paying checks against bank accounts on deposited in special accounts at the

their books in the names of nonresidents national bank, from which up to 1,000

without the prior approval of the Monetary pesos could be withdrawn the following

Stabilization Fund. week and the balance at the rate of 100

pesos a month. Amounts in excess of
(2) The proceeds of all exports up until
10,000 pesos were confiscated by the
July 15, 1960, as well as funds received in
government.
payment for services rendered in Cuba,
have to be surrendered for Cuban pesos to (10) A private individual cannot sell any

the Central Bank within three days after Cuban pesos to a foreigner who requires

collection. foreign exchange in order to export goods.

(A number of these provisions can be
(3) On July 15, 1960 the Bank for Cuba's
found in Law No. 930 of Feb. 23, 1961,
Foreign Trade was granted the monopoly
and Law of Sept. 23, 1959. A complete
of foreign trade. No private concern after
summary of Cuban currency restriction can
this time could export goods from Cuba.
be found in 11 I.M.F. Ann. Rep. on
(4) Tourists or foreigners departing from
Exchange Restrictions 93-97 [1960]; 12
Cuba are permitted to exchange only 200
I.M.F. Ann. Rep. on Exchange Restrictions
pesos against proof of having converted
93-96 [1961]; 13 I.M.F. 89-92 [1962].)
sufficient foreign exchange previously.
6 Though it is true now that all means of
(5) Local currency which is held in the
name of nonresidents at credit institutions production are controlled by the Castro
or other agencies in Cuba can be used by Government whether they were originally
these persons only with the express owned by Cubans, Americans, or other
authorization of the national bank. foreigners, the record is still clear that the
acts of confiscation were perpetrated first
(6) All transfers in currency abroad in
against American companies. To refresh
favor of private individuals, state or private
the reader's recollection the following
enterprises, etc., have to be made through
scenario is offered:
the national bank and paid to the
beneficiaries in local currency at the (1) March 4, 1959, the Cuban Government

27
 French v. Banco Nacional de Cuba
intervened the Cuban Telephone Company,
the first intervention of a United States
concern.
(2) May 17, 1959, the Cuban Government
passes the Agrarian Reform Law. Though
the enactment provided for a judicial
procedure and compensation for the taking
it has never been followed.
(3) October 25, 1959, the Cuban
Government imposed confiscatory taxes
upon the United States Government owned
nickel plant. It also failed to approve the
further exportation of nickel.
(4) June 10, 1960, the Cuban Government
93
seized four hotels owned by American
concerns.
(5) June 29, 1960, the Cuban Government
seized two oil refineries owned by
American concerns for failure to process
Russian crude oil.
(6) July 6, 1960, the Cuban Government
passed Law No. 851, "the nationalization
law", authorizing the expropriation of all
United States owned property in retaliation
for the reduction in the United States sugar
quota. The means provided for
compensating the taking was clearly
illusory. Payments for the confiscated
property were to be made only if the
United States purchased a tonnage figure
of Cuban sugar never reached by the
United States in the previous 10 years and
at a higher price than had ever been paid.
Payments were then only to be made out of
the proceeds above the tonnage limit
established. The United States Department
of State reported at the time of the passage
of this Cuban expropriation decree that the
Cuban Government had already taken over
one half of all American owned property in
Cuba before the United States sugar quota
reduction.
(7) Resolution No. 1 of Law 851 of August
6, 1960 ordered the expropriation of 26
American concerns. This served as the
basis for the Sabbatino case.
(8) Resolution No. 2 of Law 851 of
23 N.Y.2d 46 (N.Y. 1968)
September 17, 1960 nationalized three
American owned banks. This served as the
basis for the First Nat. City Bank case.
(9) Resolution No. 3 of Law 851 of
October 24, 1960 nationalized 166
properties wholly or partially owned by
United States citizens. (U.S. Dept. of State
for Senate Comm. on Foreign Relations,
88th Cong., 1st Sess., Events in United
States-Cuban Relations [Comm. Print,
1963].)
In light of these facts the validity of Decision No.
346 under international law could not conceivably
be determined without *93 considering the effect
of other Cuban currency and economic regulations
upon it. Nor can its validity be sustained merely
by referring to the circumstances which justified
its enactment or what presently exists as the
theoretical justification for its existence. Decision
No. 346 must be viewed as one of a great number
of regulations enforced to implement the Cuban
Government's policy of expropriating the property
of foreigners. Despite the unsettled nature of many
international law questions, one certain conclusion
is that Cuba's nationalization program without
compensation constitutes a violation of
international law ( Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398 [dissent, pp. 455-456],
supra; First Nat. City Bank v. Banco Nacional de
Cuba, supra; Restatement, 2d, Foreign Relations
Law of United States, § 192; see, also, Banco
Nacional de Cuba v. Farr, supra).
Under the guise of what the majority chooses to
call a currency regulation, there has been an
expropriation here, and no amount of discussion
concerning the currency problems of the postwar
world can make it otherwise. This is no
devaluation or temporary suspension. Eight years
of no payments and no substitute arrangements for
making adequate compensation is a sufficient
period in which to establish an unlawful taking.
Plaintiff's claim here to the property that she has
attached has now become a claim "based upon * *
* a confiscation or other taking * * * in violation
28
 French v. Banco Nacional de Cuba 23 N.Y.2d 46 (N.Y. 1968)

of principles of international law". Consequently, and KEATING concur, Judge KEATING in a

the act of state defense may not be interposed by separate opinion in which Judges BURKE and
defendant here. The plaintiff is entitled to SCILEPPI concur.
judgment. _ Designated pursuant to section 2 of article

The order should be affirmed, with costs. VI of the State Constitution in place of
Breitel, J., disqualified.
Opinion by Chief Judge FULD in which Judges
BERGAN, JASEN and HOPKINS_ concur, Judge Order reversed, etc.
HOPKINS in a separate opinion in which Chief 94 *94
Judge FULD and Judges BERGAN and JASEN
concur; Judge BURKE dissents and votes to
affirm in an opinion in which Judges SCILEPPI

29