Banco Nacional de Cuba v.

Sabbatino
FACTS
• A contract to purchase Cuban sugar from a wholly owned
subsidiary of Compania Azucarera Vertientes-Camaquey de
Cuba (CAV) a corporation organized under Cuban law was
made by Farr, Whitlock & Co. (Farr) an American
commodities broker.

• The CAV stock was principally owned by United States

residents. The agreement was for Farr to pay for the sugar in
New York upon the presentation of the shipping documents.
• After this deal, a law was enacted in Cuba which
empowered the government to nationalize forcefully,
expropriation of property or enterprise in which
American nationals had an interest.

• Hence, the sugar which Farr had contracted was

expropriated from Compania Azucarera.
• Farr however entered into contracts which was similar to
the one made with CAV with the Banco Para el Comercio de
Cuba, which was an instrumentality of the government.
This was done by Farr in order to obtain consent from the
Cuban government before a ship carrying sugar could leave
Cuba.

• A bill of lading which was also an instrumentality of the

Cuban government was assigned by the bank to Banco Para
el Comercio de Cuba, who presented the bills and a sight
draft as required under the contract to Farr in New York in
return for payment.
• After CAV notified Farr of its claim to the proceeds as rightful
owner of the sugar, Farr refused the documents.

• This action of Farr resulted in a court order which appointed

Sabbatino (D) as receiver of New York assets and enjoined it
from removing the payments from the state.

• Based on the allegation of the conversion of the bills of

lading seeking to recover the proceeds thereof from Farr and
to enjoin Sabbatino (D), the receiver from exercising
dominion over such proceeds, the Banco Nacional (P)
instituted this action.
• A summary judgment was granted against Banco
Nacional (P) by the district court on the grounds that
the Act of State Doctrine does not apply when the
foreign act in question is in violation of international
law. The court of appeals also upheld this judgment.
 • Whether or not the judiciary have
the authority to examine the
ISSU validity of a taking of property
within its own territory by a
E foreign sovereign even if the
taking violated international law
 HELD
• No. The judiciary, in line with the Act of State Doctrine will not
examine the validity of a taking of property within its own territory
by a foreign sovereign government recognized by this country in
the absence of international agreements to the contrary, even if
the taking violates customary international law. Even in a situation
whereby international law has been violated, the clear implication
of past cases is that the Act of State Doctrine is applicable because
the Act of State doctrine does not deprive the courts of
jurisdiction once acquire over a case. The damages of adjudicating
the propriety of such expropriation acts, regardless of whether the
State Department has it did in this case, asserted that the act
violated international law are too far-reaching for the judicial
branch to attempt. Hence the judgment of the court of appeals is
reverse and the case remanded back to the district court.