Banco Nacional De Cuba v. Sabbatino
(1964)
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Rule of Law:
The act of state doctrine, rooted in the principle of separation of powers, precludes U.S. courts from inquiring into the validity of a public act of a recognized foreign sovereign committed within its own territory, even if the act is alleged to violate customary international law.
Facts:
- In 1960, Farr, Whitlock & Co., an American commodity broker, contracted to purchase sugar from C.A.V., a Cuban corporation principally owned by U.S. residents.
- In response to the U.S. Congress reducing Cuba's sugar quota, the Cuban Council of Ministers passed Law No. 851, authorizing the expropriation of property in which U.S. nationals held an interest.
- Pursuant to this law, the Cuban government issued an executive resolution expropriating all of C.A.V.'s property and assets, including the sugar contracted for by Farr, Whitlock.
- The sugar was being loaded onto the S.S. Hornfels in a Cuban port at the time of the expropriation.
- To secure the ship's departure, the Cuban government required Farr, Whitlock to enter into a new contract for the same sugar with Banco Exterior, an instrumentality of the Cuban government.
- Banco Exterior assigned the shipping documents to Banco Nacional de Cuba (petitioner), another state instrumentality.
- Farr, Whitlock received payment for the sugar from its customer but, instead of paying Banco Nacional de Cuba, it transferred the proceeds to Sabbatino, the court-appointed receiver for C.A.V.'s New York assets.
Procedural Posture:
- Banco Nacional de Cuba sued Farr, Whitlock, and Sabbatino in the U.S. District Court for the Southern District of New York for conversion of bills of lading and their proceeds.
- On motions for summary judgment, the District Court ruled against Banco Nacional de Cuba, holding that the act of state doctrine did not apply because Cuba's expropriation violated international law.
- Petitioner Banco Nacional de Cuba appealed to the U.S. Court of Appeals for the Second Circuit.
- The Court of Appeals affirmed the District Court's judgment on similar grounds.
- The U.S. Supreme Court granted certiorari to review the decision of the Court of Appeals.
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Issue:
Does the act of state doctrine prevent U.S. courts from inquiring into the validity of a foreign sovereign's public act, committed within its own territory, even when the act is alleged to violate international law?
Opinions:
Majority - Justice Harlan
Yes. The act of state doctrine bars U.S. courts from examining the validity of a foreign sovereign's official acts committed within its own territory. The doctrine is not compelled by international law or the Constitution but is a principle of judicial restraint founded on the separation of powers. Its purpose is to prevent the judiciary from interfering with or embarrassing the Executive Branch's conduct of foreign relations. The Court reasoned that international law regarding expropriations is contentious and lacks a clear consensus, making it an inappropriate area for judicial determination, which could lead to conflict with the political branches. Furthermore, the Court established that the scope of the act of state doctrine must be determined by federal law to ensure national uniformity in foreign affairs.
Dissenting - Justice White
No. The act of state doctrine should not be applied to bar judicial inquiry when a foreign act violates international law. International law is part of U.S. law, and courts have an obligation to apply it. By refusing to adjudicate claims of international law violations, the majority's opinion validates lawless acts and abdicates the judiciary's role. The dissent argued that the Court's fear of embarrassing the Executive was speculative, especially since the State Department had already condemned Cuba's expropriation as a violation of international law. Applying a rigid rule of non-inquiry is a backward step that insulates foreign sovereigns from accountability in U.S. courts for even the most flagrant violations of international norms.
Analysis:
Banco Nacional de Cuba v. Sabbatino established the modern, robust formulation of the act of state doctrine, grounding it in domestic separation-of-powers concerns rather than international comity. This decision created a strong presumption against judicial review of foreign expropriations, significantly limiting the ability of parties to challenge such acts in U.S. courts. The ruling was highly controversial and prompted a direct legislative response from Congress in the form of the Second Hickenlooper Amendment, which created a major exception to the doctrine for claims to property expropriated in violation of international law. Despite this legislative override in the expropriation context, the Sabbatino decision's core reasoning about judicial deference to the political branches in foreign affairs remains a foundational principle in U.S. foreign relations law.
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