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Published online by Cambridge University Press: 28 March 2017
1 National City Bank v. Republic of China, 348 U.S. 356 (1955).
2 376 U.S. 398 (1964). In that case Banco Nacional de Cuba brought suit for the proceeds from a sale of sugar expropriated from Compania Azucarera Vertientes- Camaguey de Cuba (“C.A.V.”), a Cuban corporation principally owned by United States persons, held by a receiver. The action alleged that Farr Whitlock and Co., a sugar broker, had converted the relevant bills of lading; the broker refused to pay the Cuban bank because C.A.V. (which was not a party to the action) also claimed the proceeds on the ground that the Cuban expropriation was invalid.
3 First Nat’l City Bank v. Banco Nacional de Cuba, 40 U.S.L.W. 4652, 4659 n.4 (U.S. June 7, 1972) (emphasis added by Mr. Justice Brennan), citing to Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964).
4 First Nat’l City Bank v. Banco Nacional de Cuba, 40 U.S.L.W. 4652, 4659 n.4 (U.S. June 7, 1972), citing to Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 429 (1964).
5 First Natl City Bank v. Banco Nacional de Cuba, 40 U.S.L.W. 4652 (U.S. June 7, 1972), rev’g 442 F.2d 530 (2d Cir. 1972); 400 U.S. 1019 (1971), vacating 431 F.2d 394 (2d Cir. 1970), rev’g 270 F. Supp. 1004 (S.D.N.Y. 1967).
6 376 U.S. 398 (1964).
7 “(2) 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 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 with respect to a claim of title or other right acquired pursuant to an irrevocable letter of credit of not more than 180 days duration issued in good faith prior to the time of the confiscation or other taking, 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, or (3) in any case in which the proceedings are commenced after January 1, 1966.” Foreign Assistance Act of 1964, pt. 3, Ch. 1, 78 Stat. 1009, 1013, as amended, 22 U.S.C. 2370(e)(2) (1965).
8 Banco Nacional v. First Nat’l City Bank of N.Y., 270 F. Supp, 1004, 1007 (S.D.N.Y. 1967).
9 Id. at 1007.
10 Banco Nacional de Cuba v. First Natl City Bank of N. Y., 431 F.2d 394, 399 (2d Cir. 1970).
11 The Legal Adviser viewed the Second Circuit to have held “. . . that the Act of State doctrine, as expressed by the Supreme Court in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), barred adjudication of City Bank’s counterclaim.” Letter from John, R. Stevenson to the Clerk of the United States Supreme Court, Nov. 17, 1970 Google Scholar, printed as an appendix to the opinion of the court in Banco National de Cuba v. First Nat’l City Bank of N.Y., 442 F.2d 530, 536 (2d Cir. 1971) (“Stevenson Letter”). Reprinted in 65 AJ.I.L. 391 (1971).
12 Id.
13 Id.
14 Id. at 537. Reference is to Bernstein v. N.V. Nederlandsche-Amerikaansche, Etc., 210 F.2d 375 (2d Cir. 1954), rev’g 173 F.2d 71 (2d Cir. 1949). The earlier decision is digested at 44 AJ.I.L. 182 (1950); the latter is digested at 48 AJ.I.L. 499 (1954). See comment by Reeves, 54 AJ.I.L. 141, 150–52 (1960).
15 Stevenson Letter, supra, note 11, at 537.
16 Id .
17 348U.S. 356 (1955).
18 Stevenson Letter, supra, note 11, at 537.
19 210 F.2d 375 (2d Cir. 1954).
20 Stevenson concluded: “The Department of State believes that the act of state doctrine should not be applied to bar consideration of a defendant’s counterclaim or setoff against the Government of Cuba in this or like cases.” Stevenson Letter, supra, note 11, at 538.
21 First Nat’l City Bank v. Banco National de Cuba, 400 U.S. 1019 (1971).
22 “[w]e conclude that Bernstein is best left narrowly limited to its own peculiar facts and that, despite the State Department’s letter of November 17, 1970 [Stevenson Letter], the exception to the act of state doctrine created by that case is inapplicable to the case at bar.” Banco National de Cuba v. First Nat’l City Bank of N.Y., 442 F.2d 530, 535 (2d Or. 1971).
23 First Natl City Bank v. Banco Nacional de Cuba, 40 U.S.L.W. 4652 (U.S. June 7, 1972).
24 Id. at 4655.
25 Id.
26 The result, as noted in the opinion of Mr. Justice Rehnquist, “is consonant with the principles of equity set forth by the Court in National City Bank of New York v. Republic of China”. Id. (citation omitted). The Chief Justice and Mr. Justice White joined in the opinion.
27 Id. at 4657.
28 Id. at 4657.
29 Id. at 4656.
30 Mr. Justice Douglas said that as to any amount beyond the sum sued for he would “disallow the judicial resolution of that dispute for the reasons stated in Sabbatino and by Mr. Justice Brennan in the instant case”. Id. at 4656. No such amount was at issue in this case. It can be argued that Mr. Justice Douglas dictum with regard to any amount beyond the sovereign’s claim would foreclose for him scrutiny of the compensation issue as well as of the validity of the taking. As indicated infra p. 828, the rationale of the dissenting Justices does not properly settle the issue whether a failure to pay compensation comes within the act of state doctrine. ‘Whatever conclusion Mr. Justice Douglas might subsequently reach on this issue, his opinion read literally indicates that under no circumstances will he preclude under the act of state doctrine a defendant’s counterclaim up to the amount of the sovereign’s claim.
31 Id. at 4659 n.4 (citations omitted). The lower court and majority Supreme Court opinions indicate that the issue whether failure to pay compensation is an act of state was not considered elsewhere. In this case, there appears to be no significant difference between amounts representing damages for an invalid taking and compensation for a valid taking. Both such amounts surely would have exceeded the Cuban claim.
32 In the District Court Judge Dimock dismissed the complaint of Banco Nacional de Cuba, holding that enforceability of the Cuban decree in a U.S. court depended upon Cuba’s fulfillment of the obligations of international law, and that since the Cuban expropriation was not reasonably related to a public purpose, was retaliatory, discriminatory, and did not provide for adequate compensation, international law had been violated. Banco Nacional de Cuba v. Sabbatino, 193 F. Supp. 375, 384–85 (S.D.N.Y. 1961). The Second Circuit Court of Appeals affirmed. Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845 (2d Cir. 1962). Although Judge Waterman considered holding that the Cuban taking had validly passed title in the sugar to the expropriating state and that compensation for the sugar was owing to C.A.V., he explicitly declined to do so. Id. at 864. Instead, he held that the taking itself was retaliatory and discriminatory and, hence, invalid to transfer title to Cuba. Id. at 866–69. Thus, the compensation issue never reached the Supreme Court.
33 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964).
34 Id.
35 Id. (footnote omitted).
36 See, e.g., Banco Nacional de Cuba v. First Nat’l City Bank of N.Y., 270 F. Supp. 1004, 1010, 1011 (“the totality of the circumstances”, “confiscation”) (S.D.N.Y. 1967); Banco Nacional de Cuba v. First Natl City Bank of N.Y., 431 F.2d 394, 396 (confiscation “without providing adequate compensation”; Lender claimed “this act was a violation of international law”) (2d Cir. 1970); and Banco Nacional de Cuba v. First Nat’l City Bank of N.Y., 442 F.2d 530, 535 (“expropriation”) (2d Cir. 1971); Banco Nacional de Cuba v. First Nat’l City Bank of N.Y., 40 U.S.L.W., 4652, 4653 (“expropriation”), 4656 (opinion of Mr. Justice Douglas, “confiscation”), 4657 (opinion of Mr. Justice Powell, “expropriation”) (June 7, 1972).
37 The dissenting opinion states that the Court in Sabbatino “held that ‘any counterclaim [against Cuba] based on asserted invalidity must fail’.” This did not, of course, meet the point that the claim in the present case was not based on “asserted invalidity”.
38 Under what law could the Lender assert a right to compensation? According to traditional theories perhaps only the United States could assert this right under international law on behalf of a national for a wrong done to the United States. Under developing concepts of transnational law, however, the Lender itself could directly assert such a right. The opinions of Justices Rehnquist (joined in by the Chief Justice and Mr. Justice White), Douglas, and Powell, presume that the Lender could directly invoke the international obligation to compensate. Even the dissenting Justices questioned the propriety of the passing of judgment only for act of state reasons, not for lack of a right of action.
39 Drucker, “On Compensation Treaties Between Communist States,” 229 Law Times 279, 293 (1960) (“. . . Communist States vis-a-vis each other recognize that their . . . measures of depossession give rise to legal obligations towards those who have been dispossessed.”)
40 Stevenson Letter, supra, note 11, at 536, citing Foreign Assistance Act of 1964, pt. 3, Ch. 1, 78 Stat. 1009, as amended, 22 U.S.C. 2370(e)(2) (1965).