376 U.S. 398 (1964), 16, Banco Nacional de Cuba v. Sabbatino

Docket Nº:No. 16
Citation:376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804
Party Name:Banco Nacional de Cuba v. Sabbatino
Case Date:March 23, 1964
Court:United States Supreme Court

Page 398

376 U.S. 398 (1964)

84 S.Ct. 923, 11 L.Ed.2d 804

Banco Nacional de Cuba



No. 16

United States Supreme Court

March 23, 1964

Argued October 22-23, 1963




Respondent American commodity broker contracted with a Cuban corporation largely owned by United States residents to buy Cuban sugar. Thereafter, subsequent to the United States Government's reduction of the Cuban sugar quota, the Cuban Government expropriated the corporation's property and rights. To secure consent for shipment of the sugar, the broker, by a new contract, agreed to make payment for the sugar to a Cuban instrumentality which thereafter assigned the bills of lading to petitioner, another Cuban instrumentality, and petitioner instructed its agent in New York to deliver to the broker the bills of lading and sight draft in return for payment. The broker accepted the documents, received payment for the sugar from its customer, but refused to deliver the proceeds to petitioner's agent. Petitioner brought this action for conversion of the bills of lading to recover payment from the broker and to enjoin from exercising dominion over the proceeds a receiver who had been appointed by a state court to protect the New York assets of the corporation. The District Court concluded that the corporation's property interest in the sugar was subject to Cuba's territorial jurisdiction, and acknowledged the "act of state" doctrine, which precludes judicial inquiry in this country respecting the public acts of a recognized foreign sovereign power committed within its own territory. The court nevertheless rendered summary judgment against the petitioner, ruling that the act of state doctrine was inapplicable when the questioned act violated international law, which the District Court found had been the case here. The Court of Appeals affirmed, additionally relying upon two State Department letters which it took as evidencing willingness by the Executive Branch to a judicial testing of the validity of the expropriation.


1. The privilege of resorting to United States courts being available to a recognized sovereign power not at war with the United States, and not being dependent upon reciprocity of treatment, petitioner has access to the federal courts. Pp. 408408-412.

Page 399

2. The propriety of the taking was not governed by New York law, since the sugar itself was expropriated. P. 413.

3. This suit is not uncognizable in American courts as being one to enforce the "public" acts of a foreign state, since the expropriation law here involved had been fully executed within Cuba. Pp. 413-415.

4. The Government's uncontested assertion that the two State Department letters expressed only the then wish of the Department to avoid commenting on the litigation, obviates the need for this Court to pass upon the "Bernstein exception" to the act of state doctrine, under which a court may respond to a representation by the Executive Branch that, in particular circumstances, it does not oppose judicial consideration of the foreign state's act. Pp. 418-420.

5. The scope of the act of state doctrine must be determined according to federal law. Pp. 421-427.

6. The act of state doctrine applies and is desirable with regard to a foreign expropriation even though the expropriation allegedly violates customary international law. Pp. 427-437.

(a) Disagreement exists as to relevant standards of international law concerning a State's responsibility toward aliens. P. 430.

(b) The political branch can more effectively deal with expropriation than can the Judicial Branch. Pp. 431-432.

(c) Conflicts between the Judicial and Executive Branches could hardly be avoided were the judiciary to adjudicate with respect to the validity of expropriations. Even if the combination alleged in this case of retaliation, discrimination, and inadequate compensation made the expropriation here violative of international law, a judicial determination to that effect would still be unwise as involving potential conflict with or embarrassment to the Executive Branch in later litigation. Pp. 432-433.

7. A foreign country's status as a plaintiff does not make the act of state doctrine inapplicable. Pp. 437-438.

307 F.2d 845 reversed and remanded.

Page 400

HARLAN, J., lead opinion

MR. JUSTICE HARLAN delivered the opinion of the Court.

The question which brought this case here, and is now found to be the dispositive issue, is whether the so-called act of state doctrine serves to sustain petitioner's claims in this litigation. Such claims are ultimately founded on a decree of the Government of Cuba expropriating certain

Page 401

property, the right to the proceeds of which is here in controversy. The act of state doctrine in its traditional formulation precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory.


In February and July of 1960, respondent Farr, Whitlock & Co., an American commodity broker, contracted to purchase Cuban sugar, free alongside the steamer, from a wholly owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.), a corporation organized under Cuban law whose capital stock was owned principally by United States residents. Farr, Whitlock agreed to pay for the sugar in New York upon presentation of the shipping documents and a sight draft.

On July 6, 1960, the Congress of the United States amended the Sugar Act of 1948 to permit a presidentially directed reduction of the sugar quota for Cuba.1 On the same day, President Eisenhower exercised the granted power.2 The day of the congressional enactment, the Cuban Council of Ministers adopted "Law No. 851," which characterized this reduction in the Cuban sugar quota as an act of "aggression, for political purposes" on the part of the United States, justifying the taking of countermeasures by Cuba. The law gave the Cuban President and Prime Minister discretionary power to nationalize by forced expropriation property or enterprises in which American nationals had an interest.3 Although

Page 402

a system of compensation was formally provided, the possibility of payment under it may well be deemed illusory.4 Our State Department has described the Cuban law as

manifestly in violation of those principles

Page 403

of international law which have long been accepted by the free countries of the West. It is in its essence discriminatory, arbitrary and confiscatory.5

Between August 6 and August 9, 1960, the sugar covered by the contract between Farr, Whitlock and C.A.V.6 was loaded, destined for Morocco, onto the S.S. Hornfels, which was standing offshore at the Cuban port of Jucaro (Santa Maria). On the day loading commenced, the Cuban President and Prime Minister, acting pursuant to Law No. 851, issued Executive Power Resolution No. 1. It provided for the compulsory expropriation of all property and enterprises, and of rights and interests arising therefrom, of certain listed companies, including C.A.V., wholly or principally owned by American nationals. The preamble reiterated the alleged injustice of the American reduction of the Cuban sugar quota and emphasized the importance of Cuba's serving as an example for other countries to follow "in their struggle to free themselves from the brutal claws of Imperialism."7 In consequence

Page 404

of the resolution, [84 S.Ct. 928] the consent of the Cuban Government was necessary before a ship carrying sugar of a named company could leave Cuban waters. In order to obtain this consent, Farr, Whitlock, on August 11, entered into contracts, identical to those it had made with C.A.V.,

Page 405

with the Banco Para el Comercio Exterior de Cuba, an instrumentality of the Cuban Government. The S.S. Hornfels sailed for Morocco on August 12.

Banco Exterior assigned the bills of lading to petitioner, also an instrumentality of the Cuban Government, which instructed its agent in New York, Societe Generale, to deliver the bills and a sight draft in the sum of $175,250.69 to Farr, Whitlock in return for payment. Societe Generale's initial tender of the documents was refused by Farr, Whitlock, which on the same day was notified of C.A.V.'s claim that, as rightful owner of the sugar, it was entitled to the proceeds. In return for a promise not to turn the funds over to petitioner or its agent, C.A.V. agreed to indemnify Farr, Whitlock for any loss.8 Farr, Whitlock subsequently accepted the shipping documents, negotiated the bills of lading to its customer, and

Page 406

received payment for the sugar. It refused, however, to hand over the proceeds to Societe Generale. Shortly thereafter, Farr, Whitlock was served with an order of the New York Supreme Court, which had appointed Sabbatino as Temporary Receiver of C.A.V.'s New York assets, enjoining it from taking any action in regard to the money claimed by C.A.V. that might result in its removal from the State. Following this, Farr, Whitlock, pursuant to court order, transferred the funds to [84 S.Ct. 929] Sabbatino, to abide the event of a judicial determination as to their ownership.

Petitioner then instituted this action in the Federal District Court for the Southern District of New York. Alleging conversion of the bills of lading it sought to recover the proceeds thereof from Farr, Whitlock and to enjoin the receiver from exercising any dominion over such proceeds. Upon motions to dismiss and for summary judgment, the District Court, 193 F.Supp. 375, sustained federal in personam jurisdiction despite state control of the funds. It found that the sugar was located within Cuban territory at the time of expropriation, and determined that, under merchant law common to civilized countries, Farr, Whitlock could not have asserted ownership of the sugar against C.A.V....

To continue reading