Banco Nacional de Cuba v. Chase Manhattan Bank

Decision Date04 January 1980
Docket Number61 Civ. 0410-CLB.,No. 60 Civ. 4663-CLB,60 Civ. 4663-CLB
Citation505 F. Supp. 412
CourtU.S. District Court — Southern District of New York





Rabinowitz, Boudin, Standard, Krinsky & Lieberman by Victor Rabinowitz, New York City, for Cuba.

Milbank Tweed Hadley & McCloy by Andrew J. Connick, New York City, for Chase-Manhattan Bank.

Shearman & Sterling by Charles Manuel, New York City, for First Nat'l City Bank.

Davis Polk & Wardwell by James Benkard, James Kerr, New York City, for First Bank of Boston.

BRIEANT, District Judge.

The first of these actions was filed November 28, 1960 by Banco Nacional de Cuba (hereinafter "Banco Nacional") against Chase Manhattan Bank (hereinafter "Chase"). The second above entitled action was filed February 1, 1961 by Banco Para el Comercio Exterior de Cuba (hereinafter "Bancec") against First National City Bank (hereinafter "Citibank"). Both cases arise out of events following and connected with the recent Cuban Revolution and the consequent change in the economic, social and political structure of the Republic of Cuba.

These cases are two out of a larger number of similar cases pending in this Court. By separate orders made on August 7, 1961 by Hon. Sylvester J. Ryan, then Chief Judge of this Court, each of these cases were assigned for all purposes to Hon. Frederick vanPelt Bryan, pursuant to Rule 2 of the Civil Rules of this Court as then in effect. The cases were tried before Judge Bryan, who thereafter departed this life on April 17, 1978.

Following the death of Judge Bryan, these cases were reassigned to me, and the parties have stipulated and agreed through their counsel that the issues may be resolved by the Court based upon all the proceedings and papers before the late Judge Bryan, without the necessity of reopening the trial record, taking additional proof or observing the demeanor of any witnesses.

The Court has subject matter jurisdiction of the respective complaints under 28 U.S.C. ? 1332(a)(2). The counterclaims pleaded in each case are conceded to be recoverable only as set-offs to the extent that a plaintiff prevails on its respective complaint.

Although these cases have not been consolidated, they present related issues of fact and law, and the post-trial hearings before me were conducted jointly. Accordingly, and to avoid repetition it seems appropriate that the issues presented be determined in a single decision.

Familiarity is assumed with the stipulated and conceded facts in these cases, which will not be recited except to the extent necessary for an understanding of the issues presented. Familiarity is also assumed with the prior litigation tried before the late Judge Bryan, Banco Nacional de Cuba v. First National City Bank, 270 F.Supp. 1004 (S.D.N.Y.1967), rev'd. 442 F.2d 530 (2d Cir. 1971), rev'd. 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466, reh. denied 409 U.S. 897, 93 S.Ct. 92, 34 L.Ed.2d 155 (1972); on remand 478 F.2d 191 (2d Cir. 1973) (hereinafter "Banco I"). Plaintiffs have reserved their right to relitigate on subsequent appeal the legal points determined in the Banco I case, but their counsel concedes that for purposes of proceedings in this district court, those issues are precluded by the plurality opinions of the Supreme Court in 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466 et seq. and the determination on remand in 478 F.2d 191. For additional discussion of these issues, see Banco Nacional de Cuba v. Sabbatino, 193 F.Supp. 375 (S.D.N.Y.1961), aff'd. 307 F.2d 845 (2d Cir. 1962), rev'd. 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964); on remand, sub nom. Banco Nacional de Cuba v. Farr, 243 F.Supp. 957 and 272 F.Supp. 836 (S.D.N.Y.1965), aff'd. 383 F.2d 166 (2d Cir. 1967), cert. denied 390 U.S. 956, 88 S.Ct. 1038, 20 L.Ed.2d 1151, reh. denied 390 U.S. 1037, 88 S.Ct. 1406, 20 L.Ed.2d 298 (1968), and also the legislative history leading to the enactment of the so-called "Hickenlooper" or "Sabbatino" Amendment, now 22 U.S.C. ? 2370(e)(2), passed by Congress to frustrate in part the apparent or perceived rule of the Supreme Court in the Sabbatino case.



There is much literature concerning the events in Cuba following the overthrow of the Batista Government. Much of this literature is partisan in nature and of no assistance in setting forth the background of events described below. Sufficient it is to state that the effective date of the revolution in Cuba, which began in the Sierra Maestra Mountains in December 1956 is generally agreed to have been January 1, 1959.

Almost immediately after the overthrow of the Batista administration, a national government was established by Castro, Che Guevera and others, which concentrated under one hand all the executive and legislative functions of the Cuban Government. The Castro Government regarded itself as a lawful continuum of the pre-existing government of the Republic of Cuba and built for the most part on pre-existing law and institutions, making substantial but piecemeal changes to effect its revolutionary goals. Following the assumption of power it began a swift sequence of social changes in Cuba's internal affairs, and in its relationships with foreign powers and the aliens then resident in Cuba.

Almost immediately, new currency control regulations were imposed, and those regulations were gradually tightened. Banco Nacional was restructured internally in the fashion described below, and it became the sole official licensor of all foreign payments and any remissions of profits earned in Cuba by alien owned enterprises. From time to time, amendments to these regulations and changes in the policy under which they were administered, contrived to place continuously greater limitations on international trade with Cuba. Also limited thereby was the transaction of domestic business in Cuba, including banking, and the enjoyment of property, by foreigners.

Following the revolution, many members of the propertied and professional classes in Cuba took refuge in foreign countries; they fled the realm. Cuba began a swift and purposeful transition from an economy in which most of the means of production were owned and controlled by private individuals and firms, both native and alien, to a nation where the economy was more closely controlled by Government, and where the Government directly or indirectly assumed ownership and operation of the means of production. This new Government has been described loosely in the briefs as a "socialist" Government. At least within the classical definition of these words, it was not. In socialism, we are taught that the workers own and control the means of production. In Cuba, after the revolution, the Cuban Government owned and controlled the means of production, to a gradually increasing extent. The resulting internal organization may best be described as "state capitalism."

By various statutes and decrees, ownership and control of the properties and businesses of those who fled Cuba following the revolution became vested in the Cuban Government. On May 17, 1959 an "agrarian reform law" was enacted, looking towards nationalization and dismemberment of large land holdings in a nation which had previously founded its economy largely on the production of sugar for export. This agrarian reform was administered by an arm of the Cuban Government known as INRA (El Institutio Nacional de Reforma Agraria), which proceeded to act in the nature of a state-owned trading corporation, owning the sugar production facilities and disposing of the export sugar crop. Persons or entities called "interventors" were appointed by the Cuban Government to confiscate and conduct numerous business enterprises owned by absentees, native and foreign.

In November 1959, Banco Nacional de Cuba, the central bank of the Republic of Cuba, was reorganized, and Che Guevera was appointed President of Banco Nacional.

These significant social changes, hereinafter referred to in totality and for simplicity as "the social changes" were accompanied by the usual rhetoric, and by promises, viewed and intended to be viewed by some as threats, that more of the same was to follow shortly. And it did.

Sugar in the world market had been a surplus commodity for many years. Cuban sugar producers had been granted an import quota, politically administered and changed annually, for sugar to be licensed by the United States Government for importation into the American market. In the United States, the price of sugar has traditionally been maintained at a level above the world competitive price, and close to the marginal costs of American beet and cane sugar producers, in order to insure survival of domestic producers. The administration and allotment of the sugar import quotas had been an essential part of American foreign policy for many years in dealing not only with Cuba, but with other sugar producing nations. Adjustments in the sugar quota were treated as diplomatic rewards and punishments for foreign nations producing sugar, based upon their international conduct, their perceived friendliness, and treatment accorded to American nationals.

As a result of rapidly deteriorating foreign relations between the new Cuban Government and the United States, and the abhorrence which nature has for a vacuum, even in diplomacy, the Soviet Union, on February 13, 1960, was able to enter into a barter-type commercial agreement with Cuba by which large quantities of Cuban sugar were permitted to enter Russia and Russian-dominated trading partners where that sugar had not previously been sold. That sugar was to be paid for in merchandise, including, but not limited to armaments produced in the Soviet Union. The United States reacted...

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