Page 147 - Law of Peace, Volume ,

Pam 27-161-1

ply only in those cases where the claim of the right of title Concurrences in the final result of this casewere based on
or some other right in specifrc property expropriated two theories differing from each other and from that
abroad were involved. above quoted. The dissent-argued that this case was
b. The most recent Supreme Court decision concern- governed by Sabbatino, stating that the holding in Sab-
ing the Act of State doctrine is that of First National City batino was that the validity of a foreign act of state in cer-
Bank v. Banco Nacional de Cuba. 113 It has done little tain circumstancesis a political question, not cognizable in
toward resolving the confusion surrounding the doctrine U.S. courts, and that the executive branch cannot by
and the applicability of the Hickenlooper Amendments. "simple stipulation change a political question into a cog-
The issue involved was whether the Act of State doctrine nizable claim." In light of these most recent decisions,
should be applied to prevent a set-off to recover damages and the State Department's latest pronouncement on this
for the expropriation of First National City Bank's proper- matter, it is extremely dficult to speak of the Act of State
ty in Cuba. Banco Nacional's predecessor had borrowed doctrine, as interpreted by U.S. courts, in defintive
$15 million from First National City Bank in 1958. The terms. Its current status as an element of particular inter-
loan was secured by a pledge of U.S. Government bonds. national law is uncertain.
In 1960, $5 million was repaid, the $10 million balance 7-28.The Executive Branch View of the Act of State
renewed and collateral equal to the value of the repaid Doctrine. The full text of the latest executive branch
portion was released. On September 16,1960, the Castro viewpoint on the act of state doctrine, referred to by the
government in Cuba seized all of First National City Supreme Court in the First National City Bank case, is
Bank's branches in Cuba. In retaliation, the bank sold the carried as an appendix to the second consideration of this
collateral that secured the $10 million loan and applied the case by the Court of Appeals for the Second Circuit. 117
proceeds to the principal and unpaid interest. This sale The Legal Adviser of the Department of State referred to
resulted in an excess of at least $1.8 million. Banco Na- the fust decision by the court of appeals in the First Na-
cional then sued in the Federal district court to recover the tional City Bank Case (i.e., Section 2370 (e) (2) of ~itle
excess, the First National City by way of set-off and coun- 22 of the United States Code did not apply to the claim
terclaim asserted the right to recover damages for the ex- and hence the act of state doctrine as laid down by the
propriation of its branches in Cuba. The district court dis- Supreme Court in the Sabbatino case did apply) and
missed Banco Nacional's suit. The court recognized that stated that the decision involved matters of importance to
the Sabbatino case, holding that courts of one state would the foreign policy of the United States, called attention to
generally not sit in judgment on the acts of another state the Bernstein exception, disagreed with the nonapplication
taken within the latter's territory, barred the assertion of of it in the first opinion by the court of appeals, and con-
First National City's counterclaim. It held, however, that tinued as follows:
Sabbatino has been overruled, for all practical purposes, While the Department of State in the past has generally supported the
by Congress. The U.S. Second Circuit Court of Appeals applicability of the act of state doctrine, it has never argued or implied
that there should be no exceptions to the doctrine. In its Sabbatino
reversed, holding that the acts of Congress relied upon
brief, for example, it did not argue for or against the Bernstein principle;
(the Hickenlooper Amendments) by the district court did rather it assumed that judicial consideration of an act of state would be
not govern and that Sabbatino barred the assertion of the permissible when the Executive so indicated, and argued simply that the
counterclaim. 114 The Supreme Court's judgment, exchange of letters relied on by the lower courts in Sabbatino con-
stituted "no such expression in this case." Brief of the United States,
reversing and remanding the Circuit Court's decision, 115
page 1 1.
took the position that the Act of State doctrine was based Recent events, in our view, make appropriate a determination by the
primarily on the premise that judicial review of acts of a Department of State that the act of state doctrine need not be applied
foreign power might embarrass the conduct of foreign when it is raised to bar adjudication of a counterclaim or setoff when (a)
relations by the political branches of the Government. In the foreign state's claim arises from a relationship between the parties
this case, however, the Legal Adviser of the Department existing when the act of state occurred; (b) the amount of relief to be
granted is limited to the amount of the foreign state's claim; and (c) the
of State had advised the Court that the doctrine need not
foreign policy interests of the United States do not require application of
be applied. Noting this, the court asserted the doctrine.
The 1960's have seen a great increase in expropriations by foreign
We conclude that where the Executive Branch, charged as it is with pri-
governments of property belonging to United States citizens. Many cor-
mary responsibility for the conduct of foreign affairs, expressly repre-
porations whose properties are expropriated, fmancial institutions for
sents to the Court that the Act of State doctrine would not advance the
example, are vulnerable to suits in our courts by foreign governments as
interests of American foreign policy, that doctrine should not be applied plaintiff, for the purpose of recovering deposits or sums owed them in
by the courts. In so doing, we of course adopt and approve the so-called the United States without taking into account the institutions' coun-
Bernstein exception to the Act of State doctrine. 116 terclaims for their assets expropriated in the foreign country.
The basic considerations of fairness and equity suggesting that the act
113. 406-U.S. 759 (1972). of state doctrine not be applied in this class of cases, unless the foreign
114. 442 F.2d 530 (1971). policy interests of the United States so require in a particular case,were
115. 406 U.S. 759, 764 (1972). reflected in National City Bank [of New York] v. Republic of China, 348
1 16. Berstein v. Nederlandsche-Amerikoansche, 210 F.2d 375
(1 954).