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Understanding the Act of State Doctrines Effect

Published online by Cambridge University Press:  27 February 2017

Frederic L. Kirgis Jr.
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Editorial Comments
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American Journal of International Law , Volume 82 , Issue 1 , January 1988 , pp. 58 - 61
Copyright
Copyright © American Society of International Law 1988

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References

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

2 See Henkin, Act of Slate Today: Recollections in Tranquility, 6 Colum. J. Transnat’l L. 175 (1967)Google Scholar. As Chief Reporter of the revised Restatement of Foreign Relations Law, Professor Henkin has continued to view the act of state doctrine, in most cases, as “a special rule of conflict of laws.” Restatement of Foreign Relations Law of the United States (Revised) [hereinafter Restatement (Revised)] §469 Reporters’ Note 1 (Tent. Draft No. 7, 1986).

3 Nor have commentators, though they normally pay some deference to him. For a recent critique of the doctrine’s choice-of-law explanation, see Chow, Rethinking the Act of State Doctrine: An Analysis in Terms of Jurisdiction to Prescribe, 62 Wash. L. Rev. 397, 431–35 (1987)Google Scholar. Professor Chow gives only passing reference to the essential point that the doctrine is a federal choice-of-law rule, superseding state choice of law even in diversity cases. Id. at 434–35 n.251. His preferred rationale, however, is based on principles of legislative jurisdiction and turns out to be basically a choice-of-law approach. Id. at 447–74.

4 Banco Nacional de Cuba v. Chemical Bank N.Y. Trust Co., 822 F.2d 230 (2d Cir. 1987). Chemical Bank I was an earlier appeal in the same case, 658 F.2d 903 (2d Cir. 1981).

5 A Bernstein letter is a letter from the Department of State saying that judicial examination of the foreign government’s act in the case at hand would not hamper the conduct of U.S. foreign relations. See Bernstein v. N.V. Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375 (2d Cir. 1954). The letter in Chemical Bank II disclaimed any interest in having the act of state doctrine applied to the counterclaims, concluding that “the Department of State does not perceive foreign relations difficulties that should bar adjudication of these cases on the merits.” The letter also said that the situation “does not compel us to call upon the court to abstain from its normal duty to adjudicate cases properly before it.” Chemical Bank II, 822 F.2d at 236.

6 Banco Nacional de Cuba v. Chase Manhattan Bank, 658 F.2d 875 (2d Cir. 1981). The common member was the author of both opinions.

7 First Nat’l City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972).

8 A majority of the Justices in Citibank rejected the Bernstein letter as a controlling factor, and an even greater majority declined to treat the limited counterclaim as significant. As for the third factor, everyone concedes that the act of state doctrine applies if examination of the foreign government’s act, done within its own territory, would demonstrably impede the conduct of foreign relations.

Another possible way around the act of state doctrine might have been to characterize Cuba’s repudiation or nonassumption of debts owed to U.S. interests as “private” or “commercial.” Cf. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976). Quite properly, the court in Chemical Bank II did not take this route. Cuba clearly made a political decision not to pay U.S. creditors.

It could also have been argued that Cuba had taken property (the claims of the creditors) situated outside Cuba, if the claims had their situs in New York. It is generally thought that the act of state doctrine does not apply to takings of property outside the acting state’s territory. See Restatement (Revised), supra note 2, §469 Reporters’ Note 4 (Tent. Draft No. 7, 1986). In fact, though, Cuba did everything it needed to do within its own territory and effectively blocked the creditors’ claims. That should satisfy the territorial requirement, regardless of where the debts had their technical “situs.”

9 Empresa Cubana Exportadora, Inc. v. Lamborn & Co., 652 F.2d 231, 238–39 (2d Cir. 1981).

10 Cf. Ricaud v. American Metal Co., 246 U.S. 304, 309 (1918) (in an act of state case, the action of the foreign government “must be accepted by our courts as a rule for their decision”).

11 See 376 U.S. at 433 (where the Supreme Court majority revealed a certain skepticism regarding lower courts’ ability in future cases to handle less clear violations of international law than occurred in Sabbatino itself).

12 The court relied heavily on the Restatement (Second) and the Restatement of Foreign Relations Law (Revised). Both Restatements disclaim a parochial point of view, saying that they represent “the opinion of The American Law Institute as to the rules that an international tribunal would apply if charged with deciding a controversy in accordance with international law.” Restatement (Revised), supra note 2, Introduction (Tent. Draft No. 5, 1984) (quoting Restatement (Second)). But as anyone who attended the ALI debates on the revised Restatement knows, the Institute’s opinion is shaped by the views and interests of its (American) members.

The court in Chemical Bank II cited only two non-American sources: a British scholar (B. A. Wortley) and a 1931 arbitral award by the Mexican-U.S. General Claims Commission. The point in the arbitral award on which the court relied was actually a quotation from an American textbook, 1 J. Sutherland, Law of Damages 126 (4th ed. 1916). See Dickson Car Wheel Co. v. United Mexican States, 4 R. Int’l Arb. Awards 669, 681 (1931).

13 Recent arbitral awards that have considered assertions of discriminatory taking or breach of contract have found additional grounds for holding the governmental acts unlawful, or have failed to find that there actually was discrimination against foreign nationals. See BP Exploration Co. (Libya) Ltd. v. Libyan Arab Republic, 53 ILR 297, 329 (1979); Libyan American Oil Co. v. Libyan Arab Republic, 20 ILM 1 (1981); Kuwait v. American Independent Oil Co., 21 ILM 976 (1982); American International Group, Inc. v. Iran, 4 Iran-U.S. Claims Tribunal Rep. 96 (1983), 23 ILM 1 (1984); Liberian Eastern Timber Corp. v. Liberia, 26 ILM 647 (1987). Cf. Schachter, International Law in Theory and Practice, 178 Recueil Des Cours 9, 314–21 (1982 V).

Of course, the Cuban discrimination in Chemical Bank II was in the form of an uncompensated deprivation of rights. Thus, the court did not have to rely solely on discrimination to find an international law violation, but it did so nevertheless.

14 This point is more fully developed in Kirgis, Act of State Exceptions and Choice of Law, 44 U. Colo. L. Rev. 173, 182–85 (1972), and Addendum, id. at 379, 380–85 (1973). Cf Chow, supra note 3, at 447–74.

15 See Restatement (Revised), supra note 2, §402 comment d and Reporters’ Note 2 (Tent. Draft No. 6, 1985).

16 The approach outlined in this Comment should be applied even in a case involving the Second Hickenlooper Amendment. The amendment, 22 U.S.C. §2370(e)(2) (1982), contains its own choice of (U.S.) law but should be interpreted to apply only when a claim of title or other right to property stems from a violation of “true” international law—not just of standards asserted by the United States Government. See Kirgis, supra note 14, at 181–82, 185–86.