Cases by Issue - Act of State Doctrine

Kirkpatrick Co. v. Environmental Tectonics Corp. - Oral Argument

Fri, 09 Jan 2009 14:49:21 +0000

Case:

Kirkpatrick Co. v. Environmental Tectonics Corp.

Media File:

87-2066_19891127-argument.mp3

Related Transcript:

1989_87_2066_argument.xml

Transcript:

Argument of Edward Brodsky

Chief Justice Rehnquist: We'll hear argument next in No. 87-2066, W.S. Kirkpatrick & Company versus Environmental Tectonics Corporation.

Mr. Brodsky.

Mr. Brodsky: Mr. Chief Justice, and may it please the Court:

The issue in this case is whether or not the act of state doctrine bars the prosecution by the plaintiff of this action which we say that it does.

The facts are as follows.

In 1982 our client, W.S. Kirkpatrick Company, entered into an agreement with the Government of Nigeria to supply equipment on an air base, a military air base, in Nigeria.

The equipment was part of... was to be used in an aeromedical center in Nigeria as part of its defense program.

The equipment were things like ejection seats for jet aircraft and centrifugal machines to train pilots.

In connection with obtaining this contract with the Government of Nigeria, our client paid an intermediary, not an official of the Government of Nigeria... our client paid an intermediary an amount of money which, pursuant to an arrangement with the intermediary, was to be used as bribes to officials of the Government of Nigeria.

The amount of money paid was about $1.7 million.

The total contract price was about $10 million.

In 1984, our company was indicted, along with our chief executive officer... actually, it was our predecessor... for violating the Foreign Corrupt Practices Act.

We pleaded guilty.

And after that, the plaintiff in this case brought an action against us and is claiming that it is entitled to damages because, but for our bribe, it would have obtained the contract.

It is suing us under the RICO statute, under the Robinson-Patman Act, and it is suing us under a New Jersey RICO statute.

It is not suing under the Foreign Corrupt Practices Act.

The district court agreed with our position, even after receiving a letter from the legal advisor to the Secretary of State.

That letter was requested by the district court.

And the letter that was received by the district court was kind of inconsistent, internally inconsistent.

One the one hand, it said that the State Department had no objection if this case would go forward.

But, on the other hand, it also said that discovery in this case might seriously affect... that's a quote from the letter... might seriously affect United States foreign relations.

Therefore, the district court said, look, I'm not a member of the State Department, I'm not an expert in foreign relations and this case should be dismissed.

The court of appeals disagreed in the Third Circuit and the court of appeals made a distinction between something which motivates an act of state... namely, in this case we say the act of state is the awarding of the contract itself... and the validity of a contract.

The court of appeals said that we are not claiming... we disagree with this position of the court of appeals... but the court of appeals said that we are not claiming that the act of state here, namely the awarding of the contract, is an invalid act.

We are simply saying that the contract was achieved through bad motives, through a bribe.

That evidence might embarrass the Government of Nigeria but that, the court of appeals says, makes no difference.

It makes this bright line distinction between motivation and validity.

When the court of appeals did that, it went in conflict with the Ninth Circuit in the Clayco case which does not make that distinction.

And that case we say on the facts is the same as this case and, therefore, the two circuits are in conflict.

First, with regard to the motivation validity distinction.

In the first place, it is our contention here that in order for the plaintiff to prevail, the plaintiff does indeed impinge upon the validity of the act of state of the Government of Nigeria.

And the act of state doctrine says that the courts in the United States shall not examine and pass judgment upon the acts of foreign governments.

Now, the act here... the act of state... is the award of the contract and what the plaintiff is saying is that we obtained this contract through the payment of a bribe; we obtained this contract, they say, in violation of the laws of the Government of Nigeria.

They say that they should have received the contract, not us.

And in doing all of that, it seems to me that the plaintiff would be required to examine the procedures of the award of the contract by the Government of Nigeria, what officials get involved in the award of such a contract, how the award is made.

The complaint in this case doesn't even say that they were the low bidder.

They do say elsewhere in the record, their own statement, that they were the low bidder.

But there is nothing in this record or anyplace else which would even indicate that the low bidder would get the contract.

So, what they would be doing in this case and what we say that the courts in the United States should not be doing, is examining the internal workings of high officials in the Government of Nigeria on matters which directly affect the Government of Nigeria because this is a military contract, a contract that's made in connection with the air force of the Government of Nigeria.

Unknown Speaker: Certainly there is nothing in the act of state doctrine that would require a United States court to refrain from examining Nigerian law--

Mr. Brodsky: No.

Unknown Speaker: --in the abstract, is there?

Mr. Brodsky: I would agree with that, Your Honor.

But this is more than examining Nigeria law.

What they would have to say in this case... this Court would have to say, in our view... is that the contract was invalid.

It was made for the wrong purpose.

It was made because a bribe was taken.

Unknown Speaker: But there must be many cases in which one... the United States courts will examine the law of a foreign country and say that a contract was or was not valid under the law of that country.

Mr. Brodsky: Well, that's true but what the courts do not do is to say that when the foreign government entered into that contract, that act, that contract was invalid.

Unknown Speaker: So you say that the critical factor is that it was a contract by the Government of Nigeria?

Mr. Brodsky: Oh, yes.

Yes, indeed.

Unknown Speaker: And no contract entered into by the Government of Nigeria could be examined under the act of state doctrine?

Mr. Brodsky: I don't think I have to go that far if one accepts the so-called commercial exception to the act of state doctrine.

But I say... and, indeed again, the government has been inconsistent in this way as well... even the... well, first of all, the two courts below say that the commercial exception to the act of state doctrine would not apply in this case.

The Solicitor General, in his amicus brief to this Court, said the same thing.

Now the Solicitor General... yes... seems to say... seems to say, because even the brief in this Court is somewhat inconsistent, that that commercial exception would apply.

But I do not believe that the commercial exception to the act of state doctrine should apply in this case because we weren't dealing with, as I think one of the courts said, is this the kind of an agreement that a company ordinarily would enter into in the regular course of commerce, and it's not.

This is an agreement which has to do with the security of the air force, the military of the Government of Nigeria.

If anything is not a commercial contract which would come within the commercial exception, such as we had in the Dunhill case in this Court... it's this contract.

Unknown Speaker: So, if Nigeria... if the Nigerian Government were buying fertilizer, the result would be different under your view than in this case?

Mr. Brodsky: Well, in my view it would not... it might be in this Court's view.

Unknown Speaker: Not fertilizer for the military, but fertilizer for farming.

[Laughter]

Mr. Brodsky: Well, yeah, if they buy fertilizer for a farm.

I think if there is a commercial exception, that's the kind of thing that it would apply to.

Yes, I would think so.

Unknown Speaker: How about food for the troops?

I mean, food that's going to be used by the army?

Mr. Brodsky: Food for the troops gets closer, you know, as a fuzzy area as far as--

Unknown Speaker: Well, this stuff wasn't missiles.

Mr. Brodsky: --No.

Unknown Speaker: It was training... training equipment for pilots of the sort--

Mr. Brodsky: That's correct.

Unknown Speaker: --of the sort that commercial airlines might well use.

Mr. Brodsky: Well, no.

Not ejection seats.

Not centrifugal force machines to train jet pilots.

No, I don't think so, Your Honor.

All of this equipment was really a design for jet aircraft--

Unknown Speaker: Just military planes.

Mr. Brodsky: --that's used in warfare.

Unknown Speaker: Mr. Brodsky, why do you... why do you... you know, in your brief and also in your oral argument you asserted that the letter that the district court got from... from Judge Sofaer was very ambiguous and unhelpful.

I don't think it's ambiguous at all.

It seems to me the letter says very clearly that the act of state doctrine does not apply.

Mr. Brodsky: Well--

Unknown Speaker: It answered the question that, you know, the court was interested in squarely.

It said that the doctrine only... in the State Department's view... only applies to the inquiries into the validity of foreign government acts, not into the background of it.

Mr. Brodsky: --Yeah, but let's look at the rest of the letter.

If I may--

Unknown Speaker: The rest of the letter said, of course this is a sensitive case and be careful.

Mr. Brodsky: --But it goes further.

Unknown Speaker: On the act of state doctrine it was dead clear, wasn't it?

Mr. Brodsky: Well, it was dead clear in the sense of making the legal distinction which the State Department makes and which indeed the Solicitor General says is wrong, in this brief.

Unknown Speaker: Apparently the Solicitor General doesn't agree with Judge Sofaer.

Mr. Brodsky: That is correct.

But--

Unknown Speaker: He doesn't seem to have been copied on the letter either.

[Laughter]

Mr. Brodsky: --Well, we told him what the position was, Your Honor.

But you see what else that letter says, Your Honor.

It says that inquiries into the motivation and validity of foreign state's actions and discovery against foreign government officials may seriously affect United States foreign relations.

Unknown Speaker: So what?

Mr. Brodsky: Well, if I may answer the so what--

Unknown Speaker: A lot of things may.

That doesn't prove that--

Mr. Brodsky: --Let me answer the so what.

How is a district court going to deal with that?

What kind of rules does a district court follow when the district court judge is not the Secretary of State; he's not an expert in foreign relations?

Unknown Speaker: --Lord knows, but there is no way that one can read that to contradict what Judge Sofaer said in the earlier part of the letter quite flatly, which is that the act of state doctrine... whatever else may apply... the act of state doctrine does not apply.

Mr. Brodsky: Well, I quite agree with that in that sense, but by saying that it doesn't apply and in the same breath saying to the district court judge be very careful because there are foreign policy concerns here that may adversely affect the foreign policy of the United States, what we're saying is that although his conclusion is... he's saying to the district court and later to this Court... go ahead and let this case be tried.

What we're saying is that this Court should examine that very closely to see whether or not in its judgment this case should be tried.

Not to--

Unknown Speaker: Or it may be an invitation to invent some new doctrine, which invitation you may be accepting.

But it certainly... it certainly does not speak to whether it's the act of state doctrine.

Mr. Brodsky: --Well, I... look, there's no dispute about what the letter says.

The Secretary of State says... the legal advisor to the Secretary of State says... go ahead and let this action be prosecuted, which goes to the issue of whether or not this Court should simply listen, without itself making a decision or having rules on this subject, to the Secretary of State.

Mr. Justice Douglas in the Citibank case said that to do that would make this Court nothing more than an errand boy with respect to the Secretary of State, nothing more than an errand boy for the Secretary of State to decide that the court, rather than he, should decide which chestnuts to pull out of the fire and which ones to leave in the fire.

And we say that that... that rule, if you will, that Bernstein exception... while the Secretary of State's views, we would agree, should be considered by the Court as to whether or not the Court should permit an action like this to proceed, the Secretary of State's view should not be the final word on the subject.

The final word on the subject should be this Court's views, because secretaries of states come and go.

Policies change.

Indeed, the very policies, arguments, in this case have been, we say, inconsistent.

When the plea of guilty was being taken, the United States Attorney said to the district court... and, mind you, this was a very carefully orchestrated plea of guilty in this sense because foreign relations sensibilities were very important to the government.

First of all, the indictment itself was an indictment which accused us of paying money to an intermediary, not to any official of the Government of Nigeria.

Now, the government which is charged with enforcing the Foreign Corrupt Practices Act... it is the government that can decide what kind of allegations to make and what kind of allegations not to make.

So that, for example, in this case, the government very carefully decided that the allegations that it was going to make were allegations that an intermediary receive the payment rather than any official of the Government of Nigeria.

And when the plea of guilty was being taken, the United States Attorney was very careful to make that distinction and to say to the court there are things that I know that I don't want to reveal to the court because of what may happen in the Government of Nigeria as a result of this prosecution.

Unknown Speaker: Mr. Brodsky--

Mr. Brodsky: Yes?

Unknown Speaker: --which of our... can you tell us which of our cases has applied the act of state doctrine to a situation in which the validity and the effectiveness of the act of a foreign government was not an issue in the case?

Mr. Brodsky: I don't believe... I don't believe there are any.

And we're saying that that's the same here as our primary argument.

I mean, we're saying that this case is not... certainly it's different on the facts, but it's the same in principle to Sabbatino, which is an expropriation case.

Now, this is a government contract case.

But what we are saying is that, inevitably, the proof by the plaintiff will have to demonstrate that the contract that we entered into with the Government of Nigeria was an invalid contract.

So we're saying it's the same as those cases.

Now... in other words, the same as--

Unknown Speaker: That it is invalid--

Mr. Brodsky: --Yes.

Unknown Speaker: --under Nigerian law and ineffective internationally?

Mr. Brodsky: Well, I think that's what the plaintiff would have to show here.

In other words, I don't think that the two concepts can live together, (a) a valid contract in the Government of Nigeria but (b) coming to the United States and taking out profits... indeed, more than our profits... in this valid contract in Nigeria.

I don't think you can say it's a valid contract when bribes were paid to get that contract which violated Nigerian law, at least the stated law.

Now, we go further than that, and that's what the plaintiff would have to show in this case.

That's what we are saying.

We don't think the two concepts can live together, a valid--

Unknown Speaker: I would think that if the plaintiff can show that the contract is invalid, the plaintiff would lose its case.

Mr. Brodsky: --No, I respectfully disagree.

Unknown Speaker: Well, wait--

Mr. Brodsky: I think that's the plaintiff's theory.

I don't think the plaintiff would agree in this court that he has to go that far as to show it's invalid.

But that's basically what he has to show.

I mean, what do we have in either the words "validity" and "invalidity" when you say the contract is valid but you take all our profits away, when you say the contract was valid but made in violation of Nigerian law, I think you're just using words to say that this contract is invalid.

This contract has no validity to us if they take all our profits away.

Unknown Speaker: --Well, that's true in any case where you're suing somebody under the Robinson-Patman Act or under lots of statutes.

You take away the defendant's profits, but you don't set aside the underlying contract.

I don't understand that concept.

Mr. Brodsky: Well, you--

Unknown Speaker: Lots of times you recover the damages that, the defendant... the profits the defendant earned out of a contract as the measure of damages that the plaintiff seeks to recover.

Mr. Brodsky: --That is correct.

But what else is going on here is that they're not only claiming that kind of a violation... they're claiming that we bribed officials to get this contract.

They're claiming that this contract was made in violation of Nigerian law.

The Nigerian--

Unknown Speaker: Well, why is that any... take the Robinson-Patman... I guess one of their counts under Robinson-Patman.

Why is that any different than any other commercial bribe situation where you say the purchasing agent was paid off on the side and that violates a lot of statutes?

You don't set aside the underlying contract?

Mr. Brodsky: --I don't think it becomes an issue... it doesn't become important in those cases.

Unknown Speaker: Well, why is it important in this case?

Mr. Brodsky: Oh, because the contract itself, we say, is the act of state.

Unknown Speaker: I understand.

Mr. Brodsky: In those other cases it doesn't make any difference whether the contract is valid or invalid.

You get your damages and nobody argues the--

Unknown Speaker: Well, why does it make a difference here--

Mr. Brodsky: --Well, because--

Unknown Speaker: --if they don't have to prove its invalidity, and they don't think they do?

Mr. Brodsky: --Well, it makes a difference here because what we would have here is the courts in the United States examining corruption in Nigeria.

And whether you... you see, I want to make the second argument now.

Whether you call it valid or invalid, that contract, I mean our position is the same as the position of the Solicitor General on this issue.

Even if the contract is valid, it doesn't make any difference because the proof is really the important thing here as far as the act of state doctrine is concerned.

The proof in this case, whether the contract is valid or invalid, will be... must be from the plaintiff's point of view... that people at the highest level of government in Nigeria took substantial bribes for us to get this contract.

The proof also will be because it will be part of the defense, that not only did they take bribes in this case, but the Government of Nigeria lives that way.

You get a contract with the Government of Nigeria by paying bribes because if that's true, then the plaintiff has no damages in this case.

That is to say, if the proof in this case if it goes ahead... if the proof in this case shows that the only way to get a contract with the Government of Nigeria is to pay a bribe, then the plaintiff in this case has no damages because it couldn't have received this contract without paying a bribe.

Unknown Speaker: We've got to give the doctrine a new name then, if it covers this, Mr. Brodsky.

We'd have to call it the don't embarrass foreign governments doctrine, or something else.

Mr. Brodsky: Well, perhaps--

Unknown Speaker: It's a misnomer to call it the act of state doctrine then.

You're saying it doesn't matter whether there is an act of state involved here, it's the acceptance of bribery by state officials, contrary to state law, that comes under the act of state doctrine because it will embarrass our diplomatic relations with a foreign country.

We ought to really give it a new name if we accept your theory.

Mr. Brodsky: --Your Honor, if I win this case, give it any name you want to.

No, but seriously--

Unknown Speaker: But you are urging upon us an ancient theory, not a--

Mr. Brodsky: --I don't think so.

Unknown Speaker: --You are saying it comes upon... under this act of state doctrine, but you give us no case in which we've ever applied it to anything except questioning the validity of an act.

Mr. Brodsky: But I also... you also don't have the case, Your Honor, not to this date, where this Court has made the distinction that is being made by the Third Circuit in this case.

That is the distinction between embarrassment and validity.

This Court has never made that distinction yet.

So, when you ask me for a case on that subject, we don't have a case either way.

In that sense, if you disagree with my first argument that they are looking at the validity of the contract, then we have to get to the second point, and the question is whether or not this Court will indeed make that distinction.

I say, and the Solicitor General says, that there should be no distinction because, after all, when you look at the purposes of the act of state doctrine, it really doesn't become that important as to whether or not you're trying to declare the act of state invalid.

The real important thing about the doctrine, when you get to the reason for it, is that the United States courts will be looking at in this case corruption at the highest level of the Government of Nigeria.

That's what we're trying to prevent in this case.

Unknown Speaker: But our previous act of state doctrine cases don't point in that direction.

They don't suggest, as Justice Scalia said, that it would be embarrassing to a foreign government with whom we have friendly relations to have discovery about what went on in the award of the contract.

Therefore, the Court shouldn't hear it.

Mr. Brodsky: Well, no, I think the case... I mean, the case that looks this way, in my opinion, is the Sabbatino case.

That was an expropriation case, so in that sense distinguishable on the facts.

But when you look at Sabbatino, look at the kind of allegations that the claimant... or that the defendant actually in that case was making.

And this Court said you can't hear those allegations.

Things like property was being taken, discriminating against Americans... property had been taken by the Government of Cuba without just compensation.

Our government had--

Unknown Speaker: But did we say it shouldn't hear it because it might embarrass the Cuban Government?

Mr. Brodsky: --No, the Court did not make that analysis.

No, it did not.

In that case the Court said that, because it was an act of state that was the end of it, no matter what else might flow from that.

But I look at the... I mean, we're not just using those words in the abstract, using the words "act of state" in the abstract.

The purpose is what I am looking at of the act of state doctrine, whether it's in Sabbatino or it's in any of the other cases decided by this Court.

Unknown Speaker: The purpose of the Fourth Amendment is to protect invasions of privacy.

But that doesn't mean you can't search with a warrant.

I mean, yes, the act of state doctrine moves toward that purpose a certain step.

But you're saying since we've moving in that direction we go all the way and, therefore, anything that embarrasses a foreign government, not just calling into question the validity of its acts... anything that embarrasses a foreign government shouldn't be inquired into.

That's a great step further from what our--

Mr. Brodsky: Mr. Justice Scalia, I don't go that far.

I could... I could perceive of situations where a government might be embarrassed and the act of state doctrine would not apply.

But not this case.

I mean, what do we have in this case?

Corruption at the highest level of another government.

And that's why I say it applies in this case.

I don't take the position that every time a different government might be embarrassed you don't apply the act of state doctrine.

Unknown Speaker: --Mr. Brodsky, imagine a case where there were allegations of corruption in high officials in Nigeria and the United States.

Now, courts could investigate the United States but not Nigeria.

Mr. Brodsky: I'm not sure about that, Your Honor.

It seems to me under that... because, after all, what we're arguing for is a position of flexibility for the courts to have.

What we're arguing for is that the courts should consider--

Unknown Speaker: You don't need any flexibility to decide whether or not you can enforce it against the United States but not Nigeria.

That doesn't take flexibility.

Mr. Brodsky: --I would agree with that.

I'm only trying to--

Unknown Speaker: You agree with that?

Mr. Brodsky: --That if somebody in the United States violated United States law and it had nothing to do with the Government of Nigeria--

Unknown Speaker: That's not what I said.

Mr. Brodsky: --I'm sorry.

Unknown Speaker: I said there were two groups of people violating the law together, those in Nigeria in high office and those in the United States in high office.

Mr. Brodsky: Well, I would think if there were people in high office in the United States that were violating the laws, I would think that the courts would certainly want to get into that.

And if--

Unknown Speaker: And why not Nigeria?

Mr. Brodsky: --Well, because we have different concepts as far as that's concerned.

We don't have a concept involving our own government involving the act of state.

The courts in the United States look at what the government does and it's supposed to look at what this government does, but not the Government of Nigeria or any other government.

That's what the act of state doctrine is.

And you may have--

Unknown Speaker: That's what you say it is.

Mr. Brodsky: --Yes, Your Honor, of course.

That's what I say it is, Your Honor.

Of course.

But, I mean, what... we have an act of state doctrine in the first place, I say, so that the kinds of things that might be adduced in a case like this will not be adduced in American courts.

I see that I have a short time remaining.

I'd like to reserve the rest of my time, if I may.

Unknown Speaker: Very well, Mr. Brodsky.

Mr. Rutter.

Argument of Thomas B. Rutter

Mr. Rutter: Good morning, Mr. Chief Justice, and may it please the Court:

If there is one thing that is very clear as we come to the podium it is that despite any broad statements we might find in the Oetjen or Ricaud case, or in any of the other cases, the mere fact that the conduct of foreign relations is committed by the Constitution to the Executive Branch does not mean that every case or controversy which touches foreign relations lies beyond judicial cognizance.

And that's an exact quotation, if the court please, from Mr. Justice Harlan's opinion for this court in the Sabbatino case.

What needs to be done here, I suggest, is to decide which of the several bases that are available for affirmance of the Third Circuit Court of Appeals should be adopted.

And I mean by that this.

The case can be affirmed on a very narrow basis.

That is, by saying this Court's decisions in Sisal Sales and Continental Ore, which I discuss in my brief, squarely rule the outcome of this case.

Those cases say very simply and succinctly that where American citizens are brought before an American court for acts which violate American law, even if those acts have the tangential involvement of a foreign government... in Sisal Sales it being the Country of Mexico and the State of Yucatan and in Continental Ore it being a Canadian agent, exporter in Canada... that nonetheless, notwithstanding those tangential involvements of the foreign countries, the American federal courts can, will, and should decide those cases.

Likewise, I can take it to the broadest extreme.

I'll pass for the moment the proposition that there is no act of state involved here, which I have briefed in some length.

And likewise I'll pass the proposition that Sabbatino, when you read its analysis and apply the underlying premises to this case, that you find that Sabbatino says this case goes forward and so, too, our past commercial activity exception which I think applies, and, indeed, the motivation against validity argument which is sometimes advanced and which the Third Circuit followed.

To say to you that I think in the broadest reach of this case this Court is presented with the opportunity to now say the act of state doctrine, if it means anything, means merely that in a case where foreign relations are involved, the Court will invite the State Department to express its views, and if in that first time in the history of the United States of America, the State Department says, stay your hand, we will then, as a matter of federal jurisprudence, make the determination of whether we should stay our hand applying an abuse of discretion standard.

What I mean by that last statement is this.

The act of state doctrine, which is now 25 years old as defined by Sabbatino, but which is much older than that... the act of state doctrine, I suggest with respect, has done nothing more than give rise to a cottage industry amongst the law professors and the law commentators, and has permitted people who want to weep crocodile tears for places like the Country of Nigeria to come to federal court and say we ought not be held liable for our wrongdoing because a foreign country is involved.

Let me pause.

I think Mr. Justice Stevens put his finger on it precisely.

This case would not be here, nor would we be without our verdict and judgment, if the people bribed and paid off had been an American company or, indeed, if it had been an American government, be it federal, state or municipal.

The act of state doctrine has permitted these people... and, by the way, the depth and breadth of the depravity existing in terms of this company and these petitioners' behavior in Nigeria is set forth in their own memoranda on pages 212 to 222 of the joint appendix.

They were not dealing with a single intermediary.

They were dealing with at least two.

And this went on for over a year.

So that the depth and breadth of what occurred here is amply set forth in the record.

And so, too, we have amply set forth in our complaint, paragraphs 39, 40, and 41 of the complaint, where we specifically say, but for this conduct in Nigeria, and in London, and in America, by these petitioners, we would have had this contract.

We would have had the profit.

Therefore, the act of state doctrine has simply said in this case because Nigeria is involved, these petitioners, these wrongdoers, get some special benefit which would not exist if they were a straight American corporation or American government.

Unknown Speaker: Mr. Rutter--

Mr. Rutter: Yes, sir.

Unknown Speaker: --it is correct though, isn't it, that they may well have a defense that you wouldn't have had the contract unless you were willing to engage in the same kind of conduct?

Mr. Rutter: No, sir, I don't agree with that.

Number one, there are ample cases, as you know, Mr. Justice Stevens, for the proposition that you cannot defend an antitrust case by saying you are one too.

That is to say, you cannot--

Unknown Speaker: No, it's not in pari delicto.

It's simply that, in order to get this contract, you have to pay off the officials of this country.

That's the way they've done business for a long time.

That's the way the French, the British, and all the other countries do business with them and you would presume you would have to have done the same thing.

It's not totally unreasonable to assume that.

Mr. Rutter: --It is, Mr. Justice Stevens.

The first answer is the legal answer which I've suggested, in pari delicto.

Unknown Speaker: That's not the point.

It's no damages, is their argument.

Mr. Rutter: Well, the second answer is that, first of all, how will they prove it.

But more importantly, we will have countervailing evidence.

We are prepared at the trial of the case to go forward with our people who have done business in Nigeria, who would have done business on this contract, who will testify au contraire.

Now, that's not of record, Mr. Justice Stevens, but I'd represent to you that that is the situation.

Unknown Speaker: Well, I'm not trying to predict how the case will come out.

All I'm saying is that it is not unreasonable to assume that the inquiry into possible corrupt practices in this government may be broader than the facts of this particular case because of the defense they've alleged in their pleadings.

Mr. Rutter: That may be so, but Mr. Justice Stevens--

Unknown Speaker: And I don't know if that makes any difference, but at least it's certainly something we have to think about.

Mr. Rutter: --I don't think it makes any difference and I would suggest to you, sir, that it really makes no difference when you look at what the Republic of Nigeria has done in response to my request.

You will recall, Mr. Justice Stevens, that as it appears in the appendix, I asked the Republic of Nigeria, through its ambassador, to take a position, namely that we could go forward with this litigation.

They have not responded.

That suggests to me that that answer is at worst neutral, as I see it from my point of view in the case.

It is, I suggest to you, a positive fact in my case.

Namely, if Nigeria seriously didn't want to have the corruption in a previous regime... and that, too, is set forth in our appendix... if the Republic of Nigeria did not want corruption in its previous regime to become well known, they would by now have stepped forward either in this case or through the State Department and said, please, please don't disclose to the whole world what's going on in Nigeria.

Therefore, I say to you, Mr. Justice Stevens, that their suggested defense that everybody is doing it, doing it, is not one which is going to be, (a) admissible as a matter of law, and (b) will not fly as a matter of fact.

And, in any event, it is not something worthy of consideration by this Court in deciding whether the court of appeals should be reversed.

Unknown Speaker: Mr. Rutter, can I come back to the suggestion you're making as to how we ought to handle act of state cases.

I don't remember this in your brief.

But you're suggesting that if the district court gets a representation from the State Department that says, go right ahead, then, in reviewing whether that district court correctly applied the act of state doctrine or not, we should say it did correctly apply it... I'm sorry... it did correctly not apply it unless it was an abuse of discretion to ignore the State Department's letter?

Mr. Rutter: No, Mr. Justice Scalia, I obviously did not say what I intended to say which is--

Unknown Speaker: Or I didn't hear what you intended me to hear, I'll put it that way.

Mr. Rutter: --Well, if you look at the last few pages of our brief, I think I've said it there at greater length and perhaps with greater persuasion.

What I mean to say is this.

I am talking in terms of what I denominate a reverse Bernstein rule, which is to say that rather than deal with a straight Bernstein exception, which has been adopted by some members of this Court and by lower courts, and which has led to the kind of criticism that Mr. Brodsky refers to from Mr. Justice Douglas, what I am saying to you is this, and I think it's implicit in Mr. Justice White's dissenting opinion in Sabbatino and other cases that follow.

It's simply this.

The court or the litigants notify the State Department that there is a... quote... act of state issue arising in this case, i.e., the conduct of a foreign nation.

The State Department then either takes a position or not.

And I'm saying to you, Mr. Justice Scalia, the State Department, so far as my research shows, has never, ever stepped up and said to a court, "Don't litigate this case".

The most they've done is in Sabbatino where it's a no-comment kind of letter.

Unknown Speaker: Because they knew the court wouldn't listen to--

[Laughter]

--for nothing.

Mr. Rutter: In any event, sir, my proposed procedure, as set forth in the brief and as proposed here is simply this on the over-arching rule.

If the State Department steps forward to the district court and says, you ought not hear this case, you ought to pass on this case, you should defer this case or perhaps even dismiss it, the court then responds to the State Department recommendation either by accepting it or rejecting it, subject on appeal and in this Court to a review as to abuse of discretion.

That's the one safeguard that's necessary to make sure that the State Department is not playing fast and loose.

Unknown Speaker: Well, what standards does the State Department follow in deciding whether or not to give such a letter?

Mr. Rutter: I think those are matters remitted to the Executive Branch.

The question is what standard should the court apply in deciding whether or not to follow the suggestion.

For example... and foolishly... if the State Department were to say, please don't adjudicate this case because it would be an embarrassment to the First Lady, the court could then well say, well, that's not a very good reason and we do not accept that reason.

If, however, the State Department says--

Unknown Speaker: Well, I'm assuming that in making that judgment we're saying that the State Department has or has not followed an appropriate policy.

And so I don't think it's an answer for you to say, well, the State Department can do whatever it wants.

I assume the State Department has to have some guidance from us as to what is or is not an appropriate answer.

Mr. Rutter: --May I, with deference, Mr. Justice Kennedy, disagree with that because the political issues which would be involved in the State Department's decision in whether or not to write such a letter are not matters that are properly within the purview of the judiciary, even of this Court.

All this Court can do is to say, has the Bernstein-type representations by the State Department in this case been sufficient in order for the Court to properly exercise its discretion and not proceed?

I would be candid and say to you that in the overwhelming majority of the cases, if not all the time, the answer would be yes.

But I think the Court has to, in deciding how to handle a reverse Bernstein, should it decide to take that course, has got to nonetheless reserve unto itself the last and final decision, which is to say has the court below properly conducted itself as a court, after we have the representation from the State Department.

Unknown Speaker: What if the State Department says, go right ahead?

Mr. Rutter: Then the court goes ahead, sir.

Unknown Speaker: No matter what?

Mr. Rutter: Yes, sir.

Unknown Speaker: It doesn't... the court then doesn't ask any questions?

Mr. Rutter: No, sir, because, again, as I've said to Mr. Justice Kennedy, the political questions that would be involved in "embarrassment"--

Unknown Speaker: Well, you say then in this case the... the case is over because you have a representation from the State Department to go ahead.

Mr. Rutter: --Yes, sir.

I think under the Bernstein exception, or under any other careful consideration of what an act of state is supposed to mean, and the State Department having said not once but now twice, it doesn't matter to us, please feel free to go ahead,--

Unknown Speaker: Even if this is... even if this is an act of state, go ahead.

Mr. Rutter: --Even if it's an act of state, yes sir.

Unknown Speaker: Which was the case in Citibank.

Mr. Rutter: Yes, sir.

Yes, sir.

Unknown Speaker: And what if the State Department says, sorry, no comment?

Mr. Rutter: There, again, sir, I suggest that given the proper application of the rule that the case goes forward.

I'm saying to you, Mr. Justice White, that the only time the court should even consider staying its hand is when the State Department, because of its exercise of executive powers for the political reasons it has in mind says, please don't.

Unknown Speaker: Well, that's a... you do say, then, that that takes a reworking of our past cases?

Mr. Rutter: Absolutely.

But I say it's a natural corollary of your opinion in Sabbatino.

Unknown Speaker: Well, I know, but I was the sole dissent.

[Laughter]

Mr. Rutter: Well,--

Unknown Speaker: So, I wouldn't mind reworking it, I suppose.

[Laughter]

But it's against the law.

It's against the law right now because there was silence in Sabbatino.

Mr. Rutter: --That's exactly right, Mr. Justice White.

It was a no panel--

Unknown Speaker: And the Court went ahead and held that the act of state doctrine applied.

Mr. Rutter: --But let me remind you of the further history because that then suggest to me why the reworking along the lines I have suggested is necessary.

After this Court decided Sabbatino, Congress passed the second Hickenlooper amendment, under which the President has the authority to step up in any expropriation case and say, please do not hear this case.

They have never, ever exercised that authority.

In fact, when Sabbatino went back to the lower court, the State Department declined to intervene.

So, that's one of the reasons I'm suggesting to you, in line with perhaps what Mr. Justice Scalia suggested in asking the questions of Mr. Brodsky, I think it's time to rethink this doctrine and turn it around instead of... instead of making all of these lawsuits in this Court's docket... about a half a dozen in the past couple of years on petitions... instead of having these lawsuits around and law review professors having things to write about, let's let the litigants litigate the cases.

Unknown Speaker: Yes, but you certainly are making an argument you don't need to make--

Mr. Rutter: Absolutely, Mr. Justice--

Unknown Speaker: --to win this case.

Mr. Rutter: --Absolutely.

Unknown Speaker: I don't know why you'd want to carry a big load like that.

Mr. Rutter: I'm doing it, sir, because I have said that there are several levels at which this case can be decided.

On the narrowest ground, as I've said to you, under Sisal Sales and Continental Ore, I win.

Under the commercial activity exception, I prevail, because we know this is commercial activity by--

Unknown Speaker: Well, just on the Bernstein letter you--

Mr. Rutter: --Yes, sir.

Unknown Speaker: --just on the State Department's representation.

Mr. Rutter: Yes, sir.

Unknown Speaker: No matter what else is true.

Mr. Rutter: Absolutely, Mr. Justice White.

Unknown Speaker: You don't even have a very good Bernstein letter, though.

I mean, this isn't a letter in which the State Department says, go right ahead, it's not going to embarrass us.

Mr. Rutter: But as you said--

Unknown Speaker: The State Department says, go right ahead because, as we read the law, the act of state doctrine doesn't apply.

Now, we should defer to the State Department as to whether the act of state doctrine applies or not?

Mr. Rutter: --Absolutely not.

Unknown Speaker: But what it then goes on to say... although I've got to admit it's going to embarrass the devil out of us, so be very careful--

Mr. Rutter: It may embarrass--

Unknown Speaker: --that seems to me to be a reverse Bernstein letter.

I don't know why you want to rely on that letter.

Mr. Rutter: --Well, it's good enough for my purposes to satisfy the Bernstein exception, hence I rely upon it, Mr. Justice Scalia.

But it is the fact that it is not as pellucid as one might desire.

But, nonetheless, as you pointed out, it does in that paragraph, fulfill the Bernstein requirements.

And now Judge Sofaer has done it again.

He's given us another letter which is appended to the Solicitor General's brief as amicus where again he says, whatever weight I have folks, the State Department says we don't mind.

That, I think, as Mr. Justice White points out, is--

Unknown Speaker: He said, we do mind, but as we read the law, the act of state doctrine doesn't apply.

That's how... there's no other way to read that letter.

Mr. Rutter: --Well, I... in deference--

Unknown Speaker: He says, you know--

Mr. Rutter: --Mr. Justice Scalia, I think what he says is, we don't mind, but please don't do things which are embarrassing to the extent you can avoid it, whatever that means.

In any event, I see that my time is about at an end.

Unless there is another question from the Court, I would simply suggest to you, as I've tried to suggest in the response to Mr. Justice White, we can solve this case and affirm the Third Circuit, as we properly should, on any of several levels.

I invite the Court to take whichever one of the methods which I have suggested in my brief and tried to suggest to you, seems most appropriate.

However, notwithstanding Mr. Justice White's suggestion, I don't need to carry the burden.

As a lawyer who is involved in federal practice, I would most urge this Court to consider... to consider... redefining the act of state doctrine.

Thank you very much for listening to me.

Unknown Speaker: --Thank you, Mr. Rutter.

Mr. Merrill, we'll hear now from you.

Argument of Thomas W. Merrill

Mr. Merrill: Thank you, Mr. Chief Justice, and may it please the Court:

The United States supports the judgment of the court of appeals in this case, but we do so for grounds... on reasons that are narrower than those that the court of appeals itself enunciated and also those that have... some of those that have been argued by respondent in this Court.

Let me begin by addressing the threshold question of whether there is an act of state inquiry required in this case or not.

The classic or traditional formulation of the act of state doctrine is that it applies when the courts are called to question or inquire into the validity of a public act of a recognized foreign sovereign within its own territory.

In terms of that formulation, it seems to us that the critical inquiry here at the threshold is whether this case will involve the questioning or the inquiring into the validity of a foreign sovereign act.

And, more precisely, do those words mean only... refer only to a direct adjudication of the legality of the foreign act of state, which appears to be the reading that respondent implicitly adopts or that the court of appeals implicitly adopted, or are those words broad and flexible enough to encompass some additional types of cases that might also be understood as inquiring or questioning the validity of a foreign act?

We believe that this case... the type of situation of this case... is one where there ought to be an act of state inquiry.

That, because of the need to prove causation in this case, the case, if it goes forward, could establish the factual predicate which would establish as a matter of Nigerian law that this contract is either void or voidable.

And that that type of situation sufficiently implicates the general policies of the act of state doctrine that at least an inquiry into the act of state question ought to be undertaken.

Second, let me address very briefly the commercial activities--

Unknown Speaker: Excuse me.

Do you have any prior case that supports that?

Mr. Merrill: --I think American Banana at least provides some indirect support for that, Justice Scalia.

Remember, in that case, the allegation was that a foreign government, Costa Rica, had been induced by an American company to engage in expropriate... acts of essentially expropriation against another American company.

It's hard to read the case as saying that the Court, if it head the case, would have to inquire directly into the legal validity of the acts of the Costa Rican government, but, nevertheless, this Court--

Unknown Speaker: Wouldn't it have had to?

Wasn't... wasn't the setting aside of the expropriation at issue?

Mr. Merrill: --No.

It was an antitrust action brought to recover damages in the United States and the cause of the damages was the act of expropriation--

Unknown Speaker: Yeah.

Mr. Merrill: --but the defendant who was alleged to have violated the antitrust laws by conspiracy and so forth... whether their conduct was legal or illegal could have been determined without determining the legality of the expropriation itself.

I think the reaction of the court in that case was that essentially what was being alleged was that Costa Rica was a puppet of an American corporation and that that type of inquiry was of sufficient... had sufficient implications for the conduct of America's foreign relations that such an inquiry ought not to be permitted.

That obviously isn't directly parallel to this case and the two are obviously distinguishable.

But we think it provides at least some inferential support for the proposition that the narrowest possible reading of the act of state doctrine, that it only applies where there is a direct adjudication of illegality, is not necessarily one that this Court's cases require that it adopt.

Let me address briefly the commercial activities exception.

We agree with the petitioners that this act, the decision to enter into a defense procurement act, is sufficiently sovereign, that the case should not, by that reason alone, be held to fall within the commercial activities exception.

What we said in our brief was that it's nevertheless relevant under the type of comity... international comity analysis that the Court has undertaken in Sabbatino and succeeding cases, that the relationship the parties would enter into once this decision was made to enter into the contract would be commercial in nature.

So, for example, questions about breach of warranty, questions about other issues that might come up in the governance of the contractual relationship we think, for example, would fall into the commercial exception for this Foreign Sovereign Immunities Act and if there were a commercial activities exception recognized, would presumably also those questions would come within a commercial activities exception of the act of state doctrine.

So, because the relationship that would be entered into is commercial, we think that's one factor that the Court could weigh under a comity type analysis in deciding whether or not the act of state doctrine precludes giving a questioning... or not giving effect to the act of a foreign sovereign.

I'd also like to speak, if I could, to the general question of the institutional relationship between the federal courts and the executive branch in applying the act of state doctrine.

It's a matter that this Court has not spoken to in an opinion enjoined by a majority of the Court and is also of some considerable institutional interest to the United States.

The position that we've taken in our brief in this case really attempts to build on two principles that we think there is a fair consensus about within this Court's opinions, even though the Court has not reached a concluded view about them.

One is the principle that the courts, of course, are the final arbiters of question of law, and the second is the principle that the Executive Branch ought to be the final arbiter of questions of foreign relations and foreign policy.

And the way we propose that these two principles can be reconciled in this area is that when a court undertakes an act of state inquiry in deciding whether or not the act of state doctrine should in any particular case preclude examination of a foreign sovereign act that any questions about the foreign relations impact, about sensitivities of foreign governments, about the consequences for ongoing American diplomatic efforts, that those questions ought to be referred to the legal advisor of the State Department through the Justice Department and courts should give the very greatest deference to those determinations.

But that the legal elements of the doctrine, including the threshold questions about whether it is or is not an act of state, in the final determination after the courts engaged in the balancing process would, of course, remain for the courts themselves.

We think that this reconciliation is one that is consistent with all this Court's prior opinions, including the rejection by six Justices in--

Unknown Speaker: So what if... so, giving all the deference you suggest to the State Department's letter you would still say that... that the Court should make an independent inquiry as to whether there is an act... the act of state doctrine isn't law.

Mr. Merrill: --We think the Court should not question the foreign policy judgments.

And to the extent that foreign policy judgments are a very important element in the calculus, the Court should take those as a given.

But other elements in the doctrine, for example, the question of whether an act is sufficiently sovereign to trigger the act of state, or whether or not the act took place within the territory of a foreign government, those questions--

Unknown Speaker: Well,--

Mr. Merrill: --those questions are the kind, of course, that the courts could determine themselves.

Unknown Speaker: --you don't... you're not taking the position that even if there is clearly an act of state involved in this case, that the State Department letter should determine the case?

Mr. Merrill: Our position is that the State Department letter is not a trumping device.

We think that that's the reason why six justices primarily rejected the Bernstein approach.

The Bernstein approach was perceived as one where even if the court concluded as a matter of law that the act of state doctrine precludes adjudication, that the executive could come in and say, no, we want you to go ahead anyway.

And six justices in the First National City case thought that that was an impermissible relationship between the executive and the courts.

And we don't question that.

We are simply suggesting that when the court undertakes the Sabbatino-type analysis looking at the various factors in the case, and to the extent that those factors include questions like what will be the impact on ongoing diplomatic efforts of the executive, that it should refer to the State Department and get the State Department's views on those questions.

In this particular case, there were two letters, as has been noted.

The letter in the district court we think can fairly be read as saying that there would be no adverse impact on the foreign relations of the United States if the case goes forward.

But if there is any ambiguity about that, we think that reference to the letter, which is appended to our brief, should resolve it.

In that letter, the legal advisor... this is at page 2(a) of the appendix in our brief... states quite expressly that we do not see any foreign relations obstacles to adjudication of this case on the merits and we also believe that, in the absence of a representation to the contrary, the courts may properly assume that no unacceptable interference with U.S. foreign relations will occur on account of adjudication of like cases.

So, in response to this Court's grant of certiorari the State Department has undertaken a reevaluation of the foreign policy implications that suits of this type present and has determined that, as a general matter and absent a representation to the contrary, we do not see sufficient foreign policy obstacles to going forward and considering a case of this nature on the merits.

If there are no questions, I thank the Court.

Unknown Speaker: Thank you, Mr. Merrill.

Mr. Brodsky, you have two minutes remaining.

Rebuttal of Edward Brodsky

Mr. Brodsky: Well, if the Court please, first, with regard to the second letter that was received from the State Department, I don't think there is any material difference between the two letters.

The second letter says at the end, the legal advisor to the State Department reminds the trial court to exercise appropriate supervision over the trial process so as to limit damage to foreign sensibilities.

Now, what I'm saying is that there are no rules for a district court to follow in presiding over a case and limiting that case to things that will involve foreign sensibilities.

So, for that reason, and all the other reasons that I have given, I respectfully suggest that the act of state doctrine should apply in this case.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Brodsky.

The case is submitted.

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Alfred Dunhill Of London, Inc. v. Cuba - Oral Reargument

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Alfred Dunhill Of London, Inc. v. Cuba

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Alfred Dunhill Of London, Inc. v. Cuba - Oral Argument

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Alfred Dunhill Of London, Inc. v. Cuba

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Argument of Victor S. Friedman

Chief Justice Warren E. Burger: We'll hear arguments next in 73-1288, Dunhill against Republic of Cuba.

Mr. Friedman?

Mr. Victor S. Friedman: Mr. Chief Justice, may it please the Court.

This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit which applied the act of state doctrine to hold the petitioner, Alfred Dunhill of London, could not obtain an affirmative judgment against the Republic of Cuba, awarded by the District Court.

Certiorari was granted by this Court with respect to two issues.

First issue is whether statement of counsel made at the trial can constitute an act of state.

As to that issue, we contend that there is nothing in the record that in any way evidences, a sovereign act by the Republic of Cuba.

All that the record shows in this respect are statements by counsel for the Republic of Cuba indicating a litigating position in the case.

The second issue in which certiorari was granted sua sponte by this Court was whether assuming the act of state doctrine applies in this case, whether the affirmative judgment nevertheless should be reinstated under the counter claim exception set forth in First National City Bank against Banco Nacional de Cuba.

As to that issue, we contend that under the totality of the circumstances in this case where Cuba has put into issue in a single proceeding far more than the amount of the counter claims awarded against us -- against it, and where all of the claims and counter claims arise out of serious of related transactions, put into issue by Cuba in our courts that that counter claim exception should apply.

Because of the position taken by respondent's counsel in their brief in this Court, the position being that the record does not justified the phrasing of the questions as granted in the petition for certiorari.

I think it'd important that the background of this litigation be set forth at some length so that we can understand precisely what is in the record and the significance of the questions as framed by the questions as framed by this Court.

Litigation arose out of the action in September 1960 of the Republic of Cuba in nationalizing certain cigar factories in Cuba.

That action was turned an intervention, a euphemist.

And for that reason, the Cuban Government and its representatives in this case are often referred to as interventors.

The persons whose factories were seized are very often referred to as the owners.

For a long time prior to the intervention, Dunhill, as well as other importers had purchased cigars from the owners.

Indeed, for a short period after the intervention, the importers, against including Dunhill continued to purchase cigars from Cuba.

And during the immediate post-intervention period continue to make payments for shipments of cigars that had been shipped prior to the intervention.

The owners of course immediately after the intervention fled Cuba; some of them coming here to the United States.

In early 1961, the owner instituted nine actions in the Southern District of New York.

Four of them were against Dunhill.

By these actions, the owners in essence sought to obtain payments for cigar shipped both before and after the intervention.

Shortly thereafter, the interventors brought their own action, not against the importers but against the owner's counsel in an action entitled Policio against Russian Block.

By that action, the interventors in essence sought to claim the right to sue for the same matters on which the owners had already institute it suit.

Since the importers were essentially in the position of stake holder in these actions, the District Court stay the actions against them and proceeded to resolve the threshold and significant disputes between the owners and the interventors regarding who is entitled to payment of what cigars.

Insofar as relevant here, the District Court for Judge O'Brien in 1966 and under the decision that was later affirmed per curium by the Second Circuit held that the interventors were entitled to sue for the post-intervention shipments.

In essence, the court held that at least with respect to Cuban assets under the ruling of this Court in Sabbatino and the act of state doctrine set forth there, the nationalization decree of 1960 was effective as to the seized Cuban assets.

At this point in time however, the significant, and we're talking now about 1967, the interventors stipulated before the District Court that the owners were entitled to recover for free intervention shipments.

The assumption by both the owners and the interventors some seven years after the event being that these amounts were to insignificant to concern themselves with.

After the rulings in Policio against Russian Block, the interventors were allowed to intervene this time in the procedural sense in the nine actions in New York.

The actions were in fact consolidated for trial, tried together and appeal together to the Second Circuit.

During the course of trial preparation however and the course of the trial itself, it developed that as of the day of the intervention, there had been almost $500,000.00 in unpaid amounts for cigar shipped prior to the intervention.

Hardly and insignificance on this had been thought by both the owners and interventors when they entered into their stipulation in 1967.

It further developed during the course of these proceedings that the importers shortly after the intervention had in fact paid all of the sums in accordance with their long standing practice of paying on 30, 60 or 90 days terms.

At that point, Cuba of course changed its position and sought to back off from its stipulation that had entered -- it had intervened to in Policio against Russian Block.

They contended now that they should be entitled to the pre-intervention shipments as well.

And not only that, they contended that they never received those payments if in fact they had been made.

The District Court however found that not only had the payments been made by the importers, but that Cuba in fact had received them.

In the case of Dunhill, those payments amounted to some $55,000.00 more than the District Court found Dunhill still owed for the post-intervention shipments.

In the case of the importers as a group however, the situation was reversed because far more was still ode to the interventors by the importers as a group for the post-intervention shipments than the District Court found had been paid to Cuba for the pre-intervention shipments.

Judge O'Brien ruled that the owners were entitled to payment for the pre-intervention shipments.

He also ruled that the interventors had received those payments and reliable under an unjust-enrichment theory to return them to the importers.

In his initial decision, he allowed the importers to set off against what they owed for the post-intervention shipments the amounts that they had paid for the pre-intervention shipments.

He specifically ruled the act of state doctrine inapplicable to the payments received by Cuba, stating in part, and I'm quoting this portion of an opinion now.

“Here, all that occurred was a statement by counsel for the interventors during trial that the Cuban Government and the interventors denied liability and had refused to make repayment.”

This statement was made after the interventors had invoked the jurisdiction of this Court in order to pursue their claims against the importers for post-intervention shipments.

It is hard to conceive how if such a statement can be elevated to the status of an act of state any refusal by any state to honor any obligation at any time could be considered anything else, should note panthetically at this point that it was apparent that the set off procedure described by Judge O'Brien in his initial opinion obviously did not take account of Dunhill's situation.

Accordingly after the decision was rendered, we move for an affirmative judgment against the interventors.

Despite the claim and trial of an act of state, the interventors expressed no opposition to this and there being no opposition, that motion was granted.

The Second Circuit of course affirmed Judge O'Brien's decision in all respects except one.

It reversed the affirmative judgment in favor of Dunhill on the ground of the act of state doctrine.

It found the act of state in Cuba's failure to honor the importer's demand for return of the payments, and I'm quoting now, “confirmed by the Cuban Government's counsel at trial.”

In short, regardless of what the Court of Appeals language was, there is no question that on the record, the only conceivable evidence of any act of state by the Cuban Government was simply the statements by counsel for the Cuban Government that its client would not honor a claim for return of the funds.

The effect of the Court of Appeals ruling of course is to force Dunhill to pay twice for the same cigars, having already paid the interventors. Under the court's ruling, they must now pay the owners with interest.

We submit therefore that despite the statements in respondent's brief to the contrary, the first issue is properly before this Court that is whether statements of counsel can constitute an act of state.

And we submit as well that for the reason's set forth in our brief that they cannot.

Justice Potter Stewart: The Court of Appeals opinion reproduced any of the papers we have?

Mr. Victor S. Friedman: Yes, that's in the joint appendix Mr. Justice Stewart.

Justice Potter Stewart: I don't have an appendix --

Mr. Victor S. Friedman: And there's a joint appendix as well.

Justice Potter Stewart: Oh, I don't have that.

Thank you.

Argument of Victor Rabinowitz

Mr. Victor Rabinowitz: The page on which the quote from the Court of Appeals that I read is on 25 (a) of the joint appendix.

Justice Lewis F. Powell: Mr. Friedman, is there really any doubt as to the fact that Cuba as repudiated these debts?

Rebuttal of Victor S. Friedman

Mr. Victor S. Friedman: Yes Your Honor, I would say there is.

Justice Lewis F. Powell: Had they paid any of them to anybody in this country since Castro took power?

Mr. Victor S. Friedman: Well Your Honor, this is a rather special circumstance.

I think we must recognize that in all other instances were Cuba has been before this or any other court, they have appeared armed with a decree which states certain consequences, usually confiscation of property.

We have a situation in this case however were up until that last year, not only has Cuba certainly not issued any decree with respect to these funds, but is been actively contending in our courts that they never receive them.

Now, it seems to me that it is a far crime from stating that we have funds and we hereby seize them to say in the other instance that we are coming into your courts to try to collect those funds, and then when the proof come out that they already had them to deny received of the funds.

That is not a seizure and I would respectfully suggest that the situation is far different and that there is a real debt, yes sir.

Justice Lewis F. Powell: The Second Circuit as I read the opinion found an act of state in view of all of the circumstances and said that a form of declaration was not necessary, and you differ from that?

Mr. Victor S. Friedman: No, I do not.

Clearly, there are circumstances where some act, some public sovereign act of the state maybe proved by other than a formal decree.

There are a number of cases, most of them occur in time of civil strife or rebellion where a military officer for example goes in and seizes property.

That is not a formal act.

But every case which has decided the act of state doctrine has insisted that there be some public affirmative act, something that one can look at and say “this is the affirmative act of the sovereign”, something with a sovereigness acting so that if this Court or any court in this country where to take a contrary position, it could be considered in a front to the sovereignty of that nation.

Chief Justice Warren E. Burger: Well then, is it not also an act which takes place within the jurisdiction of that sovereign and then in turned his asserted in our courts?

Mr. Victor S. Friedman: That is correct Mr. Chief Justice.

Not only that in every case which has dealt with the doctrine, our courts have required a proof in our courts of the fact of that act in the foreign jurisdiction, that is correct.

Chief Justice Warren E. Burger: Was that true in Pons against Cuba, do you recall --

Mr. Victor S. Friedman: Pon?

Chief Justice Warren E. Burger: P-O-N-S against Cuba, was there an official act claimed --

Mr. Victor S. Friedman: I'm sorry.

I'm not familiar with that case, I'm sorry sir.

Chief Justice Warren E. Burger: Well, not important.

I can track that down.

Mr. Victor S. Friedman: Respondents appear to concede in their brief and I'm not sure it's a concession, but they do appear to concede that statements of counsel in fact cannot constitute an act of state.

I refer the Court to page 12 of respondent's brief in that respect.

They seek to avoid the issue by in affect asserting that counsel was simply the agency by which Cuba made known its legal position.

We suggest that this simply does not square with the cases.

As I have said, every case which has does far considered the application of this doctrine has insisted that there be some affirmative act of the foreign sovereign as the Chief Justice says pointed out within it's own territory, and then as a second requirement that there be confident proof of the existence of that act within our courts.

Here, for all that counsel has said, we still do not know what the act was.

We do not know when it took place or how it took place or who is responsible for it.

In this connection, we've cited the case of the Navemar which all be the case dealing with sovereign immunity.

I think his instructive in terms of the standards of at least minimal proof required when a sovereign comes into our courts and asserts a claim that it should be treated differently from private litigates.

In the Navemar, there was a verified statement by the Ambassador of Spain that his Government had in fact seized possession and ownership of a libel vessel.

There being some question about those facts.

The court refused to foreclose these issues, but instead, invited the ambassador to intervene in the action and prosecute his claims as a litigant in the suit.

Suggest moreover that in addition to the fact that the act of state application here was far broader than in any of the decided cases, that there are no policy reasons underlying the act of state doctrine which would require any less proof than we are contending for.

The doctrine itself as the respondents concede of necessity works in unfairness.

As to any litigant against whom the doctrine is applied, it denies him his judicial remedies.

True, if the courts are attempting to deal with a public act or pronouncement of a foreign Government, certainly, they're maybe a realistic danger that the courts either maybe involved in political controversy in international affairs were may be usurping executive prerogatives in those affairs.

But surely, we're -- there is no public act of a foreign sovereign.

We submit that those dangers are unrealistic.

And that to apply the doctrine, to create the unfairness, unless there is a realistic basis in fact on which the courts can operate, simply does not make sense.

And we submit that that requires nothing less than competent evidence at the trial that an affirmative act of a foreign sovereign has in fact occurred.

And here as we know nothing of a sort has occurred.

I reviewed the history of the case at some length because I wanted to show that for some 10 years, Cuba apparently was either unaware or at the very least disputed the receipt of the varying monies, counsel for Cuba and assets, it has seized at sometime that we don't know and in some manner which we also don't know.

There is a suggestion to respondent's brief that I feel should be discussed briefly.

At page 17, respondents appeared to argue that the nationalization decree of 1960 might be the act of state which justifies the retention of petitioner's payments.

The argument appears to be that since that decree nationalized, the accounts receivable of the owners that payments on those accounts, at least in so far as they reach Cuba may also have been taken under the authority of that decree.

Both courts below and of course held under the Republic of Iraq case that the decree was in effective to reach those accounts receivable because they were assets located outside of the jurisdiction of Cuba being payable in New York.

We believe that ruling was correct, but we do want to point out that if this is respondent's position now and if that word to be adopted, we must note that to the extent that the court rule in that fashion.

The rulings of the courts below with respect to parties not now before it would also be affected because if the court were to rule that the decree somehow operated with respect to the accounts receivable insofar as payments on those accounts reach Cuba, then we would submit that the -- that such a ruling would then effect extinguished the accounts receivable themselves, and the owner's judgments against Dunhill to that effect would also be extinguished.

I turn now to the second argument, one of the second branch of the argument which assumes that the court finds -- that the act of state doctrine is effective here.

And the question is assuming that effect is this case within the counter claim exception created by City Bank in view of the fact that petitioners counter claim here does not exceed the net balance owed to Cuba by all of the other importers who are consolidated for trial in this case.

We submit that in view of the totality of circumstances of this case that the counter claim exception should in fact be applied.

In fact, we believe that the circumstances here are far stronger for justifying the application of that doctrine than they were in City Bank.

In City Bank, of course, they were many differences of views among the different justices.

But we think that two-threads run through the various opinions.

I've have already alluded to them in my argument on the first point, they are that the act of state doctrine really serves two fundamental purposes.

One is involved with not having this Court enter into areas which are more properly reserved for the executive, the other is that this Court should not be involve in deciding issues with may affect our foreign relations.

I do not and I'm thankful, I do not for purposes of this case have to get into the question as to which of those is the more important because I think under either view, it is quite clear that allowing the counter claim here to the extent of all of the judgments in favor of Cuba would not violate either of those principles.

We must recall that this case like any other that we have found involves Cuba's coming into our courts and affirmatively seeking relief on the questions of who was entitled to the payment of all of the cigars.

Initially, they came in and asked for payments of all.

They then retreated when they found that they were significant amounts due on the post-intervention ship -- for the pre-intervention shipments.

They went back and again, sued for all of it.

The only thing that happened after that was that having as the courts, as the evidence manted and as it became clear that they might loose on some of those issues.

They retreated into an act of state defense to the assertion of a judgment.

Cuba has never in this case said that anything they have done with respect to those accounts receivable and the amounts payable on the cigars should not be treated by this Courts as a judicial issue.

In fact, Cuba has submitted these very issues to the courts.

The only reason the act of state doctrine has been asserted here is because on some of those issues, Cuba seemed to being coming out a loser.

That is --

Chief Justice Warren E. Burger: Has -- there was -- what has our State Department had to say about this case in --

Mr. Victor S. Friedman: So far as I know, nothing Mr. Chief Justice.

Chief Justice Warren E. Burger: Is it not usual that our State Department does take a position or at least advices the courts that they have no position?

Mr. Victor S. Friedman: My understanding sir is that they will do that if any party or the court requested.

We did not feel it was appropriate to request it in this instance because we did not believe there was any proof whatsoever that an act of state had occurred.

We believe --

Chief Justice Warren E. Burger: Well, wherever it is been thought, at least in my observation in cases of this kind over 18, 20 years, wherever the State Department has thought any relations between the two countries would be adversely affected.

They didn't wait for anybody to ask.

They affirmatively told the Attorney General what was the position of the State Department.

Mr. Victor S. Friedman: Well, I'm perfectly prepared to accept that Mr. Chief Justice.

In addition, I might point out that I believe that the Stevenson letter which goes beyond the City Bank case would also talks about like cases, would I believe be applicable here.

If anything this case presents certainly far less rational for and abstention by the judiciary, then First National City Bank did.

After all in First National City Bank, the effect of this Court's ruling was to have the District Court or the Court of Appeals actually rule on the legality of the seizure by the Castro Government of First National City's Cuban Bank.

Here, we have nothing of the sort.

All of the legal issues have already been decided.

The factual issues have already been decided.

The only that issue here is the entry of a judgment.

We do not have a situation where this Court is being asked as against an act of state contention to rule on matters which may involve some kind of sensitive foreign relations possibilities.

I might also point out that it appears that the -- Mr. Rabinowitz has been in contact with the State Department, although the appendix to his brief with regard to the Office of Foreign Assets Treasury Department.

So, the executive branch is obviously where the case.

I would conclude simply by saying that we have cited in our brief a number of instances where both the executive and legislative trends, it seems to us or distinctly going toward looking at this favor with any expansion of view the act of state doctrine where the doctrine of sovereign immunity.

We think that this case to the extent that the Court of Appeals held that there was an act of state doctrine applicable.

Clearly is such an expansion and we see no reason why the courts in the face of the decided legislative and executive trend to the contrary should get involved in expanding the act of state doctrine.

Justice Byron R. White: Can I ask you just one question.

I suppose there were no act of state doctrine involved in the case and they came out as it did with owing money, debts due on either side.

How about Dunhill being able to collect the excess of what the Cuba owes it from the other judgments, from the other assets available in the case?

Mr. Victor S. Friedman: Well, --

Justice Byron R. White: You say, they were consolidated for trial?

Mr. Victor S. Friedman: That's correct, that's correct.

Justice Byron R. White: Now, under New York procedure, would it be technically a --

Mr. Victor S. Friedman: A set off?

Justice Byron R. White: Let's assume Dunhill have judgment against Cuba for this -- what is it, 80,000 or whatever it is that had that judgment, and it wanted to satisfy.

Would it be technically a set off in that case?

Mr. Victor S. Friedman: No, I believe it would not be.

Justice Byron R. White: So, you would have to utilize other procedures available --

Mr. Victor S. Friedman: That's correct.

We would have to attach the judgment.

Justice Byron R. White: You have to attach the judgment?

Mr. Victor S. Friedman: Yes.

Justice Byron R. White: Less the -- your assets are there before the court?

Mr. Victor S. Friedman: That is correct, that is correct.

But let me point out --

Justice Byron R. White: But would it be really any -- for purposes of -- for our purposes, is it really any different than if you found the bank -- that you have this judgment and you found the bank accounts somewhere?

Mr. Victor S. Friedman: I believe it is, I believe it is.

Justice Byron R. White: Now, that's what I want to know.

Why is it like that?

Mr. Victor S. Friedman: Right.

Not on a technical or procedural ground.

My point simply is that Cuba has put into issue in a single litigating mode all these claims and counter claims.

And what I'm suggesting is that the rational for allowing a complete set off or counter claim within this framework, regardless of the precise form that it took is far stronger than was present in City Bank.

There are no -- to my way of thinking, there are no justifications with underly the application of the act of state doctrine which in any way, should preclude that result, whereas in City Bank, they're very definitely were different policy considerations which could have let the court to the other result.

So, I am not relying on the technicality of whether or not these were consolidated for trial or consolidated action.

I do not think that New York procedural niceties should control the ruling of this Court in that respect.

Justice Byron R. White: Would it be your position or the -- I'm not sure that you need to go so far.

But is it your position that whenever foreign sovereign comes into our courts, they must come in on our terms and have that case decided by traditional principles of law applicable to two American litigants?

Mr. Victor S. Friedman: Well, I'm afraid if I answer that question, yes Mr. Chief Justice, I luminate to the act of state doctrine and --

Justice Byron R. White: You don't think you need to illuminate it entirely in order to prevail on this case.

Mr. Victor S. Friedman: No.

I don't really at all Mr. Chief Justice.

In fact, I think, I can live within the decided precedence on the subject.

Justice William H. Rehnquist: Mr. Friedman, your response to Justice White's question that you're not relying on New York procedural niceties has certain overtones of making a virtue out of necessity because I take it if you are to bottom the argument on procedural niceties that this is really nothing like a set off in the traditional synth that lawyers use the word.

Mr. Victor S. Friedman: We -- to the extent that we would be reaching a judgment by a co-defendant.

I would agree with that Mr. Justice Rehnquist.

Chief Justice Warren E. Burger: Very well Mr. Friedman.

Rebuttal of Victor Rabinowitz

Mr. Victor Rabinowitz: Mr. Chief --

Chief Justice Warren E. Burger: Mr. Rabinowitz?

Mr. Victor Rabinowitz: -- Justice and may it please the Court.

I would like to start off if I may with this discussion that Mr. Justice White and Mr. Justice Rehnquist had been having because I suggested in filing my brief here that this petition for certiorari was improvidently granted and should be dismissed.

Then one of the reasons that I urge was that no judgment can be collected here, collected that can perhaps be obtain if the petition to wins, but no judgment can be collected here under any foreseeable circumstances, and therefore this case, well I'm not moot in the constitutional sense, that is a risk of a case of controversy under Article III.

Nevertheless, it is for all practical purposes pointless.

And it is pointless because all Cuban assets are frozen, and the Treasury Department which has the task of licensing the expenditure of funds out of frozen funds has indicated already as we knew all along it would that it will not license.

The execution of any Dunhill excess judgment against assets which are of a wise frozen whether it be a bank account as Mr. Justice White suggest or one of the other judgments that has been obtained as against Faver, Coe as Mr. Friedman suggests.

Therefore, we have a situation which is akin shall we say to an action in which plaintiff is suing a person who is concededly and obviously insolvent.

The total number of claims filed against Cuban assets in the United States amounts to $1,799,000,000.00.

Now, I don't know the amount of frozen funds are, but if they amount to a few million dollars, it's a lot.

If this $53,000.00 judgment is collected from those funds and I don't believe it can be, but if it is collected from those funds, we have pennies depending on the outcome of this litigation.

And I don't believe it can be because the procedure that is followed in all of these cases and that has been followed in the Cuba case is to require a debted to file a claim with the Foreign Claims Settlement Commission, and not to bring the lawsuit.

Dunhill chose to bring a lawsuit instead of filing a claim.

Now, I suppose it has the right to do that.

But if passed precedent in handling these cases is any guide to what the future may bring, and of course, I have no crystal ball, but I can read what has happened, there is no possibility of even this $53,000.00 sharing in that $1 billion, excuse me, $1,000,800,000.00 claim.

So, this whole discussion, although it involved very interesting questions of law, so far as return to Dunhill is concern is going to end in zero when I cannot understand any justification for Dunhill spending all his time and I of course why the court granted the petition for cert is not my business, but at least I suggest that perhaps that question might be reviewed.

Justice Byron R. White: What about -- what about the set off, face to face set off?

Mr. Victor Rabinowitz: Well, so far as the face to face set off is concerned, it is my understanding that that will be recognized by foreign assets control.

So to that extent, the face to face set off which of course is not subject on, would not the subject of this petition for cert.

It is the subject of another petition for certiorari which Cuba's filed.

Justice Byron R. White: I understand that.

I understand that but you don't claim that this present argument, you make with no rob off on any face to face set off --

Mr. Victor Rabinowitz: No, no.

Justice Byron R. White: Or anything that would like it as a matter of fact.

Mr. Victor Rabinowitz: As far as I know now, it would not.

I don't know that what the attitude of foreign assets control would be on that subject, but I'm been trying to think that a face to face set off would be recognized by the Treasury Department.

Now on the question of is there an act of state here?

I don't know whether I or to be flattered or the contrary that being suggested that is have the power to commit an act of state.

I have no such power, and then no statement that I ever made in court is to be considered to be an act of state.

Cuba here received funds and claims that it was entitle to those funds.

Hence, it refuses to return the money and it is retained to counsel to plead its right to those funds and that's what counsel has been doing to the best of its ability.

Now, that claim is not a frivolous or capricious or an arbitrary claim.

It is based as Mr. Friedman was kind enough to state on a nationalization decree, a decree which was adopted on September 17, 1960 and which purported to nationalize all of the assets of Cuban, not American but Cuban concerns about manufactured tobaccos, cigars in Havana, and to nationalize not only the physical property in Cuba, but also the accounts receivable.

The question as to whether this nationalization decree extended to the accounts receivable was litigated.

We lost in the District Court.

We lost in the Court of Appeals and pursuant to instructions specific I might saying, instructions by my client, I have filed a petition for certiorari, which is one of those issues that's pending in the other case.

And the issue there involves or revolves around this rather metaphysical question, what is the situs of the debt?

If the situs of the debt was in Havana, then, it was nationalized.

If the situs of the debt was in New York, then, it was not nationalized.

That's an issue which is not before us.

I mentioned that only to show that the claim of act of state here was not disconnected or irrelevant to the nationalization decree because if the nationalization decree did in fact and I'm advised that under Cuban law, it would have.

If that nationalization decree did in fact attached or nationalized the accounts receivable, then, we are entitled, Cuba is entitled to the funds for pre-intervention cigars.

Justice Byron R. White: And could you get them out?

Mr. Victor Rabinowitz: Well, the set off would be cancelled.

We got the money.

We have the money.

Justice Byron R. White: How did you get it?

Mr. Victor Rabinowitz: We got it because Mr. Dunhill over here paid it to us.

Justice Byron R. White: Well, could the --

Mr. Victor Rabinowitz: The whole problem now was whether we have to pay it back.

Justice Byron R. White: Yeah, I understand that.

But for post-intervention shipments --

Mr. Victor Rabinowitz: Oh, yes.

Justice Byron R. White: You can be paid for those?

Mr. Victor Rabinowitz: Oh, yes.

Justice Byron R. White: And you get the money out?

Mr. Victor Rabinowitz: Can Cuba get the money out?

Oh no, no.

It goes into that frozen --

Justice Byron R. White: Just what I thought --

Mr. Victor Rabinowitz: Well, no question about that.

That's true of all of this Cuba litigation.

Justice Byron R. White: So you're litigating -- what you're litigating here is on funds to add to the claimed accounts --

Rebuttal of Victor S. Friedman

Mr. Victor S. Friedman: Right.

We're trying as hard as we can in all of these cases to build that fund up as high as it can.

The same question was raised I think by Mr. Justice Blackmun in the City Bank case.

Our goal in this case and in the Chase case which is behind us hasn't come up there yet, is just to increase that fund because that's what my client thinks is in its best interest.

And that which I --

Chief Justice Warren E. Burger: Now when you spoke of Dunhill kindly paying that account, that was before the seizure or --

Rebuttal of Victor Rabinowitz

Mr. Victor Rabinowitz: It was after the seizure.

Chief Justice Warren E. Burger: After the seizure?

Mr. Victor Rabinowitz: It was after the seizure.

Chief Justice Warren E. Burger: Any of it bracket the seizure, some before and some after?

Mr. Victor Rabinowitz: Oh, yes.

All during the months of August, September, October, November, December, it continued to send money down to Cuba.

Now, why it did it?

I'm not all together sure.

Various reasons have been given and hadn't been proven as events later shown with the advantages of hindsight.

It would have stopped when the nationalization occurred, it would have said had it had sufficient foresight.

We don't know whose entitled to this money and therefore, we're not going to pay it to anybody.

But it didn't do that.

It continued to send the money down to Cuba.

It sets and I will assume for purposes of this argument that that's exactly what happened because --

Justice Byron R. White: Now this is all pre-intervention.

Mr. Victor Rabinowitz: All pre-intervention and a little bit of post-intervention.

I think perhaps --

Justice Byron R. White: (UInaudible) well, --

Mr. Victor Rabinowitz: But there is no issue about that.

Justice Byron R. White: Well, out there, entitled any of it back -- if you have to pay anything, it comes up only this frozen fund?

Mr. Victor Rabinowitz: The court held that the former owners are entitle to a set off, are entitle to a judgment against Cuba which is a set off, they're very complicated.

The court held that the former owners were entitled to that money.

They are entitled to that money from Dunhill which was the debtor.

And therefore, Dunhill is ordered to pay that money to the former owners.

Dunhill however paid the money to Cuba said the court by mistake.

Therefore, it is entitled to get that precise sum back from us.

So whatever it has to pay the former owners, it collects from us, except for this $53,000.00 because we contend there is no way in which it can collect an affirmative judgment of $53,000.00 from Cuba.

I'm feeling a little bad, I keep saying us in here because it may give the court some idea that I am the state, but I am not.

I am just speaking as counsel.

Chief Justice Warren E. Burger: When you -- well, I think you've answered the question I was about to ask.

Mr. Victor Rabinowitz: Now, counsel has made much in his brief, and again in his oral argument to the contention, to the argument which said that Cuba never admitted receiving the funds.

Now of course, that's not so, what happened was that the claim was made at large sums of money had been paid.

This claim did not come to like until 1967 which was some seven years after nationalization.

By that time, the -- all of the relevant records had been lost, destroyed, at least they were not available.

And so, the Republic of Cuba said in response to a set of interrogatories, we do not know as to $93,000.00 of the total, yes.

We received it, as -- because they were records.

They were endorsed checks.

As to the balance, we do not know whether we received it or not.

The District Court held that the evidence was sufficient that we had received it.

The Court of Appeals held the evidence was sufficient that we had received it.

We're not applying for cert on that issue and therefore, I will assume that of for so far as this record is concerned, we have received it.

Now of course, if we didn't receive it, then Dunhill has no claim at all.

Dunhill's whole claim here is based on the fact that it paid money to us by mistake.

If it -- if we didn't pay it, then the whole of Dunhill's claim for and therefore, we really think the petitioner is faced with the fact that whatever maybe ultimate truth, so far as to the record is concerned, Cuba got the money.

And also it is clear that so far as the record is concerned, Cuba, basing its argument on a nationalization decree says it does not have to repay the money, and we submit that that is an act of state because as has been conceded, no particular formality is required.

Justice Byron R. White: Wxcuse me Mr. Rabinowitz, Cuba got the money.

The fund, they got the money or Cuba got the money, which?

Mr. Victor Rabinowitz: Cuba got the money in September of 1960, September --

Justice Byron R. White: Before the nationalization?

Mr. Victor Rabinowitz: Bridging the nationalization; some of it before the nationalization, some of it after the nationalization.

Justice Byron R. White: But in any event, it didn't go to the fund?

Mr. Victor Rabinowitz: It went to Cuba.

Oh, by that time, money was being -- at that time, money was being shipped to Cuba.

The freeze didn't come ‘till 1963.

Up to that point, the money went down to Cuba.

Now, it's perfectly clear from all of the cases that the court -- that a course of conduct is sufficient to constitute an act of state.

We have a great deal of state action here, much more than Henrico, Cochin, Bernstein and the other traditional act of state cases.

And as I've indicated this continuing interest and continuing determination by Cuba to assert this claim is an indication on the part of Cuba that it believes that under its own nationalization decree in its own view of the law, it is entitled to this money.

Chief Justice Warren E. Burger: Mr. Rabinowitz, when you say that why this case is not technically moot in the traditional sense that it is at for all practical purposes, there's nothing left of it.

Is that because the claims against the $1,800,000,000.00 will so far exceed the fund that they really get nothing or pennies issue --

Mr. Victor Rabinowitz: Right.

Chief Justice Warren E. Burger: Is that --

Mr. Victor Rabinowitz: Right, right.

Well of two reasons.

That's one.

The other is that at least so far as the President of the Soviet Union, Bulgaria, Romania, Yugoslavia, and two or three other similarly situated countries, people who didn't file claims with the Foreign Claims Settlement Commission don't even get those pennies.

Justice Potter Stewart: Was there a cut off date?

Mr. Victor Rabinowitz: Oh, yes, cut-off date was two or three years ago.

Justice Potter Stewart: So, the claim couldn't be based on --

Mr. Victor Rabinowitz: No.

Justice Potter Stewart: A judgment now.

Mr. Victor Rabinowitz: No.

No, the claim could not be based on judgment why they didn't file before the Foreign Claims Settlement Commission, I don't know.

But there certainly is not the slightest precedent, nor for there be the slightest justification for saying that a litigant who ignored the statutory procedure set up by Congress should find himself placed in a better position, so far as ultimately collecting this judgment against --

Justice Byron R. White: Oh, it seems to have been -- is that mean if -- are you suggesting if Dunhill prevails and we reverse and Dunhill judgment is reinstated, it's useless?

Mr. Victor Rabinowitz: Yeah, that's exactly what I'm saying.

Justice Byron R. White: Because they didn't file -- in the amount of the judgment of the claim, whatever it was, will be the commission within --

Mr. Victor Rabinowitz: They didn't -- it's useless for two reasons Your Honor.

The first place, they didn't file.

Second place, even if they had filed, the amount -- if they had filed, they wouldn't need a judgment.

But even if they had filed, the amount involved would have been infinitesimal compared to the amount -- but even -- I don't know what disposition is going to be made to that.

All I can say it that the precedent follow in all of the other cases was to say specifically the judgments will not be permitted, and that claims before the filed with the Foreign Claims Settlement Commission are the only source of getting money.

And remember, so far as the settlements in the past have been concern, the issue becomes is really a dual one, one is between the United States and the foreign country, and that settles some which money as to be paid.

The second step is that the United States distributes this money to its citizens.

And in the treaties that have been entered into which Romania and the other countries that I've mentioned, the United States has specifically waived on behalf of its citizens all judgments which the citizen may have obtained or may in the future obtain against the foreign government for those pre-settlement claims shall we say, so that when was I say I can't even venture to predict what's going to happened here if the Polish and Romanian and other settlements are reached here, the judgment is really of absolutely no value in this situation.

And what we're discussing here very interesting act --and to me rather vital questions of law, and I'm always delighted to discuss them.

But in terms of the practical effect of what we're getting here, it's going to turn out to be nothing at all.

Now, I would like to --

Chief Justice Warren E. Burger: Are you suggesting that your friend is overly optimistic about Cuba's voluntarily paying any judgments which maybe entered against it?

Justice Lewis F. Powell: Well, I wouldn't.

I would prefer not to have to characterize that as even with the word optimism.

I think even that's too hopeful a word.

No, I don't know why or why counsel is doing it.

I suppose counsel is here because his client is instructed him to be here and he's got whatever motivation he has go ahead with this case, and maybe he thinks she can in some way or other collect it.

And if he does, he's doing very well for his client.

But --

Justice William J. Brennan: Mr. Rabinowitz, if there's no practical result to all of these, why is Cuba defending?

Mr. Victor Rabinowitz: Well, Cuba is defending it right now because this Court issued a petition for certiorari and told me to come here and since I always enjoy arguing before this Court, here I am.

But Cuba is proceeding with all of the other litigation because as I said before, my clients apparently and nobody has told me this, but I can grow a reasonable inference.

My client feels that it will be good to have this money in that frozen account as against someday when there is going to be a settlement.

And the more money there is in that frozen account, the better it's going to be for my client.

Now maybe, it will be better for everybody, I don't know but it's going to be better for my client.

To put in other way, if I may, I don't suppose this is a breach of professional confidence as one of my client said to me, is it better to have a million dollars in that fund or not to have a million dollars in the fund, and my answer was would it be better to have a million dollars in the fund.

I don't know exactly why it's better.

I just think it's better to have that much money in the fund than not to have that much money in the fund.

Justice William J. Brennan: You pleaded why the case is not moot.

Mr. Victor Rabinowitz: Pardon me?

Justice William J. Brennan: You just stated why the case is not moot then?

Mr. Victor Rabinowitz: The case is moot in the sense that the amount of money that will go --

Justice William J. Brennan: This is a new kind of conception of mootness.

Mr. Victor Rabinowitz: Well, alright, I -- no.

I don't think it's moot in any --

Chief Justice Warren E. Burger: This is a doctrine --

Mr. Victor Rabinowitz: -- in a constitutional sense, it certainly a case of controversy.

Chief Justice Warren E. Burger: -- (Voice Overlap) is it?

Mr. Victor Rabinowitz: That's right.

It's -- as I think in my brief, I said is a practical matter its moot, and maybe I shouldn't have used the word moot.

Justice John Paul Stevens: If you are in control of the freezing mechanism, I suppose that's right, but you're not.

Mr. Victor Rabinowitz: No, we have no connection with the freezing mechanism at all, quite the contrary.

We've tried to break it on the few occasions without any success.

Justice William H. Rehnquist: But what if petitioners were to take their judgment to France to England and try to locate Cuban assets there and they ask for full faith and credit whatever the French or English are equivalent to that is.

Mr. Victor Rabinowitz: I hadn't thought of that.

I don't know, maybe I -- I don't know how the French courts or the German courts or the English courts would treat the matter like this and what, I'm sure that they have their own problem so far as foreign relations and the enforcement of the judgment obtained under these circumstances.

I don't know.

Chief Justice Warren E. Burger: I suppose Cuba must have some accounts receivable due somewhere for sugar these days.

Mr. Victor Rabinowitz: I have read newspapers stories that indicate that that maybe the case.

I just don't know.

I -- anyhow, to conclude this part of is there an act of state, I submit that we have here as much evidence, as much of an act.

I don't know what counsel means when he keeps talking about a public act.

I don't know what exactly a public act is.

In the French against Banco Nacional in the New York Court of Appeals, the act involved a piece of paper called an instruction which was posted on the bulletin board of the national bank or the currency stabilization for a board in Cuba and that was regarded as an act of state.

Chief Justice Warren E. Burger: But sometimes, it's a document --

Mr. Victor Rabinowitz: Oh, something --

Chief Justice Warren E. Burger: -- of the foreign office of the sovereign filed in the litigation, is it not?

Mr. Victor Rabinowitz: No question at all, but sometimes it is.

But sometimes, it is the expropriation of a load of hides as in Ochin or of load of silver as in record.

The seizure of these commodities by an army in the field and the -- this has been held to be an act of state by as I say the classic cases.

Chief Justice Warren E. Burger: Are you free when I put that limitation on it, are you free to offer a hypothesis as to why the Government of Cuba as not made any formal claim of act of state, but has simply depended upon a litigation position asserted by you?

Mr. Victor Rabinowitz: You mean why it has not made a decree written in a piece of paper?

Chief Justice Warren E. Burger: Just written letters the Secretary of State of the United States often the --

Mr. Victor Rabinowitz: I think, I think that the opinion of the Cuban Government is that the nationalization decree is quite sufficient, and that there is no particular point in repeating over and over again that it claims that it nationalized these account receivable.

And therefore, it is entitled to that money.

Justice Potter Stewart: That is the decree of September 15, 1960?

Mr. Victor Rabinowitz: 1960, yes sir.

Justice Potter Stewart: They nationalized everything, didn't --?

Mr. Victor Rabinowitz: That's right, nationalized everything.

And I suppose that there is no -- the Government does not feel any compulsion to keep repeating this because the Governments are not always -- to issue documents.

Chief Justice Warren E. Burger: Is not part of the debate, whether that decree of nationalization reached the assets outside of Cuba?

Mr. Victor Rabinowitz: Yes.

That is part of the debate and there is no question --

Chief Justice Warren E. Burger: No one is challenging this litigation that Cuba by its decree of nationalization could seize and exert sovereign power over assets in Cuba.

Mr. Victor Rabinowitz: Oh no, no.

That's not an issue --

Chief Justice Warren E. Burger: Was assets somewhere else is in on another issue, is it not?

Mr. Victor Rabinowitz: Exactly, that is an issue.

But whether that seizure is valid under United States law, the seizure of accounts receivable I mean, is valid under the United States law is not valid under United States law has nothing to do with whether it's an act of state.

The fact is it's an act of state.

Now, maybe they attempted to do something that they couldn't do.

If it is true that a debt has its situs and as I said before, it's a rather metaphysical problem that a debt has it situs in the -- at the home of the debtor, then this was an ineffective nationalization decree because it sought to nationalize property outside the territory.

But in the Cuban view, this is not so, and I have as I say so argued in this petition for certiorari which is before the Court pending at this moment.

I would like to proceed to the second question which is the so called counter claim rule.

As Your Honors will recall in Sabbatino, this Court held with only one judge dissenting, that the court of the United States would not examine it to the legality of the conduct of a sovereign done within its own territory.

When the City Bank came before three years ago, the court had before it a claim by City Bank first that there was or should be a counter claim exception to the act of state doctrine.

And second, the court had before it a letter from the State Department, and that State Department said that the act of --

Chief Justice Warren E. Burger: We'll resume there after lunch Mr. Rabinowitz.

Mr. Victor Rabinowitz: How much time do I have --

Chief Justice Warren E. Burger: You may proceed whenever you're ready Mr. Rabinowitz?

Mr. Victor Rabinowitz: Thank you sir.

I would like to spend my remaining time on the problem the counter claim rule, but just for a moment before I get to that, I would like to make one thing clear if it's not already clear.

While I said that the nationalization decree of September 1960, nationalized not only the physical property, but also the account receivable, and therefore the problem arose as to where these accounts receivable were located.

Of course, it is true that shortly after in the two or three months after the nationalization decree, the money represented by these accounts receivable did in fact to get to Cuba.

So that it was no longer a question of nationalizing intangibles which will located in a foreign country, but was then became a question of the effect of the nationalization decree on that money which was then in Cuba, so that from the position of the respondent --

Justice Byron R. White: Oh, is that all of it Mr. Rabinowitz?

Mr. Victor Rabinowitz: Pardon me?

Justice Byron R. White: Is that all of it that was involved in the --

Mr. Victor Rabinowitz: All of it that was involved, yes.

Justice Byron R. White: In the Dunhill claim?

Mr. Victor Rabinowitz: All of it, yes.

All of it came to Cuba and that's why Cuba is under an obligation to pay it back.

And of course, the nationalization decree --

Justice Potter Stewart: That's a pre-intervention payments.

Mr. Victor Rabinowitz: Pre-intervention payments.

Justice Potter Stewart: I mean payments for pre-intervention to that was stolen --

Mr. Victor Rabinowitz: Yes.

Payment for pre-int -- that's right.

So that as that money came back, it was the -- put down there, it was the position of the Cuban Government that as it entered Cuba, the nationalization --

Justice Byron R. White: I think you said earlier, there was no freeze order until long after --

Mr. Victor Rabinowitz: Long after three years later.

Chief Justice Warren E. Burger: Three years -- three years --

Mr. Victor Rabinowitz: Three years later.

Now on the question of the counter claim rule, as I said in the City Bank case, this Court had before it a letter from the State Department which said that the act of state doctrine in its opinion was not to be applied in the counter claim situation and I quote “the amount of the relief to be granted is limited to the amount of the foreign states claim, and the foreign policy interest with the United States do not require application of the doctrine.”

The letter then went on to say that the foreign policy interest of the United States do not require the application of the act of state doctrine to barge adjudication of a defendant's claim or set-off against the Government of Cuba in these circumstances.

And hence the act of state doctrine should not be applied in this or like cases.

Now, there is no State Department letter here of course, and I must with due respect Your Honor say that at least so far as the case is I am familiar with, the State Department has never sua sponte written a letter.

In the Sabbatino case, the State Department participated not only as amicus but in argument, but that was on the motion of the court, not on its own notion or not by its own request.

Justice Thurgood Marshall: As a matter -- in fact in Sabbatino case, they refused to come in to the Court of Appeals.

Mr. Victor Rabinowitz: Yes, they did sir.

Yes, they did.

And in -- it's quite right.

And in the City Bank case, it's my understanding that they came in at the request of City Bank or at least at the suggestion of City Bank.

And since then in other cases which are pending in the District Court, in one case, they did submit a letter.

In other cases, they have refused to submit letters sir.

What motivates them one way or the other, I don't know.

The most recent was a refusal to submit three letters in cases involving three banks.

Now, the petitioner's argument here is based on three assumptions, none of which I respectfully submit as valid.

First, that there was a ruling by this Court in the City Bank case that there was the counter claim exception to the Sabbatino rule.

Second, that the Stevenson letter submitted in City Bank is applicable to this case.

And third, that there is an exception to what I contend is a non-existed counter claim rule which would permit the petitioner to get an affirmative judgment in this case.

Now as Your Honors, I'm sure will recall the City Bank case, there was only one opinion out of Mr. Justice Douglas which opted for a straight out and out counter claim exception to the Sabbatino case.

Three judges thought that there should be a counter claim exception when there was a State Department letter as there was in that case.

Five judges as I read the opinion felt that there should not be a counter claim exception to the Sabbatino rule.

So, it's rather difficult to say and talk about a counter claim rule in the National City Bank case because as I read those opinions, the vote was would have been on that issue four to five.

Thank you.

Justice William O. Douglas: I just hope that the court doesn't follow my lead.

Mr. Victor Rabinowitz: Your Honor, I hope it doesn't because with all due respect, I think your lead was a wrong one.

Justice William O. Douglas: Oh, you're protected by the First Amendment.

Mr. Victor Rabinowitz: I understand that.

I understand that and I'm going to take advantage of it by saying that I think --

Justice William O. Douglas: As an exception to Sabbatino.

Mr. Victor Rabinowitz: As an exception to Sabbatino.

And I'm going to take advantage of it --

Chief Justice Warren E. Burger: Go ahead.

Finish the sentence.

Mr. Victor Rabinowitz: -- by suggesting that the counter claim rule is improper for two reasons.

First, because as Mr. Justice Brennan pointed out in the dissent in City Bank, all the reasons for the Sabbatino case are equally valid with respect to a counter claim.

And the second, that more often than not, the question of whether a case comes up as a counter claim or as an affirmative claim depends on who gets to the court house first because in all of these cases, it could have operated in exactly the other way if the other party had come in first.

Justice Byron R. White: So you're in the subject manner of that petitioner of yours not yet acted on that there shouldn't be any set off in this case?

Mr. Victor Rabinowitz: Oh yes, yes sir.

And just, may I say in final conclusion on that, I would suggest that this Court dispose of this matter here in one of two ways, either it grant those other two petitions that are pending, and that we really go at this rather tangled situation and decide all of the issues, or else that the petition be dismiss as in advertently granted because --

Justice Byron R. White: Will the other be denied?

Mr. Victor Rabinowitz: Pardon me?

Justice Byron R. White: If this is dismissed, is it proper that we granted this, do you suggest we deny the other two?

Mr. Victor Rabinowitz: If this is dismissed, I would think that the others ought to be denied, yes.

If this is entertained, I think the others ought to be entertained --

Justice Byron R. White: What would you prefer --

Mr. Victor Rabinowitz: -- but unless Your Honors just want to make --

Justice Byron R. White: What would you prefer?

Which would you prefer, dismissal is improbably granted or in affirmance?

Justice William O. Douglas: Is that -- dismiss the -- inadvertently granted?

Mr. Victor Rabinowitz: In providently.

Inadvert -- no, it wasn't in advertent Your Honor.

Justice William O. Douglas: Oh, it wasn't, it's not like I can assure you.

Mr. Victor Rabinowitz: No, I'm certain, it was not inadvertent.

I misspoke.

I think, inadvertently granted, which would I prefer?

Well, I do love to argue the cases --

Justice Byron R. White: That's really difficult, isn't it?

Mr. Victor Rabinowitz: Yes, it is difficult.

I love to argue cases before this Court and the prospect of another go around that this very attractive to me.

Justice Byron R. White: Still.

Mr. Victor Rabinowitz: But still, I think it might best if every -- is like, we like the Court --

Justice Byron R. White: You know, I wouldn't guess you wouldn't wanted it affirmed.

Mr. Victor Rabinowitz: I think I would just like you to be of either affirmed, I've no objection to an affirmance.

Justice Byron R. White: You -- well, you -- would you prefer that to a dismissal?

Mr. Victor Rabinowitz: I don't know that it matter --

Justice Byron R. White: Alright, no.

Mr. Victor Rabinowitz: A great deal.

I think I would prefer dismissal to an affirmance.

Chief Justice Warren E. Burger: Didn't -- just very often we give the counsel their choice.

Mr. Victor Rabinowitz: I am under no illusion that you're giving me a choice.

Chief Justice Warren E. Burger: Mr. Friedman, we'll extend your time to five minutes from your previous three.

Rebuttal of Victor S. Friedman

Mr. Victor S. Friedman: Thank you Mr. Chief Justice.

I would just like to respond to a few remarks made by counsel for respondents.

I turn first to the question again of what is the act of state in this case, and Mr. Rabinowitz is indicated that it may proceed from one of two standpoints, and I'm still confused is to where we really look to it.

I simply want to point out again however that if it is the decree, I do not believe that this Court can rule with respect to that issue on this petition.

That is something that has not been raised by the respondent's previous to this time, and I respectfully suggest that that would affect rights of other parties to this action that where are not now before this Court.

If on the other hand, we are still dealing with the question of the possible seizure or retention of assets independently of the decree.

I would suggest again that the remarks in our brief are fully applicable, and that is there has been no proof whatsoever that any sovereign act on the part of Cuba in any form that is acceptable as evidence in our courts.

I'd like to turn now to the questions that our counsel has raised with respect to the enforceability of this judgment.

I do not pretend for a minute that I will soon be a simple matter of simply going into court and enforcing this judgment the way one would and the other civil judgment.

I do not agree with counsel for respondents that this is a worthless piece of paper.

There are a number of possible ways the judgment might be enforced.

I do not believe that this Court need consider how likely those possibilities are or just exactly what our chances will be to obtain a recovery under the judgment.

The fact of the matter is that there are possibilities and we should be entitled to pursue them.

Justice Byron R. White: Well, your set off as money and the pocket, isn't it?

Mr. Victor S. Friedman: The set off is not money in the pocket Your Honor, no sir.

Justice Byron R. White: Well, what its -- its money you don't have to pay?

Mr. Victor S. Friedman: Its money we -- for -- the money that we owe for the post-intervention shipments, that has already been paid to Cuba --

Justice Byron R. White: Yes.

Mr. Victor S. Friedman: -- for the pre-intervention shipments.

Justice Byron R. White: Yes.

Mr. Victor S. Friedman: To the extent that those are payments for the pre-intervention shipments, we still must pay the owners.

So, there is no money in the pocket there.

In fact --

Justice Byron R. White: But --

Mr. Victor S. Friedman: If we were to recover on this judgment in full, there's still would not be a single penny coming to Dunhill; that would stay with Dunhill.

Dunhill would simply have to turn that money over to the owners.

The only question is whether we're going to have to pay the owners and not recover back from the -- from Cuba.

There's no way that Dunhill can recover a single penny here that goes into Dunhill's pockets.

That really raises another issue that was alluded to by counsel for respondents, and that is the question of why didn't Dunhill file a claim?

The simple answer is here, that Dunhill was never seeking anything from anybody.

The only reason that Dunhill is in the position that is in now is because of the conflicting claims that were asserted against it by both the owners and the interventors.

Dunhill, as well as the other importers always considering themselves in the position of stakeholder, and along that same lines, I would suggest that the cut-off date, which was allude to for filing of claims, we do not think as it all applicable here for at least two reasons.

First, that refers to expropriations of property.

And as I've indicated, we do not believe there ever was any expropriation here.

Secondly, whatever the claim is that we might file to our knowledge was not in existence as of that cut-off date sometime in 1967.

If Your Honors will recall at --

Justice Byron R. White: Is this to get the litigation approval?

Mr. Victor S. Friedman: Well, I would hope not Mr. Justice.

The problem is that as of that point in time, Cuba was still contesting that they'd ever received any money.

So, it was hardly lay in our must to make a claim against them for money which a court might later judge.

Cuba owed us, but we couldn't collect of them.

Justice William J. Brennan: When did the owners start to press Dunhill?

When did the owners start to press Dunhill for payment?

Mr. Victor S. Friedman: The owners brought suit in the February or March of 1961.

Justice William J. Brennan: Oh, was that the first knowledge Dunhill had out of the owner's claim?

Mr. Victor S. Friedman: So far as the record shows, yes.

Chief Justice Warren E. Burger: It was desserted as a defense in those cases that the money was owed to and payable to Cuba as the new owner?

Mr. Victor S. Friedman: Mr. Chief Justice, so far as I know, as soon as those cases were filed, the interventors then started their action against the owner's counsel, and all proceedings, vis-à-vis, the importers were stayed.

So far as I know, I don't believe that the importers had any connection with these cases, except to be named as defendants by the owners until 1967 -- or 1966 I guess.

I would just make one other point with respect to the question of a license.

Counsel has stated that the office of foreign assets control has said in no one certain terms that a license will not be issued.

I think if the Court will look at the appendix to respondent's brief which contains the exchange of correspondents between the respondents and that office it will find that that is not the position of that office.

They had set forth a general policy, but that does not say that that is their final position or if it is, then, it would not be subject to review in the courts, or that it might not be influenced by a ruling by this Court in this proceeding.

Thank you.

Chief Justice Warren E. Burger: Thank you gentlemen.

The case is submitted.

Featured:

First Nat. City Bk. v. Banco Nacional De Cuba - Oral Argument

Thu, 23 Aug 2012 18:17:58 +0000

Case:

First Nat. City Bk. v. Banco Nacional De Cuba

Media File:

70-295_19720222-argument.mp3

Related Transcript:

70-295_19720222-argument

Transcript:

Argument of Henry Harfield

Chief Justice Warren E. Burger: The case is submitted.

We’ll hear arguments next in number 70-295, First National City Bank against Banco Nacional De Cuba.

Mr. Harfield, you may proceed whenever you’re ready?

Mr. Henry Harfield: Mr. Chief Justice, and may it please the Court.

This case brings up for review a decision by divided panel of the Court of Appeals for the Second Circuit.

The Solicitor General said of that decision that it seriously impairs the power of the executive over the control of foreign affairs.

The case may be stated very briefly.

The material facts are not in dispute.

In September 1960, the petitioner First National City Bank owned and operated 11 branches in Cuba.

On the night of Friday, September 16, 1960, the Cuban Government seized those branches.

The instrumentalities at use were its armed militia and the Banco Nacional De Cuba, the respondent here.

On the following day, Saturday, there was a radio announcement that the confiscation of American Banks had occurred by reason of executive power resolution number two, issued under Cuban Law 851.

On the opening of business on Monday, September 19, the respondent in this case was in full possession of the petitioner’s foreign branches and it was the respondent that served formal notice of confiscation on a resident Vice President of the petitioner who had been summoned to the petitioner’s former main branch for that purpose.

On the following day, the petitioner cabled to the respondent referring to the seizure of the branches and stating we have exercise our rights of lien and offset and closed your accounts as of September 17.

Now, among those accounts was a loan account which had originally been made in 1958, and this was a loan made by this petitioner to the government of Cuba here in New York City.

The borrower was a Cuban government instrumentality called Bandes (ph) and collateral for the loan was pledge by another Cuban government instrumentality called Fondo (ph), and a third Cuban government instrumentality, the respondent in this case acted as the fiscal agent for the government in connection with this.

On September 21 and 22, we are still operating in a five-day compass.

The petitioner sold the collateral that was in New York and after crediting the respondent the amount of principal and interest on the loan, there remain on the petitioner’s books in New York a balance of just about $2 million.

Two months later in November of 1960, the respondent instituted this lawsuit to in the United States District Court for the Southern District of New York to recover that balance.

And as a defense counterclaim and setoff, the petitioner showed that the value of the confiscated branches exceeded the amount claimed by the respondent.

I pause here to say that there is no dispute as to this value.

The parties have stipulated that if the petitioner is lawfully entitled to the offset claim by it, the amount is such that the respondent shall take nothing in this action.

Justice Harry A. Blackmun: Mr. Harfield, just as a matter of practicality, suppose that the respondent prevails here, what happens to the $2 million?

Mr. Henry Harfield: I take it that the $2 million would -- you mean in the sense, physically will it be remitted to Cuba?

Justice Harry A. Blackmun: Well, does Banco Nacional get the $2 million?

Mr. Henry Harfield: Well, I take it that the any recovery by Banco Nacional would be for the benefit of the Cuban Government because Banco Nacional is at least at this point completely integrated into the Cuban monolithic system.

Now, there is a blocking system that is --

Justice Harry A. Blackmun: Just as this is to which my question is directed?

Mr. Henry Harfield: Yes.

My understanding is that the -- if judgment were awarded to Banco Nacional to Cuba that the amount of that judgment would be subjected to freezing under executive order.

That is to say it would he credited to a blocked account, hopefully with the same bank.

Until the Government reaches a policy which is has not yet done as to what if anything is going to happen to the blocked Cuban property.

But I believe it is correct that the amount of that judgment less an allowance of attorney’s fee for the successful plaintiff which I am given to understand this allowed would be frozen, abiding the event ultimately of a disposition of Cuban affairs.

Justice Harry A. Blackmun: But my next question would be, why is the respondent fighting so hard for it?

And perhaps, that’s a question I will ask Mr. Rabinowitz rather to you.

Mr. Henry Harfield: I compare $2 million good reasons why the respondent is fighting hard, I mean why the petitioner is fighting hard for it.

Well, let me just continue if I may because the time sequence that I have been perhaps boring you with is, I believe important in this case.

The case was submitted on cross motions for summary judgment in July of 1961, but was not decided until late June of 1967.

Meanwhile and this was not indolence on the part of the District Judge.

Meanwhile, the Sabbatino case had been decided by this Court thereafter the Congress had an enacted the Hickenlooper Amendment to the Foreign Assistance Act, the Sabbatino litigation had gone back to the Southern District of New York, sub nomine Banco Nacional against Farr and was there decided.

And so consistently with its decision in that Farr case, the District Court in this case held that Cuba’s confiscation of American property violated International Law and that the petitioner was entitled to its offset.

The Court of Appeals affirmed the decision in the Farr case explicitly holding that the Cuban confiscation where a violation of international law.

But reverse the decision in this case on the ground that the Act of State Doctrine precluded it from inquiring into the validity or even the consequences of those same acts.

Now at that stage, that the State Department transmitted to this Court its views that important considerations of foreign policy should preclude the application of the Act of State Doctrine to cases like the instrument.

This Court granted certiorari, vacated the judgment, remanded the case to the Court of Appeals for reconsideration in the light of the views of the department of state.

The court below, nevertheless, Judge Hayes dissenting determine to adhere with original decision, this Court granted certiorari on October 12, 1971.

Now, I begin with the proposition that the Act of State Doctrine was not conceived as a device to create an unfair advantage to foreign governments that comes in to our Courts as suitors.

In this case, to cut off the petitioner’s legitimate defenses would be manifestly unfair.

Moreover, the Executive Branch and I am quoting “has made clear its view that application of the Act of State Doctrine would be inimical to significant policy interest of the United States.”

Chief Justice Warren E. Burger: Mr. Harfield, historically, where did the Act of State Doctrine originate, in the courts or in --

Mr. Henry Harfield: It originated in the courts Mr. Chief Justice.

Chief Justice Warren E. Burger: On suggestion from what source?

Mr. Henry Harfield: I think it was not precisely on the suggestion from the Executive but it is so interrelated.

Chief Justice Warren E. Burger: Well it’s a doctrine of committee, is it not?

Mr. Henry Harfield: It’s a doctrine of committee.

Chief Justice Warren E. Burger: It’s not between the branches?

Mr. Henry Harfield: It is a doctrine of committee as between branches as well as between --

Chief Justice Warren E. Burger: Governments.

Mr. Henry Harfield: Nations, as between governments.

Chief Justice Warren E. Burger: But internally within our own framework, it is a doctrine of committee of the court’s giving deference to the overwriting responsibilities of the Executive in relation to foreign policies, is that not correct?

Mr. Henry Harfield: I believe that to be exactly correct.

And the -- I shall indeed at the risk of repeating what you said varies exactly elaborate that fact is as I go on because I think that the extraordinarily position, we find ourselves in this case is that a doctrine which was conceived.

Chief Justice says, it is between committee between branches as well as between nations, and which clearly was conceived for the benefit of the coordinate branches of our own government is now attempted to be used as a weapon to create divisiveness among the coordinate branches.

This is perhaps my judgment, the single most important issue in the case at this particular stage and it goes beyond simply the recognition of the fact that the doctrine conceived in coordinate committee is now be used as a lethal weapon.

It offends us well.

Its application in this case would offend as well, the position of the legislative branch.

Because clearly, one of the interest of the United States to which the Government -- our Government has referred in its amicus brief here is respect for international law.

And our Government has repeatedly emphasized that principle of international law which says that the right of a sovereign to expropriate property is coupled with the obligation to pay for it, to make prompt adequate and effective compensation.

In this case, Cuba has to fall on that obligation and it’s indebted to this petitioner just as surely as if it had to fallen on a promissory note or a bond.

And National City Bank against Republic of China, this Court sustained a defense counterclaim and setoff based on a defaulted obligation of a foreign government that entered our court as a suitor.

Now, the respondent has argued that the Republic of China is not an act of state case because the words act of state where not used, and besides and I am quite that it is briefs the respondent has pointed out that a mere default by foreign sovereign may not be sufficient to be regard to be an act of state.

But if the Republic of China is not an act of state case, then this is not an act of state case because what we are talking about here is the repudiation of an obligation by a foreign government that they are after comes in here and attempts to seek our law, Mr. Justice Frank Burger said clear of any defenses.

Don’t listen to those fellows that say they have a defense.

The Act of State Doctrine was not intended for that purpose, and I pointed out that in the area of committee between nations, the Act of State Doctrine was devised to avoid a friction there which would either because our courts have no power or because they chose not to exercise that the jurisdiction, that might call in question the validity and the effect of acts fully executed by foreign government within its own territory.

But, to refuse to apply the Act of State Doctrine in this case does not result in any reversal of any physical act that took place in Cuba.

It doesn’t call in question I think the security of titles and international trade simply because about an offset.

And the refusal to apply the doctrine would be consistent with the policy and interest of the United States as declared both by the Legislative and the Executive Branches.

The importance of that policy I suggest is underscored by the so called Hickenlooper Amendment.

These adopt as the law of the United States the international law principle of compensation for the taking of property.

Moreover, they specified that when there is a violation of international law including but not limited to violation of the principle of compensation, then the Act of State Doctrine shall not be applicable.

In this case, the respondent asserts this Act of State Doctrine as a defense, as a defense against the petitioner’s counterclaim.

Now, if the respondent has violated the principles of international law, it is not entitled to assert that defense in this Court.

The Court of Appeals, court below of the Second Circuit reached the same conclusion, the conclusion that Cuban Law 851 was a violation of international law in the Farr case and the briefs that conclusion in a decision which this Court left under stir.

In this case, even in this case, the court below of the majority did not question the fact that under Cuban Law 851, Cuba was acting in violation of international law.

So in view of the fact that Cuba’s confiscations had been held by our courts to be unlawful.

The respondent should not be entitled to defend on that ground, the Act of State Doctrine.

Justice William H. Rehnquist: Mr. Harfield, under Rule 13, my understanding is that counterclaims are limited that those against the opposing party and here as I understand, Banco Nacional was the plaintiff and you have asserted a counterclaim, but basically as I understand goes against the government of Cuba rather than Banco Nacional, and the District Court ruled in your favor on summary judgment and the Court of Appeals did not pass on the District Court ruling.

Do you contend here that that was a proper summary adjudication in the District Court that they weren’t the same?

Mr. Henry Harfield: Yes, I do Your Honor.

Justice William H. Rehnquist: On what basis?

Mr. Henry Harfield: Well, on two bases.

To begin with that on a record before and then I would contended there was more than adequate evidence, the Banco Nacional had been totally absorb into the Cuban government so that it was indistinguishable.

If it ever had that as a respondent argues and autonomous institution, it loss that autonomy before the events here because as the respondent have said, as Cuba was in the process of changing into a socialist state, it took all the necessarily steps to destroy autonomy.

But most importantly in this case, the rule of Banco Nacional has at all times been that of an agent for the Cuban government, and that is why I elaborate it as much as I did at the outset of my remarks that the collateral, the proceeds of which are now in suit was pledge by Fondo which was part of the Cuban government.

The Banco Nacional in handling the proceeds of that loan and in handling the collateral was acting for the Cuban government, and you have a perfect opposition because there is no doubt that if there is a recovery for the respondent here that the sole beneficiary will be the Cuban government.

Unless as Mr. Justice Blackmun says our Government intervenes at some point, but we mustn’t anticipate that I claim is perfect opposition of parties.

: Let me go back then to my previous question, what is and I ask this for instruction.

What is the usual routine when assets are frozen under circumstances of this kind?

Are claims are eventually filed and then the frozen assets perhaps allocated among those claims that are allowed?

Mr. Henry Harfield: Well, I think that there are really is no such thing as a usual procedure.

In this case, the offset taken by this petitioner occurred three years and this suit was started about three years before there was any government action freezing Cuban assets.

So I point out in passing that if this petitioner had not exercise its right of offset, then the response to your question Sir would have been that the money had probably gone down the Cuba and then used to pay Chinese technicians, because the barking did not occur until about three years afterward.

Now at that stage, Cuban assets in this country where frozen but they where not vested it, they where not seized, and thereafter -- after the freezing, a system of claim submission was setup under the Foreign Claim Settlement Commission.

This was about four years after these transactions.

This petitioner filed its claim with the Foreign Claim Settlement Commission asserting the taking of its properties in Cuba and of assigning a value to it.

It then deducted from the amount it was filing as a claim, the amount of its offset in this case which credited Cuba with this.

And the Foreign Claim Settlement Commission has allowed the petitioner’s claim after deducting from the claim, the amount of this offset is on effect, they have regarded the Foreign Claim Settlement Commission has regarded this petitioner as already having recouped to the extent of its county claim.

Justice Byron R. White: But before this, the funds would be available to pay people whose claim had been filed and has been allowed that they do not have to be invested?

Mr. Henry Harfield: That's correct.

Justice Byron R. White: In addition to a --

Mr. Henry Harfield: In addition to the --

Justice Byron R. White: To a fee.

Mr. Henry Harfield: And I mentioned it Mr. Justice White that at the time that the freeze was being put on, there was considerable discussion in Congress as to whether the freeze should be moved to that second step and for vesting and the decision was not to do that, at least to that time because to take that property that a private Cuban as well as Cuban government people would have been regarded by certain members of Congress as the same kind of sin which Castro have been guilty.

So, there are the two steps that you imagine and our government has not yet taken that second step.

Justice Harry A. Blackmun: Of course, looking in the background are the other claimants who profess to be victims of Cuban expropriation aren’t they?

Mr. Henry Harfield: Yes.

Justice Harry A. Blackmun: And I suppose it’s their position that if you prevail here, City Bank enjoying a windfall?

Mr. Henry Harfield: Well, I think that may be a position.

I would certainly say that it is not a position that should be.

It should be regarded very well because as Mr. Justice White is pointed out, our government has not yet decided that it is going to treat Cuba as if it were a bankrupt to state.

But even if it did, all of the learning under the Bankruptcy Act entitles a person who is secured by reason of existing relationships of having collateral, of having liens is in that person is entitled to a preference by law and surely, a secured creditor always has a preference over an unsecured creditor.

But this is a preference which has been certainly condone if not applauded, and this if you equate this to bankruptcy, then we are exactly in the position of having exercised a setoff which under Section 68 of the Bankruptcy Law is solid.

Chief Justice Warren E. Burger: Do you think it makes any difference that this security that you hold was not part of any security transaction that relates to the expropriation in Cuba?

Mr. Henry Harfield: I would think not.

I think that my understanding of the law with respect to offsets some counterclaims is that you simply net the accounts between the parties and not certainly in New York where this offset was exercised.

Not for over a hundred years has there been a necessity of parceling this out on a precise basis.

What you do is to -- you do not have to counterclaim, you do not have to offset in respect of the identical transaction.

: But the Court of Appeals vote in the case of an underground which is due.

Mr. Henry Harfield: That is correct.

: Temporary issues?

Mr. Henry Harfield: The Court of Appeals --

: (Inaudible)

Mr. Henry Harfield: Yes, or to reinstate the judgment of the District Court.

I really have very little to add at this time.

I’d like to reserve it.

I want to make just one last point on the Act of State Doctrine which is the point that we came here on.

The point of the majority below dealt with, and I suggest that any doubt as to the applicability of the doctrine to this case at this time has been removed by the supervening expression of the executive.

And that is an expression of the executive as to the foreign policy interest of the United States.

Now, the position of the United States in this case is crystal clear.

I think there is no dispute at all as to what that position is.

But the respondent would on his brief appear to have this Court believe that the executive is invading the province of the judicial branch and I suggest that precisely the opposite is true.

As Judge Hayes said in dissent below, the majority of the court below by applying the Act of State Doctrine after an independent evaluation of the merits of the State Department’s decision is you certain the same executive function which it is the same executive prerogative which it is the function of that doctrine to preserve.

The constitutional mandate to the judicial branch is to decide cases and where there is a concern that the judicial branch might transgress on a exclusive province of the executive and the conduct of Foreign Affairs, there is an abstention on the part of the judicial branch and where the executive is silent, then an encroachment is presumed and the judiciary is it tends to abstain.

But here, the Executive has formerly declared that the foreign policy interest of the United States will be furthered to the exercise by this Court of its normal function, the resolution of cases before it.

And in the light of that declaration, I would suggest that abstention is not neutrality.

It is as the Solicitor General has said a serious impairment of the power of the executive to control Foreign Affairs.

Now, the doctrine of separation of power can scarcely be regarded as a requirement of internecine confrontation between coordinate branches of the same government for the benefit of an unfriendly government.

At this point in this case, there is no doubt that application of the Act of State Doctrine will further the foreign policy interest of Cuba.

But I suggest to you that it is inescapably true that it frustrate the foreign policy interest of the United States, and I urge that the doctrine was not applicable to this case, that it should not be applied to this case and that the judgment of the court below should be reverse.

Chief Justice Warren E. Burger: Thank you Mr. Harfield.

Mr. Rabinowitz.

Argument of Victor Rabinowitz.

Mr. Victor Rabinowitz.: Mr. Chief Justice, and may it pleased the Court.

I would like preliminarily to address myself to two questions that were placed by one by Mr. Justice Blackmun and the other by Mr. Justice Rehnquist.

And while they are preliminary and accent peripheral issues, at least one of them may be just positive of the case.

Mr. Justice Blackmun, I don’t know why the respondent is fighting so hard in this case.

All I know is that I have instructions to fight hard in this and all of the other cases which will involve an increase in the amount of the frozen funds.

Now, those funds where frozen by the Executive Branch of the Government, and unless they are unfrozen by the Executive Branch of the Government or perhaps by Congress, they are going to remain frozen and will not go to Cuba and there is no possibility at all of them getting to Cuba short of an action by the Executive Branch or the Legislative Branch, and perhaps that mean shorter from settlement of the general dispute between the United States and Cuba which may it may come at sometime in the future I assume.

We all hope that someday, it will come.

But until that day comes, I think it maybe reasonably certain that those funds will remain frozen.

Chief Justice Warren E. Burger: Perhaps, it might not unreasonable to ask them if your position is that this is just to go into the pool.

Mr. Victor Rabinowitz.: Of course.

Chief Justice Warren E. Burger: And in that case then, why is the Cuban banks are concerned about this?

Mr. Victor Rabinowitz.: We want to -- I could speculate.

I am not authorized to speculate and given the general public interest in the fact that we are dealing with it’s a government relations.

I prefer not too.

I don’t know where I could only guess as to why the Cuban Government is interested in carrying on this and as I say a great deal of all the litigations.

I think that something maybe said in response to Justice Blackmun’s request for commission a little while ago, mainly about what happens to these frozen funds and what I can tell you is not what will happen in the future, but what has happened in the past that happened with respect to the Soviet Union, that happened with respect to Yugoslavia, with respect to Romania, with respect to happened dozen other similar situations that frozen funds will collected.

They remained and blocked accounts until one day there was a settlement.

And those funds would then used to pay for all creditors.

In part of course and that is discussed and it is the reason for part of the decision of the Court of Appeals below and I think the first Court of Appeals opinion, and it is the reason and I think a perfectly valid reason for commenting that in this case, the petitioner is seeking a windfall, I would prefer to call it a preference.

A preference over all other persons who may have claims and whose only logical founders, the only way in which they might possibly someday get some return is through a large frozen fund.

Now, whether my client has that in mind, I do not know because I have not been told and as I say, I prefer not to guess about these things.

But at least, in factual terms and looking at it historically, that is what happened in the case of the other matters that I have referred to.

The Eastern European countries generally and I suppose that is the theory upon which the funds will frozen in this case.

Mr. Justice White is likely responsive not vested as a matter of fact there was a law passed and I think 1963, vesting the funds and it was until the year later so that the present of funds are not vested, they just held in an account and you cannot get money out of the account without a license from the Treasury Department, and I assure you those licenses are not freely granted.

Chief Justice Warren E. Burger: Well, I can understand, your not wanting to speculate about the policies of your client too because that involves the a matter of your client’s foreign policy but --

Mr. Victor Rabinowitz.: Yes, sir.

Chief Justice Warren E. Burger: Would you care to speculate on why the courts remanded the case to the Court of Appeals for consideration of the State Department’s view.

Mr. Victor Rabinowitz.: Well, oh while, I will get to that Your Honor.

I certainly will get to the State Department’s position here that has nothing to do with the foreign policy of the United States of Cuba.

It has to do with foreign policy of the United States in which I feel quite free to speculate because no one would suggest that I am expressing the views of the Government of the United States government.

So, I will get to that in just a moment.

I would also like preliminary to say in response to Mr. Justice Rehnquist’s question about this counterclaim matter.

We do contend as was suggested that Banco Nacional is an autonomous government agency much as I think we have about 50 autonomous government agencies here in the United States.

No one, I think would content that if the Export Import Bank where to claim against anyone that he would have the right to counterclaim against the Government of the United States.

Even though the funds of the Export Import Bank all come ultimately from the treasury of the United States, even though the Export Import Bank has a board of directors which is controlled exclusively by the United States, event though the United States created it by statute and it is the sole stockholder, nevertheless, it is an autonomous government agency just as Banco Nacional is an autonomous government agency and I think that the record is clear on that, and while I think it is a point which would be dispositive of this case, [Laughing Attempt] I don’t think it’s what we’re here for to discuss.

I would urge the Court as I have in point five of my brief to decide the case on that point.

It would be a disposition of the manner in favor of my clients it would avoid all of these other difficult international law problems and of course, my client and I would like it and I hope the Court is so disposed.

But if it is not, then obviously, there are other points which are of much greater consequence.

In the petitioner’s reply brief at page two, he suggests that there are in general too big issues in this case.

And if I may reverse the order of those issues and trace them a little less contentiously, I would agree and I would formulate the issues as follows.

In the circumstances of this case, does the Act of State Doctrine preclude the Court from considering the petitioner’s claim that the respondent acted in violation of international law?

That’s the Sabbatino point really, and it’s discussed in points one to four of the respondent’s brief.

And point two, if this is answered in the negative, was the nationalization of petitioner’s property by the Republic of Cuba a violation of international law?

And this is treated in points I think six or seven of my brief in the appendix.

Now, the Act of State Doctrine has been a part of all law at least since 1897, Underhill against Hernandez and the Supreme Court, this Court in Sabbatino traced the doctrine back to English Presidents running back 300 years.

The most recent exposition of course was the Sabbatino Decision in 1964 in which this Court in an eight to one opinion upheld the doctrine and discussed I think most of the reasons for the doctrine in great detail.

And I will not repeat the reasons for that decision, the reasons for the Act of State Doctrine because it would involve largely extensive quotations from this Court’s opinion in Sabbatino and I know that the members of the bench are familiar with it and there is no point in my doing it.

Except to say that I submit that it is a sound doctrine which is designed to keep this Court out of the consideration of the second question, namely was there a violation of international law here?

Not because the second question is hard to decide, this Court gets lots of cases that are hard to decide and not because it’s important.

Because this case -- this Court gets lots of cases that are important.

But because it necessarily involves political consideration, political questions which are best left to the Executive Branch of the Government, and I think some of the implications of this will appear in the rest of my argument.

Chief Justice Warren E. Burger: Or hasn’t been here that Executive Branch indicated that they would prefer to have judicial branch just to go ahead and decide this lawsuit?

Mr. Victor Rabinowitz.: It has in this case.

In the Sabbatino case, it said exactly the government, the opposite.

What the next administration will say, I do not know.

If there is one thing which is certain about our form of government and which is not perhaps true in many places in the world today, it’s that administration’s change, and that policy is change, and just as Mr. Deputy Attorney General Katzenbach’s stood at this podium seven years ago and said, do not extend the Bernstein Doctrine.

We do not want the Bernstein Doctrine extended is an embarrassment to our government to extend the Bernstein Doctrine.

So we find the Solicitor General of today expressing a contrary opinion and what tomorrow’s Solicitor General for legal advice and to the State Department will say I do not know.

Now, if it is perfectly reasonable and proper for administrations to differ in policy.

We expect that, that is why we have elections and that is why one person rather than another is elected President and appoints his legal adviser and his Solicitor General.

It is quite another think to expect this Court to follow in the steps of the administration in that sense.

This Court is not equipped to, is not expected to, and was not intended by the Constitution to be an instrument of the foreign policy of the United States anymore than it is an instrument of the domestic policy of the United States.

This Court is to decide things on the basis of law, and the law -- unless this Court is prepared to reverse Sabbatino, the law is the Sabbatino case, and on the basis of the Sabbatino case, this Court has set and I can think of no better way of saying it than the way Mr. Justice Harlan did.

He said the Act of State Doctrine has constitutional underpinnings.

It arises out of the basic relationships between branches of government in a system of separation of powers.

It could turn the competency of these similar institutions to make and implement particular kinds of decisions in the area of international relations.

The doctrine is formulated and passed decisions expresses the strong sense of the judicial branch that its engagement in the test of passing on the validity of foreign acts of state may hinder rather than further this country’s pursuit of goal both for itself and for the community of nations as a whole in the international sphere.

Now, I know that the legal advice to the State Department now disagrees with that and as a matter of fact the next sentence in Mr. Justice Harlan opinion is, many commentators disagree with this view.

I know that they disagree with this view.

One of the persons who disagrees with this view is Mr. Justice White, but the fact is that the Sabbatino Decision discussed all of these and discuss it in considerable detail and came to a conclusion which I submit is as sound today as it was in 1964.

: I agree with you.

Mr. Victor Rabinowitz.: Thank you. [Laughing attempt]

I knew you would not, Your Honor. [Laughter]

It is not within the competency of this Court with all due respect to it, to get involve in complicated and difficult question involving the application of the international policy of the United States.

Now, let me give you an example which is not hypothetical at all.

The Cuban expropriations here took place in I think 1960, almost immediately, the State Department issued a statement saying these confiscations are violations of international law.

State Departments always do that in this kind of situation and I assume, it is done in pursuit of the foreign policy of the United States.

These confiscations are illegal.

Now, we are here 10 years, 11 years later, we could have been on the other circumstance than here greatly or sooner.

And one of the issues that is presented to this Court is where those confiscations violations of international law?

Suppose this Court after consideration of the law should be impelled as I would urge it to hold that it was not a violation of international law at all.

This Court would then be placed in a position of having to disagree with the State Department on a question on which the State Department has expressed itself not once, but many times.

I submit that this Court should not be placed in that position.

This Court should not be placed in the position where it may be called upon to express opinions on questions of international law which are contrary to the opinions expressed by the Executive Branch in pursuit of its foreign policy.

Not this Court’s foreign policy, but the Executive Branches foreign policy because that’s its responsibility.

And this Court ought not to be placed in a position where it has that responsibility which as I say with all respect to this Court, it is not equipped the count.

: Mr. Rabinowitz.

Mr. Victor Rabinowitz.: Yes, sir.

: It’s my understanding both from the courts below and from one of the briefs here that the Act of State Doctrine is an exception to the general rule of the Paquete Habana that generally courts of the United States do decide questions of international aw unless the Act of State Doctrine exception applies.

You’re not suggesting that the Act of State Doctrine is simply swallow up that general rule, are you?

Mr. Victor Rabinowitz.: Oh!

No, sir.

: You’re limiting it to questions of the validity of the laws of foreign governments?

Mr. Victor Rabinowitz.: I am limiting to the questions of the validity of the acts of the foreign sovereign gone within its territory.

And this I say, it does seem to me that the position that the petitioner here is advocating rights as this very serious danger in connection with the separation of power.

Now this case is exactly, I might just to dispose for a moment of this Hickenlooper Amendment point, I don’t know what is really argued seriously.

The Hickenlooper Amendment is drawn in very, very narrow language.

The language is very hard to understand, and I am not going to try to read it here.

It can require very careful study and I have tried to analyze it my brief so that to be of assistance to the Court but it can’t very well be done on our oral argument.

The Court of Appeals held and here the Court was unanimous that the Hickenlooper Amendment did not apply to this kind of situation at all, would never intended to apply in this situation that Court of Appeals of the State of New York has also held with the Hickenlooper Amendment is to be given a very narrow reading and did not apply to a situation before it in the French case so that the Hickenlooper Amendment -- I really don’t think has anything do to with this case and I think this Court when it gets to analyze it in detail will come to the same conclusion.

What is much more important is not the Hickenlooper Amendment but the letter of Mr. Stevenson.

: Mr. Rabinowitz, in connection with the Hickenlooper Amendment, if we had a case here that clearly and admittedly tell within the scope of the Hickenlooper Amendment so that if you can imagine one of the point which you would not disagree.

Would your argument be that the amendment is unconstitutional?

Mr. Victor Rabinowitz.: I have argued it so, yes.

: And that you must in order to sustain position you have already stated I take it --

Mr. Victor Rabinowitz.: Yes.

: Because you could not accept Congress’ direction for the courts to as you would put it in they 'll be severely even.

Mr. Victor Rabinowitz.: Frankly, Your Honor. You have expressed it even better than I did.

: Yes.

Mr. Victor Rabinowitz.: I agree.

I think the Hickenlooper Amendment is unconstitutional because it is an economic part of Congress to tell this Court what it may or may not.

: But if it isn’t, then it is rather relevant to this case even if it does not apply, I take it.

Mr. Victor Rabinowitz.: No, sir.

If it doesn’t apply, I don’t think it is relevant.

: Well, it’s a rather a vast fundamental expression by Congress to the relationship between courts and the Executive of what the judicial job is for example.

Mr. Victor Rabinowitz.: Well, it is direction to this Court which it constitutional I suppose this Court has to follow that in certain kind cases.

Not this kind but other kinds of cases, the Act of State Doctrine shall be suspended.

: Now, other cases in which even more severely might represent some threat to the foreign policy.

Mr. Victor Rabinowitz.: Might.

I suppose that.

: Yes, it would look like cop.

Mr. Victor Rabinowitz.: Now, we have here an expression by a legal adviser to the State Department which seeks to undercut the Act of State Doctrine.

And while the legal advice limit to his contentional or has lead it to counterclaims, I really don’t understand why because all of his arguments go to anytime on the claim.

And once we eliminate the counterclaim element, there is nothing new about this proposal.

The proposal in effect is a suggestion that the Executive Branch of the Government shall have the right to tell the Court either to apply or not to apply the Act of State Doctrine.

Now, that is not a new proposal.

It was made first when Mr. Stevenson was the Chairman of the International Law Committee of the Bar Association of the City of New York in 1959.

It was repeated by Mr. Stevenson when he was writing for the probably American Chamber of International Law in about 1953.

It was discussed by the Court in the Sabbatino case.

It is as I read it a position that is endorsed by Mr. Justice White or was in his opinion, in his dissenting opinion and it was opposed -- it was opposed most vigorously by Mr. Katzenbach and by the Solicitor General in the last administration, and the court in the Sabbatino case disapproved it, and it disapproved it for reasons that are set forth in the Sabbatino decision and nothing new has happened.

Except that whereas the last administration has said this is not a business for the Executive Branch for the court at all and we will take care of our own foreign policy.

We don’t need the court to get mixed up in it because who knows how the court’s going to decide.

It is really uncontrollable.

We don’t know how the court is going to decide any particular question and therefore, we would assume that the court stay out and it referred over and over again to the possibility of embarrassment to the Executive Branch because we do not know how the court will decide the case.

Now, this administration differs and while as I say, Mr. Stevenson, of course, is quite consistent he took this position while in private factors, he took this position as editor of the journal and he takes his position now and it is quite proper that he should be consistent and it is quite proper that the administration should change when the administration changes, but that is not the problem of this Court.

The problem of this Court is to apply a doctrine which is 80 years old at least in our court and which was most recently affirmed in Sabbatino and no new reasons have been suggested why that doctrine should not be applied at this point.

Now, once we get passed if this Court should decide that the Act of State Doctrine is not to be applied --

: Let me ask you one question Mr. Rabinowitz, do you say that Bernstein is inconsistent with Sabbatino and most of them are disapproved by implication in Sabbatino?

Mr. Victor Rabinowitz.: I think not.

I think that Bernstein was a freak.

I think the case was a sport.

It arose in the situation which is very difficult to duplicate.

The facts were most unusual and it’s one of those cases which because it involved the Hitler Government because it involved the terrible excesses against persons of Jewish faith at the seizure of property under circumstances which we are all familiar with, and because the government was no longer an existence presented a situation which is I say is sui generis.

It’s his own situation and this is exactly I mean, this is not my idea, this is exactly, it is not only my idea, this is exactly what the Solicitor General said in the brief he submitted in Sabbatino.

He said it is exceedingly narrow situation and I commend the reading of that brief too Your Honor.

It is exceedingly narrow case.

It ought not be extended at all.

It arose at the very unusual facts which are not duplicated here and this Court, the Supreme Court has been the past on it in effect let’s -- let it rest.

Let’s not resurrect it.

And as I read the Sabbatino opinion, that’s what the Sabbatino court said also.

It said Bernstein ought to not to be extended.

It happened at long time ago, leave it alone, it gives us no lessons for a different situation.

So that while I think the Sabbatino case is not inconsistent with Bernstein, at least it says leave Bernstein alone, don’t extend it any further.

If this Court for one reason or another decides that it will go into the question of the legality of the Cuban expropriations that of course is the question that on the Sabbatino, we should not be discussing at all.

I have attempted in my brief to discuss the nature of international law and what the practice of nations has been.

International law is supposed to be the practice of nations.

Not the practice of the United States and Great Britain, but the practice of all nations including the Soviet Union and Indonesia and China and of the whole entity that we in general terms now called Third World or the developing nations or as Mr. Justice Harlan said the capital importing nations.

And I have attempted in an appendix to do a job which I hope was as good as I could do in with the facilities I had to show that the practice of nations is by no means clear.

And again, this was not my thought because that’s what this Court again said in Sabbatino that there is great doubt about whether an expropriation under these circumstances is a violation of international law because there is great doubt as to what is the practice of nations.

Not the morality?

Not the Fifth Amendment or the due process legality of this expropriation, but the practice of these expropriations.

What is the practice?

: Mr. Rabinowitz, did you go into the -- give your view of what the legality of an international law discriminatory expropriation?

Mr. Victor Rabinowitz.: I don’t know that I discussed that but Your Honor, there is no -- I’m glad you raised it.

There is no suggestion in this record that this was a discriminatory expropriation.

Every Cuban bank was expropriated at the same time as the American, a couple of days later perhaps, as the American bank was.

This was part of a transformation of a government from a capital --

: Would you say the same thing in Sabbatino?

Mr. Victor Rabinowitz.: But I said the same thing in Sabbatino, but the court -- at least the Court of Appeals disagreed with me.

But the Court of Appeals if the opinion will be read carefully, the Court of Appeals and I really think this was wrong [Laughter Attempt] Your Honor, the Court of Appeals in that case.

The Court of Appeals found it discriminatory and it said, sure they confiscated not only American property, but Cuban property as well, but there was a difference of two weeks.

And those two weeks where the -- three weeks or a month perhaps, but it was a difference of a few weeks in time, and those few weeks where critical because that what the time of the sugar harvest.

And that is what made it discriminatory according to the Court of Appeals in Sabbatino.

: Well anyway --

Mr. Victor Rabinowitz.: But there is no such thing here.

: Anyway, you did not address yourself to that issue.

Mr. Victor Rabinowitz.: No, I do not address myself to that quite right.

I should have the next time round. [Laughter]

I’ll try to.

But I did not and I agree that I should have Your Honor but I don’t believe that this was discriminatory and I don’t believe that any argument can be or has been made that it was discriminatory.

Now, as I say, the -- we are not here discussing the morality of the nationalization.

The result of any review of the cases of the facts will show enormous diversity and while it is true that there have been settlement reached and compensation paid in many of these cases, never, never has it been the result of a judicial ruling.

Never has it been because some courts said this and or that is illegal.

It has been the result of the way we settle international disputes in this world by diplomatic negotiation, and not by judicial interpretation.

The suggestion and the reason for the State Department’s letter in this case is that they want -- the State Department wants to protect foreign investments abroad and if I may just have one minute.

I think the Sabbatino court answered that.

If a foreign developing country is prepared to risk breach of diplomatic relations, freezing of assets, embargo on trade, embargo on travel, end of all aid and a host of other sanctions that the Executive Branch can make, it seems to me most unlikely, that it is going to be upset by the fact that a court sometime 10 years hence, is going to say that in addition, the expropriation was illegal.

The sanctions have been applied.

Cuba will not get the money as I pointed out a moment ago and that forth to take care of that in terms of the policy of the United States.

Thank you.

Chief Justice Warren E. Burger: Thank you Mr. Rabinowitz.

Mr. Harfield, you have five minutes left.

Rebuttal of Henry Harfield

Mr. Henry Harfield: Thank you Mr. Chief Justice.

I would like to begin just by without attempting to argue these points to indicate that at page 15 of our reply brief.

We pointed out that on October 13, 1960, and that date is important.

This was between the time that the Cuban government had confiscated the bank’s property in Cuba and after the bank had asserted its right of offset which I mentioned to you within a matter of days or so that following that -- but before the action was commenced, the Cuban government dissolved Fondo which had been the owner of this collateral if pledge and as we point out as I say at page 15 of the reply brief transferred the rights of Fondo in the collateral to this respondent.

Then when that had been done, they started the lawsuit.

I don’t want to dwell too much on the question of the autonomy of this respondent.

I think and I made this point back in the District Court there is some 11 years ago, there is pretty good president on this which goes back to Genesis and says the voice is Jacob’s voice but the hands of the hands of Esau, and I think that that is applicable in respect to the relationship and the transactional relationship between the Government of Cuba and this respondent.

Chief Justice Warren E. Burger: Well, I didn’t think there was much doubt about that.

Mr. Rabinowitz said you did not want to get into discussing his plans foreign policy and I don’t assume banks in Cuba have foreign policy.

So I don’t think we need to dwell much on it.

Mr. Henry Harfield: Thank you, Your Honor.

As to the question of the argument about windfall, I would refer the Court with respect to page 10 of our reply brief where we’ve done the best we can to deal with that argument and I won’t press this further on your time.

I want to close simply by knowing what is really not my job to do and that is talk about the fact that there is a great deal of more that is happened since the Sabbatino case then a change of administration, and a great deal more in respect of what our Government has done.

This Court will surely be aware that in the Sabbatino case, the Government made no expression whatsoever, and protested against a misconstruction of what had been alleged to be its statement.

Here, it has done what it set out to do and is I submit entirely consistent in its position as to its function and its duty with respect to the foreign policy of the United States and with suggestions to a coordinate branch when it becomes appropriate to do so, and I think that the department is been perfectly consistent.

Now, let me close on this point.

The argument that has been made here comes on two points.

One of them is that this Court should apply the Act of State Doctrine whether or not it was otherwise applicable because its coordinate branches of government requested not to do so, and that unless the court does this extraordinary thing, it is going to find itself in the position where it has to make a decision as to international law.

Well, this is the function of the court as was recognized by like Mr. Justice Harlan in Sabbatino.

It’s one of the many functions, and the suggestion that the Court must shy away from a decision of international law seems to me perfectly absurd.

Turning then to the question of what is the international law on this issue, and again, I don’t want to burden the Court, but we have a history that goes back as far as there’s any record of Government policy and of acceptance by the judicial branch, the proposition that when a foreign government takes somebody’s property, particularly if it is property for the American, there is an implied obligation to pay for it.

That to recognize that obligation does not involved characterizing the foreign government as being a thief or a villain.

This does not really call in question of validity, but to the extent that the validity can be called in question as I suggest, it already had been under a case which Mr. Rabinowitz agrees that he can look for amendment applies to as in the Farr case.

There can be no doubt.

Chief Justice Warren E. Burger: Well, I have notice of the sovereign ever -- can the motives of a sovereign ever be called in the question in an expropriation?

Is it not only -- is it not just the value of the property that’s involved?

Mr. Henry Harfield: Well, I think that would be so Your Honor.

Here as I have said, the value is stipulated.

The motives may be taken into consideration where there is discrimination as I believe the finding has been so far of the courts in the United States.

Thank you.

Chief Justice Warren E. Burger: Thank you Mr. Harfield.

Thank you Mr. Rabinowitz.

The case is submitted.

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Banco Nacional De Cuba v. Sabbatino - Oral Argument, Part 3

Wed, 16 Jan 2013 22:48:05 +0000

Case:

Banco Nacional De Cuba v. Sabbatino

Media File:

16_19631023-argument-3

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16_19631023-argument-3

Transcript:

Argument of Whitney North Seymour

Chief Justice Earl Warren: Banco Nacional de Cuba, Petitioner, versus Peter L. F. Sabbatino.

Mr. Seymour, you may continue your argument.

Mr. Whitney North Seymour: Mr. Chief Justice and may it please the Court.

I'm going to argue today that the judgment below was right because the confiscatory decree of Cuba was plainly a violation of international law and that the Act of State Doctrine should not be extended to cover violations of international law and that the act of state doctrine should not be extended to cover violations of international law.

And, second, I will argue that the confiscatory decree which was sought to be enforced in New York, to some extent, violated New York public policy and that the judgment is correct on that ground as well.

And, first, I must follow some beaten past but I'll follow those very fast.

Of course I don't need to argue that, since the constitution was adopted, international law has been recognized by this Court as a part of the law of the land stated eloquently in the Paquete Habana and Lola and in the eel case and many other cases.

And, the law of the land is no more obscure in the international law field than in any other field.

The importance of upholding international law was certainly never more important than it is today.

The movements with which Your Honors are familiar, the International Commission of Jurists, the World Peace Through Law Movement, both recognized the great importance of establishing and maintaining the rule of law including the rule of international law.

Mr. Rabinowitz, yesterday, suggested that there were a lot of new countries in Asia and Africa who would think that if the American courts adhere to international law and enforced it in connection with the acts of foreign states that they would be thought to be pursuing a local policy, but international law is not of that character.

The great meetings of lawyers around the world in Asia and Africa, many of the lawyers from these new countries have shown their adherence and devotion to these same principles.

At page 42 and 43 of our brief, we quote in part from the declaration adopted at the final conference in Athens which the Chief Justice attended and which declare the devotion of the lawyers of the world to the cause of the rule of law and to international law.

And that devotion was never more eloquently stated, I think, by the Solicitor General here, a day before yesterday, in the Barnett case.

So, we start from the proposition that the internation law is a part of our law, and then I want to discuss very briefly the question of whether the Cuban action didn't clearly violate international law.

And, here, the Deputy Attorney General very properly conceded that it did.

The United States had taken the position that it did.

The courts below were clearly correct in concluding that it did.

The Cuban decree was, on its face, adopted in retaliation against the action in reducing the Cuban sugar quota.

It was aimed squarely at American interest on its face.

It was, thus, retaliatory and discriminatory and, on those grounds, violated international law.

But, it also represented the confiscation of the property of aliens without compensation and, on that ground as well, was a violation of international law.

Justice Potter Stewart: On that ground alone, would it be a violation?

Mr. Whitney North Seymour: On that ground alone, Mr. Justice, in my view, we do not --

Justice Potter Stewart: You referred to the meeting in Athens.

Wasn't there a -- some difference of opinion at that very meeting as to whether or not confiscation without compensation would be a violation of international law?

Mr. Whitney North Seymour: Well, I have to attempt to reconstruct that meeting, and I have referred to it in the footnote in our brief on page 42.

Mr. Rabinowitz's proof, I think, incorrectly describes the action at Athens as one where there was grave dissension on this point.

I think the fact was that there was a resolution adopted toward the close of the meeting, and then some of the representatives or some of the newer countries thought that the American had unduly dominated the deliberations and asked that this matter be put over for a study by the World Law Center, which was to be created afterwards.

But, this came almost on the heels of the almost unanimous determination by the UN that confiscation without reasonable compensation was a violation of international law and I don't think the Athens action can fairly be regarded as casting any doubt on that question.

Now, let me just touch on the nature of this confiscation without compensation so that there won't be any doubt that the courts below were quite right in re -- in regarding the -- the provision for compensation which was suggested in a kind of a casual way in argument as being real compensation.

It was provided, in effect, that those whose property was con -- was confiscated might be compensated in the form of 30-year-Cuban bonds to be issued after appraisal of the value of the property by Cuban appraisers.

And, these bonds were to be taken care of out a sinking fund, the payments into which were entirely a matter of discretion of the Cuban authorities, and the sinking fund was to be made up in this fashion 25% of the amounts received for Cuba sold to the United States were to be deposited in that sinking fund over a period of years, but only 25% of the sales to the United States over 3 million European long tons at a price higher than had ever been paid for a Cuban sugar in the 10 years before the decree.

And, in only one year, had as much as 3 million long tons been sold to the United States.So, it's perfectly evident that this was an illusory provision and made no provision for compensation in effect.

Now, my learned friend, Mr. Rabinowitz, in his reply brief, quotes from a television interview with Mr. Castro in which he says he might be willing to negotiate with Americans on proper terms, a -- an interview three years after the event, surely, no possible support for their view that this was prompt and adequate compensation.

And so, we have a decree which was confiscatory, retaliatory, and discriminatory and it's settled by repeated declarations of the authorities to which the court looks for international law that such decrees violate international law.

Now, the doubt that the court of appeals had, or at least expressed, in trying to break down the decree is one that need not concern the court, it seems to me, at all.

It's evident that the court of appeals considered this decree to violate international law.

It was a little in doubt whether a decree which merely confiscated would violate international law if adequate compensation or if some compensation were provided.

In the first place, we're not dealing with such a decree.

In the second place, my learned friend suggested yesterday, the Deputy Attorney General, that one of the concerns about -- of the Government about our contention here was that maybe a court would sometimes make an error about international law, and I submit that an error of a lower court is to be corrected here, if there was any error in connection with its conception of international law, but I don't --

Justice Potter Stewart: If they want to, that was conceivable.

Mr. Whitney North Seymour: It's conceivable but it's sufficiently rare, so that I think we would all chance it.

Justice Potter Stewart: If a state court made an error in its understanding of international law, would this Court have jurisdiction to review it?

Would that be a federal question?

Mr. Whitney North Seymour: Well, I'm not sure, but I know it's been suggested that international law is so delicate a plan that it should not be subjected to scrutiny except by those in the State Department.

Justice Byron R. White: Isn't it -- isn't it an adversity suit?

Mr. Whitney North Seymour: Yes, sir.

Justice Byron R. White: Do you (Inaudible)

Mr. Whitney North Seymour: Well, I would suppose that the usual rule was that the -- in a diversity suit, one would look to the law of the state or the forum, but the general principle which has been followed in the federal courts, in the Act of State Doctrine, has been followed in various cases in the federal courts, and the State of New York follows the Act of State Doctrine, too.

And, therefore, there isn't any substantial difference on the Act of State Doctrine in the forum and in the federal rule.

Now, let me just go back to the question that Mr. Justice Stewart, I don't mean to pass over to your question at all, but I think the law of New York and the federal rule would be the same on the Act of State Doctrine.

It doesn't seem to me that the examination of questions of international law by a federal court or a state court is any more difficult than the examination of lots of other question that they have to examine.

Some questions which affect the life and liberties of the people and the appellate courts sit to review those questions and, on the whole, keep the lower courts from committing egregious errors, and I'm going to come a little later on to the question of whether that concern expressed by the Deputy Attorney General ought to keep the court from applying the law of the land in act of state cases.

I don't want to get ahead of myself on that if I could -- if Your Honor will bear with me a moment more.

Now, here, we have not a question of the security of titles but an action by the Cuban Government to enforce, in effect, the Cuban decree, get the avails of the effect of the cuman -- Cuban decree, and then use the Act of State Doctrine to shield its activity so that no inquiry can be made by the court about the nature of the decree and its violation of international law.

And, I submit that no authority requires this Court to permit such an action without that inquiry and, indeed, what the Cuban Government seeks here is very much like what the Chinese Government sought in the National City Bank case.

It seeks to use our law by any other litigant but it wants our law free from the claims of Justice, and I submit that that principle which was there applied in connection with the question of a counterclaim is equally applicable where the foreign government is, in effect, the plaintiff.

Now, the briefs here examine the authorities, our brief and briefs of amicae, beginning with Underhill and going through the Shapleigh case, and they undertake to try to satisfy the court that those cases really didn't decide this question.

That Underhill, at least, is really a sovereign immunity case despite the breath of some of the language in the opinion that the other cases did not involve violations of international law because they involve, in the case of Oetjen, a Mexican citizen, and in the case of Ricaud, an action of a revolutionary force which might very well be regarded as not a violation of international law, and I'm going to -- instead of taking Your Honors' time with the review of those cases in detail, I'd like to rest on the briefs on that proposition.

I say they do not control the decision here.

They do not require the Court to say that, where there is a violation of international law, the courts of the United States will not review that violation because of the Act of State Doctrine and any dicta which may be thought to go beyond that could be appropriately limited.

Your Honors, in Baker against Carr, certainly, limited the sweeping language of Oetjen to the extent that it suggest that all foreign relations matters were beyond judicial competency because they were political questions and I see no reason why, if there is anything in Underhill or the other cases that requires limitation, the Court cannot -- can't do it.

Those cases were all decided before the present development of international law had reached anything like its present state or before the countries of the world was concerned with it as they are or before the international agencies like the UN and the World Court were in existence.

And, I submit that, today, the concept of international law, the importance of international law justifies a fresh look at those questions.

Now, there's one case that my friend Mr. Rabinowitz referred to that I don't want to wholly omit reference to and that was the Bahia case in which, right after an American had hijacked an American plane which was returned by the Cuban Government, a Cuban hijacked a Cuban freighter and it was kept in the custody of the Coastguard off of Norfolk.

It kept it so in their custody that the US Marshall from the district court was not allowed to border and file s -- and file a libel.

A suggestion of sovereign immunity was filed by the State Department and there was, pretty clearly, an executive understanding that, in view of the return of the hijacked airliner, the hijacked ship would be allowed to proceed.

And, in that case, in opposing a stay that the government cited here, the Underhill case and the cour -- and the Chief Justice, in his memorandum denying a stay, referred to the Underhill case.

And, I think they're perhaps quite appropriately because there was a sovereign immunity case basically and the case in which, in effect, the Executive Department had undertaken to deal with this matter and, no doubt, the courts would give effect to executive agreements as they did in Pink, in Belmont, and many other cases and I think this was, in substance, a case of that kind.

Now, we don't need to argue any --

Justice Potter Stewart: Mr. Seymour, was that ship, the Bahia de Nipe, owned by the Cuban Government?

Mr. Whitney North Seymour: Well, it was treated as a Cuban vessel, yes.

It had been --

Justice Potter Stewart: It's Cuban registry but was it --

Mr. Whitney North Seymour: Well, my impression is that it had been -- that it was owned by the Cuban Government.

The claim was principally by the United Fruit Company.

They're part of its cargo which was this sugar.

But, in any event, it was treated -- the State Department, through the Attorney General, filed a suggestion of immunity.

Justice Potter Stewart: With the Fourth -- in the Fourth Circuit or in the District Court --

Mr. Whitney North Seymour: Yes.

Justice Potter Stewart: The question --

Mr. Whitney North Seymour: And, on that basis, the ship was ultimately released.

Justice Potter Stewart: But the issue there was not sovereign immunity, was it?

The issue was act of state, wasn't it?

Mr. Whitney North Seymour: Well, their issue was act of state but it was a sovereign immunity case, and I think that cannot be overlooked in trying to interpret the case.

The act of state argument was made on behalf of the United Fruit Company and, yet, here was a -- here was an emergency situation in which a hijacked airliner had just been returned.

Here was a hijacked ship and with a very difficult case, and I don't know whether it made battle or not, but it was a very difficult case.

But, it was within the area, I submit, of executive understanding or agreement.

Justice Potter Stewart: But doesn't that suggest that -- I don't know if that argument helps you here very much.

Doesn't that suggest that, perhaps, that's the area in which these things ought to be worked out?

Mr. Whitney North Seymour: It doesn't suggest that to me.

Justice Potter Stewart: I mean, tomorrow or the next day, there may be a couple more hijacked American Airlines.

Mr. Whitney North Seymour: Well, and there may be some --

Justice Potter Stewart: And is given to (Inaudible)

Mr. Whitney North Seymour: There may be some Litvinov agreements.

And when there are Litvinov agreements and when there are understandings about hijacked planes, then I suppose the courts will respect them but, in the mean time, the law of the land, the international law, is being obtruded through the Act of State Doctrine in every case, and I s -- I want to come to this point in a little more general way in a moment.

I don't mean to try to winso --

Justice William O. Douglas: Would --

Mr. Whitney North Seymour: Winsome away --

Justice William O. Douglas: Would you --

Mr. Whitney North Seymour: -- from the question.

Justice William O. Douglas: Would your argument, Mr. Seymour, be any different if there was compensation but it was nominal compensation?

Mr. Whitney North Seymour: I don't think so.

Justice William O. Douglas: What you're doing is applying the just compensation?

Mr. Whitney North Seymour: I think the rule of international law is just and prompt compensation for expropriated property and then, when you get less than full compensation, there must be a point at which it's illusory as it was here, and that violates international law.

Now, I'm not -- I no -- don't have to argue because of my friend's concession yesterday in the colloquy with the Court that this is a constitutional matter, that there's any constitutional inhibition on the courts requiring that they defer to the Executive all the time in this matter because it's clear that it isn't full of constitutional requirement.

Justice Byron R. White: Mr. Seymour.

Mr. Whitney North Seymour: Yes?

Justice Byron R. White: This is in connection with what I asked a while ago.

If this case had come up in the state courts, the state and the State Department had asserted the Act of State Doctrine, and the New York courts had said "run along.

We'll apply an ordinary conflicts rule and we shall not enforce something contrary to local public policy” and gave judgment against the Cuban Government, and the case was brought here.

What would be the federal question?

Mr. Whitney North Seymour: Well, I would have to rely on your ingenuity to discover that.

Justice Byron R. White: Yes, but how about yours?

Wouldn't you have to get to the constitution?

Wouldn't it have to become then a matter of separation ofpower?

Mr. Whitney North Seymour: Well, I suppose it would be argued by those who try to bring the case here that, somehow, the separation of powers, while not a constitutional matter, was so established that there was a basic question of federal policy involved.

Justice Byron R. White: Well, now, isn't that exactly the position you're in here when -- since it's a diversity suit?

Mr. Whitney North Seymour: I don't think so.

Justice Byron R. White: Well --

Mr. Whitney North Seymour: I don't think so.

Justice Byron R. White: It seems to me that --

Mr. Whitney North Seymour: Let me -- let me try to deal with that as I go along and if don't deal with it to Your Honor's satisfaction, I will try to come back to it.

Well, now, I want to pass, if I may, to an attempt to deal with Mr. Katzenbach's policy argument, and I'll hope to pick up some of the answers to some of the questions that I've deferred there.

With the greatest respect to the -- to the Government, to government counsel and to those who purport to speak for the State Department on this matter, I submit that this argument really, when Your Honors come to consider it in prospective, exaggerates the importance of the Executive as the upholder of international law and minimizes too much the role of the courts as the upholder and definer and enforcer of international law.

That it, naturally, and I naturally expect, the Executive Department to defend every possible prerogative that may exist.

It naturally tends to suggest that it's only through the declarations of the State Department about international law that international law can be advanced and it doesn't do any good for courts to make decisions about international law or to enforce international law.

That they may only just get in the way of the State Department in this regard and that it would be far better for them to continue the self-denying practice of the past and just keep out of this and let the rogue elephants that may be loose in the family of nations and may be violating international law come into our courts and enforce their decrees and let the State Department protest.

Not all was effective with rogue elephants.

It would be the one voice of the United States in support of international law.

Now, I submit that this view takes too poor a view of the contribution that could be made by the judiciary in this field.

I think it stems from a kind of a mystique about foreign relations, a kind of a feeling that, in this field, you have to leave it to the experts and I submit that, in a day when it is part of defined and declared American policy and has been for a long time, not a policy of the moment but a policy of the United States that international law is to be upheld, that the rule of law is to be upheld, that it's too important a matter to be left solely to non-lawyers and that courts and lawyers can make some contribution to it.

Now, I'm going to just go over it quickly because my time is very short, some of the main points that were made by Mr. Katzenbach in this field because many others will occur to Your Honors if you come to think about this.

And, first, let me lay aside one suggestion that Mr. Rabinowitz makes in his reply brief.

He says that when the lawyers, the amicae curae, and the others, undertake -- try to deal with these policy questions, they are confusing themselves with judges of this Court and with the Secretary of State.

I hope we're not committing that transgression.

I would've supposed that on argument as to the proper role of the various divisions of the government was open as a natural part of the advocacy in the case.

Now, as I understand the Government's brief, and Mr. Katzenbach may have alighted some of these points yesterday.

First, it suggested that the courts ought not to concern themselves with violations of international law in this field but simply let the Act of State Doctrine operate to let confiscatory decrees have their way in the United States because you can't establish a world rule of law by occasional judicial decisions.

Well, of course that's true, but every brick in the wall of international law placed there by an authoritative court respected around the world is better than another hole in the wall which is created when a confiscatory decree in violation of international law is permitted to have its way.

It suggested that if the court looks at international law in connection with such a decree, it may cast out upon international titles and I submit that, first, we don't have any such problem here because this isn't a question of a third party title.

We don't the problem of what you do about purchases, with or without notice, and that sort of thing.

But, I don't really see why it should be clear that the United States could be -- should become the natural thieves market for the sale of goods confiscated in violation of international law around the world and why this should be one of the countries where the courts feel that they must not interfere with titles so obtained.

Now, it suggested that, somehow, Cuba would react adversely, Cuba and other countries similarly situated to a decision of an American Court that they were in violation of international law, whereas, they would naturally acquiesce gracefully in any claim on behalf of the State Department to that effect.

I submit just the opposite is the case.

As Mr. Rabinowitz never more clearly shown -- showed than he did in his statement to the Court yesterday that, of course, the State Department could say anything they wanted to about international law.

That didn't make any difference, but courts shouldn't do it.

It's just this point that I want to emphasize to Your Honors.

When courts deliberately declare that a part of the law of the family of nations has been violated by this decree, the impact of that action is not only on the country involved but on the rest of the judges and lawyers of the world.

And, I submit that the Court should not downgrade its contribution in this field or assume that it's only the Executive Department's declarations that will be given weight.

Now, it suggested that this might interfere somehow with diplomacy.

I submit that that's a much exaggerated claim.

I suppose there are two possible sets of facts.

You can imagine any -- any number.

There is one set of facts in which the court decides if there's a violation of international law and the State Department is in negotiations with the country to try to work out arrangements on the basis that the country has violated international law.

Now, in such a situation, how can a declaration by a court possibly adversely affect those negotiations?

And, if you assume the opposite that a court decide there has been no violation of internal law, isn't it perfectly plain that if the State Department has taken another view since international law and whether or not it's been violated is a matter that scholars and lawyers generally can determine, that they'll see through at once the claim that there's been a violation of international law?

I'm not suggesting that the courts ought to take up the diplomatic post.

I'm suggesting that, as they contrid -- contribute the bricks to the wall of international law, they parallel and do not interfere with the activities of the Executive Department.

And, any concern to the contrary is simply an excessive confidence in the activities of non-lawyers and an excessive doubt about the contributions of judges and lawyers to this field.

Now, one final thing, Mr. Katzenback said yesterday that if you -- if you took this view, the courts would be involved in reexamining foreign judgments on the ground that they might involve violations of foreign law -- of international law.

Well, my understanding of the rule is that the Court now examines foreign judgments for lack of jurisdiction, for fraud, perhaps for lack of procedural due process.

Surely, the fact that a principle of American law, a part of the law of the land, gave an additional subject on which foreign judgments might exam -- be examined would not unduly burden the courts.

And, I submit, taking this in its most authoritative form, this really expresses an exaggerated concern and that the courts, by passing on these cases as they arrive -- arise, applying international law to the applause and enthusiasm of the countries of the world who live by international law, the decisions of this Court and the American courts are the guiding lights for most of the new countries who are trying to work out the principles of their law and, to have our courts showing their devotion to international law rather than their willingness to wink at violations of international because of the Act of State Doctrine would be useful.

And, I do not see the possibility that, occasionally, a lower court decision might need correction should stand in the way in -- to any degree.

Justice Potter Stewart: Mr. Seymour, get to this in your own good course, but am I right in understanding that if C.A.V. is the bona fide of Cuban national, then international law is not involved at all.

Mr. Whitney North Seymour: Well, I don't -- I don't agree with that.

If -- maybe I can dispose of this whole point right now.

I was going to mention it in a moment.

The incorporation of C.A.V. in Cuba with 90% of its stockholders -- American stockholders would put it in the category where, as a matter of international law, based upon the views of commentators and many of these things before Your Honor, the question of violation of international law would be considered and would be involved, and I submit the fact that Cuba picked it out for confiscatory, discriminatory, retaliatory attention shows that it would be in the position to raise the question.

Now, I don't think the fact that it's a Cuban national under those circumstances would stand in the way of consideration of its claim of violation of international law and so the lower courts upheld.

Justice Potter Stewart: We know the lower court upheld it and the honorable court --

Mr. Whitney North Seymour: Well, I think Your Honor will see in our brief extremely respectable authority for that decision, and any contention to the contrary just disregards the estoppel which is really worked by this decree.

And, I'm not going to argue that further because I think the decree itself --

Justice Potter Stewart: That's the language pointed out by my brother, Goldberg, yesterday.

Mr. Whitney North Seymour: Yes, sir.

Now --

Justice Tom C. Clark: I don't wish to interrupt the train of your argument but I wish you would cover somewhere the matter that I've raised before in which you suggested, I believe, in one of the briefs, that we might -- in order not to enforce, as you tell it, the claim of the rogue elephant that we vacate and direct the suit to be dismissed.

Mr. Whitney North Seymour: Well, I think it would be a proper disposition of the matter if the Court felt that it could not consider the international law issue and I think, since the international law issue is a critical factor here, that the Court should dismiss the case and the net result of that might be dubious under the escrow agreement, but that's something the parties would just have to figure out for themselves.

But, the argument that Mr. Laylin makes in his brief amicus and Mr. Brown make that, where the court is unable to consider all issues, the court shouldn't consider part of it and dispose of it on that basis.

It seems to me, they have a good deal of American.

Now, let me --

Justice Potter Stewart: In suggesting -- just so I can follow up as to -- you're suggesting that, under the given circumstances, a dismissal would be proper, a dismissal of this petition for certiorari or a remand with directions to the trial court to dismiss it?

Mr. Whitney North Seymour: Well, I think the proper disposition of this case is an affirmance.

Justice Potter Stewart: Yes, I understand.

Mr. Whitney North Seymour: If Your Honors do not affirm then there are two possible dispositions that would be proper in my view.

One would be to remand to the lower court to try the issues which are raised as to when the Cuban decree became effective, when title passed, if it passed, and so on.

And, the other disposition, which is the one rather intimated in Mr. Justice Clark's question, would be the direct dismissal upon the ground that, since the Court, if Your Honors adhere to the Act of State Doctrine in the teeth of a violation of international law, upon the ground that all the issues can't be considered.

Justice Potter Stewart: Direct the trial court to dismiss it.

Mr. Whitney North Seymour: Yes.Yes.

Mr. Whitney North Seymour: Now, let me just come to -- I just got a couple of minutes more and I'm going to hurry over two points, one, the so-called Bernstein letter question.

In this case, the State Department wrote letters which, amicae thought in the court below and the court below thought, indicated that the State Department did not object to the court considering the questions here.

Mr. Katzenbach and the Government brief take the view that that is a misinterpretation of those letters and I'm not in the position to quarrel with them, although the letters seem to me to go a little beyond ordinary amenities.

But, my view of the proper rule here is this.

Since there's no constitutional inhibition on the consideration of these matters by the courts, the courts saw it not as a matter of course to consider that they have to ask the State Department before they can consider cases or controversies which are committed to them by the constitution.

They're performing a constitutional function in dealing with the case or controversy and they ought to consider the State Department's views only if a matter of paramount national interest may be involved.

I would recognize, although it's not involved in this case, that if there were a situation where the dec -- the momentary decision by a court jeopardize the national interest to the point where everybody would recognize it, the court might decide to defer briefly or at length to the request by the State Department.

I think that's a far different thing from just saying “we won't move unless the State Department says we can.”

In the Bernstein case, it said it could because there was no violation of international law involved.

And so, the Bernstein case is not in point here at all anyhow.

Now, finally, let me come to the New York policy question and, Mr. Justice White, I hope this doesn't -- I hope this may answer your question.

I'm not quite sure.

New York's policy is clear, established by cases on our brief, that where a -- an expropriation decree is sought to be given any effect in New York, the New York courts will not enforce it.

A long line of authorities established that proposition and I think it's not disputable.

Now, in this case, what happened was that C.A.V. had a contract with Farr.

The Cuban Government expropriated.

It purported to expropriate the sugar but, in order to make it effective, must have appropriated some interest under that contract.

And then, it proceeded under duress to force Farr to make a new contract with a representative of the Cuban Government and then presented the documents pursuant to that new contract to Farr in New York and demanded payment.

Now, in substance and effect, that was nothing but a subrogation to the rights of C.A.V.

C.A.V. had a claim with c -- with Farr.

The Cuban Government made an identical contract, dated it back to the same day as in the original contract showing that they were simply trying to affect the same rights, and then they made the demand in New York.

Now, to disregard the form and consider the substance of that transaction is a step which I think is quite consistent with judicial action.

And, I think that the substance of that transaction was that Cuba sought to reach into New York to get payment.

And, whether you say that it was direct or indirect doesn't make much difference because payment could not be made except by enforcing the shows in action in New York, and that's exactly what happened in these cases where New York would not enforce the foreign decree because the foreign decree sought to deal with assets in New York, and this was the substance of that.

Now, Section 977 (b) of the New York Civil Practice Act, under which Sabbatino was appointed receiver, was passed to enforce the New York public policy, as cases on our brief show.

And, the policy was against expropriation in decrees being made effective in New York and these assets, in the hands of Farr, taken under custody by the receiver were taken under custody in connection with that transaction.

Finally, although no New York case deals with this directly, the policy of New York against expropriation and against permitting extraterritorial enforcement of expropriation decrees ought to be plainly more strong in opposing the enforcement of a decree which was retaliatory against the United States and which is sought to be enforced in the New York courts when it was adopted against the very sovereignty which is -- which has established the courts.

And, so, on broad grounds of New York policy, I submit that this judgment might correctively be affirmed.

Now, Judge Dimmick did not deal with the policy question, rejected an argument about policy, but I don't think he dealt with it in these terms.

Thank you, Your Honors.

Justice Byron R. White: (Inaudible)

Mr. Whitney North Seymour: And --

Justice Byron R. White: And any Act of State Doctrine that you (Inaudible)

Mr. Whitney North Seymour: Well, I think the New York policy would recognize an exception to the Act of State Doctrine where extraterritorial effect was sought to be given.

Justice Byron R. White: You mean, affirmed?

Mr. Whitney North Seymour: Yes, yes, they're -- the cases on our brief to that effect.

Justice Byron R. White: Then why -- what's (Inaudible)

Mr. Whitney North Seymour: Well, I would've thought that the federal court might very well have dismissed on that ground but it didn't do so.

I want to show you that you can as -- affirm the gr -- the judgment on that ground, as well as others.

Justice Arthur J. Goldberg: Mr. Seymour, is New York consummately part of international law?

Mr. Whitney North Seymour: Well, the -- let me take it in two steps.

First, it's clear that the act of state policy which is followed by this Court is not a part of international law.

It is clear that the Act of State Doctrine is an American doctrine, perhaps, also followed in England but not followed generally.

Therefore, that doctrine, not being a part of international law, I doubt if New York -- in New York, which must be only a fragment of that doctrine, is a part of international law.

Justice Arthur J. Goldberg: Then, I suppose that the question of international law will be explored and the state policy will controvert international law.

What should this Court do with international law?

Mr. Whitney North Seymour: Well, you -- I would've supposed that the law of the land was international law and if -- and that it would probably override a state policy, but that involves a terribly difficult and elaborate question which I wouldn't like to try to deal with right now.

Justice John M. Harlan: May I ask you one question.

Mr. Whitney North Seymour: Yes, sir.

Justice John M. Harlan: Am I correct in thinking that English courts do not enumerate to get the statement from (Inaudible)

Mr. Whitney North Seymour: I think that's probably correct, although -- and it's also clear, however, that, in various arbitrations and other cases which are cited on our brief involving English interests, there's been an effect by decisions from amelioration of the ct of State Doctrine but, in the decided cases in the courts, I think Sagor is probably still good law.

Chief Justice Earl Warren: Mr. Rabinowitz.

Argument of Victor Rabinowitz

Mr. Victor Rabinowitz: I should like, in the few minutes I have, to discuss some of the points raised by Mr. Seymour and, particularly, this very troublesome problem of what is international law.

It is true that the -- this Court held in Paquete Habana that international law is part of the law of this land but, of course, we must recognize a very essential difference.

In determining what is the law of this land, this Court has the final word and what this Court says is the law of the United States.

But, unfortunately, this Court cannot make the same pronouncements as to what is international law and, therefore, a decision by this Court saying that compensation, for example, is required by international law doesn't make it international law, with all due respect to this Court, because international law, as almost universally defined, is the practice of nations.

And, I submit with all due respect to Mr. Seymour and with all due respect to all of the very voluminous and scholarly briefs that have been written here, there is nothing in those briefs to justify any conclusion that these decrees were a violation of the established practice of nations.

As a matter of fact, if we look at history, we find that, at least since 1917, the established practice of nations has been -- have been to confiscate and to nationalize the property both of citizens and of aliens without paying compensation for it and, frequently, in a retaliatory and discriminatory fashion.

Now, this may be very sad and it may be very unfortunate and we may all regret it, and it may be that all of the commentators say this ought not to be allowed, but if we look at practice, it is what happens.

And, we cannot change the practice and we cannot change the law merely by saying that the law is otherwise.

In the Paquete Habana, which Mr. Seymour cites, the Court warned against this and it said, in looking at international law, we must be careful about the views of learned commentators who tell us what they think the law ought to be because that does not make international law.

We have, today, I think 112 nations in the United Nations.

When Grotius wrote, I suppose there were 10 or 15 or 20 nations which might have a sufficiently high degree of civilization so that they had a judicial system.

Today, we have 10 times as many.

I look forward, as much as Mr. Seymour does and as much as everybody else does, to the day when we can say that there is an established body of international law with respect to these very troublesome questions but we haven't got to that point.

I hope we will, but we aren't there.

And, the established practice of nations give no support and none of the authorities -- none of the briefs that had been submitted in this case show any support for the doctrines that Mr. Seymour has so eloquently argued here for today.

I would agree with him, perhaps, on the question of policy, but I cannot agree with him that there is any such law and all of the law review articles and all of the resolutions by the American Law Institute and all of the articles and comments by learned scholars, for whom I have the greatest respect, do not make international law in the face of a well-established practice to the contrary.

Now, what do we have here?

I disagree.

I wasn't fortunate enough to be at Athens but, from what I read in the papers and from what Mr. Ryan wrote to me, and it's cited in my brief, what happened was that, on one day, the conference of lawyers, which of course was not a legislative body and had no power to make law anyhow, said that there should be compensation for confiscated property and, the next day, they revoked it and said this requires further res -- further discussion.

That isn't the recognition of a rule of law, even if it were a legislative body.

As I point out in my brief, the United Nations confronted with the very problem, that also is not a legislative body incidentally, confronted with the very problem of making compensation for a nationalized property split 30 nations voting one way, 30 nations voting another way, and 33 nations abstaining.

Does this -- and some of the (Voice Overlap)

Justice Hugo L. Black: Suppose 60 -- suppose 60% had voted one way --

Mr. Victor Rabinowitz: I don't think it would've made --

Justice Hugo L. Black: And 40% in another.

Mr. Victor Rabinowitz: I think the result would have been exactly the same, sir.

It would not have established a fairly uniform practice among the nations.

Now, what the percentage point is, I don't know.

Justice Hugo L. Black: What if 75 had voted one way?

Mr. Victor Rabinowitz: I don't think it would make any difference and --

Justice Hugo L. Black: Suppose 90.

Mr. Victor Rabinowitz: Well, I suppose that if we got to 90, and it would then -- I would then have to look and see what the nations were.

And, if the dissenting nations were Chad -- I don't want to mention any nations.

I don't want to make anybody angry.

If the dissenting nations had a total population of 5% of the population of the world and the other nations had 95%, I suppose we could call something the established practice.

Justice Hugo L. Black: So, that'd be an international law that bounds us whether we wanted to be bound or not?

Mr. Victor Rabinowitz: It cert -- no resolution --

Justice Hugo L. Black: Would it be an international law if it didn't bind us?

Mr. Victor Rabinowitz: No resolution by the United Nations could make international law in any event because it is not a legislative body.

But, if this Court holds that international law is a part of the law of our country and if there is some subject on which there is a well established principle of international law, and, these days, I'm not so sure that I can find very many of them, even free passage of the sea is, apparently, not as well-established as it was 50 years ago, then I suppose that, under the Paquete Habana, this Court is as much bound by international law as it is by any other domestic law, at least that's what the -- what the --

Justice Hugo L. Black: Suppose it didn't want to be.

Mr. Victor Rabinowitz: Well, if it didn't want to be --

Justice Hugo L. Black: Could this Court make it so as it didn't want to be in, and that becomes so, by joining in some kind of a union that meant that you did have the power to make laws that are binding on the world?

Mr. Victor Rabinowitz: Well, obviously, this law could not -- this Court could not make the law for the world.

This law could -- this -- if I understand your question correctly, this Court could not decide what is international law and, if this Court decided that it tha -- did not wish to be bound by international law, then, presumably, it would not be bound by it.

Justice Hugo L. Black: Is that correct?

This Court might decide it, but Congress and the Executive might decide otherwise.

Mr. Victor Rabinowitz: That is quite possible also.

I sup -- well, I don't know whether Congress and the Executive --

Justice Hugo L. Black: Are you -- are you saying, even as far as -- are you going far enough to show this Court has a right to establish an international common law that binds all the nations of the world?

Mr. Victor Rabinowitz: Well, I don't -- I don't know --

Justice Hugo L. Black: By finding something -- by finding something other than that the government, itself, has a duty to accept mandates as binding on them.

Mr. Victor Rabinowitz: Well, this Court, I am sure, could not establish international law.

I'd suppose if there is to be, at least in the present state of our civilization, any international law at all, it must be an international common law because we don't have any legislatures that can determine these things.

Certainly, the legislature of the United States would not be --

Justice Hugo L. Black: As I recall, there was a rather vigorous opposition in this country to having even a national common law.

Mr. Victor Rabinowitz: Well, I think there was, but we passed that and I think, in many respects at least, we have it.

My time is up, but I would just like to repeat what I said that I don't believe that there is any justification, however vigorously and with whatever great sincerity and without -- however many footnotes there are.

There is no justification for any finding that there is any international law on this subject.

The nations of the world are split wide-open and most of the nations, or at least most of the people in most of the nations of the world, engage in wide-spread nationalizations frequently, I regret to say, without regard to the Fifth Amendment of the United States Constitution.

Justice Byron R. White: Mr. Rabinowitz, assuming it's a New York law, (Inaudible)

Mr. Victor Rabinowitz: Pardon me, I didn't hear you.

Justice Byron R. White: Assume -- assuming that it was clear under New York Law that, in a New York court, judgment would be against your client.

What authority would the federal courts have and this Court to override that -- not to follow the New York law?

Where do you latch into the federal system with international law or with --

Mr. Victor Rabinowitz: Well, it's a very difficult --

Justice Byron R. White: Act of State Doctrine?

Is there anything like that?

Mr. Victor Rabinowitz: It's a very difficult and baffling question and it's treated in the last footnote of the court of appeals --

Justice Byron R. White: At least without -- well, at least without getting into the federal constitution.

Mr. Victor Rabinowitz: Well, as I say, the last footnote in the court of appeals opinion raises this question and it raises a -- really a horrifying prospect.

If the Act of State Doctrine is to be dropped and if this, then, is determined by Erie against Tompkins and the Klaxon case so that every state is going to decide for itself what is international law and determining the effect of foreign decrees, we are likely to have 50 doctrines, or at least the possibility of 50 doctrines, plus one, namely, the federal system in cases arising in the District of Columbia where one of the Cuba cases of course did arise.

And, the possibility of that, I think, probably was what caused this last footnote.

The court -- the court of appeals did suggest that, and I read from that last footnote, on the other hand -- after quoting Erie against Tompkins and Klaxon, it said “on the other hand, certain cases have indicated that internation law is part of the body of federal law."

For our purpose here, we don't have to resolve these questions because it appears that the New York law is the same as the federal law and, in that, I agree and I think Mr. Seymour agrees also but we just disagree on what that law is.

Now, I think it's a very troublesome problem and --

Justice Byron R. White: You would -- you would urge that if it -- that if the New York law governed, you would urge that New York law has an Act of State Doctrine.

Mr. Victor Rabinowitz: I think New York law clearly has an Act of State Doctrine.

As a matter of fact, the New York State Supreme Court specifically refused to follow this decision.

In Mann against Petrolera, which is quoted in my brief, and it said that if there -- they were discussing, at that point, property which was located in New York and, therefore, under New York -- well-established New York law, it was not affected by the expropriation decree.

But, the court said "if this property had ever been in Cuba, it would have been nationalized even though, later, were brought to the United States" and it said the usual formulation is here, Sabbatino.

And -- so, the court -- courts in New York, at least insofar as we have any decisions in New York on this question, disapprove of the Sabbatino case.

Justice William J. Brennan: Well, Mr. Rabinowitz, on Mr. Justice White's hypothetical, how short of making the Act of State Doctrine a question of separation of powers and, therefore, the question of federal constitutional law?

Can the federal courts reach the decision in the New York courts?

Mr. Victor Rabinowitz: Well, it would be -- it would be difficult.

I might say that, in drawing my complaint here, I alleged not only diversity but also the executive power of the President over -- of the -- that is, the power of the Executive Branch over foreign affairs because I was -- that, as I alleged, separation of powers as a -- is a -- an additional ground of federal jurisdiction.

Now, we never got into that and I'd make --

Justice William J. Brennan: I though in your argument yesterday, in the colloquy you and I had, that you disclaimed that basis of the Act of State Doctrine.

Mr. Victor Rabinowitz: Well, I find it a little difficult to see that the Act of State Doctrine rests on constitutional grounds in the normal sense.

Now, if Mr. Katzenbach's position is a correct one, and of course I agree with it, then it may well be that we will ultimately reach the decision, which I don't think we have to reach in this case, that because, as I say, New York and federal law are the same, we will reach the decision that this is a matter which is within the exclusive prerogative of the Executive Branch of the Government and, therefore, it does come within the constitution insofar as the separation of powers can be said to be, in any event --

Justice William J. Brennan: I suppose that your argument really adds up to this, doesn't it, that, for the purpose of this case, the narrowest possible ground of decision is that, indeed, no international rule of law has been proved?

Mr. Victor Rabinowitz: Yes, sir.

Well, I would go -- I would stop before that.

I would say, for purposes of this case, we don't --

Justice William J. Brennan: Well, I know, but if that's the fact --

Mr. Victor Rabinowitz: Get there --

Justice William J. Brennan: If that's the fact, we don't have to reach act of state or anything else, do we?

Mr. Victor Rabinowitz: I put it the other way, Your Honor.

I would say that if the Act of State Doctrine applies, then we don't ever -- ever have to get to the question as to whether there's an issue of (Inaudible)

Justice William J. Brennan: Well, assuming that's --

Mr. Victor Rabinowitz: It's easier that way, Your Honor.

It's much easier because the Act of State Doctrine -- the Act of State Doctrine is a lot clearer than international law.

Justice William J. Brennan: I wonder if it so easy.

Justice Byron R. White: Well, what business have we got in applying our Act of State Doctrine, if we had one that you find in the federal cases, unless you can find it in a New York law?

Mr. Victor Rabinowitz: But it is in the New York law.

There is no -- there is no suggestion to the contrary in the New York law.

Justice Byron R. White: Well, you and Mr. Seymour obviously have a serious disagreement on this.

Mr. Victor Rabinowitz: I don't think so.

Mr. Seymour --

Justice Byron R. White: Well, he says it's an Act of State Doctrine, but it would not override a -- it would not apply in a case where there's a violation of international law.

Mr. Victor Rabinowitz: Well, he says so but there's no authority to support it.

Justice Byron R. White: Or -- no, the other way.

Mr. Victor Rabinowitz: Well, there are only three cases and, I -- in the Salimoff case, the Court says, and I find it hard to find language that -- that's clearer, that says --

Justice Byron R. White: Just to the New York law, then it's just silent on what would --

Mr. Victor Rabinowitz: Well, I -- I don't think this is silent, Your Honor.

May I just have -- I know my time is long up but, at page 12 of my brief, the Court of Appeals in New York, the courts of our -- of one independent government will not sit in judgment upon the validity of the acts of another done within its territory, even when such government seizes and sells the property of an American citizen within its boundaries.

Now, of course it didn't discuss the question as to whether there was compensation, but we all know there was no com -- this was a Russian case.

We all there was no compensation in the Soviet Union for the -- for the seizure of American property.

Justice William J. Brennan: Mr. Rabinowitz, I still don't understand why, if you are right that there is no international rule of law requiring -- no established rule of law requiring compens -- compensation upon such confiscation, if that is so, why that wouldn't dispose of this case?

Mr. Victor Rabinowitz: I think it would.

Justice William J. Brennan: Alright.

Mr. Victor Rabinowitz: I think it would dispose of it.

Yes, I think it could be done either way.

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Banco Nacional De Cuba v. Sabbatino - Oral Argument, Part 1

Wed, 16 Jan 2013 22:48:04 +0000

Case:

Banco Nacional De Cuba v. Sabbatino

Media File:

16_19631022-argument-1

Related Transcript:

16_19631022-argument-1

Transcript:

Argument of Victor Rabinowitz

Chief Justice Earl Warren: Number 16, Banco Nacional De Cuba versus Peter L. F. Sabbatino.

Mr. Rabinowitz.

Mr. Victor Rabinowitz: May it please the Court.

I notice that, although the Court does supply quill pens to counsel, it does not supply inkwells as well.

This case is here on a writ of certiorari --

Justice William J. Brennan: Does that bear on this issue?

Mr. Victor Rabinowitz: No sir.

It's just a reference to the last case.

This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit to review that court's affirmance of a judgment of the District Court for the Southern District of New York.

The District Court had entered an order dismissing the complaint on a motion by plaintiff for summary judgment.

We think both of the courts below were in error and that summary judgment should have been entered in favor of plaintiff against the defendant, Farr Whitlock.

The facts are somewhat complex, but I shall take the liberty of sketching them in rather quickly and only in broad outline because the details are really not necessary for a full understanding of the critical issue that confronts the Court on this record.

Some time prior to 19-- to July of 1960 and about April or May, a sugar brokerage firm in New York by the name of Farr Whitlock entered into two contracts with a wholly owned subsidiary of a Cuban corporation, Compania Azucarera Vertientes-Ca Aguey, which is referred to in this proceeding by the initials C.A.V.

Although Farr Whitlock was a sugar broker, it was buying this sugar on its own account.

Under the terms of the contract, the sugar was to be shipped to Morocco, but payment was to be made in New York upon presentation of the bill of ladings and other shipping documents accompanied by a sight draft for the purchase price of the sugar in accordance with normal commercial practice.

The price of the sugar was approximately $175,000.

The record shows that C.A.V. was incorporated in Cuba and that about 90% or in excess of 90% of its stockholders are said to be residents of the United States.

There is nothing into the -- in the record as to the nationality of those stockholders.

On July 6, the Republic of Cuba adopted a decree authorizing the nationalization of property owned by nationals of the United States or properties in which the United States nationals had an interest.

Under the terms of the decree, compensation was to be paid by the issuance of 20-year-bonds and the funds behind the bonds were to come from the proceeds of sales of sugar to the United States.

On that very same day, the President of the United States signed the Sugar Act of 1960, which sharply curtailed the purchases of sugar by the United States from Cuba, although the Act, of course, had been passed by Congress a few days previously.

One month later, on August 6, by a resolution made pursuant to the decree that I have mentioned, the property of C.A.V. and 25 other corporations were nationalized.

This was one of a long series of decrees, which are -- some of which are referred to in a footnote at page 39 of petitioner's brief, which began in May of 1959 and which, in the end, transformed Cuba from a capitalist to a socialist economy.

On the day of the decree, the sugar was being loaded on a freighter which was anchored in territorial waters of Cuba.

Actually, the loading was not completed until August 9.

The ship remained in territorial waters until August 11 and, on that day, new contracts were signed by Farr Whitlock with a Cuban governmental bank.

These contracts were identical in terms, even as to the date, with the original contract signed between Farr Whitlock and C.A.V. and we contend that this contract recognized the ownership of the Cuban government in this sugar.

A day or two later, the sugar went off to Morocco.

The bills of lading were assigned to the petitioner which is the National Bank of Cuba and they were sent to Societe General, a French bank which acted as the New York agent of the petitioner, together with a sight draft in the sum of $175,000.

While the bills of lading were in transit and, on August 16, 1960, in a proceeding commenced in the New York State Supreme Court, a receiver was appointed over the New York assets of C.A.V. pursuant to Section 977 (b) of the Civil Practice Act.

As a result of subsequent proceedings, that receivership was set aside and vacated.

That happened after the Court of Appeals decision on this case, the court-- Supreme Court in Kings County New York holding that the receivership was improper in the first place.

On August 26, Farr Whitlock and C.A.V. entered into a contract.

By the terms of which, Farr Whitlock agreed that if it could get possession of the sugar or of the proceeds, it would hold those proceeds for C.A.V., instead of turning them over to Societe General.

In return, C.A.V. agreed to hold Farr Whitlock harmless for any loss it might suffer as a result of this transaction and also agreed to pay it 10% of the proceeds so that, although Farr Whitlock has been referred to in this proceeding on a number of occasions as only as stakeholder, actually, it stands to gain some of the sum of $17,500 if it should prevail in this lawsuit.

On August 29, by means of a trick which we think equaled fraud, it certainly resembles fraud, Farr Whitlock managed to get possession of the bills of lading without actually honoring the sight draft.

Using the bills of lading, it negotiated them, sold the sugar, and received $175,000 for it.

It refused to pay that $175,000 over to Societe General and this lawsuit, which alleges a conversion of the bills of lading and the sugar that they represented, was commenced.

A day or two later, the money was turned over to the receiver and, upon determination of the receivership, the money which, together with interest in course, now amounts to something over $200,000 was turned up to a-- over to an escrow agent who now holds those funds awaiting the decision of this Court.

Justice Potter Stewart: Societe General, if I got it right, is the instrument of the Government of Cuba?

Mr. Victor Rabinowitz: No, it's a French bank.

It's a private bank which is owned by French Interest.

It has an agency in New York and it engages in normal commercial business and it was acting as an agent here, not an agency of, but a commercial agent for the Government of Cuba in the transaction of these businesses.

Justice Potter Stewart: Then, how did Banco Nacional De Cuba come into the picture?

Mr. Victor Rabinowitz: Well, Banco Nacional was the assignee--

Justice Potter Stewart: Of Societe?

Mr. Victor Rabinowitz: Of the Cuban Government or the Cuban bank which entered into the contract in the first place.

Societe Generale was merely an agent of the petitioner and the petitioner sued here.

Societe Generale was perhaps liable to Banco Nacional for negligence in handing over the bills of lading without getting the draft, but Banco Nacional chose not to sue Societe Generale, its agent, but rather sue directly for its--

Justice John M. Harlan: Is Banco an instrumentality of the Cuban Government?

Mr. Victor Rabinowitz: Yes.

Justice Potter Stewart: It is?

Mr. Victor Rabinowitz: Yes.

There's no question about that.

Justice Byron R. White: Is there a (Inaudible) obligation (Inaudible)?

Mr. Victor Rabinowitz: No, there was no negotiation--

Justice Byron R. White: A collection agent --

Mr. Victor Rabinowitz: It was purely a collection agent.

There seem to be no question of fact in this case and, accordingly, petitioner moved for summary judgment.

Farr Whitlock defended on two grounds.

First, it claimed that the federal court did not have jurisdiction because of the pendency of the New York State receivership and, second, it raised the series of issues of fact.

Neither of those grounds is raised in this Court and we assume that they have been abandoned.

The district court first considered the question of jurisdiction and decided in favor of the petitioner.

It then considered the factual questions and decided those in favor of petitioner, holding that there were no triable issues of fact.

We would have thought that, under these circumstances, summary judgment would have resulted in favor of the petitioner that the Court then went on to decide the case on a ground that had not been urged before it, that had not been argued before it, that had not been briefed before it, and that I don't think that any counsel had even thought about it because, to us at least, the law seemed so clear that there was no point in arguing the matter.

Despite a long line of cases of this Court and the federal courts known generally as the act of state cases, and I shall of course refer to them again later in my argument, it held that there was an exception to the act of state case, namely that they did not apply where the decree of a foreign government violated international law.

It then examined the decree of the Cuban Government in this case and it found that violation of international law had indeed existed in three respects.

First, that the Cuban decree was discriminatory against citizens of the United States; second, that it was retaliatory and third, that it confiscated a property without adequate compensation.

The Court of Appeals affirmed on somewhat different ground.

It held that the Act of State Doctrine was subject to another exception.

This was the exception which it, the same court, had found, in about 1947 I think, in the second Bernstein case, and that's reported in 210 F.2d 375.

I shall refer to that again later, although I think that the major burden of the argument, at least the major burden of the brief on this subject, will probably be carried by the Solicitor General.

In any event, the court found that the Bernstein exception was present here, relying on fragments of correspondents which were submitted to it, not by us of course and not by Farr Whitlock, but by an amicus which had sought and received leave to file an amicus brief.

And, these fragments of correspondents were handed up to the court and the court relied on these to hold that the Bernstein exception applied in this case.

It then went on to decide that the Cuban decree had violated international law and, while it didn't find the same three violations of international law that the district court had find, it sort of grouped all of them together and, to use its language, it held that there was a violation of international law for a company to fail to pay adequate compensation for the property it seizes from a particular class of aliens when the purpose for the seizure of the property is to retaliate against the homeland of those aliens and when the result of such seizure is to discriminate against them only.

In another words, it took the three grounds that the Court of Appeals said had found and locked them all together to make one single ground.

In our opinion, the basic question before the Court here is the Act of State Doctrine.

Both our brief and, to an even greater extent, the brief of the Solicitor General enters into a rather extensive consideration of the history of the Act of State Doctrine.

Both of us say that this doctrine really dates from 1674 in an English case.

But, in modern times, it may be said to date from Underhill against Hernandez, although there's some language in the Schooner Exchange which does seem to foreshadow this same doctrine.

Now, there are many, many formulations of the Act of State Doctrine in the decision for this Court.

In Oetjen against Central Leather Company, for example, this Court said the conduct of one independent government cannot be successfully questioned in the course of another.

Mr. Justice Holmes earlier, in the American Banana Company case, had said “the general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country in which the act is done.

”There is similar language in Shapleigh against Mier, in the Belmont case, in the Pink case, all of them in this Court and, most recently, in the case of Pons against the Republic of Cuba which was decided by the Court of Appeals for the District of Columbia and certiorari was denied by this Court, I believe, in 1961 and it presents a Cuba situation.

The others, of course, represented either Latin American nationalizations or Russian nationalizations.

The New York courts hold to the same effect, and this is of some significance because there are some suggestion both in the Court of Appeals and in the decisions of the -- in the briefs of -- the many briefs that have been submitted in opposition to the petitioner, that perhaps, under the Erie against Tompkins case, the New York law applies, but it really doesn't matter because the New York cases are in complete agreement.

Salimoff against Standard Oil, in 1933, is perhaps typical.

It says “the courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries and, to the same effect, the Dougherty case and Holzer against Deutsche Reichsbahn, the last one being a case involving actions by the Nazi Government of Germany.

Justice Arthur J. Goldberg: There's a bit of (Inaudible) it appears the law of (Inaudible).

At some point, the objection is (Inaudible) and they appear to have reached to define, regardless of how this case goes, (Inaudible) of our Act as it appear here.

This is on the (Inaudible) giving him advice when you're treating it as an act of state.

Mr. Victor Rabinowitz: I'll be glad to come to that, Your Honor.

I hope I remember it, and if I don't--

Justice Arthur J. Goldberg: I hope (Inaudible)

Mr. Victor Rabinowitz: Mr. Boudin will remind me if I forget.

I certainly shall.

We, and the Solicitor General, say that this doctrine, the Act of States Doctrine is generally accepted throughout the world by the courts of most other countries.

There's no doubt that it's accepted it in England in Luther against Sagor.

C.A.V. disagrees and so do some of the other amicus briefs.

And, frankly, I see no particular point in spending the time of this Court in discussing decisions in Bremen, Turin, Singapore, Nuremberg, Venice, Aden, and many other cases throu-- many other similar points throughout the world.

All of them are discussed in the brief and to be honest, I really don't see why they make very much difference because the law in the United States and England is identical and I have just stated it, and I don't know why it should make very much difference what the Court of Venice thinks about this question.

Justice Potter Stewart: Now, in the ultimate effect, it doesn't really make much difference what the courts of England think about it.

This is a--

Mr. Victor Rabinowitz: Exactly.

Justice Potter Stewart: Question of what --

Mr. Victor Rabinowitz: Exactly.

Justice Potter Stewart: The law is --

Mr. Victor Rabinowitz: Except --

Justice Potter Stewart: In the United States.

Mr. Victor Rabinowitz: Except that we are in what is sometimes referred to as Anglo-American --

Justice Potter Stewart: Well, I understand that.

Mr. Victor Rabinowitz: System of law and I just want to get the Anglo in.

Justice Potter Stewart: It's the United States court --

Mr. Victor Rabinowitz: I think --

Justice Potter Stewart: The United States court --

Mr. Victor Rabinowitz: That's so, Your Honor.

The --

Justice Potter Stewart: Now -- well, I've -- since I've interrupted you, may I ask you whether the -- or not this doctrine applies in case the foreign government has not been recognized diplomatically by our nation?

Mr. Victor Rabinowitz: Well, there is some suggestion that the doctrine does apply even where the foreign government has not been recognized but that, of course, is not before us because the foreign government has been recognized in this case.

There are no diplomatic relations, but the foreign government has been recognized and there is material, I think it's in this record, but certainly in Ricoeur and many other cases in the United States in which the Secretary of State has written letters to various courts throughout the country saying “the Cuba -- the Cuban Government has been recognized by the United States.”

Justice Potter Stewart: Throughout the --

Mr. Victor Rabinowitz: And still is.

Justice Potter Stewart: Series of transactions involved.

Mr. Victor Rabinowitz: Yes, throughout the period of transactions --

Justice Potter Stewart: And now.

Mr. Victor Rabinowitz: And including today.

The C.A.V. brief says that the Court of Appeals' decision is supported by commentators and decisions of courts in other countries and that may be true, but I don't consider it to be decisive.

Not only is there no legal authority to support the respondent here, but I submit that there are no policy considerations either.

Now, I'm not going to argue that extensively because I think that the brief of the Solicitor General handles this matter rather fully and is -- I'm sure, plans to consider these policy considerations.

I would like just to mention two points, however, which are relevant.

C.A.V. and many of the amicus briefs make quite a point of an argument which we don't make.

They make quite a point in answering an argument that we don't make and that, I believe, the Solicitor General makes either and they say that this Court has the power to decide cases even though they affect foreign relations and it quotes cases like the Familiar Ground against Canal and other similar cases.

Now, I certainly would not argue that this Court doesn't have any power to decide cases which involve foreign relations.

The Court has done so many times, and I would not argue for any such broad proposition.

For example, there is a citation -- there is a reference to Mr. Justice Brennan's decision in Baker against Carr in which the opinion makes some reference to the language in the Ricoeur case, I believe, and says that this language is too broad that the court frequently does handle problems involving foreign relations.

Now, I'm not arguing that question.

I don't think it has anything to do with this case.

All we are saying, so far as this case in concerned, that our court should recognize the validity of the Acts of other states disposing of title to property within their territorial jurisdiction.

That's all I have to say in this case and that's all that I am asking the Court to rule on.

If we have other problems in other cases, we will consider them in due course.

To hold otherwise is to challenge or to question the sovereignty of other nations, as Mr. Justice Holmes said “what is sovereignty, but the right to make decisions as to property within your own territory.”

Justice Arthur J. Goldberg: Do you decide to argue that as it leaves international law if the Court holds that?

Mr. Victor Rabinowitz: I think it's a rule of international law, Mr. Justice Goldberg, but whether it is or not.

I think it's a rule of this Court and I'm willing to rely on this Court.

I think that most courts hold that way.

You see, the difficulty with the whole feel of international law, and we'll come to this a little later, is that there is a general tendency on the part of our courts, and it's natural enough, under the circumstances, to regard international law as being something that the courts of the United States and Western Europe hold.

Now, the fact is that most of the people in the world don't live in United States or Western Europe.

They live in Africa and they live in Asia and they live in Latin America and we do not have from those courts a body of opinion of judicial decisions which enable us to tell at this time what Indonesia or Pakistan or India or China think about these issues.

Most of the people in the world live in those countries, not in the United States and Great Britain and Germany and so the whole question of international law on issues like this is really a matter which is of very, very great value.

So, I can't say “the court say international law is the practice of most civilized nations.

”I don't know and I don't believe that anybody knows what international law is in this rapidly expanding world of today with so many new nations being created almost everyday.

So, it's a pretty hard thing to tell.

Justice Arthur J. Goldberg: (Inaudible) I hope it's in the record that you're taking (Inaudible) and the Court ask you not to stay and (Inaudible)

Mr. Victor Rabinowitz: I have never considered this to be a rule of abstention, Your Honor.

I have always considered this to be a rule of positive law.

Justice Arthur J. Goldberg: And, therefore, a rule of positive law and call it the National Law of Parliament.

Mr. Victor Rabinowitz: It's our law.

Justice Arthur J. Goldberg: Would you, therefore, argue the law using your rule?

Do you have to take the rule?

In our point, (Inaudible) is the nationalization of property (Inaudible) consider your example (Inaudible)

Mr. Victor Rabinowitz: I would say that with one qualification.

I am now talking about nationalization of property within the territorial limits of the nationalizing country.

Now, there are other cases where property in New York is nationalized, and there are other Cuban cases raising tat issue, but we haven't reached those yet.

We may someday, but I am not -- I am not extending myself to that question at the moment because this property was in Cuba.

Justice William J. Brennan: Well, may I ask Mr. Rabinowitz.

You're not arguing either, are you that this is the kind of subject matter which the Constitution commits to the Executive and, in that sense, is nonjusticiable?

In other words, you're not arguing that this is a matter of lack of power in the judiciary.

Mr. Victor Rabinowitz: I should think not, Your Honor.

I don't know what the Solicitor General says about that, but I don't think I am arguing that this is not justiciable in that sense.

I think it's not justiciable for other reasons, but not in that sense.

Justice Byron R. White: Then you must -- you would probably also argue the Executive then has no business questioning the act of a foreign sovereignty.

Mr. Victor Rabinowitz: Whether the Executive may do it is a diplomatic matter. The Executive frequently questions the validity of acts of foreign countries.

This is the --

Justice Byron R. White: We may need to break international law.

Mr. Victor Rabinowitz: This is -- well, I don't know whether it's a question of breaking international law. The Executive frequently --

Justice Byron R. White: Well, they recognized them.

Mr. Victor Rabinowitz: Signs a note saying that this is a violation of international law.

This is all on the give and take of diplomacy and speeches are made and arguments are made and, in diplomatic negotiations.

I think the Executive is entitled to a freehand in this and I certainly would not limit the or -- seek to limit the Executive, even if I could, in any question as to what kind of position the Executive is going to take in the give and take of the politics of the modern world.

I think this is for the Executive to determine and I think that the Executive has a freehand, but I don't believe that it has any role in determining what this Court will decide.

The second point I would like to make in connection with this problem of the policy behind the Act of State Doctrine is an illustration that I would like to present to Your Honors which is not a hypothetical illustration, but is an actual one and which I think is an excellent illustration of why the Court ought to stay out of this area and why the Act of State Doctrine is a sound one and it arose under these circumstances.

On July 24, 1961, an Eastern Airline plane was hijacked by an armed passenger who took the plane from Miami to Havana together with all of the passengers.

The passengers came back the next day but, on August 16th, the plane was returned by the Cuban Government after a great deal of diplomatic negotiation between the Swiss and Czech as these things are handled now.

On the very next day, August 17th, a Cuban freighter was hijacked and was brought into Norfolk harbor.

This presented a political situation of, I think, considerable importance and it was made even more critical by the fact that, on board that freighter, there was a cargo of sugar and it was owned by United Fruit Company or at least United Fruit Company claimed to own it.

It was a cargo of sugar that had been nationalized by the very same decree that we are here considering, and United Fruit came in and said “we don't care about the freighter, but the sugar belongs to us.

” Now, the case of United Fruit was just as strong and just as weak as the case of C.A.V. in this re -- in this circumstance. Every single word of the C.A. brief -- C.A.V. brief, between page 12 and page 58, could have been written by United Fruit merely with a substitution of the name United Fruit for C.A.V.

Chief Justice Earl Warren: We'll recess now.

Mr. Victor Rabinowitz: Thank you.

Featured:

Banco Nacional De Cuba v. Sabbatino - Oral Argument, Part 2

Wed, 16 Jan 2013 22:48:04 +0000

Case:

Banco Nacional De Cuba v. Sabbatino

Media File:

16_19631022-argument-2

Related Transcript:

16_19631022-argument-2

Transcript:

Argument of Victor Rabinowitz

Chief Justice Earl Warren: Mr. Rabinowitz, you may continue your argument.

Justice William J. Brennan: (Inaudible) where is this money now?

Mr. Victor Rabinowitz: The money is held by an escrowee, I believe, it's Lehman Brothers.

Justice William J. Brennan: By an escrow?

Mr. Victor Rabinowitz: By an escrowee, under an escrow agreement --

Justice William J. Brennan: Among?

Mr. Victor Rabinowitz: Well, among C.A.V., Farr, Whitlock, and ourselves.

Justice William J. Brennan: I see.

Thank you.

Justice Hugo L. Black: Subject to what?

Mr. Victor Rabinowitz: Subject to the decision of this Court.

Justice Hugo L. Black: Suppose we just dismiss the decision, if the Court says “dismissed.”

Mr. Victor Rabinowitz: Well, I don't have the escrow agreement in front of me and I'm not sure about what would happen in that case, except I'm pretty sure Lehman Brothers wouldn't keep it.

I believe the escrow agreement provides that, in the event of the final order in our favor, the money is to be paid over to us.

Under what circumstances to be paid over to Farr, Whitlock, I'm not sure.

Justice Tom C. Clark: What has been suggested is the Court presents -- the Court should stick its hands off, I think you said.

Perhaps the better thing to do is to vacate all of the orders below and direct it to simply dismiss.

Mr. Victor Rabinowitz: I never suggested, Your Honor, that the --

Justice Tom C. Clark: I know you didn't, but I think, one of the reasons --

Mr. Victor Rabinowitz: Oh, some of the other people suggested that, yes.

Justice Tom C. Clark: Or you used the phrase “the Courts should keep their hands off,” I believe you said.

Mr. Victor Rabinowitz: Well, if I said it, what -- I didn't mean it in the way Your Honor does.

What I meant was that the Courts should recognize the validity of the decrees of a foreign government and should keep hands off in the sense that they should not inquire into the validity of the decree.

Justice William J. Brennan: Which is to say, to accept the plaintiff's title and decide on the issue of conversion.

Mr. Victor Rabinowitz: Pardon me.

I didn't hear the beginning of your --

Justice William J. Brennan: To accept --

Mr. Victor Rabinowitz: Yes.

Justice William J. Brennan: -- the plaintiff's title --

Mr. Victor Rabinowitz: Title.

Justice William J. Brennan: Which then automatically means, I expect, that the plaintiff wins on the issue of conversion.

Mr. Victor Rabinowitz: I should think so.

Justice William J. Brennan: Yes.

Mr. Victor Rabinowitz: I would so argue.

Justice William J. Brennan: Now, what Justice Clark has been suggesting is if we can't reach the defense, why shouldn't the Court throw the case out?

Mr. Victor Rabinowitz: Well, because the Courts haven't thrown the whole case out in similar situations in United States against Pink, in United States against Belmont, in the Court of Appeals in the Pons case.

The Court proceeded, made no distinction between whether the expropriating government for the nationalizing government was a plaintiff for the defendant, and I think that the brief of the United States handles this question quite well, that this is purely a matter of accident in how the case happens to come before the Court.

It really had nothing at all to do with the merits of the situation.

Justice William J. Brennan: So, I suppose it depends on the theory.

If as you -- I understand you to suggest the Act of state doctrine is a rule of positive law, then I expect that you'd be right.

We -- the plaintiff would be entitled to a judgment.

But if it's merely a rule of abstention, it might be more American a suggestion that if we can't -- we're going to abstain from deciding the defense, then we ought to also abstain from deciding the claim.

Mr. Victor Rabinowitz: Well, I don't believe, Your Honor, that there is any authority, aside from the briefs that had been submitted here, for the proposition that it is a rule of abstention in the sense that the Court will abstain from considering the whole case.

Justice Byron R. White: But if the judge made rule in any of event?

Mr. Victor Rabinowitz: If the judge made rule in any event, but it's supported by a long line of authority.

I was discussing the Bahia de Nipe case, that being the name of the freighter that was brought into the Court in Norfolk and, as I said, the arguments there made by United Fruit were identical with the arguments that were made here by C.A.V.

Now, the State Department moved in that case with the greatest rapidity and, in the argument before the Court of Appeals -- I don't know what happened before the District Court because I wasn't there.

But, in the argument before the Court of Appeals, the United States Attorney pointed out the very great importance in political term that the United States could hardly refuse to do what Cuba had done the day before in returning property which had been hijacked, and it urged great speed upon the Court and the Court did, in fact, act with great speed.

Altogether, three weeks, I think, elapsed between the dis -- between the day that the ship came into the harbor and the denial of the State, pending a writ of certiorari by the Chief Justice here.

And, United Fruit argued, relying on the Sabbatino case, this case, that the property, the sugar, belonged to it.

And, the Government argued, as it does here, that the Act of state doctrine meant that the property belonged to the Cuban Government and the Chief Judge denied a stay, citing as authority, therefore, the Underhill and, I think, Ricaud cases.

C.A.V. apparently agrees with that decision and it says in a footnote that the decision was “compelled by urgent considerations.”

I think that's pretty important.

There's a question as to who is to decide what the urge and considerations are.

Are they the litigants to a lawsuit?

Are they the Court or is it State Department?

Who knows what the urge and considerations are in this case?

Who is it that decides what is urgent and what is not urgent?

Are we to read the New York Times and, on the basis of that, decide that initial issue is an important political issue and that the Courts ought to decide one way or the other or are the urgent considerations more properly within the cognizance and the sole -- I suggest in this situation, sole cognizance of the executive department.

I submit that this is not the kind of an issue that a court ought to get into.

Not because it, in broad general terms, affects foreign affairs, but because, in a much more narrow sense, it affects the problem of the sovereignty of other nations and, in this case, it affects the rights, as I shall come to in a few minutes in discussing the problem of the freeze, if I get the time, the very mo -- very important question of the rights of other American property holders and the entire problem of settlement with foreign countries for a na -- with respect to the problem of compensation for nationalized property.

And, this isn't the first time this problem has arisen of course.

It's arisen dozens of times before.

Now, the Court below, the Court of Appeals, relied on the Bernstein exception to the Act of state doctrine and I'm not going to discuss it, except to say that we don't believe there is any such thing as a Bernstein exception and that, even if there were, the respondent doesn't come into it and I'll leave that to the Solicitor General.

Justice William J. Brennan: Well, I do take it though, you would say, because you deny the existence of an exception, that if the doctrine is one of a positive rule of law then it's utterly immaterial whether the Executive tells us that it's like or not like.

Mr. Victor Rabinowitz: Exactly, that's why I don't think there is any exception.

Justice Byron R. White: But on what do you base this positive rule of law, is it based on the constitution?

Mr. Victor Rabinowitz: No, I don't think this is a constitutional question.

I base it on this long line of cases which I have cited, which speak of this in terms of a positive rule of law, namely, that the Courts of United States have no authority or should not test upon the validity of the acts of a foreign government.

And, I don't believe the single exception of the Bernstein case, which was never reviewed by this Court.

I don't believe any of those cases talk in terms of judicial abstention.

They just say “this is not a subject for us to decide,” and I think that it will become clear when we examine the international law problems that are raised here as to why it's not a subject that a court should decide.

Justice Tom C. Clark: If we don't have any authority, why shouldn't we make the decision?

Justice Hugo L. Black: Well, you said --

Mr. Victor Rabinowitz: Your Honor has authority to decide the case.

Justice Hugo L. Black: You just said a moment ago that we don't have it.

Mr. Victor Rabinowitz: I said Your Honor has no auth -- what I meant, whatever I may have said, that --

Justice Hugo L. Black: If we don't have jurisdiction, while certainly --

Mr. Victor Rabinowitz: That the Court --

Justice Hugo L. Black: (Voice Overlap)

Mr. Victor Rabinowitz: -- the Court has no authority to look into the validity of the acts of a foreign government done with respect to property within its territory, and that's all that I'm arguing in this case.

I'm not arguing anything further, that you might --

Justice Hugo L. Black: Your -- your argument, as I understand it, is that if Cuba, under Cuban law, this property went to a certain place.

Mr. Victor Rabinowitz: Yes, sir.

Justice Hugo L. Black: We've got to de -- follow that as the law governing that ownership of that property.

Mr. Victor Rabinowitz: That's right.

Justice Hugo L. Black: But that we still have a duty, under the law, to decide the lawsuit on that premise.

Mr. Victor Rabinowitz: Yes, sir, on that count.

And, as a matter of fact, the United States, before the Court of international justice and elsewhere, has claimed the same thing for itself.

It has claimed, as it did in the General Aniline case, that its disposition of stock of the General Aniline Company, that stock being located in the United States, was exclusively a matter of domestic jurisdiction and that the Department of Court of International Justice had no right to look into the question as to whether the United States decree, seizing property of General Aniline Corporation, was proper or not, whether it belonged to Switzerland or whether it belonged to Swiss nationals or it belonged to German nationals, that -- and the United States so argued and the matter is cited in my brief.

So, we have also taken advantage of the Act of state doctrine when it suited our purpose.

Justice William J. Brennan: I know -- I know it's not really relevant here but, just out of curiosity, Mr. Rabinowitz, the United States has seized a lot of property of Cubans in the United States, hasn't it?

Mr. Victor Rabinowitz: Well, it has the freeze regulation that has the effect of a seizure.

Justice William J. Brennan: I just wonder, do the Cuban courts inquire into the validity of that seizure?

Mr. Victor Rabinowitz: I don't know.

They haven't, as far as I know, but whether they would claim the right to or not, I don't know.

Of course, there isn't really a seizure, and I'll get to it later if I can, it's a sort of conditional seizure because the seizure is subject to administrative license and it may be released by in -- either immediately or in due course.

I assume the Treasury Department will have to decide that for extensions.

Assuming, however, that the act of state doesn't mean what I think it means and assuming that there is a Bernstein exception so that we do get to the question on which the Courts below decided the case, we now get to the question of whether the decree of the Government of Cuba was in fact a violation of international law.

Now, everybody agrees that the -- there is no issue of international law unless C.A.V. is to be treated as an American national because, otherwise, it's just a controversy between Cuba and a Cuban national and there's no international law involved in the situation.

C.A.V. contends that it's to be treated as an American national and it relies on this from the fact that the -- there's something in the record to the effect that 90% or over 90% of the shareholders of C.A.V. are residents of the United States.

Now, in this day of extensive migration from Cuba to the United States, I don't know what that means in terms of nationals of the United States.

Justice Arthur J. Goldberg: (Inaudible) disagree to either the fact that he'd keep this property he has (Inaudible).

Mr. Victor Rabinowitz: The law said property owned by nationals or in which national -- nationals of the United States or in which nationals of the United States have an interest.

Now, how big an interest, I really don't know, but I don't think that really makes any difference.

The fact is that C.A.V. was incorporated in Cuba and the law, as far as I can tell, pretty much without exception, says that a corpo -- the nationality of a corporation is the nationality of its incor -- of the State of its incorporation.

And, the Pedro case is perhaps the leading authority on it in which the Court pointed out that, after all, if a ship owner decides that he wants the advantages of the Spanish flag by registering his ship under the Spanish flag and by incorporating in Spain, he cannot later claim the protection of some other flag.

I believe, in this case, it was the British flag.

C.A.V. chose to incorporate in Cuba, presumably it got tax advantages and other legal advantages from its incorporation in Cuba and, now, at this moment, to come in and claim the protection of the American flag, it seems to me, is somewhat belated.

Justice Byron R. White: Mr. Rabinowitz, did the -- were these issues raised and litigated below?

Mr. Victor Rabinowitz: Of course not because no one thought of this whole problem below, as I've said.

No one ever raised this issue at all in the Court -- in the District Court because the whole problem, no one discussed --

Justice Byron R. White: Yes, but it was raised --

Mr. Victor Rabinowitz: The act of state --

Justice Byron R. White: But it was raised in the Court of Appeals.

Mr. Victor Rabinowitz: Yes, it was raised in the Court of Appeals.

Justice Byron R. White: And you made this argument to the Court?

Mr. Victor Rabinowitz: Exactly.

Justice Byron R. White: And what was that court's -- what was that court's disposition?

Mr. Victor Rabinowitz: The Court merely said, inaccurately, that 90% of the -- of the stockholders of C.A.V. are American nationals.

Now, they equated the word “nationals” and “residents” which, of course, are not equal at all.

But, the record doesn't say anything about the nationality of the stockholders.

the Court of Appeals decision did say that they were nationals.

Justice Arthur J. Goldberg: Suppose you had this case an order to freeze and freezed itself in this Court in order to come to C.A.V. and, when it freezed itself, you had, in effect, a (Inaudible) company is owned by American nationals or if they have a dominating interest, as they did here.

(Inaudible) -- it's either that (Inaudible) he can't say and Cuba, itself, has no freeze involved under that statute of law, granting this is American (Inaudible) are you arguing that they involve, just regarding there (Inaudible)

Mr. Victor Rabinowitz: Is the --

Justice Arthur J. Goldberg: As it purports to nationalize (Inaudible) what they're claiming for is protection in leaving their own system.

Mr. Victor Rabinowitz: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Victor Rabinowitz: Well, I hadn't heard it suggested before the -- this Court or the Courts of the United States were to be their issue -- their view of legal issues is to be determined by what the Cuban law says.

It's true that the Cuban law did refer to the properties or enterprises owned by physical and corporate persons who are nationals of the United States or the enterprises in which such physical and corporate persons have an interest.

Justice Arthur J. Goldberg: There are limitations to the interest here.

Mr. Victor Rabinowitz: Well, 68 of what, Your Honor?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Victor Rabinowitz: There is one -- the law contains this formulation in three places, I think, and, once, it refers to predominant and, the other cases, it refers to just an interest.

Justice Arthur J. Goldberg: Nevertheless, your argument (Inaudible) Cuban national accepted it.

Mr. Victor Rabinowitz: Yes, yes.

I think that's true.

But, I must disagree with Your Honor because it seems to me that this raises a series of problems that are really very difficult if we are to determine the nationality of a -- of a corporation incorporated in Cuba by what the nationality of its shareholders even though Cuba may choose to do so.

I don't believe that our courts have ever done so, and it seems to me that there are extensive problems which are raised in my brief which are covered -- which make this a problem which would be extremely awkward to administer in the Courtroom.

For example, it's suggested that the Court will have to determine what percentage of the corporation was owned by Cubans and what percentage by American citizens, and I don't even know how the Court will go about that.

Let me turn, however, to the question of whether, assuming that it was an American corporation, whether there has been any violation of international law here, and this is the last, assuming everything else is against me.

I submit that there is no violation of international law which here been shown.

And, I would like just to point out that the world of today is not the world of 50 years ago and that the most striking feature of the world today, speaking in international terms, is a revolutionary search which has created scores of new countries and has brought about sweeping changes in the economic systems of many old ones.

No longer can we look to the law of the United States in Western Europe and, on the basis of that research, discover what is international law.

If international law is the practice of civilized nations, and so the Courts so text write it at least and I guess the Courts have also held the decision by Chief Judge Marshall in the Antelope, I think is a very good example, we have to look not only to our law but to the law of Eastern Europe, the law of Africa, the law of Asia, the law of Latin America, to Ceylon, to Indonesia, to Egypt, to Cuba, to China, to name only a few.

And, we can't just look at American presidents, and German presidents, and French presidents.

I submit that there is nothing to show that international law, namely the practice of civilized nations, makes what Cuba did here a violation of any law.

On the contrary, it seems to me that a very large proportion of the nations of the world, perhaps representing a substantial majority of the population of the world, have done exactly what Cuba has done here.

It certainly has been done in Indonesia.

It has been done in China.

It has been done in all of Eastern Europe.

And, it has been done in many parts of Latin America, in Ceylon, and many other places.

Justice Potter Stewart: Is it implicit in what you just said, Mr. Rabinowitz, that, 50 years ago, this would have been a violation of international law?

Mr. Victor Rabinowitz: It might very well be.

I don't know, Your Honor.

I'm not certain.

I think that nationalizations of property go back to the nationalization of the properties of the Church of Rome by Henry VIII and --

Justice John M. Harlan: The eighth --

Mr. Victor Rabinowitz: In 15 -- I don't know when it was but, certainly, no compensation was ever made for that nationalization.

So, I'm not sure about what the situation would have been 50 years or 500 years ago.

But, today, it may be hard for us to take, but private property doesn't quite hold the status in other countries in other parts of the world that it does here.

An international law cited by the respondent and C.A.V. and most commentators are almost all from the older nations of the world.

Justice Arthur J. Goldberg: Did you regard it to say that the national intention is exactly what the conclusion was?

Mr. Victor Rabinowitz: Well, of course, Your Honor, that's a hard case and it's a hard case that -- one of those hard cases that make bad law and I think that I would have come to the same conclusion as the Court of Appeals did in the Bernstein -- first Bernstein case and as the Court of Appeals of the -- United States Court of Appeals and as the Court of Appeals of the State of New York did in the Holzer case, both of which are cited in my brief, and I would have done it with a great deal of regret and I suppose it would've been one of those times when I would have regretted being a judge, had I been one at the time, but I think that that's what the law did.

And, may I call your attention to a case that I cited before, namely, the decision of Judge Marshall in the Antelope in which he was confronted with the problem of whether slave trade was a violation of international law.

And, after excoriating slave trade and pointing to all of the terrible miseries that result into slave trade which was illegal in the United States, he said, “How can we call this a violation of international law when two of the greatest countries in the world, Spain and Portugal, still find it legal?

It's a terrible thing.

It's immoral.

It's a very, very despicable thing but it is not a violation of international law."

Justice Arthur J. Goldberg: (Inaudible)

Mr. Victor Rabinowitz: I said --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Victor Rabinowitz: No, I said the law of civilized nations, and I don't think that the question of whether a nation is civilized is a justiciable question and I certainly think that, for the United States to hold that Ceylon, for example, which has just appropriated large amounts of American property, or Indonesia which has just -- which has recently appropriated all of the Dutch tobacco plantations, I don't believe that, in political terms, for this Court to hold that those countries are not civilized would be helpful.

Now, we have here an Act which is trying to be statutory, retaliatory, and no compensation.

Now, I would like to save some time for rebuttal and I really don't have time to consider all of these things.

They're fully discussed in the brief.

I might say that, so far as the discrimination is concerned, this is was one of a series of decrees which nationalized United States property, Cuban property, English property, Canadian property, Taiwan property, and lots of other property that was located in Cuba and, while this particular decree was directed to a particular group of companies, other decrees were related to other ones and I don't think that there was any difference of treatment.

All of them were rela -- were expropriated in exactly the same way.

Also, there's been no determination anywhere, no facts have been taken to determine whether this was a discrimination and what the -- whether the discrimination was a proper one, that is, equal treatment is not always the same as discrimination because, sometimes, equal treatment is not appropriate where the parties are unequal.

The Government has al -- or the respondent has also claimed that this was retaliatory.

The Court of Appeals said that, well, this was a retaliation for the Sugar Act of 1960 and, whether the Sugar Act was fair or unfair, nevertheless, Cuba had no right to retaliate.

Well, whether it's fair or unfair, in the Court of Appeals' own opinion, is a rather important thing and I don't think we can brush off the standard of fairness just because it's a matter that it is applied to the law of the United States.

If the standard of fairness is to be applied and that's a reason for a court's decision, then it should be applied to all of it and I don't think that the issue of fairness can be applied only to the Cuban decrees and not to American law.

And, finally, I would like to get very briefly to the question of compensation.

the Court of Appeals says there is no international law on the subject of compensation.

The respondent and C.A.V. don't accept that at all.

I suspect that's the issue that they are mostly interested in.

If they could get compensation, I don't think they'd be worried too much about the discriminatory or retaliatory aspect of this.

There are extensive citations in my brief.

I think most of the extensive nationalizations of the world in the past, well, since 1917 and perhaps before that, were without compensation.

Now, it's true that in many cases, compensation was worked out ultimately, but it was worked out by diplomatic methods and, as the Solicitor General suggests here, perhaps, someday, compensation would be worked out by diplomatic methods now.

And, now, I'd want to get to Your Honor's question on the freeze because I think it ties in with it.

In the first place, the freeze is not an absolute freeze.

It's a freeze subject to license.

If we worked to secure a judgment in this case, we would applied to the Treasury Department and we would seek to get a license.

And, the Treasury Department would decide in determining, in the light of its then existing policy, whatever it happened to be, whether it would give us a license on that or not, and that would be handled in the first instance.

Justice Arthur J. Goldberg: If I read the letters of the statute in the record before me, does it indicate that the policy (Inaudible)

Mr. Victor Rabinowitz: That was the policy the day was -- the day the letter was written.

I don't know whether it will be the policy the day that this Court hands down a judgment in our favor or whether it will be the policy 2 years from now, 5 years from now, 10 years from now, or whenever an application for a license is made, because it is a policy question the Treasury Department will have to determine policy on the basis of the facts as they exist at that time.

The second answer is that our previous experience has been, in the case of blocked funds, that when blocked funds are accumulated, and this would be the beginning or at least part of the beginning of an accumulation, it has been the experience in the past that those blocked funds have frequently been used in the future, 5 years, 10 years, in the case of the Soviet Union, 25 years later, to work out some sort of a diplomatic settlement, whereby, all American property owners receive that -- receive some sort of a share of the funds -- the blocked funds that had accumulated.

Perhaps that will happen in this case if we prevail but, if we don't prevail, it means that those funds presumably will belong to Farr, Whitlock and that's the end of it.

Now, there are many, many aspects of the freeze which could be discussed and which, if it ever becomes appropriate, will be discussed but I don't think that the freeze makes the matter moot.

It may raise some question as to how soon, if ever, we will realize the fruits of a victory we may win here and it may take a long time and it may be hard for us to get the fruits of those victory -- of that victory.

But, the alternative is to hand the money over to Farr, Whitlock and, that, we believe, is not justified on the record here and it is not going to be affected by the freeze one way or the other.

Those frozen funds may someday come in handy and, as I say, in connection with the diplomatic settlement or some other kind of settlement.

I really don't know.

Thank you.

Chief Justice Earl Warren: Deputy Attorney General Katzenbach.

Argument of Nicholas DeB. Katzenbach

Mr. Nicholas DeB. Katzenbach: Chief Justice and may it please the Court.

The United States appears today as amicus in this litigation to argue only the act of state question.

That question is phrased on page 2 of the Government's brief, “whether a court of the United States is free to examine the validity of the decree of a recognized foreign government affecting title to property within its territorial jurisdiction.

Now, as Mr. Justice Goldberg has raised the question, it was answered by Mr. Rabinowitz, I'd like, at the outset, to say that I agree that this case is not a moot case for the reasons essentially expressed by Mr. Rabinowitz that the Treasury Department regulations do prevent the transfer, and so forth, of any assets except under a license and that those assets are presently frozen.

However, a judgment is not prohibited and there is a long line of decisions in this Court that says that a -- where a judgment can be rendered to clarify title to something or the rights of someone, even if those proceeds are frozen at that point, that that case is not a moot case.

I would also like to point out that the fact of that regulation has some relevance to matters, which I'll make later in my argument, because it demonstrates, to a degree, a -- an efficient way of dealing with problems of this kind.

That is to say, again Mr. Rabinowitz had paid some note of it, often, these claims for property which is confiscated by a foreign government can be paid from such frozen assets and, in any event, the fact of the frozen assets is sometimes an inducement to a foreign government to discuss the problem of compensation.

I think there's no need for me to go over the essential facts again, but I would like to give emphasis to the two facts in this case.

One is that there is no question that the sugar involved in this case was in Cuba at the time of the relevant decree.

And, the second fact that I would like to give emphasis to is that possession of that sugar was taken on behalf of the Cuban Government and that the title of the Cuban Government at that time was recognized by Farr, Whitlock, at least for the purposes of releasing the sugar to get it on to the ultimate purchaser, so they we're not dealing here with a decree which simply was sort of a bruiting omnipresence.

We're dealing with a decree which was in fact, where measures -- inappropriate measures by those standards were taken by the Cuban Government to reduce that sugar to its possession in Cuba.

Justice John M. Harlan: There's no dispute about the effectiveness of that appropriation as such, is there?

Mr. Nicholas DeB. Katzenbach: No, I -- I think not.

The -- the facts are described in an affidavit from Farr, Whitlock to the effect that the ship was not permitted to move until the purchasers of these sugar put aside their other contracts and entered into identical contracts with the agency of the -- of the Cuban Government.

Justice John M. Harlan: And this has not been a contested issue anywhere in the litigation --

Mr. Nicholas DeB. Katzenbach: No.

Justice John M. Harlan: Has it?

Mr. Nicholas DeB. Katzenbach: No.

Justice John M. Harlan: It was effective appropriation within the territorial limits of Cuba on these sugar.

Mr. Nicholas DeB. Katzenbach: That's correct, Your Honor, as I understand.

I think it might be helpful, again at the outset, if I indicate some of the points that the Government is not arguing.

We feel that the Act of state doctrine is one of judicial creation, that this Court is entirely free to abandon it or to modify it if persuasive reasons exist for this Court taking that action.

The Government does not believe that such reasons exist.

Justice William J. Brennan: You mean that eliminates, at least from your standpoint, any argument that this is a political question in the sense of one non-justiciable because without judicial power to deal with?

Mr. Nicholas DeB. Katzenbach: I think there's no question of judicial power, Your Honor, in this case.

I think this, that there are overtones of foreign relations to it and while, again, the Government would not argue any constitutional allocation or separation in this case, we do believe that considering the proper allocations of governmental functions is something which might lead to this Court's believing it wise to adhere to its prior precedence.

Justice William J. Brennan: That's a very different thing from saying the Court has no power to deal with this offense.

Mr. Nicholas DeB. Katzenbach: It is, Your Honor, and that is the reason that I wish to make it clear.

We were not arguing that.

Justice Potter Stewart: Do you think the -- it's an ingredient of the substantive rule of law, so to speak?

Mr. Nicholas DeB. Katzenbach: Yes, I think that the -- it is -- some of the reasons for the substantive rule of law lie in the fact that the Exect -- in fact that the Executive Branch can, by enlarged, deal better with this problem.

If --

Justice Potter Stewart: And, by enlarged, has been given a great deal of power and discretion in the field of international relations.

Mr. Nicholas DeB. Katzenbach: That's -- that's absolutely correct.

Yes, Your Honor.

Justice John M. Harlan: Does that mean that the consent or non-consent of the -- or assertion or non-assertion by the Executive as to whether this should be -- this case should be justi -- adjudicated or not as an immaterial fact.

Mr. Nicholas DeB. Katzenbach: It could mean that, Your Honor.

The -- the so-called Bernstein exception is not, I believe, before this Court.

While the Court of Appeals took the correspondence in this case, which was, we believe, informal and unofficial, and construed that as a Bernstein type of letter and, therefore, placed its decision on those grounds.

That point, since the Solicitor General in his memorandum made note that the Government did not so intend it, has not been pressed by any of the parties here and I don't believe that it is necessary for this Court to decide that question and, unless the Court wishes otherwise, I do not intend to argue.

Justice John M. Harlan: Well, it's rather academic anyway because, even if the Bernstein exception is an exception here, the Government, in this Court, is saying that they do assert.

Mr. Nicholas DeB. Katzenbach: That's right.

That's correct, Your Honor.

Justice Byron R. White: Solicitor General, I gather that you are in the Court asserting clearly and equivocally that -- to the extent there isn't an Act of state doctrine we want to decide in this case.

Mr. Nicholas DeB. Katzenbach: That's correct, Your Honor.

We believe this case is un --

Justice Byron R. White: Well, but any ambiguity --

Mr. Nicholas DeB. Katzenbach: The case is inappropriate.

Justice Byron R. White: Previous to the time as, hereby, eliminated as far as the views of the Executive Branch.

Mr. Nicholas DeB. Katzenbach: I don't believe that there has been any ambiguity prior to this time in the decisions of this Court or in the decisions of other courts which have followed those decisions.

Justice William J. Brennan: Well, Mr. Attorney, may I -- I'm just a little bothered about this though.

I appreciate that, in this case, you're not suggesting that the Court not apply the Act of state doctrine.

Indeed, you're urging that we do apply it.

Well, are you asking us to decide that, in any instance where the of Act of state doctrine is applicable that, as a positive rule of law, the judiciary shall not deal with that or is there a qualification that, on some occasions, the State may say to the judiciary, “We're not concerned.

If the Court wants to go ahead and decide the question, the Court may do it?"

Mr. Nicholas DeB. Katzenbach: I would suppose that -- again, you're phrasing the Bernstein question --

Justice William J. Brennan: Well --

Mr. Nicholas DeB. Katzenbach: Your Honor -- and --

Justice William J. Brennan: I may be, but I don't --

Mr. Nicholas DeB. Katzenbach: And --

Justice William J. Brennan: I don't really see how we can fail the deal with what's suggested by Bernstein in deciding this case.

Mr. Nicholas DeB. Katzenbach: Well, I am suggesting, Your Honor, that this a positive rule of law and the question is, as you put it, whether this positive rule of law changes if the Department of State should say, in so far is the foreign relations of United States are concerned, “we have no objection to a court's inquiring this far.”

I think this Court would be free to adopt that modification as it would be free to adopt any other modification.

I don't urge the Bernstein exception upon this Court at this time and I don't urge that it not remain --

Justice William J. Brennan: Since it's a judged-made rule, in any event, we may shape it is what you're telling me.

Mr. Nicholas DeB. Katzenbach: That's correct, Your Honor.

And, since it is not necessary to the decision of this case, I was not going to urge it and, by not urging it, I do not be wish to understood as representing the views of the Government that it is opposed --

Justice Byron R. White: Unless --

Mr. Nicholas DeB. Katzenbach: To that.

Justice Byron R. White: Unless some court somewhere comes to silent from the record it sent, the State Department should deal with the subject matter of litigation.

Mr. Nicholas DeB. Katzenbach: I would be opposed to that.

If there is Bernstein exception, it seems to me that it should be made by clear and unequivocal and formal letter from an appropriate official of the Government.

I think it perhaps should, and this may be my parochial views on the Department of Justice, be one that would be submitted through the United States attorney.

Justice Arthur J. Goldberg: The general conversion rule is the rule of substantive law.

It need -- you say the Act of state doctrine is a rule of substantive law and not an extension.

The rule of substantive law, where you got a question presented to the Court, the validity of the Act for a state property (Inaudible) unless the State Department says “okay.” That's the (Inaudible).

Mr. Nicholas DeB. Katzenbach: It would be unique, Your Honor.

I don't know that it would peculiar.

If the reason for the rule -- if the reason for the rule were that, in general, this would interfere with international relations, then an assurance from the appropriate branch of the government that, in this case, it would not would seem to me to be a perfectly sensible and intelligent rule.

I don't think that that would necessarily mean that the Court would then go ahead and do it.

It would merely -- be merely stating to the Court that, insofar as that consideration would govern them, in this case, it did not, in fact, in the judgment of those charges in conducting foreign relations, appear to be applicable.

Justice Arthur J. Goldberg: Whether the State was involved in the facts.

Mr. Nicholas DeB. Katzenbach: Yes.

Justice Arthur J. Goldberg: And, you're here to find a resolution (Inaudible)

Mr. Nicholas DeB. Katzenbach: Yes, Your Honor.

Justice William J. Brennan: Well, then, gather -- would you go this far, Mr. Attorney General, in an appropriate case, maybe this is one, if we are to apply the Act of state doctrine to the defense, we ought then to say, since it is a judge-fashioned rule, “Well, we wouldn't deal with half a case and so we'll complain about it, too?”

Mr. Nicholas DeB. Katzenbach: I don't see why, Your Honor, that would follow.

If this is, as it was called by this Court in the Ricaud case, a rule of decision, if this is what I would call an ironclad complex rule which can appropriately be laid down by this Court and binding upon all.

Because of the reasons for the rule, I don't see why the fact that you have a -- whether it's a plaintiff or a defendant, should make any difference.

Indeed, that point is pressed repeatedly in the briefs of the respondents in this who would seem to make it appear that the issue here is whether or not a court of the United States will enforce a foreign decree of this kind, and they repeatedly use the word "enforce."

Well, it is perfectly true that there's a whole line of decisions and authority with this respect to such decrees which says that courts in the United States will not enforce confiscatory decrees, will not enforce decrees which are penal in their nature, which will not enforce decrees which have public policy exceptions.

There's a whole -- just hundreds of cases to this effect, but this case is not a case of that kind.

This case is not a case of that kind because, here, the property was reduced to the possession of the Cuban Government while in Cuba.

And, it's a mere accident that the case appears in the way in which it does.

As to say, if it had not been for the accident of some negotiable paper being in the hands of Farr, Whitlock in this case, then the only thing that C.A.V. could have done would have been to have attempted to enjoin that payment or to have sought the money from the -- in the hands of the agent of the Cuban Government.

In doing so, I think it would have been blocked either -- be it by sovereign immunity if this case was directly against an agent of the Cuban Government or the Cuban Government, or it would have been blocked by the Act of state doctrine if in the hands of somebody else.

There, it would have been used as a matter of defense.

So, I cannot attach any great significance to the rather odd fact here in the rather unique circumstances that this happens to be an argument made by a plaintiff in defense of his title because the money seems to have -- or what represent of the money slipped out of his hands.

I don't believe it would be wise for this Court or for any court to make that kind of distinction.

To say you contest the title if you are able to get hold of the property, however you get hold of it but, otherwise, it's barred because it makes a difference whether you appear as plaintiff or as defendant.

I don't believe that would be a wise route.

Justice Potter Stewart: Most foreseeable cases, as a matter of fact, this would be -- the Act of state doctrine would be a defense in your Code, wouldn't it?

Mr. Nicholas DeB. Katzenbach: Yes, it would, Your Honor.

Justice Potter Stewart: But, I suppose --

Mr. Nicholas DeB. Katzenbach: In most foreseeable circumstance --

Justice Potter Stewart: In the decided cases, the precedence, it was a defense --

Mr. Nicholas DeB. Katzenbach: That's correct.

Justice Potter Stewart: Wasn't it?

Mr. Nicholas DeB. Katzenbach: That's correct because this is the way it would ordinarily come up in the --

Justice Potter Stewart: Come up as a matter of fact.

Mr. Nicholas DeB. Katzenbach: In the -- in the property cases or, indeed, to go to the earlier precedent, in the cases where tort was being claimed.

Indeed, the origin of the act of state, whatever its origin, it may be old, say that it is, whether it is or not, had its first expression in this country in Underhill against Hernandez which was a suit in tort brought against Mr. Hernandez after he had ceased to be a government official for acts that he had committed in Venezuela in terms of what was called unlawful imprisonment, assault.

And, in that case, this Court first pronounced that doctrine and said that, and the quote which is so often quoted in the cases, “that every sovereign state is bound to respect the independence of every other sovereign state and the Courts of one country will not sit in judgment on the acts of the government of another done within its own territory.”

Justice William J. Brennan: Is there in, your opinion, Mr. Katzenbach, a relationship between the Act of state doctrine and the Doctrine Sovereign Immunity?

Mr. Nicholas DeB. Katzenbach: You can a -- it can be argued that there is and that this is derived in part from sovereign immunity.

In the case such as Underhill against Hernandez, it would seem look like a part of a sovereign immunity.

And, the same argument can be made that if the State takes property and then gives it to a third person, since you couldn't sue the foreign state for it, you can't sue that person.

But, it isn't -- it isn't distinct from sovereign immunity because sovereign immunity can only come to play when the sovereign is in court.

It's a -- it's a jurisdictional matter.

The act of state is not and, in addition to that, it would seem to me that the main motivation of those who are arguing this, derived from sovereign immunity, is to take the next jump and say “we don't like sovereign immunity anymore, so we don't like act of state anymore.”

Now the reasons that sovereign immunity has been cut down in some ways has been because of the extent to which governments were involved in commercial activities rather than in what we regarded as more purely governmental activities and, perhaps, the same exception could be made here, but I wouldn't know how to do it because, clearly, when the Government of Cuba takes this sugar there, it's not acting in a commercial way, even though the product may be commercial.

It's acting -- affecting in a pretty sovereign way, perhaps, too sovereign a way.

Justice John M. Harlan: Are we -- we've been told that Cuba has setup a socialist economy and I suppose this, by definition, implies it could a good deal of involvement of the State in -- but, in a capitalist economy, are thought to be private enterprise.

Mr. Nicholas DeB. Katzenbach: And that's the good reason for cutting down on sovereign immunity where it's engaged in commercial operations.

It does not seem to me that that applies to the acts done in its sovereign capacity and, certainly, expropriation is not an act done in a commercial capacity.

I can't think of a more sovereign act than that kind of seizure.

Now, it's been argued that these cases, the -- primarily, the Underhill case and the Oetjen case and the Ricaud case which are the clearer statements of this -- by this Court, it has been argued by scholars for some time that perhaps this doctrine should be changed and perhaps it's no longer applicable today.

There has been some efforts to distinguish those cases and, to a degree, they can be distinguished.

That is to say, it can be said this point was never made to the Court.

It's never argued to the Court forcibly in those cases or, in at least Oetjen, it couldn't have been international violation.

There was -- a Mexican was involved and, in Underhill, they doubted that it was a violation of international law anyhow and so forth.

These arguments are made in the respondent's briefs.

They're good arguments.

They've been made by scholars.

I think they're respectable arguments, but I think that this Court ought to face the fact quite candidly that what, as I think, the respondents do, that they are asking for a change in this doctrine when they ask that an exception for alleged violations of international law be made to the Act of state doctrine because it is quite clear from those cases and from the way in which the Court spoke in those cases that it had considered this fact.

At least it was aware of this fact, because, in each of those cases, there is a statement that the remedy, if it exists, lie through diplomatic channel, which is certainly a recognition of the fact that international matters were involved.

Justice Potter Stewart: You can't take any position, do you -- or do you, as to whether or not this was a violation of international law?

Mr. Nicholas DeB. Katzenbach: I don't take any position.

Justice Potter Stewart: That isn't the position you --

Mr. Nicholas DeB. Katzenbach: The Department of State has said that it was.

If my argument required me to take a position, I'm acting on the assumption that it was, Mr. Justice, and I believe very firmly that it was on the facts that I know, but that's not a position that's necessary for --

Justice Potter Stewart: And you don't --

Mr. Nicholas DeB. Katzenbach: Our argument and I will assume --

Justice Potter Stewart: Take it in this litigation.

Mr. Nicholas DeB. Katzenbach: That would assume, for the purposes of the -- my argument would be --

Justice Potter Stewart: That it is --

Mr. Nicholas DeB. Katzenbach: The transaction is made --

Justice Potter Stewart: That it is a violation.

Mr. Nicholas DeB. Katzenbach: That it is a clear-cut violation of international law.

I think that the point that I've been making is that the precedent, as it exist, would very clearly apply to the facts of this particular case.

Now, let me use my remaining time, if I may, to deal with what seem to me to be the most important matter before this Court, and that is whether, today, it would be a wise policy to create the exception to this doctrine which respondents have urged so vigorously and which was adopted quite clearly by the District Court and a little more equivocally, I think, by the Court of Appeals because it gone ahead to further Bernstein letter exception.

And, that is that, to the Act of state doctrine, a -- an exception exists wherever there is an allegation that the acts of a foreign state were in violation of international law and the Court is then free to check at least that much and to investigate international law for itself.

Now, it seems to me that, for the Court to examine into a foreign act of state on those grounds, could interfere with the conduct of foreign relations and, indeed, both of the Courts below acknowledged this because both of them give emphasis to the fact that, in this case, it could not.

The District Court, because they said that the foreign state had already said this was in violation of international law so, therefore, it couldn't defend the Cubans anymore than they were already offended and, the Court of Appeals, because it said we have a Bernstein letter coupled with the other.

So, both courts below, at least accept the fact that this Court interfere with -- with the foreign relations.

Now, why is this true?

Well, one thing that's true about it is, because the -- this kind of pronouncement can become a problem of time, as far as the Department of State is concerned, they have other fish to fry than this particular expropriation or this particular act.

And, it may be that the timing of a protest is important to them, whereas, the timing of a judicial pronouncement could not take into account the same factors.

And, there is the problem of phrasing it.

If, after all, the effort here is it to -- is to get compensation for the people involved whose property has been taken, if it is to resolve those relations so the future foreign freight can go on, the very serious problems of phrasing of a protest can come up, can exist.

For example, if the protest that you made, the reasons why it was in violation of law, were phrased in one way, you might be able to secure similar notes from other governments which did not agree with everything that you felt was true of international law, then this situation would agree with some of them and it might be the better part of wisdom to give emphasis to those points so as to secure similar protests from other governments.

And, in addition to that, you have the problem here of -- as a problem of phrasing in an area of developing a law which isn't entirely clear.

What international law is, with respect to its appropriations is, I assure this Court, not a crystal clear proposition, however clear it may be on these facts.

And, different states do have different views on this matter.

For the Courts of this country to pronounce, with respect to what international law presently is, in their view, in this area is, I think, seriously to affect the conduct of our foreign policy for this reason.

The Department of State is, of course, when it invokes international law in these situations, playing the role of an advocate and there is no question as to what the United States would like international law to be within this area because we would like to a have international law which would, in our judgment, protect foreign investment which would encourage development, which would create a climate of investment of that kind.

Now, already, in this case, by the expressions of doubt on the part of the Court of Appeals as to whether, for example, compensation was really required, already, the negotiating position of the Department of State, in this respect, to position it as an advocate, as urging in an external arena, is already, to an extent, hurt by the pronouncement here by the Court below as to how it looked at international law because, now, every time that the Department of State is to urge a position with respect to expropriation, it is going to have that opinion and, should this Court reverse the prior precedent or modify it, it's going to have every opinion by every court state and federal in the United States, by 50 state jurisdictions, by a number of federal jurisdictions.

It's going to have to cope with all those expressions of what international law is.

Is this really -- I would this Court, is this really the way in which international law can develop?

Isn't -- in this development, don't we have certain policy values that we wish to promote and aren't these better promoted in an external arena than by the pronouncement of courts sitting in this country, pronouncements which have to be and should be and properly should be objective decisions, objective views as to what international law is when, really, your arguing what it is as a policy argument in hope that it will become that or something approximately like it?

But, really, is what the Department of State is doing, attempting to get others to take their views, it seems to me that rather than promote international law, judicial decisions of this kind would really be a deadening weight upon its development and, at least upon its developments in lines which I think that -- we would wish to do.

And, if they follow the Department of State in their pronouncements, then all they would have done would have been to impugn their own reputation for objectivity in courts abroad and the decisions would be reviewed not as good decisions with respect to international law, but merely as the expression of parochial and nationalistic views.

The second major point that I would make is that this is not a deterrent to foreign expropriations.

If indeed the -- all of the powers given to the Executive Branch under the Trading with the Enemy Act, if we can freeze all the funds, if we can cut off all aid and assistance, if we can prevent the importation of any of the property, if we can exercise all of our not inconsiderable persuasive powers around the world in this respect it -- and this does not deter the foreign government from a violation of international law with respect to the seizure of property, why on earth is a decision by the Court in the Southern District of New York going to have that momentous effect upon a foreign government?

In fact that the Courts in the United States been widely separated incidental, not very frequent occasions, would declare it to be in violation of international law, as to act as a deterrent?

I'm simply unpersuaded.

And, I'd like to add to the final point, this Court to think very seriously, what it would be doing because I think it would be opening the doors of this Court to a flood of litigation, and let me suggest at least one way in which this might be true.

At the present moment under the law, this Court and others courts of the United States will examine foreign judgments which are unexecuted on certain limited grounds.

And, normally, we get a summary judgment using that foreign judgment to support it, but no court in the United States has ever looked behind an executed foreign judgment, a foreign judgment into which a -- which a foreign court said A owes B so much money besides that, and then A pays B that money.

Now, do you -- that would be, it seems to me, perfectly appropriately and has been suggested by the commentators to be the act of a foreign government, a foreign act of state if, now, on that judgment, a man is to come into court, Mr. B is to co -- or Mr. A is going to come into court and say “B really owes me $25 because I didn't get an international due process in the trial of that case, wherever it may have been.”

Because it seems to me that when you say acts of a foreign government, made effective within their own territory, completely carried out within their own territory are, nonetheless, subject to reexamination if they're in violation of international law, that you buy the whole package when you do it.

You buy everything which has been called or claimed to be a denial of justice under international law when you take that and you open up the doors of American courts to review all of the judgments of foreign courts, executed and unexecuted, where a plaintiff can make an allegation that his rights, under international law, had in some way been deprived.

Justice Byron R. White: Mr. Attorney General, do you understand the Court below to have held that there would be an exception to the Act of state doctrine and that they would have adjudicated this matter or inquired to the act of the Government of Cuba if the Department of State had issued a -- an explicit request to apply the doctrine?

Mr. Nicholas DeB. Katzenbach: No, I do not believe that they would have in that situation because the Court put some emphasis upon the fact that, here, there already been a protest by the State Department.

It has been proposed by some of the commentators and, I think, suggested in the respondent's briefs that the Act of state doctrine should only be used where the Department of State says that it should be invoked.

That would cause a lot of quite obvious problems.

For one thing, you'd have to review a tremendous number of cases in the Department of State and, in second place, the very fact of saying use the Act of state doctrine would unavoidably carry an implication that you did think that international law had been violated by the -- by the foreign government --

Justice Byron R. White: But I gather --

Mr. Nicholas DeB. Katzenbach: Because --

Justice Byron R. White: I gather, there are only two alternatives.

You're either going to state something about a case or you're not, after you've had some notice about it.

And, you would suggest that if you -- that if you request the Court to apply the doctrine, that the Court should apply the doctrine and you also suggest that you're silent if the doctrine applies also.

So that -- and it's only when you're not silent and, say, disregard the doctrine that the Court should then make an inquiry into the validity of the -- of the title.

Mr. Nicholas DeB. Katzenbach: Well Mr. -- Mr. Justice White, let me express my views a little differently than that.

I think it would perhaps clarify them.

I urge that this Court adopt -- affirm what has always been the rule in this situation and, that is, that, as a positive rule of decisions, conflict of laws and rules proscribed for reasons of foreign problems, the Court will not inquire into the acts of a foreign government which are taken within its own territory, and that is not the matter which the Court will inquire into.

I would say that, if that were the rule, there would be no reason at all for the Department of State to constantly call the attention of the Court to that rule since, I think, it would be done by counsel.

Justice Byron R. White: But there would be occasions on which -- on which the Department might not object and might want to say that it is in fact.

Mr. Nicholas DeB. Katzenbach: That's possible, Mr. Justice White --

Justice Byron R. White: But it hasn't, I gather.

Mr. Nicholas DeB. Katzenbach: I haven't taken -- I have taken no position with respect to whether or not that is desirable.

If the --

Justice Byron R. White: But what if it does happen that the Department --

Mr. Nicholas DeB. Katzenbach: I would think, Mr. Justice White, that case could be decided when it happen.

Justice Byron R. White: Well, it has --

Mr. Nicholas DeB. Katzenbach: It's not this case.

Justice Byron R. White: It hasn't been decided here, but it's been decided below, I suppose.

Mr. Nicholas DeB. Katzenbach: It hasn't really been decided below, Your Honor, because the first Bernstein case, Judge Hand gave a very broad hint that the situation might, indeed, be different if the Department of State waive this.

And, the second Bernstein case, such a letter did appear and there was a judgment, as I recollect, in the District Court and the appeal was mooted and the case was settled.

So, it has never been spoken on by any appellate court, except as a suggestion by Judge Hand that, perhaps, the situation would be different if such an informal letter came from the Department of State.

Justice Hugo L. Black: May I ask you and verify my assertion is wholly as your position?

Do I understand that you adopt and say that a positive rule of law, the one that has been and should be followed, is the Statement made by Chief Justice Fuller in the Underhill and Hernandez case?

Mr. Nicholas DeB. Katzenbach: That's correct, Mr. Justice Black.

That statement is obviously a very broad --

Justice Hugo L. Black: Yes.

Mr. Nicholas DeB. Katzenbach: -- statement.

Justice Hugo L. Black: Now --

Mr. Nicholas DeB. Katzenbach: I think, as it has been interpreted and as it has been understood, I would -- that would be the -- our position and not a literal application perhaps of that language.

Justice Hugo L. Black: I understand that.

That's the reason that, if you do have any distinction in your definition of what you say this positive rule of law is, I'd like to know it because I understand it to be this, what you're saying.

When a case comes in the Court by a government recognized by this country has it not acted some kind of a law and taking some kind of administrative action that reposes title to property and somebody, even itself, that the Courts shall not look behind that act and shall act in that case on the premise that the property belong to that person in whom the title has been reposed by the government?

Mr. Nicholas DeB. Katzenbach: That's correct, Justice --

Justice Hugo L. Black: Now, that being the case here, as I understand, your argument is if we should decide this case, whether we decide it one question or another, or dismiss it, whatever is done has to be done on the basis that the Government of Cuba owned this property.

Mr. Nicholas DeB. Katzenbach: Has to be done in the sense that that doctrine would require that you not -- it doesn't -- if that's the result, Mr. Justice Black --

Justice Hugo L. Black: What I'm --

Mr. Nicholas DeB. Katzenbach: You don't --

Justice Hugo L. Black: -- talking about --

Mr. Nicholas DeB. Katzenbach: -- say whether they do or not.

You say a court will not inquire beyond that title.

Justice Hugo L. Black: Well, if it can't -- using non-legal word, what does that mean?

Mr. Nicholas DeB. Katzenbach: I think what it means --

Justice Hugo L. Black: As to this property?

Mr. Nicholas DeB. Katzenbach: I think what it means is that, in the Courts of this country -- in the Courts of this country, that title will not be questioned.

Justice Byron R. White: Well, then you're --

Mr. Nicholas DeB. Katzenbach: But it can be questioned in any international tribunal.

It can be questioned in any diplomatic negotiations.

It can be questioned by any other branch of the Government.

It simply cannot be questioned by courts within United States.

Justice Hugo L. Black: Why does that not mean that, here, we have to decide this case on the basis that Cuba owned this property?

Mr. Nicholas DeB. Katzenbach: You have to -- that's -- I think it would be correct --

Justice Hugo L. Black: And --

Mr. Nicholas DeB. Katzenbach: To say that you have to decide it on that basis, whether true or not.

Justice Hugo L. Black: And, as I understand it, you also say that we have no -- under the rule it has been and is here, that you think it should remain.

It's not up to us to say “we're not going to decide it -- the case because we don't like the way the title came into this people's hands.”

Mr. Nicholas DeB. Katzenbach: Well --

Justice Hugo L. Black: Is that what it means?

Mr. Nicholas DeB. Katzenbach: I think, Your Honor, the effect of saying “we're not going to decide” would in almost all cases have the effect of treating that title that was vested through this act of state as being a good title.

Justice Hugo L. Black: Well, concretely, this is being as --

Mr. Nicholas DeB. Katzenbach: Because, normally, this is the person that has possession.

Now, concretely --

Justice William J. Brennan: It has to mean that here if judgment and conversion is to go for the plaintiff, doesn't it?

Mr. Nicholas DeB. Katzenbach: That's correct.

That's correct but this case is unique and, to make this doctrine -- let me repeat it.

To make this doctrine turn on the question of whether or not you could get possession of some negotiable papers for inspection or for whatever the purpose was, and that's what it's turning on, doesn't seem to me a proper basis for decision.

Justice Byron R. White: Attorney General, I supposed that, as you state this doctrine, it would also apply if the Government of the United States were a party to the litigation and wanted to question the title, and you would apply the doctrine rigidly enough to prohibit the Executive himself, whose conduct to foreign relations supposedly is to be protected from also questioning the title of this in the Courts.

Mr. Nicholas DeB. Katzenbach: That's -- that's -- that's correct Your Honor, unless there is a Bernstein exception, which I have not urged upon this Court and which I have said could remain for the case where --

Justice Byron R. White: So that if --

Mr. Nicholas DeB. Katzenbach: It first --

Justice Byron R. White: Except for sovereign immunity, Cuban -- therefore, Cuba should be able to get an adjudication in our courts and all the frozen assets are really Cuban assets if they arose out of confiscatory -- well, regardless of that.

Mr. Nicholas DeB. Katzenbach: Well, I don't think that --

Justice Byron R. White: Sovereign immunity --

Mr. Nicholas DeB. Katzenbach: I don't know.

Justice Byron R. White: (Voice Overlap)

Mr. Nicholas DeB. Katzenbach: I don't think that follows, Mr. Justice White.

I don't think that follows at all because I'm not suggesting that these Cuban decrees can be or should be enforced within these countries to assets that the Cuban Government doesn't have and didn't take possession of in Cuba.

Justice William J. Brennan: In Cuba, itself.

Mr. Nicholas DeB. Katzenbach: In Cuba, itself, that's right and that's all I'm suggesting.

So, I don't know how.

I don't know what.

I can't envisage the situation that you pose of the Cuban Government going around and collecting lots of things because I would suppose that these were things which were not located within Cuba at the time of this decree --

Justice Byron R. White: Well, I don't suppose --

Mr. Nicholas DeB. Katzenbach: And, if located within Cuba --

Justice Byron R. White: These very proceeds are the perfect example and, I suppose, if these proceeds are judged to be the property of Cuba, they will fall within the freeze order or whatever it is --

Mr. Nicholas DeB. Katzenbach: That's correct.

Justice Byron R. White: (Voice Overlap) standing and I would think then that United States would be in no position whatsoever to question the government -- the Cuban Government's title.

Mr. Nicholas DeB. Katzenbach: In courts of the United States.

Justice Byron R. White: Well, then --

Mr. Nicholas DeB. Katzenbach: But, they're certainly free to question --

Justice Byron R. White: So that your --

Mr. Nicholas DeB. Katzenbach: That title anywhere else.

Justice Byron R. White: Your only protection would be of sovereign immunity, I suppose, in a suit by the -- by Cuba to recover $175,000.

Mr. Nicholas DeB. Katzenbach: From us, from the United -- but it's not in our possession when it's frozen.

Justice Byron R. White: Yes, but it would be.

Mr. Nicholas DeB. Katzenbach: Well, it's just in the possession where it is and nobody can deal with it or transfer it or use it or anything else.

They can remain right in the bank.

Justice Byron R. White: Well, no one should be able though to question the Cuban Government's title to that money.

Mr. Nicholas DeB. Katzenbach: I think nobody can question the Cuban Government's --

Justice Byron R. White: In the Courts.

Mr. Nicholas DeB. Katzenbach: -- title to that money in the Courts.

Now, it may be that, at subsequent time, on an arrangement such as all of the arrangement cited, I think, on pages 30 to 32 of our brief, then the -- Justice White, they agree to give up all of these various assets in this country in return for something, perhaps providing more money.

At which point, you allocate it among all of the people who have suffered as a result of this Cuban decree.

One of the advantages of the decree --

Justice William J. Brennan: But suppose, after the petitioner prevails here, if it does, on your ground, then the petitioner brings an action against whatever bank or escrow agreement --

Justice Byron R. White: To get the money.

Justice William J. Brennan: To get the money, what happens then?

It brings us a brand new action for the Courts.

Mr. Nicholas DeB. Katzenbach: I suppose, for the same reasons that it would not have prevailed here, he would not prevail there.

Justice William J. Brennan: No, I'm assuming now that --

Mr. Nicholas DeB. Katzenbach: So he could --

Justice William J. Brennan: The petitioner here prevails and gets a judgment in conversion.

As I understand it, the $175,000 is now in the hands of an escrowee.

Mr. Nicholas DeB. Katzenbach: The --

Justice William J. Brennan: And, suppose the escrowee would then turn it over to the plaintiff, although, under the terms of the escrow --

Mr. Nicholas DeB. Katzenbach: He can't.

Justice William J. Brennan: -- agreement, it belongs to the plaintiff.

Mr. Nicholas DeB. Katzenbach: But, he can't because that's frozen anyhow.

It can't be transferred.

Justice William J. Brennan: Well, that's why --

Mr. Nicholas DeB. Katzenbach: It can't be -- nothing can happen to it under that license without permission from the treasury -- I mean -- under the regulation.

Justice Byron R. White: yes, but that's --

Mr. Nicholas DeB. Katzenbach: Literally, nothing.

Justice Byron R. White: That doesn't quite follow.

Mr. Nicholas DeB. Katzenbach: It's a very broad order.

Justice Byron R. White: That doesn't quite follow, but nobody can question the title of the Cuban Government as far as your argument.

Justice Hugo L. Black: As I understand it --

Justice Byron R. White: On any basis.

Mr. Nicholas DeB. Katzenbach: It's not a question, Mr. --

Justice Hugo L. Black: On any basis.

Mr. Nicholas DeB. Katzenbach: -- Justice White.

It's questioning the title of the Cuban Government.

In this instance, what would be there would not be the title of the Cuban Government, it would be the ability of the -- of the Cuban Government or of anybody else to do anything with respect to these transferred funds.

We wouldn't have to question their title in order to say, under the treasury regulations, pursuant to the Trading with the Enemy Act, this simply can't be dealt with.

And, in fact, the easy answer to your question --

Justice Byron R. White: This is the way to get it -- (Voice Overlap)

Mr. Nicholas DeB. Katzenbach: (Voice Overlap) as you can't even have a judgment.

Justice William J. Brennan: Can't even get a judgment?

Mr. Nicholas DeB. Katzenbach: Can't even get a judgment --

Justice Hugo L. Black: Well, that's the answer I was --

Mr. Nicholas DeB. Katzenbach: -- without permission.

Justice Hugo L. Black: That's because of the Trading with the Enemy Act, isn't it?

Mr. Nicholas DeB. Katzenbach: That's right, Mr. Justice.

Justice Hugo L. Black: Congress has acted.

Mr. Nicholas DeB. Katzenbach: That's correct.

Justice Hugo L. Black: And even though it was Cuban property or whoever property it is --

Mr. Nicholas DeB. Katzenbach: That's right.

Justice Hugo L. Black: The Government that's opposing it has to wait and that has nothing to do with these other doctrine.

Mr. Nicholas DeB. Katzenbach: That's correct.

Justice Hugo L. Black: And --

Mr. Nicholas DeB. Katzenbach: It has this much to do if they --

Justice Byron R. White: And until and unless --

Mr. Nicholas DeB. Katzenbach: -- Justice Black, it shows that this can be dealt with effectively.

Justice Byron R. White: Until and unless --

Mr. Nicholas DeB. Katzenbach: By the Executive --

Justice Byron R. White: It is the property of the Cuban Government, it is a frozen by the United States.

Mr. Nicholas DeB. Katzenbach: In so far as the Courts of this country are concerned, that will be the property of Cuba.

Justice Byron R. White: Or with your -- on your freeze order.

Mr. Nicholas DeB. Katzenbach: We would deal with it as such, yes.

Justice Arthur J. Goldberg: (Inaudible) -- it certainly doesn't reverse the act, state (Inaudible)

Mr. Nicholas DeB. Katzenbach: That is correct, Mr. Justice Goldberg, although it's difficult for a man to conceive a broader Act than the Trading with the Enemy Act.

Justice Arthur J. Goldberg: (Inaudible)

Chief Justice Earl Warren: Mr. Williams.

Argument of C. Dickerman Williams

Mr. C. Dickerman Williams: May it please the Court.

I appear for the respondent, Farr, Whitlock & Company in support of the judgment of the Court of Appeals.

Briefly and summarily, the situation before the Court is this.

Cuba is an unfriendly power.

Cuba has a power into its courts neither the United States nor its nationals can obtain justice.

Cuba adopted a confiscatory decree directed exclusively at nationals of the United States, a decree which was denounced at the time by our Government as a violation of international law.

Cuba now comes into our courts and asks to use the processes of these courts to enforce that decree against nationals of the United States.

I submit that Cuba must fail.

Mr. Seymour appears here on behalf of C.A.V.

He and I have divided our presentation to this Court in order to avoid repetition.

After a brief discussion of the facts, I shall maintain these propositions.

First, that Cuba has no standing to sue in our courts because Cuba is a foreign sovereign not entitled to comity.

Secondly, that whether or not Cuba is entitled to comity, Cuba is not entitled to prosecute this action in our courts because this is an action to enforce a public law and no sovereign may enforce its public laws in the Courts of another sovereign.

Mr. Seymour will show that the nationalization decree of August 6, 1960 was in breach of international law, that the Act of state doctrine does not apply and the decision here, favorable to Cuba, will violate public policy of the forum.

Now, let me make it clear that our position here is that of a stakeholder.

At the time we got the proceeds of the bill of lading, we were confronted with a claim by C.A.V. to be the owner of the sugar here involved.

That claim was a substantial claim.

It has been upheld by both lower courts.

Under the circumstances, we did what any other stock -- stakeholder would do.

We held on to the money awaiting an orderly determination of the rights of the parties.

We have not concealed that money.

We have not removed it from the jurisdiction.

We have not used it for our own purposes, as it has been brought out in questions directly to Mr. Rabinowitz and Mr. Katzenbach.

That money is now in a special account at Lehman Brothers awaiting the decision of this Court.

Now --

Justice Arthur J. Goldberg: If something happened as merely a physical duty and communication exists, you have to have your own (Inaudible)

Would the escrow agreement cover that agreement?

Mr. C. Dickerman Williams: Well, simply, if the action were dismissed on the merit, certainly, it would be returned to C.A.V.

But, my answer would be that if the action is dismissed, the money will be -- is payable to C.A.V.

I -- I think that's quite clear under the terms of the escrow agreement.

I haven't got it before me, but I participated in its drafting and that's my recollection of it.

Now --

Justice William J. Brennan: It would not be subject, in the hands of C.A.V., to the freeze order wouldn't it -- would it?

Mr. C. Dickerman Williams: No, I don't think so.

That's simply not my interpretation of the freeze order.

Justice William J. Brennan: Even though it's a Cuban corporation?

Is the C.A.V. a Cuban Corporation?

Mr. C. Dickerman Williams: C.A.V. is a Cuban corporation.

I don't -- I don't I'm not fully acquainted with the -- with the application of the freeze order, but it's my understanding that C.A.V., since the freeze order, has been freely able to draw on its funds.

Mr. Seymour, as counsel to C.A.V., can answer that question better than I.

Now, let me describe the circumstances under which the contracts here at issue were made.

These contracts were not entered into freely, as the Government brief suggests.

We were compelled to make these contracts.

In substance, these contracts were confiscated by the Cuban Government by means of a nationalization decree.

That --

Justice Arthur J. Goldberg: (Inaudible)

You were --

Mr. C. Dickerman Williams: What?

Justice Arthur J. Goldberg: Concluded by the Cuban Government (Inaudible)

Mr. C. Dickerman Williams: We -- we were not in Cuba.

We were not subject to arbitrary force, but we were committed on many long-term contracts involving millions of dollars.

To fulfill those contracts, we had to have those sugar -- have those quantities of sugar.

Unless, we can get sugar out of Cuba, we were ruined.

Farr, Whitlock has been referred to here as a broker.

That is a common expression in the sugar trade but it is not strictly accurate from a legal point of view.

From the legal point of view, a sugar broker functions more as a dealer.

In other words, we had bought this sugar as principal.

We had sold the same sugar.

We had sold the sugar here involved to a customer in Morocco.

We were bound not only to that customer in Morocco, but to many other con -- customers.

Justice Arthur J. Goldberg: Suppose you would have it been seizure in (Inaudible) every time you weren't there.

How long (Inaudible) if you were confronted with (Inaudible) this ship, your production would be this crop.

Mr. C. Dickerman Williams: Well --

Justice Arthur J. Goldberg: And you could have just left it and plead the (Inaudible) contract with a purchaser to go ahead, but you have to win the suit.

Mr. C. Dickerman Williams: Well, Farr, Whitlock would have been subjected to suit on many contracts involving millions of dollars, as I say, if we could not have gotten the sugar out of Cuba.

Justice Arthur J. Goldberg: If you get the sugar out of Cuba and commended suit --

Mr. C. Dickerman Williams: At that --

Justice Arthur J. Goldberg: (Inaudible)

Mr. C. Dickerman Williams: I -- I doubt that, Your Honor, the reason being that -- I think that, perhaps, C.A.V. would've had a valid defense because it was the sugar of C.A.V. that was seized.

At that time, it wasn't our sugar.

Actually, it was being loaded to supply us under our contracts with C.A.V.

The -- the Steamer Hornfels which carried the sugar to Morocco was, at that time, being loaded off the Port of Santa Maria and the loading was in process and was completed shortly after the decree was issued.

We needed that sugar to fulfill our contracts, as I say, unless we could fulfill these forward commitments, we were certainly confronted with, as it seemed to us, claims which we could not readily meet.

Justice Arthur J. Goldberg: With record in view, my question is if your view confirms it would probably be encompassed or your view confirms that the property (Inaudible) commission is confirmed.

Mr. C. Dickerman Williams: Our commission -- the commissions involved, although we function as a -- as a dealer, our commissions are relatively small.

We would -- this case involves far more.

I think the commission involved here was only $1,500 and the commissions in these other cases were relatively negligible.

If we could have gotten out of these contracts on the basis of commissions, we would have been very happy to do so.

It was to fulfill the commitments that we had that we were forced by the nationalization decree.

What -- what happened was that the Cuban authorities would not let the Steamer Hornfels sail, unless we entered into contacts with Banco Para el Comercio Exterior.

Justice Arthur J. Goldberg: That goes out in past decision --

Mr. C. Dickerman Williams: That's right.

Justice Arthur J. Goldberg: But you have to -- you have to give the sugar to (Inaudible)

Mr. C. Dickerman Williams: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. C. Dickerman Williams: Your Honor, our commissions were negligible, compared to the amounts involved here.We would have been happy to get out of these situations on the basis of the commissions.

Justice Arthur J. Goldberg: Well, your commissions (Inaudible) concerns the name of that facility?

Mr. C. Dickerman Williams: Yes, because it wasn't our sugar.

We were bound to get, from some source, sugar.

In other words, we had sold sugar, Cuban sugar, to a series of customers throughout the world.

And, the nationalization decree, the refusal of the Cuban authorities to permit the Steam -- Hornfels to sail and similar refusals involving other ships and the holding up of sugar deliveries which under contracts which we had made with the Cuban -- with the United States-owned Cuban planters, confronted us with the inability to get the sugar to fulfill our contracts.

It is not fair to say that we desire to get commissions.

The commissions were nominal.

As I say, we were liable on these forward contracts of principles and we felt rightly or wrongly that we would be sued on these contracts, that we would have a weak defense because it was not our sugar that had been confiscated.

Justice Arthur J. Goldberg: This is not in the record.

Mr. C. Dickerman Williams: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. C. Dickerman Williams: You mean on the United States imposed embargo?

Justice Arthur J. Goldberg: Yes.

Mr. C. Dickerman Williams: Well, the --

Justice Arthur J. Goldberg: (Inaudible)

Mr. C. Dickerman Williams: -- that -- that was applicable only to the importation of sugar into the United States.

This particular sugar was going to Morocco.

The embargo in the United States would have not applied to this cargo.

Justice Arthur J. Goldberg: (Inaudible) embargo would complicate it?

Mr. C. Dickerman Williams: Well, we're not anymore because, since the events of 1960, the United States has prohibited all commercial intercourse with Cuba.

Justice Arthur J. Goldberg: That's what I thought.

Mr. C. Dickerman Williams: That's true.

I mean, as of the present time, we could not do this, but the embargo was not put on until a couple of years later.

Justice Arthur J. Goldberg: Did you have it sectioned in that brief about this?

Mr. C. Dickerman Williams: We did not.

No, Your Honor.

Now, these contracts which we made with Banco Exterior, as a result of the national decree and the procedure of the Cuban authorities under it in refusing to permit the Hornfels to sail, were to be performed in New York.

In other words, the purchase price was payable in New York, in New York funds.

The contracts are in the record.

Section 7 deals with payment, and I think there's no question of that.

Now, I submit that what has happened here is that, in substance, Cuba confiscated the contracts.

That the contracts where New York shows as an action enforceable in c -- in New York -- in New York only and that the substance of what has happened here is that Cuba is now attempting an extra territorial application of the confiscation decree.

In other words, the net result of all that happened was that the Banco Exterior, as the foreign trade agency of Cuba, acquired -- New York shows as an action which Cuba is now coming into the New York courts or into the federal courts sitting in New York in order to enforce.

Now, I come to the first legal proposition which I shall advocate that Cuba has no standing to sue in the Courts of the United States in any kind of case because Cuba is not entitled to comity.

A foreign sovereign may sue in the Courts of the United States only by virtue of comity.

This Court has so held on a number of occasions, and I do not understand that my learned friend questions that proposition.

Now, comity has two elements - first, friendliness and, second, reciprocity.

Neither of those elements exists here.

In my brief, I cite a number of barely hostile statements and actions taken by Cuba and the United States against each other.

I put most of them in the appendix because it did not occur to me that anyone could seriously challenge the fact that Cuba and the United States are unfriendly today.

However, on receiving Mr. Rabinowitz's reply brief last Thursday, I find that he does maintain that, for purposes of comity, Cuba and the United States are friendly powers, and he says that the only cases in which the privilege to sue -- privilege of suit was denied because of unfriendliness are cases in which the countries involved were either at war or did not recognize each other.

And, he points out that, in this situation, Cuba and the United States are not at war and that Cuba and the United States do recognize each other.

I suggest, however, that there is a third type of situation which is inconsistent with friendliness, which affirmatively establishes unfriendliness, and that type of situation is when there has been a severance of diplomatic relations and a prohibition of all commercial intercourse.

And, here, I have to go outside my main brief because I am dealing with arguments that I only learned of on Thursday when I received Mr. Rabinowitz's reply brief.

Now, I want to refer -- and Mr. Rabinowitz makes a persuasive argument, or a plausible argument perhaps, that the Courts cannot sit on statements issued by governments about each other that, in the last four or five months, we have issued critical statements about France, South Vietnam, Haiti, and so on.

And, he argues that there must be some tangible event, and the only tangible events that he says exists are nonrecognition and war.

And, in answer to that, I suggest that there is a third type of tangible situation, namely, as I say, the severance of diplomatic relations and the prohibition of commercial intercourse.

Now, let me recite events -- concrete events which cannot possibly dis -- be dismissed as mere statements, as when, for instance, Assistant Secretary of State Martin says “our policy towards Cuba is not coexistence.

We want to get rid of Castro and Communist influence in Cuba.”

These are definite specific actions as concrete as war or as nonrecognition.

Now, on October 19 -- and all these events had occurred, some events referred to in my brief occurred before the nationalization decree, others have occurred since.

On October 19, 1960, the United States prohibited all exports to Cuba with a few exceptions.

January 3, 1961, the United States terminated diplomatic relations and it terminated those relations under these circumstances.

At 1:20 a.m., on the morning of January 3, 1961, that is to say, in the middle of the night, the Cuba Ministry of Foreign Affairs presented a note at the United States Embassy in Havana, instructing the Embassy to reduce its personnel to 11 people within 48 hours.

The President of the United States regarded that as insulting and terminated diplomatic relations on the same day.

On September 7, 1961, the United States prohibited assistance to any country which assists Cuba, unless the President shall otherwise determine.

On February 3, 1962, the United States proclaimed a complete embargo on all trade with Cuba.

On March 4, 1962, the United States prohibited the import of merchandise from anywhere, made or arrived in whole or in part of products of Cuban origin.

On July 8, 1963, they were issued the freezing orders to which reference had been made here.

The United States blocked all assets of Cuba and residents of Cuba, prohibited all persons subject to the United States jurisdiction from the unlicensed transfer of dollars to Cuba, and prohibited all unlicensed transactions of any kind with Cuba or residents of Cuba.

Now, this, I submit, Your Honors, are measures of war.

They are tangible events.

They do not require a weighing by a court of whether or not a particular statement is so unfriendly that it amounts to unfriendliness in the sense of comity.

These statements -- these actions cannot possibly be reconciled with friendliness.

Now, if we -- if the Court now -- I will say -- I think I can s -- concede it that Mr. Rabinowitz is correct that the only case is not finding friendliness in the sense of comity are cases in which there was either war or nonrecognition.

However, there is no case in which friendliness in the sense of comity was found to exist where diplomatic -- relations had been terminated or where commercial intercourse had been prohibited.

In other words, the question is an open one and I submit that in the sense in which comity is used in the various cases which are referred to in my brief, and as I believe these statements are all admitted by the other side, I submit that these are effective ways of establishing that unfriendliness.

Justice John M. Harlan: What significance, if any, do you credit to the fact that the State Department, itself, has not questioned the right of this plaintiff pursuant to the Court?

Mr. C. Dickerman Williams: Well, I don't understand.

The Department of State is a -- has appeared in the case.

It's only the Department of Justice.

I --

Justice John M. Harlan: Well, I assume that the Attorney General was speaking for the Executive Branch of the Government.

Perhaps I'm wrong.

Mr. C. Dickerman Williams: Well, I -- I don't know.

I have -- I don't -- frankly, I don't understand the brief of the Department of Justice and I don't feel that I'm in the position to interpret it.

However, from the point of view of the legal decisions on the case, the legal decisions on comity, the legal decisions -- the Court decisions are entirely clear that friendliness must exist and I respectfully submit that these statements, actions, prohibitions, severance of diplomatic relations establish that the friendliness does not exist.

Justice John M. Harlan: Well, I would suppose that the Court should be concluded on that issue by the attitude of the State Department or by the attitude of the Executive.

We -- the Courts are not going to pause in the negative inquiries to the degree of platonic relationship between the --

Mr. C. Dickerman Williams: Well, I -- I agree that the Courts cannot enter into whether or not relations are platonic or otherwise, but when there are specific events susceptible to only one interpretation, I submit that the Courts could act accordingly.

I don't -- I do not see that the Courts are dependent upon the Executive in applying the law.

The -- I do not understand the theory of Bernstein which is -- has been referred to here, namely, that the Courts must have the permission of the Executive Branch before deciding any question which is presented to them.

I -- I submit here that there are specific events which fall within the rule which has been laid down by the Courts and there's no suggestion in any of those decisions or any of those opinions that it is necessary to get any particular finding from the Executive Branch.

The Executive Branch has performed its function when it severed diplomatic relations, when it prohibited commercial intercourse.

Now, the consequences of those actions by the Executive Branch is not what the Executive Branch says about them, but what interpretation this Court puts on them.

Certainly, although my learned friends had my brief for some time now, they have not -- they do not affirmatively say here that comity exists.

They have not said that Cuba is a friendly power.

They have not repudiated, for the purposes of this case, any of the -- in any statements by the Executive Branch or any of the actions by the Executive Branch showing that there is no friendliness between the United States and Cuba.

Justice Hugo L. Black: Your argument would result, would it not, to a record saying that the Judicial Department is the department of Government that has the power to determine whether a foreign nation shall be allowed to file a suit in court?

Mr. C. Dickerman Williams: Absolutely, Your Honor, and I don't think that -- I think the case has entirely established that proposition.

Justice Hugo L. Black: Suppose --

Mr. C. Dickerman Williams: It ended --

Justice Hugo L. Black: Suppose the department -- the executive department, Legislative Department, State Department, and all of the others thought (Inaudible) would be contrary for them to policies.

Would -- could the Court still decide it?

Mr. C. Dickerman Williams: I don't think they could, Your Honor.

I think are -- the independent -- the juris -- judiciary is entirely independent branch of our government.

Of course that has not happened here but, even if they did, I would submit that, after such events, as I have described, have taken place, the Executive Branch could not come in and say “oh, we didn't mean it” or there is --

Justice Hugo L. Black: It might -- it might say that it meant to go only this far, but it did not want to add what it might say was additional international insults, one would say, and the other say they couldn't come into the Court.

Mr. C. Dickerman Williams: Well, Your Honor, I certainly think it's up to the Executive Branch to decide whether or not to terminate diplomatic relations and whether or not to prohibit commercial intercourse.

Obviously, the judiciary cannot attempt to do that kind of thing, but when it is a question of what application shall be made in a lawsuit within the jurisdiction of the Courts, that, I think is a judicial question and not an executive question.

Justice Hugo L. Black: Well, you may be right.

It's just a rather eloquent question.

Mr. C. Dickerman Williams: Well I would submit that there is another feature which is persuasive of the rule that I advocate and, that is, the decision of this Court in Ex parte Muir in which the Court said, as I read the opinion, that's 254 United States 522, that a foreign government could litigate in our courts only through official channels, only through an accredited representative, and that an appearance by private counsel was not enough.

Now, because -- well, for what reason, I don't know.

Certainly, in this case, there has been no appearance by an accredited representative.

I'd -- I certainly don't challenge Mr. Rabinowitz's authority to appear, but he appears as private counsel, not as a -- not as an Ambassador of Cuba and, in fact, I understand that, in some related litigation, he insists very clearly, a litigation in which this Court only the last week granted certiorari, that he is only a private counsel.

Now --

Justice Arthur J. Goldberg: Are you saying that this government holds corporations if any government would only hear the ambassador of that government in their courts?

If the French take the statute over the French Government, must there be a reciprocity (Inaudible)

They're suing.

We'd sue, and our courts (Inaudible).

Mr. C. Dickerman Williams: As I read Ex parte Muir, there must be an accredited representative.

Of course, in this particular instance, there isn't any doubt that the sugar belongs to Cuba.

It was Cuba which confiscated the sugar for its own benefit and, my recollection -- if my recollection is correct, the complaint says that Banco Nacional is suing here as financial agent of the Government of Cuba.

I don't think there's any suggestion that this is something that happened in the regular activity of a public corporation.

Justice Arthur J. Goldberg: Well, you're distinguishing your own -- by your last statement --

Mr. C. Dickerman Williams: Well, I'm only saying that I think it's unnecessary to this particular case but, as I read Ex parte Muir and the cases cited in Ex parte Muir, for instance, one of those cases is The Anne.

In The Anne, the Court refused to entertain a claim made on behalf of Spain by the Spanish Consul because the Court regarded the claim as not being commercial but is diplomatic and it regarded an appearance by someone with diplomatic status as necessary to the presentation of the claim of Spain.

And, I suggest also that this requirement of the appearance by an accredited representative, as distinguished from private counsel, has a real application to litigation by Cuba in our courts, and that that is shown by the case of Rich against Naviera Vacuba, a case which is cited with great enthusiasm by my learned friend.

In that case, it appears that Cuba was entitled -- was held entitled to repudiate a formal court stipulation entered into under the most solemn circumstances, by which, Cuba waived sovereign immunity with respect to the execution of the judgment which was entered into in that case.

And, yet, because that stipulation was entered into by private counsel and the Court opinion indicates that private counsel was acting within the scope of his authority, that he was duly authorized to do so, there was no question of the propriety of the behavior of private counsel.

But, because he was only a private counsel and not an accredited representative, therefore, Cuba was permitted to repudiate that stipulation.

I -- I might say that Rich against Naviera Vacuba is the case involving the buoyed need which has been referred to by Mr. Rabinowitz in the course of his argument.

Now, another essential element of comity is reciprocity, and this essential element exists wholly apart from friendliness.

The leading case laying down the law on reciprocity as the essential element of comity is Hilton against Guyot, a case in which the question before the Court was the effect to be given to a judgment of the Courts of France.

At the time of that decision, there was on question of unfriendliness between the United States and France.

The decision came down in 1895, when the two countries were entirely friendly.

The -- this Court, however, went into a most detailed examination of the requirements of re -- of comity, insofar as reciprocity was concerned, and established that our courts would function -- would accord the nationals of foreign sovereigns only the rights that those foreign sovereigns accorded our nationals.

And, in that case, because the judgment of the Courts of France -- in that case, because it appeared that the law of France was that the Courts of France could revise -- could examine and revise court judgments of other countries, therefore, our courts could reexamine judgments of the Courts of France.

Now, there has been a very recent decision by the Court of Appeals of the First Circuit, P&E Shipping Corporation against Banco Exterior, another Cuban litigation, in which the Court of Appeals, of its own motion, raised this question and remanded the case to the district judge to make findings as to whether or not nationals of the United States could get justice in Cuba.

And, pursuant to the mandate of the Court, in fact, the Court instructed the district judge to inquire from the Department of State, which he did, and the Department of State wrote a letter to the district Judge, which is Appendix B to my main brief.

And, in that letter from the Department of State to the district judge, the Department said that there had been a breakdown in the Cuban judiciary as an independent branch of the Cuban Government.

But the Cuban judiciary was now subservient to the present political policies of the Cuban Executive and that the Department had concluded that even if legal remedies theoretically existed under Cuban law, recourse by a United States national to those remedies would be futile.

Now, I learned for the first time when I received Mr. Rabinowitz's reply brief on Thursday that, in this proceeding, Mr. Rabinowitz, on behalf of Cuba, had submitted affidavits that claimed to show that United States nationals could have recourse and could receive fair treatment in the Cuban courts.

I have examined those affidavits and, all I can say -- they are too detailed to review here.

All I can say is, after examining those affidavits, that I profoundly disagree with Mr. Rabinowitz's characterization of that, and I would suggest that if a court is not satisfied with the report of the Department of State as to judicial conditions in Cuba, that it do what the, and it regards this issue as determinative of the question of comity, that it remand this case to the District Court for findings in that respect.

Now, I come to my secondly proposition and that is this, that whether or not Cuba is entitled to comity, Cuba may not prosecute this action because known foreign sovereign may enforce its public laws in the course of the United States.

In fact, the rule is universal.

No -- the Courts of no sovereign will entertain suits by other sovereigns for enforcement of their public laws.

Now, there has been a great deal of reference here to the so-called Act the state doctrine.

There is an equally well-settled Act of state doctrine which I invoke and, that is, that although the Courts will not undue the acts of state in a foreign power, neither will they enforce those acts of state.

Now, as I understand Mr. Katzenbach's distinction of this rule, which he seems to admit thoroughly, in fact, if my recollection is correct, he used the expression “hundreds of times” the Courts have laid down this rule, his dis -- his -- he distinguishes it.

He distinguishes this case on the ground that, as in a general way or they -- more often, it's more frequent that the question of the act of state comes up the other way around.

That is to say, it comes up as a defensive matter between private parties, so to speak, rather than as a suit by the foreign sovereign to enforce that act of state.

Well, I respectfully suggest that that argument is not applicable.

Of course the Court here is dealing with this case, not some theoretical case or not some usual case.

It's dealing with what happens here and my learned friends have sug -- cited no case whatsoever in which a foreign sovereign was held entitled to enforce an act of state, directly or indirectly, in the Courts of another sovereign.

I won't -- I won't go through the -- through the cases.

Apparently, they -- it is conceded that they are applicable and, the only distinction is made, that it is more likely that the question arise because a man is defending on the ground.

It's putting up the defendant who is pleading the act of state rather than the foreign sovereign involved.

Of course, as I say here, we are dealing with a case where the foreign sovereign is asserting the act of state.

And this Court, in Guaranty Trust Company against the United States, was most emphatic in drawing a distinction between those cases in which the act of a foreign sovereign might come up in the course of a litigation, let us say, between private parties and a case in which that foreign sovereign, itself, was seeking to enforce its public laws.

Justice Potter Stewart: I hadn't -- I understood Mr. Katzenbach to be arguing that what we're dealing with here is something that's been executed -- that's been executed, not something executory.

We're dealing with a -- with a feta compli, if you will, that the Court of the -- here, the United States was not being asked to effectuate the seizure of this sugar but simply that the sugar was seized and that the Court didn't have power to go beyond the seizure.

Mr. C. Dickerman Williams: Well --

Justice Potter Stewart: Not even force -- not to enforce the foreign law seeking to appropriate this but simply to recognize that it had been appropriated, as a matter of fact.

Mr. C. Dickerman Williams: Well, I -- I submit that the -- that the posture of the case shows that the foreign sovereign is trying to enforce its law.

The -- the New York cases are quite clear that, when there is a contract between the parties and property is turned over to one of those parties pursuant to the contract, his failure to make use of that property according to the terms of the contract presents a case of breach of contract as distinguished from conversion.

Now, here, we were forced or we were subjected to pressure which lead us to make these contracts.

Those contracts would be to perform in New York.

Cuba is now coming into the New York courts, as I see it, to enforce those contracts.

Justice Potter Stewart: Well, what was seized was the sugar itself, was it not?

Mr. C. Dickerman Williams: Well, actually, it really wasn't seized.

It was onboard the Hornfels.

It was in Cuban territorial waters or is said to be -- said to have been in Cuban territorial waters.

I don't -- I don't think there's any suggestion that any officer of the Cuban Government ever went onboard.

I mean, the possession is a -- such a purely theoretical legal possession.

It was never reduced to actual possession, as I read the record.

What did happen, and what I tried to emphasize, is that, by virtue of these -- of this decree and Cuba's procedure under it, we've made this contract to be performed in New York.

And, in substance, Cuba is trying to enforce that contract now.

It's trying to get the money.

Of course, Cuba is interested in sugar only partly for purposes of consumption.

Primarily, it is interested in sugar from the point of view of foreign exchange.

What Cuba wanted was foreign exchange.

It made a contract by which it was to get that foreign exchange in New York.

Now, it has come into the New York courts or the federal court sitting in New York in order to enforce that contract and get that foreign exchange.

I -- I trust I've answer you question, Your Honor.

Now --

Justice Byron R. White: Mr. Williams, what's your view of this case if there has been an unequivocal assertion in the District Court by the State Department of the so-called Act of state doctrine?

I take it, you would say the Court should disregard the doctrine question entirely.

Mr. C. Dickerman Williams: I don't think -- I don't want to get into act of state, because -- myself, because Mr. Seymour is going to deal with that subject and I don't want to answer it in anyway which might embarrass him or be inconsistent.

We -- as I say, we've divided the argument so that he will --

Justice Byron R. White: Well, yes, but you have touched upon the matter that the foreign sovereign can't use the Courts here and, thereby, enforce something that may be illegal under international law and --

Mr. C. Dickerman Williams: I -- I have said that it isn't --

Justice Byron R. White: I take that you would assert that said -- same thing even though the State Department requested the Courts not to adjudicate the legality, or not, of the -- of the foreign procedure.

Mr. C. Dickerman Williams: Yes, I would.

Mr. Seymour is going to deal with that subject more fully, but that's certainly my own position.

Furthermore, Your Honor, I'd like to make clear this, that is, that foreign sovereigns are not entitled to enforce any public law, even if it's a desirable, commendable public law.

Many of the cases involve taxes.

Tax revenue laws are, of course, public laws and the Courts have been forbidden to enforce the -- the Courts have refused to entertain the claims of foreign sovereigns when directly or indirectly based upon a revenue law.

There wasn't any question of the violation of the -- the revenue law was a perfectly proper exercise of domestic jurisdiction.

It's not suggested that the revenue law, in some of these cases which are referred to in my brief, such as Peter Buchanan Ltd. against McVey, was an improper law.

the Court conceded that it was.

It simply held that no act of state, whether or not it was valid under international law, could be enforced to a subject to enforcement in the Courts of the other sovereign.

Justice Byron R. White: You don't suggest, this one time, that you can't be very social to enforce the contract that they made with an American --

Mr. C. Dickerman Williams: No, but I -- excuse me for interrupting, if I did.

I -- I say that when a foreign sovereign seeks to enforce a contract and the enforcement of that contract is subject to the public policy of the forum, and it's quite clear, both from cases which I cite in my brief and which Mr. Seymour cites in his brief, that a contract of this type, rested on confiscation, violation of the public policy --

Justice Byron R. White: Well, it's just at this point that the United States might come in and say, "Please don't adjudicate that matter -- that matter of our foreign policy."

You just accept it.

You would say the Court should not accept it until the search is complete.

Mr. C. Dickerman Williams: No, I -- I we have an independent judiciary here, as I understand it.

I don't -- I don't understand that the judiciary --

Justice Byron R. White: But you would just reject --

Mr. C. Dickerman Williams: Of the United --

Justice Byron R. White: You would just reject the previous cases in this Court, I suppose.

Mr. C. Dickerman Williams: No, I don't think those cases are involved.

Those -- those previous case --

Justice Byron R. White: Because they didn't involved a foreign sovereign?

Mr. C. Dickerman Williams: Because they didn't involve sover -- foreign sovereign seeking to enforce acts of state.

Those were cases -- and this is an interesting distinction made by a number of the cases, in particular, an opinion of Judge Learned Hand in Moore against Mitchell and a very persuasive and, indeed, eloquent opinion by Justice Kingsmill Moore in Peter Buchanan Ltd. against McVey.

The reason given for refusing to entertain efforts by foreign sovereigns to enforce their public laws in these two opinions is this, that always there is open to the Court of the forum the consideration of whether or not the contract or law, whatever it may be, is consistent with the public policy of the forum.

Now, in private litigation, a court can determine that a particular act of state of a foreign sovereign is not consistent with a public policy or a particular law of the foreign sovereign is not consistent with its public policy.

But, in litigation brought up by a foreign sovereign, it is embarrassing to international relations for a court to have to say "we don't like this law."

And, Justice Moore points out that many of the laws of today may be shocking to the conscience of the forum.

The party says, such laws meaning public laws, have been used for racial and religious discriminations, for the furtherance of social policies and ideals dangerous to the security of adjacent countries, and for the direct furtherance of economic warfare.

Now, it says the forum must always reserve the right to declare a particular law or Act contrary to its public policy and it embarrasses -- it is embarrassing to make that finding in a case in which the foreign government, itself, sues.

Now, in other -- in other words --

Justice William J. Brennan: May I ask this, Mr. Williams?

Mr. C. Dickerman Williams: Surely.

Justice William J. Brennan: If we did not have the plaintiff we do have or the petitioner here, but some bona fide purchaser of these papers, the bill of lading and the draft and so forth, I gather, you'd be making neither of the arguments you've been giving.

Mr. C. Dickerman Williams: Well, of course I'm arguing this particular case, Your Honor.

Justice William J. Brennan: That's what I say, but if -- my point is your argument is based on the identity of the plaintiff in this particular case.

Mr. C. Dickerman Williams: That is true.

But, I -- I would like, if I may, to continue with Justice White's question.

My learned friends, in their briefs, seem to take the position that the Courts, in order to keep foreign relations in a friendly way, must always enforce their acts of state.

What was held in Moore against Mitchell, and Peter Buchanan Ltd., and similar cases, is that because policy is involved, therefore, the Court should never entertain actions by foreign sovereigns involving public laws.

Your Honor, I've completed my argument.

I received, as I think I have said, Mr. Rabinowitz's learned reply brief on Thursday.

As a result of which, I revised to some extent my position, my views, on the subject of friendliness and comity.

I have a rebuttal brief here already printed.

It's only five pages long and I've given copies of it to Mr. Rabinowitz, Mr. Katzenbach, and Mr. Seymour.

And, I would respectfully request leave to file it in the Court.

Chief Justice Earl Warren: You may file it.

Mr. Seymour.

Argument of Whitney North Seymour

Mr. Whitney North Seymour: Mr. Chief Justice and may it please the Court.

With only a couple of minutes, I will, first, say a word about the motion for substitution.

There is, pending before the Court, a motion by C.A.V., my client, to be substituted for Sabbatino, the discharged state court receiver.

Sabbatino was appointed in 1960 as the State court receiver of the assets of C.A.V.

He received the funds which is in question here.

At the end of 1962, he was discharged as state court receiver and that fund was placed in escrow abiding the event of this suit.

Therefore, Sabbatino has no further interest in the litigation.

Mr. Williams filed as an indemnity, which is reflected in the record, and C.A.V. is the only party really in a position to assert an economic interest in the fund and, under the general power of the Court to grant substitutions in such cases, we would hope that the Court would do it.

The only argument on the other side is that these were an application on this Rule 24 (c), which it isn't, and if it were made in a different court, which it's not, there would be problems but it isn't that kind of an application.

It isn't made in a court to which the rules apply and, therefore, we would Your Honors would grant the relief.

Now, on the merits, I would like to discuss the proposition, first, that the Act of state doctrine ought not to be applied where there is a clear violation of international law, and I recognize that there are dicta, which I shall have to work my way around, which would be interposed to such a proposition.

But, those dicta originated at a period when international law did not bulk as large in the views of the American Government or the people of the world or the lawyers or judges of the world as they do now, and I would hope that international law now occupied a place where weighing the complications, some of which, I think are rather exaggerated, suggested by my distinguished friend, the Deputy Attorney General, against the importance of building support for international law, case by case, by courts like the United States courts that are followed all over the world, is far more important.

And, I shall address myself, first, to that tomorrow, and then, at the end, I shall like to say a word about the public policy of New York which is involved here because this is a diversity case and, although the District Court didn't seem to take the point, there is a strong point on the public policy of New York which I'd like to present to the Court.

But, my main emphasis will be on the international law point, that I think the significance of that point is emphasized by the fact that Your Honors have before you briefs presented with great spirit and earnestness on behalf of the Association of the Bar, and the American Bar Association, and the International Law Association, and the Dean of the American Bar, Mr. John Lord O'Brian, and his partner.

And, these all emphasize the importance of the international law aspect of this and, weighing that against what is admitted to be a judge-made rule which the Court can administer as it thinks wisest in the long-range interest of the law of the United States and of the judicial administration of the United States, these indicate that international law should give -- be given great weight in the balance.

Chief Justice Earl Warren: Before you start your main argument, we'll adjourn now.

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