The American act of state doctrine.

Author:Harrison, John (American law professor)
Position:I. Introduction through II. The Supreme Court's Act of State Doctrine, p. 507-537 - Author abstract
 
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  1. INTRODUCTION II. THE SUPREME COURT'S ACT OF STATE DOCTRINE A. The Contemporary Act of State Doctrine 1. Banco Nacional de Cuba v. Sabbatino 2. Alfred Dunhill of London, Inc. v. Republic of Cuba 3. W.S. Kirkpatrick Co. v. Environmental Tectonics Corp 4. References to the Act of State Doctrine after Kirkpatrick B. "Act of State, "Jurisdictional Immunity, and Validity before Sabbatino 1. Underhill v. Hernandez 2. The Court's Transition from Immunity to Validity III. THE ACT OF STATE DOCTRINE IN THE LOWER COURTS A. The Act of State Doctrine in the Courts of Appeals 1. Spectrum Stores v. Citgo 2. World Wide Minerals v. Republic of Kazakhstan 3. Riggs National Corp. v. IRS 4. The Ninth Circuit's Act of State Doctrine B. The Act of State Doctrine in the District Courts IV. THE COMMON-LAW ACT OF STATE DOCTRINE OUTSIDE THE UNITED STATES V. The Act of State Doctrine's Place in Federal Law John Harrison, James Madison Distinguished Professor of Law, University of Virginia. Some of the issues discussed in this Article came to my attention when I served as Counselor on International Law to the Legal Adviser of the United States Department of State in 2008. The views presented here are entirely my own. Thanks to Paul Stephan and Chimene Keitner for insightful comments. Calvin Funk provided excellent research assistance.

  2. INTRODUCTION

    A page of history may be worth a volume of logic, but in a system of case law, a convoluted history can obscure doctrinal logic. Something similar may have happened with the American act of state doctrine. As propounded by the Supreme Court of the United States, the doctrine is clear and narrowly focused, and performs an important function in the law of foreign relations. But in large part because of a quirk of case-law history, the doctrine is subject to serious misconstruction. As misconstrued, it conflicts with other legal principles and leads to irrational results. Lower courts often misunderstand the doctrine, reaching results that are justified neither by the Supreme Court's cases nor by more general principles.

    Part II of this Article first describes the doctrine as the Court now states it, and reviews the case law development. This Part emphasizes that under the currently authoritative decisions the doctrine is about validity, not legality in any other sense. When it applies, the act of state principle requires that American courts give to foreign official acts in foreign sovereign territory the juridical force that those acts purport to have. In Banco Nacional de Cuba v. Sabbatino,* the Court treated as effective Cuba's decree expropriating sugar located in Cuba, without regard to whether the expropriation violated international law. The distinction between validity and compliance with applicable duties, which is on display in Sabbatino, is crucial to understanding the doctrine's substance.

    Part II then discusses the act of state doctrine's case law development and the confusion that it has engendered. The decision that the Court now regards as the doctrine's origin, Underhill v. Hernandez, (2) almost certainly was not an act of state case in today's sense. Rather, it turned on the jurisdictional immunity in American courts of foreign officials with respect to their official acts. That protection from judicial proceedings, often referred to as immunity ratione materiae, is a bar to adjudication, not a principle of substantive non-liability. Today the Court calls it foreign official immunity: the principle that individuals are not subject to foreign jurisdiction for acts they perform on behalf of their own governments. Only later, in cases after Underhill that involved foreign acts of confiscation, did the Court articulate the principles regarding validity that it now calls the act of state doctrine. There is thus a substantial discontinuity between the case said to be the doctrine's origin, and the doctrine as it now stands.

    Part III describes the confusion into which the lower courts have sometimes fallen. Some lower court decisions describe the doctrine as one of abstention, pursuant to which courts do not decide cases that are within their jurisdiction. Some lower courts also have concluded that under the act of state doctrine, American courts are barred from concluding that a foreign official act violated a duty, including a duty imposed by a federal statute like the Sherman Act. Neither view is warranted under the Supreme Court's cases. The Court has made clear that the doctrine does not call for abstention, but supplies a rule of decision by which courts are to decide on the merits. That rule of decision requires that courts treat foreign sovereign acts as legally effective. It does not determine whether foreign sovereign acts, or private acts that are related to them, comply with applicable legal duties.

    Part IV briefly discusses the act of state doctrine that appears in British cases, a doctrine that differs significantly from its American namesake. British courts include principles of official immunity ratione materiae in the act of state category. The Supreme Court of the United States treats those principles under a different rubric.

    Part V argues that the principles the American lower courts sometimes attribute to the act of state doctrine have no place in the larger system of foreign relations law. As the Supreme Court now explains it, the doctrine performs a choice of law function: it instructs American courts to accept the answers to legal questions that are provided by foreign sovereign acts in foreign territory. As a choice of law principle, the doctrine complements and does not conflict with rules about sovereign and official immunity, nor with substantive rules that apply to the acts of foreign sovereigns. By contrast, were the doctrine to provide immunity, to require abstention, or to interfere with substantive rules that govern the acts of foreign sovereigns, it would displace the legal norms that deal with those topics. The doctrine as it appears in the Supreme Court's cases thus performs an important function, while the doctrine that appears in some lower court cases disrupts the applicable law.

  3. THE SUPREME COURT'S ACT OF STATE DOCTRINE

    This Part describes the act of state doctrine as the Supreme Court now expounds it, focusing on the only two cases in the last several decades in which the Court has dealt in depth with the doctrine's content. It then explains that the case that is conventionally described as the origin of the act of state doctrine was not seen as an act of state case by the Justices who decided it. The doctrine as it now exists arose later.

    1. The Contemporary Act of State Doctrine

      Two cases together set out the Supreme Court's current act of state doctrine: Banco Nacional de Cuba v. Sabbatino (3) and W. T. Kirkpatrick Co. v. Environmental Tectonics Corp. (4) Kirkpatrick, in which the Court found the doctrine inapplicable, is more recent, and states the doctrine's content and limits quite clearly. Sabbatino applied the doctrine and therefore provides the classic example of its operation. A case after Sabbatino that also dealt with Cuban expropriations, Alfred Dunhill of London, Inc. v. Republic of Cuba, (5) confirms the scope of the doctrine as understood in Sabbatino. All the earlier cases that are today characterized as resting on act of state principles must now be understood as they are explained by the Court's more recent decisions.

      1. Banco Nacional de Cuba v. Sabbatino

        In Sabbatino, the Supreme Court held that under the act of state doctrine, American courts must give legal effect to certain exercises of legal power by foreign governments, even if those exercises of power are contrary to international law. The Court thus rested the doctrine on the distinction between validity and lawfulness, as it found that foreign law could be binding in U.S. courts even if that law violated international norms.

        Sabbatino involved a dispute about title to a cargo of sugar originating in Cuba. Sabbatino was a court-appointed receiver of the assets of C.A.V., a Cuban corporation principally owned by U.S. residents. While the sugar was in Cuba and was owed by C.A.V., the Cuban government issued a decree purporting to nationalize the sugar and other assets owned by American interests. Banco Nacional de Cuba, an instrumentality of the Cuban government, claimed title on the basis of the nationalization decree. Sabbatino claimed title through C.A.V. Both appeared in the U.S. District Court for the Southern District of Manhattan, seeking to recover the proceeds of the sale of the cargo in Morocco, which had been paid to Farr, Whitlock & Co., a sugar broker operating in New York. (6)

        In the Court's view, the actions of the Cuban government while the sugar was still in Cuba "must be regarded for these purposes to have constituted an effective taking of the sugar, vesting in Cuba C.A.V.'s property right in it." (7) The question then was whether "the rights acquired by Cuba are enforceable in our courts," a question that depended on the act of state doctrine. (8) In setting out the basic outlines of that doctrine, the Court discussed two formative cases, Oetjen v. Central Leather Co. and Ricaud v. American Metal Co., which were especially pertinent because they involved disputes over ownership of property that had been nationalized by a foreign government. (9) In both, the foreign title had been sustained without further inquiry. (10)

        The Court then turned to the respondents' argument that the case should constitute an exception to the ordinary act of state rule. One reason urged was that Cuba's seizure of the property, unlike the Mexican expropriations involved in Oetjen and Ricaud, violated international law. (11) After discussing the source of the act of state principle and its place in the American legal hierarchy, the Court rejected that argument. (12) Carefully circumscribing its holding, the Court stated that:

        [W]e decide only that the...

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