Am. Banana Co. v. United Fruit Co. - 213 U.S. 347, 29 S. Ct. 511 (1909)

Rule:

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 where the act is done. For another jurisdiction, if it should happen to lay hold of the actor, to treat him according to its own notions rather than those of the place where he did the acts, not only would be unjust, but would be an interference with the authority of another sovereign, contrary to the comity of nations, which the other state concerned justly might resent. A seizure by a state is not a thing that can be complained of elsewhere in the courts. Sovereignty is pure fact.

Facts:

Defendant United Fruit Company with the intention to prevent competition and to control and monopolize the banana trade, bought the property and business of several of its previous competitors, who were also prevented from resuming their trade. Defendant also made contracts with others, regulating the quantity to be purchased and the price to be paid, and acquired a controlling amount of stock in still others. By this and other means, it did monopolize and restrain the trade and maintained unreasonable prices. In 1903, one McConnell started a banana plantation in Panama, then part of the United States of Colombia, and began to build a railway both in accordance with the laws of the United States of Colombia. Months later, by defendant's instigation, the governor of Panama recommended to his national government that Costa Rica be allowed to administer the territory through which the railroad was to run, although the territory had been awarded to Colombia under an arbitration agreed to by treaty. Plaintiff American Banana Company bought out McConnell and went on with the work but because of defendant’s instigation, Costa Rican soldiers and officials seized a part of the plantation and a cargo of supplies. The construction and operation of the plantation and railway was also stopped. Plaintiff tried to induce the government of Costa Rica to withdraw its soldiers and also has tried to persuade the United States to interfere, but has been thwarted in both by the defendant and has failed. As a result of the defendant's acts, plaintiff has been deprived of the use of the plantation, and the railway, plantation, and supplies have been injured. Further, defendant had driven purchasers out of the market and has compelled producers to come to its terms, and it has prevented plaintiff from buying for export and sale. This action was then brought to recover threefold damages under the Act to Protect Trade against Monopolies, 26 Stat. 209. The trial court dismissed the complaint upon motion for failure to state a cause of action which was affirmed by the court of appeals. Plaintiff appealed alleging that there was a wrongful conspiracy that resulted in driving the plaintiff out of business. 

Issue:

Was there a wrongful conspiracy that resulted in driving the plaintiff out of business?

Answer:

No.

Conclusion:

The court affirmed the lower court’s judgment. The court ruled that the defendant’s actions although illegal in the United States, were permitted by the local law in the foreign jurisdiction at issue. The court held that a statute will, as a general rule, be construed as intended to be confined in its operation and effect to the territorial limits within the jurisdiction of the lawmaker, and words of universal scope will be construed as meaning only those subject to the legislation. Also, the prohibitions of the Sherman Anti-Trust Law of July 2, 1890, c. 647, 26 Stat. 209, do not extend to acts done in foreign countries even though done by citizens of the United States and injuriously affecting other citizens of the United States. The court explained that sovereignty means that the decree of the sovereign makes law, and foreign courts cannot condemn the influences persuading the sovereign to make the decree. Thus, acts of soldiers and officials of a foreign government must be taken to have been done by its order. Hence, the court ruled that a conspiracy in the United States to do acts in another jurisdiction did not draw to itself those acts and make them unlawful, if they were permitted by the local law.