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Banco Nacional De Cuba v. Sabbatino - 376 U.S. 398, 84 S. Ct. 923 (1964)

Rule:

The Judicial Branch will not examine the validity of a taking of property within its own territory by a foreign sovereign government, extant and recognized by this country at the time of suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law. 

Facts:

In 1960, Farr, Whitlock & Co. ("Farr"), an American commodity broker, contracted to purchase Cuban sugar from a wholly owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba ("CAV") whose capital stock was owned principally by United States residents. Farr agreed to pay for the sugar in New York upon presentation of the shipping documents and a sight draft. Thereafter, Cuba expropriated the property of the Cuban corporation and permitted the ship carrying the sugar to leave Cuban waters only after Farr had entered into a contract, identical to those made previously, with Banco Nacional De Cuba, an instrumentality of the Cuban government. Another such instrumentality to which the bank had assigned the bill of lading instituted an action in the United States District Court for the Southern District of New York to recover the proceeds of the bill of lading. The district court granted summary judgment against Banco Nacional De Cuba on the basis that the Cuban expropriation decree violated international law; the United States Court of Appeals for the Second Circuit affirmed. Banco Nacional De Cuba appealed.

Issue:

Can the courts of the United States inquire into the validity of the public acts that a recognized foreign sovereign power committed within its own territory?

Answer:

No

Conclusion:

The United States Supreme Court held that the act of state doctrine precluded the courts of the United States from inquiring into the validity of the public acts that a recognized foreign sovereign power committed within its own territory. The Court further found that the scope of the act of state doctrine was to be determined according to federal law, and the doctrine proscribed a challenge to the validity of the Cuban expropriation decree. Therefore, the Court found that any counterclaim based on asserted invalidity failed.

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