The act-of-state doctrine does not establish an exception for cases and controversies that may embarrass foreign governments, but merely requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid.
Upon learning that the Republic of Nigeria was interested in contracting for a construction project on an air force base in Nigeria, the chief executive officer (CEO) of a New Jersey corporation made arrangements for a Nigerian citizen to endeavor to secure the contract for the corporation. It was agreed that if the corporation secured the contract, the corporation would funnel a percentage of the contract price as a bribe to officials of the Nigerian government though the payment of a "commission" to Panamanian entities which the Nigerian citizen controlled. Both the payment and the receipt of bribes in connection with the award of a government contract were prohibited by Nigerian law. The corporation was awarded the contract, and the bribes were paid. A Pennsylvania corporation, which had been an unsuccessful bidder for the contract, learned of the "commission" and brought the matter to the attention of American and Nigerian officials. The New Jersey corporation and its CEO were eventually charged with violations of a federal corrupt practices statute, and both pleaded guilty. The Pennsylvania corporation subsequently brought an action against the New Jersey corporation, its CEO, the Nigerian citizen, and others, in which action the Pennsylvania corporation sought damages under various federal and state statutes. The defendants moved to dismiss the complaint on the ground that the action was barred by the act of state doctrine. In response to the District Court's request, the United States Department of State submitted to the court a letter in which the State Department's legal advisor addressed the question of the applicability of the act of state doctrine to the Pennsylvania corporation's action. The District Court, granting the defendants' motion to dismiss, concluded that the act of state doctrine was applicable if the inquiry presented for judicial determination included the motivation of a sovereign act which would result in embarrassment to the sovereign or constitute interference in the conduct of foreign policy of the United States. On appeal, the United States Court of Appeals reversed, ruling that the defendants had not met their burden of showing that the case should not go forward, in light of the view expressed by the State Department in its letter to the District Court that the interests of the executive branch of the Federal Government would not be harmed by prosecution of the action.
Does the act of state doctrine apply if the validity of an official act of a foreign sovereign is not at issue?
The Court held that the act of state doctrine does not apply because nothing in the present suit requires a court to declare invalid the official act of a foreign sovereign. It does not suffice that the facts necessary to establish respondent's claim will also establish that the Nigerian contract was unlawful, since the contract's legality is simply not a question that the District Court must decide.