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statement by counsel for the Republic of Cuba that Dunhill's unjust enrichment claim would not be honored constituted an act of state. The case was argued twice in this Court. We have now concluded that nothing in the record reveals an act of state with respect to interventors' obligation to return monies mistakenly paid to them. Accordingly we reverse the judgment of the Court of Appeals [485 F.2d 1355 (1975)].

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We . . . disagree with the Court of Appeals that the mere refusal of the interventors to repay funds followed by a failure to prove that interventors "were not acting within the scope of their authority as agents of the Cuban government" satisfied respondents' burden of establishing their act of state defense. . . . As the District Court found, the only evidence of an act of state other than the act of nonpayment by interventors was "a statement by counsel for the interventors, during the trial, that the Cuban Government and the interventors denied liability and had refused to make repayment.” .... 345 F. Supp., at 545. But this merely restated respondents'original legal position and adds little, if anything, to the proof of an act of state. No statute, decree, order or resolution of the Cuban Government itself was offered in evidence indicating that Cuba had repudiated her obligations in general or any class thereof or that she had as a sovereign matter determined to confiscate the amounts due three foreign importers.

If we assume with the Court of Appeals that the Cuban Government itself had purported to exercise sovereign power to confiscate the mistaken payments belonging to three foreign creditors and to repudiate interventors' adjudicated obligation to return those funds, we are nevertheless persuaded by the arguments of petitioner and by those of the United States that the concept of an act of state should not be extended to include the repudiation of a purely commercial obligation owed by a foreign sovereign or by one of its commercial instrumentalities.

The major underpinning of the act of state doctrine is the policy of foreclosing court adjudications involving the legality of acts of foreign states on their own soil that might embarrass the executive branch of our Government in the conduct of our foreign relations. Banco Nacional de Cuba v. Sabbatino, 376 U.S., supra, at 427-428, 431-433. But based on the presently expressed views of those who conduct our relations with foreign countries, we are in no sense compelled to recognize as an act of state the purely commercial conduct of foreign governments in order to avoid embarrassing conflicts with the executive branch. On the contrary, for the reasons to which we now turn, we fear that embarrassment and conflict would more likely ensue if we were to require that the repudiation of a foreign government's debts arising from its operation of a purely commercial business be recognized as an act of state and immunized from question in our courts.

Although it had other views in years gone by, in 1952, as evidenced by appendix 2 (the Tate letter), . . . the United States abandoned the absolute theory of sovereign immunity and embraced the restrictive view under which immunity in our courts should be granted only with respect to causes of action arising out of a foreign state's public or governmental actions and not with respect to those arising out of its commercial or proprietary actions. . . . Repudiation of a commercial debt cannot, consistent with this restrictive approach to sovereign immunity, be treated as an act of state; for if it were, foreign governments, by merely repudiating the debt before or after its adjudication, would enjoy an immunity which our government would not extend them under prevailing sovereign immunity principles in this country. This would undermine the policy supporting the restrictive view of immunity, which is to assure those engaging in commercial transactions with foreign sovereignties that their rights will be determined in the courts whenever possible.

. . There may be little codification or consensus as to the rules of international law concerning exercises of governmental powers, including military powers and expropriations, within a sovereign state's borders affecting the property or persons of aliens. However, more discernible rules of international law have emerged with regard to the commercial dealings of private parties in the international market. The restrictive approach to sovereign immunity suggests that these established rules should be applied to the commercial transactions of sovereign states.

Of course, sovereign immunity has not been pleaded in this case; but it is beyond cavil that part of the foreign relations law recognized by the United States is that the commercial obligations of a foreign government may be adjudicated in those courts otherwise having jurisdiction to enter such judgments. Nothing in our national policy calls on us to recognize as an act of state a repudiation by Cuba of an obligation adjudicated in our courts and arising out of the operation of a commercial business by one of its instrumentalities. For all the reasons which led the executive branch to adopt the restrictive theory of sovereign immunity, we hold that the mere assertion of sovereignty as a defense to a claim arising out of purely commercial acts by a foreign sovereign is no more effective if given the label "act of state" than if it is given the label "sovereign immunity." In describing the act of state doctrine in the past we have said that it “precludes the courts of this country from inquiring into the validity of public acts a recognized foreign sovereign power committed within its own territory.” Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401(1964)(emphasis added), and that it applies to "acts done within their own states, in the exercise of governmental authority.” Underhill v. Hernandez, 168 U. S. 250, 252 (1897) (emphasis added). We decline to extend the act of state doctrine to acts committed by foreign sovereigns in the course of their purely commercial operations. Because the act relied on by respondents in this case was an act arising out of the conduct by Cuba's agents in the operation of cigar businesses for profit, the act was not an act of state.

A concurring opinion by Mr. Justice Lewis F. Powell, Jr., expressed the view that even in cases deemed to involve purely political acts, it is the duty of the judiciary to decide such cases "[u]nless it appears that an exercise of jurisdiction would interfere with delicate foreign relations conducted by the political branches...

The dissenting opinion by Mr. Justice Thurgood Marshall disagreed that the Cuban respondents had not met their burden of proof. Justice Marshall said that the statements by counsel for the Cuban respondents showed that respondents were exercising sovereign authority when they refused to return the money Dunhill had sent “[A]s authoritative representations of the position of counsel's clients, ... these statements do confirm that the continued retention of those monies has been undertaken as an exercise of sovereign power.” Justice Marshall also questioned the wisdom of attempting the articulation of any broad commercial exception to the act of state doctrine within the confines of a single case.

Application of the act of state doctrine was a principal issue in Hunt v. Mobil Oil Corporation, 410 F. Supp. 10 (1976), decided by the U.S. District Court for the Southern District of New York on November 5, 1975, affd January 12, 1977 (U.S.C.A. 2d Cir.). Plaintiff Nelson Bunker Hunt, who was engaged in oil production in Libya, brought action against a number of other Libyan and Persian Gulf oil producers to recover for alleged violation of the antitrust laws and for breach of contract. He charged that prior to and in the course of cooperative efforts by plaintiff and defendants to deal with increasingly aggressive oil producing countries, defendants combined and conspired in violation of section 1 of the Sherman Act (15 U.S.C. 1) and section 73 of the Wilson Tariff Act (15 U.S.C. 8):

(1) to impose unlawful restrictions on him by insisting he enter into an agreement, thereafter enforced, which limited the resale of Persian Gulf oil supplied to him by defendants to his preexisting Western Hemisphere and European customers;

(2) to boycott him by refusing to deliver 90 million barrels of oil due him under that agreement; and

(3) to use the agreement, and their consequent control over the course of Libyan negotiations, to promote certain defendants' Persian Gulf interests at plaintiff's expense, and ultimately destroy him by preventing him from reaching any agreement with the Libyan Government, thus leading to plaintiff's nationalization and elimination from competition as a producer of Libyan oil.

The defendants moved to dismiss for failure to state a claim. They argued, inter alia, that all three claims were foreclosed by the act of state doctrine.

The U.S. District Court for the Southern District of New York decided that the first two counts were not barred by the act of state doctrine, but that the third count was barred by it. The Court said that the act of state concept had no bearing on the first claim because resolution of the issues raised did not in any way require an inquiry into the judgment, the conduct or acts of the Libyan Government, or any alleged conduct by the defendants which allegedly induced action by the Libyan Government. Likewise on the second claim, the Court held it was premised entirely under a provision of the oil producers' agreement and did not involve any question of Libyan conduct.

On the third claim, the Court found that the defendants'act of state plea rested on a solid foundation. It considered that the manipulative course of conduct attributed to certain oil producers following signing of the oil producers' agreement centered around the defendants' negotiations and dealings with, and action taken thereafter by, the Libyan Government, and therefore was within the proscription of the act of state doctrine. Rejecting plaintiff Hunt's contention that his claim challenged no act by the Libyan Government and did not ask the Court to sit in judgment on the acts of a sovereign, the Court stated:

It may well be that recent public disclosure of the dealings of multinational corporations with foreign governments which have an adverse impact upon American interests justifies a reappraisal of the act of state doctrine to determine whether its scope should be confined. However, in the absence of new doctrinal trends in Supreme Court opinions, reassessment of the range of the doctrine must rest with that Court and not this Court. Accordingly, the defendants' motion to dismiss the third claim is granted.

On plaintiff's breach of contract claim, the Court held that antitrust issues were so involved as to preclude stay of the antitrust proceedings pending arbitration pursuant to the arbitration provision in the oil producers' agreement.

On May 18, 1976, the U.S. District Court for the Southern District of New York, in Stroganoff-Scherbatoff v. Weldon, 420 F. Supp. 18 (1976), held that the act of state doctrine precluded the alleged descendant of the original owner of works of art from recovering such works of art from the present owners in view of the fact that the Soviet Government, which had appropriated the works of art from the original owner in Russia, was recognized by the United States at the time of the law suit.

The art works, known as the Triest Portrait and the Diderot bust, had been sold in Berlin in 1931 by order of the Trade Consulate of the Soviet Union. The defendants had become owners in due course. The plaintiff alleged that he was the direct descendant of Count Alexander Sergevitch Stroganoff, the original owner of both works of art, and that he was the rightful owner by reason of familial succession. The defendants contended that even if the plaintiff could prove ownership by familial succession the Court was barred from granting relief by reason of the act of state doctrine. The Court agreed with defendants' contention. It stated:


The act of state doctrine requires courts of this country to refrain from independent examination of the validity of a taking of property by a sovereign state where 1) the foreign government is recognized by the United States at the time of the lawsuit, and 2) the taking of the property by the foreign sovereign occurred within its own territorial boundaries.

Here, the record shows that the works of art, whether in the Stroganoff Palace or in the Imperial Hermitage Museum, were appropriated by the Soviet Government under either Decree No. iii of the Council of People's Commissars published on March 5, 1921, which nationalized all movable property of citizens who had fled the Soviet Union, or Decree No. 245 of March 8, 1923, promulgated by the All Russian Central Executive Committee and the Council of People's Commissars, which nationalized property housed in State Museums.

While plaintiff contends that the “taking” did not occur within the territory of the Soviet Union but in Berlin at the Lepke Auction and, under such circumstances, the act of state doctrine is inapplicable, the record indicates that the works of art were appropriated in Russia, prior to the Lepke Auction, and were transported to Berlin by the Soviet Government solely for the purpose of the public sale.


The Soviet Government had been recognized by the United States as the de jure government of Russia in 1933. Whether the works of art had been appropriated under Decree No. 111 of March 5, 1921, or Decree No. 245 of March 8, 1923, appears to be immaterial. The sale of the Stroganoff Collection was held by order of the Soveit Trade Consulate) and as such was carried out under the direction and with the consent of the Soviet Government. While the actual sale of the works of art occurred in Berlin, the property had been seized in Russia by the Soviet Government.

Thus, it seems clear that, on this record, plaintiff is precluded from recovery by reason of the act of state doctrine. Banco Nacional de Cuba v. Sabbatino [376 U.S. 398 (1964)).


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