United Bank Limited v. Cosmic International, Inc., 542 F.2d 868 (1976), decided by the U.S. Court of Appeals for the Second Circuiton September 30, 1976, involved a dispute between Bangladesh and Pakistani plaintiffs concerning the right to receive payment for jute products which were exported from the former territory of East Pakistan and resold in the United States prior to December 16, 1971, the day that Bangladesh won its independence from Pakistan. The jute was originally supplied by two Pakistani corporations, whose East Pakistani interests were expropriated without compensation by the Bangladesh Government after the termination of hostilities. The Bangladesh plaintiffs claim that by virtue of the nationalization orders they are the successors in interest to all property formerly owned by the Pakistani plaintiffs. Although acknowledging that no compensation was paid for any of the Pakistani property purportedly seized, the Bangladesh plaintiffs maintain that the act of state doctrine precludes American courts from examining the propriety of any taking effected by Bangladesh law.

The U.S. District Court for the Southern District of New York decided in favor of the Pakistani plaintiffs, 392 F. Supp. 262, holding that the act of state doctrine did not govern because at the time the Bangladesh Government attempted to seize the debts their situs was in New York, and the purported confiscations were contrary to U.S. public policy. The U.S. Court of Appeals affirmed.

On appeal, the Bangladesh plaintiffs maintained that the act of state doctrine should govern because the situs was in Bangladesh, and the decrees, while confiscatory, were not extraterritorial in nature. They argued, finally, that, even if the situs was in New York, the seizures in question were consistent with established American standards which permit confiscatory taking in wartime situations. The Court of Appeals held that the situs of the debts was in the United States, relying on Menendez v. Saks and Company, 485 F.2d 1355 (1973), rev'd on other grounds sub nom., Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976), ante, p. 332, and that since the District Court was not obliged to apply the act of state doctrine to extraterritorial seizures, the Bangladesh decrees were properly denied effect because American public policy "does not recognize the validity of governmental takings without compensation." The opinion stated:

[T]he Bangladesh plaintiffs have not called our attention to any cases which actually applied jurisdictional considerations in fixing situs at a place other than the debtor's domicile. Moreover, since jurisdictional determinations would inevitably require American courts to engage in complex interpretations of foreign statutory and case law pertaining to jurisdiction, resolving situs questions on such a basis would deprive the act of state doctrine of certainty and predictability. Cf. Banco Nacional de Cuba v. Sabbatino, . . . 376

U.S. at 424-428. An even more fundamental reason for declining to adopt this approach is that the act of state doctrine would thereby be given needless scope. Where an act of state has not "come to complete fruition within the dominion of... [a foreign] government,' "no fait accompli has occurred which would otherwise effectively prevent an American court from reviewing the act's validity. More importantly, in the absence of such a fait accompli, there is less likelihood that any ensuing judicial review would jeopardize this country's foreign relations . . . . [Id. at 874]

Because of territorial constraints and our country's traditional policy against confiscatory expropriations, the Bangladesh plaintiffs obviously would not have been able to seize directly the Cosmic debts located in New York. If the argument they now advance were to prevail, the Bangladesh plaintiffs would effectively be allowed to accomplish in an indirect manner a result which they could not have achieved directly. The act of state doctrine was not intended to permit foreign governments to circumvent American public policy. For this reason, our courts have always been wary of inadvertently extending extraterritorial effect to foreign seizures.

Therefore, since the Bangladesh plaintiffs' argument would, if accepted, undermine American public policy against confiscatory takings, we decline to hold that the Cosmic funds are simply security which passed as incidents to any debts that may have been seized by Bangladesh within its own borders.

The Bangladesh plaintiffs' final argument is that, even if the situs of these debts is in New York, the seizures in question were consistent with established American standards which permit confiscatory taking in wartime situations. Admittedly, there is considerable case law which would support the principle that "[t]here is no constitutional prohibition against confiscation of enemy properties."... Indeed, the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., which gives the President of the United States authority to employ confiscatory measures, has long been considered to be an exercise of congressional warmaking power under the Constitution. . . . However, neither this legislation nor any of the cases we have reviewed suggest even remotely that confiscatory seizures of an extraterritorial nature can ever be consistent with American public policy.

It would hardly be "consistent" with American public policy to create a special exception for extraterritorial seizures committed in wartime. Aside from the antagonistic effect which such an exception would inevitably have on our foreign relations with previously friendly nations, this Court has already recognized that citizens of friendly sovereigns have a legitimate expectation that their property interests in the United States will receive the benefit. of any protection our law affords . . . . [Id. at 876-877]

Chapter 7

LAW OF THE SEA AND
INTERNATIONAL WATERWAYS

§ 1 General

U.S. Oceans Policy

U.N. Conference on Law of the Sea

Secretary of State Kissinger made a statement upon the conclusion of the fifth session of the Third U.N. Conference on the Law of the Sea, which met in New York August 2 to September 17, 1976, in which he stated the views of the United States with respect to the current status of the negotiations. The following is an excerpt:

The present Revised Single Negotiating Text (RSNT) represents a consensus on a large number of issues before the Conference. This text has been maintained in this session as the basis for negotiations. A broad consensus already exists in certain key areas, including a 12-mile territorial sea, establishing coastal state resource and other rights in a 200-mile economic zone, protecting navigational rights and on marine pollution. However, the United States believes the present text remains imperfect and requires further changes in a certain number of key areas, such as: a regime for mining deep seabed minerals;

- the nature of the economic zone;

the provisions for marine scientific research in the economic

zone;

- the articles dealing with the exploitation of resources in the continental margin beyond 200 miles;

the rights of landlocked and geographically disadvantaged states in the economic zone.

During meetings between myself and certain other delegations on September 1-2, the United States put forward important new ideas on a number of key topics still at issue. With respect to deep seabed mining we proposed a package approach which would include assured access in all its aspects to deep seabed mining sites by all nations and their citizens along with a financing arrangement to enable the proposed Enterprise (the independent operating arm of the International Seabed Authority) to get into business. As part of that package we further proposed that there could be a review, in 25 years, perhaps, to determine if the provisions of the treaty regarding the system of seabed exploitation

were working adequately. This was a significant move which generated considerable interest which we believe can be transformed at the next session into specific treaty language.

With respect to the issues in Committee II of the Conference dealing with navigation and the nature of the economic zone, the United States continues to believe that a satisfactory solution is within reach. While specific language on the nature of the proposed economic zone has not yet been agreed, several promising ideas have been considered. We believe that a solution can be found which will provide for both the legitimate interests of the coastal states in protecting their resource and other interests and the high seas freedoms of the international community in the economic zone.. These provisions are important in maintaining global security and supporting our allies in this dangerous age.

În Committee III the United States is seeking protection of the marine environment and preservation of the right to conduct marine scientific research. The present text already contains important provisions on ocean pollution which we seek to strengthen. With respect to marine scientific research in the economic zone, we have proposed a compromise which will give the coastal states the right to control marine scientific research directly related to resource exploitation but which will ensure the right to conduct other forms of marine scientific research which benefit all mankind.

In order for an overall package settlement to be viable, the treaty must contain provisions for comprehensive, obligatory and binding third party dispute settlement. This session has made considerable progress toward that goal.

We believe that equitable resolution of these and other key issues in these negotiations can be found. Unless this is the case various governments may conclude agreement is not possible, resulting in unilateral action which can lead to conflict over the uses of ocean space.

The United States has a major interest as a global power in preventing such conflict and thus will continue to seek overall solutions acceptable to all groups of countries. In so doing, however, we will continue vigorously to safeguard essential American interests. We will work cooperatively with other nations, but we expect a reciprocal attitude of good will and reasonableness. There are limits beyond which the United States will not go, and we are close to such limits now.

We must now move toward businesslike negotiations and toward a recognition that the alternative to a treaty would serve no national or international community interest The United States will seek to build on the progress made to date and will continue its intensive efforts to achieve a treaty . . .

Press Release USUN-104(76), Sept. 17, 1976; Dept. of State Bulletin, Vol. LXXV, No. 1946, Oct. 11, 1976, pp. 451-453. The Revised Single Negotiating Text which formed the basis for negotiations at the Aug. 2-Sept. 17, 1976, session of the Law of the Sea Conference consisted of revised texts prepared by the Chairmen of Committee I, Committee II, and Committee III and a new single negotiating text on settlement of disputes prepared by the President of the Conference at the preceding session, U.N.

Docs. A/CONF. 62/WP.8/Rev. 1, Parts I-III, May 6, 1976, and A/CONF. 62/WP.9/Rev. 1, May 6, 1976.

In an address to the U. N. General Assembly on September 30, 1976, Secretary of State Kissinger said, with respect to the law of the sea negotiations:

The negotiations which have just recessed in New York represent one of the most important, complex, and ambitious diplomatic undertakings in history.

Consider what is at stake:

-Mankind is attempting to devise an international regime for nearly three quarters of the Earth's surface.

-Some 150 nations are participating, reflecting all the globe's diverse national perspectives, ideologies, and practical concerns. -A broad sweep of vital issues is involved: economic development, military security, freedom of navigation, crucial and dwindling living resources, the ocean's fragile ecology, marine scientific research, and vast potential mineral wealth.

-The world community is aspiring to shape major new international legal principles: the extension of the longestablished territorial sea, the creation of a completely new concept of an economic zone extending 200 miles, and the designation of the deep seabeds as the "common heritage of mankind."

We have traveled an extraordinary distance in these negotiations in recent years-thanks in no small part to the skill and dedication of the distinguished President of this Assembly. Agreement exists on key concepts: a 12-mile territorial sea, free passage over and through straits, a 200-mile economic zone, and important pollution controls. In many fields we have replaced ideological debates with serious efforts to find concrete solutions. And there is growing consensus that the outstanding problems must be solved at the next session.

But there is hardly room for complacency. Important issues remain which, if not settled, could cause us to forfeit all our hardwon progress. The conference has yet to agree on the balance between coastal state and international rights in the economic zone, on the freedom of marine scientific research, on arrangements for dispute settlement, and most crucially, on the regime for exploitation of the deep seabeds.

The United States has made major proposals to resolve the deep seabed issue. We have agreed that the seabeds are the common heritage of all mankind. We have proposed a dual system for the exploitation of seabed minerals by which half of the mining sites would be reserved for the International Authority and half could be developed by individual nations and their nationals on the basis of their technical capacity. We have offered to find financing and to transfer the technology needed to make international mining a practical reality. And in light of the many uncertainties that lie ahead, we have proposed that there be a review-for example, in 25 years to determine whether the provisions on seabed mining are working equitably.