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With respect to the Province of Newfoundland, the Department recognizes and allows the immunity of the Province from suit, except insofar as plaintiffs' claims may be based upon direct injuries to purchasers of securities in the United States arising from (a) any immediate steps taken by the Province to effect the sale of securities in the United States, (b) any alleged misrepresentation in violation of United States securities laws, made by the Province in effecting the sale of securities in the United States, or (c) any alleged failure to disclose material information which the Province, in effecting the sale of securities in the United States, was required to disclose under U.S. securities laws. The Department does not address the question of whether the Province did in fact effect any sales of securities in the United States.

Finally, the Department recognizes and allows the immunity of the Province of Newfoundland as to the claim and demand for any punitive damages.

Dept. of State File No. P77 0009-10.

A building owned by the Socialist Republic of Romania and occupied by its Permanent Mission to the United Nations was the subject of an attachment in Ungureanu v. Socialist Republic of Romania, in the Supreme Court of the State of New York, County of New York, Index No. 09793/1976. Following a diplomatic request from the Romanian Embassy in Washington, the Department of State recognized the immunity of the property in question and requested the Department of Justice to file a suggestion of immunity. In a letter of August 20, 1976, to Attorney General Edward H. Levi, Acting Legal Adviser George H. Aldrich stated:

The property in question is used as diplomatic premises of the Permanent Mission of the Socialist Republic of Romania to the United Nations. The property also serves as the residence for personnel of the Permanent Mission, and for members of the staff of the Economic Counselor of the Embassy of the Socialist Republic of Romania. The remainder of the property is currently undergoing an interior renovation for ultimate use, in the near future, by the Economic Counselor of the Embassy and by the Romanian Library.

Taking note of applicable international agreements, and also for foreign relations reasons, the Department of State recognizes and allows the immunity of this property from attachment. Consequently, the Department would be grateful if you would cause an appropriate suggestion of immunity to be filed with the Supreme Court of the State of New York, County of New York.

The Department, in making this determination, has not found it necessary to determine any question concerning the underlying lawsuit.

Dept. of State File No. P77 0009-14. The applicable international agreements cited

in a footnote to Mr. Aldrich's letter were: Vienna Convention on Diplomatic Relations, art. 22 (TIAS 7502; 23 UST 3227) and the U.N. Headquarters Agreement, sec. 15 (TIAS 1676; 61 Stat. 3416).

The Department of State received a second request for a determination of immunity from the Romanian Embassy-this time for property formerly used as the diplomatic premises of the Romanian Permanent Mission to the United Nations, but subsequently used for residential purposes by the Permanent Representative of Romania to the United Nations. It too became the subject of an attachment in Ungureanu v. Socialist Republic of Romania, supra. The Department again recognized the immunity of the property in question. Monroe Leigh, Legal Adviser, in a letter to Attorney General Levi, dated October 12, 1976, stated:

Although the present property at 60 East 93rd Street, New York City, no longer serves as the offices of the Permanent Mission of the Socialist Republic of Romania to the United Nations, it continues to serve as the residence of the Permanent Representative of the Socialist Republic of Romania to the United Nations. Moreover, although much of the building is vacant and although the building has been offered for sale or rental, it does not appear that the property has been put to any commercial, investment, or other nonpublic use.

Taking note of these circumstances and of applicable international agreements, and also for foreign relations reasons, the Department of State recognizes and allows the immunity of this property from attachment. Consequently, the Department would be grateful if you would cause an appropriate suggestion of immunity to be filed with the Supreme Court of the State of New York, County of New York.

The Department, in making this determination, has not found it necessary to determine any question concerning the underlying lawsuit.

Dept. of State File No. P77 0012-1788. The applicable international agreements cited in a footnote to Mr. Leigh's letter were Vienna Convention on Diplomatic Relations, arts. 22 and 30 (TIAS 7502; 23 UST 3227), and the U.N. Headquarters Agreement, sec. 15 (TIAS 1676; 61 Stat. 3416).

Proof of Immunity

In National American Corporation v. Federal Republic of Nigeria, 420 F. Supp. 954 (1976), the U. S. District Court for the Southern District of New York held, inter alia, on October 13, 1976, that the fact that the agreement sued under was signed by the Ministry of Defense on behalf of the Nigerian Government did not automatically entitle the defendants to sovereign immunity.

A Delaware corporation brought action against the Republic of Nigeria and the Central Bank of Nigeria to recover the unpaid

balance for the purchase price of cement and unpaid demurrage charges under the terms of a written agreement. Nigeria and the Central Bank asserted sovereign immunity as a defense, although they did not request that the Department of State recommend that the immunity be granted. They claimed that the cement was for the use of the Nigerian armed forces and that immunity is conferred on "acts concerning the armed forces." The plaintiff in resisting the claim stressed the "intrinsically commercial" nature of the contract and the absence of any reference in it to the uses of the cement.

The Court agreed with the plaintiff's contention that the fact that the agreement was signed by the Ministry of Defense was irrelevant in deciding entitlement to sovereign immunity. It held that the corporation had presented a prima facie case and was entitled to an attachment, and that partial assignees of the corporation's claim were not indispensable parties.

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The Supreme Court on May 24, 1976, in a 5-4 decision in Alfred Dunhill of London, Inc. v. The Republic of Cuba, 425 U.S. 682 (1976), held that the burden of proof in establishing an act of state defense had not been met. Four of the Justices stated that an act arising out of purely commercial operations by a foreign sovereign did not constitute an act of state. Although the Court had requested briefs and oral argument on whether its decision in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), should be overruled, it did not reach that issue.

The issue before the Court was whether the failure of respondents to return to petitioner Alfred Dunhill of London, Inc. (Dunhill), funds mistakenly paid by Dunhill for cigars that had been sold to Dunhill by certain expropriated Cuban cigar businesses was an "act of state" by Cuba precluding an affirmative judgment against respondents. See the 1975 Digest, pp. 372-375, and the 1973 Digest pp. 234-237, for background on the case. For the Department of State's views on the question of reconsideration of Sabbatino, see the letter dated November 26, 1975, from Monroe Leigh, Legal Adviser of the Department, to Solicitor General Robert H. Bork in the 1975 Digest, pp. 372-375.

The majority opinion in Dunhill was delivered by Mr. Justice Byron R. White. It stated, in part:

In granting the petition, 416 U.S. 981 (1974), we requested the parties to address certain questions, the first being whether the

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)].

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.

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