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ens, and that the Delaware corporation was not entitled to judgment as a matter of law in view of conflicting evidence.

The Supreme Court granted certiorari on May 13, 1974, 416 U.S. 981, in the case of Alfred Dunhill of London, Inc. v. The Republic of Cuba, No. 73–1288. On June 16, 1975, 422 U.S. 1005, the case was restored to the calendar for reargument, and the Court requested the parties to discuss whether its holding in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), should be reconsidered. Solicitor General Robert H. Bork authorized filing by the United States of a brief amicus curiae.

The Dunhill case arose out of the expropriation by Cuba in 1960 of several cigar concerns, and the payments thereafter sent to Cuba by American importers (including Dunhill) for pre-expropriation cigar shipments. The U.S. Court of Appeals for the Second Circuit had held that (a) the Cuban Government's acceptance of the mistaken payments in Cuba and its refusal to return the payments were an act of state, and (b) under First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972), the importers' counterclaims against the Cuban Government would be allowed only up to the amount of the award to the Cuban Government, thus rejecting Dunhill's entitlement to a counterclaim judgment in excess of the judgment in favor of Cuba. Menendez v. Saks, 485 F.2d 1355 (1973). See also the 1973 Digest, pp. 234-237.

On November 26, 1975, Monroe Leigh, Legal Adviser of the Department of State, wrote a letter to Solicitor General Bork stating the Department's view that the question of reconsideration of the Sabbatino case involved matters of importance to the foreign policy interests of the United States and requesting that its views be conveyed to the Supreme Court. The following is an excerpt from Mr. Leigh's letter:

we do not believe that the Dunhill case raises an act of state question because the case involves an act which is commercial, and not public, in nature. Moreover, since 1952, the Department of State has adhered to the position that the commercial and private activities of foreign states do not give rise to sovereign immunity. Implicit in this position is a determination that adjudications of commercial liability against foreign states do not impede the conduct of foreign relations, and that such adjudications are consistent with international law on sovereign immunity.

In the event, however, that the Court reaches the question whether the Sabbatino holding should be reconsidered, we believe that the following considerations should be called to the Court's attention:

Since Sabbatino was decided in 1964, the Department of State has on two occasions expressed to courts in the United States its views concerning act of state adjudications. First, in the Sabbatino case itself, on remand, the executive branch declined to make a determination under the Hickenlooper Amendment, 22 U.S.C. 2370(e)(2), “that application of the act of state doctrine is required in this case by the foreign policy interests of the United States." Banco Nacional de Cuba v. Farr, 272 F. Supp. 836, 837 (S.D.N.Y.), aff'd, 383 F.2d 166 (C.A.2), certiorari denied, 390 U.S. 956. Having taken note of the executive branch's position, the district court in Farr applied the Hickenlooper Amendment and held that a Cuban decree of confiscation violated customary international law. 272 F. Supp. at 838.

Second, in First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, the Department of State informed the Supreme Court that general foreign relations considerations did not require application of the act of state doctrine to bar adjudication of a counterclaim when the foreign state's claim arises from a relationship between the parties existing when the act of state occurred, and when the amount of relief to be granted is limited to the amount of the foreign state's claim.1 Relying on the precedent of Bernstein v. N. V. Nederlandsche Amerikaanshe, Etc., 210 F.2d 375 (C.A.2), where the Department had advised that the act of state doctrine need not apply to a class of cases involving Nazi confiscations, the Department in First National City Bank concluded that the act of state doctrine need not be applied “in this or like cases.”

Significantly, the Farr, Bernstein and First National City Bank cases each involved an executive branch determination which opened the way for U.S. courts to review an act of state on the merits under international law. In each of these cases, the claim or counterclaim in question alleged that an act of state violated customary international law. Thus, at least on a caseby-case basis, the trend in executive branch pronouncements has been that foreign relations considerations do not require application of the act of state doctrine to bar adjudications under international law.

This trend is mirrored in other countries. Apart from the cases cited by Mr. Justice White in Sabbatino, 376 U.S. at 440 n.1, there have been several recent decisions where foreign courts have reviewed state acts under international law.2 English law, from which our act of state doctrine derives, does not require British courts to abstain from reviewing state acts under international law.3 As fa as can be determined, this exercise of the judicial function in foreign jurisdictions has not caused serious foreign relations consequences for the countries concerned.

The present case is similar to Bernstein, Farr and First National City Bank. This Department is of the opinion that there would be no embarrassment to the conduct of foreign policy if the Court should decide in this case to adjudicate the legality of any act of state found to have taken place and to make such adjudication in accordance with any principle of international law found to be relevant.

In general this Department's experience provides little support for a presumption that adjudication of acts of foreign states in accordance with relevant principles of international law would embarrass the conduct of foreign policy. Thus, it is our view that if the Court should decide to overrule the holding in Sabbatino so that acts of state would thereafter be subject to adjudication in American courts under international law, we would not anticipate embarrassment to the conduct of the foreign policy of the United States.

1 Since First National City Bank was decided, the Department of State has taken the position in the sovereign immunity area that even where a counterclaim exceeds the foreign state's claim, the courts may adjudicate the counterclaim if it arises from the same “transaction or occurrence that is the subject matter of the claim of the foreign state.” S. 566, 93d Cong., 1st Sess., $ 1607(1); see, ALI, Restatement, Foreign Relations Law of the United States, Second, $ 70(2Xb). In our view, the adjudication of counterclaims against a foreign state, arising from the same transaction, occurrence or subject matter as the claim of the foreign state, does not pose foreign relations difficulties.

2 See e.g., In The Matter of Minera El Teniente, S.A., 12 Int'l Legal Materials 251 (Superior Ct. Hamburg, 1973) (a foreign state's act of expropriation that violates international law will not be recognized by German courts if the subject matter of the litigation has a substantial contact with Germany); Braden Copper Company v. Le Groupement d'Importation des Metaux, 12 Int'l Legal Materials 187 (Ct. of Extended Jurisdiction Paris, 1972) (rejecting sovereign immunity on a state trading company that marketed expropriated copper); Compagnie Francaise de Credit et de Banque v. Consorts Atard, Clunet, J. de Droit Int'l, 98 (1971), p. 86 (France: Cour d'Appel Amiens, 1970) (foreign expropriation decrees will not be recognized in France absent the payment of prompt, adequate and effective compensation); Credit Foncier d'Algerie et de Tunisie v. Narbonne, Clunet, J. du Droit Int'l, 96 (1969), p. 912 (France: Court de Cassation, 1969) (acts of expropriation not recognized in France unless equitable compensation is first determined); Obester Gerichtshof (Austrian Supreme Court), decision of December 22, 1965, Osterr. Juristenzeitung 21 (1966), p. 204, Clunet, J. du Droit Int'l, 94 (1967), p. 941 (an expropriation without compensation violates international law, but no recovery against purchasers of expropriated property); N.V. Assurantie Maatschappij de Nederlanden van 1845 v. P. T. Escomptobank, 33 Int'l L. Rep. 30 (D. Ct. The Hague, 1962) (rejecting act of state defense where there is a violation of international law).

3 Banco de Vizcaya v. Don Alfonso de Borbon y Austria, [1935) 1 K.B. 140, 50 T.L.Ř. 284; Re Helbert Wagg & Co. Ltd., [1956] Ch. 323, 346; 1 Lauterpacht, Oppenheim's International Law, 267–68 (8th ed. 1955). See also, Republic of Peru v. Peruvian Guano Co., (1887) 36 Ch. D. 489 and Republic of Peru v. Dreyfus Brothers & Co. (1888] 38 Ch. D. 348, where British courts, under international law, refused to give effect to Peruvian laws annulling acts of the preceding Peruvian Government; cf. Buttes Gas and Oil Co. v. Hammer (1975) 2 W.L.R. 425, at 434_35.

Dept. of State File No. P76 0015–217.

The United States filed a brief amicus curiae in Dec. 1975. It argued that a foreign state's repudiation of a commercial obligation does not preclude entry of judgment in favor of the private claimant: (A) Since a foreign state may not assert sovereign immunity as a defense to a claim relating to a commercial obligation, it should not accomplish the same result and preclude a commercial suit by pleading “act of state.” (B) If, however, the act of state doctrine is deemed to require judicial deference to a foreign state's repudiation of a commercial obligation, it should be reconsidered in light of the restricted and modern doctrine of foreign sovereign immunity. The brief concluded that the judgment of the Court of Appeals should be reversed insofar as it denies petitioner full recovery on its counterclaim.

On December 8, 1975, the Supreme Court denied certiorari in McElroy v. Taylor, 44 U.S. Law Week 3341, leaving standing a decision of the Tennessee Court of Appeals, 522 SW 2d 345 (1975), awarding custody to the father of an illegitimate Korean-American child as opposed to would-be adoptive parents who obtained the child from a Korean agency. The Tennessee Court of Appeals held that action taken by local civil authorities in Korea under the Korean code of civil procedure governing adopting of children by noncitizens did not constitute an act of state.

Chapter 7



§ 1


United States Oceans Policy

United Nations Conference on Law of the Sea

The second substantive session of the Third U.N. Conference on the Law of the Sea was held at Geneva from March 17 to May 9, 1975. The principal tangible result of the Geneva session was the distribution by the chairmen of the three main committees of informal single negotiating texts covering all subjects before the Conference. The Chairman of an informal Disputes Settlement Group also submitted a text, and the President of the Conference later prepared a single negotiating text on “Settlement of Disputes." See post, Ch. 13, § 1, p. 746. The negotiating texts were understood in no way to represent any negotiated text or accepted compromise, nor were they to prejudice in any way the positions which participating countries might subsequently take. At the close of the Geneva session, the President of the Conference indicated that governments could use the informal single negotiating texts as a basis for study and negotiation pending the next session. That session was set for March 15 to May 7, 1976, at New York, by General Assembly Resolution 3483 (XXX) of December 12, 1975.

The single negotiating texts which emerged from the Geneva session included:

Part 1- The Chairman of the First Committee's text of a Convention on the Seabed and the Ocean Floor and the Subsoil Thereof Beyond the Limits of National Jurisdiction, with provisions on interpretation, general principles, establishment of an International Seabed Authority, and final provisions, with an annex on basic conditions of exploration and exploitation, and provision for annexes concerning the organ of the Authority, to be known as the Enterprise, and a Statute of the Tribunal with jurisdiction over disputes.

Part II-The Chairman of the Second Committee's text on the territorial sea and the contiguous zone; straits used for interna

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