376 U.S. 398 (1964)
In February and July of 1960 respondent Farr, Whitlock & Co., an American commodity broker, contracted to purchase Cuban sugar free alongside the steamer from a wholly owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C. A. V.), a Cuban corporation whose capital stock was owned principally by United States residents, with payment to be made in New York upon presentation of shipping documents and a sight draft.1
On July 6, 1960, Congress amended the Sugar Act of 1948 to permit reduction of Cuba's sugar quota and President Eisenhower exercised that power the same day.2 Cuba responded by enacting Law No. 851, which authorized the President and Prime Minister to nationalize by forced expropriation property or enterprises in which American nationals held an interest.3 Between August 6 and 9 the sugar covered by the Farr, Whitlock contract was loaded onto the S. S. Hornfels at the Cuban port of Jucaro.4
On August 6 the Cuban President and Prime Minister issued Executive Power Resolution No. 1 pursuant to Law No. 851, ordering compulsory expropriation of C. A. V. and other listed American-owned companies.5 To obtain consent for the vessel to sail, Farr, Whitlock on August 11 entered identical contracts with Banco Para el Comercio Exterior de Cuba, an instrumentality of the Cuban government, and the Hornfels sailed for Morocco on August 12.6
Banco Exterior assigned the bills of lading to petitioner Banco Nacional de Cuba, another Cuban government instrumentality, which instructed its New York agent to deliver the documents and a sight draft for $175,250.69 to Farr, Whitlock in exchange for payment.7 Farr, Whitlock refused the initial tender after receiving notice of C. A. V.'s claim to the proceeds, accepted the documents only after C. A. V. agreed to indemnify it, negotiated the bills of lading to its customer, received payment, and refused to remit the proceeds.8
The New York Supreme Court appointed respondent Sabbatino temporary receiver of C. A. V.'s New York assets and enjoined Farr, Whitlock from removing the funds from the state.9 Pursuant to court order Farr, Whitlock transferred the funds to Sabbatino to abide the event of a judicial determination as to their ownership.10 Petitioner then instituted this action in the Federal District Court for the Southern District of New York. Alleging conversion of the bills of lading, it sought to recover the proceeds thereof from Farr, Whitlock and to enjoin the receiver from exercising any dominion over such proceeds.11
The District Court sustained jurisdiction, found the sugar located in Cuba at the time of expropriation, concluded that the expropriation violated international law on three grounds, and granted summary judgment against petitioner.12 The Court of Appeals affirmed on similar grounds after considering two additional State Department letters, and this Court granted certiorari.13
Whether an instrumentality of the Cuban government is barred from access to United States courts because of the state of relations between the two countries?14
No. The petitioner Banco Nacional de Cuba is not barred from access to the federal courts.17 The established facts show that diplomatic relations were severed and assets frozen but Cuba remained a recognized sovereign power short of war.18 The United States Government supported Cuba's act of state claim in this litigation.19
The petitioner is not barred from access to the federal courts.20
Whether the Cuban expropriation decree affected only contractual rights whose situs was in New York or the sugar itself located in Cuba?21
The sugar itself was expropriated rather than a contractual claim when the Cuban government refused to let the vessel sail until a new contract was signed with its instrumentality.22
Yes. The expropriation reached the sugar located in Cuba.23 The established facts establish that the sugar was loaded at the Cuban port of Jucaro.24 Cuba required a new contract with Banco Para el Comercio Exterior de Cuba before permitting the S. S. Hornfels to depart, confirming territorial jurisdiction over the property itself.25
The expropriation affected the sugar itself located in Cuba.26
Whether the act of state doctrine is governed by federal or state law in a diversity case?27
An issue concerned with a basic choice regarding the competence and function of the Judiciary and the National Executive in ordering our relationships with other members of the international community must be treated exclusively as an aspect of federal law.28 Such an issue cannot be left to divergent state interpretations.
Yes. Federal law governs the scope of the act of state doctrine.29 The established facts present a controversy touching foreign relations and the proper role of the Judicial Branch in this sensitive area.30 This is an intrinsically federal matter that cannot be left to divergent state interpretations because the doctrine arises out of the basic relationships between branches of government in a system of separation of powers.31
The scope of the act of state doctrine must be determined according to federal law.32
Whether the act of state doctrine applies to a foreign taking alleged to violate international law?33
The Judicial Branch will not examine the validity of a taking of property within its own territory by a foreign sovereign government, extant and recognized by this country at the time of suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law.34
Yes. The act of state doctrine applies even though the Cuban expropriation is alleged to violate international law.35 The established facts show that the taking occurred within Cuban territory by a recognized foreign sovereign government at the time of suit.36 No treaty or unambiguous agreement on controlling legal principles exists.37
The act of state doctrine precludes judicial examination of the validity of the Cuban expropriation.38
Related opinions on this issue
Justice White dissented on the ground that the act of state doctrine as formulated by the Court should not preclude examination when a foreign act of state is shown to be a clear violation of international law.39 He maintained that courts are obliged to determine controversies on their merits in accordance with international law.40 The reasons for nonreview lose force when the act violates international norms.41
The doctrine should not validate lawless acts merely because they are committed by a recognized sovereign within its territory.42 White argued that the Cuban decree's retaliatory, discriminatory, and uncompensated character constituted a flagrant violation that American courts should not automatically enforce.43
Whether the act of state doctrine may be invoked by a foreign government plaintiff in United States courts?44
The act of state doctrine may be invoked by a foreign government plaintiff.45 Distinguishing between suits brought by sovereign states and those of assignees would have little effect unless a difficult examination of good faith were undertaken in each case.46 The sensitivity in regard to foreign relations is heightened rather than diminished by the presence of a sovereign plaintiff.47
Yes. The act of state doctrine may be invoked by the Cuban government plaintiff.48 The established facts show that Banco Nacional de Cuba, an instrumentality of the Cuban government, brought the action seeking the proceeds.49 The doctrine's rationale of avoiding embarrassment to the Executive and interference with foreign relations applies with full force when the plaintiff is the foreign sovereign itself.50
The act of state doctrine may be invoked by a foreign government plaintiff in United States courts.51