Banco Nacional De Cuba v. Sabbatino

376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804, 1964 U.S. LEXIS 2252

• Court: Supreme Court of the United States
• Decided: March 23, 1964
• Docket: 16
• Status: Published

Opinions

Mr. Justice Harlan

delivered the opinion of the Court.

The question which brought this case here, and is now found to be the dispositive issue, is whether the so-called act of state doctrine serves to sustain petitioner’s claims in this litigation. Such claims are ultimately founded on a decree of the Government of Cuba expropriating certain property, the right to the proceeds of which is here in controversy. The act of state doctrine in its traditional formulation precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory.

I.

In February and July of 1960, respondent Farr, Whit-lock & Co., an American commodity broker, contracted to purchase Cuban sugar, free alongside the steamer, from a wholly owned subsidiary of Compania Azucarera Ver-tientes-Camaguey de Cuba (C. A. V.), a corporation organized under Cuban law whose capital stock was owned principally by United States residents. Farr, Whitlock agreed to pay for the sugar in New York upon presentation of the shipping documents and a sight draft.

On July 6, 1960, the Congress of the United States amended the Sugar Act of 1948 to permit a presidentially directed reduction of the sugar quota for Cuba.¹ On the same day President Eisenhower exercised the granted power.² The day of the congressional enactment, the Cuban Council of Ministers adopted “Law No. 851,” which characterized this reduction in the Cuban sugar quota as an act of “aggression, for political purposes” on the part‘of the United States, justifying the taking of countermeasures by Cuba. The law gave the Cuban President and Prime Minister discretionary power to nationalize by forced expropriation property or enterprises in which American nationals had an interest.³ Although a system of compensation was formally provided, the possibility of payment under it may well be deemed illusory.⁴ Our State Department has described the Cuban law as “manifestly in violation of those principles of international law which have long been accepted by the free countries of the West. It is in its essence discriminatory, arbitrary and confiscatory.” ⁵

Between August 6 and August 9, 1960, the sugar covered by the contract between Farr, Whitlock and C. A. V.⁶ was loaded, destined for Morocco, onto the S. S. Hornfels, which was standing offshore at the Cuban port of Jucaro' (Santa Maria). On the day loading commenced, the Cuban President and Prime Minister, acting pursuant to Law No. 851, issued Executive Power Resolution No. 1. It provided for the compulsory expropriation of all property and enterprises, and of rights and interests arising therefrom, of certain listed companies, including C. A. V., wholly or principally owned by American nationals. The preamble reiterated the alleged injustice of the American reduction of the Cuban sugar quota and emphasized the importance of Cuba’s serving as an example for other countries^to follow “in their struggle to free themselves from the brutal claws of Imperialism.” ⁷ In consequence of the resolution, the consent of the Cuban Government was necessary before a ship carrying sugar of a named company could leave Cuban waters. In order to obtain this consent, Farr, Whitlock, on August 11, entered into contracts, identical to those it had made with C. A. V., with the Banco Para el Comercio Exterior de Cuba, an instrumentality of the Cuban Government. The S. S. Hornfels sailed for Morocco on August 12.

Banco Exterior assigned the bills of lading to petitioner, also an instrumentality of the Cuban Government, which instructed its agent in New York, Societe Generate, to deliver the bills and a sight draft in the sum of $175,250.69 to Farr, Whitlock in return for payment. Societe Generale’s initial tender of the documents was refused by Farr, Whitlock, which on the same day was notified of C. A. V.’s claim that as rightful owner of the sugar it was entitled to the proceeds. In return for a promise not to turn the funds over to petitioner or its agent, C. A. V. agreed to indemnify Farr, Whitlock for any loss.⁸ Farr, Whitlock subsequently accepted the shipping documents, negotiated the bills of lading to its customer, and received payment for the sugar. It refused, however, to hand over the proceeds to Societe Generale. Shortly thereafter, Farr, Whitlock was served with an order of the New York Supreme Court, which had appointed Sabbatino as Temporary Receiver of C. A. V.’s New York assets, enjoining it from taking any action in regard to the money claimed by C. A. V. that might result in its removal from the State. Following this, Farr, Whitlock, pursuant to court order, transferred the funds to Sab-batino, to abide the event of a judicial determination as to their ownership.

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. Upon motions to dismiss and for summary judgment, the District Court, 193 F. Supp. 375, sustained federal in personam jurisdiction despite state control of the funds. It found that the sugar was located within Cuban territory at the time of expropriation and determined that under merchant law common to civilized countries Farr, Whitlock could not have asserted ownership of the sugar against C. A. V. before making payment. It concluded that C. A. Y. had a property interest in the sugar subject to the territorial jurisdiction of Cuba. The court then dealt with the question of Cuba’s title to the sugar, on which rested petitioner’s claim of conversion. While acknowledging the continuing vitality of the act of state doctrine, the court believed it inapplicable when the questioned foreign act is in violation of international law- Proceeding on the basis that a taking invalid under international law does not convey good title, the District Court found the Cuban expropriation decree to violate such law in three separate respects: it was motivated by a retaliatory and not a public purpose; it discriminated against American nationals; and it failed to provide adequate compensation. Summary judgment against petitioner was accordingly granted.

The Court of Appeals, 307 F. 2d 845, affirming the decision on similar grounds, relied on two letters (not before the District Court) written by State Department officers which it took as evidence that the Executive Branch had no objection to a judicial testing of the Cuban decree’s validity. The court was unwilling to declare that any one of the infirmities found by the District Court rendered the taking invalid under international law, but was satisfied that in combination they had that effect. We granted certiorari because the issues involved bear importantly on the conduct of the country’s foreign relations and more particularly on the proper role of the Judicial Branch in this sensitive area. 372 U. S. 905. For reasons to follow we decide that the judgment below must be reversed.

Subsequent to the decision of the Court of Appeals, the C. A. Y. receivership was terminated by the State Supreme Court; the funds in question were placed in escrow, pending the outcome of this suit. C. A. V. has moved in this Court to be substituted as a party in the place of Sabbatino. Although it is true that Sabbatino’s defensive interest in this litigation has largely, if not entirely, reflected that of C. A. V., this is true also of Farr, Whitlock’s position. There is no indication that Farr, Whitlock has not adequately represented C. A. V.’s interest or that it will not continue to do so. Moreover, insofar as disposition of the case here is concerned, C. A. V. has been permitted as amicus to brief and argue its position before this Court. In these circumstances we are not persuaded that the admission of C. A. V. as a party is necessary at this stage to safeguard any claim either that it has already presented or that it may present in the future course of this litigation. Accordingly, we are constrained to deny C. A. V.’s motion to be admitted as a party,⁹ without prejudice however to the renewal of such a motion in the lower courts if it appears that C. A. V.’s interests are not adequately represented by Farr, Whit-lock and that the granting of such a motion will not disturb federal jurisdiction. Cf. Strawbridge v. Curtiss, 3 Cranch 267; Indianapolis v. Chase Nat’l Bank, 314 U. S. 63, at 69; Ex parte Edelstein, 30 F. 2d 636, at 638.

Before considering the holding below with respect to the act of state doctrine, we must deal with narrower grounds urged for dismissal of the action or for a judgment on the merits in favor of respondents.

II.

It is first contended that this petitioner, an instrumentality of the Cuban Government, should be denied access to American courts because Cuba is an unfriendly power and does not permit nationals of this country to obtain relief in its courts. Even though the respondents did not raise this point in the lower courts we think it should be considered here. If the courts of this country should be closed to the government of a foreign state, the underlying reason is one of national policy transcending the interests of the parties to the action, and this Court should give effect to that policy sua sponte even at this stage of the litigation.

Under principles of comity governing this country’s relations with other nations, sovereign states are allowed to sue in the courts of the United States, The Sapphire, 11 Wall. 164, 167; Guaranty Trust Co. v. United States, 304 U. S. 126, 134. This Court has called “comity” in the legal sense “neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other.” Hilton v. Guyot, 159 U. S. 113, 163-164. Although comity is often associated with the existence of friendly relations between states, e. g., Bank of Augusta v. Earle, 13 Pet. 519, 589; Russian Republic v. Cibrario, 235 N. Y. 255, 258, 139 N. E. 259, 260, prior to some recent lower court cases which have questioned the right of instrumentalities of the Cuban Government to sue in our courts,¹⁰ the privilege of suit has been denied only to governments at war with the United States, Ex parte Don Ascanio Colonna, 314 U. S. 510; see § 7 of the Trading with the Enemy Act, 40 Stat. 416, 417, 50 U. S. C. App. § 7; cf. Hanger v. Abbott, 6 Wall. 532; Caperton v. Bowyer, 14 Wall. 216, 236, or to those not recognized by this country, The Penza, 277 F. 91; Russian Republic v. Cibrario, supra.11

Respondents, pointing to the severance of diplomatic relations, commercial embargo, and freezing of Cuban assets in this country, contend that relations between the United States and Cuba manifest such animosity that unfriendliness is clear, and that the courts should be closed to the Cuban Government. We do not agree. This Court would hardly be competent to undertake assessments of varying degrees of friendliness or its absence, and, lacking some definite touchstone for determination, we are constrained to consider any relationship, short of war, with a recognized sovereign power as embracing the privilege of resorting to United States courts. Although the severance of diplomatic relations is an overt act with objective significance in the dealings of sovereign states, we are unwilling to say that it should inevitably result in the withdrawal of the privilege of bringing suit. Severance may take place for any number of political reasons, its duration is unpredictable, and whatever expression of animosity it may imply does not approach that implicit in a declaration of war.

It is perhaps true that nonrecognition of a government in certain circumstances may reflect no greater unfriendliness than the severance of diplomatic relations with a recognized government, but the refusal to recognize has a unique legal aspect. It signifies this country’s unwillingness to acknowledge that the government in question speaks as the sovereign authority for the territory it purports to control, see Russian Republic v. Cibrario, supra, at 260-263, 139 N. E., at 261-263. Political recognition is exclusively a function of the Executive. The possible incongruity of judicial “recognition,” by permitting suit, of a government not recognized by the Executive is corn-pletely absent when merely diplomatic relations are broken.¹²

The view that the existing situation between the United States and Cuba should not lead to a denial of status to sue is buttressed by the circumstance that none of the acts of our Government have been aimed at closing the courts of this country to Cuba, and more particularly by the fact that the Government has come to the support of Cuba’s “act of state” claim in this very litigation.

Respondents further urge that reciprocity of treatment is an essential ingredient of comity generally, and, therefore, of the privilege of foreign states to bring suit here. Although Hilton v. Guyot, 159 U. S. 113, contains some broad language about the relationship of reciprocity to comity, the case in fact imposed a requirement of reciprocity only in regard to conclusiveness of judgments, and even then only in limited circumstances. Id., at 170-171. In Direction der Disconto-Gesellschaft v. United States Steel Corp., 300 F. 741, 747 (D. C. S. D. N. Y.), Judge Learned Hand pointed out that the doctrine of reciprocity has apparently been confined to foreign judgments.

There are good reasons for declining to extend the principle to the question of standing of sovereign states to sue. Whether a foreign sovereign will be permitted to sue involves a problem more sensitive politically than whether the judgments of its courts may be re-examined, and the possibility of embarrassment to the Executive Branch in handling foreign relations is substantially more acute. Re-examination of judgments, in principle, reduces rather than enhances the possibility of injustice being done in a particular case; refusal to allow suit makes it impossible for a court to see that a particular dispute is fairly resolved. The freezing of Cuban assets exemplifies the capacity of the political branches to assure, through a variety of techniques (see infra, pp. 431, 435-436), that the national interest is protected against a country which is thought to be improperly denying the rights of United States citizens.

Furthermore, the question whether a country gives res judicata effect to United States judgments presents a relatively simple inquiry. The precise status of the United States Government and its nationals before foreign courts is much more difficult to determine. To make such an investigation significant, a court would have to discover not only what is provided by the formal structure of the foreign judicial system, but also what the practical possibilities of fair treatment are. The courts, whose powers to further the national interest in foreign affairs are necessarily circumscribed as compared with those of the political branches, can best serve the rule of law by not excluding otherwise proper suitors because of deficiencies in their legal systems.

We hold that this petitioner is not barred from access to the federal courts.¹³

III.

Respondents claimed in the lower courts that Cuba had expropriated merely contractual rights the situs of which was in New York, and that the propriety of the taking was, therefore, governed by New York law. The District Court rejected this contention on the basis of the right of ownership possessed by C. A. V. against Farr, Whitlock prior to payment for the sugar. That the sugar itself was expropriated rather than a contractual claim is further supported by Cuba’s refusal to let the S. S. Hornfels sail until a new contract had been signed. Had the Cuban decree represented only an attempt to expropriate a contractual right of C. A. V., the forced delay of shipment and Farr, Whitlock’s subsequent contract with petitioner’s assignor would have been meaningless.¹⁴ Neither the District Court’s finding concerning the location of the S. S. Hornfels nor its conclusion that Cuba had territorial jurisdiction to expropriate the sugar, acquiesced in by the Court of Appeals, is seriously challenged here. Respondents’ limited view of the expropriation must be rejected.

Respondents further contend that if the expropriation was of the sugar itself, this suit then becomes one to enforce the public law of a foreign state and as such is not cognizable in the courts of this country. They rely on the principle enunciated in federal and state cases that a court need not give effect to the penal or revenue laws of foreign countries or sister states. See, e. g., The Antelope, 10 Wheat. 66, 123; Wisconsin v. Pelican Ins. Co., 127 U. S. 265; Huntington v. Attrill, 146 U. S. 657 (all relating to penal laws); ¹⁵ Moore v. Mitchell, 30 F. 2d 600, aff’d on other grounds, 281 U. S. 18; City of Detroit v. Proctor, 44 Del. 193, 61 A. 2d 412; City of Philadelphia v. Cohen, 11 N. Y. 2d 401, 184 N. E. 2d 167, 230 N. Y. S. 2d 188 (all relating to revenue laws).

The extent to which this doctrine may apply to other kinds of public laws, though perhaps still an open question,¹⁶ need not be decided in this case. For we have been referred to no authority which suggests that the doctrine reaches a public law which, as here, has been fully executed within the foreign state. Cuba’s restraint of the S. S. Hornfels must be regarded for these purposes to have constituted an effective taking of the sugar, vesting in Cuba C. A. Y.’s property right in it. Farr, Whit-lock’s contract with the Cuban bank, however compelled to sign Farr, Whitlock may have felt, represented indeed a recognition of Cuba’s dominion over the property.

In these circumstances the question whether the rights acquired by Cuba are enforceable in our courts depends not upon the doctrine here invoked but upon the act of state doctrine discussed in the succeeding sections of this opinion.¹⁷

IV.

The classic American statement of the act of state doctrine, which appears to have taken root in England as early as 1674, Blad v. Bamfield, 3 Swans. 604, 36 Eng. Rep. 992, and began to emerge in the jurisprudence of this country in the late eighteenth and early nineteenth centuries, see, e. g., Ware v. Hylton, 3 Dali. 199, 230; Hudson v. Guestier, 4 Cranch 293, 294; The Schooner Exchange v. M’Faddon, 7 Cranch 116, 135, 136; L’Invincible, 1 Wheat. 238, 253; The Santissima Trinidad, 7 Wheat. 283, 336, is found in Underhill v. Hernandez, 168 U. S. 250, where Chief Justice Fuller said for a unanimous Court (p. 252):

“Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.”

Following this precept the Court in that case refused to inquire into acts of Hernandez, a revolutionary Venezuelan military commander whose government had been later recognized by the United States, which were made the basis of a damage action in this country by Underhill, an American citizen, who claimed that he had been unlawfully assaulted, coerced, and detained in Venezuela by Hernandez.

None of this Court’s subsequent cases in which the act of state doctrine was directly or peripherally involved manifest any retreat from Underhill. See American Banana Co. v. United Fruit Co., 213 U. S. 347; Oetjen v. Central Leather Co., 246 U. S. 297; Ricaud v. American Metal Co., 246 U. S. 304; Shapleigh v. Mier, 299 U. S. ; United States v. Belmont, 301 U. S. 324; United States v. Pink, 315 U. S. 203. On the contrary in two of these cases, Oetjen and Ricaud, the doctrine as announced in Underhill was reaffirmed in unequivocal terms.

Oetjen involved a seizure of hides from a Mexican citizen as a military levy by General Villa, acting for the forces of General Carranza, whose government was recognized by this country subsequent to the trial but prior to decision by this Court. The hides were sold to a Texas corporation which shipped them to the United States and assigned them to defendant. As assignee of the original owner, plaintiff replevied the hides, claiming that they had been seized in violation of the Hague Conventions. In affirming a judgment for defendant, the Court suggested that the rules of the Conventions did not apply to civil war and that, even if they did, the relevant seizure was not in violation of them. 246 U. S., at 301-302. Nevertheless, it chose to rest its decision on other grounds. It described the designation of the sovereign as a political question to be determined by the legislative and executive departments rather than the judicial department, invoked the established rule that such recognition operates retroactively to validate past acts, and found the basic tenet of Underhill to be applicable to the case before it.

“The principle that the conduct of one independent government cannot be successfully questioned in the courts of another is as applicable to a case involving the title to property brought within the custody of a court, such as we have here, as it was held to be to the cases cited, in which claims for damages were based upon acts done in a foreign country, for it rests at last upon the highest considerations of international comity and expediency. To permit the validity of the acts of one sovereign State to be reexamined and perhaps condemned by the courts of another would very certainly ‘imperil the amicable relations between governments and vex the peace of nations.’ ” Id., at 303-304.

In Bimud the facts were similar — another general of the Carranza forces seized lead bullion as a military levy — except that the property taken belonged to an American citizen. The Court found Underhill, American Banana, and Oetjen controlling. Commenting on the nature of the principle established by those cases, the opinion stated that the rule

“does not deprive the courts of jurisdiction once acquired over a case. It requires only that, when it is made to appear that the foreign government has acted in a given way on the subject-matter of the litigation, the details of such action or the merit of the result cannot be questioned but must be accepted by our courts as a rule for their decision. To accept a ruling authority and to decide accordingly is not a surrender or abandonment of jurisdiction but is an exercise of it. It results that the title to the property in this case must be determined by the result of the action taken by the military authorities of Mexico . . . .” 246 U. S., at 309.

To the same effect is the language of Mr. Justice Cardozo in the Shapleigh case, supra, where, in commenting on the validity of a Mexican land expropriation, he said (299 U. S., at 471): “The question is not here whether the proceeding was so conducted as to be a wrong to our nationals under the doctrines of international law, though valid under the law of the situs of the land. For wrongs of that order the remedy to be followed is along the channels of diplomacy.”

In deciding the present case the Court of Appeals relied in part upon an exception to the unqualified teachings of Underhill, Oetjen, and Ricaud which that court had earlier indicated. In Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F. 2d 246, suit was brought to recover from an assignee property allegedly taken, in effect, by the Nazi Government because plaintiff was Jewish. Recognizing the odious nature of this act of state, the court, through Judge Learned Hand, nonetheless refused to consider it invalid on that ground. Rather, it looked to see if the Executive had acted in any manner that would indicate that United States Courts should refuse to give effect to such a foreign decree. Finding no such evidence, the court sustained dismissal of the complaint. In a later case involving similar facts the same court again assumed examination of the German acts improper, Bernstein v. N. V. Nederlandsche-Ameri-kaansche Stoomvaart-Maatschappij, 173 F. 2d 71, but, quite evidently following the implications of Judge Hand’s opinion in the earlier case, amended its mandate to permit evidence of alleged invalidity, 210 F. 2d 376, subsequent to receipt by plaintiff’s attorney of a letter from the Acting Legal Adviser to the State Department written for the purpose of relieving the court from any constraint upon the exercise of its jurisdiction to pass on that question.¹⁸

This Court has never had occasion to pass upon the so-called Bernstein exception, nor need it do so now. For whatever ambiguity may be thought to exist in the two letters from State Department officials on which the Court of Appeals relied,¹⁹ 307 F. 2d, at 858, is now removed by the position which the Executive has taken in this Court on the act of state claim; respondents do not indeed contest the view that these letters were intended to reflect no more than the Department’s then wish not to make any statement bearing on this litigation.

The outcome of this case, therefore, turns upon whether any of the contentions urged by respondents against the application of the act of state doctrine in the premises is acceptable: (1) that the doctrine does not apply to acts of state which violate international law, as is claimed to be the case here; (2) that the doctrine is inapplicable unless the Executive specifically interposes it in a particular case; and (3) that, in any event, the doctrine may not be invoked by a foreign government plaintiff in our courts.

y.

Preliminarily, we discuss the foundations on which we deem the act of state doctrine to rest, and more particularly the question of whether state or federal law governs its application in a federal diversity case.²⁰

We do not believe that this doctrine is compelled either by the inherent nature of sovereign authority, as some of the earlier decisions seem to imply, see Underhill, supra; American Banana, supra; Oetjen, supra, at 303, or by some principle of international law. If a transaction takes place in one jurisdiction and the forum is in another, the forum does not by dismissing an action or by applying its own law purport to divest the first jurisdiction of its territorial sovereignty; it merely declines to adjudicate or makes applicable its own law to parties or property before it. The refusal of one country to enforce the penal laws of another (supra, pp. 413-414) is a typical example of an instance when a court will not entertain a cause of action arising in another jurisdiction. While historic notions of sovereign authority do bear upon the wisdom of employing the act of state doctrine, they do not dictate its existence.

That international law does not require application of the doctrine is evidenced by the practice of nations. Most of the countries rendering decisions on the subject fail to follow the rule rigidly.²¹ No international arbitral or judicial decision discovered suggests that international law prescribes recognition of sovereign acts of foreign governments, see 1 Oppenheim’s International Law, § 115aa (Lauterpacht, 8th ed. 1955), and apparently no claim has ever been raised before an international tribunal that failure to apply the act of state doctrine constitutes a breach of international obligation. If international law does not prescribe use of the doctrine, neither does it forbid application of the rule even if it is claimed that the act of state in question violated international law. The traditional view of international law is that it establishes substantive principles for determining whether one country has wronged another. Because of its peculiar nation-to-nation character the usual method for an individual to seek relief is to exhaust local remedies and then repair to the executive authorities of his own state to persuade them to champion his claim in diplomacy or before an international tribunal. See United States v. Diekelman, 92 U. S. 520, 524. Although it is, of course, true that United States courts apply international law as a part of our own in appropriate circumstances, Ware v. Hylton, 3 Dall. 199, 281; The Nereide, 9 Cranch 388, 423; The Paquete Habana, 175 U. S. 677, 700, the public law of nations can hardly dictate to a country which is in theory wronged how to treat that wrong within its domestic borders.

Despite the broad statement in Oetjen that “The conduct of the foreign relations of our Government is committed by the Constitution to the Executive and Legislative . . . Departments,” 246 U. S., at 302, it cannot of course be thought that “every case or controversy which touches foreign relations lies beyond judicial cognizance.” Baker v. Carr, 369 U. S. 186, 211. The text of the Constitution does not require the act of state doctrine; it does not irrevocably remove from the judiciary the capacity to review the validity of foreign acts of state.

The act of state doctrine does, however, have “constitutional” underpinnings. It arises out of the basic relationships between branches of government in a system of separation of powers. It concerns the competency of dissimilar institutions to make and implement particular kinds of decisions in the area of international relations. The doctrine as formulated in past decisions expresses the strong sense of the- Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder rather than further this country’s pursuit of goals both for itself and for the community of nations as a whole in the international sphere. Many commentators disagree with this view; ²² they have striven by means of distinguishing and limiting past decisions and by advancing various considerations of policy to stimulate a narrowing of the apparent scope of the rule. Whatever considerations are thought to predominate, it is plain that the problems involved are uniquely federal in nature. If federal authority, in this instance this Court, orders the field of judicial competence in this area for the federal courts, and the state courts are left free to formulate their own rules, the purposes behind the doctrine could be as effectively undermined as if there had been no federal pronouncement on the subject.

We could perhaps in this diversity action avoid the question of deciding whether federal or state law is applicable to this aspect of the litigation. New York has enunciated the act of state doctrine in terms that echo those of federal decisions decided during the reign of Swift v. Tyson, 16 Pet. 1. In Hatch v. Baez, 7 Hun 596, 599 (N. Y. Sup. Ct.), Underhill was foreshadowed by the words, “the courts of one country are bound to abstain from sitting in judgment on the acts of another government done within its own territory.” More recently, the Court of Appeals in Salimoff & Co. v. Standard Oil Co., 262 N. Y. 220, 224, 186 N. E. 679, 681, has declared, “The courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries.” Cf. Dougherty v. Equitable Life Assurance Society, 266 N. Y. 71, 193 N. E. 897; Holser v. Deutsche Reichsbahn-Gesellschaft, 277 N. Y. 474, 14 N. E. 2d 798. But cf. Frenkel & Co. v. L’Urbaine Fire Ins. Co., 251 N. Y. 243, 167 N. E. 430. Thus our conclusions might well be the same whether we dealt with this problem as one of state law, see Erie R. Co. v. Tompkins, 304 U. S. 64; Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U. S. 487; Griffin v. McCoach, 313 U. S. 498, or federal law.

However, we are constrained to make it clear that 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.²³ It seems fair to assume that the Court did not have rules like the act of state doctrine in mind when it decided Erie R. Co. v. Tompkins. Soon thereafter, Professor Philip C. Jessup, now a judge of the International Court of Justice, recognized the potential dangers were Erie extended to legal problems affecting international relations.²⁴ He cautioned that rules of international law should not be left to divergent and perhaps parochial state interpretations. His basic rationale is equally applicable to the act of state doctrine.

The Court in the pre-Erie act of state cases, although not burdened by the problem of the source of applicable law, used language sufficiently strong and broad-sweeping to suggest that state courts were not left free to develop their own doctrines (as they would have been had this Court merely been interpreting common law under Swift v. Tyson, supra). The Court of Appeals in the first Bernstein case, supra, a diversity suit, plainly considered the decisions of this Court, despite the intervention of Erie, to be controlling in regard to the act of state question, at the same time indicating that New York law governed other aspects of the case. We are not without other precedent for a determination that federal law governs; there are enclaves of federal judge-made law which bind the States. A national body of federal-court-built law has been held to have been contemplated by § 301 of the Labor Management Relations Act, Textile Workers v. Lincoln Mills, 353 U. S. 448. Principles formulated by federal judicial law have been thought by this Court to be necessary to protect uniquely federal interests, D’Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U. S. 447; Clearfield Trust Co. v. United States, 318 U. S. 363. Of course the federal interest guarded in all these cases is one the ultimate statement of which is derived from a federal statute. Perhaps more directly in point are the bodies of law applied between States over boundaries and in regard to the apportionment of interstate waters.

In Hinderlider v. La Plata River Co., 304 U. S. 92, 110, in an opinion handed down the same day as Erie and by the same author, Mr. Justice Brandéis, the Court declared, “For whether the water of an interstate stream must be apportioned between the two States is a question of 'federal common law’ upon which neither the statutes nor the decisions of either State can be conclusive.” Although the suit was between two private litigants and the relevant States could not be made parties, the Court considered itself free to determine the effect of an interstate compact regulating water apportionment. The decision implies that no State can undermine the federal interest in equitably apportioned interstate waters even if it deals with private parties. This would not mean that, absent a compact, the apportionment scheme could not be changed judicially or by Congress, but only that apportionment is a matter of federal law. Cf. Arizona v. California, 373 U. S. 546, 597-598. The problems surrounding the act of state doctrine are, albeit for different reasons, as intrinsically federal as are those involved in water apportionment or boundary disputes. The considerations supporting exclusion of state authority here are much like those which led the Court in United States v. California, 332 U. S. 19, to hold that the Federal Government possessed paramount rights in submerged lands though within the three-mile limit of coastal States. We conclude that the scope of the act of state doctrine must be determined according to federal law.²⁵

VI.

If the act of state doctrine is a principle of decision binding on federal and state courts alike but compelled by neither international law nor the Constitution, its continuing vitality depends on its capacity to reflect the proper distribution of functions between the judicial and political branches of the Government on matters bearing upon foreign affairs. It should be apparent that the greater the degree of codification or consensus concerning a particular area of international law, the more appropriate it is for the judiciary to render decisions regarding it, since the courts can then focus on the application of an agreed principle to circumstances of fact rather than on the sensitive task of establishing a principle not inconsistent with the national interest or with international justice. It is also evident that some aspects of international law touch much more sharply on national nerves than do others; the less important the implications of an issue are for our foreign relations, the weaker the justification for exclusivity in the political branches. The balance of relevant considerations may also be shifted if the government which perpetrated the challenged act of state is no longer in existence, as in the Bernstein case, for the political interest of this country may, as a result, be measurably altered. Therefore, rather than laying down or reaffirming an inflexible and all-encompassing rule in this case, we decide only that 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.

There are few if any issues in international law today on which opinion seems to be so divided as the limitations on a state's power to expropriate the property of aliens.²⁶ There is, of course, authority, in international judicial²⁷ and arbitral²⁸ decisions, in the expressions of national governments,²⁹ and among commentators³⁰ for the view that a taking is improper under international law if it is not for a public purpose, is discriminatory, or is without provision for prompt, adequate, and effective compensation. However, Communist countries, although they have in fact provided a degree of compensation after diplomatic efforts, commonly recognize no obligation on the part of the taking country.³¹ Certain representatives of the newly independent and underdeveloped countries have questioned whether rules of state responsibility toward aliens can bind nations that have not consented to them³² and it is argued that the traditionally articulated standards governing expropriation of property reflect “imperialist” interests and are inappropriate to the circumstances of emergent states.³³

The disagreement as to relevant international law standards reflects an even more basic divergence between the national interests of capital importing and capital exporting nations and between the social ideologies of those countries that favor state control of a considerable portion of the means of production and those that adhere to a free enterprise system. It is difficult to imagine the courts of this country embarking on adjudication in an area which touches more sensitively the practical and ideological goals of the various members of the community of nations.³⁴

When we consider the prospect of the courts characterizing foreign expropriations, however justifiably, as invalid under international law and ineffective to pass title, the wisdom of the precedents is confirmed. While each of the leading cases in this Court may be argued to be distinguishable on its facts from this one — Underhill because sovereign immunity provided an independent ground and Oetjen, Ricaud, and Shapleigh because there was actually no violation of international law — the plain implication of all these opinions, and the import of express statements in Oetjen, 246 U. S., at 304, and Shap-leigh, 299 U. S., at 471, is that the act of state doctrine is applicable even if international law has been violated. In Ricaud, the one case of the three most plausibly involving an international law violation, the possibility of an exception to the act of state doctrine was not discussed. Some commentators have concluded that it was not brought to the Court’s attention,³⁵ but Justice Clarke delivered both the Oetjen and Ricaud opinions, on the same day, so we can assume that principles stated in the former were applicable to the latter case.

The possible adverse consequences of a conclusion to the contrary of that implicit in these cases is highlighted by contrasting the practices of the political branch with the limitations of the judicial process in matters of this kind. Following an expropriation of any significance, the Executive engages in diplomacy aimed to assure that United States citizens who are harmed are compensated fairly. Representing all claimants of this country, it will often be able, either by bilateral or multilateral talks, by submission to. the United Nations, or by the employment of economic and political sanctions, to achieve some degree of general redress. Judicial determinations of invalidity of title can, on the other hand, have only an occasional impact, since they depend on the fortuitous circumstance of the property in question being brought into this country.³⁶ Such decisions would, if the acts involved were declared invalid, often be likely to give offense to the expropriating country; since the concept of territorial sovereignty is so deep seated, any state may resent the refusal of the courts of another sovereign to accord validity to acts within its territorial borders. Piecemeal dispositions of this sort involving the probability of affront to another state could seriously interfere with negotiations being carried on by the Executive Branch and might prevent or render less favorable the terms of an agreement that could otherwise be reached. Relations with third countries which have engaged in similar expropriations would not be immune from effect.

The dangers of such adjudication are present regardless of whether the State Department has, as it did in this case, asserted that the relevant act violated international law. If the Executive Branch has undertaken negotiations with an expropriating country, but has refrained from claims of violation of the law of nations, a determination to that effect by a court might be regarded as a serious insult, while a finding of compliance with international law, would greatly strengthen the bargaining hand of the other state with consequent detriment to American interests.

Even if the State Department has proclaimed the impropriety of the expropriation, the stamp of approval of its view by a judicial tribunal, however impartial, might increase any affront and the judicial decision might occur at a time, almost always well after the taking, when such an impact would be contrary to our national interest. Considerably more serious and far-reaching consequences would flow from a judicial finding that international law standards had been met if that determination flew in the face of a State Department proclamation to the contrary. When articulating principles of international law in its relations with other states, the Executive Branch speaks not only as an interpreter of generally accepted and traditional rules, as would the courts, but also as an advocate of standards it believes desirable for the community of nations and protective of national concerns. In short, whatever way the matter is cut, the possibility of conflict between the Judicial and Executive Branches could hardly be avoided.

Respondents contend that, even if there is not agreement regarding general standards for determining the validity of expropriations, the alleged combination of retaliation, discrimination, and inadequate compensation makes it patently clear that this particular expropriation was in violation of international law.³⁷ If this view is accurate, it would still be unwise for the courts so to determine. Such a decision now would require the drawing of more difficult lines in subsequent cases and these would involve the possibility of conflict with the Executive view. Even if the courts avoided this course, either by presuming the validity of an act of state whenever the international law standard was thought unclear or by following the State Department declaration in such a situation, the very expression of judicial uncertainty might provide embarrassment to the Executive Branch.

Another serious consequence of the exception pressed by respondents would be to render uncertain titles in foreign commerce, with the possible consequence of altering the flow of international trade.³⁸ If the attitude of the United States courts were unclear, one buying expropriated goods would not know if he could safely import them into this country. Even were takings known to be invalid, one would have difficulty determining after goods had changed hands several times whether the particular articles in question were the product of an ineffective state act.³⁹

Against the force of such considerations, we find respondents’ countervailing arguments quite unpersuasive. Their basic contention is that United States courts could make a significant contribution to the growth of international law, a contribution whose importance, it is said, would be magnified by the relative paucity of deci-sional law by international bodies. But given the fluidity of present world conditions, the effectiveness of such a patchwork approach toward the formulation of an acceptable body of law concerning state responsibility for expropriations is, to say the least, highly conjectural. Moreover, it rests upon the sanguine presupposition that the decisions of the courts of the world’s major capital exporting country and principal exponent of the free enterprise system would be accepted as disinterested expressions of sound legal principle by those adhering to widely different ideologies.

It is contended that regardless of the fortuitous circumstances necessary for United States jurisdiction over a case involving a foreign act of state and the resultant isolated application to any expropriation program taken as a whole, it is the function of the courts to justly decide individual disputes before them. Perhaps the most typical act of state case involves the original owner or his assignee suing one not in association with the expropriating state who has had “title” transferred to him. But it is difficult to regard the claim of the original owner, who otherwise may be recompensed through diplomatic channels, as more demanding of judicial cognizance than the claim of title by the innocent third party purchaser, who, if the property is taken from him, is without any remedy.

Respondents claim that the economic pressure resulting from the proposed exception to the act of state doctrine will materially add to the protection of United States investors. We are not convinced, even assuming the relevance of this contention. Expropriations take place for a variety of reasons, political and ideological as well as economic. When one considers the variety of means possessed by this country to make secure foreign investment, the persuasive or coercive effect of judicial invalidation of acts of expropriation dwindles in comparison. The newly independent states are in need of continuing foreign investment; the creation of a climate unfavorable to such investment by wholesale confiscations may well work to their long-run economic disadvantage. Foreign aid given to many of these countries provides a powerful lever in the hands of the political branches to ensure fair treatment of United States nationals. Ultimately the sanctions of economic embargo and the freezing of assets in this country may be employed. Any country willing to brave any or all of these consequences is unlikely to be deterred by sporadic judicial decisions directly affecting only property brought to our shores. If the political branches are unwilling to exercise their ample powers to effect compensation, this reflects a judgment of the national interest which the judiciary would be ill-advised to undermine indirectly.

It is suggested that if the act of state doctrine is applicable to violations of international law, it should only be so when the Executive Branch expressly stipulates that it does not wish the courts to pass on the question of validity. See Association of the Bar of the City of New York, Committee on International Law, A Reconsideration of the Act of State Doctrine in United States Courts (1959). We should be slow to reject the representations of the Government that such a reversal of the Bernstein principle would work serious inroads on the maximum effectiveness of United States diplomacy. Often the State Department will wish to refrain from taking an official position, particularly at a moment that would be dictated by the development of private litigation but might be inopportune diplomatically. Adverse domestic consequences might flow from an official stand which could be assuaged, if at all, only by revealing matters best kept secret. Of course, a relevant consideration for the State Department would be the position contemplated in the court to hear the case. It is highly questionable whether the examination of validity by the judiciary should depend on an educated guess by the Executive as to probable result and, at any rate, should a prediction be wrong, the Executive might be embarrassed in its dealings with other countries. We do not now pass on the Bernstein exception, but even if it were deemed valid, its suggested extension is unwarranted.

However offensive to the public policy of this country and its constituent States an expropriation of this kind may be, we conclude that both the national interest and progress toward the goal of establishing the rule of law among nations are best served by maintaining intact the act of state doctrine in this realm of its application.

VII.

Finally, we must determine whether Cuba’s status as a plaintiff in this case dictates a result at variance with the conclusions reached above. If the Court were to distinguish between suits brought by sovereign states and those of assignees, the rule would have little effect unless a careful examination were made in each case to determine if the private party suing had taken property in good faith. Such an inquiry would be exceptionally difficult, since the relevant transaction would almost invariably have occurred outside our borders. If such an investigation 'were deemed irrelevant, a state could always assign its claim.

It is true that the problem of security of title is not directly presented in the instance of a sovereign plaintiff, although were such a plaintiff denied relief, it would ship its goods elsewhere, thereby creating an alteration in the flow of trade. The sensitivity in regard to foreign relations and the possibility of embarrassment of the Executive are, of course, heightened by the presence of a sovereign plaintiff. The rebuke to a recognized power would be more pointed were it a suitor in our courts. In discussing the rule against enforcement of foreign penal and revenue laws, the Eire High Court of Justice, in Peter Buchanan Ltd. v. McVey, [1955] A. C. 516, 529-530, aff’d, id., at 530, emphasized that its justification was in large degree the desire to avoid embarrassing another state by scrutinizing its penal and revenue laws. Although that rule presumes invalidity in the forum whereas the act of state principle presumes the contrary, the doctrines have a common rationale, a rationale that negates the wisdom of discarding the act of state rule when the plaintiff is a state which is not seeking enforcement of a public act.

Certainly the distinction proposed would sanction self-help remedies, something hardly conducive to a peaceful international order. Had Farr, Whitlock not converted the bills of lading, or alternatively breached its contract, Cuba could have relied on the act of state doctrine in defense of a claim brought by C. A. Y. for the proceeds. It would be anomalous to preclude reliance on the act of state doctrine because of Farr, Whitlock’s unilateral action, however justified such action may have been under the circumstances.

Respondents offer another theory for treating the case differently because of Cuba’s participation. It is claimed that the forum should simply apply its own law to all the relevant transactions. An analogy is drawn to the area of sovereign immunity, National City Bank v. Republic of China, 348 U. S. 356, in which, if a foreign country seeks redress in our courts, counterclaims are permissible. But immunity relates to the prerogative right not to have sovereign property subject to suit; fairness has been thought to require that when the sovereign seeks recovery, it be subject to legitimate counterclaims against it. The act of state doctrine, however, although it shares with the immunity doctrine a respect for sovereign states, concerns the limits for determining the validity of an otherwise applicable rule of law. It is plain that if a recognized government sued on a contract with a United States citizen, concededly legitimate by the locus of its making, performance, and most significant contacts, the forum would not apply its own substantive law of contracts. Since the act of state doctrine reflects the desirability of presuming the relevant transaction valid, the same result follows; the forum may not apply its local law regarding foreign expropriations.

Since the act of state doctrine proscribes a challenge to the validity of the Cuban expropriation decree in this case, any counterclaim based on asserted invalidity must fail. Whether a theory of conversion or breach of contract is the proper cause of action under New York law, the presumed validity of the expropriation is unaffected. Although we discern no remaining litigable issues of fact in this case, the District Court may hear and decide them if they develop.

The judgment of the Court of Appeals is reversed and the case is remanded to the District Court for proceedings consistent with this opinion.

It is so ordered.

1 74 Stat. 330.

2 Proclamation No. 3355, 74 Stat. c72, effective upon publication in the Federal Register, July 8, 1960, 25 Fed. Reg. 6414.

3 “Whereas, the attitude assumed by the government and the Legislative Power of the United States of North America, which constitutes an aggression, for political purposes, against the basic interests of the Cuban economy, as recently evidenced by the Amendment to the Sugar Act just enacted by the United States Congress at the request of the Chief Executive of that country, whereby exceptional powers are conferred upon the President of the United States to reduce the participation of Cuban sugars in the American sugar market as a threat of political action against Cuba, forces the Revolutionary Government to adopt, without hesitation, all and whatever measures it may deem appropriate or desirable for the due defense of the national sovereignty and protection of our economic development process.

“Whereas, it is advisable, with a view to the ends referred to in the first Whereas of this Law, to confer upon the President and Prime Minister of the Republic full authority to carry out the nationalization of the enterprises and property owned by physical and corporate persons who are nationals of the United States of North America, or of enterprises which have majority interest or participa-tions in such enterprises, even though they be organized under the Cuban laws, so that the required measures may be adopted in future cases with a view to the ends pursued.

“Now, therefore: In pursuance of the powers vested in it, the Council of Ministers has resolved to enact and promulgate the following

“Law No. 851

“Article 1. Full authority is hereby conferred upon the President and the Prime Minister of the Republic in order that, acting jointly through appropriate resolutions whenever they shall deem it advisable or desirable for the protection of the national interests, they may proceed to nationalize, through forced expropriations, the properties or enterprises owned by physical and corporate persons who are nationals of the United States of North America, or of the enterprises in which such physical and corporate persons have an interest, even though they be organized under the Cuban laws.” Record, at 98-99.

4 See id., Articles 4-7. Payment for expropriated property would consist of bonds with terms of at least 30 years and bearing 2% annual interest. The interest was not to be cumulative from year to year and was to be paid only out of 25% of the yearly foreign exchange received by sales of Cuban sugar to the United States in excess of 3,000,000 Spanish long tons at a minimum price of 5.75 cents per English pound. (In the preceding 10 years the annual average price had never been that high and in only one of those years had as many as 3,000,000 Spanish long tons been sold, 307 F. 2d, at 862.) The bonds were to be amortized only upon the authority of the President of the National Bank. The President and Prime Minister of the Cuban state were empowered to choose the appraisers. It is not clear whether the bonds were to be paid at maturity if funds were insufficient at that time.

5 See State Dept. Note No. 397, July 16, 1960 (to Cuban Ministry of Foreign Relations).

6 The parties have treated the interest of the wholly owned subsidiary as if it were identical with that of C. A. V.; hence no distinction between the two companies will be drawn in the remainder of this opinion.

7 “Whereas, the attitude assumed by the Government and the Legislative Power of the United States of North America, of continued aggression, for political purposes, against the basic interests of the Cuban economy, as evidenced by the amendment to the Sugar Act adopted by the Congress of said country, whereby exceptional powers were conferred upon the President of said nation to reduce the participation of Cuban sugars in the sugar market of said country, as a weapon of political action against Cuba, was considered as the fundamental justification of said law.

“Whereas, the Chief Executive of the Government of the United States of North America, making use of said exceptional powers, and assuming an obvious attitude of economic and political aggression against our country, has reduced the participation of Cuban sugars in the North American market with the unquestionable design to attack Cuba and its revolutionary process.

“Whereas, this action constitutes a reiteration of the continued conduct of the government of the United States of North America, intended to prevent the exercise of its sovereignty and its integral development by our people thereby serving the base interests of the North American trusts, which have hindered the growth of our economy a*nd the consolidation of our political freedom.

“Whereas, in the face of such developments the undersigned, being fully conscious of their great historical responsibility and in legitimate defense of the national economy are duty bound to adopt the measures deemed necessary to counteract the harm done by the aggression inflicted upon our nation.

“Whereas, it is the duty of the peoples of Latin America to strive for the recovery of their native wealth by wresting it from the hands of the foreign monopolies and interests which prevent their development, promote political interference, and impair the sovereignty of the underdeveloped countries of America.

“Whereas, the Cuban Revolution will not stop until it shall have totally and definitely liberated its fatherland.

“Whereas, Cuba must be a luminous and stimulating example for the sister nations of America and all the underdeveloped countries of the world to follow in their struggle to free themselves from the brutal claws of Imperialism. [Footnote 7 continued on p. IfiS\

“Now, therefore: In pursuance of the powers vested in us, in accordance with the provisions of Law No. 851, of July 6, 1960, we hereby,

“Resolve:

“First. To order the nationalization, through compulsory expropriation, and, therefore, the adjudication in fee simple to the Cuban State, of all the property and enterprises located in the national territory, and the rights and interests resulting from the exploitation of such property and enterprises, owned by the juridical persons who are nationals of the United States of North America, or operators of enterprises in which nationals of said country have a predominating interest, as listed below, to wit:

“22. Compañá Azucarera Vertientes Camagüey de Cuba.

“Second. Consequently, the Cuban State is hereby subrogated in the place and stead of the juridical persons listed in the preceding section, in respect of the property, rights and interests aforesaid, and of the assets and liabilities constituting the capital of said enterprises.” Record, at 102-105.

8 C. A. V. also agreed to pay Farr, Whitlock 10% of the $175,000 if C. A. V. ever obtained that sum. 307 F. 2d, at 851.

9 Because of C. A. V.’s amicus position in this Court, and because its arguments have been presented separately from those of Farr, Whitlock, even though each has adopted the other’s contentions, this opinion refers to “respondents” although Farr, Whitlock is the only formal party-respondent.

10 In P & E Shipping Corp. v. Banco Para El Comercio Exterior de Cuba, 307 F. 2d 415 (C. A. 1st Cir.), the court sua sponte questioned the right of Cuba to sue. It concluded that the matter was one for the Executive Branch to decide and remanded the case to the District Court to elicit the views of the State Department. The trial court in Dade Dry dock Corp. v. The M/T Mar Caribe, 199 F. Supp. 871 (S. D. Tex.), apparently equated the severance of diplomatic relations with the withdrawal of recognition and suspended the action “until the Government of the Republic of Cuba is again recognized by the United States of America,” id., at 874. In two other cases, however, Pons v. Republic of Cuba, 111 U. S. App. D. C. 141, 294 F. 2d 925; Republic of Cuba v. Mayan Lines, S. A., 145 So. 2d 679 (Ct. App., 4th Cir., La.), courts have upheld the right of Cuba to sue despite the severance of diplomatic relations.

11 The District Court in The Gul Djemal, 296 F. 563, 296 F. 567, did refuse to permit the invocation of sovereign immunity by the Turkish Government, with whom the United States had broken diplomatic relations, on the theory that under such circumstances comity did not require the granting of immunity. The case was affirmed, 264 U. S. 90, but on another ground.

12 The doctrine that nonrecognition precludes suit by the foreign government in every circumstance has been the subject of discussion and criticism. See, e. g., Hervey, The Legal Effects of Recognition in International Law (1928) 112-119; Jaffe, Judicial Aspects of Foreign Relations (1933) 148-156; Borchard, The Unrecognized Government in American Courts, 26 Am. J. Int’l L. 261 (1932); Dickinson, The Unrecognized Government or State in English and American Law, 22 Mich. L. Rev. 118 (1923); Fraenkel, The Juristic Status of Foreign States, Their Property and Their Acts, 25 Col. L. Rev. 544, 547-552 (1925); Lubman, The Unrecognized Government in American Courts: Upright v. Mercury Business Machines, 62 Col. L. Rev. 275 (1962). In this litigation we need intimate no view on the possibility of access by an unrecognized government to United States courts, except to point out that even the most inhospitable attitude on the matter does not dictate denial of standing here.

13 Respondents suggest that suit may be brought, if at all, only by an authorized agent of the Cuban Government. Decisions establishing that privilege based on sovereign prerogatives may be evoked only by such agents, e. g., The Anne, 3 Wheat. 435; Ex parte Muir, 254 U. S. 522, 532-533; The Sao Vicente, 260 U. S. 151; The “Gul Djemal,” 264 U. S. 90, are not apposite to cases in which a state merely sues in our Courts without claiming any right uniquely appertaining to sovereigns.

14 If Cuba had jurisdiction to expropriate the contractual right, it would have been unnecessary for it to compel the signing of a new contract. If Cuba did not have jurisdiction, any action which it took in regard to Farr, Whitlock or the sugar would have been ineffective to transfer C. A. V.’s claim.

15 As appears from the cases cited, a penal law for the purposes of this doctrine is one which seeks to redress a public rather than a private wrong.

16 The doctrine may have a broader reach in Great Britain, see Don Alonso v. Cornero, Hob. 212a, Hobart’s King’s Bench Reps. 372; Banco de Vizcaya v. Don Alfonso de Borbon y Austria, [1935] 1 K. B. 140; Attorney-General for Canada v. William Schulze & Co., [1901] 9 Scots L. T. Reps. 4 (Outer House); Dicey’s Conflict of Laws, 162 (Morris ed. 1958); Mann, Prerogative Rights of Foreign States and the Conflict of Laws, 40 Grotius Society 25 (1955); but see Lepage v. San Paulo Coffee Estates Co., [1917] W. N. 216 (High Ct. of Justice, Ch. Div.); Lorentzen v. Lydden & Co., [1942] 2 K. B. 202; F. & K. Jabbour v. Custodian of Israeli Absentee Property, [1954] 1 Weekly L. R. 139 (Q. B.), than in the United States, cf. United States v. Belmont, 85 F. 2d 542, rev’d, 301 U. S. 324 (possibility of broad rule against enforceability of public acts not discussed in either court), United States v. Pink, 284 N. Y. 555, 32 N. E. 2d 552, rev’d, 315 U. S. 203 (same); Anderson v. N. V. Transandino Handelmaatschappij, 289 N. Y. 9, 43 N. E. 2d 502; but see Leflar, Extrastate Enforcement of Penal and Governmental Claims, 46 Harv. L. Rev. 193,194 (1932).

17 The courts below properly declined to determine if issuance of the expropriation decree complied with the formal requisites of ■ Cuban law. In dictum in Hudson v. Guestier, 4 Cranch 293, 294, Chief Justice Marshall declared that one nation must recognize the act of the sovereign power of another, so long as it has jurisdiction under international law, even if it is improper according to the internal law of the latter state. This principle has been followed in a number of cases. See, e. g., Banco de Espana v. Federal Reserve Bank, 114 F. 2d 438, 443, 444 (C. A. 2d Cir.); Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F. 2d 246, 249 (C. A. 2d Cir.); Eastern States Petroleum Co. v. Asiatic Petroleum Corp., 28 F. Supp. 279 (D. C. S. D. N. Y.). But see Canada Southern R. Co. v. Gebhard, 109 U. S. 527; cf. Fremont v. United States, 17 How. 542 (United States successor sovereign over land); Sabariego v. Maverick, 124 U. S. 261 (same); Shapleigh v. Mier, 299 U. S. 468 (same). An inquiry by United States courts into the validity of an act of an official of a foreign state under the law of that state would not only be exceedingly difficult but, if wrongly made, would be likely to be highly offensive to the state in question. Of course, such review can take place between States in our federal system, but in that instance there is' similarity of legal structure and an impartial arbiter, this Court, applying the full faith and credit provision of the Federal Constitution.

Another ground supports the resolution of this problem in the courts below. Were any test to be applied it would have to be what effect the decree would have if challenged in Cuba. If no institution of legal authority would refuse to effectuate the decree, its “formal” status — here its argued invalidity if not properly published in the Official Gazette in Cuba — is irrelevant. It has not been seriously contended that the judicial institutions of Cuba would declare the decree invalid.

18 The letter stated:

“1. This government has consistently opposed the forcible acts of dispossession of a discriminatory and confiscatory nature practiced by the Germans on the countries or peoples subject to their controls.

“3. The policy of the Executive, with respect to claims asserted in the United States for the restitution of identifiable property (or compensation in lieu thereof) lost through force, coercion, or duress as a result of Nazi persecution in Germany, is to relieve American courts from any restraint upon the exercise of their jurisdiction to pass upon the validity of the acts of Nazi officials.” State Department Press Release, April 27, 1949, 20 Dept. State Bull. 592.

19 Abram Chayes, the Legal Adviser to the State Department, wrote on October 18, 1961, in answer to an inquiry regarding the position of the Department by Mr. John Laylin, attorney for amici: “The Department of State has not, in the Bahia de Ñipe case or elsewhere, done anything inconsistent with the position taken on the Cuban nationalizations by Secretary Herter. Whether or not these nationalizations will in the future be given effect in the United States is, of course, for the courts to determine. Since the Sabbatino ease and other similar cases are at present before the courts, any comments on this question by the Department of State would be out of place at this time. As you yourself point out, statements by the executive branch are highly susceptible of misconstruction.”

A letter dated November 14, 1961, from George Ball, Under Secretary for Economic Affairs, responded to a similar inquiry by the same attorney:

“I have carefully considered your letter and have discussed it with the Legal Adviser. Our conclusion, in which the Secretary concurs, is that the Department should not comment on matters pending before the courts.”

20 Although the complaint in this case alleged both diversity and federal question jurisdiction, the Court of Appeals reached jurisdiction only on the former ground, 307 F. 2d, at 852. We need not decide, for reasons appearing hereafter, whether federal question jurisdiction also -existed.

21 In English jurisprudence, in the classic case of Luther v. James Sagor & Co., [1921] 3 K. B. 532, the act of state doctrine is articulated in terms not unlike those of the United States cases. See Princess Paley Olga v. Weisz, [1929] 1 K. B. 718. But see Anglo-Iranian Oil Co. v. Jaffrate, [1953] 1 Weekly L. R. 246, [1953] Int’l L. Rep. 316 (Aden Sup. Ct.) (exception to doctrine if foreign act violates international law). Civil law countries, however, which apply the rule make exceptions for acts contrary to their sense of public order. See, e. g., Ropit case, Cour de Cassation (France), [1929] Recueil Général Des Lois et Des Arrets (Sirey) Part I, 217; 55 Journal Du Droit International (Clunet) 674 (1928), [1927-1928] Ann. Dig., No. 43; Graue, Germany: Recognition of Foreign Expropriations, 3 Am. J. Comp. L. 93 (1954); Domke, Indonesian Nationalization Measures Before Foreign Courts, 54 Am. J. Int’l L. 305 (1960) (discussion of and excerpts from opinions of the District Court in Bremen and the Hanseatic Court of Appeals in N. V. Verenigde Deli-Maatschapijen v. Deutsch-Indonesische Tabak-Han-delsgesellschaft m. b. H., and of the Amsterdam District Court and Appellate Court in Senembah Maatschappij N. V. v. Republiek Indo-nesio Bank Indonesia); Massouridis, The Effects of Confiscation, Expropriation, and Requisition by a Foreign Authority, 3 Revue Hellénique De Droit International 62, 68~ (1950) (recounting a decision of the court of the first instance of Piraeus); Anglo-Iranian Oil Co. v. S. U. P. O. R. Co., [1955] Int’l L.'Rep. 19 (Ct. of Venice), 78 II Foro Italiano Part I, 719; 40 Blatter für Zürcherische Rechts-prechung No. 65, 172-173 (Switzerland). See also Anglo-Iranian Oil Co. v. Idemitsu Kosan Kabushiki Kaisha, [1953] Int’l L. Rep. 312 (High Ct. of Tokyo).

22 See, e. g., Association of the Bar of the City of New York, Committee on International Law, A Reconsideration of the Act of State Doctrine in United States Courts (1959); Domke, supra, note 21; Mann, International Delinquencies Before Municipal Courts, 70 L. Q. Rev. 181 (1954); Zander, The Act of State Doctrine, 53 Am. J. Int’l L. 826 (1959). But see, e. g., Falk, Toward a Theory of the Participation of Domestic Courts in the International Legal Order: A Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L. Rev. 1 (1961); Reeves, Act of State Doctrine and the Rule of Law— A Reply, 54 Am. J. Int’l L. 141 (1960).

23 At least this is true when the Court limits the scope of judicial inquiry. We need not now consider whether a state court might, in certain circumstances, adhere to a more restrictive view concerning the scope of examination of foreign acts than that required by this Court.

24 The Doctrine of Erie Railroad v. Tompkins Applied to International Law, 33 Am. J. Int’l L. 740 (1939).

25 Various constitutional and statutory provisions indirectly support this determination, see U. S. Const., Art. I, § 8, els. 3, 10; Art. II, §§ 2, 3; Art. Ill, § 2; 28 U. S. C. §§ 1251 (a) (2), (b) (1), (b) (3), 1332 (a)(2), 1333, 1350-1351, by reflecting a concern for uniformity in this country’s dealings with foreign nations and indicating a desire to give matters of international significance to the jurisdiction of federal institutions. See Comment, The Act of State Doctrine— Its Relation to Private and Public International Law, 62 Col. L. Rev., 1278,1297, n. 123; cf. United States v. Belmont, supra; United States v. Pink, supra.

26 Compare, e. g., Friedman, Expropriation in International Law 206-211 (1953); Dawson and Weston, “Prompt, Adequate and Effective”: A Universal Standard of Compensation? 30 Fordham L. Rev. 727 (1962), with Note from Secretary of State Hull to Mexican Ambassador, August 22, 1938, V Foreign Relations of the United States 685 (1938); Doman, Postwar Nationalization of Foreign Property in Europe, 48 Col. L. Rev. 1125, 1127 (1948). We do not, of course, mean to say that there is no international standard in this area; we conclude only that the matter is not meet for adjudication by domestic tribunals.

27 See Oscar Chinn Case, P. C. I. J., ser. A/B, No. 63, at 87 (1934); Chorzow Factory Case, P. C. I. J., ser. A., No. 17, at 46, 47 (1928).

28 See, e. g., Norwegian Shipowners’ Case (Norway/United States) (Perm. Ct. Arb.) (1922), 1 U. N. Rep. Int’l Arb. Awards 307, 334, 339 (1948), Hague Court Reports, 2d Series, 39, 69, 74 (1932); Marguerite de Joly de Sabia, American and Panamanian General Claims Arbitration 379, 447, 6 U. N. Rep. Int’l Arb. Awards 358, 366 (1955).

29 See, e. g., Dispatch from Lord Palmerston to British Envoy at Athens, Aug. 7, 1846, 39 British and Foreign State Papers 1849-1850, 431-432. Note from Secretary of State Hull to Mexican Ambassador, July 21, 1938, V Foreign Relations of the United States 674 (1938); Note to the Cuban Government, July 16, 1960, 43 Dept. State Bull. 171 (1960).

30 See, e. g., McNair, The Seizure of Property and Enterprises in Indonesia, 6 Netherlands Int’l L. Rev. 218, 243-253 (1959); Restatement, Foreign Relations Law of the United States (Proposed Official Draft 1962), §§ 190-195.

31 See Doman, supra, note 26, at 1143-1158; Fleming, States, Contracts and Progress, 62-63 (1960); Bystricky, Notes on Certain International Legal Problems Relating to Socialist Nationalisation, in International Assn, of Democratic Lawyers, Proceedings of the Commission on Private International Law, Sixth Congress (1956), 15.

32 See Anand, Role of the “New” Asian-African Countries in the Present International Legal Order, 56 Am. J. Int’l L. 383 (1962) ; Roy, Is the Law of Responsibility of States for Injuries to Aliens a Part of Universal International Law? 55 Am. J. Int’l L. 863 (1961).

33 See 1957 Yb. U. N. Int’l L. Comm’n (Vol. 1) 155, 158 (statements of Mr. Padilla Ñervo (Mexico) and Mr. Pal (India)).

34 There are, of course, areas of international law in which consensus as to standards is greater and which do not represent a battleground for conflicting ideologies. This decision in no way intimates that the courts of this country are broadly foreclosed from considering questions of international law.

35 See Restatement, Foreign Relations Law of the United States, Reporters’ Notes (Proposed Official Draft 1962), §43, note 3.

36 It is, of course, true that such determinations might influence others not to bring expropriated property into the country, see pp. 433-434, infra, so their indirect impact might extend beyond the actual invalidations of title.

37 Of course, to assist respondents in this suit such a determination would have to include a decision that for the purpose of judging this expropriation under international law C. A. Y. is not to be regarded as Cuban and an acceptance of the principle that international law provides other remedies for breaches of international standards of expropriation than suits for damages before international tribunals. See 307 F. 2d, at 861, 868 for discussion of these questions by the Court of Appeals.

38 This possibility is consistent with the view that the deterrent effect of court invalidations would not ordinarily be great. If the expropriating country could find other buyers for its products at roughly the same price, the deterrent effect might be minimal although patterns of trade would be significantly changed.

39 Were respondents’ position adopted, the courts might be engaged in the difficult tasks of ascertaining the origin of fungible goods, of considering the effect of improvements made in a third country on expropriated raw materials, and of determining the title to commodities subsequently grown on expropriated land or produced with expropriated machinery.

By discouraging import to this country by traders certain or apprehensive of nonrecognition of ownership, judicial findings of invalidity of title might limit competition among sellers; if the excluded goods constituted a significant portion of the market, prices for United States purchasers might rise with a consequent economic burden on United States consumers. Balancing the undesirability of such a result against the likelihood of furthering other national concerns is plainly a function best left in the hands of the political branches.