23 N.Y.2d 46 (1968)

The act of state doctrine prevents U.S. courts from examining the validity of acts by a foreign government within its own territory, especially regarding currency regulations, unless the Hickenlooper Amendment applies, which requires a claim of title or right to specific property taken in violation of international law.

Summary

This case concerns the enforceability of Cuban currency stabilization certificates issued before the Castro regime. When Cuba suspended redemption of these certificates in U.S. dollars, an American investor’s assignee sued Banco Nacional de Cuba. The court addressed sovereign immunity, the act of state doctrine, and the Hickenlooper Amendment. The court found the act of state doctrine applicable, barring inquiry into Cuba’s currency regulations, as the Hickenlooper Amendment did not apply since there was no confiscation of specific property. Therefore, the complaint was dismissed.

Facts

Alexander Bitter, an American citizen, invested in a Cuban farm in 1957. In 1959, he acquired eight currency stabilization certificates from Banco Nacional de Cuba, guaranteeing payment in U.S. dollars in exchange for Cuban pesos. In July 1959, Cuba issued Decision No. 346, suspending redemption of these certificates to protect its dollar reserves. Bitter tendered his certificates in December 1959, but payment in dollars was refused.

Procedural History

Plaintiff, Bitter’s assignee, sued Banco Nacional de Cuba in the New York Supreme Court, obtaining a judgment. The Appellate Division affirmed, rejecting Banco Nacional’s sovereign immunity and act of state defenses. The New York Court of Appeals granted reargument to consider the Hickenlooper Amendment, ultimately reversing the lower court’s decision and dismissing the complaint.

Issue(s)

1. Whether Banco Nacional de Cuba is entitled to sovereign immunity.

2. Whether the act of state doctrine bars the plaintiff’s claim.

3. Whether the Hickenlooper Amendment applies to bar the act of state doctrine in this case.

Holding

1. No, because the State Department concluded the activities were commercial (jure gestionis) in nature and did not warrant immunity.

2. Yes, because the act of state doctrine generally prevents U.S. courts from questioning the validity of a foreign government’s acts within its own territory.

3. No, because the Hickenlooper Amendment applies only to cases involving a claim of title or right to specific property that has been confiscated, and this case involves a breach of contract due to currency regulations, not a taking of property.

Court’s Reasoning

The court found that the State Department’s position on sovereign immunity was controlling. Regarding the act of state doctrine, the court cited Banco Nacional de Cuba v. Sabbatino, emphasizing that U.S. courts should not sit in judgment of foreign government acts within their own territory. The court determined that Cuba’s Decision No. 346 was an act of state, regardless of whether it complied with internal Cuban law.

The court held the Hickenlooper Amendment inapplicable because it requires a claim of title or right to specific property that has been confiscated. Here, Bitter had a contract right governed by Cuban law, which was altered by currency regulations. The court emphasized that the amendment was designed to address expropriation of specific assets, not mere breach of contract due to currency controls. Citing the legislative history, the court noted that the amendment was aimed at cases where “expropriated property comes within the territorial jurisdiction of the United States”.

The court further reasoned that currency regulations are a normal exercise of governmental power, not a “confiscation” or “taking.” It cited the Restatement (Second) of Foreign Relations Law, stating that applying currency exchange requirements to aliens is not wrongful under international law, even if the local currency is less valuable. The court concluded that even if the Hickenlooper Amendment applied, the Cuban action did not violate international law.

In conclusion, the court stated: “It is plain enough upon the face of the statute — and abundantly clear from its legislative history—that Congress was not attempting to assure a remedy in American courts for every kind of monetary loss resulting from actions, even unjust actions, of foreign governments.”