Original version by John Henry Dingfelder Stone August 2009; reviewed by John Henry Dingfelder Stone November 2024.

A.  Introduction

1  In Banco Nacional de Cuba v Sabbatino (1964) (‘Sabbatino Case’), the Supreme Court of the United States (‘Court’) was presented with the issue of whether the act of state doctrine precluded United States (‘US’) domestic courts from reviewing the validity under international law of Cuban legislation that expropriated the property of American nationals and companies owned primarily by American nationals. By holding that the act of state doctrine did indeed prohibit any review of the Cuban expropriations, the Court not only aroused harsh scholarly criticism of both its reasoning and result, but also provoked US congressional legislation effectively overturning a substantial portion of the decision. In the realm of international law, the Sabbatino Case is most often referred to for its discussion of the role of domestic courts in the international legal order and its treatment of customary international law standards (International Law and Domestic [Municipal] Law).

B.  Facts of the Case

2  Farr, Whitlock & Co (‘Farr’) entered into a contract with a wholly-owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (‘CAV’), a Cuban corporation owned primarily by US residents, for the purchase of Cuban sugar. Although the sugar was to be picked up in Cuba, payment was to be made in New York upon presentation of the shipping documents and a sight draft. On 6 July 1960, the US Congress passed legislation authorizing the US President to lower the Cuban sugar quota, which President Eisenhower subsequently exercised. In retaliation to what was perceived by Cuba as an act of political aggression, the Cuban Council of Ministers adopted Law No 851, which empowered the Cuban President and Prime Minister to nationalize any property or enterprise in which American nationals held an interest (Expropriation and Nationalization). Although Law No 851 provided for an official system of compensation, the possibility of actual payment was considered all but illusory.

3  In August 1960, while the sugar at issue was being loaded onto Farr’s steamer in Cuba, CAV, as well as numerous other enterprises, was nationalized. As a result, the sugar in the hold of Farr’s steamer became the property of the Cuban government, and Farr was required to, and subsequently did, contract with an instrumentality of the Cuban government before the steamer could sail. Upon the sale of the sugar, a dispute arose in New York as to the proper recipient of the proceeds between P Sabbatino—the appointed temporary receiver of CAV’s New York assets, and the Banco Nacional de Cuba—the Cuban government’s representative in New York.

C.  Decision

4  At the outset, the Court was required to determine whether the Banco Nacional de Cuba, as an instrumentality of Cuba, was even entitled to access the US court system, since diplomatic relations between the US and Cuba had previously been severed and Cuban assets frozen. The Court considered the matter with some deliberation, before ultimately questioning its own competence to ‘undertake assessments of varying degrees of friendliness’ and abiding by the black letter law that only those nations not officially recognized or at war with the US were to be denied access to US courts (Sabbatino Case 409–10). After quickly establishing that the object of the expropriation was the Cuban sugar, as opposed to the contractual rights to the sugar, and thus determining the situ of the expropriation and the governing law, the Court turned to the act of state doctrine.

5  The traditional enunciation of the American version of the act of state doctrine, cited approvingly by the Court in the Sabbatino Case, is to be found in Underhill v Hernandez (1897): ‘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’ (at 250; Sovereignty). With this quotation as a foundation, the Court discussed the history of the act of state doctrine and its basis in American law, concluding that it did ‘not believe that this doctrine is compelled either by the inherent nature of sovereign authority…or by some principle of international law’ (Sabbatino Case 421). Nor, according to the Court, was the doctrine required by the text of the US Constitution, although it did possess constitutional ‘underpinnings’. Rather, the Court declared that the doctrine was a ‘principle of decision’, the vitality of which ‘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’ (Sabbatino Case 427–28).

6  Given the origin and rationale for the doctrine, the Court explained that the role of the judicial branch in cases involving the validity under international law of an act of sovereign states was to abstain from ruling on the act’s validity, since a judicial finding that another state had violated international law would invariably complicate the foreign relations of the US, an area historically associated with the executive branch. The Court stated, however, that ‘the greater the degree of codification or consensus concerning a particular area of international law’, or the ‘less important the implications of an issue are’ for US foreign relations, the more appropriate it would be for the judiciary to render a decision in the case (Sabbatino Case 428; Consensus). Similarly, the existence of a ‘treaty or other unambiguous agreement regarding controlling legal principles’ might provide a firm enough basis to allow the examination of an act of a sovereign state (Sabbatino Case 428). The Court therefore refused to set down an inflexible rule, opting instead for a case-by-case determination based upon a balancing of the relevant considerations.

7  After clarifying and defining the act of state doctrine, the Court turned to the specific issue in the case, namely the application of the doctrine to Cuba’s expropriation of CAV. The Court argued that a consensus did not exist within the international community as to the relevant international law standards concerning the expropriation of property. As a result, on an 8–1 vote, the Court found that the act of state doctrine did apply and therefore declined to pass judgment on the legality of the Cuban expropriation under customary international law.

8  Justice White, in the lone dissenting opinion, argued that the majority’s version of the act of state doctrine was too inflexible. In his estimation, there was nothing in the doctrine itself that required ‘American courts to decide cases in disregard of international law and of the rights of litigants to a full determination on the merits’ (Sabbatino Case 441). White chastised the majority for ‘rather lightly’ assuming that there was no consensus rule on the expropriation of property without actually undertaking a critical examination of the international law in that area (Sabbatino Case 455). Such an examination, according to White, was necessary to provide justice to the litigants, and the majority’s reasons for avoiding such an examination lacked merit.

D.  Further Developments

9  The immediate effect of the Sabbatino Case decision was that the case was to be remanded to the US District Court for further proceedings consistent with the Court’s opinion, which essentially would have meant the enforcement of the Cuban expropriation. However, this unpalatable result provoked the US Congress into quickly passing An Act to Amend Further the Foreign Assistance Act of 1961, as Amended, and for Other Purposes (more commonly known as the ‘Second Hickenlooper Amendment’ or ‘Sabbatino Amendment’). Section 301 (d) (4) Second Hickenlooper Amendment partially overturned the Sabbatino Case on a temporary basis, by forbidding US courts from invoking the act of State doctrine in cases involving Cuban expropriations that met certain requirements. The amendment was later made permanent and remains in force.

10  In 1996, the US Congress further limited the effects of the Sabbatino Case and the act of state doctrine through the passage of the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (‘Helms–Burton Act’). Section 302(a)(6) Helms–Burton Act specifically prohibits US courts from invoking the act of state doctrine in any action brought under the Helms–Burton Act, which was legislation primarily concerned with strengthening the US embargo against Cuba. In effect, the provision is simply an extension of the Second Hickenlooper Amendment exception (Lowenfeld (1996) 427–28).

E.  Assessment

11  In spite of the near-unanimity (8–1 majority) of the Justices in the Sabbatino Case, most contemporary scholars and practitioners were severely critical of the Court’s decision, as was, obviously, the US Congress (Reisman (1995–1996) 1264). However, the Sabbatino Case, although still controversial, has survived to become a landmark decision on a variety of domestic and international law issues. Within the context of American law, the Sabbatino Case provides the definitive formulation and interpretation of the act of state doctrine (§ 443 (a) Restatement [Third] of Foreign Relations Law of the United States (1965)). In addition, the decision is now widely-held to be the leading case on the existence (or non-existence) of federal common law in the US (Linde (2006) 322; § 111 (3) Restatement [Third] of Foreign Relations Law of the United States; Young (2008) 1677). As such, despite the impact of the Second Hickenlooper Amendment and Helms–Burton Act, the Sabbatino Case remains an exceedingly influential decision in the canon of American constitutional law.

12  From the perspective of international law, the foremost issue addressed by the Court in the Sabbatino Case is the role of domestic courts in the international legal order (Jennings (1965) 88). Essentially, the Court’s decision revolved around the determination that US domestic courts are only equipped to rule on the validity of acts of state where the issues of international law at stake are unimportant or are already settled. In effect, it confined the US court system to those cases in which its expertise was not needed (Jennings (1965) 90). Given that domestic courts historically have played an important role in the development of international law, the Sabbatino Case can easily be seen as detrimental to that development, and especially limiting for any American influence thereon. Falk, however, argued that any invalidation of a foreign act of state by a domestic court based upon a non-consensus rule of customary international law would fail to assist the development of that rule since the domestic decision would likely be seen more as a political decision than an authoritative judicial opinion (Falk (1964) 941).

13  In addition, the rule in the Sabbatino Case places US domestic courts in an unenviable position vis-à-vis illegal acts of state. Unlike the doctrine of justiciability wherein the court dismisses the case after refusing to examine its merits, the outcome of an act of state decision is the actual enforcement of the foreign act of state (Halberstam (1985) 74–75; Stevenson (1964) 707; see also Recognition of Foreign Legislative and Administrative Acts). While such enforcement may not be problematic where the sovereign act is legal, where the act is illegal it places the domestic courts in the position of being an accomplice to a violation of international law (Halberstam (1985) 85–86; Lowenfeld (1963–4) 217; State Responsibility). However, that this problem may simply be a necessary side-effect of respecting a foreign act of state as a solution is not readily apparent. Numerous contemporary critics of the judgment proposed that an exception to the doctrine should be made where the relevant act of state violates international law, and indeed Justice White’s dissent explicitly advances this position (Sabbatino Case 444). However, such an exception would essentially destroy the doctrine by requiring the domestic court to determine in advance whether the act of state violated international law, which is the very determination the doctrine was created to avoid (Lowenfeld (1963–64) 217–18).

14  Finally, the Court’s treatment of customary international law triggered extensive scholarly debate. Particularly contentious was the ruling in the Sabbatino Case that no consensus existed within the international legal community concerning the customary international law standard on compensation and the expropriation of property. While the Court viewed the standard as profoundly unsettled, remarking that ‘[t]here 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’ (Sabbatino Case 428), scholars argued that the near unanimity of the United Nations General Assembly Resolution 1803 (XVII) of 14 December 1962, which determined that appropriate compensation should be paid for expropriated property, effectively settled the issue nearly two years prior to the Sabbatino Case (Stevenson (1965) 78). Jennings went so far as to argue that if this particular international law standard had not gained a consensus, then it was doubtful that any other standard had either (Jennings (1965) 90). Regardless of whether the Court or scholars were correct at the time as to the settled nature of the relevant standard in the Sabbatino Case, the Court’s mere statement that the standard was unsettled likely only served to further undermine it. Furthermore, the Court’s refusal to apply an international law standard because it was not settled, while simultaneously refusing to help settle it, was viewed by many scholars more as an abdication of its judicial role than as justifiable deference to the executive branch (Maw (1963–1964) 224; Jennings (1965) 90).

F.  Conclusion

15  Despite being harshly criticized by contemporary scholars and practitioners, and being partially undercut by congressional legislation, the Sabbatino Case remains highly relevant today to both American constitutional law and international law. Although the language of the case when discussing the act of state doctrine and general issues of law is not particularly restrained, the Court’s actual holding in the Sabbatino Case regarding the particular Cuban expropriation in question is extremely narrow and limited (Falk (1964) 939–40). Thus, it may be said that the theoretical debates generated by the decision far outstrip its practical implications. However, it is precisely these debates, and specifically the role of domestic courts in the international legal order, that continue to influence modern international law.