## Facts

- Cuba nationalized several Cuban cigar manufacturers in 1960 and installed state-appointed managers (“interventors”) to operate the seized businesses.
- U.S. importers, including Alfred Dunhill of London, bought cigars shipped both before and after the nationalization.
- As of the nationalization date, importers owed money to the former private owners for cigars shipped before the takeover (pre-intervention debts).
- The interventors continued exporting cigars after the takeover, creating new debts owed to them for post-intervention shipments.
- The importers mistakenly paid the interventors amounts that were actually owed to the former owners for pre-intervention shipments.
- The former owners sued to recover the pre-intervention accounts receivable, asserting they retained title to those debts.
- The importers sought restitution or setoff against the interventors for the mistaken payments.
- The interventors refused repayment and argued the refusal was an act of state not subject to adjudication in U.S. courts.

## Issues

1. Whether the act of state doctrine barred U.S. courts from adjudicating claims seeking repayment of mistaken payments when the refusal to repay was asserted to be an act of the Cuban state.
2. Whether a foreign state’s (or its agents’) refusal to repay in a routine commercial debtor-creditor dispute constitutes an act of state absent evidence of an official decree, statute, or order.

## Decision

- The Supreme Court reversed the Second Circuit in relevant part and held that the act of state doctrine did not bar adjudication of Dunhill’s restitution claim.
- The Court concluded the record contained no evidence of a Cuban sovereign act (such as a statute, decree, or order) directing nonrepayment.
- The Court treated the interventors’ refusal to repay as commercial conduct arising from ordinary sales and payment transactions, not an exercise of sovereign authority.
- The Court permitted Dunhill to pursue affirmative recovery (not merely setoff) for the amounts mistakenly paid.

## Legal Principles

- The act of state doctrine applies to a foreign sovereign’s official acts performed within its own territory, but it does not extend to conduct that is purely commercial in character.
- Invocation of the act of state doctrine requires evidence of an identifiable sovereign act; a litigating position or counsel’s statement, without more, is insufficient.
- Courts may apply ordinary private-law remedies, including restitution and setoff, to resolve commercial disputes involving a foreign state or its agents when the challenged conduct is not shown to be sovereign action.

## Conclusion

The Court held that Cuba’s interventors could not shield a refusal to repay mistaken payments behind the act of state doctrine where the refusal appeared to be ordinary commercial behavior and was not supported by any formal sovereign directive, allowing U.S. courts to award restitution and related relief.


Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976)