## Facts

- Farr, Whitlock & Co., a U.S. commodity broker, contracted to buy sugar from a Cuban company affiliated with Companía Azucarera Vertientes–Camagüey de Cuba (C.A.V.), with payment due in New York against shipping documents and a sight draft.
- After the United States reduced Cuba’s sugar quota, Cuba enacted Law No. 851 authorizing expropriation of property in which U.S. nationals had an interest.
- Cuba expropriated C.A.V.’s property, including sugar earmarked for the original contract.
- Farr, Whitlock then contracted to buy the same sugar from a Cuban state entity; the shipping documents and draft were assigned to Banco Nacional de Cuba, an instrumentality of Cuba.
- Banco Nacional instructed its New York agent to deliver the documents upon payment; Farr, Whitlock obtained the documents, resold the sugar, collected the proceeds, and refused to remit them to Banco Nacional.
- Farr, Whitlock instead paid the proceeds to Sabbatino, a court-appointed receiver for C.A.V.

## Issues

1. Whether a recognized foreign sovereign’s instrumentality may maintain suit in U.S. federal court.
2. Whether the act of state doctrine bars U.S. courts from adjudicating the validity of Cuba’s expropriation decree affecting property located in Cuba.
3. Whether alleged violations of customary international law, or Executive Branch communications suggesting willingness to litigate validity, create an exception to the act of state doctrine.

## Decision

- The Supreme Court reversed the Second Circuit.
- A recognized foreign sovereign (and its instrumentality), not at war with the United States, may sue in U.S. courts without a reciprocity requirement.
- The act of state doctrine required U.S. courts to treat Cuba’s in-territory expropriation decree as valid for purposes of the litigation.
- No general exception applied merely because the expropriation was alleged to violate customary international law.
- Case-specific Executive Branch signals did not control whether the doctrine applied.

## Legal Principles

- The act of state doctrine, as federal common law, generally precludes U.S. courts from inquiring into the validity of public acts of a recognized foreign sovereign committed within its own territory, absent a treaty or other unambiguous governing agreement.
- The doctrine rests on separation-of-powers and foreign-relations concerns and seeks to avoid judicial determinations that risk interference with the political branches’ conduct of foreign affairs.
- Uniform federal law governs application of the act of state doctrine; state property law cannot supply a conflicting rule where foreign-relations consequences are implicated.
- Allegations that an in-territory expropriation is discriminatory, confiscatory, or otherwise violates international law do not, by themselves, permit judicial review of the foreign act’s validity.

## Conclusion

The Court held that Banco Nacional could sue in U.S. court and that the act of state doctrine barred judicial examination of Cuba’s expropriation of property within Cuba, requiring U.S. courts to treat the decree as valid despite asserted international-law defects.


Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)