## Facts

- Panama experienced a leadership dispute after President Eric Arturo Delvalle purported to remove General Manuel Noriega, and a rival faction claimed Delvalle was removed and installed Manuel Solis Palma as acting leader.
- The United States continued to recognize Delvalle as Panama’s lawful president.
- Delvalle’s government designated Panama’s U.S. ambassador, Juan B. Sosa, as the sole person authorized to control Panama’s accounts at federally insured U.S. banks.
- The U.S. Secretary of State certified Sosa’s designation under a federal statutory scheme governing recognized foreign-state representatives for banking transactions.
- Approximately $50 million in deposits and related assets tied to Panama and Banco Nacional de Panama were held at Marine Midland Bank and Bankers Trust (with other banks initially involved but later resolved).
- Panama sued to establish control over the funds and obtained temporary restraining orders preventing the banks from transferring or disposing of the accounts.
- Banco Nacional and persons claiming to act for the unrecognized rival regime sought to intervene, asserting authority or a property interest in the funds.
- Panama moved for a preliminary injunction to prevent any disposition of the funds except as directed by Sosa.

## Issues

1. Whether the court must treat the U.S. executive branch’s recognition of Delvalle’s government as conclusive when deciding who may control Panama’s assets held in U.S. banks.
2. Whether the Secretary of State’s certification of Ambassador Sosa is conclusive as to the lawful authority to direct transfers from Panama’s U.S. bank accounts.
3. Whether Panama showed irreparable harm and likelihood of success sufficient for a preliminary injunction against the banks.
4. Whether an unrecognized regime (and, relatedly, Banco Nacional) could intervene as of right to contest control of the funds.

## Decision

- The court granted Panama’s motion for a preliminary injunction against Marine Midland and Bankers Trust.
- The banks were enjoined from transferring or otherwise disposing of the disputed funds except as directed by Ambassador Sosa.
- The court held that U.S. recognition of Delvalle’s government was conclusive and barred treating the rival faction as the government of Panama in the litigation.
- The court treated the Secretary of State’s certification of Sosa as conclusive for determining who could lawfully control the accounts.
- The attempted intervention by representatives of the unrecognized regime was rejected to the extent it sought standing as Panama’s government; Banco Nacional’s participation was limited so it could not function as an indirect challenge to recognition or certified authority.

## Legal Principles

- Identification of a foreign sovereign’s government for U.S. legal purposes is committed to the political branches; courts must accept the executive’s recognition decision as conclusive.
- An unrecognized foreign regime lacks standing to appear in U.S. courts as the government of that state or to direct disposition of the state’s assets held in the United States.
- When the Secretary of State certifies a foreign state’s authorized representative for banking transactions, transfers made pursuant to that certification are conclusive as a matter of U.S. law, and banks may treat the certified person as the sole authorized controller of the accounts.
- For preliminary injunctive relief, threatened loss of effective control over state assets essential to the operation of a U.S.-recognized government may constitute irreparable harm, even though the dispute concerns money and the banks could later satisfy a judgment.

## Conclusion

The court enjoined U.S. banks from releasing Panamanian state funds except on the instructions of the U.S.-recognized government’s State Department–certified representative, holding that executive recognition and certification conclusively determine who may act for a foreign state in U.S. courts and banking transactions.


Republic of Pan. v. Republic Nat’l Bank of N.Y., 681 F. Supp. 1066 (S.D.N.Y. 1988)