Banco Nacional de Cuba v. Sabbatino

Supreme Court of the United States · 1964 · Federal Courts

376 U.S. 398 (1964)

Updated August 1, 2026

Federal Courtsact of statefederal common lawforeign relationsseparation of powersforeign sovereignexpropriationinternational law

Facts

Farr, Whitlock & Co. contracted to buy Cuban sugar from C. A. V., a Cuban corporation principally owned by United States residents, with payment to be made in New York upon presentation of shipping documents. After the United States reduced Cuba's sugar quota, Cuba enacted Law No. 851 and then issued a resolution expropriating property and interests of certain listed companies, including C. A. V., while the sugar was still in Cuban territory. Cuba would not allow the ship carrying the sugar to leave until Farr, Whitlock entered a new contract with a Cuban government instrumentality, which later assigned the bills of lading to Banco Nacional. Farr, Whitlock accepted the documents and received payment from its customer but refused to turn over the proceeds, and the disputed funds were placed in escrow pending litigation.

Issue

Whether the act of state doctrine barred United States courts from examining the validity of Cuba's expropriation decree as a basis for denying Banco Nacional's claim to the sugar proceeds. Relatedly, whether that doctrine in this setting is governed by federal law and applies even when the taking is alleged to violate international law.

Rule

The Judicial Branch will not examine the validity of a taking of property within its own territory by a foreign sovereign government, extant and recognized by the United States at the time of suit, absent a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law. The scope of the act of state doctrine is a matter of federal law.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A recognized government of Belvaria nationalizes a copper stockpile located in Belvaria and assigns the sale documents to a state-owned bank. When the copper is later resold through a broker in Chicago, the former private owner sues in federal court, arguing the decree was retaliatory, discriminatory against foreign investors, and provided no meaningful compensation.

How should the federal court treat the foreign decree in deciding ownership of the sale proceeds, assuming no treaty or other unambiguous agreement supplies controlling standards?

Explanation. The majority held that U.S. courts will not examine the validity of a taking of property within its own territory by an extant, recognized foreign sovereign, absent a treaty or other unambiguous agreement regarding controlling legal principles, even when the taking is alleged to violate customary international law. The doctrine is a rule of decision, not a jurisdictional bar.