Banco Nacional de Cuba v. Sabbatino – Oral Argument – October 22, 1963 (Part 2)

Media for Banco Nacional de Cuba v. Sabbatino

Audio Transcription for Oral Argument – October 22, 1963 (Part 1) in Banco Nacional de Cuba v. Sabbatino
Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Earl Warren:

Mr. Rabinowitz, you may continue your argument.

William J. Brennan, Jr.:

(Inaudible) where is this money now?

Victor Rabinowitz:

The money is held by an escrowee, I believe, it’s Lehman Brothers.

William J. Brennan, Jr.:

By an escrow?

Victor Rabinowitz:

By an escrowee, under an escrow agreement —

William J. Brennan, Jr.:

Among?

Victor Rabinowitz:

Well, among C.A.V., Farr, Whitlock, and ourselves.

William J. Brennan, Jr.:

I see.

Thank you.

Hugo L. Black:

Subject to what?

Victor Rabinowitz:

Subject to the decision of this Court.

Hugo L. Black:

Suppose we just dismiss the decision, if the Court says “dismissed.”

Victor Rabinowitz:

Well, I don’t have the escrow agreement in front of me and I’m not sure about what would happen in that case, except I’m pretty sure Lehman Brothers wouldn’t keep it.

I believe the escrow agreement provides that, in the event of the final order in our favor, the money is to be paid over to us.

Under what circumstances to be paid over to Farr, Whitlock, I’m not sure.

Tom C. Clark:

What has been suggested is the Court presents — the Court should stick its hands off, I think you said.

Perhaps the better thing to do is to vacate all of the orders below and direct it to simply dismiss.

Victor Rabinowitz:

I never suggested, Your Honor, that the —

Tom C. Clark:

I know you didn’t, but I think, one of the reasons —

Victor Rabinowitz:

Oh, some of the other people suggested that, yes.

Tom C. Clark:

Or you used the phrase “the Courts should keep their hands off,” I believe you said.

Victor Rabinowitz:

Well, if I said it, what — I didn’t mean it in the way Your Honor does.

What I meant was that the Courts should recognize the validity of the decrees of a foreign government and should keep hands off in the sense that they should not inquire into the validity of the decree.

William J. Brennan, Jr.:

Which is to say, to accept the plaintiff’s title and decide on the issue of conversion.

Victor Rabinowitz:

Pardon me.

I didn’t hear the beginning of your —

William J. Brennan, Jr.:

To accept —

Victor Rabinowitz:

Yes.

William J. Brennan, Jr.:

— the plaintiff’s title —

Victor Rabinowitz:

Title.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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William J. Brennan, Jr.:

Which then automatically means, I expect, that the plaintiff wins on the issue of conversion.

Victor Rabinowitz:

I should think so.

William J. Brennan, Jr.:

Yes.

Victor Rabinowitz:

I would so argue.

William J. Brennan, Jr.:

Now, what Justice Clark has been suggesting is if we can’t reach the defense, why shouldn’t the Court throw the case out?

Victor Rabinowitz:

Well, because the Courts haven’t thrown the whole case out in similar situations in United States against Pink, in United States against Belmont, in the Court of Appeals in the Pons case.

The Court proceeded, made no distinction between whether the expropriating government for the nationalizing government was a plaintiff for the defendant, and I think that the brief of the United States handles this question quite well, that this is purely a matter of accident in how the case happens to come before the Court.

It really had nothing at all to do with the merits of the situation.

William J. Brennan, Jr.:

So, I suppose it depends on the theory.

If as you — I understand you to suggest the Act of state doctrine is a rule of positive law, then I expect that you’d be right.

We — the plaintiff would be entitled to a judgment.

But if it’s merely a rule of abstention, it might be more American a suggestion that if we can’t — we’re going to abstain from deciding the defense, then we ought to also abstain from deciding the claim.

Victor Rabinowitz:

Well, I don’t believe, Your Honor, that there is any authority, aside from the briefs that had been submitted here, for the proposition that it is a rule of abstention in the sense that the Court will abstain from considering the whole case.

Byron R. White:

But if the judge made rule in any of event?

Victor Rabinowitz:

If the judge made rule in any event, but it’s supported by a long line of authority.

I was discussing the Bahia de Nipe case, that being the name of the freighter that was brought into the Court in Norfolk and, as I said, the arguments there made by United Fruit were identical with the arguments that were made here by C.A.V.

Now, the State Department moved in that case with the greatest rapidity and, in the argument before the Court of Appeals — I don’t know what happened before the District Court because I wasn’t there.

But, in the argument before the Court of Appeals, the United States Attorney pointed out the very great importance in political term that the United States could hardly refuse to do what Cuba had done the day before in returning property which had been hijacked, and it urged great speed upon the Court and the Court did, in fact, act with great speed.

Altogether, three weeks, I think, elapsed between the dis — between the day that the ship came into the harbor and the denial of the State, pending a writ of certiorari by the Chief Justice here.

And, United Fruit argued, relying on the Sabbatino case, this case, that the property, the sugar, belonged to it.

And, the Government argued, as it does here, that the Act of state doctrine meant that the property belonged to the Cuban Government and the Chief Judge denied a stay, citing as authority, therefore, the Underhill and, I think, Ricaud cases.

C.A.V. apparently agrees with that decision and it says in a footnote that the decision was “compelled by urgent considerations.”

I think that’s pretty important.

There’s a question as to who is to decide what the urge and considerations are.

Are they the litigants to a lawsuit?

Are they the Court or is it State Department?

Who knows what the urge and considerations are in this case?

Who is it that decides what is urgent and what is not urgent?

Are we to read the New York Times and, on the basis of that, decide that initial issue is an important political issue and that the Courts ought to decide one way or the other or are the urgent considerations more properly within the cognizance and the sole — I suggest in this situation, sole cognizance of the executive department.

I submit that this is not the kind of an issue that a court ought to get into.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Victor Rabinowitz:

Not because it, in broad general terms, affects foreign affairs, but because, in a much more narrow sense, it affects the problem of the sovereignty of other nations and, in this case, it affects the rights, as I shall come to in a few minutes in discussing the problem of the freeze, if I get the time, the very mo — very important question of the rights of other American property holders and the entire problem of settlement with foreign countries for a na — with respect to the problem of compensation for nationalized property.

And, this isn’t the first time this problem has arisen of course.

It’s arisen dozens of times before.

Now, the Court below, the Court of Appeals, relied on the Bernstein exception to the Act of state doctrine and I’m not going to discuss it, except to say that we don’t believe there is any such thing as a Bernstein exception and that, even if there were, the respondent doesn’t come into it and I’ll leave that to the Solicitor General.

William J. Brennan, Jr.:

Well, I do take it though, you would say, because you deny the existence of an exception, that if the doctrine is one of a positive rule of law then it’s utterly immaterial whether the Executive tells us that it’s like or not like.

Victor Rabinowitz:

Exactly, that’s why I don’t think there is any exception.

Byron R. White:

But on what do you base this positive rule of law, is it based on the constitution?

Victor Rabinowitz:

No, I don’t think this is a constitutional question.

I base it on this long line of cases which I have cited, which speak of this in terms of a positive rule of law, namely, that the Courts of United States have no authority or should not test upon the validity of the acts of a foreign government.

And, I don’t believe the single exception of the Bernstein case, which was never reviewed by this Court.

I don’t believe any of those cases talk in terms of judicial abstention.

They just say “this is not a subject for us to decide,” and I think that it will become clear when we examine the international law problems that are raised here as to why it’s not a subject that a court should decide.

Tom C. Clark:

If we don’t have any authority, why shouldn’t we make the decision?

Hugo L. Black:

Well, you said —

Victor Rabinowitz:

Your Honor has authority to decide the case.

Hugo L. Black:

You just said a moment ago that we don’t have it.

Victor Rabinowitz:

I said Your Honor has no auth — what I meant, whatever I may have said, that —

Hugo L. Black:

If we don’t have jurisdiction, while certainly —

Victor Rabinowitz:

That the Court —

Hugo L. Black:

(Voice Overlap)

Victor Rabinowitz:

— the Court has no authority to look into the validity of the acts of a foreign government done with respect to property within its territory, and that’s all that I’m arguing in this case.

I’m not arguing anything further, that you might —

Hugo L. Black:

Your — your argument, as I understand it, is that if Cuba, under Cuban law, this property went to a certain place.

Victor Rabinowitz:

Yes, sir.

Hugo L. Black:

We’ve got to de — follow that as the law governing that ownership of that property.

Victor Rabinowitz:

That’s right.

Hugo L. Black:

But that we still have a duty, under the law, to decide the lawsuit on that premise.

Victor Rabinowitz:

Yes, sir, on that count.

And, as a matter of fact, the United States, before the Court of international justice and elsewhere, has claimed the same thing for itself.

It has claimed, as it did in the General Aniline case, that its disposition of stock of the General Aniline Company, that stock being located in the United States, was exclusively a matter of domestic jurisdiction and that the Department of Court of International Justice had no right to look into the question as to whether the United States decree, seizing property of General Aniline Corporation, was proper or not, whether it belonged to Switzerland or whether it belonged to Swiss nationals or it belonged to German nationals, that — and the United States so argued and the matter is cited in my brief.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Victor Rabinowitz:

So, we have also taken advantage of the Act of state doctrine when it suited our purpose.

William J. Brennan, Jr.:

I know — I know it’s not really relevant here but, just out of curiosity, Mr. Rabinowitz, the United States has seized a lot of property of Cubans in the United States, hasn’t it?

Victor Rabinowitz:

Well, it has the freeze regulation that has the effect of a seizure.

William J. Brennan, Jr.:

I just wonder, do the Cuban courts inquire into the validity of that seizure?

Victor Rabinowitz:

I don’t know.

They haven’t, as far as I know, but whether they would claim the right to or not, I don’t know.

Of course, there isn’t really a seizure, and I’ll get to it later if I can, it’s a sort of conditional seizure because the seizure is subject to administrative license and it may be released by in — either immediately or in due course.

I assume the Treasury Department will have to decide that for extensions.

Assuming, however, that the act of state doesn’t mean what I think it means and assuming that there is a Bernstein exception so that we do get to the question on which the Courts below decided the case, we now get to the question of whether the decree of the Government of Cuba was in fact a violation of international law.

Now, everybody agrees that the — there is no issue of international law unless C.A.V. is to be treated as an American national because, otherwise, it’s just a controversy between Cuba and a Cuban national and there’s no international law involved in the situation.

C.A.V. contends that it’s to be treated as an American national and it relies on this from the fact that the — there’s something in the record to the effect that 90% or over 90% of the shareholders of C.A.V. are residents of the United States.

Now, in this day of extensive migration from Cuba to the United States, I don’t know what that means in terms of nationals of the United States.

Arthur J. Goldberg:

(Inaudible) disagree to either the fact that he’d keep this property he has (Inaudible).

Victor Rabinowitz:

The law said property owned by nationals or in which national — nationals of the United States or in which nationals of the United States have an interest.

Now, how big an interest, I really don’t know, but I don’t think that really makes any difference.

The fact is that C.A.V. was incorporated in Cuba and the law, as far as I can tell, pretty much without exception, says that a corpo — the nationality of a corporation is the nationality of its incor — of the State of its incorporation.

And, the Pedro case is perhaps the leading authority on it in which the Court pointed out that, after all, if a ship owner decides that he wants the advantages of the Spanish flag by registering his ship under the Spanish flag and by incorporating in Spain, he cannot later claim the protection of some other flag.

I believe, in this case, it was the British flag.

C.A.V. chose to incorporate in Cuba, presumably it got tax advantages and other legal advantages from its incorporation in Cuba and, now, at this moment, to come in and claim the protection of the American flag, it seems to me, is somewhat belated.

Byron R. White:

Mr. Rabinowitz, did the — were these issues raised and litigated below?

Victor Rabinowitz:

Of course not because no one thought of this whole problem below, as I’ve said.

No one ever raised this issue at all in the Court — in the District Court because the whole problem, no one discussed —

Byron R. White:

Yes, but it was raised —

Victor Rabinowitz:

The act of state —

Byron R. White:

But it was raised in the Court of Appeals.

Victor Rabinowitz:

Yes, it was raised in the Court of Appeals.

Byron R. White:

And you made this argument to the Court?

Victor Rabinowitz:

Exactly.

Byron R. White:

And what was that court’s — what was that court’s disposition?

Victor Rabinowitz:

The Court merely said, inaccurately, that 90% of the — of the stockholders of C.A.V. are American nationals.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Victor Rabinowitz:

Now, they equated the word “nationals” and “residents” which, of course, are not equal at all.

But, the record doesn’t say anything about the nationality of the stockholders.

the Court of Appeals decision did say that they were nationals.

Arthur J. Goldberg:

Suppose you had this case an order to freeze and freezed itself in this Court in order to come to C.A.V. and, when it freezed itself, you had, in effect, a (Inaudible) company is owned by American nationals or if they have a dominating interest, as they did here.

(Inaudible) — it’s either that (Inaudible) he can’t say and Cuba, itself, has no freeze involved under that statute of law, granting this is American (Inaudible) are you arguing that they involve, just regarding there (Inaudible)

Victor Rabinowitz:

Is the —

Arthur J. Goldberg:

As it purports to nationalize (Inaudible) what they’re claiming for is protection in leaving their own system.

Victor Rabinowitz:

Well —

Arthur J. Goldberg:

(Inaudible)

Victor Rabinowitz:

Well, I hadn’t heard it suggested before the — this Court or the Courts of the United States were to be their issue — their view of legal issues is to be determined by what the Cuban law says.

It’s true that the Cuban law did refer to the properties or enterprises owned by physical and corporate persons who are nationals of the United States or the enterprises in which such physical and corporate persons have an interest.

Arthur J. Goldberg:

There are limitations to the interest here.

Victor Rabinowitz:

Well, 68 of what, Your Honor?

Arthur J. Goldberg:

(Inaudible)

Victor Rabinowitz:

There is one — the law contains this formulation in three places, I think, and, once, it refers to predominant and, the other cases, it refers to just an interest.

Arthur J. Goldberg:

Nevertheless, your argument (Inaudible) Cuban national accepted it.

Victor Rabinowitz:

Yes, yes.

I think that’s true.

But, I must disagree with Your Honor because it seems to me that this raises a series of problems that are really very difficult if we are to determine the nationality of a — of a corporation incorporated in Cuba by what the nationality of its shareholders even though Cuba may choose to do so.

I don’t believe that our courts have ever done so, and it seems to me that there are extensive problems which are raised in my brief which are covered — which make this a problem which would be extremely awkward to administer in the Courtroom.

For example, it’s suggested that the Court will have to determine what percentage of the corporation was owned by Cubans and what percentage by American citizens, and I don’t even know how the Court will go about that.

Let me turn, however, to the question of whether, assuming that it was an American corporation, whether there has been any violation of international law here, and this is the last, assuming everything else is against me.

I submit that there is no violation of international law which here been shown.

And, I would like just to point out that the world of today is not the world of 50 years ago and that the most striking feature of the world today, speaking in international terms, is a revolutionary search which has created scores of new countries and has brought about sweeping changes in the economic systems of many old ones.

No longer can we look to the law of the United States in Western Europe and, on the basis of that research, discover what is international law.

If international law is the practice of civilized nations, and so the Courts so text write it at least and I guess the Courts have also held the decision by Chief Judge Marshall in the Antelope, I think is a very good example, we have to look not only to our law but to the law of Eastern Europe, the law of Africa, the law of Asia, the law of Latin America, to Ceylon, to Indonesia, to Egypt, to Cuba, to China, to name only a few.

And, we can’t just look at American presidents, and German presidents, and French presidents.

I submit that there is nothing to show that international law, namely the practice of civilized nations, makes what Cuba did here a violation of any law.

On the contrary, it seems to me that a very large proportion of the nations of the world, perhaps representing a substantial majority of the population of the world, have done exactly what Cuba has done here.

It certainly has been done in Indonesia.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Victor Rabinowitz:

It has been done in China.

It has been done in all of Eastern Europe.

And, it has been done in many parts of Latin America, in Ceylon, and many other places.

Potter Stewart:

Is it implicit in what you just said, Mr. Rabinowitz, that, 50 years ago, this would have been a violation of international law?

Victor Rabinowitz:

It might very well be.

I don’t know, Your Honor.

I’m not certain.

I think that nationalizations of property go back to the nationalization of the properties of the Church of Rome by Henry VIII and —

The eighth —

Victor Rabinowitz:

In 15 — I don’t know when it was but, certainly, no compensation was ever made for that nationalization.

So, I’m not sure about what the situation would have been 50 years or 500 years ago.

But, today, it may be hard for us to take, but private property doesn’t quite hold the status in other countries in other parts of the world that it does here.

An international law cited by the respondent and C.A.V. and most commentators are almost all from the older nations of the world.

Arthur J. Goldberg:

Did you regard it to say that the national intention is exactly what the conclusion was?

Victor Rabinowitz:

Well, of course, Your Honor, that’s a hard case and it’s a hard case that — one of those hard cases that make bad law and I think that I would have come to the same conclusion as the Court of Appeals did in the Bernstein — first Bernstein case and as the Court of Appeals of the — United States Court of Appeals and as the Court of Appeals of the State of New York did in the Holzer case, both of which are cited in my brief, and I would have done it with a great deal of regret and I suppose it would’ve been one of those times when I would have regretted being a judge, had I been one at the time, but I think that that’s what the law did.

And, may I call your attention to a case that I cited before, namely, the decision of Judge Marshall in the Antelope in which he was confronted with the problem of whether slave trade was a violation of international law.

And, after excoriating slave trade and pointing to all of the terrible miseries that result into slave trade which was illegal in the United States, he said, “How can we call this a violation of international law when two of the greatest countries in the world, Spain and Portugal, still find it legal?

It’s a terrible thing.

It’s immoral.

It’s a very, very despicable thing but it is not a violation of international law.”

Arthur J. Goldberg:

(Inaudible)

Victor Rabinowitz:

I said —

Arthur J. Goldberg:

(Inaudible)

Victor Rabinowitz:

No, I said the law of civilized nations, and I don’t think that the question of whether a nation is civilized is a justiciable question and I certainly think that, for the United States to hold that Ceylon, for example, which has just appropriated large amounts of American property, or Indonesia which has just — which has recently appropriated all of the Dutch tobacco plantations, I don’t believe that, in political terms, for this Court to hold that those countries are not civilized would be helpful.

Now, we have here an Act which is trying to be statutory, retaliatory, and no compensation.

Now, I would like to save some time for rebuttal and I really don’t have time to consider all of these things.

They’re fully discussed in the brief.

I might say that, so far as the discrimination is concerned, this is was one of a series of decrees which nationalized United States property, Cuban property, English property, Canadian property, Taiwan property, and lots of other property that was located in Cuba and, while this particular decree was directed to a particular group of companies, other decrees were related to other ones and I don’t think that there was any difference of treatment.

All of them were rela — were expropriated in exactly the same way.

Also, there’s been no determination anywhere, no facts have been taken to determine whether this was a discrimination and what the — whether the discrimination was a proper one, that is, equal treatment is not always the same as discrimination because, sometimes, equal treatment is not appropriate where the parties are unequal.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Victor Rabinowitz:

The Government has al — or the respondent has also claimed that this was retaliatory.

The Court of Appeals said that, well, this was a retaliation for the Sugar Act of 1960 and, whether the Sugar Act was fair or unfair, nevertheless, Cuba had no right to retaliate.

Well, whether it’s fair or unfair, in the Court of Appeals’ own opinion, is a rather important thing and I don’t think we can brush off the standard of fairness just because it’s a matter that it is applied to the law of the United States.

If the standard of fairness is to be applied and that’s a reason for a court’s decision, then it should be applied to all of it and I don’t think that the issue of fairness can be applied only to the Cuban decrees and not to American law.

And, finally, I would like to get very briefly to the question of compensation.

the Court of Appeals says there is no international law on the subject of compensation.

The respondent and C.A.V. don’t accept that at all.

I suspect that’s the issue that they are mostly interested in.

If they could get compensation, I don’t think they’d be worried too much about the discriminatory or retaliatory aspect of this.

There are extensive citations in my brief.

I think most of the extensive nationalizations of the world in the past, well, since 1917 and perhaps before that, were without compensation.

Now, it’s true that in many cases, compensation was worked out ultimately, but it was worked out by diplomatic methods and, as the Solicitor General suggests here, perhaps, someday, compensation would be worked out by diplomatic methods now.

And, now, I’d want to get to Your Honor’s question on the freeze because I think it ties in with it.

In the first place, the freeze is not an absolute freeze.

It’s a freeze subject to license.

If we worked to secure a judgment in this case, we would applied to the Treasury Department and we would seek to get a license.

And, the Treasury Department would decide in determining, in the light of its then existing policy, whatever it happened to be, whether it would give us a license on that or not, and that would be handled in the first instance.

Arthur J. Goldberg:

If I read the letters of the statute in the record before me, does it indicate that the policy (Inaudible)

Victor Rabinowitz:

That was the policy the day was — the day the letter was written.

I don’t know whether it will be the policy the day that this Court hands down a judgment in our favor or whether it will be the policy 2 years from now, 5 years from now, 10 years from now, or whenever an application for a license is made, because it is a policy question the Treasury Department will have to determine policy on the basis of the facts as they exist at that time.

The second answer is that our previous experience has been, in the case of blocked funds, that when blocked funds are accumulated, and this would be the beginning or at least part of the beginning of an accumulation, it has been the experience in the past that those blocked funds have frequently been used in the future, 5 years, 10 years, in the case of the Soviet Union, 25 years later, to work out some sort of a diplomatic settlement, whereby, all American property owners receive that — receive some sort of a share of the funds — the blocked funds that had accumulated.

Perhaps that will happen in this case if we prevail but, if we don’t prevail, it means that those funds presumably will belong to Farr, Whitlock and that’s the end of it.

Now, there are many, many aspects of the freeze which could be discussed and which, if it ever becomes appropriate, will be discussed but I don’t think that the freeze makes the matter moot.

It may raise some question as to how soon, if ever, we will realize the fruits of a victory we may win here and it may take a long time and it may be hard for us to get the fruits of those victory — of that victory.

But, the alternative is to hand the money over to Farr, Whitlock and, that, we believe, is not justified on the record here and it is not going to be affected by the freeze one way or the other.

Those frozen funds may someday come in handy and, as I say, in connection with the diplomatic settlement or some other kind of settlement.

I really don’t know.

Thank you.

Earl Warren:

Deputy Attorney General Katzenbach.

Nicholas Deb. Katzenbach:

Chief Justice and may it please the Court.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

The United States appears today as amicus in this litigation to argue only the act of state question.

That question is phrased on page 2 of the Government’s brief, “whether a court of the United States is free to examine the validity of the decree of a recognized foreign government affecting title to property within its territorial jurisdiction.

Now, as Mr. Justice Goldberg has raised the question, it was answered by Mr. Rabinowitz, I’d like, at the outset, to say that I agree that this case is not a moot case for the reasons essentially expressed by Mr. Rabinowitz that the Treasury Department regulations do prevent the transfer, and so forth, of any assets except under a license and that those assets are presently frozen.

However, a judgment is not prohibited and there is a long line of decisions in this Court that says that a — where a judgment can be rendered to clarify title to something or the rights of someone, even if those proceeds are frozen at that point, that that case is not a moot case.

I would also like to point out that the fact of that regulation has some relevance to matters, which I’ll make later in my argument, because it demonstrates, to a degree, a — an efficient way of dealing with problems of this kind.

That is to say, again Mr. Rabinowitz had paid some note of it, often, these claims for property which is confiscated by a foreign government can be paid from such frozen assets and, in any event, the fact of the frozen assets is sometimes an inducement to a foreign government to discuss the problem of compensation.

I think there’s no need for me to go over the essential facts again, but I would like to give emphasis to the two facts in this case.

One is that there is no question that the sugar involved in this case was in Cuba at the time of the relevant decree.

And, the second fact that I would like to give emphasis to is that possession of that sugar was taken on behalf of the Cuban Government and that the title of the Cuban Government at that time was recognized by Farr, Whitlock, at least for the purposes of releasing the sugar to get it on to the ultimate purchaser, so they we’re not dealing here with a decree which simply was sort of a bruiting omnipresence.

We’re dealing with a decree which was in fact, where measures — inappropriate measures by those standards were taken by the Cuban Government to reduce that sugar to its possession in Cuba.

There’s no dispute about the effectiveness of that appropriation as such, is there?

Nicholas Deb. Katzenbach:

No, I — I think not.

The — the facts are described in an affidavit from Farr, Whitlock to the effect that the ship was not permitted to move until the purchasers of these sugar put aside their other contracts and entered into identical contracts with the agency of the — of the Cuban Government.

And this has not been a contested issue anywhere in the litigation —

Nicholas Deb. Katzenbach:

No.

Has it?

Nicholas Deb. Katzenbach:

No.

It was effective appropriation within the territorial limits of Cuba on these sugar.

Nicholas Deb. Katzenbach:

That’s correct, Your Honor, as I understand.

I think it might be helpful, again at the outset, if I indicate some of the points that the Government is not arguing.

We feel that the Act of state doctrine is one of judicial creation, that this Court is entirely free to abandon it or to modify it if persuasive reasons exist for this Court taking that action.

The Government does not believe that such reasons exist.

William J. Brennan, Jr.:

You mean that eliminates, at least from your standpoint, any argument that this is a political question in the sense of one non-justiciable because without judicial power to deal with?

Nicholas Deb. Katzenbach:

I think there’s no question of judicial power, Your Honor, in this case.

I think this, that there are overtones of foreign relations to it and while, again, the Government would not argue any constitutional allocation or separation in this case, we do believe that considering the proper allocations of governmental functions is something which might lead to this Court’s believing it wise to adhere to its prior precedence.

William J. Brennan, Jr.:

That’s a very different thing from saying the Court has no power to deal with this offense.

Nicholas Deb. Katzenbach:

It is, Your Honor, and that is the reason that I wish to make it clear.

We were not arguing that.

Potter Stewart:

Do you think the — it’s an ingredient of the substantive rule of law, so to speak?

Nicholas Deb. Katzenbach:

Yes, I think that the — it is — some of the reasons for the substantive rule of law lie in the fact that the Exect — in fact that the Executive Branch can, by enlarged, deal better with this problem.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

If —

Potter Stewart:

And, by enlarged, has been given a great deal of power and discretion in the field of international relations.

Nicholas Deb. Katzenbach:

That’s — that’s absolutely correct.

Yes, Your Honor.

Does that mean that the consent or non-consent of the — or assertion or non-assertion by the Executive as to whether this should be — this case should be justi — adjudicated or not as an immaterial fact.

Nicholas Deb. Katzenbach:

It could mean that, Your Honor.

The — the so-called Bernstein exception is not, I believe, before this Court.

While the Court of Appeals took the correspondence in this case, which was, we believe, informal and unofficial, and construed that as a Bernstein type of letter and, therefore, placed its decision on those grounds.

That point, since the Solicitor General in his memorandum made note that the Government did not so intend it, has not been pressed by any of the parties here and I don’t believe that it is necessary for this Court to decide that question and, unless the Court wishes otherwise, I do not intend to argue.

Well, it’s rather academic anyway because, even if the Bernstein exception is an exception here, the Government, in this Court, is saying that they do assert.

Nicholas Deb. Katzenbach:

That’s right.

That’s correct, Your Honor.

Byron R. White:

Solicitor General, I gather that you are in the Court asserting clearly and equivocally that — to the extent there isn’t an Act of state doctrine we want to decide in this case.

Nicholas Deb. Katzenbach:

That’s correct, Your Honor.

We believe this case is un —

Byron R. White:

Well, but any ambiguity —

Nicholas Deb. Katzenbach:

The case is inappropriate.

Byron R. White:

Previous to the time as, hereby, eliminated as far as the views of the Executive Branch.

Nicholas Deb. Katzenbach:

I don’t believe that there has been any ambiguity prior to this time in the decisions of this Court or in the decisions of other courts which have followed those decisions.

William J. Brennan, Jr.:

Well, Mr. Attorney, may I — I’m just a little bothered about this though.

I appreciate that, in this case, you’re not suggesting that the Court not apply the Act of state doctrine.

Indeed, you’re urging that we do apply it.

Well, are you asking us to decide that, in any instance where the of Act of state doctrine is applicable that, as a positive rule of law, the judiciary shall not deal with that or is there a qualification that, on some occasions, the State may say to the judiciary, “We’re not concerned.

If the Court wants to go ahead and decide the question, the Court may do it?”

Nicholas Deb. Katzenbach:

I would suppose that — again, you’re phrasing the Bernstein question —

William J. Brennan, Jr.:

Well —

Nicholas Deb. Katzenbach:

Your Honor — and —

William J. Brennan, Jr.:

I may be, but I don’t —

Nicholas Deb. Katzenbach:

And —

William J. Brennan, Jr.:

I don’t really see how we can fail the deal with what’s suggested by Bernstein in deciding this case.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

Well, I am suggesting, Your Honor, that this a positive rule of law and the question is, as you put it, whether this positive rule of law changes if the Department of State should say, in so far is the foreign relations of United States are concerned, “we have no objection to a court’s inquiring this far.”

I think this Court would be free to adopt that modification as it would be free to adopt any other modification.

I don’t urge the Bernstein exception upon this Court at this time and I don’t urge that it not remain —

William J. Brennan, Jr.:

Since it’s a judged-made rule, in any event, we may shape it is what you’re telling me.

Nicholas Deb. Katzenbach:

That’s correct, Your Honor.

And, since it is not necessary to the decision of this case, I was not going to urge it and, by not urging it, I do not be wish to understood as representing the views of the Government that it is opposed —

Byron R. White:

Unless —

Nicholas Deb. Katzenbach:

To that.

Byron R. White:

Unless some court somewhere comes to silent from the record it sent, the State Department should deal with the subject matter of litigation.

Nicholas Deb. Katzenbach:

I would be opposed to that.

If there is Bernstein exception, it seems to me that it should be made by clear and unequivocal and formal letter from an appropriate official of the Government.

I think it perhaps should, and this may be my parochial views on the Department of Justice, be one that would be submitted through the United States attorney.

Arthur J. Goldberg:

The general conversion rule is the rule of substantive law.

It need — you say the Act of state doctrine is a rule of substantive law and not an extension.

The rule of substantive law, where you got a question presented to the Court, the validity of the Act for a state property (Inaudible) unless the State Department says “okay.” That’s the (Inaudible).

Nicholas Deb. Katzenbach:

It would be unique, Your Honor.

I don’t know that it would peculiar.

If the reason for the rule — if the reason for the rule were that, in general, this would interfere with international relations, then an assurance from the appropriate branch of the government that, in this case, it would not would seem to me to be a perfectly sensible and intelligent rule.

I don’t think that that would necessarily mean that the Court would then go ahead and do it.

It would merely — be merely stating to the Court that, insofar as that consideration would govern them, in this case, it did not, in fact, in the judgment of those charges in conducting foreign relations, appear to be applicable.

Arthur J. Goldberg:

Whether the State was involved in the facts.

Nicholas Deb. Katzenbach:

Yes.

Arthur J. Goldberg:

And, you’re here to find a resolution (Inaudible)

Nicholas Deb. Katzenbach:

Yes, Your Honor.

William J. Brennan, Jr.:

Well, then, gather — would you go this far, Mr. Attorney General, in an appropriate case, maybe this is one, if we are to apply the Act of state doctrine to the defense, we ought then to say, since it is a judge-fashioned rule, “Well, we wouldn’t deal with half a case and so we’ll complain about it, too?”

Nicholas Deb. Katzenbach:

I don’t see why, Your Honor, that would follow.

If this is, as it was called by this Court in the Ricaud case, a rule of decision, if this is what I would call an ironclad complex rule which can appropriately be laid down by this Court and binding upon all.

Because of the reasons for the rule, I don’t see why the fact that you have a — whether it’s a plaintiff or a defendant, should make any difference.

Indeed, that point is pressed repeatedly in the briefs of the respondents in this who would seem to make it appear that the issue here is whether or not a court of the United States will enforce a foreign decree of this kind, and they repeatedly use the word “enforce.”

Well, it is perfectly true that there’s a whole line of decisions and authority with this respect to such decrees which says that courts in the United States will not enforce confiscatory decrees, will not enforce decrees which are penal in their nature, which will not enforce decrees which have public policy exceptions.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

There’s a whole — just hundreds of cases to this effect, but this case is not a case of that kind.

This case is not a case of that kind because, here, the property was reduced to the possession of the Cuban Government while in Cuba.

And, it’s a mere accident that the case appears in the way in which it does.

As to say, if it had not been for the accident of some negotiable paper being in the hands of Farr, Whitlock in this case, then the only thing that C.A.V. could have done would have been to have attempted to enjoin that payment or to have sought the money from the — in the hands of the agent of the Cuban Government.

In doing so, I think it would have been blocked either — be it by sovereign immunity if this case was directly against an agent of the Cuban Government or the Cuban Government, or it would have been blocked by the Act of state doctrine if in the hands of somebody else.

There, it would have been used as a matter of defense.

So, I cannot attach any great significance to the rather odd fact here in the rather unique circumstances that this happens to be an argument made by a plaintiff in defense of his title because the money seems to have — or what represent of the money slipped out of his hands.

I don’t believe it would be wise for this Court or for any court to make that kind of distinction.

To say you contest the title if you are able to get hold of the property, however you get hold of it but, otherwise, it’s barred because it makes a difference whether you appear as plaintiff or as defendant.

I don’t believe that would be a wise route.

Potter Stewart:

Most foreseeable cases, as a matter of fact, this would be — the Act of state doctrine would be a defense in your Code, wouldn’t it?

Nicholas Deb. Katzenbach:

Yes, it would, Your Honor.

Potter Stewart:

But, I suppose —

Nicholas Deb. Katzenbach:

In most foreseeable circumstance —

Potter Stewart:

In the decided cases, the precedence, it was a defense —

Nicholas Deb. Katzenbach:

That’s correct.

Potter Stewart:

Wasn’t it?

Nicholas Deb. Katzenbach:

That’s correct because this is the way it would ordinarily come up in the —

Potter Stewart:

Come up as a matter of fact.

Nicholas Deb. Katzenbach:

In the — in the property cases or, indeed, to go to the earlier precedent, in the cases where tort was being claimed.

Indeed, the origin of the act of state, whatever its origin, it may be old, say that it is, whether it is or not, had its first expression in this country in Underhill against Hernandez which was a suit in tort brought against Mr. Hernandez after he had ceased to be a government official for acts that he had committed in Venezuela in terms of what was called unlawful imprisonment, assault.

And, in that case, this Court first pronounced that doctrine and said that, and the quote which is so often quoted in the cases, “that 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.”

William J. Brennan, Jr.:

Is there in, your opinion, Mr. Katzenbach, a relationship between the Act of state doctrine and the Doctrine Sovereign Immunity?

Nicholas Deb. Katzenbach:

You can a — it can be argued that there is and that this is derived in part from sovereign immunity.

In the case such as Underhill against Hernandez, it would seem look like a part of a sovereign immunity.

And, the same argument can be made that if the State takes property and then gives it to a third person, since you couldn’t sue the foreign state for it, you can’t sue that person.

But, it isn’t — it isn’t distinct from sovereign immunity because sovereign immunity can only come to play when the sovereign is in court.

It’s a — it’s a jurisdictional matter.

The act of state is not and, in addition to that, it would seem to me that the main motivation of those who are arguing this, derived from sovereign immunity, is to take the next jump and say “we don’t like sovereign immunity anymore, so we don’t like act of state anymore.”

Now the reasons that sovereign immunity has been cut down in some ways has been because of the extent to which governments were involved in commercial activities rather than in what we regarded as more purely governmental activities and, perhaps, the same exception could be made here, but I wouldn’t know how to do it because, clearly, when the Government of Cuba takes this sugar there, it’s not acting in a commercial way, even though the product may be commercial.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

It’s acting — affecting in a pretty sovereign way, perhaps, too sovereign a way.

Are we — we’ve been told that Cuba has setup a socialist economy and I suppose this, by definition, implies it could a good deal of involvement of the State in — but, in a capitalist economy, are thought to be private enterprise.

Nicholas Deb. Katzenbach:

And that’s the good reason for cutting down on sovereign immunity where it’s engaged in commercial operations.

It does not seem to me that that applies to the acts done in its sovereign capacity and, certainly, expropriation is not an act done in a commercial capacity.

I can’t think of a more sovereign act than that kind of seizure.

Now, it’s been argued that these cases, the — primarily, the Underhill case and the Oetjen case and the Ricaud case which are the clearer statements of this — by this Court, it has been argued by scholars for some time that perhaps this doctrine should be changed and perhaps it’s no longer applicable today.

There has been some efforts to distinguish those cases and, to a degree, they can be distinguished.

That is to say, it can be said this point was never made to the Court.

It’s never argued to the Court forcibly in those cases or, in at least Oetjen, it couldn’t have been international violation.

There was — a Mexican was involved and, in Underhill, they doubted that it was a violation of international law anyhow and so forth.

These arguments are made in the respondent’s briefs.

They’re good arguments.

They’ve been made by scholars.

I think they’re respectable arguments, but I think that this Court ought to face the fact quite candidly that what, as I think, the respondents do, that they are asking for a change in this doctrine when they ask that an exception for alleged violations of international law be made to the Act of state doctrine because it is quite clear from those cases and from the way in which the Court spoke in those cases that it had considered this fact.

At least it was aware of this fact, because, in each of those cases, there is a statement that the remedy, if it exists, lie through diplomatic channel, which is certainly a recognition of the fact that international matters were involved.

Potter Stewart:

You can’t take any position, do you — or do you, as to whether or not this was a violation of international law?

Nicholas Deb. Katzenbach:

I don’t take any position.

Potter Stewart:

That isn’t the position you —

Nicholas Deb. Katzenbach:

The Department of State has said that it was.

If my argument required me to take a position, I’m acting on the assumption that it was, Mr. Justice, and I believe very firmly that it was on the facts that I know, but that’s not a position that’s necessary for —

Potter Stewart:

And you don’t —

Nicholas Deb. Katzenbach:

Our argument and I will assume —

Potter Stewart:

Take it in this litigation.

Nicholas Deb. Katzenbach:

That would assume, for the purposes of the — my argument would be —

Potter Stewart:

That it is —

Nicholas Deb. Katzenbach:

The transaction is made —

Potter Stewart:

That it is a violation.

Nicholas Deb. Katzenbach:

That it is a clear-cut violation of international law.

I think that the point that I’ve been making is that the precedent, as it exist, would very clearly apply to the facts of this particular case.

Now, let me use my remaining time, if I may, to deal with what seem to me to be the most important matter before this Court, and that is whether, today, it would be a wise policy to create the exception to this doctrine which respondents have urged so vigorously and which was adopted quite clearly by the District Court and a little more equivocally, I think, by the Court of Appeals because it gone ahead to further Bernstein letter exception.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

And, that is that, to the Act of state doctrine, a — an exception exists wherever there is an allegation that the acts of a foreign state were in violation of international law and the Court is then free to check at least that much and to investigate international law for itself.

Now, it seems to me that, for the Court to examine into a foreign act of state on those grounds, could interfere with the conduct of foreign relations and, indeed, both of the Courts below acknowledged this because both of them give emphasis to the fact that, in this case, it could not.

The District Court, because they said that the foreign state had already said this was in violation of international law so, therefore, it couldn’t defend the Cubans anymore than they were already offended and, the Court of Appeals, because it said we have a Bernstein letter coupled with the other.

So, both courts below, at least accept the fact that this Court interfere with — with the foreign relations.

Now, why is this true?

Well, one thing that’s true about it is, because the — this kind of pronouncement can become a problem of time, as far as the Department of State is concerned, they have other fish to fry than this particular expropriation or this particular act.

And, it may be that the timing of a protest is important to them, whereas, the timing of a judicial pronouncement could not take into account the same factors.

And, there is the problem of phrasing it.

If, after all, the effort here is it to — is to get compensation for the people involved whose property has been taken, if it is to resolve those relations so the future foreign freight can go on, the very serious problems of phrasing of a protest can come up, can exist.

For example, if the protest that you made, the reasons why it was in violation of law, were phrased in one way, you might be able to secure similar notes from other governments which did not agree with everything that you felt was true of international law, then this situation would agree with some of them and it might be the better part of wisdom to give emphasis to those points so as to secure similar protests from other governments.

And, in addition to that, you have the problem here of — as a problem of phrasing in an area of developing a law which isn’t entirely clear.

What international law is, with respect to its appropriations is, I assure this Court, not a crystal clear proposition, however clear it may be on these facts.

And, different states do have different views on this matter.

For the Courts of this country to pronounce, with respect to what international law presently is, in their view, in this area is, I think, seriously to affect the conduct of our foreign policy for this reason.

The Department of State is, of course, when it invokes international law in these situations, playing the role of an advocate and there is no question as to what the United States would like international law to be within this area because we would like to a have international law which would, in our judgment, protect foreign investment which would encourage development, which would create a climate of investment of that kind.

Now, already, in this case, by the expressions of doubt on the part of the Court of Appeals as to whether, for example, compensation was really required, already, the negotiating position of the Department of State, in this respect, to position it as an advocate, as urging in an external arena, is already, to an extent, hurt by the pronouncement here by the Court below as to how it looked at international law because, now, every time that the Department of State is to urge a position with respect to expropriation, it is going to have that opinion and, should this Court reverse the prior precedent or modify it, it’s going to have every opinion by every court state and federal in the United States, by 50 state jurisdictions, by a number of federal jurisdictions.

It’s going to have to cope with all those expressions of what international law is.

Is this really — I would this Court, is this really the way in which international law can develop?

Isn’t — in this development, don’t we have certain policy values that we wish to promote and aren’t these better promoted in an external arena than by the pronouncement of courts sitting in this country, pronouncements which have to be and should be and properly should be objective decisions, objective views as to what international law is when, really, your arguing what it is as a policy argument in hope that it will become that or something approximately like it?

But, really, is what the Department of State is doing, attempting to get others to take their views, it seems to me that rather than promote international law, judicial decisions of this kind would really be a deadening weight upon its development and, at least upon its developments in lines which I think that — we would wish to do.

And, if they follow the Department of State in their pronouncements, then all they would have done would have been to impugn their own reputation for objectivity in courts abroad and the decisions would be reviewed not as good decisions with respect to international law, but merely as the expression of parochial and nationalistic views.

The second major point that I would make is that this is not a deterrent to foreign expropriations.

If indeed the — all of the powers given to the Executive Branch under the Trading with the Enemy Act, if we can freeze all the funds, if we can cut off all aid and assistance, if we can prevent the importation of any of the property, if we can exercise all of our not inconsiderable persuasive powers around the world in this respect it — and this does not deter the foreign government from a violation of international law with respect to the seizure of property, why on earth is a decision by the Court in the Southern District of New York going to have that momentous effect upon a foreign government?

In fact that the Courts in the United States been widely separated incidental, not very frequent occasions, would declare it to be in violation of international law, as to act as a deterrent?

I’m simply unpersuaded.

And, I’d like to add to the final point, this Court to think very seriously, what it would be doing because I think it would be opening the doors of this Court to a flood of litigation, and let me suggest at least one way in which this might be true.

At the present moment under the law, this Court and others courts of the United States will examine foreign judgments which are unexecuted on certain limited grounds.

And, normally, we get a summary judgment using that foreign judgment to support it, but no court in the United States has ever looked behind an executed foreign judgment, a foreign judgment into which a — which a foreign court said A owes B so much money besides that, and then A pays B that money.

Now, do you — that would be, it seems to me, perfectly appropriately and has been suggested by the commentators to be the act of a foreign government, a foreign act of state if, now, on that judgment, a man is to come into court, Mr. B is to co — or Mr. A is going to come into court and say “B really owes me $25 because I didn’t get an international due process in the trial of that case, wherever it may have been.”

Because it seems to me that when you say acts of a foreign government, made effective within their own territory, completely carried out within their own territory are, nonetheless, subject to reexamination if they’re in violation of international law, that you buy the whole package when you do it.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

You buy everything which has been called or claimed to be a denial of justice under international law when you take that and you open up the doors of American courts to review all of the judgments of foreign courts, executed and unexecuted, where a plaintiff can make an allegation that his rights, under international law, had in some way been deprived.

Byron R. White:

Mr. Attorney General, do you understand the Court below to have held that there would be an exception to the Act of state doctrine and that they would have adjudicated this matter or inquired to the act of the Government of Cuba if the Department of State had issued a — an explicit request to apply the doctrine?

Nicholas Deb. Katzenbach:

No, I do not believe that they would have in that situation because the Court put some emphasis upon the fact that, here, there already been a protest by the State Department.

It has been proposed by some of the commentators and, I think, suggested in the respondent’s briefs that the Act of state doctrine should only be used where the Department of State says that it should be invoked.

That would cause a lot of quite obvious problems.

For one thing, you’d have to review a tremendous number of cases in the Department of State and, in second place, the very fact of saying use the Act of state doctrine would unavoidably carry an implication that you did think that international law had been violated by the — by the foreign government —

Byron R. White:

But I gather —

Nicholas Deb. Katzenbach:

Because —

Byron R. White:

I gather, there are only two alternatives.

You’re either going to state something about a case or you’re not, after you’ve had some notice about it.

And, you would suggest that if you — that if you request the Court to apply the doctrine, that the Court should apply the doctrine and you also suggest that you’re silent if the doctrine applies also.

So that — and it’s only when you’re not silent and, say, disregard the doctrine that the Court should then make an inquiry into the validity of the — of the title.

Nicholas Deb. Katzenbach:

Well Mr. — Mr. Justice White, let me express my views a little differently than that.

I think it would perhaps clarify them.

I urge that this Court adopt — affirm what has always been the rule in this situation and, that is, that, as a positive rule of decisions, conflict of laws and rules proscribed for reasons of foreign problems, the Court will not inquire into the acts of a foreign government which are taken within its own territory, and that is not the matter which the Court will inquire into.

I would say that, if that were the rule, there would be no reason at all for the Department of State to constantly call the attention of the Court to that rule since, I think, it would be done by counsel.

Byron R. White:

But there would be occasions on which — on which the Department might not object and might want to say that it is in fact.

Nicholas Deb. Katzenbach:

That’s possible, Mr. Justice White —

Byron R. White:

But it hasn’t, I gather.

Nicholas Deb. Katzenbach:

I haven’t taken — I have taken no position with respect to whether or not that is desirable.

If the —

Byron R. White:

But what if it does happen that the Department —

Nicholas Deb. Katzenbach:

I would think, Mr. Justice White, that case could be decided when it happen.

Byron R. White:

Well, it has —

Nicholas Deb. Katzenbach:

It’s not this case.

Byron R. White:

It hasn’t been decided here, but it’s been decided below, I suppose.

Nicholas Deb. Katzenbach:

It hasn’t really been decided below, Your Honor, because the first Bernstein case, Judge Hand gave a very broad hint that the situation might, indeed, be different if the Department of State waive this.

And, the second Bernstein case, such a letter did appear and there was a judgment, as I recollect, in the District Court and the appeal was mooted and the case was settled.

So, it has never been spoken on by any appellate court, except as a suggestion by Judge Hand that, perhaps, the situation would be different if such an informal letter came from the Department of State.

Hugo L. Black:

May I ask you and verify my assertion is wholly as your position?

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Hugo L. Black:

Do I understand that you adopt and say that a positive rule of law, the one that has been and should be followed, is the Statement made by Chief Justice Fuller in the Underhill and Hernandez case?

Nicholas Deb. Katzenbach:

That’s correct, Mr. Justice Black.

That statement is obviously a very broad —

Hugo L. Black:

Yes.

Nicholas Deb. Katzenbach:

— statement.

Hugo L. Black:

Now —

Nicholas Deb. Katzenbach:

I think, as it has been interpreted and as it has been understood, I would — that would be the — our position and not a literal application perhaps of that language.

Hugo L. Black:

I understand that.

That’s the reason that, if you do have any distinction in your definition of what you say this positive rule of law is, I’d like to know it because I understand it to be this, what you’re saying.

When a case comes in the Court by a government recognized by this country has it not acted some kind of a law and taking some kind of administrative action that reposes title to property and somebody, even itself, that the Courts shall not look behind that act and shall act in that case on the premise that the property belong to that person in whom the title has been reposed by the government?

Nicholas Deb. Katzenbach:

That’s correct, Justice —

Hugo L. Black:

Now, that being the case here, as I understand, your argument is if we should decide this case, whether we decide it one question or another, or dismiss it, whatever is done has to be done on the basis that the Government of Cuba owned this property.

Nicholas Deb. Katzenbach:

Has to be done in the sense that that doctrine would require that you not — it doesn’t — if that’s the result, Mr. Justice Black —

Hugo L. Black:

What I’m —

Nicholas Deb. Katzenbach:

You don’t —

Hugo L. Black:

— talking about —

Nicholas Deb. Katzenbach:

— say whether they do or not.

You say a court will not inquire beyond that title.

Hugo L. Black:

Well, if it can’t — using non-legal word, what does that mean?

Nicholas Deb. Katzenbach:

I think what it means —

Hugo L. Black:

As to this property?

Nicholas Deb. Katzenbach:

I think what it means is that, in the Courts of this country — in the Courts of this country, that title will not be questioned.

Byron R. White:

Well, then you’re —

Nicholas Deb. Katzenbach:

But it can be questioned in any international tribunal.

It can be questioned in any diplomatic negotiations.

It can be questioned by any other branch of the Government.

It simply cannot be questioned by courts within United States.

Hugo L. Black:

Why does that not mean that, here, we have to decide this case on the basis that Cuba owned this property?

Nicholas Deb. Katzenbach:

You have to — that’s — I think it would be correct —

Hugo L. Black:

And —

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

To say that you have to decide it on that basis, whether true or not.

Hugo L. Black:

And, as I understand it, you also say that we have no — under the rule it has been and is here, that you think it should remain.

It’s not up to us to say “we’re not going to decide it — the case because we don’t like the way the title came into this people’s hands.”

Nicholas Deb. Katzenbach:

Well —

Hugo L. Black:

Is that what it means?

Nicholas Deb. Katzenbach:

I think, Your Honor, the effect of saying “we’re not going to decide” would in almost all cases have the effect of treating that title that was vested through this act of state as being a good title.

Hugo L. Black:

Well, concretely, this is being as —

Nicholas Deb. Katzenbach:

Because, normally, this is the person that has possession.

Now, concretely —

William J. Brennan, Jr.:

It has to mean that here if judgment and conversion is to go for the plaintiff, doesn’t it?

Nicholas Deb. Katzenbach:

That’s correct.

That’s correct but this case is unique and, to make this doctrine — let me repeat it.

To make this doctrine turn on the question of whether or not you could get possession of some negotiable papers for inspection or for whatever the purpose was, and that’s what it’s turning on, doesn’t seem to me a proper basis for decision.

Byron R. White:

Attorney General, I supposed that, as you state this doctrine, it would also apply if the Government of the United States were a party to the litigation and wanted to question the title, and you would apply the doctrine rigidly enough to prohibit the Executive himself, whose conduct to foreign relations supposedly is to be protected from also questioning the title of this in the Courts.

Nicholas Deb. Katzenbach:

That’s — that’s — that’s correct Your Honor, unless there is a Bernstein exception, which I have not urged upon this Court and which I have said could remain for the case where —

Byron R. White:

So that if —

Nicholas Deb. Katzenbach:

It first —

Byron R. White:

Except for sovereign immunity, Cuban — therefore, Cuba should be able to get an adjudication in our courts and all the frozen assets are really Cuban assets if they arose out of confiscatory — well, regardless of that.

Nicholas Deb. Katzenbach:

Well, I don’t think that —

Byron R. White:

Sovereign immunity —

Nicholas Deb. Katzenbach:

I don’t know.

Byron R. White:

(Voice Overlap)

Nicholas Deb. Katzenbach:

I don’t think that follows, Mr. Justice White.

I don’t think that follows at all because I’m not suggesting that these Cuban decrees can be or should be enforced within these countries to assets that the Cuban Government doesn’t have and didn’t take possession of in Cuba.

William J. Brennan, Jr.:

In Cuba, itself.

Nicholas Deb. Katzenbach:

In Cuba, itself, that’s right and that’s all I’m suggesting.

So, I don’t know how.

I don’t know what.

I can’t envisage the situation that you pose of the Cuban Government going around and collecting lots of things because I would suppose that these were things which were not located within Cuba at the time of this decree —

Byron R. White:

Well, I don’t suppose —

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

And, if located within Cuba —

Byron R. White:

These very proceeds are the perfect example and, I suppose, if these proceeds are judged to be the property of Cuba, they will fall within the freeze order or whatever it is —

Nicholas Deb. Katzenbach:

That’s correct.

Byron R. White:

(Voice Overlap) standing and I would think then that United States would be in no position whatsoever to question the government — the Cuban Government’s title.

Nicholas Deb. Katzenbach:

In courts of the United States.

Byron R. White:

Well, then —

Nicholas Deb. Katzenbach:

But, they’re certainly free to question —

Byron R. White:

So that your —

Nicholas Deb. Katzenbach:

That title anywhere else.

Byron R. White:

Your only protection would be of sovereign immunity, I suppose, in a suit by the — by Cuba to recover $175,000.

Nicholas Deb. Katzenbach:

From us, from the United — but it’s not in our possession when it’s frozen.

Byron R. White:

Yes, but it would be.

Nicholas Deb. Katzenbach:

Well, it’s just in the possession where it is and nobody can deal with it or transfer it or use it or anything else.

They can remain right in the bank.

Byron R. White:

Well, no one should be able though to question the Cuban Government’s title to that money.

Nicholas Deb. Katzenbach:

I think nobody can question the Cuban Government’s —

Byron R. White:

In the Courts.

Nicholas Deb. Katzenbach:

— title to that money in the Courts.

Now, it may be that, at subsequent time, on an arrangement such as all of the arrangement cited, I think, on pages 30 to 32 of our brief, then the — Justice White, they agree to give up all of these various assets in this country in return for something, perhaps providing more money.

At which point, you allocate it among all of the people who have suffered as a result of this Cuban decree.

One of the advantages of the decree —

William J. Brennan, Jr.:

But suppose, after the petitioner prevails here, if it does, on your ground, then the petitioner brings an action against whatever bank or escrow agreement —

Byron R. White:

To get the money.

William J. Brennan, Jr.:

To get the money, what happens then?

It brings us a brand new action for the Courts.

Nicholas Deb. Katzenbach:

I suppose, for the same reasons that it would not have prevailed here, he would not prevail there.

William J. Brennan, Jr.:

No, I’m assuming now that —

Nicholas Deb. Katzenbach:

So he could —

William J. Brennan, Jr.:

The petitioner here prevails and gets a judgment in conversion.

As I understand it, the $175,000 is now in the hands of an escrowee.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Nicholas Deb. Katzenbach:

The —

William J. Brennan, Jr.:

And, suppose the escrowee would then turn it over to the plaintiff, although, under the terms of the escrow —

Nicholas Deb. Katzenbach:

He can’t.

William J. Brennan, Jr.:

— agreement, it belongs to the plaintiff.

Nicholas Deb. Katzenbach:

But, he can’t because that’s frozen anyhow.

It can’t be transferred.

William J. Brennan, Jr.:

Well, that’s why —

Nicholas Deb. Katzenbach:

It can’t be — nothing can happen to it under that license without permission from the treasury — I mean — under the regulation.

Byron R. White:

yes, but that’s —

Nicholas Deb. Katzenbach:

Literally, nothing.

Byron R. White:

That doesn’t quite follow.

Nicholas Deb. Katzenbach:

It’s a very broad order.

Byron R. White:

That doesn’t quite follow, but nobody can question the title of the Cuban Government as far as your argument.

Hugo L. Black:

As I understand it —

Byron R. White:

On any basis.

Nicholas Deb. Katzenbach:

It’s not a question, Mr. —

Hugo L. Black:

On any basis.

Nicholas Deb. Katzenbach:

— Justice White.

It’s questioning the title of the Cuban Government.

In this instance, what would be there would not be the title of the Cuban Government, it would be the ability of the — of the Cuban Government or of anybody else to do anything with respect to these transferred funds.

We wouldn’t have to question their title in order to say, under the treasury regulations, pursuant to the Trading with the Enemy Act, this simply can’t be dealt with.

And, in fact, the easy answer to your question —

Byron R. White:

This is the way to get it — (Voice Overlap)

Nicholas Deb. Katzenbach:

(Voice Overlap) as you can’t even have a judgment.

William J. Brennan, Jr.:

Can’t even get a judgment?

Nicholas Deb. Katzenbach:

Can’t even get a judgment —

Hugo L. Black:

Well, that’s the answer I was —

Nicholas Deb. Katzenbach:

— without permission.

Hugo L. Black:

That’s because of the Trading with the Enemy Act, isn’t it?

Nicholas Deb. Katzenbach:

That’s right, Mr. Justice.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Hugo L. Black:

Congress has acted.

Nicholas Deb. Katzenbach:

That’s correct.

Hugo L. Black:

And even though it was Cuban property or whoever property it is —

Nicholas Deb. Katzenbach:

That’s right.

Hugo L. Black:

The Government that’s opposing it has to wait and that has nothing to do with these other doctrine.

Nicholas Deb. Katzenbach:

That’s correct.

Hugo L. Black:

And —

Nicholas Deb. Katzenbach:

It has this much to do if they —

Byron R. White:

And until and unless —

Nicholas Deb. Katzenbach:

— Justice Black, it shows that this can be dealt with effectively.

Byron R. White:

Until and unless —

Nicholas Deb. Katzenbach:

By the Executive —

Byron R. White:

It is the property of the Cuban Government, it is a frozen by the United States.

Nicholas Deb. Katzenbach:

In so far as the Courts of this country are concerned, that will be the property of Cuba.

Byron R. White:

Or with your — on your freeze order.

Nicholas Deb. Katzenbach:

We would deal with it as such, yes.

Arthur J. Goldberg:

(Inaudible) — it certainly doesn’t reverse the act, state (Inaudible)

Nicholas Deb. Katzenbach:

That is correct, Mr. Justice Goldberg, although it’s difficult for a man to conceive a broader Act than the Trading with the Enemy Act.

Arthur J. Goldberg:

(Inaudible)

Earl Warren:

Mr. Williams.

C. Dickerman Williams:

May it please the Court.

I appear for the respondent, Farr, Whitlock & Company in support of the judgment of the Court of Appeals.

Briefly and summarily, the situation before the Court is this.

Cuba is an unfriendly power.

Cuba has a power into its courts neither the United States nor its nationals can obtain justice.

Cuba adopted a confiscatory decree directed exclusively at nationals of the United States, a decree which was denounced at the time by our Government as a violation of international law.

Cuba now comes into our courts and asks to use the processes of these courts to enforce that decree against nationals of the United States.

I submit that Cuba must fail.

Mr. Seymour appears here on behalf of C.A.V.

He and I have divided our presentation to this Court in order to avoid repetition.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

After a brief discussion of the facts, I shall maintain these propositions.

First, that Cuba has no standing to sue in our courts because Cuba is a foreign sovereign not entitled to comity.

Secondly, that whether or not Cuba is entitled to comity, Cuba is not entitled to prosecute this action in our courts because this is an action to enforce a public law and no sovereign may enforce its public laws in the Courts of another sovereign.

Mr. Seymour will show that the nationalization decree of August 6, 1960 was in breach of international law, that the Act of state doctrine does not apply and the decision here, favorable to Cuba, will violate public policy of the forum.

Now, let me make it clear that our position here is that of a stakeholder.

At the time we got the proceeds of the bill of lading, we were confronted with a claim by C.A.V. to be the owner of the sugar here involved.

That claim was a substantial claim.

It has been upheld by both lower courts.

Under the circumstances, we did what any other stock — stakeholder would do.

We held on to the money awaiting an orderly determination of the rights of the parties.

We have not concealed that money.

We have not removed it from the jurisdiction.

We have not used it for our own purposes, as it has been brought out in questions directly to Mr. Rabinowitz and Mr. Katzenbach.

That money is now in a special account at Lehman Brothers awaiting the decision of this Court.

Now —

Arthur J. Goldberg:

If something happened as merely a physical duty and communication exists, you have to have your own (Inaudible)

Would the escrow agreement cover that agreement?

C. Dickerman Williams:

Well, simply, if the action were dismissed on the merit, certainly, it would be returned to C.A.V.

But, my answer would be that if the action is dismissed, the money will be — is payable to C.A.V.

I — I think that’s quite clear under the terms of the escrow agreement.

I haven’t got it before me, but I participated in its drafting and that’s my recollection of it.

Now —

William J. Brennan, Jr.:

It would not be subject, in the hands of C.A.V., to the freeze order wouldn’t it — would it?

C. Dickerman Williams:

No, I don’t think so.

That’s simply not my interpretation of the freeze order.

William J. Brennan, Jr.:

Even though it’s a Cuban corporation?

Is the C.A.V. a Cuban Corporation?

C. Dickerman Williams:

C.A.V. is a Cuban corporation.

I don’t — I don’t I’m not fully acquainted with the — with the application of the freeze order, but it’s my understanding that C.A.V., since the freeze order, has been freely able to draw on its funds.

Mr. Seymour, as counsel to C.A.V., can answer that question better than I.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

Now, let me describe the circumstances under which the contracts here at issue were made.

These contracts were not entered into freely, as the Government brief suggests.

We were compelled to make these contracts.

In substance, these contracts were confiscated by the Cuban Government by means of a nationalization decree.

That —

Arthur J. Goldberg:

(Inaudible)

You were —

C. Dickerman Williams:

What?

Arthur J. Goldberg:

Concluded by the Cuban Government (Inaudible)

C. Dickerman Williams:

We — we were not in Cuba.

We were not subject to arbitrary force, but we were committed on many long-term contracts involving millions of dollars.

To fulfill those contracts, we had to have those sugar — have those quantities of sugar.

Unless, we can get sugar out of Cuba, we were ruined.

Farr, Whitlock has been referred to here as a broker.

That is a common expression in the sugar trade but it is not strictly accurate from a legal point of view.

From the legal point of view, a sugar broker functions more as a dealer.

In other words, we had bought this sugar as principal.

We had sold the same sugar.

We had sold the sugar here involved to a customer in Morocco.

We were bound not only to that customer in Morocco, but to many other con — customers.

Arthur J. Goldberg:

Suppose you would have it been seizure in (Inaudible) every time you weren’t there.

How long (Inaudible) if you were confronted with (Inaudible) this ship, your production would be this crop.

C. Dickerman Williams:

Well —

Arthur J. Goldberg:

And you could have just left it and plead the (Inaudible) contract with a purchaser to go ahead, but you have to win the suit.

C. Dickerman Williams:

Well, Farr, Whitlock would have been subjected to suit on many contracts involving millions of dollars, as I say, if we could not have gotten the sugar out of Cuba.

Arthur J. Goldberg:

If you get the sugar out of Cuba and commended suit —

C. Dickerman Williams:

At that —

Arthur J. Goldberg:

(Inaudible)

C. Dickerman Williams:

I — I doubt that, Your Honor, the reason being that — I think that, perhaps, C.A.V. would’ve had a valid defense because it was the sugar of C.A.V. that was seized.

At that time, it wasn’t our sugar.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

Actually, it was being loaded to supply us under our contracts with C.A.V.

The — the Steamer Hornfels which carried the sugar to Morocco was, at that time, being loaded off the Port of Santa Maria and the loading was in process and was completed shortly after the decree was issued.

We needed that sugar to fulfill our contracts, as I say, unless we could fulfill these forward commitments, we were certainly confronted with, as it seemed to us, claims which we could not readily meet.

Arthur J. Goldberg:

With record in view, my question is if your view confirms it would probably be encompassed or your view confirms that the property (Inaudible) commission is confirmed.

C. Dickerman Williams:

Our commission — the commissions involved, although we function as a — as a dealer, our commissions are relatively small.

We would — this case involves far more.

I think the commission involved here was only $1,500 and the commissions in these other cases were relatively negligible.

If we could have gotten out of these contracts on the basis of commissions, we would have been very happy to do so.

It was to fulfill the commitments that we had that we were forced by the nationalization decree.

What — what happened was that the Cuban authorities would not let the Steamer Hornfels sail, unless we entered into contacts with Banco Para el Comercio Exterior.

Arthur J. Goldberg:

That goes out in past decision —

C. Dickerman Williams:

That’s right.

Arthur J. Goldberg:

But you have to — you have to give the sugar to (Inaudible)

C. Dickerman Williams:

Yes.

Arthur J. Goldberg:

(Inaudible)

C. Dickerman Williams:

Your Honor, our commissions were negligible, compared to the amounts involved here.We would have been happy to get out of these situations on the basis of the commissions.

Arthur J. Goldberg:

Well, your commissions (Inaudible) concerns the name of that facility?

C. Dickerman Williams:

Yes, because it wasn’t our sugar.

We were bound to get, from some source, sugar.

In other words, we had sold sugar, Cuban sugar, to a series of customers throughout the world.

And, the nationalization decree, the refusal of the Cuban authorities to permit the Steam — Hornfels to sail and similar refusals involving other ships and the holding up of sugar deliveries which under contracts which we had made with the Cuban — with the United States-owned Cuban planters, confronted us with the inability to get the sugar to fulfill our contracts.

It is not fair to say that we desire to get commissions.

The commissions were nominal.

As I say, we were liable on these forward contracts of principles and we felt rightly or wrongly that we would be sued on these contracts, that we would have a weak defense because it was not our sugar that had been confiscated.

Arthur J. Goldberg:

This is not in the record.

C. Dickerman Williams:

Yes.

Arthur J. Goldberg:

(Inaudible)

C. Dickerman Williams:

You mean on the United States imposed embargo?

Arthur J. Goldberg:

Yes.

C. Dickerman Williams:

Well, the —

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Arthur J. Goldberg:

(Inaudible)

C. Dickerman Williams:

— that — that was applicable only to the importation of sugar into the United States.

This particular sugar was going to Morocco.

The embargo in the United States would have not applied to this cargo.

Arthur J. Goldberg:

(Inaudible) embargo would complicate it?

C. Dickerman Williams:

Well, we’re not anymore because, since the events of 1960, the United States has prohibited all commercial intercourse with Cuba.

Arthur J. Goldberg:

That’s what I thought.

C. Dickerman Williams:

That’s true.

I mean, as of the present time, we could not do this, but the embargo was not put on until a couple of years later.

Arthur J. Goldberg:

Did you have it sectioned in that brief about this?

C. Dickerman Williams:

We did not.

No, Your Honor.

Now, these contracts which we made with Banco Exterior, as a result of the national decree and the procedure of the Cuban authorities under it in refusing to permit the Hornfels to sail, were to be performed in New York.

In other words, the purchase price was payable in New York, in New York funds.

The contracts are in the record.

Section 7 deals with payment, and I think there’s no question of that.

Now, I submit that what has happened here is that, in substance, Cuba confiscated the contracts.

That the contracts where New York shows as an action enforceable in c — in New York — in New York only and that the substance of what has happened here is that Cuba is now attempting an extra territorial application of the confiscation decree.

In other words, the net result of all that happened was that the Banco Exterior, as the foreign trade agency of Cuba, acquired — New York shows as an action which Cuba is now coming into the New York courts or into the federal courts sitting in New York in order to enforce.

Now, I come to the first legal proposition which I shall advocate that Cuba has no standing to sue in the Courts of the United States in any kind of case because Cuba is not entitled to comity.

A foreign sovereign may sue in the Courts of the United States only by virtue of comity.

This Court has so held on a number of occasions, and I do not understand that my learned friend questions that proposition.

Now, comity has two elements – first, friendliness and, second, reciprocity.

Neither of those elements exists here.

In my brief, I cite a number of barely hostile statements and actions taken by Cuba and the United States against each other.

I put most of them in the appendix because it did not occur to me that anyone could seriously challenge the fact that Cuba and the United States are unfriendly today.

However, on receiving Mr. Rabinowitz’s reply brief last Thursday, I find that he does maintain that, for purposes of comity, Cuba and the United States are friendly powers, and he says that the only cases in which the privilege to sue — privilege of suit was denied because of unfriendliness are cases in which the countries involved were either at war or did not recognize each other.

And, he points out that, in this situation, Cuba and the United States are not at war and that Cuba and the United States do recognize each other.

I suggest, however, that there is a third type of situation which is inconsistent with friendliness, which affirmatively establishes unfriendliness, and that type of situation is when there has been a severance of diplomatic relations and a prohibition of all commercial intercourse.

And, here, I have to go outside my main brief because I am dealing with arguments that I only learned of on Thursday when I received Mr. Rabinowitz’s reply brief.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

Now, I want to refer — and Mr. Rabinowitz makes a persuasive argument, or a plausible argument perhaps, that the Courts cannot sit on statements issued by governments about each other that, in the last four or five months, we have issued critical statements about France, South Vietnam, Haiti, and so on.

And, he argues that there must be some tangible event, and the only tangible events that he says exists are nonrecognition and war.

And, in answer to that, I suggest that there is a third type of tangible situation, namely, as I say, the severance of diplomatic relations and the prohibition of commercial intercourse.

Now, let me recite events — concrete events which cannot possibly dis — be dismissed as mere statements, as when, for instance, Assistant Secretary of State Martin says “our policy towards Cuba is not coexistence.

We want to get rid of Castro and Communist influence in Cuba.”

These are definite specific actions as concrete as war or as nonrecognition.

Now, on October 19 — and all these events had occurred, some events referred to in my brief occurred before the nationalization decree, others have occurred since.

On October 19, 1960, the United States prohibited all exports to Cuba with a few exceptions.

January 3, 1961, the United States terminated diplomatic relations and it terminated those relations under these circumstances.

At 1:20 a.m., on the morning of January 3, 1961, that is to say, in the middle of the night, the Cuba Ministry of Foreign Affairs presented a note at the United States Embassy in Havana, instructing the Embassy to reduce its personnel to 11 people within 48 hours.

The President of the United States regarded that as insulting and terminated diplomatic relations on the same day.

On September 7, 1961, the United States prohibited assistance to any country which assists Cuba, unless the President shall otherwise determine.

On February 3, 1962, the United States proclaimed a complete embargo on all trade with Cuba.

On March 4, 1962, the United States prohibited the import of merchandise from anywhere, made or arrived in whole or in part of products of Cuban origin.

On July 8, 1963, they were issued the freezing orders to which reference had been made here.

The United States blocked all assets of Cuba and residents of Cuba, prohibited all persons subject to the United States jurisdiction from the unlicensed transfer of dollars to Cuba, and prohibited all unlicensed transactions of any kind with Cuba or residents of Cuba.

Now, this, I submit, Your Honors, are measures of war.

They are tangible events.

They do not require a weighing by a court of whether or not a particular statement is so unfriendly that it amounts to unfriendliness in the sense of comity.

These statements — these actions cannot possibly be reconciled with friendliness.

Now, if we — if the Court now — I will say — I think I can s — concede it that Mr. Rabinowitz is correct that the only case is not finding friendliness in the sense of comity are cases in which there was either war or nonrecognition.

However, there is no case in which friendliness in the sense of comity was found to exist where diplomatic — relations had been terminated or where commercial intercourse had been prohibited.

In other words, the question is an open one and I submit that in the sense in which comity is used in the various cases which are referred to in my brief, and as I believe these statements are all admitted by the other side, I submit that these are effective ways of establishing that unfriendliness.

What significance, if any, do you credit to the fact that the State Department, itself, has not questioned the right of this plaintiff pursuant to the Court?

C. Dickerman Williams:

Well, I don’t understand.

The Department of State is a — has appeared in the case.

It’s only the Department of Justice.

I —

Well, I assume that the Attorney General was speaking for the Executive Branch of the Government.

Perhaps I’m wrong.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

Well, I — I don’t know.

I have — I don’t — frankly, I don’t understand the brief of the Department of Justice and I don’t feel that I’m in the position to interpret it.

However, from the point of view of the legal decisions on the case, the legal decisions on comity, the legal decisions — the Court decisions are entirely clear that friendliness must exist and I respectfully submit that these statements, actions, prohibitions, severance of diplomatic relations establish that the friendliness does not exist.

Well, I would suppose that the Court should be concluded on that issue by the attitude of the State Department or by the attitude of the Executive.

We — the Courts are not going to pause in the negative inquiries to the degree of platonic relationship between the —

C. Dickerman Williams:

Well, I — I agree that the Courts cannot enter into whether or not relations are platonic or otherwise, but when there are specific events susceptible to only one interpretation, I submit that the Courts could act accordingly.

I don’t — I do not see that the Courts are dependent upon the Executive in applying the law.

The — I do not understand the theory of Bernstein which is — has been referred to here, namely, that the Courts must have the permission of the Executive Branch before deciding any question which is presented to them.

I — I submit here that there are specific events which fall within the rule which has been laid down by the Courts and there’s no suggestion in any of those decisions or any of those opinions that it is necessary to get any particular finding from the Executive Branch.

The Executive Branch has performed its function when it severed diplomatic relations, when it prohibited commercial intercourse.

Now, the consequences of those actions by the Executive Branch is not what the Executive Branch says about them, but what interpretation this Court puts on them.

Certainly, although my learned friends had my brief for some time now, they have not — they do not affirmatively say here that comity exists.

They have not said that Cuba is a friendly power.

They have not repudiated, for the purposes of this case, any of the — in any statements by the Executive Branch or any of the actions by the Executive Branch showing that there is no friendliness between the United States and Cuba.

Hugo L. Black:

Your argument would result, would it not, to a record saying that the Judicial Department is the department of Government that has the power to determine whether a foreign nation shall be allowed to file a suit in court?

C. Dickerman Williams:

Absolutely, Your Honor, and I don’t think that — I think the case has entirely established that proposition.

Hugo L. Black:

Suppose —

C. Dickerman Williams:

It ended —

Hugo L. Black:

Suppose the department — the executive department, Legislative Department, State Department, and all of the others thought (Inaudible) would be contrary for them to policies.

Would — could the Court still decide it?

C. Dickerman Williams:

I don’t think they could, Your Honor.

I think are — the independent — the juris — judiciary is entirely independent branch of our government.

Of course that has not happened here but, even if they did, I would submit that, after such events, as I have described, have taken place, the Executive Branch could not come in and say “oh, we didn’t mean it” or there is —

Hugo L. Black:

It might — it might say that it meant to go only this far, but it did not want to add what it might say was additional international insults, one would say, and the other say they couldn’t come into the Court.

C. Dickerman Williams:

Well, Your Honor, I certainly think it’s up to the Executive Branch to decide whether or not to terminate diplomatic relations and whether or not to prohibit commercial intercourse.

Obviously, the judiciary cannot attempt to do that kind of thing, but when it is a question of what application shall be made in a lawsuit within the jurisdiction of the Courts, that, I think is a judicial question and not an executive question.

Hugo L. Black:

Well, you may be right.

It’s just a rather eloquent question.

C. Dickerman Williams:

Well I would submit that there is another feature which is persuasive of the rule that I advocate and, that is, the decision of this Court in Ex parte Muir in which the Court said, as I read the opinion, that’s 254 United States 522, that a foreign government could litigate in our courts only through official channels, only through an accredited representative, and that an appearance by private counsel was not enough.

Now, because — well, for what reason, I don’t know.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

Certainly, in this case, there has been no appearance by an accredited representative.

I’d — I certainly don’t challenge Mr. Rabinowitz’s authority to appear, but he appears as private counsel, not as a — not as an Ambassador of Cuba and, in fact, I understand that, in some related litigation, he insists very clearly, a litigation in which this Court only the last week granted certiorari, that he is only a private counsel.

Now —

Arthur J. Goldberg:

Are you saying that this government holds corporations if any government would only hear the ambassador of that government in their courts?

If the French take the statute over the French Government, must there be a reciprocity (Inaudible)

They’re suing.

We’d sue, and our courts (Inaudible).

C. Dickerman Williams:

As I read Ex parte Muir, there must be an accredited representative.

Of course, in this particular instance, there isn’t any doubt that the sugar belongs to Cuba.

It was Cuba which confiscated the sugar for its own benefit and, my recollection — if my recollection is correct, the complaint says that Banco Nacional is suing here as financial agent of the Government of Cuba.

I don’t think there’s any suggestion that this is something that happened in the regular activity of a public corporation.

Arthur J. Goldberg:

Well, you’re distinguishing your own — by your last statement —

C. Dickerman Williams:

Well, I’m only saying that I think it’s unnecessary to this particular case but, as I read Ex parte Muir and the cases cited in Ex parte Muir, for instance, one of those cases is The Anne.

In The Anne, the Court refused to entertain a claim made on behalf of Spain by the Spanish Consul because the Court regarded the claim as not being commercial but is diplomatic and it regarded an appearance by someone with diplomatic status as necessary to the presentation of the claim of Spain.

And, I suggest also that this requirement of the appearance by an accredited representative, as distinguished from private counsel, has a real application to litigation by Cuba in our courts, and that that is shown by the case of Rich against Naviera Vacuba, a case which is cited with great enthusiasm by my learned friend.

In that case, it appears that Cuba was entitled — was held entitled to repudiate a formal court stipulation entered into under the most solemn circumstances, by which, Cuba waived sovereign immunity with respect to the execution of the judgment which was entered into in that case.

And, yet, because that stipulation was entered into by private counsel and the Court opinion indicates that private counsel was acting within the scope of his authority, that he was duly authorized to do so, there was no question of the propriety of the behavior of private counsel.

But, because he was only a private counsel and not an accredited representative, therefore, Cuba was permitted to repudiate that stipulation.

I — I might say that Rich against Naviera Vacuba is the case involving the buoyed need which has been referred to by Mr. Rabinowitz in the course of his argument.

Now, another essential element of comity is reciprocity, and this essential element exists wholly apart from friendliness.

The leading case laying down the law on reciprocity as the essential element of comity is Hilton against Guyot, a case in which the question before the Court was the effect to be given to a judgment of the Courts of France.

At the time of that decision, there was on question of unfriendliness between the United States and France.

The decision came down in 1895, when the two countries were entirely friendly.

The — this Court, however, went into a most detailed examination of the requirements of re — of comity, insofar as reciprocity was concerned, and established that our courts would function — would accord the nationals of foreign sovereigns only the rights that those foreign sovereigns accorded our nationals.

And, in that case, because the judgment of the Courts of France — in that case, because it appeared that the law of France was that the Courts of France could revise — could examine and revise court judgments of other countries, therefore, our courts could reexamine judgments of the Courts of France.

Now, there has been a very recent decision by the Court of Appeals of the First Circuit, P&E Shipping Corporation against Banco Exterior, another Cuban litigation, in which the Court of Appeals, of its own motion, raised this question and remanded the case to the district judge to make findings as to whether or not nationals of the United States could get justice in Cuba.

And, pursuant to the mandate of the Court, in fact, the Court instructed the district judge to inquire from the Department of State, which he did, and the Department of State wrote a letter to the district Judge, which is Appendix B to my main brief.

And, in that letter from the Department of State to the district judge, the Department said that there had been a breakdown in the Cuban judiciary as an independent branch of the Cuban Government.

But the Cuban judiciary was now subservient to the present political policies of the Cuban Executive and that the Department had concluded that even if legal remedies theoretically existed under Cuban law, recourse by a United States national to those remedies would be futile.

Now, I learned for the first time when I received Mr. Rabinowitz’s reply brief on Thursday that, in this proceeding, Mr. Rabinowitz, on behalf of Cuba, had submitted affidavits that claimed to show that United States nationals could have recourse and could receive fair treatment in the Cuban courts.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

I have examined those affidavits and, all I can say — they are too detailed to review here.

All I can say is, after examining those affidavits, that I profoundly disagree with Mr. Rabinowitz’s characterization of that, and I would suggest that if a court is not satisfied with the report of the Department of State as to judicial conditions in Cuba, that it do what the, and it regards this issue as determinative of the question of comity, that it remand this case to the District Court for findings in that respect.

Now, I come to my secondly proposition and that is this, that whether or not Cuba is entitled to comity, Cuba may not prosecute this action because known foreign sovereign may enforce its public laws in the course of the United States.

In fact, the rule is universal.

No — the Courts of no sovereign will entertain suits by other sovereigns for enforcement of their public laws.

Now, there has been a great deal of reference here to the so-called Act the state doctrine.

There is an equally well-settled Act of state doctrine which I invoke and, that is, that although the Courts will not undue the acts of state in a foreign power, neither will they enforce those acts of state.

Now, as I understand Mr. Katzenbach’s distinction of this rule, which he seems to admit thoroughly, in fact, if my recollection is correct, he used the expression “hundreds of times” the Courts have laid down this rule, his dis — his — he distinguishes it.

He distinguishes this case on the ground that, as in a general way or they — more often, it’s more frequent that the question of the act of state comes up the other way around.

That is to say, it comes up as a defensive matter between private parties, so to speak, rather than as a suit by the foreign sovereign to enforce that act of state.

Well, I respectfully suggest that that argument is not applicable.

Of course the Court here is dealing with this case, not some theoretical case or not some usual case.

It’s dealing with what happens here and my learned friends have sug — cited no case whatsoever in which a foreign sovereign was held entitled to enforce an act of state, directly or indirectly, in the Courts of another sovereign.

I won’t — I won’t go through the — through the cases.

Apparently, they — it is conceded that they are applicable and, the only distinction is made, that it is more likely that the question arise because a man is defending on the ground.

It’s putting up the defendant who is pleading the act of state rather than the foreign sovereign involved.

Of course, as I say here, we are dealing with a case where the foreign sovereign is asserting the act of state.

And this Court, in Guaranty Trust Company against the United States, was most emphatic in drawing a distinction between those cases in which the act of a foreign sovereign might come up in the course of a litigation, let us say, between private parties and a case in which that foreign sovereign, itself, was seeking to enforce its public laws.

Potter Stewart:

I hadn’t — I understood Mr. Katzenbach to be arguing that what we’re dealing with here is something that’s been executed — that’s been executed, not something executory.

We’re dealing with a — with a feta compli, if you will, that the Court of the — here, the United States was not being asked to effectuate the seizure of this sugar but simply that the sugar was seized and that the Court didn’t have power to go beyond the seizure.

C. Dickerman Williams:

Well —

Potter Stewart:

Not even force — not to enforce the foreign law seeking to appropriate this but simply to recognize that it had been appropriated, as a matter of fact.

C. Dickerman Williams:

Well, I — I submit that the — that the posture of the case shows that the foreign sovereign is trying to enforce its law.

The — the New York cases are quite clear that, when there is a contract between the parties and property is turned over to one of those parties pursuant to the contract, his failure to make use of that property according to the terms of the contract presents a case of breach of contract as distinguished from conversion.

Now, here, we were forced or we were subjected to pressure which lead us to make these contracts.

Those contracts would be to perform in New York.

Cuba is now coming into the New York courts, as I see it, to enforce those contracts.

Potter Stewart:

Well, what was seized was the sugar itself, was it not?

C. Dickerman Williams:

Well, actually, it really wasn’t seized.

It was onboard the Hornfels.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

It was in Cuban territorial waters or is said to be — said to have been in Cuban territorial waters.

I don’t — I don’t think there’s any suggestion that any officer of the Cuban Government ever went onboard.

I mean, the possession is a — such a purely theoretical legal possession.

It was never reduced to actual possession, as I read the record.

What did happen, and what I tried to emphasize, is that, by virtue of these — of this decree and Cuba’s procedure under it, we’ve made this contract to be performed in New York.

And, in substance, Cuba is trying to enforce that contract now.

It’s trying to get the money.

Of course, Cuba is interested in sugar only partly for purposes of consumption.

Primarily, it is interested in sugar from the point of view of foreign exchange.

What Cuba wanted was foreign exchange.

It made a contract by which it was to get that foreign exchange in New York.

Now, it has come into the New York courts or the federal court sitting in New York in order to enforce that contract and get that foreign exchange.

I — I trust I’ve answer you question, Your Honor.

Now —

Byron R. White:

Mr. Williams, what’s your view of this case if there has been an unequivocal assertion in the District Court by the State Department of the so-called Act of state doctrine?

I take it, you would say the Court should disregard the doctrine question entirely.

C. Dickerman Williams:

I don’t think — I don’t want to get into act of state, because — myself, because Mr. Seymour is going to deal with that subject and I don’t want to answer it in anyway which might embarrass him or be inconsistent.

We — as I say, we’ve divided the argument so that he will —

Byron R. White:

Well, yes, but you have touched upon the matter that the foreign sovereign can’t use the Courts here and, thereby, enforce something that may be illegal under international law and —

C. Dickerman Williams:

I — I have said that it isn’t —

Byron R. White:

I take that you would assert that said — same thing even though the State Department requested the Courts not to adjudicate the legality, or not, of the — of the foreign procedure.

C. Dickerman Williams:

Yes, I would.

Mr. Seymour is going to deal with that subject more fully, but that’s certainly my own position.

Furthermore, Your Honor, I’d like to make clear this, that is, that foreign sovereigns are not entitled to enforce any public law, even if it’s a desirable, commendable public law.

Many of the cases involve taxes.

Tax revenue laws are, of course, public laws and the Courts have been forbidden to enforce the — the Courts have refused to entertain the claims of foreign sovereigns when directly or indirectly based upon a revenue law.

There wasn’t any question of the violation of the — the revenue law was a perfectly proper exercise of domestic jurisdiction.

It’s not suggested that the revenue law, in some of these cases which are referred to in my brief, such as Peter Buchanan Ltd. against McVey, was an improper law.

the Court conceded that it was.

It simply held that no act of state, whether or not it was valid under international law, could be enforced to a subject to enforcement in the Courts of the other sovereign.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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Byron R. White:

You don’t suggest, this one time, that you can’t be very social to enforce the contract that they made with an American —

C. Dickerman Williams:

No, but I — excuse me for interrupting, if I did.

I — I say that when a foreign sovereign seeks to enforce a contract and the enforcement of that contract is subject to the public policy of the forum, and it’s quite clear, both from cases which I cite in my brief and which Mr. Seymour cites in his brief, that a contract of this type, rested on confiscation, violation of the public policy —

Byron R. White:

Well, it’s just at this point that the United States might come in and say, “Please don’t adjudicate that matter — that matter of our foreign policy.”

You just accept it.

You would say the Court should not accept it until the search is complete.

C. Dickerman Williams:

No, I — I we have an independent judiciary here, as I understand it.

I don’t — I don’t understand that the judiciary —

Byron R. White:

But you would just reject —

C. Dickerman Williams:

Of the United —

Byron R. White:

You would just reject the previous cases in this Court, I suppose.

C. Dickerman Williams:

No, I don’t think those cases are involved.

Those — those previous case —

Byron R. White:

Because they didn’t involved a foreign sovereign?

C. Dickerman Williams:

Because they didn’t involve sover — foreign sovereign seeking to enforce acts of state.

Those were cases — and this is an interesting distinction made by a number of the cases, in particular, an opinion of Judge Learned Hand in Moore against Mitchell and a very persuasive and, indeed, eloquent opinion by Justice Kingsmill Moore in Peter Buchanan Ltd. against McVey.

The reason given for refusing to entertain efforts by foreign sovereigns to enforce their public laws in these two opinions is this, that always there is open to the Court of the forum the consideration of whether or not the contract or law, whatever it may be, is consistent with the public policy of the forum.

Now, in private litigation, a court can determine that a particular act of state of a foreign sovereign is not consistent with a public policy or a particular law of the foreign sovereign is not consistent with its public policy.

But, in litigation brought up by a foreign sovereign, it is embarrassing to international relations for a court to have to say “we don’t like this law.”

And, Justice Moore points out that many of the laws of today may be shocking to the conscience of the forum.

The party says, such laws meaning public laws, have been used for racial and religious discriminations, for the furtherance of social policies and ideals dangerous to the security of adjacent countries, and for the direct furtherance of economic warfare.

Now, it says the forum must always reserve the right to declare a particular law or Act contrary to its public policy and it embarrasses — it is embarrassing to make that finding in a case in which the foreign government, itself, sues.

Now, in other — in other words —

William J. Brennan, Jr.:

May I ask this, Mr. Williams?

C. Dickerman Williams:

Surely.

William J. Brennan, Jr.:

If we did not have the plaintiff we do have or the petitioner here, but some bona fide purchaser of these papers, the bill of lading and the draft and so forth, I gather, you’d be making neither of the arguments you’ve been giving.

C. Dickerman Williams:

Well, of course I’m arguing this particular case, Your Honor.

William J. Brennan, Jr.:

That’s what I say, but if — my point is your argument is based on the identity of the plaintiff in this particular case.

C. Dickerman Williams:

That is true.

But, I — I would like, if I may, to continue with Justice White’s question.

Audio Transcription for Oral Argument – October 23, 1963 in Banco Nacional de Cuba v. Sabbatino

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C. Dickerman Williams:

My learned friends, in their briefs, seem to take the position that the Courts, in order to keep foreign relations in a friendly way, must always enforce their acts of state.

What was held in Moore against Mitchell, and Peter Buchanan Ltd., and similar cases, is that because policy is involved, therefore, the Court should never entertain actions by foreign sovereigns involving public laws.

Your Honor, I’ve completed my argument.

I received, as I think I have said, Mr. Rabinowitz’s learned reply brief on Thursday.

As a result of which, I revised to some extent my position, my views, on the subject of friendliness and comity.

I have a rebuttal brief here already printed.

It’s only five pages long and I’ve given copies of it to Mr. Rabinowitz, Mr. Katzenbach, and Mr. Seymour.

And, I would respectfully request leave to file it in the Court.

Earl Warren:

You may file it.

Mr. Seymour.

Whitney North Seymour:

Mr. Chief Justice and may it please the Court.

With only a couple of minutes, I will, first, say a word about the motion for substitution.

There is, pending before the Court, a motion by C.A.V., my client, to be substituted for Sabbatino, the discharged state court receiver.

Sabbatino was appointed in 1960 as the State court receiver of the assets of C.A.V.

He received the funds which is in question here.

At the end of 1962, he was discharged as state court receiver and that fund was placed in escrow abiding the event of this suit.

Therefore, Sabbatino has no further interest in the litigation.

Mr. Williams filed as an indemnity, which is reflected in the record, and C.A.V. is the only party really in a position to assert an economic interest in the fund and, under the general power of the Court to grant substitutions in such cases, we would hope that the Court would do it.

The only argument on the other side is that these were an application on this Rule 24 (c), which it isn’t, and if it were made in a different court, which it’s not, there would be problems but it isn’t that kind of an application.

It isn’t made in a court to which the rules apply and, therefore, we would Your Honors would grant the relief.

Now, on the merits, I would like to discuss the proposition, first, that the Act of state doctrine ought not to be applied where there is a clear violation of international law, and I recognize that there are dicta, which I shall have to work my way around, which would be interposed to such a proposition.

But, those dicta originated at a period when international law did not bulk as large in the views of the American Government or the people of the world or the lawyers or judges of the world as they do now, and I would hope that international law now occupied a place where weighing the complications, some of which, I think are rather exaggerated, suggested by my distinguished friend, the Deputy Attorney General, against the importance of building support for international law, case by case, by courts like the United States courts that are followed all over the world, is far more important.

And, I shall address myself, first, to that tomorrow, and then, at the end, I shall like to say a word about the public policy of New York which is involved here because this is a diversity case and, although the District Court didn’t seem to take the point, there is a strong point on the public policy of New York which I’d like to present to the Court.

But, my main emphasis will be on the international law point, that I think the significance of that point is emphasized by the fact that Your Honors have before you briefs presented with great spirit and earnestness on behalf of the Association of the Bar, and the American Bar Association, and the International Law Association, and the Dean of the American Bar, Mr. John Lord O’Brian, and his partner.

And, these all emphasize the importance of the international law aspect of this and, weighing that against what is admitted to be a judge-made rule which the Court can administer as it thinks wisest in the long-range interest of the law of the United States and of the judicial administration of the United States, these indicate that international law should give — be given great weight in the balance.

Earl Warren:

Before you start your main argument, we’ll adjourn now.