The Continued Viability of the Act of State Doctrine in Foreign Branch Bank Expropriation Cases

American University International Law Review Volume 3 | Issue 1 Article 3 1988 The Continued Viability of the Act of State Doctrine in Foreign Branch Bank Expropriation Cases Paul N. Filzer Follow this and additional works at: http://digitalcommons.wcl.american.edu/auilr Part of the International Law Commons Recommended Citation Filzer, Paul N. "The Continued Viability of the Act of State Doctrine in Foreign Branch Bank Expropriation Cases." American University International Law Review 3, no. 1 (1988): 99-143. This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University International Law Review by an authorized administrator of Digital Commons @ American University Washington College of Law. For more information, please contact . THE CONTINUED VIABILITY OF THE ACT OF STATE DOCTRINE IN FOREIGN BRANCH BANK EXPROPRIATION CASES Paul N. Filzer* INTRODUCTION The social and political revolutions of the nineteenth and twentieth centuries frequently involved the expropriation1 of property of United States citizens. 2 These expropriations ultimately produced extensive litigation in United States courts.3 The act of state doctrine' often precludes United States courts from adjudicating these cases solely on the * J.D. Candidate, 1988, Washington College of Law, The American University. 1. See BLACK'S LAw DICTIONARY 470, 522 (5th ed. 1979) (defining expropriation as the taking of private property by the state); see also infra notes 205-17 (discussing the legal issues concerning expropriations). 2. See, e.g., Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401-06 (1964) (concerning the seizure of sugar following the Cuban revolution of 1959); Oetjen v. Central Leather Co., 246 U.S. 297, 299-301 (1918) (involving the seizure of animal hides during the Mexican revolution of 1913); Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854, 857 (2d Cir. 1981) (regarding the expropriation of the assets and liabilities of a United States bank following the fall of South Vietnam in 1975), cert. denied, 459 U.S. 976 (1982); Day-Gormley Leather Co. v. National City Bank, 8 F. Supp. 503, 504 (S.D.N.Y. 1934) (concerning the seizure of bank deposits following the Russian revolution of 1917). 3. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401-06 (1964) (concerning claims to a shipload of sugar expropriated after the Cuban revolution in 1959); Oetjen v. Central Leather Co., 246 U.S. 297, 300-01 (1918) (involving rights to animal hides seized during the Mexican revolution of 1913); American Banana Co. v. United Fruit Co., 213 U.S. 347, 352 (1909) (regarding title to lands expropriated after the succession of Panama from the United States of Colombia in 1903); Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854, 857 (2d Cir. 1981) (concerning claims for repayment of bank deposits expropriated immediately after the fall of Saigon to communist forces in 1975), cert. denied, 459 U.S. 976 (1982); Bernstein v. N.V. Nederlandische-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375, 375-76 (2d Cir. 1954) (involving a dispute over title to ships seized during the reign of National Socialism in Germany between 1933 and 1945). 4. Underhill v. Hernandez, 168 U.S. 250, 252 (1897). Chief Justice Fuller, speaking for a unanimous court, said: 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. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves. Id.; see also infra notes 61-62 and accompanying text (discussing the origins and development of the act of state doctrine). AM. U.J. INT'L L. & POL'Y [VOL. 3:99 merits of the litigants' legal claims.5 Although the cases in which United States courts formulated the traditional act of state doctrine involved the expropriation of tangible property," more recent act of state cases7 involve the expropriation of intangible property, namely, deposits 8 held in foreign branches9 of United States banks. 10 In foreign branch bank expropriation cases, a United States bank, presented with depositor demands for repayment of expropriated deposits, invokes the act of state doctrine to prevent a court from adjudicat5. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 398 (1964) (holding that the act of state doctrine proscribes United States courts from maintaining an action challenging the validity of a Cuban expropriation decree); Callejo v. Bancomer, S.A., 764 F.2d 1101, 1116 (5th Cir. 1985) (holding that the act of state doctrine precludes civil actions challenging the validity of Mexican exchange control regulations); see infra notes 61-94 and accompanying text (discussing the application of the act of state doctrine in United States courts). 6. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 398 (1964) (involving the expropriation of sugar loaded aboard a container ship anchored in Havana harbor); Ricaud v. American Metal Co., Ltd., 246 U.S. 304, 305 (1918) (involving the Mexican provisional government's seizure of lead bullion). 7. E.g., Garcia v. Chase Manhattan Bank, N.A., 735 F.2d 645 (2d Cir. 1984); Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854 (2d Cir. 1981), cert. denied, 459 U.S. 976 (1982); Trinh v. Citibank, N.A., 623 F. Supp. 1526 (E.D. Mich. 1985); Perez v. Chase Manhattan Bank, N.A., 61 N.Y.2d 460, 463 N.E.2d 5, 474 N.Y.S.2d 689, cert. denied, 469 U.S. 966 (1984). 8. See 12 C.F.R. § 204.2(a)(1)(i) (1987) (defining the concept of deposit). The Code of Federal Regulations defines a deposit as [T]he unpaid balance of money or its equivalent received or held by a depository institution in the usual course of business and for which it has given, or is obligated to give credit . . . to an account . . . which is evidenced by an instrument on which the depository institution is primarily liable. Id. A deposit of money is a loan to the bank in which it is deposited. Miller, Debt Situs and the Act of State Doctrine: A Proposalfor a More Flexible Standard, 49 ALB. L. REV. 647, 647 n.1 (1985). A deposit establishes a debtor-creditor relationship between a bank and its depositors. 1 W. SCHLICHTING, T. RICE & J. COOPER, BANKING LAW § 9.02(1) (1987) [hereinafter 1 W. SCHLICHTING]. A bank becomes indebted to its depositor for the amount of the deposit accepted. Id. The statement of the bank portrays this indebtedness as a liability. E. SYMoN s & J. WHITE, BANKING LAW 188 (1985). This Comment uses the terms "liability" and "obligations" interchangeably to refer to the debt a bank owes a depositor. 9. See 12 C.F.R. § 211.2(h) (1987) (defining a foreign branch as "an office of an organization other t (...truncated)