Warren E. Burger: The case is submitted. We’ll hear arguments next in number 70-295, First National City Bank against Banco Nacional De Cuba. Mr. Harfield, you may proceed whenever you’re ready?
Henry Harfield: Mr. Chief Justice, and may it please the Court. This case brings up for review a decision by divided panel of the Court of Appeals for the Second Circuit. The Solicitor General said of that decision that it seriously impairs the power of the executive over the control of foreign affairs. The case may be stated very briefly. The material facts are not in dispute. In September 1960, the petitioner First National City Bank owned and operated 11 branches in Cuba. On the night of Friday, September 16, 1960, the Cuban Government seized those branches. The instrumentalities at use were its armed militia and the Banco Nacional De Cuba, the respondent here. On the following day, Saturday, there was a radio announcement that the confiscation of American Banks had occurred by reason of executive power resolution number two, issued under Cuban Law 851. On the opening of business on Monday, September 19, the respondent in this case was in full possession of the petitioner’s foreign branches and it was the respondent that served formal notice of confiscation on a resident Vice President of the petitioner who had been summoned to the petitioner’s former main branch for that purpose. On the following day, the petitioner cabled to the respondent referring to the seizure of the branches and stating we have exercise our rights of lien and offset and closed your accounts as of September 17. Now, among those accounts was a loan account which had originally been made in 1958, and this was a loan made by this petitioner to the government of Cuba here in New York City. The borrower was a Cuban government instrumentality called Bandes (ph) and collateral for the loan was pledge by another Cuban government instrumentality called Fondo (ph), and a third Cuban government instrumentality, the respondent in this case acted as the fiscal agent for the government in connection with this. On September 21 and 22, we are still operating in a five-day compass. The petitioner sold the collateral that was in New York and after crediting the respondent the amount of principal and interest on the loan, there remain on the petitioner’s books in New York a balance of just about $2 million. Two months later in November of 1960, the respondent instituted this lawsuit to in the United States District Court for the Southern District of New York to recover that balance. And as a defense counterclaim and setoff, the petitioner showed that the value of the confiscated branches exceeded the amount claimed by the respondent. I pause here to say that there is no dispute as to this value. The parties have stipulated that if the petitioner is lawfully entitled to the offset claim by it, the amount is such that the respondent shall take nothing in this action.
Harry A. Blackmun: Mr. Harfield, just as a matter of practicality, suppose that the respondent prevails here, what happens to the $2 million?
Henry Harfield: I take it that the $2 million would -- you mean in the sense, physically will it be remitted to Cuba?
Harry A. Blackmun: Well, does Banco Nacional get the $2 million?
Henry Harfield: Well, I take it that the any recovery by Banco Nacional would be for the benefit of the Cuban Government because Banco Nacional is at least at this point completely integrated into the Cuban monolithic system. Now, there is a blocking system that is --
Harry A. Blackmun: Just as this is to which my question is directed?
Henry Harfield: Yes. My understanding is that the -- if judgment were awarded to Banco Nacional to Cuba that the amount of that judgment would be subjected to freezing under executive order. That is to say it would he credited to a blocked account, hopefully with the same bank. Until the Government reaches a policy which is has not yet done as to what if anything is going to happen to the blocked Cuban property. But I believe it is correct that the amount of that judgment less an allowance of attorney’s fee for the successful plaintiff which I am given to understand this allowed would be frozen, abiding the event ultimately of a disposition of Cuban affairs.
Harry A. Blackmun: But my next question would be, why is the respondent fighting so hard for it? And perhaps, that’s a question I will ask Mr. Rabinowitz rather to you.
Henry Harfield: I compare $2 million good reasons why the respondent is fighting hard, I mean why the petitioner is fighting hard for it. Well, let me just continue if I may because the time sequence that I have been perhaps boring you with is, I believe important in this case. The case was submitted on cross motions for summary judgment in July of 1961, but was not decided until late June of 1967. Meanwhile and this was not indolence on the part of the District Judge. Meanwhile, the Sabbatino case had been decided by this Court thereafter the Congress had an enacted the Hickenlooper Amendment to the Foreign Assistance Act, the Sabbatino litigation had gone back to the Southern District of New York, sub nomine Banco Nacional against Farr and was there decided. And so consistently with its decision in that Farr case, the District Court in this case held that Cuba’s confiscation of American property violated International Law and that the petitioner was entitled to its offset. The Court of Appeals affirmed the decision in the Farr case explicitly holding that the Cuban confiscation where a violation of international law. But reverse the decision in this case on the ground that the Act of State Doctrine precluded it from inquiring into the validity or even the consequences of those same acts. Now at that stage, that the State Department transmitted to this Court its views that important considerations of foreign policy should preclude the application of the Act of State Doctrine to cases like the instrument. This Court granted certiorari, vacated the judgment, remanded the case to the Court of Appeals for reconsideration in the light of the views of the department of state. The court below, nevertheless, Judge Hayes dissenting determine to adhere with original decision, this Court granted certiorari on October 12, 1971. Now, I begin with the proposition that the Act of State Doctrine was not conceived as a device to create an unfair advantage to foreign governments that comes in to our Courts as suitors. In this case, to cut off the petitioner’s legitimate defenses would be manifestly unfair. Moreover, the Executive Branch and I am quoting “has made clear its view that application of the Act of State Doctrine would be inimical to significant policy interest of the United States.”
Warren E. Burger: Mr. Harfield, historically, where did the Act of State Doctrine originate, in the courts or in --
Henry Harfield: It originated in the courts Mr. Chief Justice.
Warren E. Burger: On suggestion from what source?
Henry Harfield: I think it was not precisely on the suggestion from the Executive but it is so interrelated.
Warren E. Burger: Well it’s a doctrine of committee, is it not?
Henry Harfield: It’s a doctrine of committee.
Warren E. Burger: It’s not between the branches?
Henry Harfield: It is a doctrine of committee as between branches as well as between --
Warren E. Burger: Governments.
Henry Harfield: Nations, as between governments.
Warren E. Burger: But internally within our own framework, it is a doctrine of committee of the court’s giving deference to the overwriting responsibilities of the Executive in relation to foreign policies, is that not correct?
Henry Harfield: I believe that to be exactly correct. And the -- I shall indeed at the risk of repeating what you said varies exactly elaborate that fact is as I go on because I think that the extraordinarily position, we find ourselves in this case is that a doctrine which was conceived. Chief Justice says, it is between committee between branches as well as between nations, and which clearly was conceived for the benefit of the coordinate branches of our own government is now attempted to be used as a weapon to create divisiveness among the coordinate branches. This is perhaps my judgment, the single most important issue in the case at this particular stage and it goes beyond simply the recognition of the fact that the doctrine conceived in coordinate committee is now be used as a lethal weapon. It offends us well. Its application in this case would offend as well, the position of the legislative branch. Because clearly, one of the interest of the United States to which the Government -- our Government has referred in its amicus brief here is respect for international law. And our Government has repeatedly emphasized that principle of international law which says that the right of a sovereign to expropriate property is coupled with the obligation to pay for it, to make prompt adequate and effective compensation. In this case, Cuba has to fall on that obligation and it’s indebted to this petitioner just as surely as if it had to fallen on a promissory note or a bond. And National City Bank against Republic of China, this Court sustained a defense counterclaim and setoff based on a defaulted obligation of a foreign government that entered our court as a suitor. Now, the respondent has argued that the Republic of China is not an act of state case because the words act of state where not used, and besides and I am quite that it is briefs the respondent has pointed out that a mere default by foreign sovereign may not be sufficient to be regard to be an act of state. But if the Republic of China is not an act of state case, then this is not an act of state case because what we are talking about here is the repudiation of an obligation by a foreign government that they are after comes in here and attempts to seek our law, Mr. Justice Frank Burger said clear of any defenses. Don’t listen to those fellows that say they have a defense. The Act of State Doctrine was not intended for that purpose, and I pointed out that in the area of committee between nations, the Act of State Doctrine was devised to avoid a friction there which would either because our courts have no power or because they chose not to exercise that the jurisdiction, that might call in question the validity and the effect of acts fully executed by foreign government within its own territory. But, to refuse to apply the Act of State Doctrine in this case does not result in any reversal of any physical act that took place in Cuba. It doesn’t call in question I think the security of titles and international trade simply because about an offset. And the refusal to apply the doctrine would be consistent with the policy and interest of the United States as declared both by the Legislative and the Executive Branches. The importance of that policy I suggest is underscored by the so called Hickenlooper Amendment. These adopt as the law of the United States the international law principle of compensation for the taking of property. Moreover, they specified that when there is a violation of international law including but not limited to violation of the principle of compensation, then the Act of State Doctrine shall not be applicable. In this case, the respondent asserts this Act of State Doctrine as a defense, as a defense against the petitioner’s counterclaim. Now, if the respondent has violated the principles of international law, it is not entitled to assert that defense in this Court. The Court of Appeals, court below of the Second Circuit reached the same conclusion, the conclusion that Cuban Law 851 was a violation of international law in the Farr case and the briefs that conclusion in a decision which this Court left under stir. In this case, even in this case, the court below of the majority did not question the fact that under Cuban Law 851, Cuba was acting in violation of international law. So in view of the fact that Cuba’s confiscations had been held by our courts to be unlawful. The respondent should not be entitled to defend on that ground, the Act of State Doctrine.
William H. Rehnquist: Mr. Harfield, under Rule 13, my understanding is that counterclaims are limited that those against the opposing party and here as I understand, Banco Nacional was the plaintiff and you have asserted a counterclaim, but basically as I understand goes against the government of Cuba rather than Banco Nacional, and the District Court ruled in your favor on summary judgment and the Court of Appeals did not pass on the District Court ruling. Do you contend here that that was a proper summary adjudication in the District Court that they weren’t the same?
Henry Harfield: Yes, I do Your Honor.
William H. Rehnquist: On what basis?
Henry Harfield: Well, on two bases. To begin with that on a record before and then I would contended there was more than adequate evidence, the Banco Nacional had been totally absorb into the Cuban government so that it was indistinguishable. If it ever had that as a respondent argues and autonomous institution, it loss that autonomy before the events here because as the respondent have said, as Cuba was in the process of changing into a socialist state, it took all the necessarily steps to destroy autonomy. But most importantly in this case, the rule of Banco Nacional has at all times been that of an agent for the Cuban government, and that is why I elaborate it as much as I did at the outset of my remarks that the collateral, the proceeds of which are now in suit was pledge by Fondo which was part of the Cuban government. The Banco Nacional in handling the proceeds of that loan and in handling the collateral was acting for the Cuban government, and you have a perfect opposition because there is no doubt that if there is a recovery for the respondent here that the sole beneficiary will be the Cuban government. Unless as Mr. Justice Blackmun says our Government intervenes at some point, but we mustn’t anticipate that I claim is perfect opposition of parties.
Speaker: Let me go back then to my previous question, what is and I ask this for instruction. What is the usual routine when assets are frozen under circumstances of this kind? Are claims are eventually filed and then the frozen assets perhaps allocated among those claims that are allowed?
Henry Harfield: Well, I think that there are really is no such thing as a usual procedure. In this case, the offset taken by this petitioner occurred three years and this suit was started about three years before there was any government action freezing Cuban assets. So I point out in passing that if this petitioner had not exercise its right of offset, then the response to your question Sir would have been that the money had probably gone down the Cuba and then used to pay Chinese technicians, because the barking did not occur until about three years afterward. Now at that stage, Cuban assets in this country where frozen but they where not vested it, they where not seized, and thereafter -- after the freezing, a system of claim submission was setup under the Foreign Claim Settlement Commission. This was about four years after these transactions. This petitioner filed its claim with the Foreign Claim Settlement Commission asserting the taking of its properties in Cuba and of assigning a value to it. It then deducted from the amount it was filing as a claim, the amount of its offset in this case which credited Cuba with this. And the Foreign Claim Settlement Commission has allowed the petitioner’s claim after deducting from the claim, the amount of this offset is on effect, they have regarded the Foreign Claim Settlement Commission has regarded this petitioner as already having recouped to the extent of its county claim.
Byron R. White: But before this, the funds would be available to pay people whose claim had been filed and has been allowed that they do not have to be invested?
Henry Harfield: That's correct.
Byron R. White: In addition to a --
Henry Harfield: In addition to the --
Byron R. White: To a fee.
Henry Harfield: And I mentioned it Mr. Justice White that at the time that the freeze was being put on, there was considerable discussion in Congress as to whether the freeze should be moved to that second step and for vesting and the decision was not to do that, at least to that time because to take that property that a private Cuban as well as Cuban government people would have been regarded by certain members of Congress as the same kind of sin which Castro have been guilty. So, there are the two steps that you imagine and our government has not yet taken that second step.
Harry A. Blackmun: Of course, looking in the background are the other claimants who profess to be victims of Cuban expropriation aren’t they?
Henry Harfield: Yes.
Harry A. Blackmun: And I suppose it’s their position that if you prevail here, City Bank enjoying a windfall?
Henry Harfield: Well, I think that may be a position. I would certainly say that it is not a position that should be. It should be regarded very well because as Mr. Justice White is pointed out, our government has not yet decided that it is going to treat Cuba as if it were a bankrupt to state. But even if it did, all of the learning under the Bankruptcy Act entitles a person who is secured by reason of existing relationships of having collateral, of having liens is in that person is entitled to a preference by law and surely, a secured creditor always has a preference over an unsecured creditor. But this is a preference which has been certainly condone if not applauded, and this if you equate this to bankruptcy, then we are exactly in the position of having exercised a setoff which under Section 68 of the Bankruptcy Law is solid.
Warren E. Burger: Do you think it makes any difference that this security that you hold was not part of any security transaction that relates to the expropriation in Cuba?
Henry Harfield: I would think not. I think that my understanding of the law with respect to offsets some counterclaims is that you simply net the accounts between the parties and not certainly in New York where this offset was exercised. Not for over a hundred years has there been a necessity of parceling this out on a precise basis. What you do is to -- you do not have to counterclaim, you do not have to offset in respect of the identical transaction.
Speaker: But the Court of Appeals vote in the case of an underground which is due.
Henry Harfield: That is correct.
Speaker: Temporary issues?
Henry Harfield: The Court of Appeals --
Speaker: (Inaudible)
Henry Harfield: Yes, or to reinstate the judgment of the District Court. I really have very little to add at this time. I’d like to reserve it. I want to make just one last point on the Act of State Doctrine which is the point that we came here on. The point of the majority below dealt with, and I suggest that any doubt as to the applicability of the doctrine to this case at this time has been removed by the supervening expression of the executive. And that is an expression of the executive as to the foreign policy interest of the United States. Now, the position of the United States in this case is crystal clear. I think there is no dispute at all as to what that position is. But the respondent would on his brief appear to have this Court believe that the executive is invading the province of the judicial branch and I suggest that precisely the opposite is true. As Judge Hayes said in dissent below, the majority of the court below by applying the Act of State Doctrine after an independent evaluation of the merits of the State Department’s decision is you certain the same executive function which it is the same executive prerogative which it is the function of that doctrine to preserve. The constitutional mandate to the judicial branch is to decide cases and where there is a concern that the judicial branch might transgress on a exclusive province of the executive and the conduct of Foreign Affairs, there is an abstention on the part of the judicial branch and where the executive is silent, then an encroachment is presumed and the judiciary is it tends to abstain. But here, the Executive has formerly declared that the foreign policy interest of the United States will be furthered to the exercise by this Court of its normal function, the resolution of cases before it. And in the light of that declaration, I would suggest that abstention is not neutrality. It is as the Solicitor General has said a serious impairment of the power of the executive to control Foreign Affairs. Now, the doctrine of separation of power can scarcely be regarded as a requirement of internecine confrontation between coordinate branches of the same government for the benefit of an unfriendly government. At this point in this case, there is no doubt that application of the Act of State Doctrine will further the foreign policy interest of Cuba. But I suggest to you that it is inescapably true that it frustrate the foreign policy interest of the United States, and I urge that the doctrine was not applicable to this case, that it should not be applied to this case and that the judgment of the court below should be reverse.
Warren E. Burger: Thank you Mr. Harfield. Mr. Rabinowitz.
Victor Rabinowitz: Mr. Chief Justice, and may it pleased the Court. I would like preliminarily to address myself to two questions that were placed by one by Mr. Justice Blackmun and the other by Mr. Justice Rehnquist. And while they are preliminary and accent peripheral issues, at least one of them may be just positive of the case. Mr. Justice Blackmun, I don’t know why the respondent is fighting so hard in this case. All I know is that I have instructions to fight hard in this and all of the other cases which will involve an increase in the amount of the frozen funds. Now, those funds where frozen by the Executive Branch of the Government, and unless they are unfrozen by the Executive Branch of the Government or perhaps by Congress, they are going to remain frozen and will not go to Cuba and there is no possibility at all of them getting to Cuba short of an action by the Executive Branch or the Legislative Branch, and perhaps that mean shorter from settlement of the general dispute between the United States and Cuba which may it may come at sometime in the future I assume. We all hope that someday, it will come. But until that day comes, I think it maybe reasonably certain that those funds will remain frozen.
Warren E. Burger: Perhaps, it might not unreasonable to ask them if your position is that this is just to go into the pool.
Victor Rabinowitz: Of course.
Warren E. Burger: And in that case then, why is the Cuban banks are concerned about this?
Victor Rabinowitz: We want to -- I could speculate. I am not authorized to speculate and given the general public interest in the fact that we are dealing with it’s a government relations. I prefer not too. I don’t know where I could only guess as to why the Cuban Government is interested in carrying on this and as I say a great deal of all the litigations. I think that something maybe said in response to Justice Blackmun’s request for commission a little while ago, mainly about what happens to these frozen funds and what I can tell you is not what will happen in the future, but what has happened in the past that happened with respect to the Soviet Union, that happened with respect to Yugoslavia, with respect to Romania, with respect to happened dozen other similar situations that frozen funds will collected. They remained and blocked accounts until one day there was a settlement. And those funds would then used to pay for all creditors. In part of course and that is discussed and it is the reason for part of the decision of the Court of Appeals below and I think the first Court of Appeals opinion, and it is the reason and I think a perfectly valid reason for commenting that in this case, the petitioner is seeking a windfall, I would prefer to call it a preference. A preference over all other persons who may have claims and whose only logical founders, the only way in which they might possibly someday get some return is through a large frozen fund. Now, whether my client has that in mind, I do not know because I have not been told and as I say, I prefer not to guess about these things. But at least, in factual terms and looking at it historically, that is what happened in the case of the other matters that I have referred to. The Eastern European countries generally and I suppose that is the theory upon which the funds will frozen in this case. Mr. Justice White is likely responsive not vested as a matter of fact there was a law passed and I think 1963, vesting the funds and it was until the year later so that the present of funds are not vested, they just held in an account and you cannot get money out of the account without a license from the Treasury Department, and I assure you those licenses are not freely granted.
Warren E. Burger: Well, I can understand, your not wanting to speculate about the policies of your client too because that involves the a matter of your client’s foreign policy but --
Victor Rabinowitz: Yes, sir.
Warren E. Burger: Would you care to speculate on why the courts remanded the case to the Court of Appeals for consideration of the State Department’s view.
Victor Rabinowitz: Well, oh while, I will get to that Your Honor. I certainly will get to the State Department’s position here that has nothing to do with the foreign policy of the United States of Cuba. It has to do with foreign policy of the United States in which I feel quite free to speculate because no one would suggest that I am expressing the views of the Government of the United States government. So, I will get to that in just a moment. I would also like preliminary to say in response to Mr. Justice Rehnquist’s question about this counterclaim matter. We do contend as was suggested that Banco Nacional is an autonomous government agency much as I think we have about 50 autonomous government agencies here in the United States. No one, I think would content that if the Export Import Bank where to claim against anyone that he would have the right to counterclaim against the Government of the United States. Even though the funds of the Export Import Bank all come ultimately from the treasury of the United States, even though the Export Import Bank has a board of directors which is controlled exclusively by the United States, event though the United States created it by statute and it is the sole stockholder, nevertheless, it is an autonomous government agency just as Banco Nacional is an autonomous government agency and I think that the record is clear on that, and while I think it is a point which would be dispositive of this case, [Laughing Attempt] I don’t think it’s what we’re here for to discuss. I would urge the Court as I have in point five of my brief to decide the case on that point. It would be a disposition of the manner in favor of my clients it would avoid all of these other difficult international law problems and of course, my client and I would like it and I hope the Court is so disposed. But if it is not, then obviously, there are other points which are of much greater consequence. In the petitioner’s reply brief at page two, he suggests that there are in general too big issues in this case. And if I may reverse the order of those issues and trace them a little less contentiously, I would agree and I would formulate the issues as follows. In the circumstances of this case, does the Act of State Doctrine preclude the Court from considering the petitioner’s claim that the respondent acted in violation of international law? That’s the Sabbatino point really, and it’s discussed in points one to four of the respondent’s brief. And point two, if this is answered in the negative, was the nationalization of petitioner’s property by the Republic of Cuba a violation of international law? And this is treated in points I think six or seven of my brief in the appendix. Now, the Act of State Doctrine has been a part of all law at least since 1897, Underhill against Hernandez and the Supreme Court, this Court in Sabbatino traced the doctrine back to English Presidents running back 300 years. The most recent exposition of course was the Sabbatino Decision in 1964 in which this Court in an eight to one opinion upheld the doctrine and discussed I think most of the reasons for the doctrine in great detail. And I will not repeat the reasons for that decision, the reasons for the Act of State Doctrine because it would involve largely extensive quotations from this Court’s opinion in Sabbatino and I know that the members of the bench are familiar with it and there is no point in my doing it. Except to say that I submit that it is a sound doctrine which is designed to keep this Court out of the consideration of the second question, namely was there a violation of international law here? Not because the second question is hard to decide, this Court gets lots of cases that are hard to decide and not because it’s important. Because this case -- this Court gets lots of cases that are important. But because it necessarily involves political consideration, political questions which are best left to the Executive Branch of the Government, and I think some of the implications of this will appear in the rest of my argument.
Warren E. Burger: Or hasn’t been here that Executive Branch indicated that they would prefer to have judicial branch just to go ahead and decide this lawsuit?
Victor Rabinowitz: It has in this case. In the Sabbatino case, it said exactly the government, the opposite. What the next administration will say, I do not know. If there is one thing which is certain about our form of government and which is not perhaps true in many places in the world today, it’s that administration’s change, and that policy is change, and just as Mr. Deputy Attorney General Katzenbach’s stood at this podium seven years ago and said, do not extend the Bernstein Doctrine. We do not want the Bernstein Doctrine extended is an embarrassment to our government to extend the Bernstein Doctrine. So we find the Solicitor General of today expressing a contrary opinion and what tomorrow’s Solicitor General for legal advice and to the State Department will say I do not know. Now, if it is perfectly reasonable and proper for administrations to differ in policy. We expect that, that is why we have elections and that is why one person rather than another is elected President and appoints his legal adviser and his Solicitor General. It is quite another think to expect this Court to follow in the steps of the administration in that sense. This Court is not equipped to, is not expected to, and was not intended by the Constitution to be an instrument of the foreign policy of the United States anymore than it is an instrument of the domestic policy of the United States. This Court is to decide things on the basis of law, and the law -- unless this Court is prepared to reverse Sabbatino, the law is the Sabbatino case, and on the basis of the Sabbatino case, this Court has set and I can think of no better way of saying it than the way Mr. Justice Harlan did. He said the Act of State Doctrine has constitutional underpinnings. It arises out of the basic relationships between branches of government in a system of separation of powers. It could turn the competency of these similar institutions to make and implement particular kinds of decisions in the area of international relations. The doctrine is formulated and passed decisions expresses the strong sense of the judicial branch that its engagement in the test of passing on the validity of foreign acts of state may hinder rather than further this country’s pursuit of goal both for itself and for the community of nations as a whole in the international sphere. Now, I know that the legal advice to the State Department now disagrees with that and as a matter of fact the next sentence in Mr. Justice Harlan opinion is, many commentators disagree with this view. I know that they disagree with this view. One of the persons who disagrees with this view is Mr. Justice White, but the fact is that the Sabbatino Decision discussed all of these and discuss it in considerable detail and came to a conclusion which I submit is as sound today as it was in 1964.
Speaker: I agree with you.
Victor Rabinowitz: Thank you. [Laughing attempt] I knew you would not, Your Honor. [Laughter] It is not within the competency of this Court with all due respect to it, to get involve in complicated and difficult question involving the application of the international policy of the United States. Now, let me give you an example which is not hypothetical at all. The Cuban expropriations here took place in I think 1960, almost immediately, the State Department issued a statement saying these confiscations are violations of international law. State Departments always do that in this kind of situation and I assume, it is done in pursuit of the foreign policy of the United States. These confiscations are illegal. Now, we are here 10 years, 11 years later, we could have been on the other circumstance than here greatly or sooner. And one of the issues that is presented to this Court is where those confiscations violations of international law? Suppose this Court after consideration of the law should be impelled as I would urge it to hold that it was not a violation of international law at all. This Court would then be placed in a position of having to disagree with the State Department on a question on which the State Department has expressed itself not once, but many times. I submit that this Court should not be placed in that position. This Court should not be placed in the position where it may be called upon to express opinions on questions of international law which are contrary to the opinions expressed by the Executive Branch in pursuit of its foreign policy. Not this Court’s foreign policy, but the Executive Branches foreign policy because that’s its responsibility. And this Court ought not to be placed in a position where it has that responsibility which as I say with all respect to this Court, it is not equipped the count.
Speaker: Mr. Rabinowitz.
Victor Rabinowitz: Yes, sir.
Speaker: It’s my understanding both from the courts below and from one of the briefs here that the Act of State Doctrine is an exception to the general rule of the Paquete Habana that generally courts of the United States do decide questions of international aw unless the Act of State Doctrine exception applies. You’re not suggesting that the Act of State Doctrine is simply swallow up that general rule, are you?
Victor Rabinowitz: Oh! No, sir.
Speaker: You’re limiting it to questions of the validity of the laws of foreign governments?
Victor Rabinowitz: I am limiting to the questions of the validity of the acts of the foreign sovereign gone within its territory. And this I say, it does seem to me that the position that the petitioner here is advocating rights as this very serious danger in connection with the separation of power. Now this case is exactly, I might just to dispose for a moment of this Hickenlooper Amendment point, I don’t know what is really argued seriously. The Hickenlooper Amendment is drawn in very, very narrow language. The language is very hard to understand, and I am not going to try to read it here. It can require very careful study and I have tried to analyze it my brief so that to be of assistance to the Court but it can’t very well be done on our oral argument. The Court of Appeals held and here the Court was unanimous that the Hickenlooper Amendment did not apply to this kind of situation at all, would never intended to apply in this situation that Court of Appeals of the State of New York has also held with the Hickenlooper Amendment is to be given a very narrow reading and did not apply to a situation before it in the French case so that the Hickenlooper Amendment -- I really don’t think has anything do to with this case and I think this Court when it gets to analyze it in detail will come to the same conclusion. What is much more important is not the Hickenlooper Amendment but the letter of Mr. Stevenson.
Speaker: Mr. Rabinowitz, in connection with the Hickenlooper Amendment, if we had a case here that clearly and admittedly tell within the scope of the Hickenlooper Amendment so that if you can imagine one of the point which you would not disagree. Would your argument be that the amendment is unconstitutional?
Victor Rabinowitz: I have argued it so, yes.
Speaker: And that you must in order to sustain position you have already stated I take it --
Victor Rabinowitz: Yes.
Speaker: Because you could not accept Congress’ direction for the courts to as you would put it in they 'll be severely even.
Victor Rabinowitz: Frankly, Your Honor. You have expressed it even better than I did.
Speaker: Yes.
Victor Rabinowitz: I agree. I think the Hickenlooper Amendment is unconstitutional because it is an economic part of Congress to tell this Court what it may or may not.
Speaker: But if it isn’t, then it is rather relevant to this case even if it does not apply, I take it.
Victor Rabinowitz: No, sir. If it doesn’t apply, I don’t think it is relevant.
Speaker: Well, it’s a rather a vast fundamental expression by Congress to the relationship between courts and the Executive of what the judicial job is for example.
Victor Rabinowitz: Well, it is direction to this Court which it constitutional I suppose this Court has to follow that in certain kind cases. Not this kind but other kinds of cases, the Act of State Doctrine shall be suspended.
Speaker: Now, other cases in which even more severely might represent some threat to the foreign policy.
Victor Rabinowitz: Might. I suppose that.
Speaker: Yes, it would look like cop.
Victor Rabinowitz: Now, we have here an expression by a legal adviser to the State Department which seeks to undercut the Act of State Doctrine. And while the legal advice limit to his contentional or has lead it to counterclaims, I really don’t understand why because all of his arguments go to anytime on the claim. And once we eliminate the counterclaim element, there is nothing new about this proposal. The proposal in effect is a suggestion that the Executive Branch of the Government shall have the right to tell the Court either to apply or not to apply the Act of State Doctrine. Now, that is not a new proposal. It was made first when Mr. Stevenson was the Chairman of the International Law Committee of the Bar Association of the City of New York in 1959. It was repeated by Mr. Stevenson when he was writing for the probably American Chamber of International Law in about 1953. It was discussed by the Court in the Sabbatino case. It is as I read it a position that is endorsed by Mr. Justice White or was in his opinion, in his dissenting opinion and it was opposed -- it was opposed most vigorously by Mr. Katzenbach and by the Solicitor General in the last administration, and the court in the Sabbatino case disapproved it, and it disapproved it for reasons that are set forth in the Sabbatino decision and nothing new has happened. Except that whereas the last administration has said this is not a business for the Executive Branch for the court at all and we will take care of our own foreign policy. We don’t need the court to get mixed up in it because who knows how the court’s going to decide. It is really uncontrollable. We don’t know how the court is going to decide any particular question and therefore, we would assume that the court stay out and it referred over and over again to the possibility of embarrassment to the Executive Branch because we do not know how the court will decide the case. Now, this administration differs and while as I say, Mr. Stevenson, of course, is quite consistent he took this position while in private factors, he took this position as editor of the journal and he takes his position now and it is quite proper that he should be consistent and it is quite proper that the administration should change when the administration changes, but that is not the problem of this Court. The problem of this Court is to apply a doctrine which is 80 years old at least in our court and which was most recently affirmed in Sabbatino and no new reasons have been suggested why that doctrine should not be applied at this point. Now, once we get passed if this Court should decide that the Act of State Doctrine is not to be applied --
Speaker: Let me ask you one question Mr. Rabinowitz, do you say that Bernstein is inconsistent with Sabbatino and most of them are disapproved by implication in Sabbatino?
Victor Rabinowitz: I think not. I think that Bernstein was a freak. I think the case was a sport. It arose in the situation which is very difficult to duplicate. The facts were most unusual and it’s one of those cases which because it involved the Hitler Government because it involved the terrible excesses against persons of Jewish faith at the seizure of property under circumstances which we are all familiar with, and because the government was no longer an existence presented a situation which is I say is sui generis. It’s his own situation and this is exactly I mean, this is not my idea, this is exactly, it is not only my idea, this is exactly what the Solicitor General said in the brief he submitted in Sabbatino. He said it is exceedingly narrow situation and I commend the reading of that brief too Your Honor. It is exceedingly narrow case. It ought not be extended at all. It arose at the very unusual facts which are not duplicated here and this Court, the Supreme Court has been the past on it in effect let’s -- let it rest. Let’s not resurrect it. And as I read the Sabbatino opinion, that’s what the Sabbatino court said also. It said Bernstein ought to not to be extended. It happened at long time ago, leave it alone, it gives us no lessons for a different situation. So that while I think the Sabbatino case is not inconsistent with Bernstein, at least it says leave Bernstein alone, don’t extend it any further. If this Court for one reason or another decides that it will go into the question of the legality of the Cuban expropriations that of course is the question that on the Sabbatino, we should not be discussing at all. I have attempted in my brief to discuss the nature of international law and what the practice of nations has been. International law is supposed to be the practice of nations. Not the practice of the United States and Great Britain, but the practice of all nations including the Soviet Union and Indonesia and China and of the whole entity that we in general terms now called Third World or the developing nations or as Mr. Justice Harlan said the capital importing nations. And I have attempted in an appendix to do a job which I hope was as good as I could do in with the facilities I had to show that the practice of nations is by no means clear. And again, this was not my thought because that’s what this Court again said in Sabbatino that there is great doubt about whether an expropriation under these circumstances is a violation of international law because there is great doubt as to what is the practice of nations. Not the morality? Not the Fifth Amendment or the due process legality of this expropriation, but the practice of these expropriations. What is the practice?
Speaker: Mr. Rabinowitz, did you go into the -- give your view of what the legality of an international law discriminatory expropriation?
Victor Rabinowitz: I don’t know that I discussed that but Your Honor, there is no -- I’m glad you raised it. There is no suggestion in this record that this was a discriminatory expropriation. Every Cuban bank was expropriated at the same time as the American, a couple of days later perhaps, as the American bank was. This was part of a transformation of a government from a capital --
Speaker: Would you say the same thing in Sabbatino?
Victor Rabinowitz: But I said the same thing in Sabbatino, but the court -- at least the Court of Appeals disagreed with me. But the Court of Appeals if the opinion will be read carefully, the Court of Appeals and I really think this was wrong [Laughter Attempt] Your Honor, the Court of Appeals in that case. The Court of Appeals found it discriminatory and it said, sure they confiscated not only American property, but Cuban property as well, but there was a difference of two weeks. And those two weeks where the -- three weeks or a month perhaps, but it was a difference of a few weeks in time, and those few weeks where critical because that what the time of the sugar harvest. And that is what made it discriminatory according to the Court of Appeals in Sabbatino.
Speaker: Well anyway --
Victor Rabinowitz: But there is no such thing here.
Speaker: Anyway, you did not address yourself to that issue.
Victor Rabinowitz: No, I do not address myself to that quite right. I should have the next time round. [Laughter] I’ll try to. But I did not and I agree that I should have Your Honor but I don’t believe that this was discriminatory and I don’t believe that any argument can be or has been made that it was discriminatory. Now, as I say, the -- we are not here discussing the morality of the nationalization. The result of any review of the cases of the facts will show enormous diversity and while it is true that there have been settlement reached and compensation paid in many of these cases, never, never has it been the result of a judicial ruling. Never has it been because some courts said this and or that is illegal. It has been the result of the way we settle international disputes in this world by diplomatic negotiation, and not by judicial interpretation. The suggestion and the reason for the State Department’s letter in this case is that they want -- the State Department wants to protect foreign investments abroad and if I may just have one minute. I think the Sabbatino court answered that. If a foreign developing country is prepared to risk breach of diplomatic relations, freezing of assets, embargo on trade, embargo on travel, end of all aid and a host of other sanctions that the Executive Branch can make, it seems to me most unlikely, that it is going to be upset by the fact that a court sometime 10 years hence, is going to say that in addition, the expropriation was illegal. The sanctions have been applied. Cuba will not get the money as I pointed out a moment ago and that forth to take care of that in terms of the policy of the United States. Thank you.
Warren E. Burger: Thank you Mr. Rabinowitz. Mr. Harfield, you have five minutes left.
Henry Harfield: Thank you Mr. Chief Justice. I would like to begin just by without attempting to argue these points to indicate that at page 15 of our reply brief. We pointed out that on October 13, 1960, and that date is important. This was between the time that the Cuban government had confiscated the bank’s property in Cuba and after the bank had asserted its right of offset which I mentioned to you within a matter of days or so that following that -- but before the action was commenced, the Cuban government dissolved Fondo which had been the owner of this collateral if pledge and as we point out as I say at page 15 of the reply brief transferred the rights of Fondo in the collateral to this respondent. Then when that had been done, they started the lawsuit. I don’t want to dwell too much on the question of the autonomy of this respondent. I think and I made this point back in the District Court there is some 11 years ago, there is pretty good president on this which goes back to Genesis and says the voice is Jacob’s voice but the hands of the hands of Esau, and I think that that is applicable in respect to the relationship and the transactional relationship between the Government of Cuba and this respondent.
Warren E. Burger: Well, I didn’t think there was much doubt about that. Mr. Rabinowitz said you did not want to get into discussing his plans foreign policy and I don’t assume banks in Cuba have foreign policy. So I don’t think we need to dwell much on it.
Henry Harfield: Thank you, Your Honor. As to the question of the argument about windfall, I would refer the Court with respect to page 10 of our reply brief where we’ve done the best we can to deal with that argument and I won’t press this further on your time. I want to close simply by knowing what is really not my job to do and that is talk about the fact that there is a great deal of more that is happened since the Sabbatino case then a change of administration, and a great deal more in respect of what our Government has done. This Court will surely be aware that in the Sabbatino case, the Government made no expression whatsoever, and protested against a misconstruction of what had been alleged to be its statement. Here, it has done what it set out to do and is I submit entirely consistent in its position as to its function and its duty with respect to the foreign policy of the United States and with suggestions to a coordinate branch when it becomes appropriate to do so, and I think that the department is been perfectly consistent. Now, let me close on this point. The argument that has been made here comes on two points. One of them is that this Court should apply the Act of State Doctrine whether or not it was otherwise applicable because its coordinate branches of government requested not to do so, and that unless the court does this extraordinary thing, it is going to find itself in the position where it has to make a decision as to international law. Well, this is the function of the court as was recognized by like Mr. Justice Harlan in Sabbatino. It’s one of the many functions, and the suggestion that the Court must shy away from a decision of international law seems to me perfectly absurd. Turning then to the question of what is the international law on this issue, and again, I don’t want to burden the Court, but we have a history that goes back as far as there’s any record of Government policy and of acceptance by the judicial branch, the proposition that when a foreign government takes somebody’s property, particularly if it is property for the American, there is an implied obligation to pay for it. That to recognize that obligation does not involved characterizing the foreign government as being a thief or a villain. This does not really call in question of validity, but to the extent that the validity can be called in question as I suggest, it already had been under a case which Mr. Rabinowitz agrees that he can look for amendment applies to as in the Farr case. There can be no doubt.
Warren E. Burger: Well, I have notice of the sovereign ever -- can the motives of a sovereign ever be called in the question in an expropriation? Is it not only -- is it not just the value of the property that’s involved?
Henry Harfield: Well, I think that would be so Your Honor. Here as I have said, the value is stipulated. The motives may be taken into consideration where there is discrimination as I believe the finding has been so far of the courts in the United States. Thank you.
Warren E. Burger: Thank you Mr. Harfield. Thank you Mr. Rabinowitz. The case is submitted.