Opinion ID: 748853
Heading Depth: 2
Heading Rank: 3

Heading: Order Clearly Erroneous as a Matter of Law-Act of State Doctrine

Text: 20 The classic statement of the act of state doctrine is found in Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456 (1897), where Justice Fuller stated for the Court: 21 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. 22 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416, 84 S.Ct. 923, 934, 11 L.Ed.2d 804 (1964) (quoting Underhill, 168 U.S. at 252, 18 S.Ct. at 84). Although once viewed as an expression of international law, resting on considerations of international comity and expediency, the act of state doctrine is currently viewed as a consequence of domestic separation of powers, reflecting 'the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder' the conduct of foreign affairs. W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp., Int'l, 493 U.S. 400, 404, 110 S.Ct. 701, 704, 107 L.Ed.2d 816 (1990) (quoting Banco Nacional, 376 U.S. at 423, 84 S.Ct. at 937). 23 Under this current view, an action will be barred only if: (1) there is an official act of a foreign sovereign performed within its own territory; and (2) the relief sought or the defense interposed [in the action would require] a court in the United States to declare invalid the [foreign sovereign's] official act. Id. at 405, 110 S.Ct. at 704.
24 In 1986, when Ferdinand E. Marcos left power, the Swiss Federal Council, 7 the highest governing body in the Swiss Executive Branch, issued an Executive Order freezing all assets of the Marcos family that were held in Switzerland. The Federal Council, expecting the Philippine government to seek recovery of funds deposited by Marcos and his family in Switzerland, issued the freeze order to ensure that the funds did not disappear before the Philippine government had an opportunity to act. 25 Shortly thereafter, the Philippine government formally requested, pursuant to the Swiss Federal Act on Mutual Assistance in Criminal Matters (IMAC), 8 that the Government of Switzerland freeze all assets held in Switzerland that belonged to Marcos and his family pending the outcome of a criminal investigation and prosecution in the Philippines. 9 The Philippine government also requested assistance in obtaining evidence about the amount and nature of the Marcos assets held in Switzerland and the circumstances under which such assets were deposited. 26 After ensuring that the Philippine government's request complied with IMAC, the Swiss Federal Office of Police forwarded the request for assistance to the enforcement authorities of the cantons in which the Marcos bank accounts were maintained-Geneva, Fribourg and Zurich-with instructions to take provisional measures immediately. 10 Pursuant to IMAC procedures which require the cantonal authorities to execute the instructions of the Swiss federal government, cantonal orders were immediately issued freezing all assets belonging directly or indirectly to Marcos and/or his family. These cantonal orders, which superseded the previously issued Executive Order, were appealed and affirmed by judgments of the Swiss Federal Supreme Court, the highest court in Switzerland. The cantonal freeze orders remain in effect today. 27 Switzerland's act of issuing first the Executive Order and then the cantonal freeze orders pursuant to IMAC was paradigmatically sovereign in nature; it is not [the type of act] that a private person can exercise. Callejo v. Bancomer, S.A., 764 F.2d 1101, 1116 (5th Cir.1985). The Executive and subsequent cantonal orders were, therefore, clearly an official act of a foreign sovereign performed within its own territory. W.S. Kirkpatrick, 493 U.S. at 405, 110 S.Ct. at 704. 28 2. Relief Sought Would Require a United States Court to Declare Invalid a Foreign Sovereign's Official Act 29 In the Rosales action, the MDL plaintiffs seek relief including: (1) an injunction restraining the Banks from transferring or otherwise conveying any funds or assets held by the Banks on behalf of the Marcos Estate except as ordered by the district court; and (2) a declaration that the Chinn assignment is valid and binding on the Banks. Both of these forms of relief would not only require a United States court to question the validity of the freeze orders, but would also render nugatory Switzerland's attempts to render legal assistance to The Republic of the Philippines by protecting the Estate assets. See Callejo, 764 F.2d at 1116. The relief sought therefore violates the act of state doctrine, and the district court's refusal to dismiss the action was clearly erroneous as a matter of law. 30 The injunction sought by the plaintiffs would compel the Banks to hold any assets of the Marcos Estate subject to the district court's further orders. It is clear that the district court plans on taking control of any Estate assets held by the Banks, even though those assets are currently frozen pursuant to official orders of Swiss authorities. Any order from the district court compelling the Banks to transfer or otherwise convey Estate assets would be in direct contravention of the Swiss freeze orders. Subjecting Estate assets held by the Banks to the district court's further orders would thus allow a United States court to question and, in fact, declare invalid the official act of a foreign sovereign. W.S. Kirkpatrick, 493 U.S. at 405, 110 S.Ct. at 704. Issuance of the injunctive relief sought would therefore violate the act of state doctrine. 31 A declaration by a United States court that the Chinn assignment is valid and binding on the Banks would also violate the act of state doctrine. The assignment purports to assign to Robert Swift, counsel for the MDL plaintiffs, all of the Estate's right, title and interest in and to bank accounts maintained in Switzerland. The assignment directs entities having authority over such bank accounts to perform all necessary acts to effect the transfer of the above bank accounts forthwith. 32 A declaration that this assignment is valid and binding on the Banks would be a declaration that the Banks must transfer all Estate assets held by the Banks to Swift forthwith. Such a declaration would not only contradict, and therefore declare invalid, the Swiss freeze orders, but would also require the Banks to disregard the Swiss orders. 33 United States courts are bound to respect the independence of every other sovereign State, including Switzerland. See Underhill, 168 U.S. at 252, 18 S.Ct. at 84. If the MDL plaintiffs want to contest the legality of the Swiss freeze orders, seek a declaration of the validity of the Chinn assignment as against the Banks, or seek an injunction compelling the Banks to turn over the assets, they should do so via the Swiss judicial system. See Miller v. United States, 955 F.Supp. 795, 798 (N.D.Ohio 1996).