Document: 348 U.S. 356 75 S.Ct. 423 99 L.Ed. 389 The NATIONAL CITY BANK OF NEW YORK, Petitioner,v.The REPUBLIC CHINA et al. No. 30. Argued Nov. 9, 1954. Decided March 7, 1955. Rehearing Denied April 18, See 349 913, 598. Mr. William Harvey Reeves, New York City, for petitioner. Louis J. Gusmano, Woodhaven, N.Y., respondents. Justice FRANKFURTER delivered the opinion of Court. 1 Shanghai-Nanking Railway Administration, an official agency respondent Republic China, established a $200,000 deposit account in 1948 with head office petitioner National City Bank York. Subsequently, sought to withdraw funds, but refused pay, and brought suit Federal District Court under 48 Stat. 184, as amended, 12 U.S.C. § 632, U.S.C.A. 632. 2 In addition various defenses, interposed two counterclaims seeking affirmative judgment $1,634,432 on defaulted Treasury Notes owned by petitioner.1 After plea sovereign immunity, dismissed counterclaims, 108 F.Supp. 766, entered them pursuant Rule 54(b), Rules Civil Procedure, 28 Petitioner appealed, while appeal was pending leave from amend denominating setoffs including additional data. denied leave. 14 F.R.D. 186. Appeals Second Circuit affirmed dismissal denial ground that were not based subject matter respondent's (whether they be treated requests relief or setoffs) and, therefore, it would invasion immunity our courts permit pursued. 208 F.2d 627. Because importance question its first appearance this Court, we granted certiorari.2 347 951, 74 676, 98 1097. 3 status China is determination Executive outside competence Accordingly, start fact governmental agencies enjoy foreign sovereign's immunities same extent any other country duly recognized United States. Guaranty Trust Co. v. States, 304 126, 137—138, 58 785, 791, 82 1224. 4 freedom being haled into court defendant has impressive title-deeds. Very early history recognized, De Moitez South Carolina, Fed.Cas.No.9,697, Bee 422 (Admiralty Pa., 1781, Francis Hopkinson, J.), since become part fabric law. It such solely through adjudications Unlike special position accorded States party defendants Eleventh Amendment, privileged state explicit command Constitution. rests considerations policy given legal sanction To sure, nonsuability without consent likewise derived policy. But these are different order those give nation immunity. idle repeat rehearse set forth Chief Marshall's classic Schooner Exchange M'Faddon, 7 Cranch, 116, 287. 5 even enjoyed territorial doctrine which been favored test time. increasingly found conflict growing subjection action moral judgment. A reflection steady shift attitude toward American observations unanimous opinions 'Public peculiar rights preferences due changed', Davis Pringle, 268 315, 318, 45 549, 550, 69 974; 'There no doubt intermittent tendency governments little less grasping than have past * *,' White Mechanics' Securities Corp., 269 283, 301, 46 118, 70 275; '* present climate disfavor Keifer & Reconstruction Finance 306 381, 391, 59 516, 519, 83 784. This chilly feeling against began reflect itself federal legislation 1797.3 At day Congress decided when sues individual, individual can off all debts properly him sovereign. And because objections ad hoc legislative allowance private claims, hundred years ago created Claims,4 where like obligor, may affirmatively held undertakings. amenability commonplace regard carry out 'the enlarged scope government economic affairs', supra, at page 390, 519. substantive sweep judicial process grown apace.5 6 outlook thus reflected merely relevant problem. They important. claims dominant rooted sentiments justice public morality among most powerful shaping-forces lawmaking courts. Legislation adjudication interacting influences development trend, presumably manifesting strong social policy, makes demands process. James M. Landis, Statutes Sources Law, Harvard Legal Essays (1934), p. 213 seq.; Harlan F. Stone, Common Law 50 Harv.L.Rev. 4, 13 16. More immediately touching evolution doctrines regarding restrictive State Department taken claim As responsible conduct affairs, normal means suggesting particular suit. Ex parte Peru, 318 578, 581, 63 793, 795, 87 1014. Its failure refusal suggest significant weight Compania Espanola de Navegacion Maritima, S.A. Navemar, 303 68, 432, 667; Mexico Hoffman, 324 30, 65 530, 89 729. reason major consideration rule enunciated embarrassing consequences rejection diplomatic relations. Recently pronounced broadly recognizing commercial operations government, 26 Dept.State Bull. 984 (1952), despite thirty earlier rejected weighty Judge Mack Pesaro, D.C., 277 473 (see, also, his Gloria, 286 188), differentiating between war vessels governments. Berizzi Bros. Steamship 271 562, 611, 1088. 8 so come immediate situation before us. short dealing attempt bring one law nongovernmental obligors must bow. We invoking resisting fairly curtail recovery.6 wants law, litigant, free justice. becomes vital, examine led bar applicable here foreclose determining, according prevailing whether China's unjustly enforced disregarding legitimate China. expounded Exchange, implied exempt 'exclusive absolute' jurisdiction, implication deriving standards morality, fair dealing, reciprocal self-interest, respect 'power dignity' sovereign.7 9 (a) Claims available nationals (or their governments) simple condition: national's sued citizens.8 An Chinese9 could sue default bond, 1491(4), counterclaim—to Government's claim—in court, 2406, 2406; see Wilkins, Wheat. 135, 225; cf. Metropolis, 15 Pet. 377, 10 774; G. Co., 309 506, 511, 60 653, 655, 84 894. Thus seems only sovereign, coming own choice, liability substantially Government long willingly assumed. (b) apparently suable contract onw courts,10 Americans Chinese courts.11 No parochial bias manifest make affront us entertains suits own. Decisions seem grant absolute direct sovereigns12 inapposite context light Department's reluctance raise defense courts, 984, 985 (1952); 41 527, 747, 747. 11 (c) Respondent urges fiscal management falls within category immune defined 1952 pronouncement. denied, beside point. freely suitor courts; neither asked nor slightest intimation embarrass friendly relations (d) counterclaim allowed cut immunity.13 proof positive absolute, play application. limitation 'based matter' too indeterminate, indeed capricious, mark bounds limitations There great diversity what suit' 'growing transaction.' Clark, Code Pleading (2d ed.) 653—660; York, Cir., 236. cannot deemed related Agency's funds except insofar transactions regarded aspects continuous business relationship. point ultimate thrust allows setoff reaches situation. controlling SchoonerExchange present, implied. conclusion anticipated Washington circuit four after he had Exchange.14 reversed case remanded directions reinstate further proceedings inconsistent opinion. Reversed. Reversed directions. DOUGLAS took decision case. 16 REED, whom BURTON CLARK join, dissenting. 17 Some data premised if discussion confined reasonable space. postulate released jurisdiction specifically submit power.1 18 That does create irresponsibility. Satisfaction organ recognizes obligation pay creditors compensate injured it. 19 control arise depend upon will said speaking depends territory.' exemptions *' Cranch 138, 143, enforceable right exists 'against authority depends.'2 20 exclusion sovereignties general Marshall rest proposition: 21 'The world composed distinct sovereignties, possessing equal independence, whose mutual benefit promoted intercourse each other, interchange good offices humanity dictates require, sovereigns consented relaxation practice, cases certain circumstances, complete respective territories sovereignty confers. 22 'This may, some instances, tested common usage, opinion, usage.' 136. 23 might summarized word 'comity.'3 local course, consent. 24 'Without doubt, place capable destroying implication. He exercise either employing force, subjecting ordinary tribunals. until power exerted manner misunderstood, considered having imparted tribunals breach faith exercise.' Id., 146.4 25 ancillary principle that, determining follow guidance political branch.5 questioned. Furthermore, Note 36th Year Short Term Bank's obligations, jure imperii form, highest character. Consequently, desirability relaxing strict acts commerce, gestionis, inapplicable. referred Court's 427. If foregoing statements sound, notes unless enacted statute restricts done. comes down bringing recovery bank deposit, waived subjected Fed.Rules Civ.Proc. 13. Under words subd. Rule, over authorized more plaintiff's claim. there render court. violate do so.6 case, evidently feels limited amount claim, allow extent. mere should relied avoid jurisdictional I find justification restricting absence executive action.7 27 Affirmative necessary States.8 Action similar nature required authorize setoff. comity gave full was, pointed out, 146, withdrawn 'in misunderstood.' legislation.9 creation property well merit stricture Marshall: 'A justly violating faith, although expressly plighted, suddenly previous notice, powers consonant usages received obligations citilized world.' 137. 29 International pre-eminently Judicial views supposed interests touchstone whereby determine law.10 change generous parsimonious application Executive. Our possess solemn obligations. allots judiciary confidence view separation powers, undertake determinations primary concern branches Government. Differences exist desirable necessity nonjudicial determinations.11 surely better decisions left organs responsibility carrying affairs. establishment policies Such abuse power. conscious determined purpose keep functions separate effectively duties. branches. 30 determines, however, changing pertains functions. Even assumption proper concern, reach (as conceded), why used offset destroy recover? Why able assert defensively, noteholders obligated prevented collecting notes? Here entirely disconnected overdue national forward recover deposit. cause Bank. says: 31 situation.' 32 much character Deposits lifeblood existence. wise tell nations assets now future, brought, every debtors acquire par discount. unfair friends detrimental financial mercantile interests. For fairness need go beyond arising seek enforce me sanctions circuitous evasion well-established prohibiting sovereigns. 33 affirm. pledged 1920 secure loan Pacific Development Company banking syndicate participated. repaid, during liquidation bought collateral sale. second purchased petitioner's Shanghai branch time issue 1947—1948. record assume value share par. outset argues certiorari dropped demand relief, conceded independent ordinarily contain requisite finality base contends reduced setoff, became defenses such, nonreviewable concluded below. reject view. dwindle confined—as result accepted jurisprudence Shaw, 495, 659, 888—to reducing recovery. judgment, Appeals, terminated separable segment litigation. Act Mar. 3, 1797, §§ 514, 515. version appears 2406. Feb. 24, 1855, 612, 765, 9; Jones, 119 477, 440. recent tort liability. Aug. 2, 1946, 1346(b), 1346(b). Those dealt problem include: Express 195 230; 236; re Patterson-MacDonald Shipbuilding 293 192; Kingdon Roumania 250 341; Hungarian People's Cecil Associates, Inc., D.C.S.D.N.Y., 118 954; Pang-Tsu Mow, D.C.D.C., 105 411; 90 448; 583; Kingdom Norway Sugar Refining 188, Mack, J.; French Inland Nav. D.C.E.D.Mo., 263 410; Union Soviet Republics Belaiew, 42 T.L.R. (K.B.Div.); African La Compagnie Franco-Belge, (1898) Ch. 190; 1224; Dexter Carpenter, Inc. Kunglig Jarnvagsstyrelsen, 43 705; Strousberg Costa Rica, 44 L.T.R.(N.S.) 199 (C.A.); Claim Russian Volunteer Fleet British Admiralty, Annual Digest Public Cases 1925—1926, 210 (British Admiralty Transport Arbitration Board; Appeal). Of cited decisions, district directly involved judgment: supra. pages 136—137, 143—144, comprehensive critique subsequently applied, Lauterpacht, Problem Jurisdictional Immunities Foreign Brit.Y.Int'l L. 220. Privy Council recently Lord Scrutton Jupiter, (1924) P. 236 (C.A), assertion compels stay decline jurisdiction. Juan Ysmael Indonesia, (1954) W.L.R. 531. Earl Jowitt reviewed indicated subtleties English Cf. 38—42, 534—536, 729 (concurring opinion). 2502, 2502. earliest 243, July 27, 1868; O'Keefe, Wall. 178, 131; 1113, 785; Westfal-Larsen D.C.N.D.Cal., 550. citizen Yuan, Interpretation (Feb. 16, 1929). Treaty Art. VI, 1305. Yuan 373 (Dec. 15, 1930); Supreme Uniform 1933 (Peking, June 22, 1925), L.Rev., 84; 1929); Constitution (1947). Rizaeff Fre res Mercantile Fleet, 6, (Provisional 1927). E.g., 230. King Spain Oliver, C.C.D.Pa., Fed.Cas. 572, 7,813, Pet.C.C. 276. duties alleged owed shipments goods made Spanish colonies royal licenses. replied obtained licenses paid Hope Dutch concession return promised, inter alia, colonies. also negotiated unrelated transaction, revenues repay loan. Instead handing King, applied reduce debt directed verdict defendants. First privity payment discharged them. assuming ruled King's 'Let be, argued, administration Joseph (Bonaparte, who had, power, agreed debt), invalid Ferdinand; still, Ferdinand, successor father (Charles IV, made), nation, bound Holland; discharged, charged (because revenues), hands payments duties, effect plaintiff, owes, Holland, originally due, discharge application, it, authorised make, circumstances supported, appropriated.' 577, 289—290. Clarke, 436, 444, 1001; Kansas 204 331, 341, 388, 51 510; Larson Domestic Com. 337 682, 703, 1457, 1468, 93 1628. Kawananakoa Polyblank, 205 349, 353, 526, 834; 501, 661, 888. Duff Kelantan, A.C. 797. Naviera Vascongado S. Cristina, (1938) 485, 498. 571 seq., 588, 799, 1014; 35, 532, 815. 502, 662, 190, 198, enjoin use deposited funds. On connected concerning North sued, citing Duke Brunswick Hanover, Beav. Weekly Reporter 125, 199. Probably obvious tenable distinction proceeding counterclaim, few phase claims. None discussed reached takes today. note majority presented accord my discussing attention. Belgium E.A.G. Badts, Nederlandsche Jurisprudentie, 1923, 618, Am.Dig. Pub. Int'l 1919—1922, 129, Belgian Government, sale cargo wheat. held: 'That take cognisance State. entitled lose submits another correctness statement impaired circumstance actions are, sake convenience, joined proceedings, counter-claim lose, consequence thereof, particularly plaintiff bases title, performed capacity.' Nor derive support Fed.Cas.No.7,813, 276, 429 S.Ct., 14, mentioned asserted simply payment, presented, debt. Book 1951, vol. XXVIII, pp. 239, 269; 38, 534, 729; 573, 576, 613, Vidal Mayor, Alderman Citizens Philadelphia, How. 127, 197—198, 205; Muschany 49, 66, 442, 451, 744. Dissents Great Northern Life Ins. Read, 322 47, 57, 64 873, 878, 88 1121, Commerce 723, 1478, 1628; concurring 40, 65. 535,

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