Amicus Curiae Brief — WS Kirkpatrick & Co. v. Environmental Tectonics Corp., Int'l

—_——

Supreme Court, Us.

—

FILED

1 ocr 5 1583

JOSEPH F. SPANION, J

No. 87-2066 om

IN THE

Supreme Court of the United States

OCTOBER TERM 1989

WS. KIRKPATRICK & Co., INC., et al.,

Petitioners,

VS.

ENVIRONMENTAL TECTONICS CORPORATION

INTERNATIONAL,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

BRIEF AMICUS CURIAE OF

THE AMERICAN BAR ASSOCIATION

L. STANLEY CHAUVIN, JR.

Counsel of Record

President

AMERICAN BAR ASSOCIATION

750 N. Lake Shore Drive

Chicago, Illinois 60601

(312) 988-5000

JAMES R. SILKENAT

MICHAEL D. SANDLER

ROGER B. COVEN

Counsel for Amicus Curiae

October 5. 1989 The American Bar Association

TABLE OF CONTENTS

INTEREST OF AMICUS CURIAE ............

SUMMARY OF ARGUMENT ...............

GEE Gato eescanehebedbeccecbdawss

THE ACT OF STATE DOCTRINE SHOULD BE

RETURNED TO A CONFLICT OF LAWS

PUES Shee nceeecedseseerpeesecensnis

A. The Doctrine Should Be a Conflict of Laws

Rule That Simply Precludes Judicial Review

of the Validity of a Foreign State’s Public

Acts Under Its Own Laws ............

B. A Factual Inquiry Into the Causes of a Foreign

State Act Is Not Barred by the Act of State

PE Os wUsceeneneeneeeukews

CET bh ac paiagnaeeasseeaven eee

20

22

il

TABLE OF AUTHORITIES

Cases

Alfred Dunhill of London, Inc. v. Repub-

lic of Cuba, 422 U.S. 1005 (1975) ...

Alfred Dunhill of London, Inc. v. The Re-

public of Cuba, 425 U.S. 682 (1976). .

Allied Bank Int’! v. Banco Credito, 757

F.2d 516 (2d Cir.), cert. dismissed, 473

ee ce tone ee

American Banana Co. v. United Fruit Co.,

po RO

American International Group, Inc. v. Is-

lamic Republic of Iran, 493 F. Supp.

§22 (1980), vacated on other grounds,

657 F.2d 430 (D.C. Cir. 1981)......

Arizona v. Rumsey, 467 U.S. 203 (1984)

Asociacion de Reclamantes v. United

Mexican States, 735 F.2d 1517 (D.C.

ein tea g ee eee

Banco Nacional de Cuba v. Sabbatino,

ED owes eceeeece

Banco de Espana v. Federal Reserve Bank

of New York, 114 F.2d 438 (2d Cir.

re

Bernstein v. Van Heyghen Freres Societe

Anonyme, 163 F.2d 246 (2d Cir.), cert.

denied, 332 U.S. 772 (1947). .......

Boyle v. United Technologies Corp.,

NG ree

California Motor Transport Co. v. Truck-

ing Unlimited, 404 U.S. 508 (1972) ..

Callejo v. Bancomer, S.A., 764 F.2d 1101

CL. i ob ce b eee es

Page

6, 20

6, 10, 17, 18

10, 18

passim

21

16

TABLE OF AUTHORITIES —Continued

Chas. T. Main Int'l v. Khuzestan Water,

651 F.2d 800 (ist Cir. 1981) .......

Citizens To Preserve Overton Park, Inc. v.

Volpe, 401 U.S. 402 (1971) ........

Clayco Petroleum Corp. v. Occidental Pe-

troleum Corp., 712 F.2d 404 (9th Cir.

Se

Compagnie Francaise D’Assurance v.

Phillips Petroleum Co., 105 F.R.D. 16

Cs 4a k oho sce ee 0

Compania de Gas de Nuevo Laredo, S.A.

v. Entex, Inc., 686 F.2d 322 (Sth Cir.

ES

Dames & Moore v. Regan, 453 U.S. 654

ES

Earn Line S.S. Co. v. Sutherland S.S. Co.,

254 F. 126 (S.D.N.Y. 1918), aff'd sub

nom., The Claveresk, 264 F. 276 (2d

ES Se. es k's an 6 6% ©

Edwards v. Aguillard, 482 U.S. 578 (1987)

Environmental Tectonics v. W.S. Kirkpat-

rick, Inc., 847 F.2d 1052 (3d Cir. 1988).

cert. granted, 57 U.S.L.W. 3841 (1989)

Erie Railroad Co. v. Tompkins, 304 U.S.

ee thle oi dw eke 40 8s

First National Bank v Banco Nacional de

Cuba, 406 U.S. 759 (1972) ........

Ghana Supply Commission v. New En- _

gland Power Co., 83 F.R.D. 586 (D.

ee

Goldwater v. Carter, 444 U.S. 996 (1979)

Page

12,

13,

14,

19

19

iv

TABLE OF AUTHORITIES—Continued

Hudson v. Guestier, 8 U.S. (4 Cranch.)

Pn cnukh bss cheebiewas «ae

Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d

Cir.), cert. denied, 434 U.S. 984 (1977)

Huntington v. Attrill, 146 U.S. 657 (1892)

In re Fried Krupp Actien-Gesellschaft,

Co SG ae Tee

Industrial Investment Development Corp.

v. Mitsui, 594 F.2d 48 (Sth Cir. 1979),

cert. denied, 445 U.S. 903 (1980) ....

International Association of Machinists v.

OPEC, 649 F.2d 1354 (9th Cir. 1981),

cert. denied, 454 U.S. 1163 (1982) ...

Kalamazoo Spice Extraction Co. v. Provi-

sional Military Government of Socialist

Ethiopia, 729 F.2d 422 (6th Cir. 1984)

Kolovrat v. Oregon, 366 U.S. 187 (1961)

Kunstsammlungen zu Weimar v. Elicofon,

478 F.2d 231 (2d Cir. 1973), cert. de-

nied, 415 U.S. 931 (1974) .........

Mannington Mills, Inc. v. Congoleum

Corp., 595 F.2d 1287 (3d Cir. 1979). .

Moore v. Mitchell, 30 F.2d 600 (2d Cir.

1929), aff'd, 281 U.S. 18 (1930) .....

Moscow Fire Ins. Co. v. Bank of New

York, 280 N.Y. 286, 20 N.E.2d 758

(1939), aff'd sub. nom. United States v.

Moscow Fire Ins. Co., 309 U.S. 624

Dts éeus seetsehdedeeed ues

O.N.E. Shipping v. Flota Mercante Gran-

colombiana, 830 F.2d 449 (2d Cir.

IS eM a RL Ate a a

14

i2

Vv

TABLE OF AUTHORITIES—Continued

Oetjyen v. Central Leather Co., 246 U.S.

A eee

Piper Aircraft Co. v. Reyno, 454 U.S. 235

Dt ciPiavacuuncee bau ute ee

Ramirez de Arellano v. Weinberger 745

F.2d 1500 (D.C. Cir. 1984) vacated 471

ek SE -cdeduthbweede os

Rangen, Inc. v. Sterling Nelson & Sons,

351 F.2d 851 (9th Cir- 1965) .......

Republic of Peru v. Dreyfus Bros. & Co..,

Tn Mi Pe oe eccdccees

Republic of Iraq v. First Nat'l City Bank,

353 F.2d 47 (2d Cir. 1965), cert. denied,

Fee ccc weeccsdéséc

Rose v. Himely, 8 U.S. (4 Cranch.) 241

EE oe eee

Shapleigh v. Meir, 299 U.S. 468 (1937) .

Societe Internationale v. Rogers, 357 U.S.

ray eee

Swift & Co. v. Wickham, 382 U.S. [11

Dd cudhes Gunes e600 d4's 0%

Timberlane Lumber Co. v. Bank of

America, 549 F.2d 597 (9th Cir. 1976)

Underhill v. Hernandez, 168 U.S. 250

Ditech nhabeaed 6e6n6 he one os

United States v. Morgan, 313 U.S. 409

a ee er

United States v. O’Brien, 391 U.S. 367

DiC sh titund bende whedon ee

United States v. Pink, 315 U.S. 203 (1942)

Wolff v. Oxholm, [1817] 6 M. & S. 92, 105

8 SS

vi

TABLE OF AUTHORITIES—Continued

Zschernig v. Miller, 389 U.S. 429 (1968)

Statutes and Regulations

Ps REED co cc ccctsccecs

EE re

Foreign Sovereign Immunities Act, 28

U.S.C. § 1602 et seg. .........

Restatement (Second) of Conflict of ~m

SR a

Miscellaneous

Brief of the Republic of China as Amicus

0 RR eee re ae er ee

Halberstam, Sabbatino Resurrected: The

Act of State Doctrine in the Revised Re-

statement of U.S. Foreign Relations

Law, 79 Am. J. Int’l L. 68 (1985)... .

Leigh & Sandler, Dunhill: Toward a Re-

consideration of Sabbatino, 16 Va. J.

EE wa cee saa ae ss

16

16

IN THE

Supreme Court of the United States

OCTOBER TERM 1989

No. 87-2066

W.S. KIRKPATRICK & Co., INC., ef ai.,

Petitioners,

VS.

ENVIRONMENTAL TECTONICS CORPORATION,

INTERNATIONAL,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

BRIEF AMICUS CURIAE OF

THE AMERICAN BAR ASSOCIATION

This amicus curiae brief is submitted in support of the

respondent, Environmental Tectonics Corporation, Interna-

tional. By letters filed with the Clerk of the Court, petitioner

and respondent have consented to the filing of this brief.

INTEREST OF AMICUS CURIAE

The American Bar Association (the ‘‘Association”’) is

appearing as amicus curiae in view of its long-standing inter-

est in avoiding impediments to the legal process in disputes

having foreign aspects. The Association is concerned that the

act of state doctrine has been unnecessarily expanded in the

lower courts to deny litigants their day in court. When

2

applied, the act of state doctrine absolutely bars any adjudica-

tion in cases and controversies over which our courts have

jurisdiction conferred by Congress or state legislatures.

Because it preempts the normal legal process, the act of state

doctrine should be sparingly applied and only for sound and

persuasive reasons.

The Association desires to present a position that none of

the parties before the Court will apparently argue. Specifi-

cally, this brief urges that in deciding this case, the Court

should reconsider the rationale for the act of state doctrine

and return the doctrine to its conflict of laws origins (and

away from its current preoccupation with the conduct of for-

eign relations). Such an approach would ensure a more prin-

cipled use of the doctrine in this and other cases. It would

limit the situations where the doctrine could preempt the

normal legal process, while enhancing the rule of law in litiga-

tion involving foreign state acts.

The Association has previously taken similar positions.

Goal VIII of the Association (“to advance the rule of law in

the world”’) has as one of its objectives “the development of

the rule of lawin . . . resolution of conflict between nations

and between nationals of different nations.” An overly broad

application of the act of state doctrine, by contrast, frustrates

the legal process and the rule of law in cases having foreign

aspects.

More specifically, the Association has sought to reduce the

number of situations in which the act of state doctrine is

applied. In August 1984, the Association adopted a resolu-

tion recommending amendment of the Foreign Sovereign

Immunities Act, 28 U.S.C. §§ 1602 et seq., in accordance with

eight principles. The fifth of those principles was to:

Add a new [provision] which excludes application of

the act of state doctrine by a foreign state in cases

where the Act confers jurisdiction upon the federal

3

courts to adjudicate claims for expropriation or

breach of contract.!

Although the present case before the Court does not concern

expropriation or breach of contract—but only whether a U.S.

court may make a factual finding regarding the reasons for a

foreign contract award—similar interests are at stake. This ts

a civil dispute between U.S. litigants under U.S. statutes, in a

case where a U.S. court has undeniable jurisdiction. The

claims are certainly no less susceptible to the judicial process

than expropriation and breach of contract claims mentioned

in the Association’s above-quoted resolution. The Associa-

tion’s interest and goal in furthering the rule of law in dis-

putes having foreign aspects would be impaired by expanding

the act of state doctrine to cover this type of case. Indeed,

such an extension of the doctrine will necessarily involve a

rationale inconsistent with the Association’s recommenda-

tions in this area.

SUMMARY OF ARGUMENT

A. The Court should reevaluate the basis of, and justifica-

tions for, the act of state doctrine as a necessary part of its

decision in this case. Based on this Court’s reasoning in

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964),

the lower courts have viewed the act of state doctrine as

requiring them to make threshold assessments of the possible

foreign relations implications of their decisions. If a judge

believes that in4uiry into a foreign state act will have foreign

relations implications, the act of state doctrine may bar any

further adjudication. Invoking the doctrine preempts all fur-

ther legal proceedings. Yet, judges often lack the diplomatic

materials and experience with which to predict if their

! The Board of Governors of the Association adopted an additional

resolution in November 1987 recommending support for an interna-

tional convention on forei;n state of immunity. That resolution rec-

ommended that any such convention “not preclude the further

development of national remedies against foreign states consistent with

general principles of international law.”

4

actions will produce some foreign relations friction—or if

any possible friction will be serious enough to warrant pre-

emption of a court’s Article III responsibility to hear cases

and controversies over which it has jurisdiction.

The present case involves such a proposed preemption of

the judicial process. Under the reasoning of the Sabbatino

decision, the lower courts in this case faced a Hobson's

choice. They could have simply deferred to the real foreign

affairs experts, the State Depertment, which sent a letter to

the district court; but that would have surrendered judicial

independence to the executive. Or, they could have followed

the logical thrust of Sabbatino (which they did), making stabs

at predicting possible foreign relations implications of their

actions as a prelude to hearing the case.

The reasoning of the Sabbatino decision overlooked the

main historica! foundations of the act of state doctrine. Origi-

nally, the doctrine was a conflict of laws rule in the broad

sense. It essentially said that foreign courts and authorities

are the appropriate bodies to review the validity of a foreign

State’s acts in its Own territory—and under its own laws. U.S.

courts were not to conduct this kind of judicial review. The

doctrine simply allocated competence between U.S. courts

and a foreign state’s own authorities in reviewing the validity

of foreign state acts performed in the foreign state’s own

territory.’

Returning the doctrine to its conflict of laws foundations

(and away from its current foreign relations focus) will pro-

duce a more predictable and defensible rule. It will spare the

courts from a task for which they are ill-equipped. It will

spare litigants from foreign relations predictions by judges

jacking foreign relations experience.

? Where a foreign state act is claimed to violate an international

principle but the court concludes that the international principle has

not yet become a settled rule of international law, the only body of law

under which the state act may be reviewed is, once again, the foreign

state's domestic laws. This is the situation that essentially was found to

exist in Sabbatimo, 376 US. at 428-30.

5

B. The Association takes no position on whether princi-

ples other than the act of state may limit inquiry into the

motivations or causes of foreign government action. Similar

principles exist in the domestic context. If, however, the act

of state doctrine is returned to its conflict of laws foundations,

the doctrine itself ought not bar judicial inquiry in this case.

The district court was not asked to review the validity of a

foreign state act performed in that state’s own territory, by

applying the foreign state’s own laws. The doctrine as a

conflicts rule does not prevent our courts from engaging in

normal fact-finding.

ARGUMENT

THE ACT OF STATE DOCTRINE SHOULD BE

RETURNED TO A CONFLICT OF LAWS RULE

Respondent Environmental Tectonics Corporation, Inter-

national (“ETC”) seeks civil damages on grounds that peti-

tioners allegedly won a Nigerian air force contract from ETC

through bribery of Nigerian government officials. Unlike a

criminal prosecution under the Foreign Corrupt Practices

Act, however, ETC in this civil action had to allege more than

payments or offers of dribery. ETC also had to allege that it

was injured by such payments of offers. To establish a causal

link between the alleged bribery and ETC’s claimed injury, a

trier of fact must find that the alleged bribery of Nigerian

officials had a causal effect on the contract award to

petitioners. ed

Petitioners claim that such a finding—indeed, any such

inquiry by a U.S. court—is barred by the act of state doctrine.

We submit that invoking the doctrine as a bar to the normal

judicial process of fact-finding would be an unwarranted

extension of the doctrine. Indeed, it would be a derogation

from the judiciary’s Article III responsibilities to adjudicate

cases and controversies over which they have jurisdiction.

See Sabbatino, 376 U.S. at 450-51 (White J., dissenting). Of

6

more immediate concern, however, the Court should recon-

sider the general basis for applying the act of state doctrine as

part of its decision in this case.

A. The Doctrine Should Be a Conflict of Laws Rule That

Simply Precludes Judicial Review of the Validity of a

Foreign State’s Public Acts Under Its Own Laws

|. Traditionally, the act of state doctrine precluded U.S.

courts from engaging in judicial review of (1) the validity

(2) of a foreign state’s public acts (3) fully performed within

the foreign state’s own territory. See Banco Nacional de Cuba

v. Sabbatino, 376 U.S. 398, 400 (1964). The doctrine allo-

cated competence as between U.S. and foreign courts to pass

judgment on a foreign sovereign’s public acts, based on prin-

ciples of territoriality:

Every sovereign state is bound to respect the inde-

pendence 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. .

Underhill v. Hernandez, 168 U.S. 250, 252 (1897). This prin-

ciple was derived from the English common law. See Sabba-

tino, 376 U.S. at 416.

Until this Court’s decision in the Sabbatino case, the act of

State doctrine was a type of “conflict of laws” rule in the

broadest sense. It allocated competence to review state acts

between our judiciary and foreign judiciaries. It applied only

to the review of foreign state acts performed in the foreign

state’s own territory—and, thus, presumptively governed by

the foreign state’s own laws. Cf. American Banana Co, v.

United Fruit Co., 213 U.S. 347, 356 (1909) (“the character of

3 This Cour: has previously requested argument on the question,

“Should this Court's holding in Banco Nacional de Cuba v. Sabba-

tino, . . . be reconsidered?” Alfred Dunhill of London, Inc. v. The

Republic of Cuba, 422 U.S. 1005 (1975). However, this question was

not reached in the eventual decision on the merits in that case. Alfred

Dunhill of London, inc. v. The Republic of Cuba, 425 U.S. 682 (1976).

7

an act as lawful or unlawful must be determined wholly vy the

law of the country where the act is done”). U.S. courts would

not sit in judgment on the validity of such foreign acts of

state, in the sense that our courts would not judicially review

foreign state acts under the national laws of the foreign state.

We similarly expected foreign courts not to review the valid-

ity of U.S. government acts under U.S. !aw.*

This conflicts rule did not apply to all acts of a foreign state.

First, if the foreign state act was not fully consummated

within the foreign state’s own territory but required the assist-

ance of U.S. courts to give effect to the act, U.S. courts would

first determine whether the foreign state act was consistent

with U.S. public policy. For example, if a foreign state

attempted to expropriate property situated within the United

States, U.S. courts would determine whether the expropria-

tion was consistent with U.S. public policy regarding takings.

If not, a U.S. court would not recognize the foreign state act as

valid. See Moscow Fire Ins. Co. v. Bank of New York, 280

N.Y. 286, 20 N.E.2d 758 (1939), aff'd sub. nom. United States

v. Moscow sire Ins. Co., 309 U.S. 624 (1940); Republic of Iraq

v. First Nat'l City Bank, 353 F.2d 47 (2d Cir. 1965), cert.

denied, 382 U.S. 1027 (1966).° '

Second, U.S. courts would not give effect to a foreign state

act if doing so would amount to an enforcement of the foreign

state’s penal or revenue laws. See Huntington v. Attrill, 146

U.S. 657, 669 (1892); Moore v. Mitchell, 30 F. 2d 600 (2d Cir.

1929), aff'd on other grounds, 281 U.S. 18 (1930); Sabbatino,

376 U.S. at 413-14; id. at 447-50 (White, J., dissenting).

4 This conflicts rule was at one time based on considerations of

comity and respect for other sovereigns. See Sabhatino, 376 U.S. at 458

(White, J., dissenting); Brief of the Republic of China as Amicus

Curiae, at 8-12.

5 Conversely, when it applies, the act of state doctrine overrides the

normal conflict of laws rule that courts will not give effect to foreign

laws repugnant to the public policy of the forum. The foreign state act

is recognized even if contrary to public policy of the forum. Sabbatino,

376 US. at 446 (White, J., dissenting).

8

Third, even if a foreign state act had been fully consum-

mated within its own territory, the earliest U.S. decisions did

not recognize the act as valid if the act violated a settled

principle of international law or the law of nations. In Rose v.

Himely, 8 U.S. (4 Cranch.) 241 (1808), Chief Justice John

Marshall reviewed the validity of a French court’s condemna-

tion of a ship within French territory, drawing a distinction

between a review under the foreign country’s own laws and a

review under the law of nations:

Of its own jurisdiction, so far as depends on munici-

pal rules, the court of a foreign nation must judge,

and its decision must be respected. But if it exercises

a jurisdiction which, according to the law of nations,

its sovereign could not confer, however available its

sentences may be within the dominions of the prince

from whom the authority is derived, they are not

regarded by foreign courts. This distinction is taken

upon this principle, that the law of nations is the law

of all tribunals in the society of nations... .

Id. at 276-77. Cf. Hudson v. Guestier, 8 U.S. (4 Cranch.) 293,

294 (1808) (U.S. courts may not review a foreign court judg-

ment “unless the court passing the sentence loses its jurisdic-

tion by some circumstance which the law of nations can

notice”’).

Early this century, however, this Court said that the doc-

trine applied even where a foreign state act was claimed to

violate international law. Oetjen v. Central Leather Co., 246

U.S. 297, 304 (1918).° The ruling was noi necessary to the

decision, as the Court later recognized. Sabbatino, 376 U.S.

~

© Cf Shapleigh v. Meir, 299 U.S. 468, 471 (1937).

9

at 417. Nor did the ruling address the contrary reasoning in

Rose v. Himely or in earlier British decisions.’

Notwithstanding the unsettled “international law” corol-

lary to the doctrine, courts continued to apply the act of state

doctrine as a conflict of laws principle—at least until Sabba-

tino was decided. As the Second Circuit stated when asked to

review the validity of an act of the government of Spain:

We agree, however, with the contentions of the

defendants that the question of the validity under

Spanish law of the secret decree, or of any other step

in the purported acquisition of title to the silver by

the Spanish government, is not open to examination

by us. If these acts took place, they took place within

Spain. It has been squarely brid that the courts of

this country will not examine the acts of a foreign

sovereign within its own borders, in order to deter-

mine whether or not those acts were legal under the

municipal law of the foreign state.

Banco de Espana v. Federal Reserve Bank of New York, 114

F.2d 438, 443 (2d Cir. 1940) (emphasis added). See also

Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d

246, 249 (2d Cir.), cert. denied, 332 U.S. 772 (1947) ( a court

“will not undertake to pass upon the validity under the

municipal law of another state” of acts of that foreign state’s

officials); Earn Line S.S. Co. v. Sutherland S.S. Co., 254 F.

126, 129(S.D.N.Y. 1918), aff'd sub nom. The Claveresk, 264

F. 276 (2d Cir. 1920).

’ See Welff v. Oxholm, [1817] 6M. & S. 92, 106, 105 Eng. Rep. 1177,

1182 (holding that a court was not bound to respect a foreign state

ordinance “not conformable to the usage of nations”); Republic of Peru

v. Dreyfus Bros. & Co., [1888] 38 Ch. D. 348 (where an English court

chose to disregard a Peruvian statute found to be contrary to interna-

tional law, even though it purported to annul a contract executed and

performed within Peru); /n re Fried Krupp Actien-Gesellschaft, [1917] 2

Ch. D. 188, 193-94.

10 ~

Some members of the Court have similarly acknowledged

the conflict of laws roots of the doctrine. In cases involving

expropriation of property in a foreign state’s own territory,

the doctrine ‘.as been described as related to “the conflict of

laws rule, adopted in virtually all nations, that the lex loci is

the law governing title to property.” Sabbatino, 376 U.S. at

445 (White, J., dissenting). More broadly, Justice White

stated:

We are not dealing here with those cases where a

court refuses to measure a foreign statute

against . . . the fundamental law of the foreign

state itself. In those cases the judicially created act

of state doctrine is an aspect of the conflict of laws

rules of the forum and renders the foreign law

controlling.

Id. at 470-71. Similarly, in an opinion joined by Justices

Brennan and Biackmun, Justice Marshall noted that

the act of state doctrine merely tells a court what law

to apply to a case; it “concerns the limits for deter-

mining the validity of an otherwise applicable rule of

law.”

Alfred Dunhill of London, Inc. v. The Republic of Cuba, 425

U.S. 682, 726 (Marshall, J., dissenting), quoting Sabbatino,

376 U.S. at 438.

2. This Court’s 1964 decision in the Sabbatine case has

been extended far beyond its actual holding. Sabbatino

involved a dispute over who was entitled to the proceeds

from a sale of sugar that had been expropriated in Cuba by

8 In an opinion joined by then Judge Scalia, it was noted that such

acts of state may be “grounded in the ‘primeval interest’ of a sovereign

state to ‘resolv{e] all disputes over use or right to use of real property

within its domain.’ " Ramirez de Arellano v. Weinberger, 745 F.2d

1500, 1569(D.C. Cir. 1984)(Judge Starr, dissenting), vacated, 471 U.S.

1113 (1988), quoting Asoctacion de Reclamantes v. United Mexican

States, 735 F.2d 1517, 1521 (D.C. Cir. 1984).

the Cuban government. The former owners claimed the pro-

ceeds (which had been attached in New York) on grounds

that the expropriation violated customary international law.

This Court held only that rules of customary international

law concerning “takings” were not sufficiently settled to per-

mit U.S. courts to review the validity of the Cuban govern-

ment’s action under international law, and, thus, the act of

state doctrine barred review by a U.S. court of the validity of

the taking:

It should be apparent that the greater the degree of codifi-

cation or consensus concerning a particular area of inter-

national law, the more appropriate it is for the judiciary

to render decisions regarding it, since the courts can then

focus on the application of an agreed principle. . . .

Therefore, rather than laying down or reaffirming an

inflexible and all-encompassing rule in this case, we

decide only that the Judicial Branch will not examine the

validity of a taking of property within its own territory by

a foreign sovereign government . . . in the absence of a

treaty or other unambiguous agreement regarding con-

trolling legal principles, even if the complaint alleges that

the taking violates customary international law.

Sabbatino, 376 U.S. at 428.°

This holding, however, was interwoven with an entire

reformulation of the act of state doctrine and its basis. The

Court announced that act of state was now a separation of

powers doctrine whose “continuing vitality depends on its

capacity to reflec: the proper distribution of functions

between the jusicia! aind political branches of the Govern-

ment on matters bearing on foreign affairs.” Jd. The Court

continued:

It is also evident that some aspects of international law

touch more sharply on national nerves than do others:

* Congress has attempted to overturn this particular holding in 22

U.S.C. § 2370(e( 2).

12

the less important the implications of an issue are for our

foreign relations, the weaker the justification for exclusiv-

ity in the political branches.

Id. (emphasis added).'°

Thus, the Court appeared to announce a new rationale for

the doctrine, at least in those cases where it was claimed that a

foreign state act contravened international law. The Court

appeared to transform the doctrine from a conflict of laws

rule into a balancing test based on foreign relations considera-

tions. The Court seemed to invite lower courts to assess how

important “the implications of an issue are for our foreign

relations” when deciding whether to invoke the doctrine.

The lower courts have seized the invitation. They have

ruled that the “act of state doctrine calls upon the courts to

make a preliminary assessment . . . of ‘the likely impact on

international relations that would result from judicial consid-

eration of the sovereign’s act.” " O.N.E. Shipping v. Flota

Mercante Grancolombiana, 830 F.2d 449, 452 (2d Cir. 1987),

quoting Allied Bank Int'l v. Banco Credito, 757 F.2d 516, 520-

21 (2d Cir.), cert. dismissed, 473 U.S. 934 (1985). They have

held, without any expert guidance, that “any analysis by this

court would have an adverse effect on the relations between

this country and Mexico.”” Compania de Gas de Nuevo

Laredo, S.A. v. Entex, Inc., 686 F.2d 322, 326 (Sth Cir. 1982).

They have similarly found it to be “clear” that any judicial

scrutiny of foreign government decisions involving petro-

leum “would embarrass the political branches of our govern-

ment in the conduct of foreign policy.” Clayco Petroleum

Corp. v. Occidental Petroleum Corp., 712 F.2d 404, 407 (9th

Cir. 1983); see International Association of Machinists v.

OPEC, 649 F.2d 1354, 1359-61 (9th Cir. 1981), cert denied

454 U.S. 1163 (1982).

'0 The majority in Sabbatino appeared concerned that if a proposed

rule of international law was not seitled and that if, instead, a US.

court was asked to engage in “the sensit.ve task of establishing a princi-

ple.” foreign relations implications couid ensue. /d at 428 (emphasis

added).

13

Even when the doctrine has not been applied to bar an

adjudication, the lower courts have undertaken to decide if

lawsuits over which they have jurisidiction would have “the

potential for interference with our foreign relations,”

Timberlane Lumber Co. v. Bank of America, 549 F.2d 597,

607 (9th Cir. 1976); or if an adjudication “might possibly

present problems of international relations.” Mannington

Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1294 (3d Cir.

1979).

Casting judges as assayers of foreign policy implications

has also led, in some of our courts of appeal, to the expansion

of the act of state doctrine at issue in this case. In Clayco,

supra, the issue was whether allegedly uniawful payments to

foreign officials caused (or motivated) the award of an oil

concession. As here, the existence of the payments (and their

receipt by foreign officials) was not the reason to invoke the

act of state doctrine. Nor, as here, was the Court asked to

review the validity of any state act. Rather, the court of

appeals said that any judicial inquiry into whether those pay-

ments had a causal effect on the concession award would have

foreign policy implications and “thus embarrassment would

result from adjudication.”” Clayco, 712 F.2d at 407. See Hunt

v. Mobil Oil Corp., 550 F.2d 68, 77 (2d Cir.), cert. denied, 434

U.S. 984 (1977) (holding that any judicial inquiry into the

motivation of a state act would result in “hindering and

embarrassing the conduct of foreign relations which is the

very reason underlying the policy of judicial abstention

expressed in the doctrine’’).

Even the court of appeals in the present case felt it had to

venture into the arena of making foreign policy evaluations.

It gave great “respect” to a letter the district court had

received from the State Department suggesting no foreign

policy embarrassment would result from an adjudication in

this case. Environmental Tectonics v. W.S. Kirkpatrick, Inc.,

847 F.2d 1052, 1062 (3d Cir. 1988), cert. granted, 57

U.S.L.W. 3841 (1989). But the State Department views could

not be “controlling.” /d. at 1057 n.6 and 1062, citing this

14

Court’s split decision in First National Bank v Banco

Nacional de Cuba, 406 U.S. 759 (1972). Hence, the court of

appeals felt it had to make its own assessment of the foreign

relations implications of continuing with this case—which

proved to be different from the district court’s assessment.

The current split in the circuits on the issue now before the

Court can be directly attributed to differing assessments of

foreign relations implications. Compare Environmental Tec-

tonics and Industrial Investment Development Corp. v. Mitsui,

594 F.2d 48, 55 (Sth Cir. 1979), cert. denied, 445 U.S. 903

(1980) (finding no preclusive foreign policy implications

where motivation—but not validity of a state act—was at

issue), with Clayco, 712 F.2d at 407, and Hunt, 550 F.2d at

77. Simply put, the separation of powers rationale of Sabba-

tino asks judges to engage in foreign relations evaluations for

which they generally lack the necessary diplomatic back-

ground and foreign policy experience. Conflicting evalua-

tions are the inevitable result. Some litigants are able to have

their claims heard; others are not.

3. The Court in Sabbatino apparently felt compelled to

reevaluate the act of state doctrine, since it had not had occa-

sion to consider the doctrine in the aftermath of Erie Railroad

Co. v. Tompkins, 304 U.S. 64 (1938). See Sabbatino, 376 U.S.

at 425. The Court concluded that the act of state doctrine,

though a rule fashioned by the courts, “must be determined

according to federal law.” Jd. at 427. It fouad ample consti-

tutional and statutory support reflecting a need for national

uniformity and “indicating a desire to give matters of inter-

national significance to the jurisdiction of federal institu-

tions.” Jd. at 427 n.25. This part of the analysis was

fundamentally sound and sufficient to support a federal rule.

Nevertheless, the Court apparently felt it could not base a

federal rule on earlier rationales for the doctrine. It charac-

terized these earlier rationales as based simply on “historic

notions of sovereignty.” Jd. at421. It then found that the

doctrine was neither derived from international law nor

required by the Constituiion. /d. at 421-23. So it attempted

15 ~

to build on statements in earlier decisions suggesting that if

U.S. courts reviewed sovereign acts performed in the sover-

eign’s own territory, international friction might arise. Thus,

the Court announced that separation of powers considera-

tions—as “constitutional underpinnings”’—would hence-

forth be the basis for this federal, court-fashioned doctrine (at

least where a state act was said to violate international law).

id. at 423.

For whatever reason, the majority in Sabbatino did not

address directly the conflict of laws foundations of the doc-

trine, which are more than mere “notions of sovereign

authority.” Broadly speaking, conflict of laws is a set of rules

“which determines what effect is given to the fact that [a] case

may have a significant relationship to more than one state.”

Restatement (Second) of Conflict Of Laws § 2 (1971). As

discussed above, the doctrine, until Sabbatino, allocated

competence between our judiciary and foreign courts. A U.S.

court is hardly the competent or appropriate body to declare a

foreign state act invalid under “the fundamental law of the

foreign state.” Sabbatino, 376 U.S. at 470-71 (White, J.,

dissenting). Similarly, if a foreign state act performed in the

foreign state’s territory is claimed to violate an international

principle which has not become a settled rule of international

law (as found in Sabbatino), the only “law” by which the state

act can be reviewed is, again, the foreign state’s domestic law.

Once again, U.S. courts are so) the appropriate bodies to

engage in such judicial review.

Recasting the act of state doctrine as a federal conflict of

laws rule is supported by the same constitutional and statu-

tory authorities relied on in Sabbatino for a separation of

powers rule. Sabbatino, 376 U.S. at 427 n.25. The need is

unquestioned for the nation to speak with one voice in defin-

ing the outer limits of our judicial power to review foreign

16

state acts. A federal rule is no less supportable when based on

conflict of laws considerations than when dressed up in “‘sep-

aration of powers” garb.'!

Compelling reasons exist for the Court, in deciding this

case, to return the act of state doctrine to its traditional foun-

dation as a conflict of laws rule of federal dimension. First, in

deciding this and other act-of-state cases, a conflicts rule pro-

vides a readily ascertainable standard that the lower courts

and state courts can consistently apply. A court need only

determine if the case before it requires review of the validity

of a foreign state act fully performed in the foreign state’s own

territory and governed by the foreign state’s own laws. If such

review of validity is required, the doctrine bars adjudication

of that issue (and of the remaining parts of the case if they

cannot be segregated); otherwise, the case proceeds in the

normal fashion. As it did in Sabbatino, the Court can leave to

a future case the question of whether validity may be

reviewed under a settled rule of international law or under a

treaty provision. '?

Second, so long as “foreign policy implications” remain

the touchstone of the act of state doctrine, the lower courts

(and litigants) will face an untenable situation. On the one

hand, they cannot simply let the State Department dictate

'! See Leigh & Sandler, Dunhill: Toward A Reconsideration of Sabba-

tino, 16 Va. J. Int'l L. 685, 709-16 (1976); cf Boyle v. United Technolo-

gies Corp., 108 S. Ct. 2510, 2513-16 (1988). See also Halberstam,

Sabbatino Resurrected: The Act of State Doctrine in the Revised Restate-

ment of U.S. Foreign Relations Law, 79 Am. J. Int’! L. 68, 90-91 (1985)

'2 Since Sabbatino was decided, at least one cour’ of appeals has held

that a foreign state’s expropriatory acts performed within a foreign

State’s own territory can be reviewed under an international rule con-

tained in a treaty or international agreement. Kalamazoo Spice Extrac-

tion Co. v. Provisional Military Government of Socialist Ethiopia, 729

F.2d 422 (6th Cir. 1984). Compare American International Group, Inc.

v. Islamic Republic of Iran, 493 F. Supp. 522, 525 (1980), vacated on

other grounds, 657 F.2d 430(D.C. Cir. 1981), with Callejo v. Bancomer,

S.A., 764 F.2d 1101, 1118 (Sth Cir. 1985).

17

when a case will be adjudicated, or barred, by abject defer-

ence 10 the agency that has the actual foreign policy expertise.

Such a course would strip the judiciary of its independence.

See Dunhill, 425 U.S. at 725-26 (Marshall, J., dissenting). On

the other hand, allowing the current situation to be perpetu-

ated requires judges to make inexpert pronouncements (or

guesses) about the foreign relations consequences of a case, as

a prelude to exercising customary judicial functions. Judges

are presumptive experts in applying a conflict of laws rule,

but presumptive laymen in trying to predict foreign relations

implications of their acts.

Third, no overriding reason exists for the courts to make

foreign relations assessments a part of an act of state doctrine.

No such endeavor has been found necessary for other judicial

actions that have the potential for foreign relations implica-

tions. As noted above, U.S. courts will not honor a foreign

state’s expropriation of property situated in the United States

if the taking is not consistent with U.S. public policy. Neither

will U.S. courts give effect to a foreign state’s penal or revenue

laws, irrespective of the foreign relations impact. See Sabba-

tino, 376 U.S. at 413-14. U.S. courts routinely decide (with-

out regard to foreign affairs concerns) whether persons

wanted by a foreign state will be extradited, even though there

may be foreign relations implications to the extradition pro-

ceedings. In contested criminal prosecutions under the For-

eign Corrupt Practices Act, U.S. courts and juries may be

called on to make detailed :nquiries concerning the taking of

bribes by foreign government officials. Ever. a plea agreement

may involve offers of proof implicating foreign officials. See

Environmental Tectonics, 847 F.2d at 1056. Courts regularly

interpret treaties, without first determining the impact of the

potential interpretation on relations with any foreign state.

See Kolovrat v. Oregon, 366 U.S. 187, 194-96 (1961); cf

Zschernig v. Miller, 389 U.S. 429, 432 (1968). In none of

these situations has the need arisen to ask the lower courts to

make assessments of foreign relations implications before

deciding whether to hear the case.

18

There may be a future case when the actual foreign policy

experts, the executive branch, may believe that an adjudica-

tion relating to a foreign state act may have an impact on the

immediate conduct of foreign relations. There has been no

such case to date—not even on remand in Sabibatino—where

the executive has felt compelled to ask a court to apply the act

of state doctrine.'> More to the point, there are other legal

tools to deal with such a situation. As in the Iranian hostage

crisis, the executive branch may seek to stay litigation for an

extended period, pending resolution of a crisis. E.g., Chas. T.

Main Int'l v. Khuzestan Water, 651 F.2d 800, 804 n.4 (ist Cir.

1981); see Sabbatino, 376 U.S. at 471 (Whiie, J., dissenting)

(“The proper disposition is to stay the proceedings until cir-

cumstances permit an adjudication... ™). Or, if a U.S.

citizen’s claim is against a foreign government or its agencies,

the U.S. government may “espouse” the claim and settle it in

certain circumstances. See Dames & Moore v. Regan, 453

U.S. 654, 679-88 (198! » United States v. Pink, 315 U.S. 203,

229-30 (1942); Asociacion de Reclamantes v. United Mexican

States, 735 F.2d 1517 (1984) (per Judge Scalia). If foreign

policy interests require a protective order or other special

procedures, the government may file a suggestion of interest

with any court under 28 U.S.C. § 517. It may also advise any

court of foreign policy determinations affecting factual issues

inacase. See, e.g., Kunstsammlungen zu Weimar vy. Elicofon,

478 F.2d 231, 232 (2d Cir. 1973), cert. denied, 415 U.S. 931

(1974). Under other conflict of laws and comity principles,

U.S. courts have self-imposed limits on compelling discovery

of foreign documents and information. See Societe Internati-

onale v. Rogers, 357 U.S. 197 (1958). Foreign government

'3 See letter of the Department of State's Legal Adviser to the Solic:-

tor General, appended to the opinion of the Court in Alfred Dunhill of

London, Inc. v. Republic of Cuba, 425 U.S. 682, 706 (1976), and the

letter of the State Department's Legal Adviser to the district court

appended to the opinion of the court of appeais below, Environmental

Tectonics, 847 F.2d at 1067-69. Similarly, the executive branch has

never used its post-Sabbatino statutory authority to invoke the act of

state doctrine in expropriation cases when required “by the foreign

policy interests of the United States.” 22 U.S.C. § 2370(e\2).

19

claims of executive privilege have been recognized in U.S.

courts. See Compagnie Francaise D'Assurance v. Phillips

Petroleum Co., 105 F.R.D. 16 (S.D.N.Y. 1984); cf Ghana

Supply Commission v. New England Power Co., 83 F.R.D.

586 (D. Mass. 1979). U.S. courts may decline to exercise

jurisdiction under the doctrine of forum non conveniens. See

Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 (1981). Of

course, some issues bearing on foreign relations may not be

susceptible to resolution under ascertainable legal standards

and, thus, nonjusticiable under the “political question” doc-

trine. See Goldwater v. Carter, 444 U.S. 996 (1979).

The act of state doctrine, even if properly founded as a

conflict of laws rule, will have ancillary benefits in the area of

foreign relations. But no logical or empirical reason exists

why foreign relations implications must be the central touch-

stone of this court-made rule. A “conflict rule would have

been enough in itself to have controlled the outcome of most

of the act of state cases decided by this Court.” Sabbatino,

376 US. at 445 (White, J., dissenting).

For the reasons stated, the doctrine need not put judges in

the position of making foreign relations determinations. or

put litigants at the mercy of those determinations. Before

deciding if the doctrine applies in the case now before the

Court, we urge the Court to reconsider the doctrine’s proper

basis and to return the doctrine to its conflict of laws

foundations. '*

'4 Stare decisis does not preclude reconsideration. The holding in

Sabbatino is not at issue here, but only a portion of its reasoning that

appears unworkable. See Swift & Co. v. Wickham, 382 U.S. 111, 116

(1965) (“Unless inexorably commanded by statute, a procedural prin-

ciple of this importance should not be kept on the books in the name of

stare decisis once it is proved to be unworkable in practice”). Of

course, “adherence to precedent is not rigidly required in constitu-

tional cases . . . .” Arizona v. [....2sey, 467 U.S. 203, 212 (1984). The

act of state doctrine, moreover, involves neither a statutory nor a con-

stitutional standard, but simply a Court-made rule of federal common

law that is intended to survive Erie v. Tompkins. As demonstrated, the

(footnote continues)

—

20

B. A Factual Inquiry Inte The Causes Of A Foreign State

Act Is Not Barred By The Act f State Doctrine Itself.

|. The Association takes no position on the ultimate mer-

its of this case. The logic of the position expressed in part A

above, however, indicates that the act of state doctrine should

not be applied in this case.

As aconflict of laws rule, the act of state doctrine addresses

the competence to review the validity of foreign state acts. It

is not a bar to judicial fact-finding. The district court below

was not asked to declare the contract award invalid under

Nigeriaz. domestic law. Nor was the district court asked to

review the Nigerian contract award under international prin-

ciples which are not sufficiently settled to be treated as rules of

international law (thus leaving Nigerian law as the only sys-

tem of applicable legal rules). Indeed, the contract award may

be entirely lawful under Nigerian law; that issue is not before

the Court. Since neither the validity nor the legal effect of the

contract award itself is at issue, the act of state doctrine

should not be applied.

2. The Court might consider other principles, not part of

the act of state doctrine, that would limit the ability of U.S.

courts to review the motivations or causes of foreign govern-

ment actions. In a domestic context, the Court has placed

limitations on reviewing the motivations underlying the

actions of cabinet officials and Congress. See United States v.

Morgan, 313 U.S. 409, 422 (1941), United States v. O'Brien,

391 U.S. 367, 383-84 (1968): cf Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). In this area, a

distinction is sometimes drawn between subjective influences

on government action and the avowed purposes and causes of

(footnote continued)

rationale for this rule as announced in Sabhatino involved a departure

from earlier jurisprudence supporting the doctrine. The Court subse-

quently appeared to question this rationale when, in the Dunhill case, it

asked for reargument on whether the Sabbatino holding should be

reconsidered. Dunhill, 422 U.S. 1005.

21

an act as Stated in official pronouncements such as a legisla-

tive history. See Edwards v. Aguillard, 482 U.S. 578, 636-39

(1987) (Scalia, J., dissenting). Policy reasons, however, may

exist in special cases for examining subjective influences on a

government decision—such as where the decisionmaker has

been bribed. Cf. California Motor Transport Co. v. Trucking

Unlimited, 404 U.S. 508 (1972); Rangen, Inc. v. Sterling Nel-

son & Sons, 351 F.2d 851 (9th Cir. 1965).

The germs of such an approach in the foreign context

appear in American Banana Co. v. United Fruit Co., 213 US.

347 (1909). Although sometimes characterized as an “act of

state” case, American Banana itself did not purport to apply

the act of state doctrine. The Court simply held that the

antitrust laws did not extend to acts committed in a foreign

country—incuding efforts to persuade a foreign state to act

against a competitor. The Court also declared that “persuad-

ing a foreign power to do this or that cannot be a tort,” at least

not under the law of the florcign power. /d. at 358.

Any rule limiting inquiry into the reasons or motivations

for a foreign state act would involve different considerations

than a rule completely barring judicial review of a foreign

state act’s validity. For example, policy reasons often exist

for not probing the mental processes of government officials.

See United States v. Morgan, 313 U.S. at 422. Certain types

of influences on government conduct (foreign or domestic)

may not be susceptible to judicial measurement. See United

States v. O’Brien, 391 U.S. at 383-84. In some cases, how-

ever, policy reasons might support inquiry into the decision

process, or Congress may have authorized such an inquiry by

the courts.

No record has been made in this case against which such

principles might be developed or applied. Because the act of

doctrine was invoked before any discovery or evidentiary

proceedings occurred in this case, ETC has not yet had an

opportunity to present or obtain its proof regarding the rea-

sons for the contract award. It is possible that ETC or the

22

petitioners may have access to documents stating or indicat-

ing the reasons for the award. Or perhaps payments to ofh-

cials are not prohibited in Nigeria and, for this or other

reasons, Nigerian officials or others may be willing to furnish

proof of the reasons.

Ce aversely, ETC may face obstacles in meeting its burden

of proof on the issue of causation. It may be faced with claims

of government privilege. Nigeria may refuse to honor letters

rogatory. Objective evidence of the reasons for the award

may not exist. These possibilities, however, are not presently

before the Court. The Association takes no position on these

latter issues.

CONCLUSION

For the reasons and on grounds set forth above, the act of

state doctrine should be returned to a conflict of laws rule.

Respectfully submitted

L. STANLEY CHAUVIN, JR.

Counsel of Record

President

AMERICAN BAR ASSOCIATION

750 N. Lake Shore Drive

Chicago, Illinois 60601

(312) 988-5000

JAMES R. SILKENAT

MICHAEL D. SANDLER

ROGER B. COVEN

Counsel for Amicus Curiae

The American Bar Association

October 5, 1989

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