# Appendix — First Nat. City Bank v. Banco Nacional De Cuba > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0030%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1972 - **Citation:** 406 U.S. 759 ## Text APPENDIX. i FILED In THE NOV 26 197) Supreme Court of the Upttadee tates cur eee eee oa Ocroser Term, 1971 — No. 70-295 FIRST NATIONAL CITY BANK, Petitioner, BANCO NACIONAL DE CUBA, Respondent. On Writ of Certiorari to the United States Court of Appeals for the Second Circuit Petition for Certiorari filed June 17, 1971 Certiorari graxted October 12, 1971 INDEX I ak cic sc esi ceiclieectemanie Amended Complaint (Exhibit omitted) Answer to Amended Complaint ~-.---_.--.._-___- Second Amended Reply of Plaintiff _._____________ Opinion and Order of the United States District Court, Southern District of New York __________ 34 Opinion of the United States Court of Appeals for Se NOG CATON 2... nccncncencseccsceaunnn ~ 48 Order of the Supreme Court -_-----_--_-_-________ 71 Opinion on Remand of the United States Court of Appeals for the Second Cireuit ______._-_______- 72 Order of the Supreme Court _____________________ 88 UNITED STATES DISTRICT COURT SouTHERN District or New York No. 60 Civ. 4664 Banco Nacrionau DE Cusa, Plawmntiff, Vv. THe First Nationa City Bank or New York, Defendant. Docket Entries Date Proceedings Nov. 28-60—Filed complaint & issued summons. Dec. 660—Filed summons & return—served deft. 11-30- 60. Dec. 19-60—Filed stip. & order extending time for deft. to answer to 1-9-61. Clerk. Jan. 9-61—Filed stip. & order extending time for deft. to answer to 1-19-61. Clerk. Jan. 19-61—Filed deft’s Answer to the complaint. Mar. 6-61—Filed pltff’s amended complaint. Mar. 6-61—Filed deft’s answer to amended complaint. Mar. 28-61—Filed stip. & order extending time for pltff. to answer to 4-10-61. Noonan, J. Apr. 11-61—Filed pltff’s Reply to counterclaim. Apr. 21-61—Filed pltff’s amended reply to counterclaim. May 24-61—Filed affdvts., exhibits & notice of motion for . summary nidemient for deft. on first and second causes of action of amended com- plaint and for setoffs & counterclaims pleaded in its answer to the amended com- plaint—Ret. 6/6/61. $ N Be bed oe CREEK et tay erat pone yey erties yaraen kg * g sf 4 2 2 Date Proceedings June 15-61—Memorandum endorsed on notice of motion filed 5/24/61—Motion adjourned from cal. endar of 6/13/61 to 7/25/61. No interest to be charged from original return date of - June 6, 1961 to July 25, 1961. So ordered— Levet, J. May 26-61—Filed deft’s statement pursuant to Rule 9(g). May 26-61—Filed deft’s memorandum of law in support of motion for summary judgment. July 14-61—Filed affdvt., notice of motion for an order granting leave to pltff. to serve 2nd amended reply—ret. 7/25/61. July 14-61—Filed pltff’s Memorandum in support. July 20-61—Filed pltff’s affidavits of Victor Rabinowitz & Dr. Raul Lopez Gonzalez in opposition to motion for summary judgment. July 20-61—Filed pltff’s memorandum in opposition to motion for summary judgment. July 20-61—Filed pltff’s statement pursuant to rule 9(g), federal rules of Civil procedure. July 26-61—Memo endorsed on notice of motion filed 7/14/61.—Motion granted. So ordered. Bryan, J.—mailed notices. Aug. 1-61—Filed pltff’s 2nd amended Reply to complaint. Aug. 7-61—Filed order assigning case to Bryan, J. for all purposes—Ryan, J. (filed in 60-663). _ Aug. 23-62—Filed Order to Show Cause why an order should not be made granting leave for ap- plicants to intervene, etc. ret. Aug. 28/62, with affdvt. & pleadings. ; | Date _ Proceedings Aug. 28-62—Memo endorsed on order to show cause filed . 8-23-62—This motion is respectfully re- ferred to Judge Bryan—Levet, J. Oct. 22-62—Filed affdvt. of Victor Rabinowitz. Nov. 5-62—Memo endorsed on order to show cause filed ~ 8/23/62—Motion granted without opposi- ’ tion. Applicants for intervention are made ‘parties to the action & proposed pleadings, will be deemed their pleadings as interven- ors & deemed served upon other ptys. in this action. This is an order. Bryan, J. mn. Apr. 20-64—P re-trial conference held, Bryan, J. May 28-64—Filed pltff’s affdvt. & notice of motion for summary juigment—Ret. before Bryan, J. at a time to be set by Court. June 22-64—Filed affdvt. of Henry Harfield. June 22-64—Filed pliff’s supplemental brief in support of motion for summary judgment. July 24-64—F led pltff’s response to deft’s reply of 7-8-64. July 21-67—Filed deft’s reply brief. July 21-67—Filed deft’s reply memorandum. July 21-67—Filed deft’s memorandum. July 21-67—Filed deft’s memorandum. July 21-67—Filed memorandum Opinion #33857—def?’s motion for summary judgment on 2nd claim is granted—judgment will be entered ac- cordingly—pltff’s cross-motion for sum- mary judgment on its Ist claim & on the counterclaims is denied—deft’s motion for be ae 3 ~ ~ ' oe DO RINE 8 EE ae TEETER Pa YORE CERT AOS pany? PEASE OI we CRTINE ol ere ties Ace + CONS pans perteyigew tay: RYE PY v ih ne a! wrnentoes ite Boerne: SRERRR TROUT Ear Ker sentn r . 4 Date Proceedings summary judgment on the Ist claim is denied since there are triable issues the cage will be :vied on the sole issue of amt. which deft. is entitled to assert by way of set-off— So Ordered—Bryan, J. M/N. July 27-67—Filed affdvt. of Henry Harfield in opposition to pltff’s motion to resettle the order of this Court dated July 20, 1967. July 27-67—Filed judgment & order that deft. 1st Nat'l City have judgment against pltff. Banco Nacional De Cuba dismissing the 2nd claim for relief—Rryan, J. judgment entered— Clerk m/n. Ent. 28-67. Aug. 14-67—Filed pltff’s notice of appeal—mailed copy to Shearman & Sterling. Oct. 13-67—Filed memo endorsed on unsigned order— pltff’s motion for resettlement is in all re- spects denied. It is so ordered—Bryan, J,, mailed notice. Nov. 1-67—Pre-trial eonference held—Before Bryan, J. Mar. 22-68—Filed stip. & order—If the dett. is lawfully entitled to the offset claimed by it, the amount thereof is such that pltff. will take nothing in this action. This stipulation is made solely for the purpose of permitting entry of a final order & judgment on deft’s motion for summary judgment so that pltif. may perfect an appeal from the determina- tions of law made in the court’s opinion dated 7-21-67. Pltff. does not, for any other purpose, make any admissions as to fact or law which may be adverse to it.—So or- dered—Bryan, J. 5 EP Date Proceedings Apr. 26-68—Filed J udgment—Ordered, adjudged & de- creed that the pltff. take nothing, & that the action be dismissed on the merits & that the deft. First National City Bank have & re- cover its costs from the pltff., Banco Na- cional De Cuba.—Bryan, J. Judgment ent. 4-26-28—Clerk mailed notice. Ent. 4-29-68. May 20-68—Filed pltff’s Notice of Appeal. Mailed copy to: Shearman & Sterling. SS SO SRE Fem a 6 UNITED STATES COURT OF APPEALS For tu 3 Seconp CIRcuIT Nos. 480 and 481—September Term, 1969 Docket Nos. 32533 and 33864 Banco NacionaL De Cusa, Appellant, v. Tux First Nationau Ciry Bank or New York, Appellee, Date Proceedings July 12-68—Filed record (original papers of District | Court) (order 7/27/67). July 12-68—Dep. Acct. 10241 (4702) CD :£7. July 12-68—Filed order extending time to file record to 7-12-68 (& in 33864). July 12-68—Filed record (original papers of District Court) (& in 33864). Aug. 15-68—Filed order extending time to serve appel- lant’s designation of the parts of the record, etc. to 9-13-68. Aug. 1-69—Keceived Docket Fee (Banco Nacional de Cuba) (order 4/26/68) (& in 33864). Aug. 6-69—Filed supplemental record (original papers of District Court) (& in 33864). Dec. 11-69—Filed order extending time to file appellant's brief to 12-12-69 (& in 33864). Dee. 12-69—Filed joint appendix, with proof of service (& in 33864). ———————————_ 7 Date Proceedings Dec. 12-69—Filed brief, appellant with proof of service (& in 33864). Jan. 2-70—Filed order extending time to file appeliee’s brief, to 2-13-70. Feb. 10-70—Filed order extending time to file appellees and intervenors brief to 2-27-70 (& in 33864). Feb. 27-70—Filed brief, intervenors with proof of service (& in 33864). Feb. 27-70—Filed brief, appellee with proof of service (& in 33864). Mar. 16-70—Filed order extending time to file appellant’s reply brief to 3-16-70 (& in 33864). Mar. 16-70—Filed reply brief, appellant with proof of ser- vice (& in 33864). Mar. 23-70—Argument heard (by: Lumbard, Hays, CJJ & Blumenfeld, DJ) (& in 33864). July 16-70—Judgment Reversed and Action Remanded, Lumbard, ChJ. (& in 33864). July 16-70—Filed judgment (& in 33864) Vacarep 2-25-71. July 30-70—Filed motion to stay issuance of mandate (with proof of service) (& in 33864). Aug. 4-70—Filed affidavit in opposition to raotion to stay issuance of mandate with proof of service (& in 33864). Aug. 5-70—Filed reply affidavit in response to opposition papers with proof of service (& in 33864). Aug. 19-70—Filed order granting motion for a further stay of the mandate to 10-14-70 (& in 33864). Oct. 16-70—Filed notice of filing of petition for writ of certiorari (& in 33864). Pacaeerteriasiivsis: WP nue Man Acts 8 SUPREME COURT OF THE UNITED STATES No. 846—October Term, 1970 First Nationat City Bank, Petitioner v. Banco Nacronat, DE Cusa, Respondent Date Proceedings — Oct. 13-70—Petition for writ of certiorari filed. Nov. 10-70—Order extending time to file response unti 11-16-70. Nov. 16-70—Brief in opposition filed. Nov. 17-70—Reply brief of petitioner filed. Nov. 20-70—Memorandum filed. (Gov’n.) Dec. 19-70—Answer of Banco Nacional De Cuba to meno , randum submitted by Solicitor General. Jan. 471—Petition distributed. Jan. 25-71—Petition granted. Adjudged to be vacated an remanded. See Orpen. Feb. 23-71—Judgment issued. . 15-71—-Motion of respondent for waiver of clerk’ costs filed. . 16-71—-Motion above distributed. May 3-71—Motion of respondent for waiver of clerk’ costs is denied. See OrpER. 9 UNITED STATES COURT OF APPEALS For THE SEcoND Circuit Nos. 798, 799—September Term, 1970 Docket Nos. 32533 and 33864 Banco Nactonat De Cusa, Appellant, v. Tue First Nationat City Bank or New Yor, Appellee. Date Proceedings Feb. 1-71—Filed notice from Supreme Court granting petition for writ of certiorari; vacating judgment of this Court and remanding action to Court of Appeals for reconsidera- tion, ete. (& in 33864). Feb. 25-71—Filed certified copy of order of Supreme Court granting petition for writ of certiorari (& in 33864). Feb. 25-71—Filed certified copy of judgment of Supreme Court vacating judgment of this Court with costs and remanding action to the U. S. Court of Appeals for reconsideration, etc. (& in 33864). Feb. 25-71—Filed order directing that additional briefs of parties may be accepted. Feb. 25-71—Filed brief and appendix, appellant with proof of service (& in 33864). Feb. 25-71—Filed brief, appellee with proof of service (& in 33864). Mar. 12-71—Filed reply brief, appellant with proof of serv- ice (& in 33864). EE - * 10 Date Proceedings Mar. 12—.1—Filed reply brief, appellee with proof of sery- ice (& in 33864). Mar. 18-71—Argument heard (by: Lumbard ChJ & Hays, CJ & Blumenfeld, DJ) (& in 33864). Apr. 27-71—Judgment Reversed and Action Remanded, Lumbard, ChJ (& in 33864). Apr. 27-71—Dissenting in separate opinion, Hays, CJ (& in 33864). Apr. 27-71—Filed judgment (& in 33864). May 5-71—Filed copy of notice by Supreme Court deny- ing waiver of clerk’s costs. May 12-71—Filed motion to further stay issuance of man- date (& in 33854). May 24-71—Filed order granting motion to further stay issuance of mandate (& in 33864). June 17-71—Filed notice of Supreme Court (by Telephone) of filing of petition for writ of certiorari (& in 33864). June 21-71—Filed notice of filing of petition for writ of certiorari (& in 33864). June 21-71—Filed certificate of filing of petition for writ of certiorari (& in 33864). July 15-71—Filed copy of notice extending time te file a response to the petition for a writ of cer- : tiorari in Supreme Court to 9-1-71 (& in { 33864). Oct. 28-71—Filed certified copy of order of Supreme Court granting petition for writ of certiorari (& in 33864). Nov. 11-71—Certified original, supplemental record and proceedings for Shearman & Sterling, Esqs. (& in 33864). 11 Amended Complaint (Exuisit OMITTED) UNITED STATES DISTRICT COURT SourHern District or New YorK [Tirtz Omittep] Plaintiff, by its attorneys, Rabinowitz & Boudin, for its Amended Complaint herein, alleges: As AND For A First Cause or ACTION: 1. Plaintiff is a corporate body existing under and by virtue of the laws of the Republic of Cuba, authorized to administer the domestic and foreign credit operations of the Republic of Cuba as its agent and having its principal ofice in Havana, Cuba. 9 Defendant is a national banking association, duly organized and existing under the laws of the United States of America, with its principal office located in the City of New York. 3. The jurisdiction of this Court is invoked under 28 U.S. C. 1332, in that plaintiff is a foreign corporation and defendant is a citizen of the State of New York, and the amount in controversy excceds, exclusive of interest and costs, the sum of $10,000. 4. On or about July 8, 1958, the defendant entered into a contract with Banco de Desarrollo Economico y Social (hereinafter referred to as Bandes) and with Fondo de Shayne OLEATE S aS Lost RGAE Sil SSeS a pete A RRA ore te ND Lovb arty Ais lm tieteycs Bek ieee . 12 Establizacion de la Moneda (hereinafter referred to g Fondo), by the terms of which the defendant loaned { Bandes the sum of $15,000,000, for a period of one year said loan being secured by United States Government obli gations, owned by Fondo, having a face value in excess 0: _ $15,000,000. Bandes and Fondo were both autonomous in stitutions of the Republic of Cuba, having been duly create by the laws of said Republic. A copy of said contract i annexed hereto. 5. On or about July 8, 1959, said loan was extended fo: a period of one year. 6. By virtue of Laws 730 and 847, as amended, of th Republic of Cuba, dated respectively February 16, 1960 an June 30, 1960, Bandes was dissolved and the plaintiff suc ceeded to certain of its liabilities, including the obligatio to repay the loan hereinabove referred to. The Republi of Cuba guaranteed the payment of such loan by plaintifi 7. Ox: July 7, 1960, plaintiff made a part payment o said loan to the extent of $5,000,000; at the same time, th loan of the unpaid balance of $10, 000 000 was extended fo an additional period of one year. 8. On September 23, 1960, the defendant advised plair tiff that the collateral held as security for the unpaid pot tion of the loan had been sold and the proceeds applie against the unpaid principal amount of the loan and inte! est thereon. 9. Upon information and belief, the amount realize by the sale of such collateral amounted to $12,412,000; ¢ this sum, $10,000,000 was applied to the unpaid princip: amount of the loan and $65,000 was applied to the paymer of interest on said unpaid portion of the loan for the perio from July 7, 1960 to September 23, 1960, leaving a balan due and owing from defendant to plaintiff amounting | $2,347,000. 13 10. ‘On or about October 13, 1960, Fondg was dissolved by virtue of Law No. 891 of the Republic of Cuba and by virtue of said law plaintiff assumed all of the rights and obligations of Fondo. - 41. By virtue of the foregoing, there is now due and owing from the defendant to the plaintiff the sum of $2,347,000. As AND FoR A SxconpD CavusE oF ACTION: 12. Plaintiff repeats and realleges each and every al- legation contained in paragraphs 6677’, $9? and ‘3’ here- inabove. | 12. Prior to October 17, 1960, Banco Gelats, Banco Pujol, Banco de San Jose, Banco Castano, Banco Asturiano de Ahorras, Banco de la Construccion and Trust Company of Cuba were corporations organized and existing under the laws of the Republic of Cuba. For some time prior-to that date, said corporations had maintained accounts in their respective names at the office of the defendant in New York City. 14. On October 17, 1960, Banco Gelats, Banco Pujol, Banco de San Jose, Banco Castano, Banco Asturiano de Ahorras, Banco de la Construccion and Trust Company of Cuba were nationalized by virtue of Law No. 891 of the Republic of Cuba. By the terms of that law, plaintiff became the legal successor of the property and assets of said corporations. | 15. Upon information and belief, on October 17, 1960, there was credited to the above mentioned accounts the following sums: To the account of Banco Gelats the sum of $209; to the account of Banco Pujol the sum of $248.86 ; to the account of Banco de San Jose the sum of $17,783.24; to the account of Banco Castano the sum of $683.51; to the account of Banco Asturiano de Ahorras the sum of $73.59; Ses. : = x ve ge ek, ae. Se a he etn cn ia tnne faiths Mya Uti a ate rae tin eer ten earthen teen en nee eee ee hint Me OB detest a on nee RR 14 to the account of Banco de la Construccion the sum of $101.82; and to the account of Trust Company of Cuba the sum of $14,712.91. 16. On or about October i7, 1960, the defendant closed the said accounts and appropriated the funds therein to itself. Since that time, the defendant has refused to pay over said sums to the plaintiff, although demand therefor has been made. 17. By reason of the aforesaid, defendant is indebted to the plaintiff in the sum of $33,812.93. Wuenerore, plaintiff demands judgment against defend- ant in the amount of $2,380,812.93, together~with interest and the costs of this action. “ RasinowitTz & Bovupin by Victron Rasinow1tTz Attorneys for Plaintiff Office & P. O. Box 25 Broad Street New York 4, N. Y. [Exursit OmirTep] oe 15 > Answer to Amended Complaint [ CAPTION Omirtep] Defendant The First National City Bank of New York answers the amended complaint herein as follows: 1. Defendant has no knowledge or informaiion sufficient to form a belief as to the truth of any of the allegations contained in paragraph 1 thereof except that prior to the commencement of this action plaintiff became and at all times since then has been and now is an agent and instru- mentality of the Republic of Cuba wholly owned by said Republic. i» y Admitted. 3. Defendant admits that plaintiff purports to invoke the jurisdiction of this Court under 28 U.S.C. 1332 but denies knowledge or information sufficient to form a belief as to the truth of the allegation in paragraph 3 thereof that plaintiff is a foreign corporation. ~ 4, Defendant denies each and every allegation «cntained in paragraph 4 thereof except that on or about July 8, 1958 defendant entered into a contract with Banco de Desarrollo Economico y Social (referred to in the amended complaint and hereinafter as ‘‘Bandes’’), Fondo de Hsta- bilizacion de la Moneda (referred to in the amended com- plaint and hereinafter as ‘‘Fondo’’) and plaintiff; that an accurate copy of this contract is annexed to the amended complaint; and except that defendant denies knowledge or information sufficient to form a belief as to the truth of the allegation that Bandes and Fondo were both autonomous institutions of the Republic of Cuba. 5. Admitted. rg 7 *) Tw ‘4 ely ee ee ee ee Re LN PR 8S EP ee, ee De a Pad oe ke oP as! & © TPR eee LUN iiss EARL Bh ai cS IERIE a ies Os 16 6. Defendant has no knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 6 thereof. 7. Defendant denies each and every allegation contained in paragraph 7 thereof. 8. Defendant denies each and every allegation contained in paragraph 8 thereof excepi that on September 23, 1960 defendant sent a cable to plaintiff reading as follows: ‘Syou ARE ADVISED THAT COLLATERAL HELD AS SECURITY FOR DEMAND NOTE OF BANCO D™% DESARROLLO ECONOMICO Y SOCIAL, DATED JULY 8, 1958, Has BEEN so AND PROCEEDS APPLIED AGAINST PRINCIPAL AND INT AS INDICATED IN OUR CABLE SEPTEMBER 20.”’ ST AND ‘‘oUR CABLE SEPTEMBER 20’’ referred to in said cable of September 23, 1960 was a cable which defendant hz . sent to plaintiff cn September 20, 1960 which read as follows: ‘¢rHIS IS TO NOTIFY YOU THAT IN VIEW OF ACTION TAKEN RESPECTING OUR BRANCHES IN CUBA WE FAVE EXERCISED OUR RIGHTS OF LIEN AND OFFSET AND CLOSED YOUR ACCOUNTS AS OF SEPTEMBER 17”’ 9. Defendant denies each and every ailegation con- tained in paragraph 9 thereof. 10. Defendant has no knowledge or information sufi- cient to form a belief as to the truth of any of the allega- tions contained in paragraph 10 thereof. 11. Defendant denies each and every allegation con- tained in paragraph 11 thereof. 12. Defendant repeats and realleges each and every allegation contained in paragraphs 1, 2 and 3 hereof. —_ ———————————————————s | 17 13. Defendant admits that for some time prior to and up to on or about October 14, 1960 it maintained on its books at its head office in New York City accounts in the names of Banco Gelats, Baneo Pujol, Banco de San Jose, Banco Castano, S. A., Banco Asturiano de Ahorros, S. A., Banco de la Construccion and The Trust Company of (Cuba; and except as admitted by the foregoing defendant denies knowledge or information sufficient to form a belief as to the truth of any of the allegations contained in para- graph 13 thereof. 14. Defendant has no knowledge or information suffi- cient to form a belief as to the truth of any of the allega- tions contained in paragraph 14 thereof. 15. Defendant denies each and every allegation con- tained in paragraph 15 thereof. 16. Defendant denies eacli and every allegation con- tained in paragraph 16 thereof. 17. Defendant denies each and every allegation con- tained in paragraph 17 thereof. For a First CoMpLeTE DEFENSE TO THE First Cause or ACTION IN THE AMENDED CoMPLAINT DEFENDANT ALLEGES: 18. This action is brought by and for the benefit of the Republic of Cuba by and through its agent and wholly- owned instrumentality, the plaintiff herein, which is in fact and law and in form and function an integral part of and indistinguishable from the Republic of Cuba. 18. In and before the year 1898 the territory of the Republic of Cuba was a colony of the Kingdom of Spain. In or about April 1898 the peoples of the territory of Cuba asserted their right to independence. On or about April j Biter ronan area acer nee Abe Besititestetesitisicrces.c’ Y apenas Tia pe Tic GO Bette 4 7 > 18 20, 1898 the United States of America recognized the inde. pendence of the peoples of Cuba. 20. In consequence of such recognition the United States of America engaged in war with the Kingdom of Spain and carried on such war for and on behalf cf the peoples of Cuba until the peoples of Cuba had been libe- rated. On December 10, 1898, the Treaty of Paris was duly executed by the United States of America and the Kingdom of Spain, and pursuant to such Treaty the Kingdom of Spain withdrew all of its forces, both military and civil, from Cuba. 21. By reason of the action of the United States of America, the peoples of Cuba were emancipated and were enabled to and did establish an autonomous government for themselves and for the area of Cuba. The United States of America recognized the autonomous government of the Republic of Cuba upon its creation and has continued to _extend recognition to the successor lawful governments of the Republic of Cuba. 22. From the inception of the said independent Republic of Cuba, the laws of Cuba have provided for the private ownership of property and for the protection of rights concerning such private property; and by its establishment and administration and enforcement of such laws and other- wise, the Republic of Cuba initiaily and until the latter part of the year 1960 represented that it would protect and preserve all business legaliy established within the Re- public of Cuba and all private rights acquired therein and would protect and defend all such businesses lawfully carrying out the legitimate objects thereof, and that it was and at all times would be ready, willing and able to meet all of its international commitments and otherwise conform to the Law of Nations. 23. In reliance upon the representations made by the Republic of Cuba for the protection of property and prop- \ \ers | 19 oor ie erty rights and upon its integrity, good faith and dedication to the principles of freedom, all as hereinabove set forth in paragraph 22 hereof, and pursuant to the laws of Cuba and to Section 25 of the Federal Reserve Act, the defend- ant, in or about August, 1915, opened a branch of its banking business in the City of Havana, Cuba, for the purpose of carrying on the business of banking in further- ance of the foreign commerce of the United States, and for the provision of banking services and facilities for the business activities of Cuba and its inhabitants and the development of its natural resources and trade, all of which comprise the economy of the Republic of Cuba; and in further reliance on said representations, defendant con- tinued to invest in the Republic of Cuba, additional funds and to open and operate additional branches, and on Sep- tember 16, 1960 defendant maintained and operated eleven distinct and separate branches within the Republic of Cuba. 24. In 1958 the Republic of Cuba applied to the defend- ant for financial assistance in the form of a loan of United States dollars to be used for governmental purposes of said Republic of Cuba. On or about July 8, 1958, in re- sponse to this request, defendant entered into a credit agreement, a copy of which is annexed to the amended complaint, with three agencies or instrvmentalities of the Republic of Cuba, designated by it for the purpose, namely, Bandes, Fondo and plaintiff, which agreement provided fora loan by defendant to Bandes of the sum of $15,000,000, such loan to be secured by obligations of the United States Government and of the International Bank for Reconstruc- tion and Development (hereinafter called ‘‘the collateral’’) pledged with the defendant for such purpose by the Repub- lic eof Cuba through its agents and instrumentalities, Fondo and plaintiff; and on or about July 8, 1958, at its head office in the City of New York, the defendant received said collateral in pledge and made the loan of $15,000,000 to the Republic of Cuba through its agency and instrumentality, Bandes. PETOKA TOR 10 EL DD eee PTET FTI a ees ree er eh iin owe Bcoitsenciw: Oe RS ECR Pee a 20 25. On or about December 31, 1958 a new government calling itself the Revolutionary Government of Cubs and being under the leadership of one Fidel Castro as.umed de factg control of the Republic of Cuba and on or about January 7, 1959 the United States of America formally extended recognition to Castro’s Revolutionary Govern. ment. 26. Subsequent to January 7, 1959, the Republic of Cuba formally and expressly reaffirmed its representations, assurances and guaranties with respect to the preservation of private property and with respect to the other matters set forth in paragraph 22 hereof, anc to this end on or about February 17, 1959 the Republic of Cuba by the said Revolutionary Government promulgated the Fundamental Law of Cuba, Articles 24 and 87 of which provided and still provide, in English translation, as follows: ‘‘Article 24. Confiscation of property is pro- hibited, but it is authorized for the property of the Tyrant deposed on December 31, 1958 and of his collaborators, of natural or juridical persons respon- sible for crimes committed against the national econ- omy or the public treasury, and those who are enriched or have been enriched unlawfully under — the protection of the public power. No other natural — or juridical person can be deprived of his property — except by competent judicial authority and for a ~ justifiable reason of public benefit or social interest and always after payment of appropriate compensa- tion in cash, fixed by court action. Non-compliance with these requirements shall give the person whose property has been expropriated the right to protec- tion by the ccurts and, if the case warrants, to resti- tion of his property. ‘‘The reality of the grounds for public benefit or social interest and the need for expropriation shall be decided by the courts in the event of challenge.” 21 ‘‘ Article 87. The Cuban State recognizes the existence and legitimacy of private property in its broadest concept as a social function and without f other limitations than those which, for reasons of § public necessity or social interest, are imposed by law.”’ ME ta cc 97. Inor about July 1959 the Republic of Cuba. through its agent and instrumentality Bandes, requested the defend- ant to forbear collection of uhe loan previously referred to for a period of one year; and in reliance upon the repre- sentations described in paragraphs 22 and 26 hereof the defendant acquiesced in such request. 98. Inor about July 1960 the Republic of Cuba, through its agent and instrumentality, the plaintiff herein, pro- ‘ posed to pay to the defendant on or before July 8, 1960 $5,000,000 of the indebtedness incurred as alleged in para- graph 24 hereof and requested that a proportionate amount of the collateral be released and that demaud for the bal- lance be deferred for a period of a year; and the defendant, in reliance upon the representations as set forth in para- graphs 22 and 26 hereof, and upon the express pr«viso that the continuance of the lear. was predicated on a continuance of the then existing conditions, acquiesced in such request by the Republic of Cuba. 29. On September 16 and 17, 1960, the Republic of Cuba forceably seized and took from the defendant all of the branch offices and the business and property of defen- dant in the Republic of Cuba, and deciared itself substituted for and subrogated in place and stead of the defendant with respect to such property and rights as well as the entire assets and liabilities of defendant within the Repub- lic of Cuba, without the consent of the defendant but against its will, and without compensation of any sort whatsoever. “5 havel o's iii ae Mnas Une ’ i , sia sean Ce ee ee eee a ‘igs Goad te ba ae elas Th ates aaah gale me Oy S56: AI OR OEE aE Sa aes gpa ad a % SO PAN hk M rare igh gL EAL A GRR eA ee ee eT 22 30. Thereafter the Government of the United States of America protested against the action alleged in paragraph 29 hereof and declared such action to have been forced ex. propriation taken under color of a dise 1inatory, coafisca. tory and arbitrary law. 31. After September 17, 1960 defendant sold the col. lateral and applied the net amount realized upon said sale to the then unpaid principal amount of the loan and to the interest then accrued and unpaid on said loan, and applied the balance as an offset to its claim against the Republic of Cuba for the value of its property seized by the Republic of Cuba. 32. On January 3, 1961 the Government of the United States severed diplomatic relations with the Government of the Republic of Cuba on the ground that the harass. ment and vilification by the said Government of the Re- public of Cuba had passed endurance and thus indicated that the normal courtesies extended between friendly nations would not be continued as to the Republic of Cuba, 33. The seizure by the Republic of Cuba of the defen- dant’s property within the territory of the Republic of Cuba as alleged in paragraph 29 hereof was discrimina- tory, confiscatory and in violation of international law, and the laws of the United States, and the laws of the Republic of Cuba itself. 34. In this action the Republic of Cuba, through its agent and wholly-owned instrumentality the plaintiff herein, seeks to rccover from the defendant a sum of money, the amount of which can be determired onlv in an accounting in equity. The Republic cf Cuba is therefore seeking _ equitable relief and by reason of the tortious acts of the Republic of Cuba is seizing defendant’s property and the violation by the Republic of Cuba of its assurances respect- ing the protection of private property and its own laws and vane 23 international law with respect thereto, all as more fully hereinabove set forth, the Republic of Cuba, including its agent and instrumentality the plaintiff herein, comes into this Court with unclean hands and is not entitled to any equitable relief and the action must be dismissed. . For A SECOND CoMPLETE DEFENSE TO THE First Cause OF AcTION IN THE AMENDED COMPLAINT AND AS A SETOFF AND COUNTERCLAIM THE DEFENDANT ALLEGES: 35. It repeats and realleges each and every allegation set forth in paragraphs 18 through 33 hereof. 36. By reason of the matters hereinbefore set forth, the defendant has been damaged by the wrongful and tortious acts of the Republic of Cuba in an amount substan- tially in excess of the amount claimed in the first cause of action of the amended complaint herein but at present indeterminable, and the defendant is entitled to setoff against such damages the amount claimed in the first cause of action of the amended cvmplaint herein, leaving a bal- ance due and owing from the Republic of Cuba to the defendant. For a Turrp CompLeTe DEFENSE TO THE First CavsE OF ActTION IN THE AMENDED CoMPLAINT AND AS A SETOFF AND COUNTERCLAIM DEFENDANT ALLEGES: 37. It repeats and realleges each and every allegation set forth in paragraphs 18 through 33 hereof. 38. The reasonable value of the business and property of defendant in the Republic of Cuba, at the time of the seizure thereof by the Republic of Cuba, was substantially in excess of the amount claimed in the first canse of action of the amended complaint hercin. The Republic of Cuba promised to and was obligated by international law to pay prompt, adequate and effective compensation to defen- dant and others whose property it seized. seijapcaahe 24 39. No part of such compensation has been paid to defendant but, on the contrary, the Republic of Cuba has repudiated its obligation to make such payment and has waived the necessity of any demand therefor. 40. By reason of the matters hereinbefore alleged, the Republic of Cuba is indebted to the defendant in an amount substantially in excess of the amount claimed in the first cause of action of the amended complaint herein but at present indeterminable, and the defendant is entitled to setoff against such indebtedness the amount claimed in the first cause of action of the amended complaint herein, leaving a balance due and owing from the Republic of Cuba to the defendant. For a FourtH CoMPLETE DEFENSE TO THE First Cause oF ACTION IN THE AMENDED COMPLAINT DEFENDANT ALLEGES: 41. The real party in interest is not Banco Nacional de Cuba, the plaintiff kerein, but the Republic of Cuba. The action must be dismissed because it is not being prose- cuted in the name of the real party in interest. For a First CoMPLETE DEFENSE TO THE SECOND CAUSE oF ACTION IN THE AMENDED COMPLAINT AND ASA SETOFF AND COUNTERCLAIM DEFENDANT ALLEGES: 42. Defendant repeats and realleges each and every allegation contained in paragraphs 18-23, inclusive, 25, 26, 29 and 30 hereof. 43. On or about October 14, 1960 the Republic of Cuba purported to enact its Law No. 891 pursuant to which 1 private Cuban banks were purportedly nationalized by the Republic of Cuba and their assets, including deposits i foreign countries, were purportedly taken over by the Republic of Cuba. 25 44, On or about October 14, 1969 defendant was ad- yised of the purported enactment of said Law No. 891 and thereupon applied the balances standing to the credit of the accounts in the names of Banco Gelats, Banco Pujol, Banco de San Jose, Banco Castano, S. A., Banco Asturiano de Ahorros, S. A., Banco de la Construccion and The Trust Compan of Cuba as an offset to its claim against the Republic of Cuba for the value of its property seized by the Republic of Cuba. 45. Defendant repeats and realleges each and every allegation contained in paragraphs 32 and 33 hereof. 46. By reason of the matters hereinbefore set forth, defendant has been damaged by the wrongful and tortious acts of the Republic of Cuba in an amount substantially in excess of the amount claimed in the second cause of action of the amended complaint herein but at present inde- terminable, and defendant is entitled to setoff against such damages the amount claimed in the second ceuse of action of the amended complaint herein, leaving a balance due and owing from the Kepublic of Cuba to the defendant. For a Seconp CoMPLETE DEFENSE TO THE SECOND CAUSE or ACTION IN THE AMENDED CoMPLAINT AND ASA Srrorr AND COUNTERCLAIM DEFENDANT ALLAGES: 47. Defendant repeats and realleges each and every allegation contained in paragraphs 42-45 hereof, inclusive. 48. The reasonable value of the business and property of defendant in the Republic of Cuba, at the time of the seizure thereof by the Republic of Cuba, was substantially in excess of the amount claimed in the second cause of action of the amended complaint herein. The Republic of Cuba promised to and was obligated by international law to pay prompt, adequate and effective compensation to defendant and others whose property is seized. PLOT EE ESENS ERNE MEAP LI SALE RH SM STR EL ARR 2 RN LM EE LANE LETRA ROM HIND IE RUNES FUT 49. No part of such compensation has been paid to defendaut but, on the contrary, the Republic of Cuba has repudiated its obligation to make such payment and has waived the necessity of any de.nand therefor. 50. By reason of the matters hereinbefore alleged, the Republic of Cuba is indebted to the defendant in an amount substantially in excess of the amount claimed in the second cause of action of the amended complaint herein but at present indeterminable, and the defendant is entitled to setoff against such indebtedness the amount claimed in the second cause of action of the amended complaint herein, leaving a balance due and owing from the Republic of Cuba to the defendant. For a Tu1rp CoMPLETE DEFENSE TO THE SECOND CAUSE or ACTION IN THE AMENDED COMPLAINT DEFENDANT ALLEGES: 51. Plaintiff’s second cause of action is based upon a claim of right, title and interest in plaintiff to certain assets of those private Cuban banks which are named iz paragraphs 13 and 14 of the amended complaint herein Plaintiff claims to be entitled to these certain assets not a a result of any voluntary act of said private Cuban vanks but solely as 4 result of the purported enactment by the Republic of Cuba of its Law No. 891. 52. Those certain assets which plaintiff is attempting to recover by its second cause of action herein are debt: payable in the City and State of New York which wer on the date of the purported enactment of said Law No 891 and still are represented by deposit balances in bank accounts maintained by said private Cuban banks with defendant in the City and State of New York and whic constitute property located within said City and State. 53. The said alleged Law No. 891 of the Republic o Cuba is by its terms a confiscatory decree and the Republi 27 of Cuba has not paid or tendered prompt, adequate and . effective compensation to the owners of said private Cuban hanks for the forced expropriation of their property through which plaintiff claims to derive its right, title and interest as alleged in its second cause of action herein. 54, It is contrary to the public policy of the State of New York to enforce a confiscatory decree with respect to property located within the State of New York at the date of the decree and the second cause of action therefore fails to state a claim upon which relief to plaintiff can be granted. For a FourtH Compete DEFENSE TO THE Sreconp CAUSE or ACTION IN THE AMENDED COMPLAINT DEFENDANT ALLEGES: 55. The real parties in interest are Banco Gelats, Banco Pujol, Banco de San Jose, Banco Castano, S.A., Banco Asturiano de Ahorros, 8.A., Banco de la Construccion and The Trust Company of Cuba and not Banco Nacional de Cuba, the plaintiff herein. The action must be dismissed because it is not being prosecuted in the name of the real parties in interest. For a Firru Complete DEFENSE TO THE SECOND CAUSE or ACTION IN THE AMENDED COMPLAINT DEFENDANT ALLEGES: 56. The real party in interest is not Banco Nacional de Cuba, the plaintiff herein, but the Republic of Cuba. The action must be dismissed because it is not being prosecuted in the name of the real party in interest. Wuererorg, the defendant demands judgment herein 1. Dismissing this action with prejudice ; | BREA tio DESAI Sei lB Sais EERIE, hla RIANA SHS AC hae eins ss aa ra Sibi ae ap gn ge eee SEAORS leet 28 2. Adjudicating that the Republic of Cuba is liable to the defendant in an amount in excess of the amount speci. fied in the amended complaint herein, without prejudice to the defendant’s rights at any subsequent time, through diplomatic channels or in an international forum, in any forum in any foreign nation, or in any court in the United States, to assert such liability of the Republic of Cuba either through affirmative relief or as a matter of defense, offset, counterclaira, or by such other means as may from time to time be available to it; 3. For such other, further and different relief as to the Court may seem just. Dated: New York, N.Y. March 6, 3.961 SHEARMAN & STERLING & Wricut By Harry Harrieip Member of the Firm Attorneys for Defendant 20 Exchange Place New York 5, N.Y. 29 Second Amended Reply of Plaintiff [Caption OmittepD] Plaintiff, for its second amended reply, alleges: As a Repty to THE First CoUNTERCLAIM ALLEGED in ParacrapHs 35 anp 36 oF THE ANSWER TO THE AMENDED CoMPLAINT, THE PLAINTIFF: 1. Denies each and every allegation contained in para- graphs 18, 30, 33, 34 and 36 of the answer. 2. The allegations contained in paragraphs 19, 20, 21 and 22 of the answer all relate to historical facts allegedly occurring prior to the establishment of plaintiff and to matters not within the corporate knowledge of the plaintiff or the personal knowledge or memory of its officers. Therefore, the plaintiff denies knowledge or information sufficient to form a belief as to the allegations of said paragraphs. 3. Denies each and every allegation contained in para- graph 23 of the answer, except admits that the defendant, in or about August, 1915, opened a branch of its banking business in the City of Havana, Cuba; that among the pur- poses of such branch was to carry on the business of bank- ing; and that on September 16, 1960, defendant maix.‘ained and operated 11 branches within the Republic of Cuba. 4, Denies each and every ailegation in paragraph 24 of the answer, except admits that in 1958 defendant en- tered into an agreement, a copy of which is annexed to the amended complaint; plaintiff refers to the said copy of the agreement for the terms thvreof. 5. Denies each and every allegation contained in para- graph 25 of the answer, except admits that on or about ci tet ao aa bE BUSSE ERG LOE EAGER CET: ey male 30 \ * January 7, 1959, the United States of America formally extended recognition to the present government of Cub, 6. Denies each and every allegation contained in para. graph 26 of the answer, except admits that on or about February 17, 1959, ‘the Republic of Cuba promulgated a law entitled ‘‘Fundamental Law’’; plaintiff refers to said law for its contents. 7. \Denies each and every allegation contained in para- graph 27 of the answer, except admits that in or about July of 1959, the loan which was the subject matter of the agreement hereinabove referred to was extended for a period of one year. 8. Denies each and every allegation contained in para- graph 28 of the answer, except admits that in or about July, 1960, plaintiff proposed to and did pay to the defen- dant $5,000,000. of the indebtedness incurred pursuant to the aforementioned agreement and requested that a pro- portionate amount of collateral be released and that the balance of the loan be extended for a period of one year. 9, Dehies each and every allegation contained in para- graph 29 of the answer, except admits that on or about September 16, 1960, the business and property of the defendant in the Republic of Cuba was nationalized. 10. Denies each and every allegation contained in para- graph 31 of the answer, except admits that after Septem- ber 17, 1960, defendant sold the collateral held as security for the unpaid portion of the loan. 11. Denies each and every allegation contained in para- graph 32 of tlie answer, except admits that on January 3, 1961, the Government of the United States severed diplo- matic relations with the Government of the Republic of Cuba. 31 As a Repty to THE SeconpD CouNTERCLAIM ALLEGED in ParacraPpas 37 THroucsH 40 INCLUSIVE OF THE ANSWER TO THE AMENDED CoMPLAINT, THE PLAINTIFF: 12. Repeats and realleges each of the denials and ad- missions set forth in paragraphs 1 through 11 inclusive hereinabove. 13. Denies each and every allegation contained in para- graphs 38, 39 and 40 of the answer. As a Repty to tHE Turrp CounTERCLAIM ALLEGED in ParacrapHs 42 THroucH 46 INCLUSIVE OF THE ANSWER TO THE AMENDED CoMPLAINT, THE PLAINTIFF: 14. Repeats and realleges each of the denials and ad- missions set forth in paragraphs 1, 2, 3, 5, 6 and 9 herein- above. 15. Denies each and every allegation contained in para- graphs 30, 33 and 46 of the answer. 16. Denies each and every allegation contained in para- graph 43 of the answer, except admits that on or about October 14, 1960, the Republic of Cuba enacted Law No. 891 and plaintiff refers to that law for the contents thereof. 17. Denies each and every allegation contained in para- graph 44 of the answer, except admits that on or about October 14, 1960, the defendant seized balances standing to the credit of the accounts in the ames of Banco Gelats, Banco Pujol, Banco de San Jose, Banco Castano S.A., Banco Asturiano de Ahorros, S.A., Banco de la Construc- cion and the Trust Company of Cuba. 18. Denies each and every allegation contained in para- graph 32 of the answer, except admits that on January 3, 1961, the Government of the United States severed diplo- ri relations with the Government of the Republic of ba. 32 AS AND FoR A REPLY T) THE FourtTH COUNTERCLAIM ALLEGED IN ParaGcrapus 47 THROUGH 50 INCLUSIVE oF THE ANSWER TO THE AMENDED COMPLAINT, THE PLAINTIFF : 19. Repeats and realleges each and every allegation contained in paragraphs 14 through 18 inclusive herein. above. : 20. Denies each and every allegation contained in para. graphs 48, 49 and 50 of the answer. As AND For A Fst, AFFIRMATIVE DEFENSE To Hacu OF THE COUNTERCLAIMS ALLEGED BY DEFENDANT IN ITS ANSWER TO THE AMENDED COMPLAINT, THE PuaIntiFF ALLEGES: 21. The allegations set forth in each of said counter- claims do not state claims upon which relief can be granted. As AND FoR A SECOND, AFFIRMATIVE DEFENSE TO Each : OF THE COUNTERCLAIMS ALLEGED BY DEFENDANT IN ITS ¥ ANSWER TO THE AMENDED COMPLAINT, THE : PuawntirF ALLEGES: 22. Plaintiff is an autonomous financial institution which, under the laws of the Republic of Cuba, is not responsible for the obligations of the Republic of Cuba. As AND For A Trier, AF¥IRMATIVE DEFENSE TO Hach OF THE COUNTERCLAIMS ALLEGED BY DEFENDANT IN ITS ANSWER TO THE AMENDED CoMPLAINT, THE PuaIntTiIFF ALLEGES: 23. To the extent, if eny, to which plaintiff may be re- sponsible for the obligations of the Republic of Cuba, it is entitled to immunity from a suit in a court of the United States. : ee 33 As A PartraL DEFENSE TO HacH OF THE CouUNTERCLAIMS ALLEGED BY DEFENDANT IN ITS ANSWER TO THE AMENDED CoMPLAINT: 94. Plaintiff realleges each and every allegation con- tained in paragraph 23 hereof. Wuenrerore, plaintiff demands judgment against the de- fendant : (a) Dismissing defendant’s counterclaims ; (b) Awarding judgment to the plaintiff in the sum de- manded by the complaint ; and (c) Awarding the plaintiff interest and the costs and disbursements of this action. Dated: New York, N.Y. August 1, 1961 Rasrnow1tz & Boupin by Victor RaBINowItTz Member of the Firm Attorneys for Plaintiff 25 Broad Street New York 4, N. Y. Ms ¥. E Ny f E F & : L ' iy . ; 34 Opinion and Order, Dated July 20, 1967 and Entered July 21, 1967 UNITED STATES DISTRICT COURT SoutHERN District, New Yorx July 20, 1967 Banco Nacional DE CuBa, Plaintiff, Vv. Tue First NationaL City BaNnK oF New York, Defendant. No. 60 Civ. 4664. Shearman & Sterling, New York City, for defendant; Henry Harfield, Charles C. Parlin, Jr., William Harvey Reeves, New York City, of counsel. Rabinowitz & Boudin, New York City, for plaintiff; Victor Rabinowitz, Mary M. Kaufman, Henry Winestine, Eleanor Fischer, New York City, of counsel. Opinion FREDERICK VAN PE.LT Bryan, District Judge: This action by Banco Nacional of Cuba (Banco Na- cional), the financial agent of the Government of Cuba, against The First National City Bank of New York (First National City) is one of the numerous cases before me rais- ing issues arising out of confiscations of American-owned property in Cuba by the Castro Government. . The amended complaint alleges two claims for relief, the first for the excess realized by First National City on the sale of collateral held as security for a loan, and the second for deposits by nationalized Cuban banks in First National 35 City in New York. The answer pleads a series of defenses, set-offs and counterclaims based principally on the confisca- tion of First National City’s Cuban branches. First Na- tional City has now moved for summary judgment pursuant to Rule 56(a), F.R.C.P., and Banco Nacional has cross- moved for the same relief on the first claim and for judg- ment dismissing the counterclaims. Rule 56(b). L The facts giving rise to the first claim for relief are not in serious dispute. On July 8, 1958, First National City, a New York banking corporation doing business in New York and throughout the world, made a loan of fifteen million dol- lars to Banco de Desarrollo Economico y Sozial (Bandes), a governmental corporate agency of the Republic of Cuba. The loan was secured by United States Government bonds and obligations of the International Bank of Reconstruction and Development pledged te First National City by Fondo de Estabilizacion de La Moneda (Fondo), another Cuban governmental agency, and Banco Nacional. On January 1, 1959, the Castro Government took control of the Republic of Cuba. The fifteen million dollar loan to Bandes was re- newed for another year or July 8, 1959. Thereafter by virtue of Cuban Law No. 720, February 16, 1960, and Law No. 847, June 30, 1960, Bandes was dissolved and Banco Na- cional succeeded to the rights and obligations with which we are concerned in this action, including the obligation to repay the loan. The Republic of Cuba guaranteed repay- ment. On July 7, 1960, the terms of the loan were rene- gotiated for the last time. Banco Nacional repaid five mil- lion dollars, and requested and obtained an agreement from First National City to defer demand for the balance of ten million dollars for one year. A proportionate amount of collateral was then released. September 16, 1960, however, marked the date of an ir- reparable breach of the relationship between these parties. On that day the Cuban militia seized all eleven of First Na- tional City’s branches located in Cuba. On the following weer Bee 36 | day the issuance of Executive Power Resolution No. 2 left no uncertainty as to the permanent nature of these confisca. tions; u.ider the terms of the resolution the Cuban State was declared ‘‘subrogated’’ to all of First National City’s rights, ovligations, and liabilities.! In the light of this turn of events First National City, on September 23, 1960, sold the collateral it held as security ‘for the unpaid portion of the loan and appiied the proceeds in payment of the principal obligation and accrued interest, Defendant concedes—and plaintiff for purposes of this mo- tion does not deny—that the amount realized on the sale of collateral exceeded by $1,810,880.51 the ten million dollars of unpaid principal and the $65,000 interest then due.? The first claim for relief seeks judgment for the amount of the excess. The answer of First National City to the first claim alleges in substance that the Republic of Cuba is the real party in interest in this action, that the Cuban government is indebted to the defendant in an amount exceeding the sum demanded in the amended complaint by reason of the con- fiscation of its Cuban property, and that therefore the defendant is entitled to set off this outstanding obligation as a complete defense to the claims asserted by Banco Na- cional. First National City has also interposed an affirma- tive counterclaim for the amount of the excess, and seeks dismissal of plaintiff’s claim with prejudice. Both parties recognize that this court on the present papers cannot de- termine the value of First Nationa! City’s Cuban properties which have been confiscated. But apart from this issue of fact the basic questions in this case are posed by the motions before me. The ultimate legal issues on the first claim are clearly drawn. Banco Nacional strenuously contends that the afir- mative counterclaim and the set-off by way of defense are 1 See note 6, infra. 2 The amount sought in the first count of the amended complaint was $2,347,000. * pm pit ae 37 barred, alternatively, by principles of sovereign immunity and the act of state doctrine. The dispositive question is simply whether defendant is precluded on those grounds from asserting—either affirmatively or by way of set-off as a complete defense—a claim for the value of its confiscated Cuban properties. II. Sovereign Immunity There is no serious question that the Government of Cuba and Banco Nacional are ve and the same for purposes of this litigation.? And as a general rule a state which initi- ates proceedings in a court of another sovereignty waives immunity from a counterclaim or set-off to the extent that it does not exceed the amount of the state’s claims. ALI, Restatesnent (Second), Foreign Relations Law of the United States § 70(2)(a) (1965). This waiver extends to defensive counterclaims which do noi arise out of the sub- ject matter of the claims of the state which initiated the 3Plaintiff at various times has argued that defendant’s claim against the Cuban government cannot be asserted against Banco Na- cional, an entirely separate entity. This position is, of course, flatly inconsistent with the sovereign immunity argument. Moreover, throughout the Sabbatino litigation it was recognized by every court concerned that Banco Nacional De Cuba was an instrumentality of the Cuban government. Banco Nacional v. Sabbatino, 193 F. Supp. 375 (S.D. N.Y. 1961), aff’d, 307 F.2d 845 (2d Cir. 1962), rev’d, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964). As Judge Wein- feld pointed out the complaint there alleged that plaintiff was a “public corporation wholly owned by the government.” Banco Nacional De Cuba v. Sabbatino, 27 F.R.D. 255, 258 (S.D. N.Y. 1961). The present amended complaint alleges only that plaintiff “is a corporate body existing under * * * the laws of the Republic of Cuba, authorized to administer the domestic and foreign credit operations of the Republic of Cuba as its agent and having its principal office in Havana, Cuba.” But any doubts as to the organic relationship between plaintiff and the Cuban government are removed by an examination of the local laws defining the function and authority of Banco Nacional. Plaintiff alone has exclusive charge of directing the banking fizction of the state. Law No. 891, arts. 1, 2, 3, Oct. 14, 1960. And it is plaintiff who shall exercise “the monetary sovereignty of the Nation.” Law No. 930, art. 1, Feb. 23, 1961. The Government of Cuba and Banco Nacional are indistinguishable entities for purposes of this lawsuit. Compare Dexter & Carpenter, Inc. v. Kunglig Jarnvagsstyrelsen, 43 F.2d 705 (2d Cir. 1930). 38 action. Naticaal City Bank of New York v. Republic of China, 348 U.S. 356, 75 S. Ct. 423, 99 L. Ed. 389 (1955); Wacker v. Bisson, 348 F.2d 602, 610 (5th Cir. 1965) ; Ameri- can Hawaiian Ventures, Inc. v. M. V. J. Latuharhary, 257 F, Supp. 622, 626-627 (D. N.J. 1966) ; See Dexter & Carpente? Inc. v. Kunglig Jarnvagsstyrelsen, 43 F.2d 705 (2d Cir, 1930). The ultimate policy reason for this is simply that ‘fairness has been thought to require that when the soy- ereign seeks recovery, it be subject to legitimate counter. claims against it.'’ Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 438, 84 S. Ct. 923, 945, 11 L. Ed. 2d 804 (1964); see Pugh & McLaughlin, Jurisdictional Immunities of For. eign States, 41 N.Y.U. L. Rev. 25, 53-54 (1966). So viewed, there is no doubt that the assertion of First National City’s defensive counterclaim as a set-off is not barred se plaintiff happens to be an instrumentality of vernment. When a foreign government insti- tutes suit in\the courts of this country, it can expect nothing more and nothing less than substantial justice between the parties. Since the decision in National City Bank of New York v. Republic of China a suit brought by a foreign government is no longer a one-way street. The doctrine of sovereign immunity cannot be raised in this court as a technical bar to any legitimate defensive counterclaims or set-offs advanced by First National City. Whether the defendant has such legitimate de- fenses—and if so in what amount—are, of course, entirely separate questions.° * Pons v. Republic of Cuba, 111 U.S. App. D.C. 141, 294 F.2d 925 (1961), cert. den., 368 U.S. 960, 82 S. Ct. 406, 7 L. Ed. 2d 392 (1962), is not to the contrary because the party there aggrieved by the Cuban confiscation was a Cuban national. 5 As mentioned, First National City has also interposed an affirmative counter-claim to recover the amount by which the com- pensation for the confiscations exceeds the $1,810,880.51 figure. I hold, however, that plaintiff's limited waiver of immunity by institut- ing this suit permits only the assertion of a defensive counter- claim that “does not exceed the amount of the state’s claims.” Restatement (Second), Foreign Relations Law of the United States § 70(2) (a) (1965). SL BOLTS RECS OOQET RE: SIPPY SZ EMELLOE, ALE PEGE BIE SE MEE LANAI ALITA LAT aN — 39 III. The Act of State Doctrine. The basis for defendant’s set-off is that the Govern- ment of Cuba, in whose shoes Banco Nacional stands, con- fseated eleven of First National City’s Cuban branches without compensation and in violation of international lav. Under Banco Nacional de Cuba v. Sabbatino, 376 US. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964), inquiry into the legality vel non uf the expropriations here in- volved would be foreclosed by the act of state doctrine which forbids the courts of une country from sitting ‘‘in judgment on the xcts of the government of another, done | within its own territory.’’ 376 U.S. .at 416, 84 S. Ct. at 934, queting Underhill v. Hernandez, 168 U.S. 250, 252, 18S. Ct. 83, 42 L. Ed. 456 (1897). However, the holding in Sabbatino was for all practical purposes overruled by the Hickenlooper amcdment to the Foreign Assistance Act of 1964, 22 U.S.C. § 2370(e) (2), as amended 79 Stat. 658-659 (Sept. 6, 1965), the constitutionality of which has been upheld. Banco Nacional de Cuba v. Farr, 243 F. Supp. 957 (S.D. N.Y. 1965), aff’d, July 31, 1967 (2d Cir.). Con- gress there declared that the courts of this country should not refrain, on the ground of the act of state doctrine, from determining the merits in cases involving a confiscation after January 1, 1959, by an act of a foreign state ‘‘in violation of the principles of international law, including the principles of compensation.’’ The Hickenlooper amend- ment specifically stated that it did not apply ‘‘in any case in which an act of a foreign state is not contrary to inter- national law’’. The ultimate act of state doctrine issue boils down to whether the confiscation of First National City’s Cuban property violated principles of international law. In my view the seizures here involved had precisely this effect for a combination of reasons. In the first place the various decrees authorizing the confisecations did not provide for adequate payments to | First National City. The scheme of ‘‘illusory compensa- tion’’ outlined by Judge Waterman in Sabbatino, 307 F.2d PLEA LES LGA R «Ba ONE: ENA IADR roan PERSE ANI MAREN ORD SCOOTER acy 4st . Vase Mey 7 Hk ie bi ai i ae Racha EERIE ALT 40 at 862, has been totally ineffective in practice in the inter. vening years. No compensation whatsoever appears to have been forthcoming and none can reasonably be expected in the foreseeable future. It is true that both the Second Circuit and the Supreme Court in Sabbatino pointedly refrained from resolving the delicate question of whether the mere failure, without more, to provide adequate compensation to aliens whose property has been expropriated constitutes a breach of international law. 376 U.S. at 428-430, 84 S. Ct. 923; 307 F.2d at 862-864. But Congressional passage of the Hicken. looper Amendment has removed any doubt on this score— at least insofar as the courts of this country are concerned, While the reference to the ‘‘principles of compensation” in 22 U.S.C. § 2370(e) (2) is somewhat open-ended because it does not state specifically that compensation is a sine qua non of full compliance with international law, sub- section (1) of the same statute leaves no doubt as to the views of Congress on the subject. That provision requires the suspension of assistance under the foreign aid pro- gram to the government of any state which, after effec. tuating the confiscation of property that is at least 50 per- cent owned by United States citizens or corporations, ‘‘fails within a reasonable time * * * to take appropriate steps * * * to discharge its obligations under international - law toward such citizen or entity, including speedy com- pensation for such property in convertible foreign ex- change, equivalent to the full value thereof, as required by international law’’. The legislative history of the Hicken- looper Amendment and its extensions is replete with statements reaffirming what is plain on the face of the legis- lation, ie., that international law, at least from the paro- chial point of view of the United States, requires ful compensation for seizures of American-owned property. S. Rep. No: 170, 89th Cong., 1st Sess. at 19; 110 Cong. Ree. 18936-37, 18946 (Aug. 14, 1964) ; 110 Cong. Rec. App. A5157 (daily ed. Oct. 7, 1964) (Senator Hickenlooper’s Statement - on Conference Report); see 22 U.S.C. § 2370(a) (2). 41 It is clear to me that this rule of compensation legisla- tively announced by Congress is fully consistent with gen- erally accepted principles of international law estabi'shed by the authorities reviewed by the appellate courts in Sab- batino. It is therefore unnecessary to reiterate the settled proposition that ‘‘the rules of international law * * * are subject to the express acts of Congress.’’ United States ex rel. Pfefer v. Bell, 248 F. 992 995 (E.D. N.Y. 1918). This court would accordingly be bound to apply the provisions of the Hickenlooper Amendment even if they were found to be inconsistent with the views of other nations on inter- national law, though that is not so here. See The Nereide, 13 U.S. (9 Cranch) 388, 423, 3 L. Ed. 769 (1815) ; Paquette Habana, 175 U.S. 677, 700, 20 S. Ct. 290, 44 L. Ed. 320 (1900); United States v. Siem, 299 F. 582, 583 (9th Cir. 1924) ; Schroeder v. Bissell, 5 F.2d 838 (D. Conn. 1925) ; Reeves, The Sabbatino Case and the Sabbatino Amend- ment: Comedy—or Tragedy of Errors, 20 Vand. L. Rev. 429, 492-93 (1967). There is more to this case, however, than a naked failure by the Cuban government to comply with general principles of compensation. Violations of international law spring from other sources also. The September 16, 1960, takeover of First National City’s branch banks in Cuba had all the earmarks of the seizure of American-owned properties which Judge Waterman in Sabbatino condemned as violative of international law for reasons apart from the failure to provide compensation. Here, as in Sabbatino, the expro- priations were consummated under Cuban Law No. 851, July 6, 1960, which granted the government carte blanche authority to confiscate all properties owned by nationals of the United States. As Judge Waterman pointed out, see 307 F.2d at 865 n. 14, this law plainly was passed as a retaliatory measure against the United States Goverment’s reduction of the sugar quota allotted to Cuba. On Septem- ber 17, 1960, the day after the Cuban militia seized defen- dant’s branches, the Cuban government issued Executive Power Resolution No. 2, which, like Resolution No. 1 in- 42 olved in Sabbatino, justified the seizures of American. owned property as retaliation for an ‘‘act of cowardly and criminal aggression,’’ that is, the reduction of the sugar quota.°® 6 The vitriolic language of Resolution No. 2, Def. Ex. 22, left no doubt as to the retaliatory and discriminatory motivation for the bank seizures : “Whereas: Law No. 851 of July 6, 1960, published in the Gaceta Oficial of July 7, authorized the undersigned to order jointly, when- ever they consider it necessary to the defense of the national interest, the nationalization, by means of expropriation, of the assets and com- panies owned by natural or juristic persons who are nationals of the United States of America, or of companies in which the said persons have an interest or participation, even though the said companies were constituted in accordance with Cuban laws. Whereas: It is not possible to allow a large share of the nation’s banking to remain in the hands of the imperialist interests which, in an act of cowardly and criminal aggression, inspired the reduction of our sugar quota. Whereas: Subsequent to the reduction of the sugar quota, the Government of the United States of America and the representatives of monopolistic interest of that country repeatedly committed acts of open aggression against, the Cuban economy, such as those involving the curtailment of trade between the two countries, which had the obvious purpose of hampering the economic development of Cuba; and the imposition of embargoes on commercial aircraft owned by Cuban companies, under the legal guise of claims against civil debts, but which have the implicit purpose of curtailing our vital means of international communication, in an increasingly greater effort to isolate our country. Whereas: One of the most efficient instruments of that imperial- istic ‘interference in our historical development has been typified by the operations of the American commercial banks, which have served as a financial vehicle to facilitate the monopolistic activities of the American companies in Cuba and the massive invasion of our couniry by imperialistic capital through usurious loans, which, far from pro- moting our economic growth, brought about in times of emergency numerous lawsuits resulting in the seizure of our national wealth by that imperialistic capital. Whereas: Jt has always been the financial policy of these banks to encourage the activities of the American companies that devote their efforts to the procurement of our natural resources, the exploitation of our land by holders of large estates, and the mercantile operations that have contributed to the growing trend toward importing Ameri- can manufactured goods, to the extent that it has hindered the devel- opment of national industries and has forced our economy to become dependent on a single crop and a single export. PSOE IN GD, 9 8 SARE ETT Sea lt neta OCT aCe EE RR ES AEE RE SPECIE ETS noe a 43 ‘“[C]onfiscation without compensation when the expro- priation is an act of reprisal does not have significant sup- port among disinterested international law commentators from any country.’’ 307 F.2d at 866. Thus the allegations in the decrees that the general public intcrest necessitated the seizures of First National City’s property must be dis- counted when the manifest purpose of the confiscations was political retaliation of the rankest sort. Moreover, as in Sabbatino, the reprisals involved in this ease evidently evince discrimination rising to the level of a violation of international law. Not only was Law No. 851 aimed solely at United States Nationals, but also a general confiscation of the remaining Cuban banking properties did not take place until October 14, 1960,’ almost a month after - First National City’s branches were seized. Even then the end result was not that Cuban-owned enterprises and Amer- iean-owned enterprises were treated alike, compare 307 F.2d at 845, because the compensation provisions for Americans, unlike those for Cuban citizens, were entirely Whereas: All this proves that the activities of American banks in ~ Cuba have been a decisive factor in the disruption of our economic structure. : | | Whereas : It is unquestionable that the continuation of American ~ banking interests in Cuba, a typical example of the imperialistic phe- nomenon, constitutes an obstacle to national liberation. | Whereas : In addition to the facts already stated, there is the delib- erate practice of the United States Government designed to facilitate and to encourage, within its own territory, counter-revolutionary ac- tivities by war criminals and fugitive traitors. | | : | Whereas: Furthermore, the work of international espionage in Cuban territory has been intensified under the sponsorship of that Government, with notorious contempt for international law and with - the obvious: intention of promoting conspirational activities in our country. Whereas: All these acts are undertaken for the purpose of destroying the great achievements of the Cuban Revolution, in the wicked hope of again subjecting our countzy to imperialistic oppres- sion. Whereas: We the undersigned realize that we should exercise the authority vested in us, and that we should proceed, in responsible discharge of the revolutionary duty, to nationalize all the American ee ee 2397: ERR RDRRORRORCEORONES , TES. 1 BCP - ' 44 dependent upon the creation of a fictitious fund consisting of ‘‘twenty-five per cent of the foreign exchange received by Cuba from its annual sales to the United States of Cuban sugar in excess of three million Spanish long tons at a price of not less than 5.75 cents per English pound (f.a.s.).’’ 307 F.2d at 862. Beyond this, First National City obviously was damaged by discrimination to the extent it did not enjoy the profitable use of its Cuban properties during the period non-American bank enterprises operated w- molested. IV. The totality of circumstances presented by this case—a patent failure to provide adequate compensation, a retalia- tory confiscation by a foreign government, and discrimina- tion against United States nationals—compel a finding that the Cuban decree directing confiscation of First National City’s property was in direct contravention of the prin- ciples of international law. Thus First National City is entitled to set-off against the first claim for relief such banks operating in our country, thus advancing still further on the road undertaken by cur people, with firm patriotic will, toward the total economic independence of our nation. Now, therefore: Exercising the authority vested in us, in accor- dance with the provisions of Law No. 851 of July 6, 1960, We Resolve: First, To order the nationalization, by expropriation, and conse- quently, award to the Cuban Government, in absolute ownership, all the assets, rights and shares deriving from the utilization thereof, especially the baisks, including all their branches and agencies located in Cuba, whick are the property of the following legal persons: 1. The First National City Bank of New York 2. The First National Bank of Boston 3. The Chase Manhattan Bank Second: Accordingly, the Cuban State is hereby declared subro- gated in the place and stead of the natural or juristic persons listed in the preceding paragraph with respect to the above mentioned property, rights, and rights of action, and to the assets and liabilities forming the capital of the above mentioned companies.” oe. & 8° s 7 Law No. 891, Def. Ex. 10. RDU tpt seen er mamnets Taare ea SR 45 amount as may be due and owing to it from the Cuban Government as compensation for the seized Cuban prop- erties, and I so hold.*® Banco Nacional is quite correct in pointing out that the amount owing to First National City from the Government of Cuba under the applicable international law ‘‘principles of compensation’” cannot be determined on this record. The actual amount of the set-off which can be asserted here poses delicate questions of fact and law requiring further careful consideration. See Reeves, supra at 505-508, for a consideration of some of the factors involved. It therefore cannot be determined on these motions whether, as defend- ant contends, the amount of the set-off equals or exceeds the sum of $1,810,880.51 admittedly owning to the plaintiff. If it does, defendant is entitled to judgment dismissing count one? V. Tne second claim for relief may be speedily disposed of. Italleges that a number of Cuban banks which were nation- alized pursuant to Law No. 891 in October, 1960, at that time maintained accounts with the defendant at its office in New York City. Banco Nacional as agent of the Cuban Govern- ment now lays claim to these funds, amounting to some $33.819.93, by virtue of the confiscation decree declaring 8 The Sabbatino amendment is inapplicable “in any case with re- spect to which the President determines that application of the act of state doctrine is required in that particular case by the foreign policy interests of the United States, and a suggestion to this effect is filed on his behalf in that case with the court.” 22 U.S.C. 4 2370(e) (2). However, since the Executive Branch has maintained silence for the six years this action has been pending, it is clear that it has not deter- mined that foreign policy interests of the United States require appli- cation of the act of state doctrine here. 922 U.S.C. § 2370(e). Any sum which First National City is permitted to set-off in this action will, of course, have to be taken into account by the United States Foreign Claims Settlement Commission in assessing claims filed by First National City. See International Claims Settlement Act, § 501, 78 Stat. 1110 (1964), 22 11.S.C. § 1643. Vk i hc 2 a Oa vip. Wie te aca era 46 it to have full title to the property of the Cuban banks who maintained these accounts in New York. The short answer to this claim is simply that ‘‘whep property confiscated is within the United States at the time of the attempted confiscation, our courts will give effect, to ts of state ‘only if they are consistent with the policy and law of the United States.’’’ Republic of Iraq v. First National City Bank, 353 F.2d 47, 51 (2d Cir. 1965), cert den., 382 U.S. 1027, 86 S. Ct. 648, 15 L. Ed. 2d 540 (1966), quoting ALI, Restatement of Foreign Relations Law § 46 (Proposed Official Draft, 1962). The Cuban decree, like the attempted confiscation of the accounts in Republic of Iraq, is plainly contrary to our policy and laws. It is not entitled to extraterritorial enforcement in United States courts as to property located within the United States. Re. public of Iraq v. First National City Bank, supra; see F. Palicio y Compania v. Brush, 256 F. Supp. 481 (S.D. N.Y. 1966), aff’d per curiam, 375 F.2d 1011 (2d Cir. 1967) ; see Note, International Conflict of Laws: Limitations Imposed On Effect American Courts May Give Foreign Confisca- tions, 1966 Duke L.J. 828. Defendant is therefore entitled to judgment dismissing count two. VI. In the light of what has been already said the motions before me are disposed of as follows: (1) Defendant’s motion for summary judgment on the second claim for relief is granted. Since I find there is no just reason for delay, it is directed that final judgment in favor of defendant will be entered accordingly. Rule 54(b), F.R.C.P. (2) Plaintiff’s cross-motion for summary judgment on its first claim and on the counterclaims is in all respects denied. (3) Defendant’s motion for summary judgment on the first claim is denied since there are triable issues of fact 47 and law with respect to the amount of defendant’s set-off. However, I hold that defendant is entitled to set-off as inst the first claim for relief any amounts due and owing to it from the Cuban Government by reason of the confis- cation of First National City’s Cuban properties. This opinion shall constitute my specification of the facts supporting that holding pursuant to Rule 56(d), F.R.C.P. The case will be tried on the sole issue of the amount which defendant is entitled to assert by way of set-off. It is so ordered. ib ial Satna UR eke aR Kadles Rie TNT 48 Opinion, Dated July 16, 1970 UNITED STATES COURT OF APPEALS For tHE Seconp Circuit Nos. 480 and 481—September Term, 1969. (Argued March 23, 1970 Decided July 16, 1970) Docket Nos. 32533 and 33864 Banco Nacronat De Cusa, Appellant v. Tue First NationaL City Bank or NEw York, Appellee Before: Lumsarp, Chief Judge, Hays, Circuit Judge, and BLuMENFELD, District Judge." Appeal from an order of the United States Distric Court for the Southern District of New York, Frederid vanP. Bryan, J., granting defendant-appellee’s motion fo summary judgment on its counterclaim against plaintiff appellant. Reversed and remanded with directions. Victor Rasrnowitz, New York, N. Y. (Rabino \. 4z, Boudin & Standard, Leonard B. Bou din, and Kristin Booth Glen, on the brief) for appellant. * Sitting by designation. 49 Henry Harrrevp, New York, N. Y. (Shearman & Sterling, Wm. Harvey Reeves, and John J. Madden, Jr., on the brief, for appellee. Watter J. Neyton, New York, N. Y., on the brief, for Alicio Ruiz Martinez, Sr., et w., mtervenors. LumBarD, Chief Judge: Plaintiff-appellant Banco Nacional de Cuba appeals from an order of the District Court for the Southern Dis- trict of New York which granted summary judgment to defendant-appellee First National City Bank of New York (First National City) on Banco Nacional’s two causes of | actiou. Appellant has abandoned the second cause of action | on this appeal, and thus only the first cause of action, which is based on the following facts, is before us on this appeal. First National City, when the Castro government of Cuba expropriated its properties there, forthwith sold collateral securing a loan it had made to Banco Nacional prior to the change in Cuba’s government. The effect of Judge Bryan’s order was to allow First National City to retain, as an offset against the value of its expropriated properties, the amount by which the proceeds from the sale of the collateral exceeded the amount then owing on the loan. We hold that allowing such an offset was error. The so- called Hickenlooper Amendment does not give to a lender such as First National City the right to apply assets under its control to recoup losses it has suffered by expropria- tion of its properties in Cuba. Accordingly, we reverse and remand to the district court for a factual finding as to the amount of the excess. Once this factual determina- tion is made, we direct entry of summary judgment in favor of Banco Nacional on its first cause of action. On July 8, 1958, First National City made a fifteen million dollar secured loan to Banco de Desarrollo Eco- ) nomico y Social (Bandes), a corporate agency of the gov- 50 ernment of the Republic of Cuba. Collateral for the loan was pledged by Banco Nacional de Cuba (Banco Nacional) and another Cuban government agency, Fondo de Estab. ilizacion de la Moneda (Fondo) ; this security was held in New York and consisted of bonds of the United States government and obligations of the International Bank of Reconstruction and Development. The Castro forces seized control of the government of Cuba on January 1, 1959. Thereafter, on July 8, 1959, First National City renewed the fifteen million dollar loan to Bandes for another year. During the course of the ensuing year, two Cuban laws went into effect which re. sulted in the dissolution of Bandes and the succession by Banco Nacional to many of its rights and obligations, including the obiigation to repay the fifteen million dollars, plus interest, to First National City. The Republic of Cuba also guaranteed that the loan would be repaid. First National City and Banco Nacional renegotiated the loan for the second time on July 7, 1960. Banco Na. cional repaid one-third of the loan—tive million dollars— and First National City released approximately one-third of the collateral. At Banco Nacional’s request, First Na- tional City agreed not to demand repayment of the ten million dollar baiance for one year. On September 16, 1960, the Cuban militia occupied the eleven First National City branch offices in Cuba. Execv- tive Power Resolution No. 2, issued by the Castro gov- ernment the following day, formally confirmed that the branches had in fact been nationalized.? i The district court cited these laws as Cuban Law No. 730, Feb- ruary 16, 1960, and Cuban Law No. 847, June 30, 1960. 2 Executive Power Resolution No. 2 was issued pursuant to Cuban Law No. 851, July 6, 1960. See Banco Nacional de Cuba v. Sabbatino, 307 F.2d, 845, 849, 861-2 (2d Cir. 1962). Executive Power Resolution No. 2 is set out in the opinion of the district court, 270 F. Supp. at 1009-1010, note 6. 2x PARTIE MVE AE LEE PONY PER 51 First National City retaliated almost immediately. On September 20, 1960, it notified Banco Nacional that it had dosed Banco Nacional’s accounts as of September 17 and that it was claiming the amounts on deposit therein as an offset against the nationalization of its properties in Cuba.’ What is more important to the present appeal, on Septem- ber 21 and 22, 1960, First National City sold the collateral held in New York as security on the ten million dollar lan. First National City received from that sale an amount _eonceded to be at least $11,892,448 and perhaps as much as $12,412,000—which was substantially in excess of that required to discharge the ten million dollar principal sum and the interest thereon at the annual rate of 4 per cent for the period July 8, 1960 through the time of the sale. II. Banco Nacional instituted suit in November, 1960, against First National City to recover the excess realized on the sale of the collateral held as security for the loan. Its complaint also set forth a second cause of action for recovery of the deposits on the Cuban banks which First National City had retained. As Judge Bryan described it, First National City’s answer raised ‘‘a series of defenses, set-offs and counterclaims based principally on the con- fication cf First National City’s Cuban branches.’’ 270 F. Supp. at 1005. Both parties moved for summary judg- ment on both causes of action and on the counterclaims. As to the secou.d cause of action, Judge Bryan granted First National City’s motion for summary judgment. Banco Nacional filed a notice of appeal from that portion of his _} What had happened was that a number of private Cuban banks with deposits in First National City were nationalized pursuant to Cuban Law No. 891 in October 1960, and the confiscation decree declared that Banco Nacional was to have full title to the property of those banks. Thus, First National City, in notifying Banco 4 Nacional, referred to the accounts as Banco Nacional’s. 52 order, but is not pressing that appeal at this time.* Ip dealing with the first cause of action, Judge Bryan denied Banco Nacional’s motion for summary judgment on its ciaim aud on First National City’s counterclaim. However, as to defendant First National City’s motion for summary judgment on the first cause of action and the counterclaim, Judge Bryan ruled: Defendant’s motion for summary judgment on the first claim is denied since there are triable issues of fact and law with respect to the amount of defendant's set-off. However, I hold that defendant is entitled to set-off as against [Banco Nacional’s] first claim for relief any amounts due and owing to it from the Cuban Government by reason of the confiscation of First National City’s Cuban properties. 270 F. Supp. at 1011. It is this latter holding that is before us on this appeal. After Judge Bryan’s order was filed, the parties entered into a stipulation providing that the value of First Na- tional City’s property which had been confiscated in Cuba - exceeds any amount which Banco Nacional could be awarded 4 We only observe that Judge Bryan’s resolution of this issue was in compliance with the decision of this court in Republic of Iraq v. First National ‘City Bank, 353 F.2d 47 (2d Cir. 1965), cert. den, 382 U.S. 1027 (1960). We also note that the holding that the Cuban expropriation decrees are not entitled to extraterritorial enforcement in United States courts as to property located within the United States is distinct from the question whether the act of state doctrine —absent the Hickenlooper Amendment — bars an American court from inquiry into the validity of expropriations of American property within the territory of the expropriated nation. On this appeal, certain intervenors point out that they claim some of these deposits. The court below, in granting summary judgment to First National City on Banco Nacional’s second cause of action, did not reach these claims, which we assume will be litigated below at some time. ee 53 on its first cause of action to recover from First National City the excess amount realized on the sale of the collateral. | I. First National City claims that it is entitled to retain the excess amount realized on the foreclosure of the collateral as a set-off because the Cuban government con- fscated its branch banks without providing adequate com- pensation, and that this act was a violation of international law. Judge Bryan properly observed that under the United States Supreme Court’s decision in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), ‘inquiry into the legality vel non of the expropriations here involved would be foreclosed by the act of state doctrine which forbids the courts of one country from sitting ‘in judgment of the acts of the government of another, within its own terri- tory.’ ’?? 270 F. Supp. at 1007. However, Judge Bryan then concluded that the Sabbatino decision had been legislatively overruled ‘‘for all practical purposes,’’ by the Hickenlooper Amendment to the Foreign Assistance Act of 1964, 22 USC. § 2370(e) (2), as amended, 79 Stat. 658-59 (Sept. 6, 1965). He also noted that the Hickenjooper Amendment had been held constitutional in the Southern District of New York in the sequel to the Sabbatino \litigation, Banco Nacional de Cuba v. Farr, 243 F. Supp\ 957 (8.D.N.Y. 1965) ; we add that the district court decisidn_in Farr was affirmed in a lengthy opinion by Judge Waterman, 383 F.2d 166 (2d Cir. 1967), and that Banco Nacional’s petition for a writ of certiorari in that case was denie.‘, 390 US. 1956 (1968). Judge Bryan also held that the Hickenlooper Amend- ment directed him, regardless of the act of state doctrine, , to determine ‘‘the merits in cases involving a confiscation: _ after January 1, 1959, by an act of a foreign state ‘in ‘This stipulation was entered for purposes of this litigation, to . avoid the necessity of a trial on the value of First National City’s expropriated assets located in Cuba. See 270 F. Supp. at 1010-11. — bai : ; 54 violation of the principles of international law, including the principles of compensation.’ ’’ 270 F. Supp. at 1007. Proceeding to the merits, Judge Bryan held that the confis. cation of First National City’s branches did violate inter. national law because adequate compensation was not pro- vided and because the confiscation was a reprisal evidencing discrimination against nationals of the United States, 270 F. Supp. at 1007-1010. In light of this, he concluded that First National City was entitled to a set-off against Banco Nacional’s claim to recover the amount left from the sale of the collateral after deduction of the principal and interest due and owing. | On this appeal, Banco Nacional makes three principal arguments. First, it claims that the act by which the Cuban government confiscated First National City’s branches in Cuba was an act of state, that the Hickenlooper amendment is not applicable to the facts in this case, and thus that the district court should have followed Mr. Justice Harlan’s opinion for the Court in Sabbatino and not inquired into the validity of the Cuban expropriation under international jaw.° Second, Banco Nacional argues that the Hickenlooper Amendment is unconstitutional.” Third, Banco Nacional contends, with some justification, that summary judgment on First National City’s counterclaim was improper be- cause: (1) the counterclaim was invalid procedurally in that it was directed at the Republic of Cuba, which is not an ‘‘opposing party’’ in the present suit under Rule 13 of the Federal Rules of Civil Procedure and the interpretations of that rule; or (2), assuming the counterclaim to be proper 6 A sub-part of this argument is that, assuming the Hickenlooper Amendment applies to the facts or this case, Judge Bryan incorrectly applied international law in holding that the Cuban expropriations violated international law. However, appellant concedes that if this court holds the Amendment applicable to the case at bar, Judge Bryan’s decision on this issue was in accordance with the decision of this court in Banco Nacional v. Farr, supra. 382 F.2d at 183-185; appellant states that it raises the issue only to preserve it for further appeal. 7? Again, this issue was resolved against Banco Nacional in Banco Nacional v. Farr, supra, 383 F.2d at 178-183. h3) procedurally, Banco Nacional is not in fact liable for the obligations of the Republic of Cuba; or (3) because at the very least this latter question raised a triable issue’ of fact which was improperly resolved on a motion for summary judgment. Since we agree with Banco Nacional’s first argu- ment, we find it unnecessary to pass on the other conten- tions. IV. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)* laid down a rule of federal law by which this court and all other courts are bound absent subsequent changes in the rule wrought by Congress or by the Supreme Court. In the course of his exhaustive opinion for the eight- member majority of the Court, Mr. Justice Harlan devoted considerable attention to the general problem of when domestic courts should decline to pass upon claims which draw into question the validity of the acts of foreign sovereign states. He observed that the © ‘‘continuing vitality [of the act of state doctrine] de- pends on its capacity to reflect the proper distribution of functions between the judicial and political branches of the Government on matters bearing upon foreign affairs. It should be apparent that the greater the degree of codification or consensus concerning a particular area of international law, the more appro- priate it is for the judiciary” to render decisions re- garding it, since the courts can then focus on the appli- cation of an agreed principle to circumstances of fact rather than on the sensitive task of establishing a prin- ciple not inconsistent with the national interest or with international justice. It is also evident that some aspects of international law touch much more sharply on national nerves than do others; the less important the implications of an issue are for our foreign policy, * Reversing Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845 (2d Cir. 1962). 56 the weaker the justification for exclusivity in the political branches.’’ 376 U.S. at 427-8. From this general discussion, Mr. Justice Harlan’s opinion proceeds to a specific consideration of the problem posed when the courts of one nation purport to examine the validity under international law of another nation’s expropriation of the property of foreign nationals. Exam- ining the state of the international law on this question, the Court concluded that there was no extant definition of the limits of such power which could command anything approaching a substantial majority of informed opinion. Id. at 428. After canvassing some of the basic disagree- ments on the question,’ the Court stated that ‘‘[il]t is difficult to imagine the courts of this country embarking on . an adjudication in an area which touches more sensitively the practical and ideological goals of the various members of the community of nations.’’ Id. at 430. The Court’s opinion also stressed that it is far wiser for — the courts to defer to the Executive in the task of securing © some form of compensation for citizens of the United States — who have lost property through expropriation by a foreign | state. The Executive can often achieve some form of gen- eral redress, whereas judicial determinations can have only ah occasional impact.’? Moreover, judicial ‘‘decisions would, if the acts involved were declared | invalid, often be likely to give offense to the expro- priating country; since the concept of territorial sovereignty is so deep-seated, any state may resent the refusal of the courts of another sovereign to accord validity to acts within its territorial borders. Piece- meal dispositions of this sort involving the probability of affront to another state couid seriously interfere 9 376 U.S. at 429-430. 10 See section VI, infra. wo 57 with siegotiations being carried on by the Executive Branch and might render less favorable the terms of an agreement that could otherwise be reached. Rela- tiuns with third countries which have engaged in similar expropriations would not be immune from effect.’’ Id. at 431-2. Mr. Justice Harlan also dismissed the argu- ment that American courts should examine the validity of foreign expropriations because in doing so they would make an important contribution to the development of international law as based on ‘‘the sanguine proposition that the decisions of the courts of the world’s major capital exporting country and principal exponent of the free enter- prise system would be accepted as disinterested expressions of sound legal principal by those adhering to widely dif- ferent ideologies.’’ 376 U.S. at 434-5. Accordingly, the Court held ‘‘that the Judicial Branch will not examine the validity of a taking of property within its own territory by a foreign government, extant and recognized by this country at the time of suit, in the absence of a treaty or other unambiguous agreement regarding controlling legal principles, even if the complaint alleges that the taking violates customary international law.’’ Id. at 428. There can be no doubt that the confiscation of First National City’s branch offices in Cuba by the Cuban gov- ernment was such a taking of property. As such it is an act of state the validity of which the Court has directed the Judicial Branch not to examine. te V. The analysis just presented would suffice to decide this appeal but for the enactment of the Hickenlooper Amend- ment by Congress. The amendment, sometimes described during the Congressional debates as the ‘‘Sabbatino Amend- 58 ment,’’'! was passed in 1964, shortly after the Supreme Court rendered. its decision in Sabbatino, and that fact js importan: in interpreting the language Congress used. In pertinent part, the Hickenlooper Amendment now provides: ‘¢(2) Notwithstanding any other provision of lay, no court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits giving effect to the prin- ciples of international law in a case in which a claim of title or other right to property is asserted by any party including a foreign state (or a party claiming through such state) based upon (or traced through) a confisca- tion or other taking after January 1, 1959, by an act of that state in violation of the principles of international law, including the principles of compensation and the other standards set out in this subsection... .’’ Judge Bryan held that the Hickenlooper Amendment overruled the Sabbatino decision ‘‘for all practical pur- poses’’ and that he was therefore required to disregard the act of state doctrine and to pass on the validity of the expropriations of First National City’s branches in terms of international law. Banco Nacional takes the position that Judge Bryan’s reading of the Hickenlooper Amend- ment is far too broad. We agree. To understand the legislative history upon which Banco Nacional relies, it is necessary to sketch briefly the facts of Sabbatino itself. The case involved a shipment of Cuban sugar which was to have been purchased by an American commodity broker, Farr, Whitlock & Co., from the Cuban subsidiary of an American owned firm, C.A.V. Before the shipment could leave Cuba, all of the O.A.V.’s assets in Cuba were expropriated. Thereafter, the Cuban govert- 11 See e.g., Hearings before the Senate Committee on Foreign Relations on S. 2659, S. 2660, S. 2662, and H.R. 11380, 88th Cong, 2d Sess. (1964) at 449; Hearings before the House Committee on Foreign Affairs on H.R. 7750, 89th Cong., Ist Sess. (1965). | ‘ 59 nent allowed the shipment of sugar to leave Cuba, but only after Farr, Whitlock had entered into contracts, identical io its earlier agreement with C.A.V., with Banco Para (ommercio Exterior de Cuba (Banco Exterior), an instru- nentality of the Cuban government. The ship carrying the sugar was then allowed to sail from Cuba to Morocco. Banco Exterior assigned the bills of lading to Banco Yacional, which in turn assigned them to Societe Generale, 4 French bank which acted as Banco Nacional’s agent in New York, for presentation to Farr, Whitlock for payment. In some manner, Farr, Whitlock obtained possession of the bills of lading from Societe Generale without making pay- ment upon presentation. The money which Farr, Whitlock yas supposed to pay for the shipment was also claimed by C.A.V. Thus, the dispute over the right to the pro- weds of the sale of the expropriated shipment of Cuban sugar was between Banco Nacional, which in the words of the Hickenlooper Amendment claimed ‘‘title or other right _,. based upon (or traced through) a confiscation,”’ and (.A.V., an American-owned firm which had owned the sugar before the expropriation. Sabbatino was handed down by the Supreme Court in March, 1964, and in April, 1964, Senator Hickenlooper pro- posed the initial version of a foreign aid bill amendment related to the case in the Foreign Relations Committee.” A Conference Committee rew the language in Septem- ber, 1964, and the amendedq.version was enacted on October 7, 1964, as section 301 4) of the Foreign Assistance Act of 1964. Pub. L. 88-633, 78 Stat. 1009, 1013. It was changed slightly and re-enacted in its present form on Sep- 12“No court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits, or to apply principles of international law including the principles of compensation and the other standards set out in this subsection, in a case in which an act of a foreign state occurring after January 1, 1959 is alleged to be contrary to international law, and effect shall not be given by the court in any such case to acts that are found to be in violation thereof.” (S. Rep. No. 1188, Part I, 88th Cong., 2d Sess. [1964], p. 37 ; emphasis added. ) an ia 60 tember 6, 1965, as section 301(d)(2) of the Foreign Assist. ance Act of 1965. Pub. L. 89-171, 79 Stat. 653 22 U.S.¢. § 2370(e) (2). It is evident from the proceedings in Congress relating to the Hickenlooper Amendment that Congressmen and others were quite concerned about the problem peculiarly related to the facts of the Sabbatino case. At the time of the Congressional debates during 1964 and 1965, virtually all American-owned property in Cuba had been national. ized. Much of this property consisted of productive in. stallations such as sugar plantations, fertilizer plants, mines, and oil production facilities. In light of this, when the Supreme Court in Sabbatino issued a ruling which would apparantly permit Banco Nacional to prevail over an American-owned firm in securing the proceeds of the sale of a shipment of expropriated sugar to an American commodity broker, the phrase ‘‘thieve’s market for expro- priated property’’ came into vogue. In explaining his pro- posal in an August, 1964, letter to the Washington Post, Senator Hickenlooper used the term ‘‘thieve’s market,” and explained further that the Amendment’s purpose was to require American courts to apply international law ‘‘whenever expropriated property comes within the terri- torial jurisdiction of the United States.’’ 110 Cong. Ree, 19548. At another time, he said ‘‘Basically the amendment is designed to assure that the private litigant is granted his day in court.’’ 110 Cong. Rec. 18936. The Senator further explained: ‘‘’'The amendment] will discourage foreign expropria tion by making sure that the United States cannot become a ‘thieve’s market’ for the product of foreign expropriations. * * * * * One ‘of the principal reasons for the proposed amendment is that it will serve no‘ice that foreign 13 For a discussion of these changes see Banco Nacional v. Farr, supra, 383 F.2d at 171-2, and at 171, note 5. 61 states taking action against U.S. investment in viola- tion of international law cannot market the product of their expropriation in the United States free from litigation.’’ 110 Cong. “Rec. 19555, 19559 (1964). See also id. 19548, 19557. When the Conference Godnatiten reported the Amend- inent to the House of Representatives on October 2, 1964, Congressman Adair, its sponsor in the House, gave this explanation of its purpose: ‘ First National City Bank, Petitioner, Ve Banco Necionel de Cubs OrpeR ALLOWING CERTIORARI. Filed October 12, erececenons]9 71, The petition herein for a writ of certiorari to the United States Court of Appeals for the Second -«-sccceuseeeeee Circuit is granted. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0030%3A01. Public record. Not legal advice.