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

2 Occidental Petroleum Corp. v. Buttes Gas & Oil Co., [1975] 1 Q.B. 557, 572D.

3 (1848) 2 H.L. Cas. 1. .

4 Id, at 17, per Lord Cottenham.

5 (1844)Ch. 6Beav. 1.

6 Defendant's dual status required that the focus be on acts of a sovereign character rather than of a private character. See text at note 4 supra.

7 (1844) Ch. 6 Beav. at 60.

8 (1848) 2 H.L. Cas. at 27.

9 [1975] 1 Q.B. at 573B. The process of distinction has since developed apace; one writer has declared the existence of no less than seven “different kinds of act of state.” Allott, The Courts and the Executive: Four House of Lords Decisions, [1977] Cambridge L.J. 255, 270.

10 [1975] 1 Q.B. at573G.

11 23 Halsbury's laws of england 304 (Butterworth ed. 1912). Later editions have adopted varying classifications and analyses.

12 S. A. DE Smith, Constitutional and administrative law 121 (1971).

13 (1765) 19 State Trials 1029.

14 Id. at 1031.

15 Compare the refusal of the U.S. Supreme Court to tolerate presidential seizure, without congressional authority, of domestic steel mills when a strike threatened the supply of war materials during the Korean War. Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952).

16 (1765) 19 State Trials at 1066. The courts'jealous sensitivity to attempted encroachment on the rights of subjects under the banner of the prerogative has by no means abated. Responding to a claim by the BBC that it had been established as an instrumentality whereby the Crown exercised its supposed “prerogative right to a monopoly” of wireless telegraphy, and hence was not liable to income tax, Lord Diplock stated: “it is 350 years and a civil war too late for the Queen's courts to broaden the prerogative. The limits within which the executive government may impose obligations or restraints upon citizens of the United Kingdom without any statutory authority are now well settled and incapable of extension.” British Broadcasting Corporation v. Johns, [1965] 1 Ch. 32, 97E.

17 (1765) 19 State Trials at 1066.

18 (1848) 2 Ex. 167.

19 This might go to the procedural right to bring an action against the English Crown in the English courts, as well as to the substantive right to be free from the exercise of discretionary Crown authority. See, e.g., Johnstone v. Pedlar, [1921] 2 A.C. 262.

20 [1970] A.C. 179.

21 Id. at 207. Compare the decision of the United States District Court for the District of Columbia in Berlin Democratic Club v. Rumsfeld (410 F.Supp. 144 (1976)), holding that the U.S. Constitution prohibited wiretapping without a judicial warrant by the U.S. Army of U.S. citizens in Germany. Note also, and compare with note 19 supra, the court's holding that an Austrian citizen, also a victim of the wiretap in Germany, lacked standing to sue in federal court.

22 [1970] A.C. at 235, per Lord Wilberforce.

23 The criteria are discussed below; see text at note 62 infra.

24 [1965] A.C. 75. Burmah Oil is a UK corporation.

25 If the Crown takes without payment, is the failure to pay or the taking itself the unlawful act? This question will occupy us further in section III.

26 [1970] A.C. at 188D-E.

27 D. Keir & H. Lawson, Cases In Constitutional Law 155 (5th ed. 1967). The discussion of acts of state in the sixth edition at 144-53 (1979) displays some uncertainty as to how Nissan should be incorporated into the doctrinal framework.

28 (1859) 13 Moo. P.C. 22, 75.

29 We discuss below the extent to which this doctrinal principle is explicitly recognized as such by the courts, rather than being merely an abstraction created by the present writer.

30 But see Mann, The Sacrosanctity of the Foreign Act of State, 59 L.Q. REV. 42 (1943).

31 This was conceded in 1° Congreso del Partido, discussed in section IV below.

32 Halsbury's Laws Of England, supra note 11, at 310-11 (references omitted).

33 (1674) 3 Swans. 604.

34 Id. at 607.

35 Id. at 605.

36 Id. at 606.

37 Id. at 607.

38 168 U.S. 250, 252 (1887).

39 Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977), cert, denied, 434 U.S. 984 (1977).

40 Ibid.

41 Sir Wilfrid Greene M.R. stated: “I do not myself find the fear of the embarrassment of the executive a very attractive basis upon which to build a rule of English law.” Kawasaki Risen Kabushiki Kaisba of Kobe v. Bantham Steamship Co., [1939] 2 K.B. 544, 552-

42 In re Claim by Helbert Wagg & Co., [1956] 1 Ch. 323, 351-52.

43 Czarnikow v. Rolimpex, [1978] 3 W.L.R. 274.

44 A consideration that will occupy us further in section IV.

45 [1978] 3 W.L.R. at 279.

46 [1975] 1 Q.B. 557. The House of Lords refused leave to appeal in this case.

47 Id. at 564D. In an earlier action for conspiracy, the U.S. courts accepted such an argument. Occidental Petroleum Corp. v. Buttes Gas & Oil Co., 331 F.Supp. 92 (CD. Cal. 1971), aff ‘d per curiam, 461 F.2d 1261 (9th Cir. 1972), cert, denied, 409 U.S. 950 (1972).

48 [1975] 1 Q.B. at 567C.

49 Id. at 574F.

50 Id. at 578A.

51 [1970] A.C. at 238A. It is to be noted that here a case involving inquiry into the motives of the British Government was cited in support of the propriety of such an inquiry with respect to a foreign government. There is no suggestion that there should be greater reluctance to inquire in one case or the other. In Nissan Lord Reid alone felt that political considerations precluded judicial inquiry into the motives of the Crown. Id. at 212F-213A.

52 [1979] 1 Lloyd's List L.R. 481, 487-88. Plaintiffs eventually dropped their case before appeal. See Higgins, , The Death Throes of Absolute Immunity: The Government of Uganda Before the English Courts, 73 AJIL 465, 470 (1979).Google Scholar

53 The cause of action in Uganda Holdings arose before passage of the State Immunity Act, 1978. However, Lord Denning had already suggested incorporation of the restrictive theory of sovereign immunity in the Trendtex case ([1977] 1 All E.R. 881), and the court here was arguing under that hypothesis. The 1978 Act, together with its U.S. counterpart, will be discussed in section II.

54 Private communication.

55 As in Rolimpex.

56 Sec “Notes,” in 25 Halsbury's Statutes Of England at 749 (3d ed. 1970).

57 [1975] 1 Q.B. at 581D.

58 [1906] 1 K.B. 613, 639-40.

59 Nissan, [1970] A.C. at 231G, per Lord Wilberforce.

60 S. A. DE Smith, supra note 12, at 137-38.

61 [1970] A.C. at 237F-H, per Lord Pearson.

62 Id. at 218D, per Lord Morris of Borth-y-Gest (emphasis added).

63 Even counsel admitted: “The conspiracy charge does not involve the court in deciding whether the decree of the ruler of Sharjah or the acts of Her Majesty's government in the area are valid or invalid: it is accepted that such an inquiry would be contrary to international law.” [1975] 1 Q.B. at 563D. We feel, however, that it may be premature to elevate the principle of nonjusticiability of international disputes in municipal courts to the status of a rule of international law. The furor following People v. McLeod (1 Hill 377 (N.Y. 1841)), in which an attack by Canadian forces on Fenian forces in U.S. waters had led to a murder charge against one of the Canadians, indicates that disparate views may be held on such matters. The affair is discussed in W. H. moore, act of state in english law 126-31 (1906). See also the opinion of Learned Hand in The Florence H (248 Fed. 1012, 1017 (S.D.N.Y. 1918)), suggesting that courts should be oblivious to such international considerations, leaving the Executive to make any subsequent adjustment it wishes by diplomatic action.

64 [1975] 1 Q.B. at 573F. A fine distinction, whose ramifications will occupy us in section III.

65 Nissan, [1970] A.C. at 220B, per Lord Morris of Borth-y-Gest.

66 Compare Wade, , Act of State in English Law: Its Relations with International Law, 15 BRIT. Y.B. INT'L L. 98, 104 (1934).Google Scholar

67 See text at note 61 supra.

68 28 U.S.C. §§1330, 1332(a)(2), (3), and (4), 1391(f), 1441(d), 1602-1611, reprinted in 71 AJIL 595 (1977), 15 ILM 1388 (1976).

69 In both nations judicial activity had to some extent anticipated the legislative changes. See Victory Transport Inc. v. Comisaria General, 336 F.2d 354 (2d Cir. 1964), cert, denied, 381 U.S. 934 (1965); Trendtex Trading Corporation v. Central Bank of Nigeria, [1977] 1 All E.R. 881. See also Higgins, , Recent Developments in the Law of Sovereign Immunity in the United Kingdom, 71 AJIL 423 (1977)Google Scholar; Delaume, The State Immunity Act of the United Kingdom, 73 id. at 185 (1979); and Delaume, Long-Arm Jurisdiction Under the Foreign Sovereign Immunities Act, 74 id. at 640 (1980).

70 28 U.S.C. § 1603(d); State Immunity Act §3(3).

71 461 F.Supp. 384 (1978).

72 Id. at 395.

73 Ibid.

74 Ibid.

75 [1979] 2 Trade Cas. 79,002 (CD. Cal.).

76 OPEC was dismissed from the action at the outset, it being admitted that it had not been legally served with process. None of the defendants entered an appearance.

77 [1976] U.S. Code Cong. & Ad. News 6614-15, cited by the court at [1979] 2 Trade Cas. at 79,012 n.14.

78 [1979] 2 Trade Cas. at 79,011.

79 28 U.S.C. §1605(a) (3).

80 The legislative history of this section of the FSIA includes a further effort by Congress in its continuing endeavors to instruct the Supreme Court in the rudiments of international law. “The term ‘taken in violation of international law’ would include the nationalization or expropriation of property without payment of the prompt adequate and effective compensation required by international law.” [1976] U.S. Code Cong. & Ad. News 6618. Compare the Sabbatino Amendment, 22 U.S.C. §2370(e)(2).

81 425 U.S. 682 (1976).

82 id. at 693.

83 While the FSIA had not yet been enacted, the State Department had long urged the virtues of the restrictive theory, and the courts had moved towards accepting it. See note 69 supra.

84 425 U.S. at 706.

85 Justice Stevens declined to express any opinion on this aspect of the case. Id. at 715. 86

86 S.Ct. 1878 (1976), as first published in the advance sheets. These comments, a continuation of the present note 15 to the dissent, do not appear in the final published edition of the reports.

87 See [1976] U.S. Code cong. & AD. News 6618-19 for the view that a commercial exception to the act of state doctrine is necessary for the proper working of the FSIA.

88 Compare Justice Jackson's celebrated concurrence in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 634 (1952).

89 [1976] U.S. CODE CONG. & AD. NEWS 6619.

90 550 F.2d 68, 73 (2d Cir. 1977).

91 See also National American Corporation v. Federal Republic of Nigeria, 448 F.Supp. 622 (S.D.N.Y. 1978), aff'd, 597 F.2d 314 (2d Cir. 1979). This case arose out of the same crisis at the port of Lagos, caused by excessive cement purchases by the Government of Nigeria, as did Trendtex. The district court considered the effect of the FSIA on act of state doctrine, and decided that “an act of state affords only limited legal protection.” But the court's reasoning was obscure, and in any case the Second Circuit affirmed on other grounds, explicitly stating that it was not considering the act of state defense; 597 F.2d at 324 n.14.

92 461 F.Supp. at 394.

93 Id. at 398.

94 473 F.Supp. 680 (S.D.N.Y. 1979).

95 Id. at 690.

96 (1673) 3 Swans. 603.

97 Id. at 604.

98 [1902] A.C. 176.

99 Presumably, the circumstances were not such as to justify the seizure under the prerogative. No reference to this appears in the House of Lords decision, and we have been unable to obtain a record of the decision of the Court of Appeal entering judgment in favor of Fracis Times for the value of the ammunition.

100 [1902] A.C. at 177.

101 Id. at 180. The court knew that such was the law of Muscat because the Sultan had said so: “no English tribunal is capable of … saying that the Sultan of Muscat was wrong in his exposition of his own law.” Ibid. Judicial deference to executive determinations of the facts in international cases is still considerable, but no longer total. For an example of a refusal by the House of Lords to accept an executive pronouncement as to the facts of an international situation, see Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853. It is usual, however, for a court to accept executive statements on such matters as the de facto occupation of territory, where the court lacks capacity to form its own independent conclusions. Such statements have been pleasingly called “facts of state“; W. H. Moore, supra note 63, at 33.

102 (1836) 2 Bing. N.C. 781.

103 Id. at 795.

104 Foreign Enlistment Act, 59 Geo. 3, c. 69 (1819).

105 2 Bing. N.C. at 796.,

106 See text at note 64 supra.

107 [1921] 3 K.B. 532.

108 Ibid.

109 A. DICEY & J. morris, the conflict of laws 558 (9th ed. 1973).

110 [1921] 3 K.B. at 545.

111 Id. at 558-59. The fears expressed have been described as containing an “obvious exaggeration.” M. Wolff, Private International law 177 n.l (2d ed. 1950).

112 “[T]he system of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection.” A. Dicey & J. Morris, supra note 109,at721. U.S. courts will nowadays similarly respect the parties’ expressed intention. Scherk v. Alberto-Culver Co., 417 U.S. 506(1972). But if no intention is expressed, they will undertake an interest analysis to determine the proper law, rather than concern themselves with inferred intention. See Restatement (SECOND) OF Conflict OF Laws §187 (1971).

113 [1950] A.C. 24.

114 See text at note 128 infra.

115 [1950] A.C. at 27. This finding has been widely criticized.

116 [1959] 2 All E.R. 362.

117 Id. at 365-66. The House of Lords reversed, finding that the proper law of the contract was English, not Greek. [1960] 2 All E.R. 421.

118 [1939] 2 K.B. 678. Compare Regazzani v. Sethia, [1957] 3 All E.R. 286.

119 [T]he only reason why a foreign act of State is recognized here is that the legal relationship in question is subject to its law. If, therefore, that law has to be applied, the Court sitting here must apply it in its entirety and “must consider itself sitting in” the country whose law it applies. Mann, supra note 30, at 155, citing Collier v. Rivaz, (1841) 2 Curt. 855. Quaere whether the “reason” given in the first sentence above is not a circularity.

120 [1953] 1 Q.B. 248. The issue discussed here was not appealed. In an appeal on other grounds the judgment was reversed by the Court of Appeal, and reinstated by the House of Lords sub nom. Bank voor Handel en Scheepvart v. Administrator of Hungarian Property, [1954] A.C. 584.

121 [1953] 1 Q.B. at 260. Earlier cases had differed; see Lorentzen v. Lydden & Co., [1942] 2 K.B. 202.

122 The Dutch decree was upheld in the state of New York on the grounds of its harmony with the public policy of the United States. Anderson v. N. V. Transandine Handelmaatschappij, 28 N.Y.S. 2d 547 (1941), aff'd, 289 N.Y. 9 (1942).

123 [1953] 1 Q.B. at 262.

124 [1956] 1 Ch. at 349.

125 [1953] 1 W.L.R. 246.

126 Helbert Wagg, [1956] 1 Ch. at 346.

127 [1975] 1 All E.R. 539 (H.L.).

128 Id. at 567D-G.

129 Id. at 555C. With the greatest respect, this would seem to confuse the fact of the existence of a certain state of affairs with the manner in which the English courts will respond to it. See the subsection “Remedies” below.

130 [1975] 1 All E.R. at 572E. Some courts, including the Israeli Supreme Court, have recognized the German expatriation decree on the grounds that to reject it would result in individual hardship or revulsion due to retention of German nationality. See Mann, The Present Validity of Nazi Nationality Laws, 89 L.Q. REV. 194, 204 (1973).

131 Luther v. Sagor is, on its facts, authority only for the proposition that a foreign state may seize the property of its own nationals without paying compensation. See note 137 infra.

132 In re Fried Krupp, [1919] 2 Ch. 188.

133 Republic of Italy v. Hambros Bank, [1950] Ch. 314.

134 And in certain other cases of no concern to us here.

135 28U.S.C. §1605(a)(3).

136 Jennings, Nullity and Effectiveness in International Law, in Cambridge Essays In International Law 64 (1965).

137 We join Jennings's footnote: This article is not concerned with the argument one way or the other about the limits international law places upon the power to expropriate alien property; it will be assumed, purely for the purposes of argument, and without prejudice, that international law requires the payment of prompt, just and effective compensation. Id. at 79.

138 Id. at 79-80.

139 Id. at 80 (emphasis added).

140 Ibid.

141 See text at note 98 supra.

142 See text at note 30 supra.

143 See note 64 supra.

144 Although it may possibly do so if there is a prior contract; this is a sharply contested issue. See section IV below.

145 The courts of the United States have traditionally refused to consider such a possibility, since it would involve an inquiry into the motives of a foreign government. Hunt v. Mobil Oil Corp., 550 F.2d at 72. However, the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §78 dd-2, creates the criminal offense of bribing foreign government officials to influence government decisions. Tort liability may in general be founded on breach of a statute, so a cause of action might be stated by a claim that a bribe had resulted in governmental action detrimental to plaintiff. It is thus arguable that this Act undermines the Hunt rationale in a fashion analogous to that in which the FSIA affects Dunhill.

146 Allen v. Flood, [1898] A.C. 1.

147 [1975] 1 Q.B. at 577A.

148 [1901] A.C. 495.

149 Thus, traders may combine to reduce prices and thus drive other competitors out of business, as long as the purpose is to further their own trade interests. Mogul Steamship Co. v. McGregor, Gow & Co., [1892] A.C. 25. Some types of combination have since been prohibited by statute, but these are not relevant to the Buttes case.

150 [1978] 1 All E.R. 81, 89A-B. The references in the quotation to “a government” should for the purposes of this section be read as referring to the Crown.

151 Commissioners of Crown Lands v. Page, [1960] 2 All E.R. 726, 735-36.

152 Board of Trade v. Temperley Steam Shipping Co. Ltd., [1926] 2 Lloyd's List L.R. 76, 78.

153 Rederiaktiebolaget Amphitrite v. R., [1921] 3 K.B. 500, 503-04.

154 J. D. B. Mitchell, The Contracts Of Public Authorities (1954); Hogg, , The Doctrine of Executive Necessity in the Law of Contract, 44 AUSTL. L. J. 154 (1970)Google Scholar; Higgins, The Availability of Damages for Reliance by a Government on Executive Necessity, in International Law And Economic order, festschrift für f. A. Mann 21 (eds. Flume, Hahn, Kegel, & Simmonds. 1977).

155 Higgins, note 154 supra, at 33 (quoting Hogg, supra note 154, at 157).

156 Similarly, the argument that free speech may be as much “chilled” by fear of substantial damage awards as by injunctions was accepted in New York Times v. Sullivan, 376 U.S. 254 (1964).

157 Certainly since William Cory & Son Ltd. v. London Corporation, [1951] 2 K.B. 476, discussed by Hogg, supra note 154, at 157.

158 Compare Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960).

159 Compare G. Calabresi, The Cost Of Accidents (1970).

160 The U.S. cases are fully discussed by J. D. B. Mitchell, supra note 154.

161 431 U.S. 1 (1977).

162 This was a four to three decision. Justices Stewart and Powell did not participate.

163 431 U.S. at 28-29.

164 Id. at 29 n.27; see also id. at 30 n.28.

165 See text at note 62 supra.

166 431 U.S. at 26.

167 Id. at 61-62.

168 [1920] 2 K.B. 287.

169 A. Dicey & J. Morris, supra note 109, at 781.

170 Id. at 783; G. C. Cheshire, Private International Law 234-35 (9th ed. 1974; 10th ed. 1979 unavailable to the writer); Mann, , The Proper Law of Contracts Concluded by International Persons, 35 BRIT. Y.B. INT'L L. 34 (1959).Google Scholar

171 Maritime National Fish v. Ocean Trawlers, [1935] A.C. 524.

172 [1978] 1 All E.R. 81 (C.A.), [1978] 2 All E.R. 1043 (H.L.).

173 Cited in [1978] 2 All E.R. at 1046G-H.

174 See, e.g., id. at 1048A, per Lord Wilberforce.

175 To be sure, there may come a point where contractual obligations are financially so burdensome that performance would threaten the economic stability of a nation. It has been recognized that various sovereign remedies, such as devaluation and foreign currency restrictions, remain open to a state in such circumstances. See Kahler, text at note 113 supra. But these are general remedies, not invidiously singling out the holders of state contracts.

176 Quoted by the court at [1978] 1 All E.R. at 88A-C.

177 Id. at 89E.

178 [1978] 2 All E.R. at 1047H-J.

179 Cited in id. at 1047A.

180 See, e.g., [1978] 1 All E.R. at 89H.

181 See Trendtex, [1977] 1 All E.R. 881.

182 Compare text at note 198 infra.

183 Note that under English law the prospect of a party's sustaining severe financial loss does not serve to frustrate a contract. See Tsakiroglou Be Co. v. Noblee Thorl GmbH, [1962] A.C. 93, 115 (H.L.) (holding that closure of the Suez Canal did not frustrate a c.i.f. contract). Compare and contrast the U.S. practice: “Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance.” U.C.C. §2-615, Official Comment 4 (1978).

184 See the subsection “Contracts with the Crown” above.

185 Higgins, note 154 supra, at 29-30. Compare The Republic of Peru v. Dreyfus Brothers, [1888] 38 Ch. 348.

186 [1978] 1 All E.R. 1169 (Q.B.D.), [1980] 1 Lloyd's List L.R. 23 (C.A.).

187 Although the relevant “assets” were not all “within” Chile.

188 Higgins, note 69 supra.

189 [1978] 1 All E.R. at 1192G. Similarly, Carey v. National Oil Corp., 453 F.Supp. 1097 (C.D.N.Y. 1978), where the Libyan Arab Republic was found to have induced its national oil corporation to breach certain contracts not for commercial reasons but as a deliberate weapon of foreign policy, and so could claim sovereign immunity.

190 The court, following Trendtex, was applying the restrictive theory of sovereign immunity, as later embodied in the State Immunity Act. See note 69 supra.

191 [1978] 1 All E.R. at 1193A.

192 Id. at 1193C.

193 Id. at 1193D.

194 Leave to appeal to the House of Lords has been granted.

195 [1980] 1 Lloyd's List L.R. at 35.

196 Id. at 32.

197 [1978] 1 All E.R. at 1195G, per Goff J. See also [1980] 1 Lloyd's List L.R. at 36, per Waller L.J.

198 The Cuban Government certainly had sufficient financial control over Mambisa to follow such a course. See [1978] 1 All E.R. at 1188G. Note also the recent concern in England over the growing tendency of substantial companies to trade through flimsy subsidiaries, and to let the latter collapse rather than pay their debts. The Sunday Times (London), Dec. 9, 1979, at 72, col. 1.

199 [1980] 1 Lloyd's List L.R. at 31.

200 28 U.S.C. § 1605(a)(5)(B).

201 Were immunity to be denied in 1° Congreso, it might be argued on the merits that hostility between the Cuban and Chilean regimes was so strong that English cases relating to contracts between subjects and enemy aliens should control; these permit abrogation of contracts and freezing of assets. Ertel Bieber v. Rio Tinto Co., [1918] A.C. 260; Arab Bank v. Barclay's Bank, [1954] A.C. 495. Similarly, Sardino v. Federal Reserve Bank of New York, 361 F.2d 106 (2d Cir. 1966), cert, denied, 385 U.S. 898 (1966).