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33.3: Important Doctrines of Nation-State Judicial Decisions

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    Learning Objectives

    By the end of this section, you will be able to:

    • Define and describe the three traditional bases for a nation’s jurisdiction over those individuals and entities from other nation-states.
    • Explain forum non conveniens and be able to apply that in a case involving citizens from two different nation-states.
    • Describe and explain the origins of both sovereign immunity and the act-of-state doctrine, and be able to distinguish between the two.

    Bases for National Jurisdiction under International Law

    A nation-state has jurisdiction to make and enforce laws (1) within its own borders, (2) with respect to its citizens (nationals”) wherever they might be, and (3) with respect to actions taking place outside the territory but having an objective or direct impact within the territory. In the Restatement (Third) of Foreign Relations Law, these three jurisdictional bases are known as (1) the territorial principle, (2) the nationality principle, and (3) the objective territoriality principle.

    As we have already seen, many difficult legal issues involve jurisdictional problems. When can a court assert authority over a person? (That’s the personal jurisdiction question.) When can a court apply its own law rather than the law of another state? When is it obligated to respect the legal decisions of other states? All these problems have been noted in the context of US domestic law, with its state-federal system; the resolution of similar problems on a global scale are only slightly more complicated.

    The territorial principle is fairly simple. Anything that happens within a nation’s borders is subject to its laws. A German company that makes direct investment in a plant in Spartanburg, South Carolina, is subject to South Carolina law and US law as well.

    Nationality jurisdiction often raises problems. The citizens of a nation-state are subject to its laws while within the nation and beyond. The United States has passed several laws that govern the conduct of US nationals abroad. United States companies may not, for example, bribe public officials of foreign countries in order to get contracts (Foreign Corrupt Practices Act of 1976). Title VII of the Civil Rights Act also applies extraterritorially—where a US citizen is employed abroad by a US company.

    For example, suppose Jennifer Stanley (a US citizen) is discriminated against on the basis of gender by Aramco (a US-based company) in Saudi Arabia, and she seeks to sue under Title VII of the Civil rights Act of 1964. The extraterritorial reach of US law seems odd, especially if Saudi Arabian law or custom conflicts with US law. Indeed, in EEOC v. Arabian American Oil Co., the Supreme Court was hesitant to say that US law would “reach” across the globe to dictate proper corporate conduct.EEOC v. Arabian American Oil Co. 499 U.S. 244 (1991). Later that year, Congress made it clear by amending Title VII so that its rules would in fact reach that far, at least where US citizens were the parties to a dispute. But if Saudi Arabian law directly conflicted with US law, principles of customary international law would require that territorial jurisdiction would trump nationality jurisdiction.

    Note that where the US laws conflict with local or host country laws, we have potential conflict in the extraterritorial application of US law to activities in a foreign land. See, for example, Kern v. Dynalectron.Kern v. Dynalectron, 746 F.2d 810 (1984). In Kern, a Baptist pilot (US citizen) wanted to work for a company that provided emergency services to those Muslims who were on a pilgrimage to Mecca. The job required helicopter pilots to occasionally land to provide emergency services. However, Saudi law required that all who set foot in Mecca must be Muslim. Saudi law provided for death to violators. Kern (wanting the job) tried to convert but couldn’t give up his Baptist roots. He sued Dynalectron (a US company) for discrimination under Title VII, claiming that he was denied the job because of his religion. Dynalectron did not deny that they had discriminated on the basis of his religion but argued that because of the Saudi law, they had no viable choice. Kern lost on the Title VII claim (his religion was a bona fide occupational qualification). The court understood that US law would apply extraterritorially because of his nationality and the US nationality of his employer.

    The principle of objective territoriality is fairly simple: acts taking place within the borders of one nation can have a direct and foreseeable impact in another nation. International law recognizes that nation-states act appropriately when they make and enforce law against actors whose conduct has such direct effects. A lawsuit in the United States against Osama bin Laden and his relatives in the Middle East was based on objective territoriality. (Based in Afghanistan, the Al Qaeda leader who claimed credit for attacks on the United States on September 11, 2001.)

    Where a defendant is not a US national or is not located in the United States when prosecution or a civil complaint is filed, there may be conflicts between the United States and the country of the defendant’s nationality. One of the functions of treaties is to map out areas of agreement between nation-states so that when these kinds of conflicts arise, there is a clear choice of which law will govern. For example, in an extradition treaty, two nation-states will set forth rules to apply when one country wants to prosecute someone who is present in the other country. In general, these treaties will try to give priority to whichever country has the greater interest in taking jurisdiction over the person to be prosecuted.

    Once jurisdiction is established in US courts in cases involving parties from two different nations, there are some important limiting doctrines that business leaders should be aware of. These are forum non conveniens, sovereign immunity, and the act-of-state doctrine. Just as conflicts arise over the proper venue in US court cases where two states’ courts may claim jurisdiction, so do conflicts occur over the proper forum when the court systems of two nation-states have the right to hear the case.

    Forum Non Conveniens; Forum-Selection Clauses

    Forum non conveniens is a judicial doctrine that tries to determine the proper forum when the courts of two different nation-states can claim jurisdiction. For example, when Union Carbide’s plant in Bhopal, India, exploded and killed or injured thousands of workers and local citizens, the injured Indian plaintiffs could sue Union Carbide in India (since Indian negligence law had territorial effect in Bhopal and Union Carbide was doing business in India) or Union Carbide in the United States (since Union Carbide was organized and incorporated in the United States, which would thus have both territorial and nationality bases for jurisdiction over Union Carbide). Which nation’s courts should take a primary role? Note that forum non conveniens comes into play when courts in two different nation-states both have subject matter and personal jurisdiction over the matter. Which nation’s court system should take the case? That, in essence, is the question that the forum non conveniens doctrine tries to answer.

    In the Bremen case (Section 33.5.1 “Forum-selection clauses”), the German contractor (Unterweser) had agreed to tow a drilling rig owned by Zapata from Galveston, Texas, to the Adriatic Sea. The drilling rig was towed by Unterweser’s vessel, The Bremen. An accident in the Gulf damaged the drilling rig, and Zapata sued in US district court in Florida. Unterweser argued that London was a “better,” or more convenient, forum for the resolution of Zapata’s claim against Unterweser, but the district court rejected that claim. Had it not been for the forum-selection clause, the claim would have been resolved in Tampa, Florida. The Bremen case, although it does have a forum non conveniens analysis, is better known for its holding that in cases where sophisticated parties engage in arms-length bargaining and select a forum in which to settle their disputes, the courts will not second-guess that selection unless there is fraud or unless one party has overwhelming bargaining power over the other.

    In short, parties to an international contract can select a forum (a national court system and even a specific court within that system, or an arbitral forum) to resolve any disputes that might arise. In the Bremen case, Zapata was held to its choice; this tells you that international contracting requires careful attention to the forum-selection clause. Since the Bremen case, the use of arbitration clauses in international contracting has grown exponentially. The arbitration clause is just like a forum-selection clause; instead of the party’s selecting a judicial forum, the arbitration clause points to resolution of the dispute by an arbitrator or an arbitral panel.

    Where there is no forum-selection clause, as in most tort cases, corporate defendants often find it useful to invoke forum non conveniens to avoid a lawsuit in the United States, knowing that the lawsuit elsewhere cannot as easily result in a dollar-value judgment. Consider the case of Gonzalez v. Chrysler Corporation (see Section 33.5.3 “Forum non conveniens”).

    Sovereign Immunity

    For many years, sovereigns enjoyed complete immunity for their own acts. A king who established courts for citizens (subjects) to resolve their disputes would generally not approve of judges who allowed subjects to sue the king (the sovereign) and collect money from the treasury of the realm. If a subject sued a foreign sovereign, any judgment would have to be collectible in the foreign realm, and no king would allow another king’s subjects to collect on his treasury, either. In effect, claims against sovereigns, domestic or foreign (at home or abroad), just didn’t get very far. Judges, seeing a case against a sovereign, would generally dismiss it on the basis of “sovereign immunity.” This became customary international law.

    In the twentieth century, the rise of communism led to state-owned companies that began trading across national borders. But when a state-owned company failed to deliver the quantity or quality of goods agreed upon, could the disappointed buyer sue? Many tried, but sovereign immunity was often invoked as a reason why the court should dismiss the lawsuit. Indeed, most lawsuits were dismissed on this basis. Gradually, however, a few courts began distinguishing between governmental acts and commercial acts: where a state-owned company was acting like a private, commercial entity, the court would not grant immunity. This became known as the “restrictive” version of sovereign immunity, in contrast to “absolute” sovereign immunity. In US courts, decisions as to sovereign immunity after World War II were often political in nature, with the US State Department giving advisory letters on a case-by-case basis, recommending (or not recommending) that the court grant immunity to the foreign state. Congress moved to clarify matters in 1976 by passing the Foreign Sovereign Immunities Act, which legislatively recognized the restrictive theory. Note, especially, Section 1605(a)(2).

    Jurisdictional Immunities of Foreign States

    28 USCS § 1602 (1998)

    § 1602. Findings and declaration of purpose

    The Congress finds that the determination by United States courts of the claims of foreign states to immunity from the jurisdiction of such courts would serve the interests of justice and would protect the rights of both foreign states and litigants in United States courts. Under international law, states are not immune from the jurisdiction of foreign courts insofar as their commercial activities are concerned, and their commercial property may be levied upon for the satisfaction of judgments rendered against them in connection with their commercial activities. Claims of foreign states to immunity should henceforth be decided by courts of the United States and of the States in conformity with the principles set forth in this chapter [28 USCS §§ 1602 et seq.].

    § 1603. Definitions

    For purposes of this chapter [28 USCS §§ 1602 et seq.]—

    (a) A “foreign state”, except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

    (b) An “agency or instrumentality of a foreign state” means any entity—

    (1) which is a separate legal person, corporate or otherwise, and

    (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

    (3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title nor created under the laws of any third country.

    (c) The “United States” includes all territory and waters, continental or insular, subject to the jurisdiction of the United States.

    (d) A “commercial activity” means either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.

    (e) A “commercial activity carried on in the United States by a foreign state” means commercial activity carried on by such state and having substantial contact with the United States.

    § 1604. Immunity of a foreign state from jurisdiction

    Subject to existing international agreements to which the United States is a party at the time of enactment of this Act [enacted Oct. 21, 1976] a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.

    § 1605. General exceptions to the jurisdictional immunity of a foreign state

    (a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case—

    (1) in which the foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver;

    (2) in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States;

    (3) in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States;

    (4) in which rights in property in the United States acquired by succession or gift or rights in immovable property situated in the United States are in issue;

    (5) not otherwise encompassed in paragraph (2) above, in which money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment; except this paragraph shall not apply to—

    (A) any claim based upon the exercise or performance or the failure to exercise or perform a discretionary function regardless of whether the discretion be abused, or

    (B) any claim arising out of malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights;

    Act of State

    A foreign country may expropriate private property and be immune from suit in the United States by the former owners, who might wish to sue the country directly or seek an order of attachment against property in the United States owned by the foreign country. In the United States, the government may constitutionally seize private property under certain circumstances, but under the Fifth Amendment, it must pay “just compensation” for any property so taken. Frequently, however, foreign governments have seized the assets of US corporations without recompensing them for the loss. Sometimes the foreign government seizes all private property in a certain industry, sometimes only the property of US citizens. If the seizure violates the standards of international law—as, for example, by failing to pay just compensation—the question arises whether the former owners may sue in US courts. One problem with permitting the courts to hear such claims is that by time of suit, the property may have passed into the hands of bona fide purchasers, perhaps even in other countries.

    The Supreme Court has enunciated a doctrine governing claims to recover for acts of expropriation. This is known as the act-of-state doctrine. As the Supreme Court put it in 1897, “Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on…[and thereby adjudicate the legal validity of] the acts of the government of another done within its own territory.”Underhill v. Hernandez, 168 U.S. 250, 252 (1897). This means that US courts will “reject private claims based on the contention that the damaging act of another nation violates either US or international law.”Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979). Sovereign immunity and the act-of-state doctrine rest on different legal principles and have different legal consequences. The doctrine of sovereign immunity bars a suit altogether: once a foreign-government defendant shows that sovereign immunity applies to the claims the plaintiff has raised, the court has no jurisdiction even to consider them and must dismiss the case. By contrast, the act-of-state doctrine does not require dismissal in a case properly before a court; indeed, the doctrine may be invoked by plaintiffs as well as defendants. Instead, it precludes anyone from arguing against the legal validity of an act of a foreign government. In a simple example, suppose a widow living in the United States is sued by her late husband’s family to prevent her from inheriting his estate. They claim she was never married to the deceased. She shows that while citizens of another country, they were married by proclamation of that country’s legislature. Although legislatures do not marry people in the United States, the act-of-state doctrine would bar a court from denying the legal validity of the marriage entered into in their home country.

    The Supreme Court’s clearest statement came in a case growing out of the 1960 expropriation of US sugar companies operating in Cuba. A sugar broker had entered into contracts with a wholly owned subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.), whose stock was principally owned by US residents. When the company was nationalized, sugar sold pursuant to these contracts had been loaded onto a German vessel still in Cuban waters. To sail, the skipper needed the consent of the Cuban government. That was forthcoming when the broker agreed to sign contracts with the government that provided for payment to a Cuban bank rather than to C.A.V. The Cuban bank assigned the contracts to Banco Nacional de Cuba, an arm of the Cuban government. However, when C.A.V. notified the broker that in its opinion, C.A.V. still owned the sugar, the broker agreed to turn the process of the sale over to Sabbatino, appointed under New York law as receiver of C.A.V.’s assets in the state. Banco Nacional de Cuba then sued Sabbatino, alleging that the broker’s refusal to pay Banco the proceeds amounted to common-law conversion.

    The federal district court held for Sabbatino, ruling that if Cuba had simply failed to abide by its own law, C.A.V.’s stockholders would have been entitled to no relief. But because Cuba had violated international law, the federal courts did not need to respect its act of appropriation. The violation of international law, the court said, lay in Cuba’s motive for the expropriation, which was retaliation for President Eisenhower’s decision to lower the quota of sugar that could be imported into the United States, and not for any public purpose that would benefit the Cuban people; moreover, the expropriation did not provide for adequate compensation and was aimed at US interests only, not those of other foreign nationals operating in Cuba. The US court of appeals affirmed the lower court’s decision, holding that federal courts may always examine the validity of a foreign country’s acts.

    But in Banco Nacional de Cuba v. Sabbatino, the Supreme Court reversed, relying on the act-of-state doctrine.Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964). This doctrine refers, in the words of the Court, to the “validity of the public acts a recognized foreign sovereign power commit[s] within its own territory.” If the foreign state exercises its own jurisdiction to give effect to its public interests, however the government defines them, the expropriated property will be held to belong to that country or to bona fide purchasers. For the act-of-state doctrine to be invoked, the act of the foreign government must have been completely executed within the country—for example, by having enacted legislation expropriating the property. The Supreme Court said that the act-of-state doctrine applies even though the United States had severed diplomatic relations with Cuba and even though Cuba would not reciprocally apply the act-of-state doctrine in its own courts.

    Despite its consequences in cases of expropriations, the act-of-state doctrine is relatively narrow. As W. S. Kirkpatrick Co., Inc. v. Environmental Tectonics Co. (Section 33.5.4 “Act of State”) shows, it does not apply merely because a judicial inquiry in the United States might embarrass a foreign country or even interfere politically in the conduct of US foreign policy.

    Key Takeaway

    Each nation-state has several bases of jurisdiction to make and enforce laws, including the territorial principle, nationality jurisdiction, and objective territoriality. However, nation-states will not always choose to exercise their jurisdiction: the doctrines of forum non conveniens, sovereign immunity, and act of state limit the amount and nature of judicial activity in one nation that would affect nonresident parties and foreign sovereigns.


    1. Argentina sells bonds on the open market, and buyers all around the world buy them. Five years later, Argentina declares that it will default on paying interest or principal on these bonds. Assume that Argentina has assets in the United States. Is it likely that a bondholder in the United States can bring an action in US courts that will not be dismissed for lack of subject matter jurisdiction?
    2. During the Falkland Island war between Argentina and Great Britain, neutral tanker traffic was at risk of being involved in hostilities. Despite diplomatic cables from the United States assuring Argentina of the vessels’ neutrality, an oil tanker leased by Amerada Hess, traveling from Puerto Rico to Valdez, Alaska, was repeatedly bombed by the Argentine air force. The ship had to be scuttled, along with its contents. Will a claim by Amerada Hess be recognized in US courts?

    This page titled 33.3: Important Doctrines of Nation-State Judicial Decisions is shared under a CC BY-NC-SA 3.0 license and was authored, remixed, and/or curated by Anonymous via source content that was edited to the style and standards of the LibreTexts platform.