The act-of-state doctrine or foreign act of state doctrine is a principle in English and United States law which states that every sovereign state is bound to respect the independence of every other sovereign state, and the courts will not sit in judgment of another government's acts or act of any sovereign national done within its own territory. The doctrine is not required by international law, but it is a principle recognized and adhered to by United States federal and state courts. In the United States, the rationales for the doctrine include respect for other nations' sovereignty and protection of the U.S. Executive's prerogative in foreign affairs, both of which may be frustrated by a decision issuing from U.S. courts. The act-of-state doctrine enters consideration most often in cases where a foreign sovereign has expropriated the property of a U.S. national located in that foreign territory. Rather than pursuing recourse through the courts, United States nationals are to take their claims against foreign sovereign governments to the Executive so that the government can either espouse the claims of all U.S. nationals as a group or seek recourse through diplomatic channels. The United States employs the act-of-state doctrine more broadly and with more frequency than other countries.
Background
The act of state doctrine, which arose out of colonial practice in the 17th century, entered into American jurisprudence in the case Underhill v. Hernandez,. In an 1892 revolution, General José Manuel "Mocho" Hernández expelled the existing Venezuelan government and took control of Ciudad Bolívar, where plaintiff Underhill lived and ran a waterworks system for the city. Underhill, an American citizen, repeatedly applied to Hernández for an exit passport, but his requests were refused, and Underhill was forced to stay in Ciudad Bolívar and run the waterworks. Hernández finally relented and allowed Underhill to return to the United States, where he instituted an action to recover damages for his detention in Venezuela. In finding for the defendant, a New York Court determined that Hernández had acted in his official capacity as a military commander so his actions were those of the Venezuelan government. The court therefore refused to hear Underhill's claim against the government based on the act of state doctrine. The court reasoned, "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 the acts of the government of another, done within its own territory."
In Banco Nacional de Cuba v. Sabbatino,, the United States Supreme Court applied the act of state doctrine even where the state action likely violated international law. The case arose when Cuba nationalized its sugar industry, taking control of sugar refineries and other companies in the wake of the Cuban revolution. A large number of Americans who had invested in those companies lost their investments without compensation when the Cuban government assumed control. However, despite the loss suffered by United States nationals, the Supreme Court upheld the act of state doctrine by assuming the validity of Cuba's domestic action and therefore rejected the claim of US nationals against Cuba for their lost investments. The Sabbatino court stated that although the doctrine is not found in the Constitution, explicitly or implicitly, it does have "constitutional underpinnings" in the concept of separation of powers. The Supreme Court reasoned that because the Executive had exclusive authority to conduct foreign affairs with other nations on behalf of the United States, disputes arising from the official actions of foreign sovereign powers should not be settled by the Judiciary because those decisions could interfere with the Executive's conduct of foreign affairs.
In response to the outcome of the case, Congress enacted, more commonly referred to as the "Second Hickenlooper Amendment", named after the bill's sponsor, Bourke B. Hickenlooper, an Iowa Senator. Generally, under the Hickenlooper Amendment, courts are not to apply the act of state doctrine as a bar against hearing cases of expropriation by a foreign sovereign. There is an exception if the Executive requests that the courts consider the act of state doctrine because foreign policy interests may be damaged by judicial interference:
English law
The foreign act of state doctrine applies in English law. In April 2018, the English Commercial Court ruled that it also applies in English arbitration.
