Act of state doctrine
A US rule under which courts do not rule on the validity of a foreign state's public act within its own territory, which often closes the path to recovery after an expropriation.
The act of state doctrine bars US courts from ruling on the validity of a public act performed by a recognized foreign state within its own territory, even when it breaches international law. The Supreme Court established it in Banco Nacional de Cuba v. Sabbatino of March 23, 1964, over a cargo of sugar nationalized by Cuba. Congress responded the same year with the so-called Hickenlooper amendment, which sets it aside for certain expropriations, but the doctrine endures. It separates two hurdles often confused: immunity shields the state from suit, the act of state doctrine shields its decision from review. For the political risk insurer, subrogated to the rights of the expropriated investor, it explains why recovery goes through investment arbitration rather than domestic courts, and why the applicable treaty weighs on the severity of the loss.
For the Cuban nationalizations of 1959 and 1960, the US Foreign Claims Settlement Commission certified 5,913 claims worth about 1.9 billion dollars in principal. With no judicial route, they have been waiting for more than half a century for a settlement between states.
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