The Limits of Sovereign Jurisdictional Immunity:
the Petrol Shipping Corporation and
Victory Transport Cases
K. R. Simmonds *
The clearly discernible, although somewhat erratic, movement in
Anglo-American jurisprudence toward a restrictive interpretation
of sovereign jurisdictional immunities has in recent years met a
number of vicissitudes of fortune. A general feeling that immunities
should depend on the interest of function rather than that of status,
and that, in particular, immunities in respect of commercial acts
(jure gestionis) can no longer be widely justified in the new political
and economic context of State trading activities, has become manifest
in much judicial and juristic comment.’ Yet both Britain and the
United States have found difficulty in breaking away from the
classical nineteenth century doctrine of absolute immunity, founded
upon respect for the dignity of the foreign sovereign and the equality
of nations, which was established in an age when the r0le and
function of government was limited and predictable.2 The process of
a reformulation of doctrine, has, however, met with greater success
* Director, British Institute of International and Comparative Law, London;
Visiting Professor of Law, McGill University, 1963.
1 See, inter alia, Kahan v. Federation of Pakistan, (1951) 2 K.B. 1003; Sultan
of Johore v. Abubaker Tunku and Others (1952) A.C. 318; Baccus S.R.L. V.
Servicio Nacional del Trigo (1957) 1 Q.B. 438; Rahirtoola V. Nizam of Hydera-
bad (1958) A.C. 379; Hersch Lauterpacht, “The Problem of Jurisdictional Iro-
inunities of Foreign States”, in (1951) 28 B.Y.B.I.L. 220; Clive M. Schmitthof,
“The Claim of Sovereign Immunity in the Law of International Trade”, in (1958)
7 International and Comparative Law Quarterly, 452-467. On the U.S. position,
see: Notes, “Jurisdictional Immunity of Foreign Sovereigns” and “Sovereign
Immunity for Commercial Instrumentalities of Foreign Governments”, in (1954)
63Yale L.J. 1148 and (1948) 58Yale L.J. 176 respectively; Timberg, “Sovereign
Immunity, State Trading, Socialism and Self-Deception”, in Essays on Interna-
tional Jurisdiction, (1961) p. 40 ff (also Aron in the same volume, at p. 21 ff) ;
P. C. Jessup, “Has the Supreme Court Abdicated One of Its Functions ?”, in
(1946) A.J.LL., 168.
2 See: M. Brandon, “Sovereign Immunity of Government-Owned Corporations
and Ships”, in (1954) 39 Cornell L.Q. 425; Richard A. Falk, “The Role of Do-
nestic Courts in the International Lagal Order” (1964), Chap. VII (“Sovereign
Immunity: A Discourse on Recent Havoc”) p. 139 ff.; W. Friedmann, “The
Changing Structure of International Law”, (1964), pp. 343-346; Timberg, “Ex-
propriation Meamsres and State Trading”, in (1961) 55 Proc. Am. Soc. Int. L.
113, 118.
292
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in the United States than it has in Britain. Since the so-called “Tate
Letter” of 1952 there has been a marked shift in U.S. executive policy
toward an adoption of a restrictive theory of sovereign immunity in
the consideration of requests of foreign governments for grants of
sovereign immunity.3 The Federal courts have shown themselves less
likely to allow a plea of sovereign immunity where the executive has
declined to do so. The archaic and inflexible character of the classical
doctrine has frequently been emphasised and condemned; in some
cases, particularly in National City Bank v. Republic of New York
(1955) 4, there has been evidence of a judicial desire to rethink the
rationale of sovereign immunity and to strive to ensure, wherever
possible, a substantial parity of treatment between sovereign and
private litigants.
Some recent decisions, however, indicate that the movement is
once again entering into a period of difficulty and uncertainty. Lan-
guage used in the majority opinion of the Supreme Court in Banco
Nacional de Cuba v. Sabbatino 5 (1964), where the Court refused to
allow an examination of the validity of the expropriation of alien
property, situate in its own territory, by the Government of Cuba,
although the foreign act had been characterised as violative of
international law by the State Department, may lead to a blurring
3 Changed Policy Concerning the Granting of Sovereign Immunity to Foreign
Governments, 26 Dept. State Bull. 984 (1952). The “Tate Letter”, addressed by
the then Acting Legal Adviser of the State Department, Professor Jack B. Tate,
to the U.S. Attorney General, concluded, after a comparative review of the
application of the restrictive theory of immunity in the practice of a number
of foreign States, that, with the possible exception of the United Kingdom, little
support could be found (except for Soviet bloc countries) for the continued full
acceptance of the absolute theory : “… the granting of sovereign immunity to
foreign governments in the courts of the United States is most inconsistent with
the action of the Government of the United States in subjecting itself to suit in
these same courts in both contract and tort and with its long established policy
of not claiming immunity in foreign jurisdictions for its merchant vessels…
the Department feels that the wide spread and increasing practice on the part
of governments in engaging in commercial activities makes necessary a practice
which will enable persons doing business with them to have their rights deter-
mined in the courts. For these reasons it will hereafter be the Department’s
policy to follow the restrictive theory of sovereign immunity in the consideration
of requests of foreign governments for a grant of sovereign immunity.”
4348 U.S. 356 (1955). See : Claudy, “The Tate Letter and the National City
Bank case: Implications”, in (1958) 52 Proc. Am. Soc. Int. L. 80, K. R. Sim-
monds, “Implied Waiver of Immunity: Permissible Counterclaims against a
Sovereign Plaintiff”, in (1960) 9 International and Comparative Law Quarterly,
334, 341-2.
5 376 U.S. 398 (reported also in
(1964) 58 A.J.LL. 779); see the critical
literature referred to in note 71 infra.
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– LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
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of the distinction between the doctrines of act of state and sovereign
immunity. Executive reaction to the litigation in another “Cuban”
case, Rich v. Naviera Vacuba, S.A. 6 (1961)
(the Bahia de Nipe
case) has been thought to indicate a withdrawal from the guide-lines
laid down in the “Tate Letter” and the exaggerated judicial deference
toward the exercise of executive discretion shown in this case has
been condemned as supporting the promotion of ad hoe executive
policy in the immunity context.7
To add to these difficulties comes the case of Petrol Shipping
Corporation v. Kingdom of Greece, Ministry of Commerce, Purchase
Directorate 8 (1964), the first of the two cases which I intend to
examine in this article. The facts were simple and only marginally
in dispute. The respondent had chartered the petitioner’s tanker
Atlantis to carry a cargo of grain from Texas to Greece pursuant to
the Agricultural Trade Development and Assistance Act 9. This was
an “Aid cargo”, and, as is well known, 50% of such cargoes must be
shipped in American bottoms. On arrival at the port of Piraeus,
Greece, the Atlantis was directed by the respondent, an agency of
the Kingdom of Greece, to a berth at which the vessel could not safely
lie afloat. The Atlantis suffered damage and the respondent disclaim-
ed responsibility. The Charter Party contained an arbitration
clause 10; the Petrol Shipping Corporation appointed its own arbitra-
Ambassador, appearing specially, suggested lack of jurisdiction to
sue a sovereign State without its consent. Judge Dawson dismissed
the motion for want of jurisdiction and the petitioner appealed to
the Court of Appeals for the Second Circuit, alleging that the District
tor and moved the court of first instance (the District Court for the
Southern District of New York) for an order directing the respon-
dent to appoint an arbitrator also.” In the District Court the Greek
Court erred in accepting the unsupported suggestion of the Greek
Ambassador and should have required the respondent to establish its
claim to immunity through the usual State Department channels.
6197 F. Supp. 710 (E.D.A. 1961); 295 F. 2d 24 (4th Cir. 1961). See also
State ex rel. National Institute of Agrarian Reform v. Dekle, 137 So. 2d 581,
(Fla. 1962) and Dade Drydock Corp. v. The MIT Mar Caribe, 199 F. Supp. 871
(S.D. Texas 1961). An extended critique of the Bahia de Nipe case is given by
Falk, op. cit., pp. 145-164; cf. M. H. Cardozo, “Judicial Deference to State Depart-
ment Suggestion : Recognition of Prerogative or Abdication to Usurper”, in
(1963) 48 Cornell L.Q. 461, 464-468.
7Falk, op. cit., pp. 156-158.
8 326 F. 2d 117.
9 7 U.S.C.A.S. 1691 et seq.
10 The arbitration clause provided that “for the purpose of enforcing any award,
this agreement may be made a rule of the Court”, 326 F. 2d 117, note 2.
S11232 F. Supp. 294 (S.D.N.Y. 1963).
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The Court of Appeals upheld the plea of sovereign immunity and
affirmed dismissal of the action for want of jurisdiction (Judge
Clark dissenting). The Court regarded the narrow issue presented
by the appeal as falling within Puente v. Spanish National State
(1941.12 In that case, a suit for legal fees, the Court took judicial
notice of the sovereignty of the Spanish National State, after con-
sidering a letter from the Spanish Ambassador declining to accord
consent to jurisdiction, and dismissed the suit. Judge Clark, giving
the judgment of the Court on that occasion, said:
“In this action, where there is no vestige of apparent jurisdiction, there
would seem to be no reason why the plaintiff must not proceed in the usual
way to show jurisdiction by alleging and proving defendant’s consent to be
sued; nor why, for lack thereof, the court, acting on its own motion or an
appropriate suggestion under Rule 12(h) should not dismiss … Courts take
judicial notice of the sovereign character of a defendant and, in case of
doubt, address their own inquiries to the executive.”
A little earlier, however, he had distinguished another line of
authority, stemming from Ex parte Muir,13 where, if a court had the
elements of jurisdiction in an action (e.g. jurisdiction over a vessel
against which a foreign State laid claim), he had held that:
“1… it is not improper to require of even a sovereign who would oust it of
that jurisdiction that he furnish due proof to support his claim.” 14
Judge Clark referred back to his own judgment in Puente in the
course of his dissenting judgment in Petrol Shipping Corporation.
His caveat in Puente with respect to those cases where the Court
had the elements of jurisdiction should not be taken to refer to a
rule limited to particular instances. Further more he regarded it as
necessary for the Court to recognize the “controlling importance”
or State Department pronouncements on national policy with respect
to immunity claims,15 particularly those springing from State com-
12 116 F. 2d 43, cert. denied 314 U.S. 627 (1914) ; cf. Ex parte Republic of Peru,
318 U.S. 578 (1943).
13 254 U.S. 522 (1921). See also : The Belgenland, 114 U.S. 355, 368-369; The
Pesaro, 271 U.S. 562 (1926); Compania Espanola de Navegacion Maritima V.
The Navemar 303 U.S. 68 (1938).
14 116 F. 2d, 43, 44-45 (emphasis supplied); see F. D6ak, “The Plea of Sover-
eign Immunity in the New York Court of Appeals”, in (1940) 40 Col. L. Rev. 453.
15 326 F. 2d 117, 118; cf. Judge Clark’s judgment in Sullivan v. State of Sao
Paulo, 122, F. 2d 355 (1941) and U.S. ex rel. D’Esquiva v. Uhl 137 F. 2d 903,
906-907 (1943). In Republic of Mexico v. Hoffman, 324 U.S. 30 (1945) Stone,
C.J., giving the opinion of the Supreme Court, said, refusing to recognise im-
munity from suit of a vessel owned but not possessed by a foreign State : “We
can only conclude that it is the national policy not to extend the immunity in
the manner now suggested, and that it is the duty of the courts, in a matter so
intimately associated with our foreign policy and which may profoundly affect
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
295
mercial activities. Since the “Tate Letter” it had been the common
practice of the courts “to seek or await” State Department advice
before making a grant of this or related forms of immunity. He was
of the view that the District Court in the present case had, without
seeking or awaiting such advice, accorded the Kingdom of Greece “a
special privilege” which was contrary to recent practice:
“This circumstances of consent to the arbitration of what appears clearly
to be a commercial transaction suggest a good possibility that the Depart-
ment which has the responsibility (as we do not) for control of our foreign
relations will not support the defense of immunity here.” 16
His criticism of the District Court was severe; it had interfered
“most discriminatorily” in matters (of “delicate foreign relations”)
not entrusted to its responsibility. 17 It was important that the State
Department’s position be known; the decision of the Court below
should therefore in his opinion be reversed and the case remanded.
The respondent applied for a re-hearing by the full Court sitting
en banc. This was granted, and, on 25 May, 1964, after considering
a brief submitted by the State Department as amicus curiae, eight
judges of the Court of Appeals, with one judge dissenting, decided
that the judgment of the District Court should be vacated and the
case remanded to that Court with instructions to take evidence rele-
vant to the contentions of the parties and to make a furher determi-
nation in the light of such evidence and arguments put forward. 17 The
brief for the United States as amicus curiae was concerned only with
an examination of the proper procedures involved in the presentation
of a plea of sovereign immunity; although of great interest it is
therefore outside the ambit of our present discussion. No opinion was
expressed as to the effectiveness of service of process in order to
obtain personal jurisdiction over the appellee, as to the possible
applicability of the doctrine of “Act of State”, or as to whether the
State Department would have supported a claim of sovereign immu-
nity if the Greek Government had applied directly to it.18 The brief
recommended that the case be remanded for development of the facts
bearing upon the suggestion of sovereign immunity, and, as has been
noted, the Court followed this advice. Nevertheless, the brief stressed
that the ultimate resolution of the immunity problem was far from
it,, not to enlarge an immunity to an extent which the government, although
often asked, has not seen fit to recognize” (ibid., p. 38).
16 326 F. 2d 117, 119.
17 Ibid. Cf. Banco Nacional de Cuba v. Sabbatino, 307 F. 2d 845, 855-858 and
Falk, op. cit., 118 ff.
18 Brief for the United States as amicus curiae, p. 4, note 3. I am indebted
to Mr. J. Blair and to Mr. G. W. Haight for their courtesy in making available
to me many of the papers in this case.
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clear and that, unless further facts were forthcoming, the Court
could not proceed to determine (i) whether or not there had been a
waiver of immunity, derived from entry into the arbitration agree-
ment or the subsequent conduct of the Greek Government,
(ii)
whether or not the distinction between acts of a public and acts of
a private character was to be followed and applied in the present
case, (iii) whether, if this distinction were applied, the Charter
Party was to be construed as a private act –
lure gestionis, or (iv)
whether the damage caused to the Atlantis was properly a matter fall-
ing under the arbitration agreement or was the result of an indepen-
dent public act of the appellee.
Up to the time of writing no further developments have been
reported in the Petrol Shipping Corporation case. This is undoubtedly
because of the emergence of a parallel case, Victory Transport Inc.
v. Comisaria General de Abasteciemientos y Transportes “I (the Vic-
tory Transport case) where an application has recently been made
to the Supreme Court for a writ of certiorari.20 Oral argument in this
case was heard in the Court of Appeals only two days before the
same Court granted a re-hearing in the Petrol Shipping Corporation
case. Victory Transport was also on appeal from the District Court
for the Southern District of New York and involved substantially
similar issues. In this case the appellant, an agency of the Spanish
Government, had chartered a vessel, the Hudson, from the appellee in
order to transport a cargo of surplus wheat from Alabama to certain
Spanish ports. The wheat had, as in the Petrol Shipping Corporation
case, been purchased under the Agricultural Trade Development and
Assistance Act. The Hudson was delayed and suffered damage whilst
discharging her cargo and the appellee argued that the ports were
unsafe. The Charter Party contained a clause (the “New York Pro-
duce Arbitration Clause”) which provided for the reference of any
dispute between the parties to three arbitrators (“commercial men”)
in New York.21 Their decision was to be treated as final, and, as in
the earlier case, the agreement was to be treated as rule of the Court
for the sake of enforcing any award. The appellant failed to pay for
the damage to the vessel or to submit the dispute to arbitration. The
appellee instituted proceedings to compel arbitration and secured an
ex parte order from the District Court permitting service of its peti-
tion by registered mail to the Madrid office of the appellant. Service
19 336 F. 2d 354.
20 33 LW 3295 (March 9, 1965). The Solicitor General has been invited to file
a brief expressing the views of the United States.
21 336 F. 2d 354, 356 note 2. Proceedings were instituted under s. 4 of the U.S.
Arbitration Act (9 U.S.C.S. 4).
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
297
was effected but the appellant later moved the District Court to
vacate the service as extraterritorial and unauthorised by statute.22
Counsel for the appellant, appearing specially, pleaded lack of juris-
diction and immunity from suit as the appellant was a Government
agency. In the District Court, on 15th October, 1963, Judge Murphy
rejected this contention; in his view the plea of sovereign immunity
was not appropriate to a foreign Government in a case concerned
with, as here, a commercial operation. Accordingly, he held that the
Court had in personam jurisdiction and entered an order compelling
arbitration. 23 The Court of Appeals, on 9 September, 1964, affirmed
this order, upheld in personam jurisdiction, denied sovereign immuni-
ty and found “Act of State” irrelevant. 24
Judge Joseph Smith, giving the opinion of the Court, addressed
himself directly to the problem of the restrictive theory of sovereign
immunity.25 He devoted much of a careful and well documented opi-
nion to a review of the decline of the absolute theory of immunity and
to an assessment of the distinction between acts jure imperil and acts
jure gestionis as seen through the eyes of contemporary U.S. courts:
“… Because of the dramatic changes in the nature and functioning of
sovereigns, particularly in the last half century, the wisdom of retaining
the doctrine has been cogently questioned… Growing concern for individual
rights and public morality, coupled with the increasing entry of govern-
ments into what has previously been regarded as private pursuits, has led
a substantial number of nations to abandon the absolute theory of sovereign
immunity in favor of a restrictive theory.” 26
Since the end of the Second World War the United States had
been a party to a number of commercial treaties in which provisions
had obligated each contracting party to waive its sovereign immunity
in respect of state-controlled enterprises engaged in business activities
within the territories of other signatories. To this must be added the
effect of the “Tate Letter”, which was indicative of the State De-
partment’s adherence to the jure imperii and jure gestionis distinc-
tion.27 The court would naturally show deference to a pronouncement
by the State Department in any case, and, following Republic of Mexi-
co V. Hoffman,28 would deny a claim of immunity where the State
22 232 F. Supp. 294.
23 Ibid.
24 336 F. 2d 354, 361-2, 363.
25 Ibid., 357-362.
28 Ibid., 357.
27 Ibid., 358.
28 324 U.S. 30, 35 (1945): “It
is therefore not for the courts to deny an
immunity which our government has seen fit to allow or to allow an immunity
on new grounds which the government has not seen fit to recognize”. Cf.: Na-
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[Vol. 11
Department had indicated, either directly or indirectly, that immuni-
ty need not be accorded, or would allow a claim of immunity where
the Government saw fit to suggest it.
Judge Smith was careful to add that it must not be assumed that
the courts would not grant immunity unless specifically requested to
do so by the State Department. Claims of immunity could properly
be presented to the courts either by way of the Department’s sugges-
tion or directly by a duly accredited and recognised representative of
the foreign sovereign concerned. 29 In the present case there was no
communication from the State Department. In the District Court the
plea of immunity was merely supported by an affidavit from the
Spanish Consul in New York; the Court of Appeals had before it a
letter from the Spanish Ambassador and a motion that he be allowed to
appear specially. Judge Smith, without deciding whether or not this
procedure was adequate, treated the claims as properly presented and
granted the motion.30 However, he held that it was the duty of the
court to decide for itself whether or not it was the “established policy”
of the State Department to recognise a claim of this type.31 Upon what
guidance could the court rely? The “Tate Letter” gave no guide-lines
or criteria to assist the courts in working out the distinction between
acts jure imperii and acts jure gestionis; but the State Department
very clearly intended that the courts should apply the distinction.32
Judge Smith found no satisfactory guidance in the decisions of muni-
cipal courts or the works of commentators. The theory that the nature
of the transaction should be looked to, and that public sovereign acts
were those which could not be performed by individuals, had in prac-
tice produced “rather astonishing results” and could not cover those
contracts which by their nature had to be negotiated by States.33 The
purpose of the transaction theory he found to be even more unsatis-
factory since conceptually the modern sovereign State always has a
public purpose to its activities. 34 If a purely functional test were to be
tional City Bank of New York V. Republic of China, 348 U.S. 356, 360-361 (1955)
and Comment : “The Jurisdictional Immunity of Foreign Sovereigns”, in (1954)
63 Yale L.J. 1148, 1157-1158.
29 336 F. 2d 354, 358.
30 Ibid., 359, note 7.
31 Ibid., 359.
32 Ibid., 360.
3 See :Draft Convention on the Competence of Courts in Regard to Foreign
States, Harvard Law School Research in International Law, 386-391
(1931);
Lauterpacht, op. cit., 225; S. Sucharitkul,State Immunities and Trading Activities
in International Law, 265-276 (1959) ; and other authorities gathered at 336 F.
2d 354, 359, notes 8 and 9.
34 336 F. 2d 354, 359-360 and notes 10, 11; cf. C. M. Schmitthoff, op. cit., 455.
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
299
applied to the activity in question then the court might easily project
its own subjective ideas about the “proper realm of State functioning”.
Judge Smith advanced no theory of his own to justify or explain the
distinction, but one may suspect that he found sympathy with those
commentators who hold the distinction ultimately to be unworkable.35
Nevertheless, such a distinction, whatever its basis or rationale,
had to be applied to the facts of the present case. In the most signifi-
cant part of the opinion, which followed, Judge Smith attempted to
re-define the restrictive theory of immunity and to re-state its scope:
“The purpose of the restrictive theory of sovereign immunity is to try to
accommodate the interest of individuals doing business with foreign govern-
ments in having their legal rights determined by the courts, with the interests
of foreign governments in being free to perform political acts without under-
going the embarrassment or hindrance of defending the propriety of such acts
before foreign courts. Sovereign immunity is a derogation from the normal
exercise of jurisdiction by the courts and should be accorded only in clear
cases. Since the State Deparment’s failure or refusal to suggest immunity
is significant, we are disposed to deny a claim of sovereign immunity that
has not been “recognized and allowed” by the State Department unless
it is plain that the activity in question falls within one of the categories
of strictly political or public acts about which soverigns have traditionally
been quite sensitive. Such acts are generally limited to the following cat-
egories:
(1)
(2)
(3) acts concerning the arned forces
(4) acts concerning diplomatic activity
(5)
internal administrative acts, such as expulsion of an alien
legislative acts, such as nationalization
public loans.” 36
If diplomacy required an extension of these categories, then the
State Department should file a suggestion of immunity; if the cate-
gories were too extensive then the State Department should issue a
new policy pronouncement.
In the light of this definition Judge Smith had no difficulty in
finding that the chartering of the Hudson by the Comisaria General
was not a “strictly political or public act” but had “all the earmarks
of a typical commercial transaction”.3 7 He regarded the inclusion of
the arbitration clause as “one of the most significant indications of
the private commercial nature” of the Charter Party.38 The purchas-
ing activity of the Comisaria General had been conducted through
35Ibid., 360; see: Lauterpacht, op. cit., 225-226; G. G. Fitzmaurice, “State
Immunity from Proceedings in Foreign Courts”, in (1933) 14 B.Y.B.I.L., 101,
123-124.
36 Ibid.
37 336 F. 2d 354, 360.
38 Ibid., 361.
McGILL LAW JOURNAL
[Vol. l1
normal private trade channels and was an act jure gestionis if the
restrictive theory were applied. In support of this conclusion he
referred, inter alia, to a recent decision of the French Court of
Appeal 39 and to a decision of the Commercial Tribunal of Alexandria
declining to grant immunity over twenty years ago to the Comisaria
General in a suit arising from a purchase of wheat intended for con-
sumption in Spain during the course of the Second World War.40 lie
also cited the State Department’s communication to the Court in
New York and Cuba Mail S.S. Co. v. Republic of Korea in 1955.41 In
that case the Korean Government was alleged to have been respon-
sible for damage caused to a vessel which was unloading a cargo of
rice despatched as a gift to Korean civilian and military personnel
during the Korean War:
“Though suggesting that Korea’s property was immune from attachment,
the State Department refused to suggest immunity “inasmuch as the par-
ticular acts out of which the cause of action arose are not shown to be of a
purely governmental character”. If the wartime transportation of rice to
civilian and military personnel is not an act jure imperii, a fortiori the
peacetime transportation of wheat for presumptive resale is not an act jure
imperii.” 42
The appellant’s “Act of State” contention, rightly, found short
shrift with Judge Smith, who likened it to an attempt to “enter the
sanctuary of soreveign immunity through the side door”. 43 The con-
tention that “Act of State” applied to the actions of the Comisaria
General was “considerably wide of the mark”. Following the defini-
tion of the doctrine adopted by the Supreme Court in Sabbatino,44 he
found that it applied only to the public acts of a foreign sovereign.
Designating safe ports for the Hudson was not a public act of the
Spanish Government, did not become an “Act of State” simply be-
cause performed by a State instrumentality, and was not performed
in any case within the territory of Spain.4
On the issue of the Court’s in personam jurisdiction, Judge Smith,
when confronted by the appellant with the panel decision in the Petrol
39Myrtoon Steamship Co. v. Agent Judiciaire du Trdsor, in (1957) 24 Int.
Law Rep., 205, 206.
40Egyptian Delta Rice Mills Co. v. Comisaria General de Madrid, (1942-3) 55
Bulletin de Ligislation et de Jurisprudence Egyptiennes, 114; see Lauterpacht,
op. cit., (note 1), p. 255.
41132 F. Supp. 684, 685 (S.D.N.Y. 1955).
42 336 F. 2d 354, 362.
43Ibid.
4 376 U.S. 398, 401.
45336 F. 2d 354, 363; the designation of the discharge ports was done by the
appellant’s shippers at Mobile, Ala. and entered there on the bill of lading.
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LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
301
Shipping Corporation case,46 held that the Comisaria General must
be deemed, by agreeing to arbitrate in New York, where the U.S.
Arbitration Act makes such agreements specifically enforceable, to
have consented to the jurisdiction of a court in New York that could
compel arbitration proceedings. 47 To hold otherwise would have made
the arbitration clause a nullity. In the recent Farr 4 and Orion Shipp-
ing 49 cases the Court of Appeals had held that 4 of the U.S. Arbitra-
tion Act gives in personam jurisdiction for the District Court to order
foreign corporations which had agreed to arbitration in New York
to submit to such arbitration:
“Unless the arbitration clause in this charter differs significantly from the
arbitration clauses specifically enforced in the Farr and Orion cases, it is
clear that the court has in personam jurisdiction, for we see no reason to
treat a commercial branch of a foreign sovereign differently from a foreign
corporation.” 50
No such significant difference between the wording of the arbi-
tration clauses in Farr and Orion Shipping cases and that in the
instant case could be observed. Thus the agreement to arbitrate con-
tained an implicit consent to an enforcement of that agreement.51
Judge Smith also rejected the appellant’s argument as to an alleged
impropriety of extraterritorial service and affirmed the finding of
the court below that, since consent to jurisdiction was established, the
authorisation of service by the District Court did not violate due
process.52
Both the Petrol Shipping Corporation and Victory Transport
decisions give cause for concern. Petrol Shipping Corporation raises,
in a neat form, the question of whether an agreement by a State to
submit disputes to arbitration may be treated as a waiver of sovereign
46 326 F. 2d 117, 118. See : Kunglig Jarnvagsstyrelsen v. Dexter & Carpenter,
300 F. 891 (S.D.N.Y. 1924), affirmed 32 F. 2d 195 (2 Cir. 1929).
47336 F. 2d 363.
4 8 Farr & Co. v. Compania Intercontinental De Navegacion, 243 F. 2d 342
(2 Cir. 1957).
4 9 Orion Shipping & Trading Co. V. Eastern States Petroleum Corp. of Panama,
284 F. 2d 419 (2 Cir. 1960).
50 336 F. 2d 363 (emphasis supplied).
51 Ibid., 364.
52 Ibid. See : Federal Rules of Civil Procedure, Rules 4(d) (3), 4(d) (7) and
4(e).
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immunity in an arbitration proceeding. Victory Transport re-opens
the “implied waiver” issue and links it with the application of the
jure imperii/jure gestionis distinction. The rationale of the restric-
tive theory of sovereign immunity applied by the Court in Victory
Transport is difficult to identify and the categorisation adopted of
“public” State activities is open to objection on several counts.r3
(i) The restrictive theory in Victory Transport
One writer has commented that the Victory Transport decision
represents in effect an abandonment of the State Department atti-
tude toward the restrictive theory; in future sovereign immunity will
be allowed only in exceptional circumstances. 54 On the other hand,
the decision has been welcomed as “…
the first formulation of the
theory of restrictive sovereign immunity at the federal appellate
level.. .” 55 The Court, as has been noted, acknowledged the difficulty
of applying the “Tate Letter”; however, the State Department had
at least indicated then that it favoured the grant of immunity on the
basis of function, and, in the absence of a Department suggestion, the
Court was free to make its own characterisation of the State activity
in question. In order to establish, subject to the policy direction of
the “Tate Letter”, what Friedmann has called “a resasonable equili-
brium” between State and individual rights and obligations, the
Court examined the activity of the Comisaria General with the object
of ascertaining whether any derogation from “the normal exercise
of jurisdiction” was justifiable.3″ It is significant that the Court
regarded such a derogation, in the absence of a State -Department
suggestion, as exceptional and, in any case, only appropriate where
“public activities”, as categorised by itself, were in question. There
is no trace, in Victory Transport, of the old attitude that some com-
mercial and economic operations may be as much a proper Govern-
mental activity as any of the more traditional functions.5 Nor did the
Court, in deciding whether or not, at the outset, it was the “establish-
ed policy” of the State Department to recognise a claim of the type
presented by the Comisaria General, appear to pay much heed to the
53 The case is discussed in a perceptive Note by Craig S. Bamberger, in (1965)
6 Harvard Int. Law Club Journal, 203, esp. 215-218.
54 Ibid., 215.
55 Case Note in (1965) 63 Mich. L. Rev., 708.
56 336 F. 2d, 354, 360. See : W. Friedmann, “The Changing Structure of Inter-
national Law” (1964), 343-346, at 346.
57 Cf. Berizzi Bros. Co. v. S.S. Pesaro, 271 U.S. 562 (1926) ; New York v. United
States, 326 U.S. 572 (1946)
(the Saratoga Springs case).
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
303
frequently cited proposition that immunity need only be granted
when the executive branch would be embarrassed if it were not. 58
Instead, the Court used the “Tate Letter” as sufficient evidence of
a policy designed to enforce the distinction between acts jure imperii
and acts jure gestionis, and, without regard to State Department
policy in particular cases, 59 proceeded to define the former category
in its own terms. Those terms are not novel. The list of “public acti-
vities” put forward by Judge Smith is similar to that proposed by
Lalive in a course of lectures at the Hague Academy of International
Law in 1953.60 Lalive, in turn, was seeking to modify a list of rules
advanced by Lauterpacht in the article referred to above.61 Lauter-
pacht had advanced the proposition that Governmental immunities
should, in principle, be abolished and that foreign States should be
subjected to the jurisdiction of the forum in the same way and to the
same extent as the sovereign of the forum. The “safeguards” or quali-
fications he was prepared to admit would grant immunity to legisla-
tive acts, executive acts on the territory of the foreign State, certain
administrative acts, and would preserve the traditional immunities of
diplomatic property and warships. Governmental contracts would,
in this view, be subject to the conflict of laws rule of the forum.6 2
Both the Lalive and Lauterpacht listings may be criticised on
their inclusions and exclusions.6 3 However, it is not necessary here to
enter into the merits of the individual categories but rather to focus
attention upon the central problem of their rationale. As has been
pointed out by Sucharitkul, 64 an enumeration of acts which are
exempt from jurisdiction merely transposes the problem of establish-
ing a realistic distinction between “governmental” and “commercial”
activities; we are left with what is in effect a new version of the
distinction between acts “jure imperii” and acts “jure gestionis” –
a distinction which Lauterpacht with much justification considered
unworkable. The cogency of this argument is reinforced if we look at
58 The judgment of Stone C.J. in Republic of Mexico v. Hoffmann, (324 U.S.
31, 35 (1945) has been cogently criticised by Falk, op. cit., 160 and Jessup,
op. cit., 168-172. See also : F. Deak, “The Plea of Sovereign Immunity and the
New York Court of Appeals”, in (1940) 40 Col. L.R. 453-465.
59 Bamberger, op. cit., 207-209.
60 J.-F. Lalive, “L’immunitj de Juridiction des Etats et des organisations inter-
nationales” in (1953) 84 Recueil des Cours, 205, 285-286.
61 Lauterpacht, op. cit., 237; cr. Sucharitkul, op. cit., 284.
62 Lauterpacht, op. cit., 237-238.
63 See : D. P. O’Connell, International Law (1965), Vol. 2, 916-919; Sucharitkul,
op. cit., 233 ff.; Bamberger, op. cit., 215-218.
64 Sucharitkul, op. cit., 284.
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the pronouncement of the Court in Victory Transport.5 The Court
gives us a list of “strictly political or public acts” and claims that the
list reflects traditional areas of activity about which States have
demonstrated “sensitivity”. The list, by itself, tells us little about the
rationale of restrictive immunity or about the development of future
judicial attitudes. How are the categories to be interpreted? How do
they relate to the exercise of executive discretion and the formulation
of executive policy? The Court is aware, as is evident from its criti-
cism of the functional test,66 of the danger of judicial arbitrariness
or an excessively subjective approach when a municipal court has to
consider the delimitation of foreign governmental activity. Yet per-
haps a greater danger lies in over-formalisation, since, as the recent
Cuban cases have convincingly demonstrated,6 7 any distinction be-
tween governmental and commercial activities cannot be static in the
changing social and economic circumstances of contemporary inter-
national society. Even assuming that the categorisation proposed in
Victory Transport were to be considered as adequate, any constructi-
ve future interpretation of the categories must depend upon a prior
re-thinking of the rationale of the grant of sovereign immunity.
Victory Transport does not proceed on the lines of Lauterpacht’s
basic proposition –
the assimilation of foreign sovereign immunities
to those of the domestic State –
but, after the categorisation of
“public activities”, reverts to a consideration of the nature and the
function of the purchasing activity of the Comisaria General.68 The
reliance upon the New York and Cuba Mail S.S. Co. case, and upon
the French and Egyptian authorities cited, seems to indicate that in
fact, contrary to its express words, the Court was applying at least a
qualified functional test to the state activity in question.69 Thus the
apparent preciseness and predictability of the suggested categor-
isation is, it is submitted, largely illusory. The establishment of at
least a minimum international consensus upon a narrower doctrine
of sovereign immunity can only be achieved if there is first a re-
examination of the reasons for, and the function of, external (State
to State) deference today.70 In the United States, of course, external
65 326 F. 2d 354, 360.
66 Ibid., 359.
67 See especially the Bahia de Nipe litigation – Rich v. Naviera Vacuba, S.A.
197 F. Supp. 710 (E.D.A. 1961), 295 F. 2d 24 (4th Cir. 1961)
and Falk,
op. cit., 145 ff. Cf. American Law Institute, Draft Restatement of Foreign Rela-
tions Law (1962), 212 ff., esp. at 230-232.
–
68326 F. 2d 354, 361.
69 Ibid.
70 See : O’Connell, op. cit., Vol. 2, 913 ff.
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
305
deference cannot be studied in isolation from the problem of internal
(Judiciary/Executive) deference. 71 That is why the most optimistic
feature of the Victory Transport decision may perhaps be found in
the Court’s preparedness, even eagerness, to decide for itself how,
in the absence of a specific State Department suggestion, a doctrine
of restrictive immunity should be applied. 72
(ii) Prior waiver of immunity in Petrol Shipping Corporation.
The recent Draft Restatement of the Foreign Relations Law of
the United States 7 contains the following rule:
“(i) A state may waive the immunity to which it
is entitled…
(73)
Waiver may be made by international agreement or by contract in advance
of any action being brought against the state concerned. A waiver of im-
munity from suit by a state does not, in the absence of a clear indication
to the contrary, imply a waiver of immunity from execution.” 74
The reporters, however, note that no U.S. cases have been found
to support the suggested rule as to prior waiver of immunity by
contract, although “it is believed that the courts in the United States
would apply it in view of the general development regarding agree-
ments between states and private parties”.7 5 Both Petrol Shipping
71 Falk, op. cit., 164 ff.; cf. K. R. Simmonds, “The Sabbatino Case and the Act
of State Doctrine”, in (1965) 14 International and Comparative Law Quarterly,
452, at 461-2, 468-470, 477-479, 483-484, 487-488 and authorities there cited.
72 Fears aroused in some quarters by an excessive “spirit of judicial abdication”
(with respect to internal deference), such as that evidenced in Republic of
Mexico V. Hoffman, 324 U.S. 30, 35 (1945), may therefore be somewhat
assuaged by Victory Transport.
73 op. cit., 239.
74 Comments in this article are of course restricted to the problem of sovereign
immunity from jurisdiction. Immunity from execution, even where there is no
immunity from suit or there is a consent to jurisdiction, is firmly established by
Dexter & Carpenter, Inc. v. Kunglig Jarnvagsstyrelsen, 43 F. 2d. 705 (2d Cir.
1930); Bradford V. Chase National Bank, 24 F. Supp. 28, 38 (D.C. S.D. N.Y.
1938); New York & Cuba M.S.S. Co. v. Republic of Korea, 132 F. Supp. 684
(S.D.N.Y. 1955) and Weilamann v. Chase Manhattan Bank, 21 Misc. 2d 1086,
192 N.Y.S. 2d 469 (1959).
75 Draft Restatement, 242 (emphasis supplied). Art. 8 of the Harvard Research
Draft Convention on Competence of Courts in Regard to Foreign States (1932)
provided : “A State may be made a respondent in a proceeding in a court of
another State : a) When it gives express consent at the time the proceeding is
instituted; or b) When, after notification of the proceeding, it takes any steps
relating to the merits in that proceeding before asserting its immunity; or
c) When, by the contract upon which the proceeding is based, it has previously
consented to the institution of such a proceeding; or d) When, by treaty with
the State in whose Court the proceeding is brought, it has previously consented
to the institution of such a proceeding; or e) When it has previously, by law
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Corporation and Victory Transport present contracts where prior
waiver was alleged, at least in so far as submission to arbitration
was concerned. In Petrol Shipping Corporation, especially, the Court
was pressed with the argument that the arbitration clause consenting
to the Court’s jurisdiction for the purpose of enforcing any ar-
bitration award included consent to the appointment of an ar-
bitrator. 76 This, it was suggested, made the case readily distinguish-
able from Puente v. Spanish National State 77; the Court, however,
as has been noted, rejected the submission and regarded Puente as
decisive.78
It is argued that waiver of immunity from suit may alike be
traceable to the express or implied consent of the foreign State;
once that consent is established the State should not be allowed
“to blow hot and cold” with the jurisdiction. The English rule,
however, is that submission to the jurisdiction, or waiver of im-
munity, must be made in face of the court and at the time the
court is asked to exercise jurisdiction.79 Thus, even should there
be a contract in existence providing for submission, the foreign
State may still resile from it and claim sovereign immunity. Neither
prior assent to an arbitration clause 1o nor the presence of a motion
to set aside the award of an arbitrator 81 have been held, in English
courts, to amount to submission to the jurisdiction. It might be
expected that the U.S. rule would be less severe ;S2 the little authority
that does exists suggests that this is not so.8 3 The position of pre-suit
waiver in the U.S. before the instant cases was that no court had
or regulation or declaration in force when the claim of the complainant arose,
indicated that it would consent to the institution of such a proceeding”. (Em-
phasis supplied).
76 Petrol Shipping Corporation v. Kingdom of Greece, Appellant’s Petition for
Re-hearing, 1-2.
77 116 F. 2d 43. It may be noted that Puente has not been cited in the Supreme
unlike
Court and has only rarely been relied upon in lower Federal courts –
Sullivan v. State of Sao Paulo, 122 F. 2d 355 (1941).
78 326 F. 2d 117, 118.
79 Mighell V. Sultan of Johore, [1894] 1 Q.B. 149; Duff Development Co. V.
Government of Kelantan [1924] A.C. 797; Kahan v. Federation of Pakistan
[1951] 2 K.B. 1003; see, for a general survey, E. J. Cohn, “Waiver of Immunity”
in (1958) 34 B.Y.B.I.L. 260.
so Duff Development Co. V. Government of Kelantan, [1924] A.C. 797.
81 Compania Mercantil Argentina v. U.S. Shipping Board, (1924) 40 T.L.R. 601.
s2 See: M. Chase Waring, “Waiver of Sovereign Immunity”, in (1965)
6
Harvard Int. Law Club Journal, 189, 197-199.
83 Cf. Railroad Co. v. Tennessee, 101 U.S. 337 (1879) and Lamont V. Travelers
Ins. Co. 281, N.Y. 362, 365 (1939).
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
307
held that, in consequence of a prior contract, a sovereign was bound
to submit a dispute to the jurisdiction of an American court or
American arbitrators. Neither in Petrol Shipping Corporation nor
in Victory Transport was the court prepared to face the issue of
waiver. Whether this was due to the absence of authority, or to
the persuasive pressure of the English line of decisions, is difficult
to say. It has been suggested that the characterisation of the “private”
State activity in Victory Transport was itself “little more than an
application of implied waiver of immunity”. 4 This argument is
tenuous; the characterisation of a State activity as “private”, “com-
mercial”, or simply “non-public” as in Victory Transport, disposes
of the issue of jurisdictional immunity, although litigation there-
after may of course still be affected in a number of ways by the
sovereign status of one of the parties. The refusal of the State
Department to express a view on the issue of prior waiver as present-
ed in Petrol Shipping Corporation is thus, in view of the state of
the law, understandable83 On certain aspects of the law relating
to waiver of sovereign immunity, in particular those concerned with
counterclaims or “set-offs” against foreign soverings, the U.S. courts
have recently shown initiative and resource. 86 Express or implied
prior waiver by contractual agreement appears, however, despite
the prognostications of the Restatement reporters, to be in advance
of contemporary judicial thinking.
.+
.0
+0
It has been only possible in the space of a short article to point
to some of the most notable features of the two cases discussed.8 7
The immediate combined effect of Petrol Shipping Corporation and
Victory Transport will surely be to exacerbate existing high feeling
in commercial, as well as legal, circles against “the archaic and
disfavored” plea of sovereign immunity, as it was styled in National
City Bank v. Republic of China.88 Since both of the cases concerned
84 Waring, op. cit., 197, 199; see also 200, 201.
85 Petrol Shipping Corporation, Brief for the United States as Amicus Curiae,
4 note 3.
86 See : National City Bank of New York v. Republic of China 348 U.S. 356
(1955); Et Ve Balik Kwurmn v. B.N.S. International Sales Corp., 204 N.Y.S.
2d 971 (1960), and articles cited in note 4 supra.
87 The manner of presentation to U.S. courts of claims of sovereign immunity
has, for instance, not been discussed. See : Petrol Shipping Corporation, Brief
for the United States as Amicus Curiae, 6-10.
88 384 U.S. 356, 359.
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[Vol. II
“Aid cargoes”, many American ship-owners and underwriters may
understandably express their resentment at being denied redress by
arbitration in U.S. courts for claims arising from Charter Parties
containing agreed dispute clauses.8 9 Promises of diplomatic interven-
tion may do little to alleviate this situation, which could have an
important bearing upon the development, as well as the implement-
ation, of the Foreign Aid programme. Yet the long-term problem
is not simply one of avoiding, as the Court said in Victory Transport,
the sacrifice of private litigants in the interests of international
comity.90 It is rather a problem of totally revising our conception
of the modern State and its activities, and re-thinking the purposes
which sovereign jurisdictional immunities are intended to serve. The
doctrine of absolute immunity cannot, it is suggested, survive such
examination. An abolition of all jurisdictional immunities can hardly
be expected at the present time. If a restrictive theory that is both
predictable and flexible is to emerge, it can do so, in the writer’s
view, only if State activities are characterised by municipal courts
according to their function. To rely upon what is fundamentally an
artificial distinction between State “public” or “private” acts may
be as disastrous as to abdicate responsibility in favour of the prov-
ince of diplomatic negotiation. The role of the municipal court in
the United States, recently the subject of an admirable study by
Falk, is limited by executive policy and pronouncements. The eval-
uation of immunity claims when the executive is silent, as in Petrol
Shipping Corporation and Victory Transport, is carried out by the
court within the context of policy statements, such as those made in
the “Tate Letter”. If the court is willing, as in Victory Transport,
to decide for itself how the restrictive immunity policy should be
applied, then it should also be willing to examine the claim before
it by reference to its functional justification.91
89 See, for example, the report of the Petrol Shipping Corporation case in U.S.
Journal of Commerce, January 10, 1964.
00 336 F. 2d 354, 360.
01 Since this article was prepared for the press, a memorandum for the United
States as amicus curiae in the Victory Transport case, on petition for a writ
of certiorari to the Court of Appeals for the Second Circuit, has been published
(May, 1965). The tone is cautious and the memorandum is substantially devoted
to a criticism of the manner in which the issues were framed by the petitioner.
On the decision of the Court of Appeals in Victory Transport the comment is
made (p. 5) : –
“While we believe the decision to be correct.., this is the first
time that a federal court has unequivocally upheld the restrictive theory of
sovereign immunity”. Victory Transport marks”… the first clear-cut departure
by an American federal court from the so-called absolute theory of sovereign
immunity upheld in Berizzi… (p. 7) (Berizzi Bros. C. v. Comite De Ventas de
Cieles, 219, N.Y.S. 2d. 1018; Three Stars Trading Co. v. Republic of Cuba, 222
No. 4] LIMITS OF SOVEREIGN JURISDICT. IMMUNITY
N.Y.S. 2d. 675, and Harris & Company Advertising Inc. v. Republic of Cuba, 127
So. 2d. 687 (Fla.), The comment is also made (p. 7) that this is apparently the
first federal case to uphold and in personam action against an objecting foreign
soverign or its unincorporated agency or department.
The Comisaria General had, however, expressly disavowed reliance upon
the “absolute” theory of sovereign immunity in its petition (reply brief, p. 3) and
had asked (i) whether it could be held, by executing the agreement to arbitrate,
to have consented to the subsequent assertion of in personam jurisdiction to
enforce arbitration of a dispute arising under the agreement, and (ii) whether
the method of service of process was proper and permissible. On the first of
these points the arnicus memorandum takes the view (pp. 8-12) that the alleged
distinction between actions directly against a foreign Government and actions
begun by seizing the property of a foreign Government is unsound but sufficiently
supported by authority to be worthy of consideration by the Court of Appeals
if argued along with the fundamental issue as to whether sovereign immunity
is note-
extends to transactions such as that involved in Victory Transport. It
(p. 11) that the “assumption” that
worthy that the memorandum comments
sovereign immunity does not extend to commercial transactions should not be
allowed to enter into the body of the law “without thorough examination of the
question” – This seems to rest upon an over-cautious interpretation of existing
authority. On the second point raised by the petitioner, the comment is made
that there is no reason, apart from considerations of sovereign immunity, why
an agency of a foreign Government should not be treated as a foreign corporation
for purposes of service.
The Solicitor General’s conclusion is that certiorari should be granted if
the petitioner presents, in addition to the two points above, the fundamental
issue of the scope of sovereign immunity in commercial transactions.
