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U.S. Supreme Court

FNC Bank v. Banco Para el Comercio, 462 U.S. 611 (1983)

First National City Bank v. Banco Para el Comercio Exterior de Cuba

No. 81-984

Argued March 28, 1983

Decided June 17, 1983

462 U.S. 611


In 1960, the Cuban Government established respondent to serve as an official autonomous credit institution for foreign trade, with full juridical capacity of its own. Respondent sought to collect on a letter of credit issued by petitioner bank in respondent's favor in support of a contract for delivery of Cuban sugar to a buyer in the United States. Shortly thereafter, all of petitioner's assets in Cuba were seized and nationalized by the Cuban Government. When respondent brought suit on the letter of credit in Federal District Court, petitioner counterclaimed, asserting a right to set off the value of its seized Cuban assets. After the suit was brought, but before petitioner filed its counterclaim, respondent was dissolved and its capital was split between Banco Nacional, Cuba's central bank, and certain foreign trade enterprises or houses of the Cuban Ministry of Foreign Trade. Rejecting respondent's contention that its separate juridical status shielded it from liability for the acts of the Cuban Government, the District Court held that, since the value of petitioner's Cuban assets exceeded respondent's claim, the setoff could be granted in petitioner's favor, and therefore dismissed the complaint. The Court of Appeals reversed, holding that respondent was not an alter ego of the Cuban Government for the purpose of petitioner's counterclaim.

Held: Under principles of equity common to international law and federal common law, petitioner may apply the claimed setoff, notwithstanding the fact that respondent was established as a separate juridical entity. Pp. 462 U. S. 619-633.

(a) The Foreign Sovereign Immunities Act of 1976 does not control the determination of whether petitioner may apply the setoff. That Act was not intended to affect the substantive law determining the liability of a foreign state or instrumentality, or the attribution of liability among such instrumentalities. Pp. 462 U. S. 619-621.

(b) Duly created instrumentalities of a foreign state are to be accorded a presumption of independent status. This presumption may be overcome, however, where giving effect to the corporate form would permit a foreign state to be the sole beneficiary of a claim pursued in United States courts while escaping liability to the opposing party imposed by international law. Pp. 462 U. S. 623-630.

Page 462 U. S. 612

(c) Thus, here, giving effect to respondent's juridical status, even though it has long been dissolved, would permit the real beneficiary of such an action, the Cuban Government, to obtain relief in our courts that it could not obtain in its own right without waiving its sovereign immunity and answering for the seizure of petitioner's assets in violation of international law. The corporate form will not be blindly adhered to where doing so would cause such an injustice. Having dissolved respondent and transferred its assets to entities that may be held liable on petitioner's counterclaim, Cuba cannot escape liability for acts in violation of international law simply by retransferring assets to separate juridical entities. To hold otherwise would permit governments to avoid the requirements of international law simply by creating juridical entities whenever the need arises. Pp. 462 U. S. 630-633.

658 F.2d 913, reversed and remanded.

O'CONNOR, J., delivered the opinion of the Court, in which BURGER, C.J.,and WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined, and in Parts I, II, III-A, and III-B of which BRENNAN, BLACKMUN, and STEVENS, JJ., joined. STEVENS, J., filed an opinion concurring in part and dissenting in part, in which BRENNAN, and BLACKMUN, JJ., joined, post, p. 462 U. S. 634.

Page 462 U. S. 613

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