E. Clarifying Application of the Act of State Doctrine
- As explained in the Guide, sovereign states enjoy not only the statutory protections of the FSIA, but also the largely non-statutory protections of the Act of State Doctrine. The Act of State Doctrine generally precludes US courts from reviewing or questioning any action by a foreign sovereign that is lawful under that sovereign's laws, with the goal of preventing the judicial branch from becoming embroiled in non-US affairs deemed to be within the province of the political branches of the US government.
- The increased role of sovereign states in commerce and related litigation will require US courts to further define and clarify the Act of State Doctrine and the respective roles of the US courts and non-judicial branches. We have seen the beginnings of this Trend in 2008.
- Defining the Territorial and Policy Limits of the Doctrine
(a) In Agudas Chasidei (discussed above), the Russian Federation (defendant) sought to invoke the Act of State Doctrine to dismiss claims concerning the alleged expropriation of plaintiff's Library and Archive. The D.C. Circuit held that:
(b) It was Russia's burden to prove application of the Act of State doctrine and that Russia had not carried that burden with respect to the seizure of the archive. 528 F.3d at 951-52. The Act of State doctrine applies only to seizures within a sovereign's own territory and Russia had not overcome the evidence that the seizure in question occurred in Poland, rather than in Soviet-occupied Germany (as Russia theorized). Id.
(c) With respect to the alleged seizure of the Library by the Bolshevik government in 1917-25, the Circuit rejected the argument that the Act of State Doctrine could be ignored because of the various "changes in regime" from 1925 to present. Id. at 953. (Such a "change in regime" exception to the doctrine had been suggested by the US Supreme Court in 1964 and applied by other courts in the intervening decades.) The Circuit held that, to the extent that such an exception exists, it applies only where it is clear that the current regime does not seek to rely on or justify the prior regime's actions. Because Russia was actively opposing the plaintiff's claims of expropriation, the "change in regime" did not alleviate the foreign policy issues that the Act of State Doctrine seeks to avoid. Id. at 954.
(d) The Court likewise rejected the suggestion that certain conduct could be so clearly egregious as to fall within a "consensus" of condemnation within the international community, obviating any foreign policy clashes. Id. at 955.
(e) Finally, with respect to a supposed second or renewed seizure of the Library in 1991-92, the Court noted that a specific US statute - the "Second Hickenlooper Amendment," 22 USC ? 2370(e)(2) - "normally bars application of the act of state doctrine to seizures occurring after January 1, 1959." Id. at 953.
- Applying Act of State Doctrine to Privately Initiated Criminal Proceedings
(a) In many countries outside the US, private parties can initiate criminal proceedings - a phenomenon open to potential abuse as parties seek to gain "leverage" in commercial settings (as has been seen in some matters in Latin America and the former Soviet Union.). Such potential for private abuse of public proceedings likely will require closer examination of the purpose, utility, and limits on the application of the Act of State Doctrine.
(b) The Seventh Circuit Court of Appeals recently ventured into this area in Nocula v. UGS Corp., 520 F.3d 719 (7th Cir. 2008). The plaintiff alleged, in part, that the defendants (a US entity and Polish subsidiary) had instituted a criminal complaint against the plaintiff's affiliate in Poland to put business pressure on the plaintiff. As a result, the Polish police allegedly had seized and destroyed the plaintiff's property (computers) in Poland. Plaintiff brought suit in the US against the private defendants - but not the Polish authorities - based, in part, on the theory that the defendants had caused the police investigation that led to plaintiff's injury.
(c) The US district court dismissed the complaint for a number of reasons, including that the seizure by the Polish police was an act of state the legality and propriety of which could not be questioned by US courts. The Seventh Circuit affirmed, holding that the "decision of a foreign sovereign to exercise its police power through the enforcement of its criminal laws plainly qualifies as an act of state." 520 F.3d at 728. Although the plaintiff had alleged that the private defendants had seized the computers, the Court agreed that other facts alleged showed that the seizure was "part and parcel" of the public criminal prosecution and, therefore, immune from review under the Act of State Doctrine regardless of any alleged private instigation of that prosecution. Id.