FIRST NATIONAL CITY BANK, PETITIONER V. BANCO PARA EL COMERCIO EXTERIOR DE CUBA No. 81-984 In the Supreme Court of the United States October Term, 1982 On Writ of Certiorari to the United States Court of Appeals for the Second Circuit Brief for the United States as Amicus Curiae in Support of Petitioner TABLE OF CONTENTS Interest of the United States Statement Summary of argument Argument: Argument: I. Federal law must determine when a foreign state or its instrumentalities may be subject to the jurisdiction of the courts of the United States A. The amenability of foreign states and their instrumentalities to suit in United States courts is a uniquely federal question B. Foreign law cannot be dispositive of litigation brought in United States courts by instrumentalities of foreign states II. Whether a state instrumentality played a "key role" in a particular unlawful expropriation should not be the single, conclusive factor in determining whether the instrumentality should be considered an alter ego of the state A. Principles of corporate law address the question of when courts should disregard a corporation's separate legal identity B. The public character of a state instrumentality's activities is indicative of its autonomy from the state C. The identity of the real party in interest is fundamental to the determination of the permissibility of a counterclaim D. Special equitable concerns are implicated when a foreign plaintiff relies on the putatively separate status of a state-owned instrumentality to defeat a valid counterclaim III. The district court's reasonably determined that Bancec was Cuba's alter ego for purposes of Citibank's counterclaim Conclusion QUESTION PRESENTED Whether a nominally separate agency or instrumentality of a foreign state that brings suit in federal court should be insulated from a set-off or counterclaim arising out of illegal expropriatory acts by the foreign state solely because the agency or instrumentality did not play a "key role" in the particular expropriations that are the subject of the counterclaim. INTEREST OF THE UNITED STATES Protecting overseas commerce and investment, and maintaining legal standards and procedures for that purpose, are important objectives of American foreign policy. Congress has enacted several statutes to further these objectives. See, e.g., 22 U.S.C. 2351 (b) (4) and (6) (empowering the President to take steps to discourage expropriations by countries receiving foreign assistance); 22 U.S.C. 2370 (e) (1) (requiring suspension of foreign assistance to countries that expropriate American property without timely compensation). Congress also has permitted recourse to federal courts in certain circumstances for adjustment of expropriation claims against foreign sovereigns. See 22 U.S.C. 2370 (e) (2) (restricting application of act of state doctrine); 28 U.S.C. 1605 (a) (3) (denying sovereign immunity in certain expropriation cases). These statutes, as well as numerous commercial treaties and multilateral conventions, are designed to safeguard overseas investments and provide for the equitable resolution of transnational investment and commercial disputes. The decision of the court of appeals severely limits the ability of American claimants to raise valid expropriation claims in proceedings instituted against them in the United States by foreign government instrumentalities. The denial of a right to setoff to American claimants therefore impairs the interests of the United States in the protection of our citizens and their commercial dealings abroad. STATEMENT 1. This case arises out of events surrounding the Cuban revolution of the late 1950's. Following the violent overthrow of the Batista government, and as part of its efforts to transform the economic, social and political structure of the country, the revolutionary Cuban Government embarked on a broad program of confiscating privately owned property (Pet. App. 3b-7b). On May 17, 1959, the revolutionary government adopted an agrarian reform law that directed a newly created state agency, El Institutio de Reforma Agraria (the National Institute of Agricultural Reform or INRA), to nationalize large land holdings and provide for government-controlled marketing of agricultural exports (id. at 5b). Similarly, "interventors" were appointed by the Cuban Government to confiscate enterprises owned by absentee owners of agricultural and other businesses. See generally Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682, 685 (1976). That same year the Cuban central bank, Banco Nacional de Cuba, was reorganized and placed under the direction of Che Guevara, Minister of State for Cuba (Pet. App. 10a). On April 25, 1960, the Cuban foreign trade bank, Banco Cubano del Comercio Exterior, was reorganized as Banco Para el Comercio Exterior de Cuba (Bancec) (id, at 3a) "to contribute to, and collaborate with, the international trade policy of the Government" (id. at 4d). Bancec was placed under the direction of the President of Banco Nacional, Che Guevara (id. at 10a), with the assistance of delegates from four government ministries, including INRA (id. at 8d-9d). On August 18, 1960, First National City Bank (Citibank) established an irrevocable letter of credit for $650,000 in favor of Bancec (Pet. App. 13b). The credit covered a shipment of sugar Bancec had acquired from INRA, /1/ and was payable at sight on readiness to discharge the cargo in a United States port (ibid.). The first call on the letter came on September 15, 1960, when Banco Nacional, acting as Bancec's collection agent, presented Citibank in New York with documents for payment of $217,249.50 (C.A. App. 5a). /2/ On September 17, 1960, before Citibank had honored the draw, Cuba expropriated the property and assets of Citibank's Cuban branches and appointed "interventors" to continue their operations (Pet. App. 13b). The expropriations were ordered by Che Guevara and carried out by members of the Cuban Militia acting on orders from officials of Banco Nacional. See Banco Nacional de Cuba v. First National City Bank, 478 F.2d 191 (2d Cir. 1973). Rather than making payment to Banco National on the letter of credit, Citibank set-off the amounts owing Bancec against the value of its confiscated Cuban assets. Since Citibank's expropriated assets exceeded the amount of the drawn on Bancec's letter of credit, Citibank withheld all payment (Pet. App. 13b). /3/ On February 1, 1961, Bancec brought suit in the United States against Citibank on the letter of credit for the net amount of $193,280.30 (Pet. App. 4a). Citibank counterclaimed for the value of its expropriated branches, alleging that Cuba was the real party in interest in the litigation (id. at 15b, 23b). Three weeks later, on February 23, 1961, the Cuban government dissolved Bancec and assigned its rights, claims and assets "'peculiar to the banking business'" to Banco Nacional; its other interests were transferred to a newly created Ministry of Foreign Trade (id. at 4a-5a n.4). On July 6, 1961, at respondent's request, the parties stipulated that the letter of credit claim had passed to the Ministry of Foreign Trade /4/ and that the Republic of Cuba should be substituted as plaintiff (id. at 15b). The district court approved the stipulation, but an amendment complaint was never filed (ibid.). Discovery did not begin in the litigation until 1973. Following trial, but before a decision was rendered, the presiding district court judge died. The case was reassigned to another judge who, with the consent of the parties (Pet. App. 2b), based his decision on the record already developed before the court (ibid.). 2. On January 4, 1980, the district court dismissed Bancec's claim. The court held that although Bancec had a right to recover on the unpaid letter of credit, Citibank could set off the full amount of that claim against its losses arising out of Cuba's expropriation of its branches (Pet. App. 22b). In the district court's view, Bancec was properly regarded as the alter ego /5/ of the Republic of Cuba for purposes of Citibank's offset. The court found that (id. at 15b-16b): Bancec and its successors in interest are to be equated with the Cuban Government. Bancec was created by the Government to engage in a state function. All of its capital was contributed by the Government, and it had no function to fulfull, except to manage the export of commodities for the account of the Government. Thereafter, the devolution of the claim, however viewed, brings it into the hands of the Ministry (of Foreign Trade), or Banco Nacional, each an alter ego of the Cuban Government (for this purpose). After noting that Banco Nacional previously had been held to be an alter ego of the Cuban government in similar circumstances, the district court, looking to "the realities of the situation," perceived no legal or factual basis for treating Bancec any differently (Pet. App. 20b). For guidance, the court looked to analogues in the judicial treatment of American government-owned institutions (see, e.g., Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381 (1939)), as well as judicial precedents involving sovereign immunity claims by foreign government agencies and instrumentalities, both before and after the enactment of the Foreign Service Immunities Act of 1976, 28 U.S.C. 1602 et seq. (Pet. App. 21b-22b). Drawing on these authorities, the district court did not consider itself bound by Cuba's characterization of Bancec as "autonomous" (Pet. App. 20b-22b): Under all of the relevant circumstances shown in this record, including the Stipulated Facts, it is clear that Bancec lacked an independent existence, and was a mere arm of the Cuban Government, performing a purely governmental function. The control of Bancec was exclusively in the hands of the Government, and Bancec was established solely to further Governmental purposes. Moreover, Bancec was totally dependent on the Government for financing and required to remit all of its profits to the Government. * * * * * Bancec is not a mere private corporation, the stock of which is owned by the Cuban Government, but an agency of the Cuban Government in the conduct of the sort of matters which even in a country characterized by private capitalism, tend to be supervised and managed by the Government. Where the equities are so strong in favor of the counter-claiming defendants, as they are in this case, the Court should recognize the practicalities of the transactions. Doing justice in the case should not be obfuscated or side-tracked by self-serving recitals in post-revolutionary statutes of the Cuban Government, undoubtedly drawn with litigation of this sort in mind. The Court concludes that Bancec is an alter ego of the Cuban Government. The district court further held (Pet. App. 24b) that Citibank's counterclaim was not precluded by application of the act of state doctrine, relying primarily on this Court's decisions in First National City Bank v. Banco Nacional de Cuba (Citibank I), 406 U.S. 759 (1972), and National City Bank v. Republic of China, 348 U.S. 356 (1955). /6/ 3. The court of appeals reversed. It "agree(d) with the district court's descriptions of Bancec's functions and its status as a wholly-owned instrumentality of the Cuban government" (Pet. App. 8a). The court concluded, however, that Bancec was not Cuba's alter ego for purposes of the counterclaim (id. at 8a-9a): (A)n instrumentality of a government is not necessarily an alter ego of that government for all purposes. If the instrumentality has been created as a separate and distinct judicial entity under the laws of the state that owns it, we will normally respect its independent identity for a number of purposes. * * * We will, on the other hand, ignore the statutory distinction between the state and its instrumentality when the subject matter of the counterclaim assertible against the state (is) conduct in which the instrumentality has a key role. The court of appeals distinguished Citibank's pursuit of its counterclaim against Banco Nacional in Citibank I on the ground that Banco Nacional had played a major role in the expropriation of Citibank's branches (Pet. App. 9a). The court believed that it was only by virtue of that conduct that Banco Nacional became an alter ego of the Cuban government for purposes of the expropriation counterclaim (id. at 10a). The court viewed Bancec's situation as "materially different" (id. at 11a): Although Bancec was an instrumentality of the Cuban government, it was principally engaged in promoting foreign trade. It was this engagement that gave rise to the claim it asserts in the present lawsuit. The claim is a purely commercial one having no connection with the revolution or the expropriations -- except that the expropriation led Citibank to refuse payment. And Citibank has not shown that Bancec played any role whatever in the expropriations of the Citibank branches. Although the court of appeals took note of Bancec's dissolution and the subsequent assignment and reassignment of its claim (Pet. App. 4a n.4), it apparently found those facts immaterial to the alter ego issue. The court similarly ignored the parties' stipulation in 1961 that Cuba was the real party in interest (id. at 15b), and did not discuss the relevance of either corporate law precedents or cases involving United States government agencies. /7/ SUMMARY OF ARGUMENT I. A. Both courts below properly looked to federal law, rather than state law, in their analysis of the propriety of Citibank's counterclaim against Bancec. The Constitution grants the federal government pervasive power over the international commerce and foreign affairs of the United States, reflecting a need for uniformity in this country's dealings with foreign nations. This concern extends as well to assertions of judicial power, since the exercise of jurisdiction over a foreign sovereign may have a profound effect upon the United States' relations with that government. The issue presented in this case falls squarely within the policies favoring uniformity, since it is fundamentally a question of the power of the United States courts to adjudicate the liabilities of a foreign state in the face of that state's claim that the party before the court is a separate juridical entity. B. The courts below also properly did not consider themselves bound by Cuba's characterization of Bancec as a separate juridical entity for all purposes. The effect to be given foreign law in United States courts is a question of domestic law. Particularly where a foreign state has chosen to use United States courts in pursuing its claims, the foreign state's law -- although entitled to great deference -- should not be dispositive of the character of the parties and claims before the court. Moreover, modern choice of law doctrine indicates that United States courts should not be bound to apply Cuban law in the circumstances of this case, where the transaction at issue was the sale and delivery of a shipment of sugar to the United States and collection of payment was to be made in the United States from an American bank. II. The court of appeals erred in adopting a mechanical two-step rule for determining whether a foreign instrumentality should be considered an alter ego of the state for purposes of a counterclaim based upon an expropriation. Although we agree with the court of appeals that there should be a presumption in favor of recognizing the juridical autonomy conferred upon foreign state-owned instrumentalities by their own law, we disagree with the court of appeals' holding that a state instrumentality cannot be considered amenable to an expropriation counterclaim unless the instrumentality played a "key role" in the expropriation. The court of appeals' test completely forecloses reliance upon the factors that traditionally have provided the basis for equitable determinations of the status of the parties and claims before United States courts. Instead of being confined to determining whether an instrumentality played a "key role" in an expropriation, United States courts should properly consider a number of other factors that traditionally have guided courts' use of their equitable powers. A. Corporate law long has recognized that a corporation should be considered the alter ego of its parent or subsidiary if the corporation is organized or managed with a disregard of its separate existence. Instrumentalities of a foreign sovereign should be subject to similar scrutiny, particularly when the sovereign exercises unfettered power to create, dissolve, and control its instrumentalities and to assign their assets and liabilities free from legal constraints. Here, there is ample evidence that Bancec enjoyed no meaningful autonomy. Bancec was completely capitalized by the Cuban government, remitted its profits to Cuba, and served only to manage the export of commodities for the account of Cuba. When it suited the Cuban government's purposes, Bancec was summarily dissolved and its assets and functions distributed to other government agencies and instrumentalities. Indeed, after Bancec's dissolution, respondent's counsel stipulated that Cuba itself should be substituted for Bancec as plaintiff. B. The court of appeals failed to give sufficient weight to the public, governmental nature of Bancec's function. Deference to the juridical independence of an instrumentality of a foreign state is not appropriate where the instrumentality primarily serves to discharge a government function or the foreign state deals with the instrumentality as if it were a government agency. In this case, Bancec was an instrument of Cuban national economic policy, with the function of assuming title to commodities expropriated by Cuba and arranging for their export and sale. Bancec's board of directors was composed entirely of Cuban government officials, and it was headed by Che Guevara, who simultaneously was Minister of State and President of the Cuban central bank, Banco Nacional. In these circumstances, it is appropriate to hold Bancec liable for the illegal expropriatory acts of the Cuban government. C. It is also clear that the real party in interest in this case is Cuba, not Bancec. Cuba is the beneficiary of the claim involved in this case. Bancec no longer exists, having been dissolved by Cuba over 20 years ago. The district court found that at the time of Bancec's dissolution by the Cuban government, Bancec's claim against Citibank under the letter of credit devolved to Banco Nacional, which has previously been found to be the alter ego of the Cuban government for the purposes of the expropriation of Citibank's Cuban branches. Although Cuba now contends that the claim passed instead to the Ministry of Trade, that entity, too, is an arm of the Cuban government. Respondent recognized this fact early in the litigation when its counsel stipulated that Cuba itself should be substituted for Bancec as plaintiff. D. Finally, equitable concerns require that Bancec be found an appropriate counterclaim defendant in this case. Where a foreign sovereign avails itself of United States courts to enforce a claim, considerations of fairness require particularly close scrutiny of the sovereign's assertions that the American defendant should be prevented from raising its claims or defenses in response. A foreign state coming into United States courts should not be permitted to raise insubstantial corporate formalities as a shield against the interests of justice. ARGUMENT I. FEDERAL LAW MUST DETERMINE WHEN A FOREIGN STATE OR ITS INSTRUMENTALITIES MAY BE SUBJECT TO THE JURISDICTION OF THE COURTS OF THE UNITED STATES Although federal jurisdiction in this action was founded on diversity of citizenship under 28 U.S.C. 1332, both courts below correctly looked to federal rather than state law in analyzing the propriety of Citibank's counterclaim. Federal law must be dispositive on the issue of when a foreign state or its instrumentality will be subject to the jurisdiction of United States courts. Moreover, in articulating the applicable principles of federal law, the law of the foreign state, while relevant, cannot be determinative, particuarly where it is the foreign state or its instrumentality that is resisting a counterclaim while seeking recourse to our courts. A. The amenability of foreign states and their instrumentalities to suit in United States courts is a uniquely federal question As this Court has stated, "(f)or local interests the several States of the Union exist, but for national purposes, embracing our relations with foreign nations, we are but one people, one nation, one power." The Chinese Exclusion Case, 130 U.S. 581, 606 (1889). The provisions of the Constitution that grant the federal government pervasive power over international commerce and foreign affairs (see Article I, Section 8, Clauses 3 and 10; Article II, Sections 2 and 3; Article III, Section 2) reflect "a concern for uniformity in this country's dealings with foreign nations and * * * a desire to give matters of international significance to the jurisdiction of federal institutions." Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427 n.25 (1964). This concern is particularly germane to assertions of judicial power. "Every judicial action exercising or relinquishing jurisdiction over * * * a foreign government has its effect upon our relations with that government." Mexico v. Hoffman, 324 U.S. 30, 35 (1945). See also Ex parte Peru, 318 U.S. 578, 588-589 (1943). Indeed, a foreign sovereign may perceive a particular assertion of jurisdiction as "an affront to its dignity," with profound implications for the United States' foreign relations. Mexico v. Hoffman, supra, 324 U.S. at 35-36. The issue presented in this case is fundamentally a question regarding the competence and power of our courts over foreign states. While variously characterized by the courts below as a question of "real party in interest" (Pet. App. 15b), "alter ego" (id. at 13a, 16b), and "independent identity" (id. at 9a), at bottom the case presents the issue of when our courts may adjudicate the liabilities of a foreign state notwithstanding its claim that the party before the court is a separate juridical entity. This obviously is a matter of great potential sensitivity in our relations with foreign states. It calls for a uniform rule for all foreign states or government instrumentalities that may become parties to judicial proceedings in the United States. Only federal law can furnish such a standard. /8/ B. Foreign law cannot be dispositive of litigation brought in United States courts by instrumentalities of foreign states Both courts below did not consider themselves bound by Cuba's characterization of Bancec as a separate juridical entity for all purposes. The effect to be given foreign law in United States courts is, of course, a question of domestic law. Hilton v. Guyot, 159 U.S. 113 (1895). And, at least where a foreign state has chosen to take advantage of a United States forum to pursue its claims, its own law should not be dispositive regarding the character of the parties and claims before the court. See 6 M. Whiteman, Digest of International Law 709 (1968), citing Republic of Rumania v. Constantinescu, 45 Am. J. Int'l L. 799-800 (1951) (High Ct. Zurich, Switz.), and Republic of Haiti v. Plesch, 195 Misc. 219, 88 N.Y.S.2d 9, 10 (1949). Cf. Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706, 714-715 (5th Cir.), cert. denied, 393 U.S. 924 (1968) (foreign act of state need not be recognized while it purports to affect United States territory). While foreign law should be given significant weight, it cannot be allowed to defeat the interests of justice. /9/ The court of appeals gave undue deference to the characterization advanced by Cuba. Modern choice of law doctrine also indicates that United States courts should not be bound to apply Cuban law in the circumstances of this case. See, e.g., Restatement (Second) of Conflict of Laws Sections 6 and 145 (1971); Restatement (Second) Foreign Relations Law of the United States Section 66 comment a (1965). The commercial transactions underlying Bancec's claim had substantial contacts with the United States. The transaction at issue was the sale and delivery of a shipment of sugar to the United States. Moreover, the letter of credit upon which Bancec sued was issued in New York City (C.A. App. 631), and collection of payment was to be made in the United States. Bancec voluntarily appeared in the courts of the United States to pursue its claims. See Restatement (Second) of Conflict of Laws Section 125 (1971) (law of forum state determines proper and necessary parties to an action). These contacts with the United States provide ample grounds for looking to the law of the forum to protect the interests of justice. /10/ See, e.g., Restatement (Second) Foreign Relations Law of the United States Sections 17, 18 and 19 (1965). II. WHETHER A STATE INSTRUMENTALITY PLAYED A "KEY ROLE" IN A PARTICULAR UNLAWFUL EXPROPRIATION SHOULD NOT BE THE SINGLE, CONCLUSIVE FACTOR IN DETERMINING WHETHER THE INSTRUMENTALITY SHOULD BE CONSIDERED AN ALTER EGO OF THE STATE The court of appeals adopted a mechanical two-step rule for determining whether a foreign instrumentality should be considered an alter ego of the state for purposes of an expropriation counterclaim (Pet. App. 8a-9a): (1) under the foreign state's law, is the instrumentality treated as a separate juridical entity?; (2) if so, did the agency nevertheless play a "key role" in the foreign state's expropriations so as to incur the state's liabilities? /11/ In essence, under the court of appeals' approach, foreign law determines the cognizability of an expropriation counterclaim against the instrumentality of a foreign state, subject to a single, narrow exception based on United States law, which comes into play only when an instrumentality has acted in concert with the state in committing the wrong. That exception, moreover, is largely illusory, since a state instrumentality that played a "key role" in the wrongful activity would be a joint tortfeasor, liable on its own account. The United States agrees with the first half of the court of appeals' test. There should be a presumption in favor of recognizing the judicial autonomy conferred on foreign state-owned instrumentalities by their own laws. As the House Report on the Foreign Sovereign Immunities Act of 1976 states (H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 29-30 (1976)): If U.S. law did not respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions between different U.S. corporations or between a U.S. corporation and its independent subsidiary. Moreover, the United States has established dozens of government incorporated entities to perform defined functions independently of day-to-day government control. See, e.g., 31 U.S.C. 846 (listing many government-organized corporations). Domestic law provides for the separate juridical identity of these corporations within the United States. Many of these government-owned corporations, however, do business abroad and engage in international commercial transactions. Under principles of reciprocity and comity, the treatment of foreign government instrumentalities in United States courts can be expected to have a material influence on how foreign states and courts treat United States' government-owned corporations abroad. Notwithstanding our agreement with the first half of the court of appeals' test, we believe that the second leg of the court's rule is unnecessarily restrictive. By limiting a state instrumentality's liability solely to those instances where the instrumentality plays a "key role" in the wrong complained of, the court of appeals has completely disregarded the question of the common identity of the nominal plaintiff and the state. The court of appeals "key role" test, moreover, forecloses reliance on the factors that traditionally have guided equitable determinations of the status of the parties and claims before United States courts. If left undisturbed, the decision may well permit United States courts to become collection vehicles for expropriating foreign governments, while leaving American nationals without a fair opportunity to raise counterclaims based upon their injury under international law. When a nominally separate foreign government instrumentality avails itself of our courts, its status as the alter ego of its parent state should be determined by equitable considerations. The "key role" test adopted by the court of appeals, however, improperly confines the scope of judicial scrutiny. In addition to whether or not an entity played a "key role" in allegedly illegal conduct, a court should be permitted to consider other factors, discussed below, in determining whether to hold a state-owned entity liable for conduct of the state itself. A. Principles of corporate law address the question of when courts should disregard a corporation's separate legal identity This Court, and the lower federal courts, have not hesitated to "pierce the corporate veil" to avoid miscarriages of justice in proceedings involving corporations and their parents or subsidiaries. While acknowledging that recognition of separate identity is the rule, rather than the exception, the Court has carefully scrutinized a broad range of factors in determining whether particular entities are truely separate. See, e.g., NLRB v. Deena Artware, Inc., 361 U.S. 398, 402-404 (1960) (footnotes omitted): (A)s Mr. Justice Cardozo said in Berkey v. Third Avenue R. Co., 244 N.Y. 84, 95, 155 N.E. 58, 61, "Dominion may be so complete, interference so obstrusive, that by the general rules of agency the parent will be a principal and the subsidiary an agent. Where control is less than this, we are remitted to the tests of honesty and justice." That is not a complete catalogue. The several companies may be represented as one. Apart from that is the question whether in fact the economic enterprise is one, the corporate forms being largely paper arrangements that do not reflect the business realities. One company may in fact be operating as a division of another; one may be only a shell, inadequately financed, the affairs of the group may be so intermingled that no distinct corporate lines are maintained. These are some, though by no means all, of the relevant considerations, as the authorities recognize. Accord, Pepper v. Litton, 308 U.S. 295, 310 (1939); Consolidated Rock Co. v. Du Bois, 312 U.S. 510, 523-524 (1941); Davis v. Alexander, 269 U.S. 114, 117 (1925); see 1 W. Fletcher, supra, at Sections 41-46. Similarly, when the United States has created corporate instrumentalities to perform specified functions, but retained control over the instrumentalities' finances, management, and operations, this Court has looked beyond the corporate form to treat the United States and its instrumentalities as one. /12/ See Rainwater v. United States, 356 U.S. 590, 591-592 (1958); Cherry Cotton Mills, Inc. v. United States, 327 U.S. 536, 539 (1946); Emergency Fleet Corp v. Western Union, 275 U.S. 415, 424-426 (1928). Instrumentalities of foreign sovereigns should be subject to similar scrutiny. Their claim to separate juridical status cannot be resolved simply by reliance on their organic statute or laws of incorporation. Foreign states often have unfettered power to create, dissolve, and control their instrumentalities, and to assign their assets and liabilities, free from traditional legal constraints. /13/ Foreign law, therefore, cannot be allowed to shield state-owned instrumentalities from careful scrutiny under American law to ensure the equitable attribution of liabilities. There is ample evidence in the record that Bancec enjoyed no meaningful autonomy from the Cuban government in conducting its business. The district court determined that Bancec "had no function to fulfill, except to manage the export of commodities for the account of the Government" (Pet. App. 16b). When it suited the Cuban government's purposes, Bancec was summarily dissolved and its assets and functions were distributed to other agencies and instrumentalities of the Cuban government (id. at 4a-5a n.4, 14b-15b). While Bancec was completely capitalized by Cuba and remitted its profits to the Cuban government, like other state-owned corporations (id. at 3a-4a), the district court found that Bancec was not "a mere private corporation, the stock of which is owned by the Cuban Government, but an agency of the Cuban Government in the conduct of the sort of matters which even in a country characterized by private capitalism, tend to be supervised and managed by Government" (id. at 22b). Bancec's president was Cuba's Minister of State and President of Banco Nacional (id. at 9a-10a); its board was not a body of independent directors, but rather delegates from several government ministries, managing their common venture (id. at 4a). Indeed, after the dissolution of Bancec, respondent's counsel stipulated that Cuba itself should be substituted for Bancec as the plaintiff (id. at 15b). The Cuban government's close control over Bancec establishes that Bancec properly should be viewed as an alter ego of Cuba itself. The indicia of control that United States courts have traditionally analyzed in determining that a corporation and its parent are alter egos are found here. See, e.g., Rainwater v. United States, supra, 356 U.S. at 592 (instrumentality is simply "administrative device" for government); Cherry Cotton Mills, Inc. v. United States, supra, 327 U.S. at 539 (instrumentality is created to accomplish "purely governmental purposes"); Consolidated Rock Co. v. Du Bois, supra, 312 U.S. at 519, 522 (parent corporation manages, operates, and finances subsidiary); Pepper v. Litton, supra, 308 U.S. at 310 (dominance and exploitation of corporation by controlling shareholder); Davis v. Alexander, supra, 269 U.S. at 117 (parent and subsidiary operated as a single company); Chicago, Milwaukee & St. Paul Ry. v. Minneapolis Civic & Commerce Association, 247 U.S. 490, 497-498 (1918) (common officers and directors and common operation of the two corporations); NLRB v. Deena Artware, Inc., supra, 361 U.S. at 399-401 (corporations share common officers and directors and are components of a "'single enterprise'"). These factors are of even greater importance in the circumstances of this case, where the revolutionary Cuban government was in the midst of sweeping social, economic, and legal changes and where state instrumentalities were suddenly created and summarily dissolved as required to meet immediate political goals. The record of the Cuban government's close control over Bancec establishes that Bancec has no legitimate claim to independence from the Cuban government. The court of appeals erred in ignoring this evidence and instead finding Bancec to be an independent entity solely on the basis that it played no "key role" in the expropriation of Citibank's Cuban branches. B. The public character of a state instrumentality's activities is indicative of its autonomy from the state The court of appeals failed to give sufficient consideration to the public, governmental nature of Bancec's functions. As the functions of a state instrumentality approach those of the government itself, a state is less likely -- and less able -- to delegate them to another entity without assuming responsibility for their exercise. This principle may be articulated either as a presumption that instrumentalities which perform important government functions are so likely to be subject to the direct control of the state that they lack genuine autonomy or as a conclusion of law that certain governmental functions are non-delegable. Separate juridical status ordinarily is accorded to certain state instrumentalities on the theory that their functions are limited to correspond with activities that might be undertaken by private parties. Most frequently, their purpose is to accomplish specific commercial tasks free from day-to-day direction by the state. Even the state trading companies of communist states have been found to satisfy this standard, if they demonstrate proper separation from their parent governments. See C. Czarnikow Ltd. v. Centrala Handlu Zagranicznego Rolimpex, (1979) A.C. 351 (H.L.). This legal and practical autonomy entitles state instrumentalities to sue and be sued in their own name and to answer only for their own wrongs. See generally H.R. Rep. No. 94-1487, supra, at 15-16. On the other hand, when the activities of a state instrumentality become more subject to the government's day-to-day control or fall more clearly into the public sphere in which only a government can act, its claims to autonomy become more attenuated. See Rainwater v. United States, supra, 356 U.S. at 591-592; Cherry Cotton Mills, Inc. v. United States, supra, 327 U.S. at 539; cf. Edlow International Co. v. Nuklearna Elektrarna Krsko, 441 F.Supp. 827, 832 (D.D.C. 1977). Under the jurisprudence of many countries, a state instrumentality may become eligible in these circumstances to benefit from the sovereign's immunity from suit. /14/ By the same token, such a close relationship may deprive the instrumentality of a defense of force majeure or of supervening illegality based upon its own government's subsequent legislation. Cf. C. Czarnikow Ltd. v. Centrala Handlu Zagranicznego Rolimpex, supra. An instrumentality of an unrecognized government also may be excluded from the use of United States courts, even though a private corporation chartered by that same government might be permitted to sue. See Federal Republic of Germany v. Elicofon, 358 F. Supp. 747 (E.D.N.Y. 1972), aff'd, 478 F.2d 231 (2d Cir. 1973), cert. denied, 415 U.S. 931 (1974); cf. Transportes Aereos De Angola (TAAG) v. Ronair, Inc., 544 F.Supp. 858 (D. Del. 1982). Government instrumentalities also are more likely to be subject to the direct control of the state to ensure that their activities conform with changing public policy. The state may exercise this control either by sporadic political intervention into the instrumentality's affairs, or by legal provisions that make officials of the state the instrumentality's governing authorities. In either case, third parties cannot reasonably be expected to consider the instrumentality as a separate legal entity. /15/ Unlike the court of appeals, the district court carefully considered the public nature of Bancec's responsibilities in concluding that it was an alter ego of the Cuban state. Bancec was an instrument of Cuban national economic policy, designed to cooperate with and contribute to foreign trade programs adopted by Banco Nacional (Pet. App. 4d). To insure that its activities conformed with state policy, Bancec's governing board was composed entirely of Cuban government officials (id. at 8d-9d), headed by Che Guevara as Minister of State and President of Banco Nacional (ibid.; id. at 10a). In contrast with other state commercial instrumentalities Bancec was not simply financed by the government, but was also used as a tool for implementing government policy. See, e.g., Houston v. Murmansk Shipping Co., 87 F.R.D. 71, 74 n.5 (D. Md. 1980); Icenogle v. Olympic Airways, S.A., 82 F.R.D. 36, 39 n.3 (D.D.C. 1979); Edlow International Co. v. Nuklearna Elektrarna Krsko, supra, 441 F. Supp. at 832; compare Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1379 (5th Cir. 1980). Moreover, Bancec performed an important function for the revolutionary Cuban government by assuming title to commodities seized by Cuba under its nationalization program and arranging for their export and sale. See note 1, supra; Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 404-405 (1964). As the district court found, Bancec was "a mere arm of the Cuban Government, performing a purely governmental function. The control of Bancec was exclusively in the hands of the Government, and Bancec was established solely to further Government purposes" (Pet. App. 20b-21b). In these circumstances, the district court correctly held Bancec liable for the illegal expropriatory acts of the Cuban government. Where a state instrumentality primarily serves a public, governmental function, its claim of "autonomy" from the foreign government itself must be viewed with skepticism. This is particularly true where, as here, the instrumentality has helped its parent government effectuate a public program violative of international law. The court of appeals' "key role" test only partially recognizes this principle. The court of appeals is correct in holding that when an instrumentality actively contributes to the very wrong at issue, it cannot retreat into a shell of autonomy for purposes of resisting valid claims for restitution. But the instrumentality's separate standing also is compromised to the extent it departs from strictly commercial functions to assist in a broad program of expropriation. Although not dispositive, an instrumentality's assistance in the unlawful program of the state is properly considered in arriving at the equitable balance underlying a determination whether the instrumentality and the state are alter egos. C. The identity of the real party in interest is fundamental to the determination of the permissibility of a counterclaim A foreign state's pursuit of a claim in the name of its instrumentality does not conclusively resolve the question of who, in fact, is the party before the court. Federal courts are empowered to examine who will be the actual beneficiary of any recovery in a litigation, as well as the history of the chain of title to the claim, in determining whether to permit an offset against the plaintiff's recovery. See Fed. R. Civ. P. 13 (counterclaims); 17 (a) (real party in interest); /16/ 25 (c) (substitution of parties). See also 28 U.S.C. 1607 (federal jurisdiction over counterclaims against foreign states). When a foreign state has dissolved a nominally separate entity by decree, it cannot be permitted to take refuge behind the abandoned corporate shell to defeat a valid counterclaim. This is particularly true in cases such as this one, where Cuba has consistently exercised control over the claim by initially taking the claim for itself, then reassigning the claim to its agencies or instrumentalities. See note 4, supra. Because the real party in interest in this action is the government of Cuba, Citibank should be allowed to assert its counterclaim based on the illegal expropriation of its assets by the Cuban government. The Cuban government -- not Bancec -- is the beneficiary of the claim involved in this case. The claim here arises out of the sale of sugar acquired through "intervention" by the Cuban government. Although Bancec was utilized to effectuate that sale, profits from the sale were not to be credited to Bancec's account but were to be deposited in the Cuban treasury (Pet. App. 3a-4a). Bancec, moreover, no longer exists, and the string of events since its demise clearly demonstrates that the Cuban government -- not some long defunct corporate shell -- is the actual party before the Court. Three weeks after this suit was commenced, the Cuban government dissolved Bancec, transferring its functions and assets to other government agencies and instrumentalities (Pet. App. 4a-5a n.4). Bancec's assets "'peculiar to the banking business'" (id. at 13b) devolved upon Banco Nacional, while its other assets were assigned to the Ministry of Foreign Trade (id. at 14b). Although there is some dispute regarding the actual devolution of the claim in this case, /17/ the claim, however its assignment is viewed, passed to "an alter ego of the Cuban Government" (id. at 16b), because Banco Nacional has previously been held to be such an alter ego (Banco Nacional de Cuba v. First National City Bank, 478 F.2d 191, 193-194 (2d Cir. 1973)), and the "Ministry of Foreign Trade is no different than the Government of which its minister is a member" (Pet. App. 16b). Moreover, early in the litigation, the parties in fact stipulated that the Republic of Cuba should be substituted for Bancec as the plaintiff (id. at 15b). /18/ The Cuban government should not be permitted to defeat a valid counterclaim by proceeding in the name of an instrumentality that has not existed for over two decades. Since it is Cuba that is actually enforcing this claim, the court of appeals erred in failing to permit Citibank to offset against Cuba's claim the value of its wrongfully expropriated assets. /19/ In Bangor Punta Operations, Inc. v. Bangor & Aroostook R.R., 417 U.S. 703, 713 (1974), this Court refused to permit a parent corporation to bring suit in the name of its subsidiary where the parent itself plainly was barred from suit. The Court held that the parent, "the principal beneficiary of any recovery and itself estopped from complaining of petitioners' alleged wrongs, cannot avoid the command of equity through the guise of proceeding in the name of respondent corporations which it owns and controls." 417 U.S. at 713. Cuba similarly cannot avoid the command of equity by proceeding through the guise of a now-nonexistent corporate entity it once owned and controlled. See Standard Lime & Cement Co. v. United States, 503 F. Supp. 938, 941 (W.D. Mich. 1980) (parent corporation found to be real party in interest for subsidiary's tax refund claim where the subsidiary's assets and business had been transferred to the parent and the subsidiary continued to exist only in form). There is yet another reason why Cuba should be considered the real party in interest in this litigation. The panel of the court of appeals that decided this case recognized in a companion case decided the same day that Cuba is the real party in interest on claims that pass from the government to its instrumentalities. In Banco Nacional de Cuba v. Chemical Bank New York Trust Co., 658 F.2d 903 (2d Cir. 1981), the court of appeals found that Cuba, not Banco Nacional, was the real party in interest with respect to a lawsuit brought by Banco Nacional to recover sums that several private Cuban banks had deposited with New York banks prior to the private banks' expropriation. Although Banco Nacional obtained the assets of the private banks following expropriation, "Banco Nacional must be viewed as pursuing those claims on behalf of the Cuban government" because the Cuban government initially expropriated the assets and only later transferred them to Banco Nacional. Id. at 910. The principles applied in Chemical Bank are equally applicable here. Even in Bancec originally had an independent, legitimate claim against Citibank, that claim would have become subject to Citibank's rights to set-off and counterclaim when Cuba dissolved Bancec and assumed its rights on February 23, 1961. Subsequent efforts to re-transfer the claim to other government intrumentalities could not free the claim from citibank's right to set-off. As in Chemical Bank, the court of appeals should have found Cuba to be the real party in interest here, and thus an appropriate defendant to Citibank's counterclaim. D. Special equitable concerns are implicated when a foreign plaintiff relies on the putatively separate status of a state-owned instrumentality to defeat a valid counterclaim When a foreign state brings suit in United States courts to enforce a legal right, courts should give particular attention to the procedural posture in which an alter ego question arises. This Court has held that a foreign state invoking the aid of a United States forum may properly be subject to a wider range of counterclaims than might otherwise be brought in a direct action against the state. See National City Bank v. Republic of China, 348 U.S. 356 (1955); First National City Bank v. Banco Nacional de Cuba (Citibank I), 406 U.S. 759 (1972). These same equitable concerns support particularly close scrutiny of alter ego questions when a foreign government instrumentality seeks to defeat adjudication of a valid counterclaim on the ground that the plaintiff is nominally distinct from its parent state. In National City Bank v. Republic of China, supra, 348 U.S. at 364-365, this Court held that when "(a) sovereign has freely come as a suitor into our courts * * * the consideration of fair dealing" permits the American defendant to assert unrelated counterclaims against the foreign sovereign up to the amount of its own recovery. Thus, when a foreign state has invoked our laws, it may not do so "free from the claims of justice" (id. at 362). This restriction on general concepts of sovereign immunity has now been codified in the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. 1607(c). See H.R. Rep. No. 94-1487, supra, at 23. In Citibank I, this Court resolved the related question whether the act of state doctrine bars the prosecution of a counterclaim arising from the expropriation of property within the foreign state's territory. A majority of the Court held that the act of state doctrine does not bar such a counterclaim. /20/ Rather, as in Republic of China, the Court held that a counterclaim may be interposed by an American defendant to defeat any affirmative recovery against it. /21/ The question presented in this case -- whether Bancec is properly viewed as an alter ego of Cuba and thus is amendable to a counterclaim based on Cuba's expropriation -- is closely linked to the questions decided in Republic of China and Citibank I. While this Court's past decisions do not resolve the issue here, this case raises the same equitable concerns that prompted the Court in Republic of China and Citibank I to permit counterclaims by American defendants against foreign sovereigns who invoked the assistance of our courts. When a foreign state seeks to use United States law to recover through our courts, it should not be permitted to assert its own law to defeat otherwise valid counterclaims unless its law accurately reflects the status of the parties and claims before the court. Insubstantial corporate formalities, like sovereign immunity, may not be utilized by foreign states as a shield against "the claims of justice." National City Bank v. Republic of China, supra, 348 U.S. at 362. "In such cases, courts of equity, piercing all fictions and disguises, will deal with the substance of the action and not blindly adhere to the corporate form." Bangor Punta Operations, Inc. v. Bangor & Aroostook R.R., supra, 417 U.S. at 713. III. THE DISTRICT COURT REASONABLY DETERMINED THAT BANCEC WAS CUBA'S ALTER EGO FOR PURPOSES OF CITIBANK'S COUNTERCLAIM The district court, on the basis of many of the foregoing factors, concluded that Citibank could properly offset Bancec's claim by the value of its expropriated assets. The court detailed the evidence showing Cuba's dominance and control of Bancec (see, e.g., Pet. App. 15b-16b, 22b). The court noted cases where government corporations, because of their relationship to their parent, had been held to be an arm of that government, sharing "in the privileges, responsibilities and immunities of that Government" (id. at 21b, citing Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381 (1939)). The court emphasized that Bancec was essentially "an agency of the Cuban Government" (Pet. App. 22b) and therefore had scant claim to autonomy from that government. The court found that Cuba was the real party in interest in this litigation (id. at 15b) because after the demise of Bancec the present claim devolved either upon Banco Nacional or the Ministry of Foreign Trade, "each an alter ego of the Cuban Government" (id. at 16b). Finally, the court recognized that where a state-owned entity seeks recovery while attempting to avoid a legitimate counterclaim against the state, "the Court should recognize the practicalities of the transactions" (id. at 22b). In short, the district court carefully analyzed the factors set forth in this brief in the course of "(d)oing justice in the case" (ibid.). The court of appeals, on the other hand, limited its equitable analysis to a single inquiry: did Bancec play a "key role" in Cuba's expropriation of Citibank's Cuban branches? The court of appeals' willingness to ignore the substantial factors probed, examined and balanced by the district court illustrates the serious shortcomings of its narrow legal standard. Resolution of the question whether Bancec and Cuba are alter egos cannot depend on any single fact or test. Like other equitable determinations, resolution of this issue must be informed by the totality of the circumstances, based upon the full factual record. The district court's determination that Bancec should be regarded as Cuba's alter ego is fully supported by judicial precedent and the record developed below. During its transient existence, Bancec played a material role in effectuating the Cuban expropriation program and was certainly no stranger to the unlawful public policy upon which Citibank's counterclaim is based. Bancec should not be permitted to invoke the protection of American law entirely "free from the claims of justice." National City Bank v. Republic of China, supra, 348 U.S. at 362. The district court's just and reasonable ruling should not have been disturbed. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted REX E. LEE Solicitor General J. PAUL MCGRATH Assistant Attorney General KENNETH S. GELLER Deputy Solicitor General RICHARD G. WILKINS Assistant to the Solicitor General GEOFFREY S. STEWART Attorney DAVIS R. ROBINSON Legal Adviser FRED L. MORRISON Counselor on International Law JONATHAN B. SCHWARTZ JOHN R. CROOK RONALD W. KLEINMAN Attorneys Department of State DECEMBER 1982 /1/ INRA had acquired the sugar in question on January 15, 1960 from its private owners by "intervention." See Resolution 127 of INRA (J.A. 33). There is no evidence in the record that INRA provided compensation to the original owners of the sugar, although respondent claims that INRA's "intervention" here was in the nature of a receivership. See Answer of Bancec to Brief for the United States as Amicus Curiae 6. However, this Court previously has found that Cuba's acquisition of sugar from private owners was a "compulsory expropriation." Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 403 (1964). /2/ "C.A. App." refers to the joint appendix filed in the court of appeals. /3/ In October 1960, Cuba enacted two additional laws providing for further expropriation of business enterprises and private banking activities (Pet. App. 10b-11b). The latter of these laws declared that banking henceforth was to be a public function conducted only by the State (id. at 11b). /4/ The Republic of Cuba asserts that the claim later passed, in turn, from the Ministry of Foreign Trade to the Empresa Cubana de Exportaciones and, upon its dissolution, to the Empresa Cubana Exportadora de Azucar y sus Derivados (Pet. App. 4a-5a n.4). The latter two entities were both government-created agencies or instrumentalities. /5/ The term "alter ego" traditionally is used to indicate an interrelationship between two entities that justifies disregarding their separate legal status. While the term has been applied most frequently when a parent corporation is held liable for the acts or obligations of a corporate instrumentality, it also issued to encompass the reciprocal situation where a corporate instrumentality is held responsible for the acts or obligations of its parent, particularly in the counterclaim context. See 1 W. Fletcher, Cyclopedia of the Law of Private Corporations Sections 37 and 41.3 (perm. ed. 1974). /6/ The district court noted (Pet. App. 24b) that Citibank had received a Bernstein letter from the Department of State expressing the view that the suit could be maintained without impairing the foreign relations interests of the United States. See Bernstein v. N.V. Nederlandsche, 210 F.2d 375 (2d Cir. 1954). /7/ The court of appeals concluded that the Foreign Sovereign Immunities Act of 1976, "assuming that it may be applied retroactively to affect this action" (Pet. App. 11a), supported its holding. The court found that the Act expressed an affirmative intent not "to subject an instrumentality to liability for acts or transactions with which it had no connection, which were done or entered into by other agencies or instrumentalities of the state" (id. at 12a). /8/ Although it deals generally with the amendability of foreign nations to suit in federal court, the Foreign Sovereign Immunities Act of 1976 (FSIA) 28 U.S.C. 1602 et seq., does not resolve the question of when an allegedly separate entity can be equated with a foreign state. Indeed, in enacting the FSIA, Congress expressly chose not to resolve the alter ego issue. As the House Report stated (H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 12 (1976)): The bill is not intended to affect * * * the attribution of responsibility between or among entities of a foreign state; for example, whether the proper entity of a foreign state has been sued, or whether an entity sued is liable in whole or in part for the claimed wrong. The Act instead focuses on the scope of federal jurisdiction and the sovereign immunity that will be accorded to foreign states by United States courts pursuant to international law. To be sure, the Act does acknowledge that foreign government instrumentalities may constitute separate juridical identities in appropriate cases, entitled (with their property) to recognition under United States law. See 28 U.S.C. 1610(b); H.R. Rep. No. 94-1487, supra, at 15-16. But the legislative history of the Act also adverts to the possibility of cases where this will not be true (ibid.), and the Act itself does not provide any standards for making this determination. As with many other questions that must be addressed in applying the Act (see id. at 16 (courts are to determine what is a "'commercial activity'")), Congress expected questions of attribution to be resolved by the courts on the basis of judically developed legal principles. Thus, the court of appeals' conclusion (Pet. App. 12a) that the FSIA supports its holding in this case is erroneous. The Act simply does not address "the attribution of responsibility between or among entities of a foreign state" (H.R. Rep. No. 94-1487, supra, at 12). /9/ Domestic courts are commonly called upon to evaluate the actual relationship between a state and its government instrumentalities, notwithstanding the provisions of foreign law, in other contexts, including the evaluation of claims to sovereign immunity by government corporations (see I. Brownlie, Principles of Public International Law 341 (3d ed. 1979); S. Sucharitkul, State Immunities and Trading Activities in International Law 104-161 (1959); 9 Ga. J. Int'l & Comp. L. 111, 115 (1979)) and evaluation of claims of force majeure by instrumentalities that seek to rely on the state's directives defensively (see Becker, The Rolimpex Exit from International Contract Responsibility, 10 N.Y.U. J. Int'l L. & Pol. 447 (1978)). /10/ Where, by treaty, the United States has agreed with a foreign state to apply certain legal standards, those standards would of course govern the court's determination. No such treaty, however, is in force between the United States and Cuba. /11/ Although some passages of the court of appeals' opinion might be read to import a broader rule, its disregard of the factual record developed in the district court strongly suggests the court of appeals believed, pursuant to its "key role" test, that these other factors identified by the district court were not relevant to the issue whether Bancec is Cuba's alter ego. /12/ While these considerattios are relevant to an analysis of the relationship between a foreign state and its instrumentalities, no single factor is conclusive. In analyzing the relationship between a foreign state and its agencies and instrumentalities, a flexible approach is required because of the difficulty of proving many facts concerning a foreign nation's treatment of its instrumentalities. /13/ The brief existence of Bancec, the manner of its subsequent dissolution, and the dispersal of its claims among other corporate entities that similarly blinked into and out of existence vividly demonstrates the control Cuba has exerted over state-owned instrumentalities. See Pet. App. 4a-5a n.4. These changes in corporate status reflect the approach of a government more interested in rapidly achieving its public policy -- expropriation -- than in utilizing its publicly chartered corporations to engage in legitimate commercial activities. /14/ See, e.g., the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. 1605, which accords immunity to public, noncommmercial acts of government-owned corporations. See also Krajina v. TASS Agency, (1949) 2 All Eng. Rep. 274 (C.A.) (TASS, although a "juridical person," is not a separate entity and is therefore entitled to sovereign immunity); Yessenin-Volpin v. Novosti Press Agency, 443 F. Supp. 849, 852 (.S.D.N.Y. 1978) (same). /15/ Decisions of lower courts dealing with the legal status of the instrumentalities of socialist states have recognized that an instrumentality of a foreign state should be considered, for purposes of sovereign immunity, as part of that state when the instrumentality's principal purpose is to discharge a state function and the foreign government exercises control over the instrumentality's operations. See Yessenin-Volpin v. Novosti Press Agency, supra, 443 F. Supp. at 854. /16/ Federal Rule of Civil Procedure 17(a) requires that "(e)very action shall be prosecuted in the name of the real party in interest." The rule assures that the action is brought by the party who is entitled to enforce the right in question so that a defendant will not be subjected to repeated litigation on a single claim. See 6 C. Wright & A. Miller, Federal Practice and Procedure Section 1543, at 643 (1971); Pacific Coast Agricultural Export Association v. Sunkist Growers, Inc., 526 F.2d 1196, 1208 (9th Cir. 1975), cert. denied, 425 U.S. 959 (1976). Importantly, the rule also enables a defendant to raise in a single case whatever defenses it has against the real party in interest. See Virginia Electric & Power Co. v. Westinghouse Electric Corp., 485 F.2d 78 (4th Cir. 1973), cert. denied, 415 U.S. 935 (1974). /17/ The district court reasoned that the letter of credit claim, being a chose in action typically "regarded as being the sort of asset, right and claim peculiar to the banking business, * * * probably should be regarded as vested in Banco Nacional" (Pet. App. 13b-14b). Plaintiff asserted that the claim passed to the Ministry of Foreign Trade (see id. at 16b). /18/ Although the district court approved the stipulation, Cuba was never formally substituted for Bancec as plaintiff (Pet. App. 15b). /19/ The fact that Cuba may have reassigned the claim since it originally passed to either Banco Nacional or the Ministry of Foreign Trade does not alter the conclusion that Cuba is the real party in interest here. Citibank propounded its counterclaim in its original answer of March 6, 1961 (C.A. App. 8a), two weeks after Bancec's dissolution. Respondent cannot defeat a valid counterclaim by reassigning its direct claim after the counterclaim has been raised. /20/ The plurality held that the act of state doctrine was not a bar to the counterclaim there at issue because the Department of State, in a Bernstein letter, had represented to the Court that application of that doctrine would not advance the interests of American foreign policy. 406 U.S. at 762-770. Justice Douglas considered the case controlled by Republic of China. Id. at 770-773. Justice Powell concluded that permitting the counterclaim would not interfere with the delicate foreign relations supervised by the political branches of governmetn. Id. at 773-776. /21/ On remand in Citibank I, the court of appeals upheld Citibank's counterclaim, finding that Cuba's expropriation of its branches had been retaliatory, discrminatory, and without compensation, in violation of international law. 478 F.2d at 191.