I Congreso del Partido Case (Restrictive approach to sovereign immunity)

The concept of sovereign immunity is important in international law. Essentially, sovereign nations cannot find their conduct being called into question in the courts of another sovereign nation. This maintains the sovereign independence of each country. However, not every act that is undertaken by a government is a sovereign act. Sometimes government-owned enterprises conduct commercial activities just like any other trading corporation. In those circumstances, the restrictive theory of sovereign immunity applies. So the sovereign government is not immune for those normal commercial activities. This restrictive theory has two main foundations. It is necessary, in the interest of justice, to individuals having such transactions with states, to allow them to bring such transactions before the courts. To require a state to answer a claim based on such transactions does not involve a challenge to, or inquiry into, any act of sovereignty or governmental act of that state. In this case, a Cuban state-run enterprise contracted to sell bulk sugar to purchasers in Chile. One Cuban vessel was in port, and another was at sea heading to the port, when there was a revolution in Chile which ousted the regime which had friendly relations with Cuba. Cuba determined that the sugar contract should not go ahead. The ship in port was required to leave without continuing to unload, and the other ship was redirected, ultimately to North Vietnam. It seems clear there was either a breach of contract, or in tort, a conversion of the sugar. The question is whether the government of Cuba should have been able to claim sovereign immunity. The contract was fairly obviously a commercial contract, but the breach arose from the Cuban government's sovereign decision to break off diplomatic ties with Chile. Was that enough, or, as the contract was commercial, should Cuba accept that immunity could not be relied upon? The courts split, with the majority ultimately finding that the conduct was commercial, and no immunity could be claimed. From this case we learn that when determining whether sovereign immunity can be relied upon, it is necessary to examine the entire context of the conduct, and this includes looking at the nature of any breach of contract, not just the contract itself. The distinction between commercial and sovereign acts is not always clear, particularly in the case of socialist governments, where government-owned enterprises may have little independent decision-making capability.