ment based upon the failure of Petroleos Mexicanos (Pemex) to indemnify a dissolved Delaware corporation, Papantla, for the destruction of its royalty and participating interests in Mexican oil, the district court relied upon United States v. Pink, 315 U.S. 203 (1942), in which the U.S. Supreme Court accepted a similar opinion issued by the Commissariat of Justice of the Soviet Union. The district court opinion, issued by Senior District Judge Edwin D. Steel, Jr., on October 7, 1976, distinguished Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976), from the case at bar and found that both nonaction and affirmative conduct of a governmental agency acting upon sovereign governmental authority can have the status of an act of state.

Portions of the district court opinion appear below:

The case is before the Court upon a motion of defendant for summary judgment which raises two "act of state" questions: (1) whether the decree of the President of Mexico dated March 18, 1938, which expropriated oil in Mexico owned by foreign nationals, an admitted act of state, had the effect of extinguishing the royalty and participating interests which Papantla Royalties Corporation ("Papantla") claims to have had in the expropriated oil; and (2) whether the actions taken by the Mexican commissions created by Presidential decrees of 1945 and 1947 for the purpose of indemnifying persons whose royalty and participating interests in Mexican oil were extinguished, and in particular the refusal of the commissions to recognize certain claims of Papantla, were acts of state of the Mexican Government.

Pemex argues that the effect of the expropriation decree of 1938 was to extinguish Papantla's royalty and participating interests. On the other hand, plaintiff contends that the expropriation decree, which he concedes to be a valid act of state as this Court held in D'Angelo v. Petroleos Mexicanos [398 F. Supp. 72], at p. 78, is so limited in its terms as not to include Papantla's interests. Plaintiff points out that the decree is expressly limited to seizing the personal and real properties belonging to 17 specified oil companies and nothing more. Plaintiff denies that Papantla owned any of these properties and claims that it only owned royalty and participating interests attributable to the confirmatory concessions, neither of which the decree purported to reach.

In view of plaintiff's position Pemex requested the attorney general of Mexico to render an official interpretation of the scope and effect of the expropriation decree. Acting under authority of Mexican law the attorney general did so. His opinion states in pertinent part . . .:

[A]ll of the rights of royalty holders [regalists], that is to say, of surface owners who were entitled, in accordance with contracts with such oil companies, to receive indemnification payments for the

occupation of lands; . . . were terminated and extinguished as a result and as a direct consequence of the said Expropriation Decree, by virtue of which all of the properties, movables and immovables, of the 17 petroleum companies mentioned therein were expropriated. Such rights were terminated and extinguished by reason of the legally relevant fact that, as a result of the 1938 Expropriation Decree, the said companies from that date were deprived of the right to exploit or utilize the concessions in any form, and consequently, it was legally impossible for the said companies to perform their obligations with respect to lessors, royalty holders, or third parties, in general, and the assignees thereof.

In United States v. Pink, 315 U.S. 203, 62 S.Ct. 552, 86 L.Ed. 796 (1942), the issue was whether expropriation decrees of the Soviet Government were intended to have extraterritorial effect with respect to property in New York. That same issue had previously been determined in a companion case, Moscow Fire Ins. Co. v. Bank of New York & Trust Co., 280 N.Y. 286, 20 N.E.2d 758 (1939), aff'd 309 U.S. 624, 60 S.Ct. 725, 84 L.Ed. 986 (1940), by a referee appointed by the lower court to determine, among other things, the intended effect of the Soviet decrees. Based on the record then before him, which did not include an opinion of the Commissariat of Justice of the Soviet Government, the referee found that the Soviet decrees were not intended to have extraterritorial effect. Subsequent to the hearings in the Moscow case, the plaintiff, being the United States Government in both the Moscow and Pink cases, requested the Commissariat of Foreign Affairs of the Soviet government to obtain an official declaration by the Commissariat of Justice in order to make clear, as a matter of Russian law, the effect of the particular expropriation decree. Pink, supra, at 218, 62 S.Ct. 552. In response to that request the Commissariat of Justice issued an interpretation on November 28, 1937, which declared that the expropriation decree which had been promulgated in 1918, nearly 20 years earlier, had extraterritorial effect. The Supreme Court, finding this to be an official interpretation of the decree, held that it foreclosed further inquiry by United States courts on the subject. 315 U.S. at 220-21, 62 S.Ct. 552.

The principle of Pink requires this Court to accept the opinion of the attorney general of Mexico as an official declaration by that government that the effect of the expropriation decree was to extinguish Papantla's royalty and participating rights in the expropriated oil.

*

Plaintiff argues that the recent case of Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976), "abolished" the act of state doctrine and "dealt a death blow" to it....

In the Dunhill case there was no "official declaration" by the Cuban Government that the refusal of the interventors to pay Dunhill's claim was authorized by their appointment or by the confiscation decree. The Court considered this important for it said:

No statute, decree, order or resolution of the Cuban Government itself was offered in evidence indicating that Cuba had repudiated her obligation. . . .

...

The absence of any evidence that the repudiation of Dunhill's claim was deemed to be an official act of the Cuban Government, without more, distinguishes Dunhill from the instant case. Here Pemex placed in the record the official declaration of the Mexican Government expressed through its attorney general that the effect of the expropriation decree was to extinguish Papantla's rights. Plaintiff places great store upon that part of the Dunhill opinion which, speaking through Mr. Justice White, states that an act of state should not be extended to include the repudiation of a purely commercial obligation owed by a foreign government or by one of its commercial instrumentalities. Plaintiff argues that since Pemex was engaged in a commercial business the act of state doctrine has no relevance to it.

It is true that Pemex is engaged in a commercial business, the operation in Mexico of an oil company for profit. The expropriation, however, was not accomplished as an incident to this business. Pemex was not even in existence when the expropriation occurred. The fact that the Mexican Government ultimately entered the oil business through Pemex does not make the expropriation itself commercial activity. . . .

The Mexican Government recognized that the expropriation decree [by the President of Mexico in 1938] would cause loss to some lessors and holders of royalty and participating interests such as Papantla by its effect in extinguishing their rights. It therefore sought an equitable method by which those persons who were damaged could be compensated.

In 1945 the President of Mexico, as an exercise of his constitutional powers, issued a presidential decree delegating to Pemex primary responsibility for verifying the claims for rent and royalties and determining who were entitled to be compensated because of their loss. Thereafter Pemex assigned its duties under the decree to the Comision de Rentas e Regalias ("Comision de Regalias") which Pemex created for that purpose. The Comision de Regalias was staffed by lawyers who had been carrying out studies requested by the Director General of Pemex since 1944 concerning the problem of rent and royalty claimants. By the same 1945 decree the President established a governmental commission, Comision Depuradora e Liquidora de Rentas e Regalias del Petroleo ("Comision Depuradora"), composed of one official from the Ministry of Finance and Public Credit, one official from the Ministry of National Economy and two officials from Pemex. It had the responsibility for resolving and finalizing claims which it found to be meritorious after it had received satisfactory information as to the verification of the claims.

In 1947 a further Presidential decree declared that:

For obvious reasons of justice and for the convenience of the national economy, it is necessary to proceed to resolve the claims.

which are pending resulting from obligations directly linked to the indemnification for expropriation derived from the application of the Decree of March 18, 1938, with claimants of rents and royalties agreed upon by the expropriated companies. . . .

The 1947 decree changed the name of Comision de Regalias to Comision Revisora de Rentas y Regalias ("Comision Revisora"), . . . The duties and responsibilities for the execution of the national policies manifested in the Presidential decrees of 1945 and 1947 were consolidated in the Comision Global. The authority of the commissions to provide indemnification for legitimate claims was recognized by Roscoe B. Gaither on behalf of Papantla, who submitted its claims to the commissions for determination and accepted payment for those claims which the commissions deemed meritorious.

Pemex contends that the commissions were acting under Presidential decrees and hence their activities, and in particular their failure to recognize and pay most of the plaintiff's claims, were acts of state of the Mexican Government, which under relevant principles, require this Court to abstain from looking into the validity of the claims or reviewing the proceedings before the commissions.

That the actions of the commissions were acts of state is substantiated by the opinion of the attorney general of Mexico. In his affidavit of March 22, 1976, he said...:

The Decrees of the President of the United Mexican States, in the legitimate exercise of his constitutional powers, in creating the Comision Depuradora y Liquidadora de Rentas y Regalias del Petroleo and the [creation of the] Comision de Regalias, Rentas e Indemnizaciones Globales by Petroleos Mexicanos, for the purpose of complying with the duties and obligations imposed thereon by the aforementioned Presidential Decrees, and its [Petroleos Mexicanos] activity as an instrumentality or agent of the Government for such purpose; and the determination of the legitimacy, evaluation, and the consequent acceptance or rejection of the aforementioned claims by the said Commisions [sic], were all, severally or collectively, acts of the Mexican Government performed by it and through its authorized agents, in the exercise of its governmental and sovereign powers;... The procedure for indemnification established by the oft-cited Presidential Decrees of 1945 and 1947 neither contemplates nor recognizes, in any manner whatsoever, an award for damages by a foreign Court or Tribunal; since the procedure established by the said Decrees provides the sole and exclusive means to obtain the recognition of a right to damages suffered by lessors, royalty holders, third parties, and the assignees thereof, as a result of the oil Expropriation Decree in 1938.

Plaintiff asserts that this conclusion is inconsistent with the holding in Dunhill. He points out that in Dunhill the Court rejected the Cuban Government's argument that the refusal of the "interventors" to pay Dunhill was an act of state, and that the Supreme

Court noted that no formal evidence was before it of the repudiation by the Cuban Government of her obligations.

This, according to plaintiff, becomes significant in the light of the statement of Mrs. Gaither, the wife and executor of the estate of Gaither. She said that she examined her husband's personal files, the files of Papantla in her possession and the files of Pemex and that none contain any written rejection of Papantla's claims. From this plaintiff argues that in the absence of any formal rejection of Papantla's claims by the Mexican commissions their action, under Dunhill, cannot be viewed as an act of state.

*

Nonaction as well as affirmative conduct of a governmental agency, if based upon sovereign governmental authority, can have the status of an act of state. French v. Banco Nacional, 23 N.Y. 2d 46, 295 N.Y.S. 2d 433, 242 N.E.2d 704 (1968). Conduct otherwise having the quality of an act of state does not lose its character as such simply because it is not evidenced by a formal governmental decree. Oetjen v. Central Leather Co., 246 U.S. 297, 38 S.Ct. 309, 62 L.Ed. 726 (1918), Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed.2d 456 (1897). The minority opinion in Dunhill recognizes this:

That a foreign sovereign has issued no formal decree and performed no "affirmative" act is not fatal, then, to an act of state claim. If the foreign state has exercised a sovereign power either to act or to refrain from acting, there is an act of state.

The situation in Dunhill contrasts sharply with the instant one. The only evidence of an act of state in Dunhill was the nonpayment by the interventors of Dunhill's claims and the denial of liability by the Cuban attorneys. In the present case an act of state is evident in the record. The Presidential decrees created the commissions for the specific purpose of determining the claimants entitled to indemnification and to provide for it. It was the functioning of the commissions within this area of their specific Presidential authorization which resulted in their rejection of and failure to pay Papantla's claims. Mrs. Gaither does not say that the commissions did not examine the claims or that the Comision Global did not reject them. The record is undisputed that the commissions did both.

Viewed in the light most favorable to plaintiff the record discloses that Gaither filed 576 claims on behalf of Papantla for indemnification with the Mexican commissions, that 7 of the claims were recognized and paid, and that the remainder were rejected. The failure of the commissions' records to contain written evidence of their rejections of the claims or their failure to give Gaither or Papantla written notice of their rejection may not comport with procedures and practices generally followed by administrative agencies of the United States. It does not follow that for this reason this Court should exercise its jurisdiction to adjudicate the claims and decide whether the Mexican Government through its agent Pemex must pay them. Because the actions and nonactions of the Mexican commissions were acts of state this Court will not review them and at

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