The National City Bank of New York v.

Republic of China
348 U.S. 356 (1955)

Principles:
The primary point of international law is sovereign immunity. This case shows an exception
to the absolute doctrine of immunity for states, as it does not entitle immunity to those who
are willing to be considered under the fair judgment of our law. The decision also shows a
use of the business relationship between the bank and Republic of China, as a standard for
the District Court’s dismissal of the case, which was largely ignored in evaluating the claim
under the Republic of China’s rights in our courts.

Facts:
The Shanghai-Nanking Railway Administration, an official agency of respondent Republic
of China, established a $200,000 deposit account in 1948 with the New York head office of
petitioner National City Bank of New York. Subsequently, respondent sought to withdraw
the funds, but petitioner refused to pay, and respondent brought suit in Federal District Court.
The Republic of China sued an American bank in a Federal District Court of recover
$200,000 deposited in the bank by a governmental agency of the Republic.

Petitioner interposed two counterclaims seeking an affirmative judgment for $1,634,432 on

defaulted Treasury Notes of respondent owned by petitioner. After a plea of sovereign
immunity, the District Court dismissed the counterclaims and entered judgment on them
pursuant to Rule 54 (b), Federal Rules of Civil Procedure.

Petitioner appealed, and while the appeal was pending sought leave from the District Court to
amend the counterclaims by denominating them setoffs and including additional data. The
District Court denied leave.

The Court of Appeals for the Second Circuit affirmed the dismissal and the denial on the
ground that the counterclaims were not based on the subject matter of respondent's suit
(whether they be treated as requests for affirmative relief or as setoffs) and, therefore, it
would be an invasion of respondent's sovereign immunity for our courts to permit them to be
pursued. Because of the importance of the question and its first appearance in this Court,
certiorari was granted.

Republic of China is admissible to judgment in the federal courts by bringing suit under the
law of the United States. The status of the Republic of China in our courts is a matter for
determination by the Executive and is outside the competence of this Court. Accordingly, we
start with the fact that the Republic and its governmental agencies enjoy a foreign sovereign's
immunities to the same extent as any other country duly recognized by the United States.

Issue/s:
Can the Republic of China claim sovereign immunity under Foreign Sovereign Immunities
Act in response to the counterclaims against the financial activity of their government?

Ruling:
The Court decided that China’s claim of immunity was invalid under the circumstances of
the case, specifically that the fact of China’s decision to bring suit in U.S. courts waves
immunity. The decision also rests on the matter of the continual business relationship
between the bank and China, as the counterclaims were found to be relevant on that fact
alone, again eliminating sovereign immunity in this case. There is no consent to immunity by
the court, the counterclaims are reinstated and the case is returned to District Court for
further evaluation.