This Article is written by Maria Sharwari from Surendranath Law College, Kolkata

Table of Contents

Introduction

Act of State is an exercise of sovereign power as a matter of policy or political expediency, which is not available against a citizen. Any authority derived from a statute or legislation is known as a statutory authority. If any person acting under statutory authority causes damage to a person, then that person cannot bring an action for it. Even if, under normal circumstances, the act would have amounted to tort, if there is a statutory authority, the defendant cannot be held liable. In such cases, if there is a provision for compensation in the relevant statute, only then the injured person will get compensation, otherwise not. Under the authority of the statute, compensation is not only given for specific damage but also harms which are incidental to the exercise of such authority. For example, the state government decides to expand a highway and it goes across a person’s land, the highways authority cannot be held liable for tort because it is protected by a statute and has the authority. Acts authorised by statutes must be done carefully and without exceeding the powers granted by the statute, so that no unnecessary damage is done otherwise the person can be held liable. Compensation for damage caused by such acts may be claimed as given in the statute.^{^[1]}

The Act of State Doctrine

The act-of-state doctrine or federal act of state doctrine is a principle of federal common law in the United States which states, in circumstances where it applies, that courts in the United States will not rule on the validity of another government’s (formal) sovereign act with respect to property located within the latter’s own territory. The act-of-state doctrine enters consideration most often in cases where a foreign sovereign has expropriated the property of a U.S. national located in that foreign territory (e.g. through nationalization).^{^[2]}

The doctrine states that an act which would otherwise be an actionable wrong may be so authorized or adopted by a government as to make it an “Act of State” for which no individual is personally liable, and for which the government can be made responsible only through its own grace or through international recourse. The theory apparently is that the king or the state can do no wrong, but the individual officers who administer the government may do but not frequently. When they do so, they are responsible to the person injured, but if their acts were done in good faith in the service of the state, the state will make good the loss done to its servants. So far so good; but here sometimes comes in, as an obstacle to justice, the “Act of State” doctrine, to relieve the individual without subjecting the government to any liability except in the international forum.^{^[3]}

Under English Law

Also known as the Doctrine of Crown act of State, it is defined as “Act of state means an act of the Executive as a matter of policy performed in the course of its relations with another state, including its relations with the subjects of that state, unless they are temporarily within the allegiance of the Crown.” In accordance with British Jurisprudence no member of the Executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a court of justice. And the same principle applies to a friendly alien resident in British territory. But when the person or the property of a person who is not a British subject and who is not residing in British territory is injured by an act “done by any representative of Her Majesty’s authority, civil or military, and which is either previously sanctioned or subsequently ratified by Her Majesty”, the person injured has no remedy for such an act is an act of State. An act of State is outside the ordinary law; it is essentially an exercise of sovereign power as a matter of policy or political expediency. Its sanction is not that of law, but that of sovereign power, and municipal courts must accept it without question. Ratification by the sovereign power of the act of one of its officers is equivalent to a prior command and may render such act an act of State.^{^[4]}

Under Indian Law

The English law relating to Act of State was followed in India in the pre Independence era and has been followed even after the Constitution came into force as it became a part of the common law of India continued by the Constitution as existing law. As held by the Supreme Court “an act of State is not available against a citizen”; it is “a sovereign act which is neither grounded on law nor does it pretend to be so”; it is “a catastrophic change constituting a new departure”; “in civil commotion, or even in war or peace, the State cannot act catastrophically outside the ordinary law and there is legal remedy for its wrongful acts against its own subjects or even a friendly alien within the State”. Acts of the executive Government in the name of the President in the normal course of administration (eg allotment of petrol outlets from discretionary quota of a minister) are not acts of State and are open to judicial scrutiny and their authority, validity and correctness can be examined by courts.^{^[5]}

Essentials of an Act of State

An act done in exercise of sovereign power in relation to another State or subjects of another State is an act of State and cannot be questioned by municipal courts. According to Wade and Philips, the term “”Act of State’ means an act of the Executive as a matter of policy performed in the course of its relations with another State, including its relations with the subjects of that State, unless they are temporarily within the allegiance of the Crown”.

In the words of Hidayatullah J.,¹ “an act of State is an exercise of power against an alien and neither intended nor purporting to be legally founded. A defence of this kind does not seek to justify the action with reference to the law but questions the very jurisdiction of the courts to pronounce upon the legality or justice of the action.”^{^[6]}

The essentials of an act of State are:

The act is done by the representative of a State.
The act is injurious to some other State or its subject.
The act may be either previously sanctioned or subsequently ratified by the State.

Applicability of the Doctrine

The Act of State doctrine is applicable to only those acts which are carried out by a government official or body. The act of the government officials will be considered as an act of State where the official is exercising his official functions. In deciding whether this doctrine is to be applied or not, the courts consider whether the government official was acting in his public capacity or not. If the official is acting for his own benefit instead of acting for the State’s benefit, then the doctrine of Act of State will not apply to such acts.^{^[7]}

Absolute and Conditional Authority

The philosophy behind this principle is that the lesser private rights must yield to the greater public good. Hence the state and its officers are given certain immunity to do acts in pursuance of the public order even if they may lead to tortious liability. The extent of this immunity is decided by taking into consideration whether the authority is absolute or conditional.^{^[8]}

The authority under the statute may be of two kinds- absolute and conditional. Any damage caused by an act done under absolute statutory authority is not actionable. In case of conditional authority the statute permits doing of such acts, but at the same time puts a condition on the manner of its exercise so that they may not cause any harms to others. Such restriction may be express or implied.^{^[9]}

In Metropolitan Asylum District v. Hill^{^[10]}, the appellants, a hospital authority, were empowered to set up a smallpox hospital. They erected such a hospital in a residential area and the same created danger of infection to the residents of the area. It was held to be a nuisance and the appellants were issued an injunction to remove the hospital. The statutory authority, in this case, was construed to be conditional in so far as they were considered to be authorized to set up a hospital if that could be done without creating a nuisance.^{^[11]}

Article 300 of the Indian Constitution

Article 300 of the Constitution deals with the suits by or against the Government in India. It lays down that the Government of India may sue or be sued by the name of the Union of India and government of a state may sue or be sued by the name of that state, eg. State of Andhra Pradesh or State of Uttar Pradesh and so on. Thus, the Union of India and states are legal entities (juristic personalities) for purposes of suits and proceedings, not the Government of the Union or government of states.

Regarding the extent of the governmental liability, the Constitution (Article 300) declares that the Union of India or states can sue or be sued in relation to their respective affairs in the like cases as the dominion of India and the corresponding provinces or Indian states might have sued or been sued before the Constitution. This provision is subject to any law made by Parliament or a state legislature. But, no such law has been enacted so far. Hence, at present, the position in this respect remains the same as it existed before the Constitution. In the pre-Constitution period (i.e.. from the days of the East India Company up to the commencement of the Constitution in 1950), the government was suable for contracts but not for torts (wrongs committed by its servants) in respect of its sovereign functions.^{^[12]}

Liability for Torts

In the beginning, the East India Company was only a trading body. Gradually, it acquired territories in India and became a sovereign authority. The Company was suable for its functions as a trader but not as a sovereign. This immunity of the Company in respect of its sovereign functions was based on the English Common Law maxim that the ‘King can do no wrong, which means that the King was not liable for wrongs of his servants. This traditional immunity of the State (i.e., Crown) in Britain from any legal liability for any action has been done away by the Crown Proceedings Act (1947). However, the position in India still remains the same.

Therefore, the government (Union or states) in In- dia can be sued for torts (civil wrongs) committed by its officials only in the exercise of its non-sovereign functions but not in the sovereign functions like administering justice, constructing a military road, commandering goods during war, etc. This distinction between the sovereign and non-sovereign functions of the Government in India and the immunity of the government in respect of its sovereign functions was established in the famous P and O Steam Navigation Company case (1861). This was reaffirmed by the Supreme Court in the post-independence era in the Kasturilal case (1965). However, after this case, the Supreme Court started giving a restrictive interpretation to sovereign functions of the government and awarded compensation to victims in a large number of cases.^{^[13]}

In Nagendra Rao Case (1994), the Supreme Court criticised the doctrine of sovereign immunity of the State and adopted a liberal approach with respect to the tortuous liability of the State. It ruled that when a citizen suffers any damage due to the negligent act of the servants of the State, the State would be liable to pay compensation for it and the State cannot avoid this liability on the ground of sovereign immunity. It held that in the modern sense, the distinction between sovereign and non-sovereign functions does not exist. It laid down the proposition that barring a few functions, the State cannot claim any immunity.^{^[14]}

In Common Cause Case (1999), the Supreme Court again examined the whole doctrine and rejected the sovereign immunity rule. The Court held that the rule of State liability as laid down in P. & O. Steam Navigation Company case is very outmoded. It said that in modern times when the State activities have been considerably increased it is very difficult to draw a line between its sovereign and non-sovereign functions. The increased activities of the State have made a deep impression on all facets of citizens’ life, and therefore, the liability of the State must be made co-extensive with the modern concept of a welfare State. The State must be liable for all tortuous acts of its employees, whether done in exercise of sovereign or non-sovereign powers. Finally, the court observed that the efficacy of Kasturilal case as a binding precedent has been eroded.

In the Prisoner’s Murder (2000), the Supreme Court ruled that in the process of judicial advancement Kasturilal case has paled into insignificance and is no longer of any binding value.^{^[15]}

Case Laws

1. In Buron v. Denman, an action was brought against Captain Denman, a captain in the British Navy, for for releasing slaves and burning the slave barracoons owned by the plaintiff on the West Coast of Africa (outside British Dominion). The defendant had no authority to do so but his act was ratified by the British Government. It was held to be an act of State for which no action could lie. The plaintiff, therefore, could not recover anything.^[16]
2. In Secretary of State in Council of India v. Kamachee Boye Saheba, the Rajah of Tanjore, who was an independent sovereign, was by virtue of treaties, under the protection of the East India Company. The Rajah died without any male issue and the directors of the Company declared the Raj to have been lapsed to the British Government. The widow of the Rajah Kamache Boye Saheba filed a suit against the East India Company. The Privy Council held that it was an act of State and for such wrong, no Municipal Court of Justice can afford remedy.^[17]
3. In Johnstone v Pedlar, an Irishman who became a naturalised American citizen came to Ireland and took part in rebellion and was deported. He again came to Ireland and was arrested for illegal drilling, and money found on his person was confiscated. In an action for wrongful detention of the money or in the alternative for damages for conversion, the defendant raised the plea of act of State which was negatived by the House of Lords on the ground that at the time of confiscation of the money, the plaintiff, though an American citizen, owed local allegiance to the Crown because of his residence in Ireland which conferred on him local rights. Some obiter dicta in this case favours the view that act of State is no defence unless the act is done outside the British territory. But it has been held that deportation from or detention of an alien enemy in England are acts of State.^[18]
4. In Hardial Singh v. State of Pepsu, The Punjab High Court rejected the act of State as a defence in this case and accepted the claim of the appellant. It was held that when different States were merged on 20-8-1948 by a covenant amongst their rules and the new State of PEPSU was created by such merger, all the citizens of covenanting States had become the citizens of PEPSU on that date. The act of repudiation of grant in 1952 was an act as regards its own citizens for which the act of State could not be pleaded.^[19]
5. In Banco Nacional de Cuba v. Sabbatino, (1964), the United States Supreme Court applied the act of state doctrine even where the state action likely violated international law. The case arose when Cuba nationalized its sugar industry, taking control of sugar refineries and other companies in the wake of the Cuban revolution. A large number of Americans who had invested in those companies lost their investments without compensation when the Cuban government assumed control. However, despite the loss suffered by United States nationals, the Supreme Court upheld the act of state doctrine by assuming the validity of Cuba’s domestic action and therefore rejected the claim of US nationals against Cuba for their lost investments. ^[20]

Conclusion

To conclude, an Act of State refers to the exercise of sovereign power as a matter of policy or political expediency. It is not available against a citizen. Any authority derived from a statute or legislation is known as statutory authority. If there is a statutory authority, the defendant cannot be held liable. In such cases, if there is a provision for compensation in the relevant statute, only then the injured person will get compensation, otherwise not. Under the authority of the statute, compensation is not only given for specific damage but also harms which are incidental to the exercise of such authority.

References

https://blog.ipleaders.in/act-of-state- ↑
https://en.m.wikipedia.org/wiki/A ↑
Supra note 1 ↑
Ratanlal and Dhirajlal, The Law of Torts, p. 85,86(LexisNexis, Haryana, Twenty-eighth Ed, 2019) ↑
Id,. p. 87 ↑
Dr R. K. Bangia, Law of Torts, p. 51, 52(Allahabad Law Agency, Haryana, Twenty-Sixth Ed, 2021) ↑
Supra note 1 ↑
Supra note 1 ↑
Supra note 1 ↑
(1869) L.R.H.L. 171. ↑
Dr R. K. Bangia, Law of Torts, p. 50(Allahabad Law Agency, Haryana, Twenty-sixth Ed, 2021) ↑
M Laxmikanth, Indian Polity, p. 64.2,( Mc Graw Hill Education, Chennai, Fifth Ed, 2017 ↑
Supra note 12 ↑
Id,. 64.3 ↑
Supra note 14 ↑
Supra note 6 ↑
Supra note 6 ↑
Supra note 5 ↑
Dr R. K. Bangia, Law of Torts, p. 53(Allahabad Law Agency, Haryana, Twenty-sixth Ed, 2021) ↑
Supra note 2 ↑
Dr R. K. Bangia, Law of Torts, p. 42(Allahabad Law Agency, Haryana, Twenty-sixth Ed, 2021) ↑
Id, p.43. ↑