Allied Bank International v. Banco Credito Agricola

Banco Credito Agricola (defendant) was a Costa Rican state-owned bank. Allied Bank International (Allied) (plaintiff) lent a sum of United States dollars to Banco Credito Agricola. Some of the negotiations for this loan took place in New York, and Banco Credito Agricola agreed to pay the debt in United States dollars to Allied in New York. Eventually, Costa Rica faced a debt crisis and was unable to pay the loan. The Costa Rican government sought to restructure unilaterally its debt obligations. Allied sued Banco Credito Agricola in United States district court. Banco Credito Agricola raised the act-of-state doctrine as a defense to the suit, arguing that the Costa Rican government’s restructuring of Banco Credito Agricola’s debt obligations made the debt unenforceable. The district court accepted this defense and dismissed the suit. Allied appealed, and the court of appeals initially affirmed the district court’s dismissal because it mistakenly believed that the United States government supported Costa Rica’s debt restructuring. Allied requested a rehearing of the appeal, which was granted. The United States filed an amicus curiae brief explaining that the unilateral restructuring of Banco Credito Agricola’s debt by the Costa Rican government was contrary to United States policy to ensure foreign debt that originated in the United States remained valid and enforceable throughout any negotiations regarding debt obligations.