National City Bank of NY v. Republic of China

99 L. Ed. 2d 389 · Supreme Court of the United States · 1955

Facts

The Republic of China sued National City Bank to recover a deposit. The Bank counterclaimed for defaulted Treasury Notes owned by the Republic of China. Lower courts dismissed the counterclaims, citing sovereign immunity because they were not based on the subject matter of the original suit.

Issue

Does a foreign sovereign, by initiating a lawsuit in U.S. courts, implicitly waive its sovereign immunity defense against counterclaims, even if those counterclaims are not directly related to the subject matter of the sovereign's original suit, but merely seek to reduce its recovery?

Holding

Yes. The Supreme Court reversed the lower courts' dismissal, holding that the counterclaims should be reinstated. A foreign sovereign, by suing in U.S. courts, implicitly waives its immunity from counterclaims to the extent of reducing its recovery.

Rule

When a foreign sovereign voluntarily invokes the jurisdiction of U.S. courts as a plaintiff, it implicitly waives its sovereign immunity defense against counterclaims, at least to the extent that those counterclaims seek to reduce the sovereign's recovery, even if they are not directly related to the subject matter of the original suit. The doctrine of sovereign immunity is not absolute and must consider fair play.

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Case brief last reviewed 2026-05-18. Prepared by CaseReader from the published opinion.