Three banks that are wholly owned by the Republic of Costa Rica had issued promissory notes, payable in U.S. dollars in New York City. The notes are now in default due solely to actions of the Costa Rican government, which had suspended all payments of external debt because of escalating economic problems.
Efforts by Costa Rica to curb foreign debt payment difficulties conflicted with U.S. policy for debt resolution procedures as conducted under the auspices of the International Monetary Fund.
A syndicate of U.S. banks brought suit to recover on the promissory notes. The three Costa Rican banks assert the act of state doctrine as a defense. Should the doctrine apply? Explain.