The U.S. Supreme Court case Sumitomo Shoji America, Inc. v. Avagliano et al., 1981, revolved around the interpretation of a treaty between Japan and the United States regarding employment discrimination based on nationality by Japanese companies operating in the US. The plaintiffs were American employees who alleged that they were denied promotions due to their non-Japanese nationality by Sumitomo Shoji America, a subsidiary of a Japanese corporation. The company argued that it was allowed to make such distinctions under an exception clause in Article VIII(1) of the Treaty of Friendship, Commerce and Navigation between Japan and USA (1953). However, after examining both English and Japanese versions of this treaty as well as its negotiation history, the Supreme Court unanimously ruled against Sumitomo's argument stating that nothing in Article VIII(1) grants foreign corporations license to violate laws prohibiting employment discrimination.

In the dissenting opinion for Sumitomo Shoji America, Inc. v. Avagliano et al., Justice William Rehnquist disagreed with the majority's interpretation of a treaty between Japan and the United States that allowed Japanese companies to hire management "at their discretion." The majority held this meant they could discriminate in favor of Japanese citizens for managerial positions. However, Rehnquist argued that such an interpretation was inconsistent with U.S law prohibiting employment discrimination based on nationality. He contended that allowing foreign corporations to violate domestic anti-discrimination laws would set a dangerous precedent and undermine these protections' effectiveness. Furthermore, he believed there was no clear evidence suggesting either country intended this treaty provision to permit discriminatory hiring practices when it was negotiated or ratified.