1 The Protection of Nationals 163 (Baltimore, 1932).

2 The rule does not apply where the dispute is submitted to an international tribunal by way of compromis. See the Serbian and Brazilian Loan Cases, P.C.I.J., Series A. Nos. 14, 15.

3 These were the facts in the ease of International Trustee for the Protection of Bondholders v. The King, [1937] A.C.50: having found that the bonds issued by the British Government were governed by the law of New York, the House of Lords had no hesitation in giving effect to the Joint Resolution of Congress abrogating the gold clause. ‘

4 To be sure the defendant state may be guilty of an international tort in that it may fail to provide adequate judicial remedies and thus commit a denial of justice, or its rules of private international law may not conform to the minimum standard which public international law prescribes. In these and similar circumstances, however, the international tort, if any, does not lie in conduct peculiarly relating to state contracts. The problem of liability is a general one and, for the reasons given in the following paragraph of the text, irrelevant in the present context.

5 We are, of course, not concerned here with questions of jurisdiction or with any such defense as the lack of exhaustion of local remedies.

6 2 Int. Arb. Awards 1081 et seq.

7 Ibid. 1095.

8 Ibid. 1098.

9 Cmd. 8425, p. 9, or Anglo-Iranian Oil Co. Case, Pleadings, p. 72.

10 This was the conclusion rightly reached in the Anglo-Iranian Oil Co. Case, [1952] I.C.J. Rep. 93; digested in 46 A.J.I.L. 737 (1952).

11 This followed from Art. 22 (F) of the Concession, according to which any award was to be based “ o n the juridical principles contained in Article 38 of the Statutes of the Permanent Court of International Justice.” On the possibility and effect of a submission to public international law, see Mann, 21 Brit. Yr. Bk. of Int. Law 11 (1944); Festschrift fur Gutzwiller 465 (1959); 36 Brit. Yr. Bk. of Int. Law (1959), and the literature there referred to.

12 The Persian legislation is printed in Cmd. 8425, p. 29, and Anglo-Iranian Oil Co. Case, Pleadings 36. It is of a very rudimentary character.

13 In Anglo-Iranian Oil Co. v. Jaffrate (The Rose Mary), [1953] 1 W.L.R. 246, at 251, 252, this was admitted.

14 On the deplorable fate of the arbitration proceedings, see Johnson, 30 Brit. Yr. Bk. of Int. Law (1953).

15 This was the view taken by Campbell, J., in the case referred to above, note 13.

16 This was the view taken by Upjohn, J., in Re Helbert Wagg & Co. Ltd., [1956] Ch. 323, at 346.

17 It is a matter of regret that in Italy and Japan the courts failed to give redress against an obvious international tort: Court of Venice, March 11, 1953, Foro Italiano 78 (1953), I, p. 719, 1955 Int. Law Rep. 19; Civil Court of Rome, Sept. 13, 1954, Foro. Italiano 1955, I, 256; 1958 Rev. Crit. de Droit Int. Priv6 519, with note by De Nova, 1955 Int. Law Rep. 23; Court of Appeal, Tokyo, 1953 Int. Law Rep. 305. The reasoning of these decisions to the effect that the Persian legislation afforded adequate compensation is wholly unconvincing. The failure to give redress against acts of remarkable lawlessness must forever be a source of disappointment for international, lawyers.

18 P.C.I.J., Series C, No. 78. It did not become necessary for the Court to render a decision.

19 Ibid. 32, 238.

20 The statute is printed on p. 118.

21 In view of such refusal the Arbitrator stayed the proceedings: see pp. 113 et seq. This decision which caused the trouble was probably mistaken. It was for the Arbitrator to decide upon his own jurisdiction, even in a case in which it was alleged that a submission, valid at the time of the contract, became invalid as a result of later legislation

22 Ibid. 32.

23 Ibid. 295. For the Yugoslav argument presented by M. Stoykovitch, see pp. 242, 254 et seq., 333, 334.

24 [1957] I.C.J. Rep. 9, digested in 51 A.J.I.L. 777 (1957). The Court was not called upon to render a decision on the merits.

25 1 Pleadings 34.

26 Ibid. 404.

27 2 Pleadings 61. And see pp. 63, 181, 182. For the Norwegian answer see 1 Pleadings 485 et seq.; 2 ibid. 134 et seq.

28 4 Moore, Digest 705; 5 Hackworth, Digest 611.

29 Moore, op. cit. 289, 723 et seq.; Hackworth, op. cit. 611 et seq.

30 Moore, op. cit. 708; Eagleton, The Responsibility of States 161 (1928).

31 2 McNair, International Law Opinions 202-204.

32 Case of Certain Norwegian Loans, 2 Pleadings 134.

33 2 Recueil des Arbitrages Internationaux 548 (Note Doctrinale). See also, e.g., Van Hecke, Problèmes Juridiques des Emprunts Internationaux 279, 280 (1955); Eagleton, The Responsibility of States 165, 166 (1928); Lipstein, 22 Brit. Yr. Bk. of Int . Law 134, 135, 142 (1945).

34 International Law 988.

35 Ibid. 989, 990.

36 Ibid. 991.

37 For a similar assertion, see 1 Borehard, State Insolvency and Foreign Bondholders 137 (1951), whose observations cannot realily be followed. They are limited to the cases of currency devaluation and the abrogation of the gold clause. Againstthis view, see Sir John Fischer Williams, Chapters on Current International Law 257 et seq., 291 (1929).

38 4 Int. Arb. Awards 26.

39 Ibid. 33.

40 Ibid. 691.

41 Ibid. 699; see also p. 700.

42 Ibid. 21.

43 It is difficult to understand how the last-mentioned case came to be relied upon by France in the case of Certain Norwegian Loans, 1 Pleadings 404. From time to time learned writers have referred to such decisions as The Administration of Posts and Telegraphs of the Republic of Czechoslovakia v. Radio Corporation of America, 30 A.J.I.L. 523 (1936), or Radio Corporation of America v. The National Government of the Republic of China, 3 Int. Arb. Awards 1623, but a perusal of these cases makes it obvious that they are immaterial to the point under discussion; these were private law arbitrations in the course of which no point of public international law arose. Nor is any help to be derived from the award made by the Permanent Court of Arbitration in the case of French Claims Against Peru, 16 A.J.I.L. 480 (1922): the claim of Dreyfus Bros, against Peru was fixed by the Peruvian President in 1880. A Peruvian law of 1886 declared all the internal acts performed by the President null and void. It was held that “this law cannot be applied to foreigners who treated in good faith.” The case depended on the effects of recognition and on the fact that the acknowledgment of 1880 was not an internal act.

44 Kahler v. Midland Bank, [1950] A.C. 24, at 56.

45 England: Re Chesterman's Trusts, [1923] 2 Ch. 466, 478; Belgium: Cass., Feb. 24, 1938, 39 Bulletin de l'Institut Juridique International 105 (1938); Germany: Supreme Court, May 28, 1936, JW 1936, 2058; Sweden: Supreme Court, Jan. 30, 1937, 36 Bulletin de l'Institut Juridique International 334 (1937); see, generally, 2 Rabel, Conflict of Laws 546 et seq.; Van Hecke, Problèmes Juridiques des Emprunts Internationaux 195, 196 (1955), and numerous other writers on the conflict of laws.

46 For a fundamental discussion see Rabel, 10 Rabels Zeitschrift 492, 508 et seq. (1936). One of the principal questions is whether such a clause does not involve only the incorporation of a foreign law, i.e. a case of materiellrechtliche Verweisung. Probably the answer should be in the affirmative.

47 P.C.I.J., Case Concerning the Free Zones of Upper Savoy and the District of Gex, Series A, No. 24, p. 12, and many other decisions rendered by that tribunal.

48 1957-1958 Proceedings and Committee Reports of the American Branch 70, 71.

49 Perhaps it should be emphasized at this point once again that cases of discrimination, denial of justice, abuse, and so forth, are not within the contemplation of this article.

50 See, in particular, Murray v. Charleston, 96 U. S. 432, 445 (1877), and other cases, all of which relate to contracts made by American States or municipalities granting exemption from taxation. Since Piqua Branch of the State Bank of Ohio v. Knoop, 16 How. 369 (1853), such contracts are valid. These cases rest on very special reasoning which does not lend itself to generalization. They can possibly be supported on the ground that they envisage only partial exemption from taxation, are predicated upon consideration and establish a rule which, as the example of charities shows, does not endanger essential governmental activities. See, generally, J.D.B. Mitchell, The Contracts of Public Authorities (1954).

51 This point requires emphasis. It is unfortunate that no international lawyer discussing expropriation, confiscation or nationalization has as yet to any appreciable extent investigated the municipal law on such fundamental matters as the conception of property, the conception of taking, the ambit of the duty to compensate and so forth. This is the principal reason why most studies of the international law relating to the taking of property are so unsatisfactory. They rest on insecure and insufficient foundations, with the result that on a number of crucial points they have only positivistic assertions to offer. As indicated, 75 Law Quarterly Rev. 219, note 43 (1959), the writer hopes soon to resume his studies of the municipal law of expropriation as an essential preliminary to the study of the international law of expropriation. The doubts about this program expressed by Drucker, 228 The Law Times 86 (1959) only serve to emphasize the urgency of the task.

52 Lynch v. U.S., 292 U. S. 571, at 576, 577, 579 (1933), per Mr. Justice Brandeis. Similarly Brooks-Scanlon Corporation v. U.S., 265 U.S. 106 (1923), which has its international counterpart in the Case of Norwegian Claims, Scott, Hague Court Reports, p. 38, and should be contrasted with Omnia Commercial Co. v. U.S., 261 U.S. 502 (1923).

53 The distinction between regulation and taking is both fundamental and universal. It is sanctioned by so many American and German decisions that they cannot even be listed. It was recently recognized in an impressive manner by the House of Lords in England: Belfast Corporation v. O. D. Cars Ltd., [1960] 1 All E.R. 65.

54 Much useful material on the law of England, the United States and Prance has been collected by Professor Mitchell (note 50 above). It will, of course, be appreciated that most of the cases used, in particular the American cases, are grounded in express Constitutional provisions, such as the due process clause and the prohibition of State impairment of the obligations of contract. But these provisions, in turn, rest on fundamental ideas of universal validity.

55 Chicago & Alton Railroad Co. v. Tranbarger, 238 U.S. 67, at 76 (1915), per Mr. Justice Pitney on behalf of the Court. See also New Orleans Gas Light Co. v. Louisiana Light & Heat Producing & Manufacturing Co., 115 IT. 8. 650, 672 (1885); Pennsylvania Railroad Co. v. Miller, 132 U.S. 75, 83 (1889); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).

56 Mugler v. Kansas, 123 U.S. 623 (1887).

57 Knox v. Lee, and Parker v. Davies, 12 Wall. 457, 551 (1870), per Mr. Justice Strong; Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240, 306 (1935), per Chief Justice Hughes; German Supreme Court, March 1, 1924, RGZ 107, 370; Nov. 4, 1925, RGZ 111, 320; May 20, 1926, RGZ 114, 27.

58 What prima facie is “ regulation “ may become a “ taking . “ The question is one of degree: Pennsylvania Coal Co. v. Mahon, 260 U. S. 393 (1922); New Orleans Public Service v. City of New Orleans, 281 U. S. 682, 687 (1929); Belfast Corporation v. O.D.Cars Ltd., [1960] 1 All E.E. 65, at 70, per Lord Simonds.

59 Lynch v. U. S., 292 U.S. 571, 580 (1933), where Mr. Justice Brandeis said that “to abrogate contracts in the attempt to lessen government expenditure would not be the practice of economy, but an act of repudiation.” Cf. Von Hoffmann v. City of Quincy, 4 Wall. 535 (1866). In the same sense German Supreme Court, Feb. 10, 1932, RGZ 136, 113, 123.

60 Horowitz v. XT. S., 267 U. S. 458, at 460 (1925), per Mr. Justice Sanford on behalf of the Court. In the same sense the Court of Appeal in England: William Cory and Son Ltd. v. City of London, [1951] 2 K.B. 476.

61 Stone v. Mississippi, 101 U.S. 814, 817, 818 (1879), per Chief Justice Waite. See also, e.g., New Orleans Public Service Co. v. City of New Orleans, 281 U.S. 682 (1929).

62 Chicago & Alton Railroad Co. v. Tranbarger, 238 XT. S. 67 (1914).

63 The West River Bridge Co. v. Dix, 6 How. 507, 532 (1848), per Mr. Justice Daniel on behalf of the Court; Home Building & Loan Association v. Blaisdell, 290 XT. 8. 398, 435 (1933); East New York Savings Bank v. Hahn, 326 XT. S. 230 (1945).

64 New Orleans Gas Light Co. v. Louisiana Light & Heat Producing & Manufacturing Co., 115 U. S. 650, 671, 673 (1885).

65 Ibid, at 672. For a similar application of the principle see Manigault v. Springs, 199 TJ. S. 473, 480, 481 (1905). The leading case is Charles River Bridge v. Warren Bridge, 11 Pet. 420 (1837).

66 Lynch v. TJ. S. (note 59 above), at 579.

67 Because the Act of 1933 was enacted to economize, and this is insufficient justification for regulation: note 59 above. Moreover, it was directed against a specified and limited group of persons and therefore lacked generality.

68 Perry v. U.S., 294 TJ. 8. 330 (1935). Although a distinguished writer (Professor H. M. Hart, “ T h e Gold Clause in United States Bonds,” 48 Harvard Law Review 1057 (1935)) has suggested that “few more baffling pronouncements … have ever issued from the United States Supreme Court,” the reason is both clear and at the same time a very special one. It is derived solely from two provisions of the American Constitution, according to which Congress is authorized “ t o borrow money on the credit of the United states “ (Art. I, Sec. 8), and the “validity of the public debt of the United States, authorized by law … shall not be questioned” (14th Amendment, Sec. 4). The analysis by Mitchell, op. cit. 148 et seq., is unsatisfactory, because he overlooks these essential points.

69 In other words, if the state itself carries on the lottery, the case would clearly be one of taking.

70 Above, p. 575.

71 Pleadings 78; it was to the effect that there was “always prima facie an international obligation upon a State to observe the terms of a concession granted to a foreigner … the international responsibility of the grantor State is engaged if there is a breach of this obligation and if municipal remedies have been exhausted without success” (italics supplied).

72 Pleadings 81. The argument was developed at p. 87 et seq. At its conclusion the thesis was submitted (p. 92) that “ a State can validly bind itself by treaty or by contract with a foreign national not to interfere with concessionary rights “ (italics ! I supplied). A similar argument is put forward by Friedmann, Law in a Changing ! Society 455, 456 (1959).

73 Note 65 above; and see Home Building & Loan Association v. Blaisdell, 290 U. S. 398 (1933).

74 Chicago & Alton Railroad Co. v. Tranbarger, ?38 U.S. 67, at 76 (1914), per Mr. Justice Pitney on behalf of the Court. See Mitchell, op. cit. 90 et seq., for a large number of other cases on the same point. It is, however, difficult to agree with the analysis suggested by the learned author.

75 Nos. 3, 4, 8 and 9, conveniently printed in 2 I.L.C. Yearbook (1956) 223; see also 24 A.J.I.L. Supp. 48 et seq. (1930).

76 Art. 6, 2 I.L.C. Yearbook (1956) 225.

77 Art. 8, 23 A.J.I.L. Spec. Supp. 167 et seq. (1929); 2 I.L.C. Yearbook (1956) 229.

78 2 I.L.C. Yearbook (1957) 104, 116.

79 This term, unfortunately, is not defined.

80 Some of the material on this point is collected by Mann, 21 Brit. Tr. Bk. of Int. Law 11, at 13, 14 (1944). It is not really open to doubt that the distinction between contracts and public debts (if it ever existed), is obsolete and unjustified. In the same sense Eagleton, The Responsibility of States 176 et seq. (1928), and Van Hecke, Problèmes Juridiques des Emprunts Internationaux 17 et seq. (1955).

81 Above, note 68.

82 In the case of contractual obligations, economic necessity is suggested as an additional justification. “Public interest” is so wide a term that it is likely to comprise economic necessity.