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making compensation to the holders of the company's debentures and stock rather than to the company itself seems somewhat questionable, since such a procedure produces uncertainty and confusion, and cannot but shake the confidence of future investors.69
Within the compass of a short paper it is not practicable to make an examination of the Continental practice. The weight of authority seems to lend support to the view that concessions are generally binding upon the receiving state; but the practice of European countries is not always consistent nor altogether uniform.60
59 For a detailed report of the facts of the case, and criticism of the action of the British Government, see Sir Thomas Barclay's Problems of International Practice and Diplomacy, p. 47. Sir Thomas Barclay seems to have in mind, however, rather the physical assets of the railway company than the value of the concession belonging to it.
60 Fiore says: "The annexing government succeeds to the rights and obligations resulting from contracts regularly stipulated by the ceding government in the relative public interest of the territory ceded.” 1 Fiore, No. 356, p. 313.
Also see, for instance, the judgment of the Court of Cassation of Florence rendered on July 26, 1878, in which the court said: "The principles of public law provide that when it is a case of partial cession of territory the obligations contracted by the state with regard to the ceded territory pass with that territory to the state which succeeds”; and again on December 15, 1879, the same court said: "By public law, the state which succeeds in one part of the territory of another state is bound, independently of special conventions, by the obligations legally contracted by the latter regarding the territory in which it succeeds."
After citing various expressions to the same effect by leading jurists, Keith, in his Theory of State Succession, adds:
"In addition to the jurists there is a formidable list of treaties. The treaty of 10th November, 1859, confirms railway concessions granted by the Austrian Government (Art. 2) and recognizes all contracts regularly made by that Gov. ernment (Art. 9). The treaty between France and Sardinia of 23rd August, 1860, states (Art. 5) that France succeeds to the rights and obligations resulting from contracts regularly made by Sardinia for objects of public interest concerning especially Savoy or Nice. The treaty of 30th October, 1864, between Austria, Prussia and Denmark contains (Art. 17) a precisely similar stipulation, as does the treaty of 3rd October, 1866, between Austria and Italy (Art. 8). England, in ceding the Ionian Islands in the treaty of 29th March, 1864 (Art. 7), stipulated that Greece should take over all contractual obligations; so all trading and mineral concessions by the Government were safeguarded by the treaty for the cession of Heligoland of 1st July, 1890 (Art. 9). The concessions of British subjects in Swaziland were guaranteed by Art. 7 of the Convention with the Transvaal of 10th December, 1894. The United States treaty with Spain of 10th December, 1898, provided for the recognition of contracts and concessions, VI. CONCLUSION
The suggestion that concessions, to be binding, must have been granted with a view to the general improvement or benefit of the locus ceded, is the peculiar contribution of America. Although there have not been as yet enough ruling upon this particular matter to justify calling it a settled American doctrine, it has been sufficiently enunciated to demand the consideration of all interested in this branch of the law. Yet the “benefit test,” equitable and sound as it seems, is not entirely without disadvantages and difficulties. Where the receiving state is not bound by the concession, the rule may lead to the practical result of depriving concessionaries of any recourse, since the ceding state may be extinct, or unwilling to accord them any compensation. It is also subject to the objection that it opens up to the courts of the receiving state a possible way of avoiding liability upon concessions, by the simple assertion that the concession was not in fact granted for the benefit of the locus ceded. Even to a court sincerely anxious to do justice, it presents a test which may be attended with considerable difficulty of application. For all these reasons one cannot prophesy what may be its future.
On the other hand, the rule has many manifest advantages. Abstractly, it seems clear justice that a state, acquiring territory by conquest or cession, should not be saddled with debts and obligations which it never itself undertook and which were never created for the benefit of the territory acquired by it. In fact, a rule of absolute liability regardless of benefit would seem actually unjust. Although
including patents and copyrights. So the Bank of Annecy, in Savoy, is confirmed in its concessions by Art. 6 of the treaty of the 23rd August, 1860, while Art. 8 of the same treaty protects patents. The treaty of the 3rd October, 1866, contains (Art. 10) a similar recognition to that of the treaty of Zürich regarding railway concessions. The treaty of the 11th December, 1871 (Art. 10), confirms patents granted to Frenchmen in Alsace-Lorraine; the treaty of 1st July, 1890, recognizes Lloyd's signalling rights in Heligoland (Art. 12-6), besides other Government concessions. It may also be added that the Prussian Government in taking over Hanover, Hesse, Frankfort, Nassau and Schleswig-Holstein (Royal Patents of 3rd October, 1866, and 12th January, 1867), which are cases of annex. ation by conquest, took over and recognized all Government concessions and contracts.” Keith's Theory of State Succession (1907), pp. 66, 67.
the test of the benefit may be difficult to apply, the difficulty of apply. ing the property test” is incomparably greater. Furthermore, after a few decisions have settled the general principles by which “benefit” is to be determined, many of the difficulties of application will disappear. “Benefit” should be interpreted in a broad way. It need not necessarily signify the direct and immediate financial benefit of the ceded territory; it is enough if the concession was granted to further the general progress and development of the country. The building of a railway, the opening up of a country's resources, the furthering of a district's industry and economic development, may all be for the general benefit of a country. But a concession for exploitation, granted, at the expense of the local district, for the pain of the granting government as the chief end in view, would clearly not be for the benefit of the locus ceded; and it would seem unjust that the receiving state should be saddled with such an obligation. The danger of attempting to enforce as international law a sweeping generalization, making all concessions binding upon the receiving state, is that the injustice of cases such as that suggested will tend to cause a reaction in favor of the view, which has been already advanced by some writers, that no concessions are legally binding upon the receiving state.
Whether or not the “Benefit Rule" will be permanently incorporated into international law only the future can tell. The law will doubtless be freshly moulded by the judicial and administrative decisions in the years following the termination of the present world conflict, when the whole question of succession will assume a new and large importance. May it not be that by the adoption of the benefit test” as suggested by the practice of the United States, international law may reach a closer approximation to the eternal principles of justice, or "jural postulates,” which must be at the foundation of all law which endures ?
FRANCIS B. SAYRE.
TREATMENT OF ENEMY ALIENS (Being Part XV of Some Questions of International Law in the European War, continued from previous numbers of the JOURNAL)
MEASURES IN RESPECT TO PROPERTY AND BUSINESS
A. IN GREAT BRITAIN The English Custodian. The outbreak of the war found in nearly every belligerent country vast amounts of property, both real and personal, owned by persons of enemy nationality or domicile. Likewise, enemy persons were the owners or shareholders in many business and industrial enterprises, corporations, partnerships, etc. With a view to preventing such property from being used or such business from being conducted in a manner prejudicial to the national defense or for the benefit of the enemy, the governments of all the belligerent countries very early adopted measures for placing enemyowned property and enemy business enterprises under the control or supervision of the public authorities.
In Great Britain, such property was placed under government control by the Trading with the Enemy Amendment Act of November 27, 1914, which directed the Board of Trade to appoint a custodian of enemy property for England and Wales and another for Scotland and Ireland. For England and Wales the public trustee, an officer already in existence, was designated to perform the duties of custodian. He was charged with the duty of “receiving, holding, preserving and dealing with such property as might be paid to or vested in him in pursuance of the act.” The courts were empowered to vest in the custodian any property, real or personal, belonging to
1 For figures on the value of such holdings, see Clunet, Journal du Droit International, 1915, p. 286, 1917, p. 496; Strasburger Post, July 18, 28, 1917; in Facts about the War, Paris Chamber of Commerce, August, 1917. See, also, Eccard, Biens et Intérêts Français en Allemagne, 1917, pp. 26-27, and Bruneau, l'Allemagne en France, 1914.
or held or managed for or on behalf of any enemy, whenever they were satisfied that such disposition was expedient. All such property was declared to be exempt from attachment or seizure in execution of a judgment, although the custodian was allowed to pay debts due British subjects from the income thereof, if so ordered by the courts.? Subject to this exception, the custodian was to hold all property placed in his custody until the end of the war, for the benefit of its owners, provided their own governments accorded reciprocity of treatment to British subjects. The custodian was further empowered to place on deposit with any bank, or to invest in any securities approved by the Treasury, any moneys paid over to or received by him in pursuance of the Act, and any dividends or interest received on account of such deposits or investments were to be dealt with in such manner as the Treasury might direct. Any sum which, had a state of war not supervened, would have been payable to or for the benefit of an enemy subject in the form of dividends, interest or profits, was to be paid to the custodian and not to the enemy claimant. All holders of enemy property and all managers of companies in which enemy aliens held an interest were required to furnish the custodian within one month full particulars concerning all shares, stocks, and interests held by enemy aliens in such property or companies. Creditors of enemy aliens and persons entitled to recover damages against an enemy alien were authorized to make application to the High Court for an order empowering the custodian to sell or otherwise dispose of the property of any enemy alien against which a British subject might have such a claim. The transfer by an enemy alien of any securities, debts, bills, notes or obligations, after the outbreak of war, was declared to be illegal, unless they were bona fide transactions and made for value received before November 19th.3
2 In the case of Krupp Aktien Gesellschaft (1916 W. N. 234), Mr. Justice Younger held that British creditors of enemy aliens were not entitled to interest on such debts. Thereupon the rules issued in pursuance of the Act were promptly amended so as to allow interest in such cases. Solicitors' Journal, Vol. 60, p. 534; 'Law Times, July 1, 1916, pp. 150-151.
3 Text of the Act in Pulling's Manual of Emergency Legislation, Supp. II, pp. 19-27, and Baty and Morgan, War, Its Conduct and Legal Results, pp. 512523.