2
Re Claim by Helbert Wagg & Co
[1956] Ch 323 (Chancery Division, English High Court)
[The following extract contains observations (strictly speaking, obiter) by Upjohn J on the recognition of foreign legislation which expropriates or confiscates property and the correctness of the reasoning of Campbell J in Anglo-Iranian Oil Co Ltd v. Jaffrate (The Rose Mary) [1953] 1 WLR 246.
Upjohn J made these observations in the course of deciding whether a Moratorium Law enacted in Germany in 1933 effectively had varied the terms of a loan agreement made in 1924, and expressed to be governed by German law, between an English lender and a German borrower. In reaching the conclusion that the Moratorium Law effectively had varied the terms of the loan agreement, Upjohn J rejected the English lender’s argument that the Moratorium Law was expropriatory or confiscatory in nature and, on that account, not entitled to be recognized in England.]
UPJOHN J. ... [344] I start with the elementary proposition that it is part of the law of England, and of most nations, that in general every civilized State must be recognized as having power to legislate in respect of movables situate within that State and in respect [345] of contracts governed by the law of that State, and that such legislation must be recognised by other States as valid and effectual to alter title to such movables and to sustain, modify or dissolve such contracts. The substantial question I have to determine is what limit is to be imposed upon that proposition when the effect of such legislation comes to be debated in the courts of other States. I may note in passing that the modern tendency is to deny extraterritorial validity to legislation, for example, upon movables situate outside the state at the time of the legislation: Bank voor Handel en Scheepvaart NV v. Slatford [1953] 1 QB 248.
To this general principle of recognition in foreign courts of territorial validity of legislation there are undoubted limitations or exceptions as the following examples show: (1) No State will enforce the fiscal laws, however proper, of another State, nor penal statutes, using that phrase in the strict sense of meaning statutes imposing penalties recoverable by the State for infringement of some law. ... (2) English law will not recognize the validity of foreign legislation intended to discriminate against nationals of this country in time of war by legislation which purports to confiscate wholly or in part movable property situated in the foreign State. ... [346] (3) English courts will not recognize the validity of foreign legislation aimed at confiscating the property of particular individuals or classes of individuals; Banco de Vizcaya v. Don Alfonso de Borbon y Austria [1935] 1 KB 140 which treated the Spanish laws purporting to expropriate the ex-King of Spain’s property as examples of penal legislation; and see Anglo-Iranian Oil Co. v. Jaffrate (The Rose Mary) [1953] 1 WLR 246 where Campbell J, sitting in the Supreme Court of Aden, held certain laws of the State of Persia which he found to be passed to nationalize the plaintiff company only without compensation were confiscatory and ineffectual to pass title.
Another example suggested by Professor Lauterpacht in the 8th edition of Oppenheim’s International Law, at p 268, is a law passed by a foreign State expropriating the property in such State of British Protestants.
I do not challenge the correctness of the decision in the Rose Mary case upon the facts of that case, but Campbell J came to the conclusion that the authorities both of this and other countries justified the formulation of a more general principle, namely : (1) all legislation that expropriates without compensation is contrary to international law; and (2) that such law is incorporated in the domestic law of Aden and accordingly such legislation will not be recognized as valid in the courts of Aden. Unless the law of England takes a different view of international law from the law of Aden, the judge’s conclusions can only be correct if his interpretation of AM Luther Co v. James Sagor & Co [1921] 3 KB 532 and Princess Paley Olga v. Weisz [1929] 1 KB 718 is correct. Those cases, both in the Court of Appeal, were concerned with the effect of Russian legislation introduced shortly after the Russian Revolution of 1917 which in fact expropriated certain types of private property situate in Russia without any compensation. They established the principle that this court will not inquire into the legality of acts done by a foreign government in respect of property situate in its own territory. Campbell J considered that principle to be valid only where the property confiscated belongs (as in both those cases) to [347] subjects of the confiscating State. However, all three judgments in Luther v. Sagor laid down the principle in perfectly general terms and it was in no way limited, at any rate in express terms, to a recognition of the validity of such legislation in relation only to nationals of the confiscating State. ...
In equally general terms were the judgments of two members of the court in Princess Paley Olga v. Weisz [1929] 1 KB 718. It seems clear that Scrutton LJ drew no distinction between the operation of legislation upon the property of a national of the confiscating State and a foreigner who had movables in that State ... .
[348] It is true that Russell LJ, in that case, said (at 736): “This court will not inquire into the legality of acts done by a foreign government against its own subjects in respect of property situate in its own territory,” but it was sufficient for the decision of the case before him, and he dealt with the point very briefly. ...
On the other hand, in Perry v. Equitable Life Assurance Society of United States of America (1929) 45 TLR 468 the plaintiff, a British subject residing in Russia, took out a policy of life assurance with the defendants, the proper law of the contract being Russian. It was held that certain confiscatory decrees of the Russian government were effective to annul the contract, though it is true that no point was taken that such decrees could be valid only against Russian nationals. ...
In In re Banque des Marchands de Moscou (Koupetschesky), Royal Exchange Assurance v. The Liquidator [1952] 1 TLR 739 (which does not appear to have been cited to Campbell J) Vaisey J expressed the view that the general principle was not limited to nationals of the confiscating State. I respectfully agree with him, for it seems to me that on this question nationality must be irrelevant. If the principle be true in respect of a State in relation to its own nationals, it must surely be conceded in relation to those persons who, though not subjects of the State, nevertheless bring their movables within its jurisdiction for business or private reasons or for the like reasons enter into contracts governed by the law of the State, and in general enjoy the same benefits and protection and are subject to the same disadvantages and disabilities as subjects of the State.
With all respect to Campbell J, I think that Luther v. Sagor [1921] 3 KB 532 and Princess Paley Olga v. Weisz [1929] 1 KB 718 laid down principles of [349] general application not limited to nationals of the confiscating State.
In my judgment the true limits of the principle that the courts of this country will afford recognition to legislation of foreign States in so far as it affects title to movables in that State at the time of the legislation or contracts governed by the law of that State rests in considerations of international law, or in the scarcely less difficult considerations of public policy as understood in these courts. Ultimately I believe the latter is the governing consideration. But, whatever be the true view, the authorities I have reviewed do show that these courts have not on either ground recognized any principle that confiscation without adequate compensation is per se a ground for refusing recognition to foreign legislation.
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RA.PIL07. Claim by Herbert Wagg & Co