Corfu Channel Case (United Kingdom v.

Albania)

Brief Fact Summary. The fact that the Albanian (P) authorities did not make the presence of mines in its
waters was the basis of the United Kingdom (D) claim against them.

Synopsis of Rule of Law. International obligations in peace time are created through elementary
consideration.

Facts. The explosion of mines in the Albanian (P) waters resulted in the death of a British naval
personnel. It was on this basis that the United Kingdom (D) claimed that Albania (P) was internationally
responsible for damages.

Issue. Are international obligations in time of peace created through elementary consideration?

Held. Yes. International obligations in peace time are created through elementary consideration. Every
state has an obligation not to knowingly allow its territory to be used for acts contrary to the rights of
other states.

Discussion. In this case, the Court found that the Hague Convention of 1907 could not be applied but the
Convention was applicable only in time of war. It was on the basis of the principle of freedom of
maritime communication that this case was decided.
Whether the Court could deliver an advisory opinion in relation to the obligations of Russia
towards Finland regarding Eastern Carelia, given that Russia had not given its consent to have
this issue resolved through the League of Nations or the Court.

PERMANENT
COURT OF
INTERNATIO
NAL JUSTICE
Third Ordinary Session

Status of the Eastern Carelia

Advisory Opinion

BEFORE President
Loder
: :
Vice-
President Weiss,
:
Lord Finlay, Mm. Nyholm, Moore, De Bustamante,
Judges:
Altamira, Oda, Anzilotti, Huber
Deputy
M Wang
Judge(s):

Perm. http://www.worldcourts.com/pcij/eng/decisions/1923/1923.07.23_easte
Link: rn_carelia.htm

Citation: Status of Eastern Carelia, Advisory Opinion, 1923 P.C.I.J. (ser. B)

No. 5 (July 23)
Publicati Publications of the Permanent Court of International Justice Series B
on: – No. 5; Collection of Advisory Opinions A.W. Sijthoff’s Publishing
Company, Leyden, 1923

[1] [p7] The Council of the League of Nations on April 21st, 1923, adopted the
following Resolution:

(English text.)
"The Council of the League of Nations requests the Permanent Court of
International Justice to give an advisory opinion on the following question,
taking into consideration the information which the various countries
concerned may equally present to the Court:

"Do Articles 10 and 11 of the Treaty of Peace between Finland and Russia,
signed at Dorpat on October 14th, 1920, and the annexed Declaration of the
Russian Delegation regarding the autonomy of Eastern Carelia, constitute
engagements of an international character which place Russia under an
obligation to Finland as to the carrying out of the provisions contained
therein?"
"The Secretary-General is authorized to submit this [p8] application to the
Court, together with all the documents relating to the question, to inform the
Court of the action taken by the Council in the matter, to give all necessary
assistance in the examination of the question, and to make arrangements to be
represented, if necessary, at the Court."

(French text.)
«Le Conseil de la Société des Nations prie la Cour permanente de
Justiceinternationale de donner son avis consultatif, en prenant en
considération lesrenseignements que pourraient lui adresser également les
différents pays intéressés, surla question suivante:

«Les articles 10 et 11 du Traité de Paix entre la Finlande et la Russie, signé

àDorpat le 14 octobre 1920, ainsi que la Déclaration y annexée de la délégation
russeconcernant l'autonomie de la Carélie orientale, constituent-ils des
engagements d'ordreinternational obligeant la Russie vis-à-vis de la Finlande à
l'exécution des dispositions ycontenues?»
«Le Secrétaire général est autorisé à soumettre cette requête à la Cour, ainsi
quetous documents relatifs à la question, à exposer à la Cour l'action du
Conseil dans lamatière, à donner toute l'aide nécessaire à l'examen de l'affaire
et à prendre, le caséchéant, des dispositions pour être représenté devant la
Cour.»

[2] On the 27th of the same month the Secretary-General of the League, by
virtue of this Resolution, sent to the Permanent Court of International Justice
the following request:

(English text.)
"In execution of the Resolution of the Council of the League of Nations
adoptedon April 21st, 1923, of which a certified true copy is annexed hereto,
"And by virtue of the authorization given by this Resolution,
"The Secretary-General of the League of Nations
"Has the honour to present to the Permanent Court of International Justice the
request of the Council that the Court will, in accordance with Article 14 of the
Covenant [p9] of the League, give an advisory opinion upon the following
question, taking into consideration the information which the various countries
concerned may equally present to the Court:
" ‘Do Articles 10 and n of the Treaty of Peace between Finland and Russia,
signed at Dorpat on October 14th, 1920, and the annexed Declaration of the
Russian Delegation regarding the autonomy of Eastern Carelia, constitute
engagements of an international character which place Russia under an
obligation to Finland as to the carrying out of the provisions contained
therein?’"
(French text.)
«Le Secrétaire général de la Société des Nations,
«en exécution de la Résolution adoptée par le Conseil le 21 avril 1923, dont
copie conforme est annexée à la présente,
«et en vertu de l'autorisation à lui donnée par ladite Résolution,
«a l'honneur de présenter à la Cour permanente de Justice internationale une
requête du Conseil demandant à la Cour de bien vouloir, conformément à
l'article 14 du Pacte, donner son avis consultatif, en prenant en considération
les renseignements que pourraient lui adresser également les différents pays
intéressés, sur la question suivante :
«Les articles 10 et 11 du Traité de Paix entre la Finlande et la Russie, signé à
Dorpat le 14 octobre 1920, ainsi que la Déclaration y annexée de la délégation
russe concernant l'autonomie de la Carélie orientale, constituent-ils des
engagements d'ordre international obligeant la Russie vis-à-vis de la Finlande à
l'exécution des dispositions y contenues?»

[3] In conformity with Article 73 of the Rules of Court, notice of the request
was given to the Members of the League of Nations through the Secretary-
General of the League, and to the States mentioned in the Annex to the
Covenant.

[4] Furthermore, the Registrar of the Court was directed to notify the Soviet
Government of the request. [p10]

[5] Together with the request were transmitted the documents, the list of
which, as appended to the request itself, is as follows:

1. Treaty of Dorpat, October 14th, 1920.

Authenticated texts in Finnish, Russian and Swedish and French translation
supplied by the Finnish Government.
2. Declaration of the Russian Government annexed to the Treaty of Dorpat
concerning autonomy of Eastern Carelia.
Authenticated texts in Finnish, Russian and Swedish, and French translation
supplied by the Finnish Government.
3. Note by the Secretary-General to the Council submitting a letter from the
Finnish Ministry for Foreign Affairs, dated November 26th, 1921. (Doc. 506.
1921. VII.)
4. Memorandum by the Secretary-General, dated December 29th, 1921,
summarizing the position of Carelia. (Doc. 545. 1921. VII.)
5. Note by the Secretary-General, dated December 31st, 1921, accompanying a
letter from the Central Government of Carelia to the Council. (Doc. 555. 1921.
VII.)
6. Minutes of the meeting of the Council held on January 13th and 14th, 1922,
and declaration made to the Council by the representative of Finland.
7. Declaration made to the Assembly by the representative of Finland on
September 6th, 1922.
8. Note by the Secretary-General submitting to the Council a letter of
November 10th, 1922, from M. Enckell, Delegate of Finland. (Doc. 95. 1923.
VII.)
9. Memorandum by the Secretary-General setting forth the results of the steps
taken.
(Doc. 83. 1923. VII.) [p11]
10. Memorandum by the Secretary-General to the Council, April l0th, 1923.
(Doc.
251. 1923. V.)
11. Letter from M. Enckell, and memorandum of the Finnish Government of
April 19th, 1923, accompanied by the memorandum of the three Finnish
jurists. (Doc. 322. 1923. VII.)
12. Preliminary report to the Council by M. Salandra. (Doc. 321. 1923. V.)
13. Report by the representative of Italy dated April 21st, 1923. (Doc. 327,
1923. V.)
14. Extract from the Minutes of the Council's Meetings of April 20th and 21st,
1923.
15. Carelian Green Book, 1922.
16. Finnish White Book, February, 1922.
17. Report of the three foreign jurists, 1922.
18. Chronological statement of the stages in the treatment of the question of
Eastern
Carelia before the Council of the League of Nations.

[6] Furthermore, the Court had before it a certain number of documents

transmitted to it on behalf of the Finnish Government, namely:

1. A paper by M. Erich, called "La question de la Carelie orientate."

2. Final conclusions of the Finnish Government.
3. A paper by M. Erich, called "La question de la Carelie orientate soumise
pour avis a la Cour permanente de Justice internationale."
4. Additional note (to legal opinion previously given) by M. Charles de
Visscher.
5. Minutes (in Finnish) of the sittings of the Conference of Peace between
Finland and Russia, held at Dorpat 12th—October 14th, 1920. [p12]
6. Minutes (extracts in French translation) of sittings of the said Conference
held on June 15th and 16th, July 28th and October 4th and 5th, 1920.
7. The Soviet Government's note of February 27th, 1923, and the Finnish
Government's notes of June 16th and 19th, 1923.
[7] The Court likewise had before it a note from the Polish Minister at the
Hague, dated June 28th, 1923, and a telegram from the Esthonian Government
dated July 3rd, 1923.

[8] The Court also heard, at the request of the Finnish Government, the
statements of its
representative, M. Rafael Erich, and received from him a document containing
arguments supplementary to those statements. The Court had informed M.
Erich before hearing his statement that it would be glad to have his views as to
whether it had competence to give effect to the request for an advisory opinion
upon the question of Eastern Carelia, submitted to it by the
Council of the League of Nations.

[9] The Secretary-General of the League was duly informed of the step taken
by the Court in this respect.

[10] M. Tchitcherin, the Russian People's Commissary for Foreign Affairs, on

the 11th June despatched to the Court a telegram, which has been read in Court
in full, and which is as follows:

(Translation by the Registry.)

"June eleventh. Reply to your 3055 May 19th. The Russian Government finds
it impossible to take any part in the proceedings, without legal value either in
substance or in form, which the Permanent Court intends to institute as regards
the Carelian question. Whereas the Workers' Commune of Carelia is an
autonomous portion of the Russian Federation; whereas its autonomy is based
on the decree of the Pan-Russian Central Executive Council, dated June 8th,
1920, which was enacted before the examination of this question by the Russo-
Finnish Peace Conference at Dorpat; furthermore, whereas the Treaty [p13] of
Dorpat, in connection with another matter, refers to the autonomous territory of
Carelia as already existing without imposing any obligation in this respect
upon Russia; whereas the Russian Delegation at Dorpat declared each time that
this question was raised that it was an internal question affecting the Russian
Federation; furthermore, whereas Berzine, the President of the Russian
Delegation, at the meeting of October 14th, 1920, brought the fact that Carelia
was autonomous to the knowledge of the Finnish Delegation solely for their
information; furthermore, whereas in a Note dated December 5th, 1920, and
addressed to the Finnish Charge d'affaires, Tchitcherin, the Commissary of the
People, protested categorically against the action taken by the Finnish
Government in placing the Eastern Carelian question before the League of
Nations, a course which in the view of the Russian Government constituted an
act of hostility to the Russian Federation and an intervention in its domestic
affairs; furthermore, whereas, in an official communication published on June
18th, 1922, the Commissary of the People for Foreign Affairs declared that the
Russian Government absolutely repudiated the claim of the so-called League
of Nations to intervene in the question of the internal situation of Carelia and
stated that any attempt on the part of any power to apply to Russia the article of
the Covenant of the League relating to disputes between one of its Members
and a non-participating State would be regarded by the Russian Government as
an act of hostility to the Russian State: the Russian Government categorically
refuses to take any part in the examination of this question by the League of
Nations or by the Permanent Court. Apart from considerations of law,
according to which the question of the status of Carelia is a matter of Russian
domestic jurisdiction, the Soviet Government is compelled to affirm that it
cannot consider the so-called League of Nations and the Permanent Court as
impartial in this matter, having regard to the fact that the majority [p14] of the
Powers belonging to the League of Nations have not yet accorded the Soviet
Government de jure recognition, and several of them refuse even to enter into
de facto relations with it. This situation is further borne out by the fact that the
Council of the League of Nations or the Powers which control it, represented
by the Council of Ambassadors, have often taken decisions obviously directed
against the most vital interests of the Soviet Republics, and have done so
without even asking the views of the Soviet Government. This occurred when
the annexation of Bessarabia by Roumania was recognized by them and again
when a regime was established at Memel which debarred Russia from any
voice in the question of navigation on the Niemen, or again, when Eastern
Galicia, the great majority of whose population is Ukrainian, was annexed to
Poland. These are the reasons which render it quite impossible for the Russian
Government to take any part in the discussion of the Carelia question before
the Permanent Court. Stop N. 364. Tchitcherin."

«Onze juin Stop Réponse à votre 3055 du 19 mai Stop Le Gouvernement russe
trouve impossible de prendre une part quelconque à la procédure dénuée de
valeur légale et dans le fond et dans la forme à laquelle la Cour permanente
veut soumettre la question Carélienne Stop Attendu que la Commune de travail
Carélienne est une partie autonome de la Fédération russe ne possédant point le
droit de relations internationals indépendantes Vrg Attendu ensuite que son
autonomie est basée sur le décret du Conseil exécutif central pan-russe du huit
juin mil neuf cent vingt qui fut édicté avant l'examen de cette question par la
Conférence de Paix russo-finlandaise de Yourief Vrg Attendu aussi que le
Traité de Yourief mentionne en traitant un autre sujet la Carélie autonome
comme déjà existante sans stipuler d'obligation à ce sujet pour la Russie Vrg
Attendu [p15] aussi que la délégation russe à Yourief chaque fois que cette
question surgissait a toujours
déclaré que c'était une affaire intérieure de la Fédération russe Vrg Attendu
aussi que le Président de la délégation russe Berzine à la séance du quatorze
octobre mil neuf cent vingt porta uniquement à titre d'information à la
connaissance de la delegation finlandaise le fait de l'autonomie de la Carélie
Vrg Attendu aussi que par une note du cinq décembre mil neuf cent vingt et un
au nom du Chargé d'affaires de Finlande le Commissaire du Peuple Tchit-
chérine protesta catégoriquement contre l'acte du Gouvernement finlandais qui
avait posé la question de la Carélie orientale devant la Société des Nations ce
qui dans l'opinion du Gouvernement russe constituait un acte hostile à la
Fédération russe et une intervention dans ses affaires intérieures Vrg Attendu
aussi que dans une communication officielle publiée le dix huit juin mil neuf
cent vingt deux le Commissariat du Peuple pour les Affaires étrangères déclara
que le Gouvernement russe repousse absolument la prétention de la soi-disant
Société des Nations d'intervenir dans la question de la situation intérieure de la
Carélie et fait savoir que toute tentative de quelque Puissance que ce soit
d'appliquer à la Russie l'article des statuts de la Société des Nations relatif aux
conflits entre un de ses Membres et une Puissance non participante serait
considérée par le Gouvernement russe comme un acte hostile contre la
République russe Vrg Le Gouvernement russe refuse absolument toute
participation à l'examen de cette question par la Société des Nations ou la Cour
permanente Stop Indépendamment des considérations de droit en vertu
desquelles la question de la situation de la Carélie est une question intérieure
de la Fédération russe le Gouvernement soviétiste se voit obligé de déclarer
qu'il ne peut considérer la prétendue Société des Nations et la Cour permanente
comme impartiales en cette matière vu que la majorité des Puissances adhérant
à la Société des Nations ne reconnaissent point encore de jure le Gouvernement
soviétiste et plusieurs d'entre elles refusent d'entrer avec lui même en des
relations de fait Stop Cet état de choses est [p16] confirmé par le fait que le
Conseil de la Société des Nations ou les Puissances qui le dirigent représentées
par le Conseil des Ambassadeurs ont souvent adopté des décisions
manifestement dirigées contre les intérêts élémentaires des Républiques,
soviétistes et cela sans même demander l'avis du Gouvernement comme cela
fut le cas quand l'annexion de la Bessarabie à la Roumanie fut reconnue par
eux ou quand à Memel un régime fut établi qui écarte la Russie de toute
influence dans la question de navigation sur le Niémen1 ou bien encore quand
la Galicie [d'] Orient dont la population est dans son immense majorité
ukrainienne fut annexée à la Pologne Stop Telles sont les raisons qui écartent
pour le Gouvernement russe toute possibilité de rapports avec la discussion de
la question Carélienne devant la Cour permanente Stop N. 364. Tchitchérine.»

II.

[11] Eastern Carelia is a territory of considerable extent, lying between the

White Sea and
Lake Onega on the east and Finland on the west.

[12] Finland became entirely separated from Russia in 1917. War broke out
between the Soviet Government and Finland, the two countries being in
controversy as to boundaries and as to a great many other questions which are
enumerated in the Treaty of Dorpat, which was concluded on the 14th October,
1920, and came into force on the 1st January, 1921.While the hostilities were
going on two of the Communes of Eastern Carelia Repola and Porajarvi were
placed under the protection of Finland.
[13] Articles 10 and 11 of the Treaty of Dorpat are as follows:

(English translation by the Secretariat of the League of Nations.)

Article 10.
"Finland shall, within a time limit of forty-five days, dating from the entry into
force of the present Treaty, withdraw her troops from the Communes of Repola
and [p17] Porajarvi. These Communes shall be re-incorporated in the State of
Russia and shall be attached to the autonomous territory of Eastern Carelia,
which is to include the Carelian population of the Governments of Archangel
and Olonetz, and which shall enjoy the national right of self-determination."
Article 11.
"The Contracting Powers have adopted the following provisions for the benefit
of the local population of the Communes of Repola and Porajarvi, with a view
to a more detailed regulation of the conditions under which the union of these
Communes with the Autonomous Territory of Eastern Carelia referred to in the
preceding article is to take place:
"1. The inhabitants of the Communes shall be accorded a complete amnesty, as
provided in Article 35 of the present Treaty.
"2. The local maintenance of order in the territory of the Communes shall be
undertaken by a militia organised by the local population for a period of two
years, dating from the entry into force of the present Treaty.
"3. The inhabitants of these Communes shall be assured of the enjoyment of all
their movable property situated in the territory of the Communes, also of the
right to dispose and make unrestricted use of the fields which belong to or are
cultivated by them and of all other immovable property in their possession,
within the limits of the legislation in force in the Autonomous Territory of
Eastern Carelia.
"4. All the inhabitants of these Communes shall be free, if they so desire, to
leave Russia within a period of one month from the date upon which this
Treaty comes into force. Those persons who leave Russia under these
conditions shall be entitled to take with them all their personal possessions and
shall retain, within the limits of [p18] the existing laws in the independent
territory of Eastern Carelia, all their rights to any immovable property which
they may leave in the territory of these Communes.
"5. Citizens of Finland and Finnish commercial and industrial associations,
shall be permitted, for the duration of one year from the date upon which this
Treaty comes into force, to complete in these Communes the felling of forests
to which they are entitled by contracts signed prior to June 1st, 1920, and to
take away the wood felled."

(French text.)

Article 10.
«La Finlande retirera, dans un délai de quarante-cinq jours à partir de la mise
en vigueur du présent Traité, ses troupes des communes de Repola et de
Porajàrvi. Ces communes seront réincorporées dans l'Etat russe et attachées au
territoire autonome de la Carélie de l'Est, qui comprendra la population
carélienne des gouvernements d' Arkhangel et d'Olonetz et jouira du droit des
nations de disposer d'elles-mêmes.»
Article 11.
«Pour régler d'une manière plus précise les conditions de l'union des
communes de Repola et de Porajàrvi, citées dans l'article précédent, avec le
Territoire autonome de la Carélie de l'Est, les dispositions suivantes ont été
adoptées par les Puissances contractantes en faveur de la population locale:
«1. Les habitants des communes devront obtenir une amnistie entière,
conformément aux stipulations de l'article 35 du présent Traité.
«2. Le maintien de l'ordre local sur le territoire des communes sera confié,
pendant une durée de deux ans à partir [p19] de la mise en vigueur du présent
Traité, à une milice instituée par la population locale.
«3. Il sera garanti aux habitants desdites communes la possession intégrale de
leurs biens meubles sur le territoire de ces communes, ainsi que le droit de
disposer et d'user librement des champs qui leur appartiennent ou qu'ils
cultivent, ainsi que de tous les autres biens immeubles en leur possession, dans
les limites des lois en vigueur dans le territoire autonome de la Carélie de l'Est.
«4. Tout habitant de ces communes sera autorisé, s'il le désire, à quitter
librement la Russie dans un délai d'un an à partir de la mise en vigueur du
présent Traité. Les personnes quittant la Russie sous ces conditions seront
autorisées à emporter avec elles tous leurs biens meubles et garderont, dans les
limites des lois en vigueur dans le territoire autonome de la Carélie de V Est,
tous leurs droits aux immeubles laissés par elles dans le territoire desdites
communes.
«5. Il sera accordé aux citoyens finlandais et aux sociétés commerciales et
industrielles finlandaises le droit, durant un an à partir de la mise en vigueur du
present Traité, de terminer dans ces communes la coupe des forêts auxquelles
ils ont acquis droit en vertu de contrats conclus avant le premier juin 1920, et
d'en emporter le bois coupé.»

[14] The Treaty contains also a number of provisions upon other matters, e.g.
boundaries, territorial waters, fishing, right of transit, neutralisation of waters
and islands, customs, government property and debts, commercial relations and
traffic, railways, posts and telegraphs.
Article 37 provides for the appointment of a Russo-Finnish Mixed
Commission, to see to the execution of the Treaty and to questions of public
and private rights which might arise under it.

[15] It will be observed that the Articles 10 and 11 describe the territory of
Eastern Careliaas "autonomous," but, except as provided in these articles, there
are not in the Treaty itself any provisions as to the nature and extent of the
autonomy. [p20]

[16] Certain other documents described as "Declarations inserted in the Proces-

Verbal by the Finnish and Russian Peace Delegations at Dorpat, October 14th,
1920, at the meeting for the signature of the Treaty of Peace between the
Republic of Finland and the Socialist Federative Republic of the Russian
Soviets," were likewise presented to the Court; one of these documents is as
follows:

(French text.)
«Déclaration de la Délégation russe concernant l'autonomie de la Carélie de V
Est.
«A la séance générale du 14 octobre des délégations de la Paix, la declaration
suivante fut faite au procès-verbal au nom de la délégation russe :
«La République socialiste fédérative des Soviets de Russie garantit à la
population carélienne des gouvernements d' Arkhangel et d' Olonetz (Aunus)
les droits suivants:
«1) La population carélienne des gouvernements d' Arkhangel et d'Olonetz
(Aunus) jouira du droit des nations de disposer d'elles-mêmes.
«2) La Carélie de V Est habitée par cette population formera, en ce qui
concerne ses affaires intérieures, un territoire autonome Aini à la Russie sur
base fédérative.
«3) Les affaires concernant cette région seront traitées par une représentation
nationale élue par la population locale, et ayant le droit d'imposition pour les
besoins du, territoire, le droit de rendre des ordonnances et règlements
concernant les besoins locaux, ainsi que de régler l'administration interne.
«4) La langue locale indigène sera la langue de l'administration, de la
législation et de l'instruction publique.
«5) Le territoire, autonome de la Carélie de l'Est aura le droit de régler sa vie
économique selon ses besoins locaux et selon l'organisation économique
générale de la République. [p21]
«6) En rapport avec la réorganisation des formations militaires defensives de la
République russe, il sera organisé sur le Territoire autonome de la Carélie de
l'Est un système de milice ayant pour but la suppression de l'armée
permanente, et la création à sa place d'une milice nationale pour la defense
locale.»

(English translation by the permanent Secretariat of the League of Nations.)

"Declaration of the Russian Delegation with regard to the autonomy of Eastern

Carelia.

"At the general meeting of Peace delegates on October 14th, the following
declaration was inserted in the proces-verbal on behalf of the Russian
Delegation:

"The Socialist Federative Republic of the Russian Soviets guarantees the

following rights to the Carelian population of the Governments of Archangel
and Olonetz (Aunus):
"(1) The Carelian population of the Governments of Archangel and Olonetz
(Aunus) shall enjoy the right, of self-determination.
"(2) That part of Eastern Carelia which is inhabited by the said population shall
constitute, so far as its internal affairs are concerned, an autonomous territory
united to Russia on a federal basis.
"(3) The affairs of this district shall be dealt with by national representatives
elected by the local population, and having the right to levy taxes for the needs
of the territory, to issue edicts and regulations with regard to local needs, and
to regulate internal administration.
"(4) The local native language shall be used in matters of administration,
legislation and public education.
"(5) The autonomous territory of Eastern Carelia shall have the right to
regulate its economic life in accordance with its local needs, and in accordance
with the general economic organization of the Republic. [p22]
"(6) In connection with the reorganization of the military defensive forces of
the Russian Republic, there shall be organized in the autonomous territory of
Eastern Carelia a militia system, having as its object the suppression of the
permanent army and the creation in its place of a national militia for local
defence."

III.

[17] It appears from the documents which have been supplied to the Court that
the Government of Finland and the Soviet Government are in acute
controversy with regard to the above-mentioned Declaration. The Finnish
Government maintain that it forms part of the contract between the two
countries and that the Treaty was signed on the terms that the Declaration was
as binding as the Treaty itself. The Soviet Government maintain that the
Declaration was not by way of contract, but was only declaratory of an existing
situation and made merely for information.

[18] It appears from the letters and documents before the Court that disputes
very early arose between the Finnish and Russian Governments as to alleged
failure to carry out the Treaty obligations on a great number of points, one of
which related to autonomy for Eastern Carelia.

[19] An examination of the diplomatic correspondence between Finland and

Russia, which
constitutes the actual record of the controversy between the two countries
concerning Eastern
Carelia, clearly demonstrates:

1. That there is not, and never has been, any question between the two
countries as to the legal existence of the Treaty of Dorpat and the obligatory
force of its stipulations.
2. That both parties, while acknowledging the existence and obligatory force of
the Treaty, differ as to the interpretation and legal effect of certain provisions,
particularly Articles 10 and 11 relating to Eastern Carelia. [p23]
3. That Finland claims, while Russia denies, that the declaration, which, though
not mentioned in the Treaty is inserted in the protocol of signature concerning
it, constitutes part of the terms.

[20] Finland asked the League of Nations to take the matter up, and after some
discussion, the Council of the League adopted on January 14th, 1922, the
following Resolution:

(English text.)
"The Council of the League of Nations, having heard the statement submitted
by the Finnish Delegation on the situation in Eastern Carelia, contained in a
letter from the Finnish Government, dated November 26th, 1921, and the
statements submitted by the Esthonian, Latvian, Polish and Lithuanian
representatives, is willing to consider the question with a view to arriving at a
satisfactory solution if the two parties concerned agree. The Council is of
opinion that one of the interested States, Member of the League, which is in
diplomatic relations with the Government of Moscow, might ascertain that
Government's intentions in that respect.
"The Council could not but feel satisfaction if one of these States could lend its
good offices as between the two parties, in order to assist in the solution of this
question, in accordance with the high ideals of conciliation and humanity
which animate the League of Nations.
"The Secretary-General is instructed to obtain all necessary information for the
Council."

(French text.)
«Le Conseil de la Société des Nations, après avoir entendu les renseignements
fournis par la délégation finlandaise sur la situation en Carélie orientale, qui a
fait l'objet de la lettre du Gouvernement finlandais en date du 26 novembre
1921, ainsi que les déclarations des représentants de l'Esthonie, de la Lettonie,
de la Pologne et dela Lithuanie, est disposé, s'il y a à ce sujet accord entre les
deux parties intéressées, à examiner la question en vue [p24] de trouver une
solution satisfaisante. Le Conseil estime qu'un des Etats intéressés, Membre de
la Société, qui est en relations diplomatiques avec le Gouvernement de
Moscou, pourrait s'informer de ses dispositions à cet égard.
« Si l'un de ces Etats pouvait aider, par ses bons offices entre les deux parties, à
la solution de la question dans le haut esprit de conciliation et d'humanité qui
est celui de la Société des Nations, le Conseil ne pourrait que s'en montrer
satisfait.
«Le Secrétaire général est invité à recueillir tous renseignements utiles pour
l'information du Conseil.»

[21] In accordance with the wish expressed by the Council, the Esthonian
Government, which was in diplomatic relations with the Russian Government,
invited the latter to submit the
question of Eastern Carelia to the examination of the Council, "on the basis of
Article 17 of the
Covenant," a copy of which was annexed to the Esthonian Government's note.
In the same note
the Esthonian Government, referring to the Resolution of the Council, asked
the Soviet
Government whether it would, on its part, consent to submit the question to the
Council in
conformity with Article 17 of the Covenant "and to cause itself, for that
purpose, to be
represented on the Council."

[22] The Russian Government, by its note of February 2nd, 1922, declined that
request.

[23] Eventually, the Finnish Government, having again brought the matter
before the Council, the Council adopted the Resolution set forth at the outset of
this Opinion.

IV.

[24] The first observation to be made is that the question put to the Court
relates to the obligation alleged to have been incurred by Russia under the
Declaration and under Article 10 of
the Treaty, that Eastern Carelia should enjoy autonomy, and to the other
obligations in respect of
the two Communes of Repola and Porajarvi arising under Articles 10 and 11 of
the Treaty. An answer to it one way or the other could have no [p25] effect
upon any of the other points on which Finland and Russia are in dispute as to
the execution or non-execution of the Treaty. There is no request for any
interpretation of any of the clauses bearing upon the question of execution.

[25] In the second place, it is necessary to arrive at a clear conception of the

exact nature of the question before the Court. The Court is asked to give an
Advisory Opinion upon the question whether Articles 10 and 11 of the Treaty
of Dorpat, and the above-mentioned Declaration of the Russian Delegation
regarding the autonomy of Eastern Carelia, constitute engagements of an
international character which place Russia under an obligation to Finland.

[26] As already stated, the fact that the Treaty of Dorpat was entered into has
never been in dispute.

[27] It appears from the documents presented to the Court that:

(a) Finland's contentions are:

(1) That Articles 10 and 11 of the Treaty of Dorpat and the Declaration
inserted in the protocol relative thereto constitute executory obligations which
Russia is bound to carry out.
(2) That Russia has not carried out those-obligations.
(b) Russia's contentions are:
(1) That Russia considers the question relating to the autonomy of Eastern
Carelia as an internal matter, arid that this was brought to the notice of the
representatives of Finland at the time of the negotiation of the Treaty of
Dorpat. The Declaration was given solely for information.
(2) That the autonomy mentioned under Articles 10 and 11 of the Treaty of
Dorpat and in the Declaration refers only to the existing Workers' Commune of
Carelia, established by Decree of June 7th, 1920, prior to the conclusion of the
Treaty.

[28] A memorandum by the Secretary-General of the League, dated April 10th,

1923 (Doc. C. 251. 1923. V.), brings out with perfect clearness the point really
in controversy. It says:

"From this point of view, the question which arises in international law is as
follows: Is there or is there not [p26] a contractual obligation between Finland
and Russia with regard to Eastern Carelia, and, if no such obligation exists, do
the requests put forward by Finland constitute acts of interference in the
internal affairs of Russia?"

[29] And again, after stating the Russian position, it says:

"Finland maintains, on the other hand that the text of the Treaty of Dorpat is
completed by the attached Declarations of the Russian Government; that in
virtue of these Declarations the Soviet Government has entered into a
contractual obligation based, in particular, on the fact that Finland has ceded
afresh to Russia the two Communes of Repola and Porajarvi in exchange for
the rights of autonomy promised by Russia to the Carelians; that the closest
possible connection exists between the Declarations and the provisions of the
Treaty, and indeed that the existence of the Russian Declarations had been a
condition of her signing the Treaty; and that it therefore follows that the
Finnish Government has the same right to insist upon the execution of the
provisions of these Declarations—declarations obtained by it in favour of
persons of Finnish race on the other side of the Finnish frontier—as in the case
of the provisions of the Treaty itself."

[30] The question whether this Declaration forms part of the obligations into
which Russia
entered, as Finland asserts, or was merely by way of information, as Russia
contends, is, in the very nature of things, a question of fact. The question is,
was such an engagement made? The real question put to the Court largely turns
upon the Declaration as to autonomy inserted in the protocol of signature
relative to the Treaty. If that Declaration forms part of the engagement between
Finland and Russia, it would stand for this purpose on the same footing as the
Treaty itself.

[31] It has been suggested by the representative of the Finnish Government that
the question submitted to the Court should be understood as a preliminary
question relating to the nature [p27] of the dispute by analogy to Article 15,
par. 8 of the Covenant. For the reasons already stated and to be stated, the
Court is unable to agree to this interpretation of the question submitted by the
Council, an interpretation which, moreover, appears to the Court not to be
warranted by the terms of the question.

[32] There has been some discussion as to whether questions for an advisory
opinion, if they relate to matters which form the subject of a pending dispute
between nations, should be put to the Court without the consent of the parties.
It is unnecessary in the present case to deal with this topic.

[33] It follows from the above that the opinion which the Court has been
requested to give
bears on an actual dispute between Finland and Russia. As Russia is not a
Member of the League
of Nations, the case is one under Article 17 of the Covenant. According to this
article, in the event of a dispute between a Member of the League and a State
which is not a Member of the League, the State not a Member of the League
shall be invited to accept the obligations of membership in the League for the
purposes of such dispute, and, if this invitation is accepted, the
provisions of Articles 12 to 16 inclusive shall be applied with such
modifications as may be deemed necessary by the Council. This rule,
moreover, only accepts and applies a principle which is a fundamental
principle of international law, namely, the principle of the independence of
States. It is well established in international law that no State can, without its
consent, be compelled to submit its disputes with other States either to
mediation or to arbitration, or to any other kind of pacific settlement. Such
consent can be given once and for all in the form of an obligation freely
undertaken, but it can, on the contrary, also be given in a special case apart
from any existing obligation. The first alternative applies to the Members of
the League who, having accepted the Covenant, are under the obligation
resulting from the provisions of this pact dealing with the pacific settlement of
international disputes. As concerns States not members of the League, the
situation is quite different; they are not bound by the Covenant. The
submission, [p28] therefore, of a dispute between them and a Member of the
League for solution according tothe methods provided for in the Covenant,
could take place only by virtue of their consent. Such consent, however, has
never been given by Russia. On the contrary, Russia has, on several occasions,
clearly declared that it accepts no intervention by the League of Nations in the
dispute
with Finland. The refusals which Russia had already opposed to the steps
suggested by the Council have been renewed upon the receipt by it of the
notification of the request for an advisory opinion. The Court therefore finds it
impossible to give its opinion on a dispute of this kind.

[34] It appears to the Court that there are other, cogent reasons which render it
very inexpedient that the Court should attempt to deal with the present
question. The question whether
Finland and Russia contracted on the terms of the Declaration as to the nature
of the autonomy of
Eastern Carelia is really one of fact. To answer it would involve the duty of
ascertaining what evidence might throw light upon the contentions which have
been put forward on this subject by
Finland and Russia respectively, and of securing the attendance of such
witnesses as might be necessary. The Court would, of course, be at a very great
disadvantage in such an enquiry, owing
to the fact that Russia refuses to take part in it. It appears now to be very
doubtful whether there would be available to the Court materials sufficient to
enable it to arrive at any judicial conclusion upon the question of fact: What
did the parties agree to? The Court does not say that there is an absolute rule
that the request for an advisory opinion may not involve some enquiry as
to facts, but, under ordinary circumstances, it is certainly expedient that the
facts upon which the opinion of the Court is desired should not be in
controversy, and it should not be left to the Court
itself to ascertain what they are.

[35] The Court is aware of the fact that it is not requested to decide a dispute,
but to give an advisory opinion. This circumstance, however, does not
essentially modify the above considerations. The question put to the Court is
not one of abstract law, but concerns directly the
main point of the [p29] controversy between Finland and Russia, and can only
be decided by an
investigation into the facts underlying the case. Answering the question would
be substantially equivalent to deciding the dispute between the parties. The
Court, being a Court of Justice, cannot, even in giving advisory opinions,
depart from the essential rules guiding their activity as
a Court.

[36] It is with regret that the Court, the Russian Government having refused
their concurrence, finds itself unable to pursue the investigation which, as the
terms of the Council's Resolution had foreshadowed, would require the consent
and co-operation of both parties. There are also the other considerations
already adverted to in this opinion, which point to the same conclusion.

[37] The Court cannot regret that the question has been put, as all must now
realize that the Council has spared no pains in exploring every avenue which
might possibly lead to some solution with a view to settling a dispute between
two nations.

[38] Done in English and French, the English text being authoritative, at the
Peace Palace, The Hague, this twenty-third day of July, nineteen hundred and
twenty-three, in two copies, one of which is to be deposited in the Archives of
the Court and the other to be forwarded to the Council of the League of
Nations.

(Signed) Loder,
President.
(Signed) A. Hammarskjold,
Registrar.

[39] MM. Weiss, Vice-President, Nyholm, de Bustamante and Altamira,

judges, declare that they are unable to share the views of the majority of the
Court as to the impossibility of giving an advisory opinion on the Eastern
Carelian question.

(Initialled) L.
(Initialled) A. H.
Factory At Chorzów, Germany v Poland, Judgment, Claim for
Indemnity, Merits, Judgment No 13, (1928) PCIJ Series A No 17, ICGJ
255 (PCIJ 1928), 13th September 1928, League of Nations (historical)
[LoN]; Permanent Court of International Justice (historical) [PCIJ]

Whether the Polish Government should pay the sum of 30 million Reichsmark in terms of
provisional measures in the case.

PERMANENT
COURT OF
INTERNATION
AL JUSTICE
Fourteenth (Ordinary) Session

The Factory At Chorzow (Claim for Indemnity) (The Merits)

Germany v. Poland

Judgment

Presiden
BEFORE: Anzilotti
t:
Former
Presiden Huber
t:
Lord Finlay, Nyholm, de Bustamante, Altamira,Oda,
Judges:
Pessoa
Deputy
Beichmann
Judge(s):
National
Rabel, Ehrlich
Judge:

Represent German
Dr. Erich Kaufmann, Professor at Berlin
ed By: y:
Thadeus Sobolewski, Agent for the Polish Government
Poland:
before the Polish-German Mixed Arbitral Tribunal

Perm. http://www.worldcourts.com/pcij/eng/decisions/1928.09.13_chorz
Link: ow1.htm
Citation: Factory at Chorzow (Germ. v. Pol.), 1928 P.C.I.J. (ser. A) No. 17
(Sept. 13)
Publicatio Publications of the Permanent Court of International Justice Series
n: A - No. 17; Collection of Judgments A.W. Sijthoff’s Publishing
Company, Leyden, 1928.

[p5] THE COURT,

composed as above,
having heard the observations and conclusions of the Parties,
delivers the following judgment:

[1] The Government of the German Reich, by an Application instituting

proceedings filed with the Registry of the Court on February 8th, 1927, in
conformity with Article 40 of the Statute and Article 35 of the Rules of Court,
has submitted to the Permanent Court of International Justice a suit
concerning the reparation which, in the contention of the Government of the
Reich, is due by the Polish Government for the damage suffered by the
Oberschlesische Stickstoffwerke A.-G. (hereinafter designated as the
Oberschlesische) and the Bayerische Stickstoffwerke A.-G. (hereinafter
designated as the Bayerische) in consequence of the attitude adopted by that
Government towards those Companies in taking possession of the nitrate
factory situated at Chorzów, which attitude has been declared by the Court in
Judgment No. 7 (May 25th, 1926) not to have been in conformity with the
provisions of Article 6 and the following articles of the Convention
concerning Upper Silesia concluded at Geneva on May 13th, 1922, between
Germany and Poland (hereinafter described as the Geneva Convention).

[2] On receipt of the German Government's Case in the suit, on March 3rd,
1927, the Polish Government, on April 14th, 1927, raised a preliminary
objection denying the Court's jurisdiction to hear the suit brought before it
and submitting that the Court should, "without entering into the merits,
declare that it had no jurisdiction".

[3] The Court dealt with this plea in its Judgment No. 8 given on July 26th,
1927, by which it overruled the preliminary objection raised by the Polish
Government and reserved for judgment on the merits the suit brought on
February 8th, 1927, by the German Government.

[4] Furthermore, under the terms of this judgment, the President was
instructed to fix the times for the filing of the Counter-Case, Reply and
Rejoinder on the merits. These times, which were in the first place fixed to
expire on [p6] September 30th, November 15th and December 30th, 1927,
were subsequently extended by successive decisions until November 30th,
1927, February 20th and May 7th, 1928, respectively.

[5] The documents of the written proceedings were duly filed with the
Registrar of the Court within the times finally fixed and were communicated
to those concerned as provided in Article 43 of the Statute.

[6] In the course of hearings held on June 21st, 22nd, 25th, 27th and 29th,
1928, the Court has heard the oral statements, reply and rejoinder submitted
by the above-mentioned Agents for the Parties.

***

[7] The submissions made in the German Government's Application of

February 8th, 1927, were as follows:

It is submitted:

[Translation.]
(1) that by reason of its attitude in respect of the Oberschlesische
Stickstoffwerke and Bayerische Stickstoffwerke Companies, which attitude
has been declared by the Court not to have been in conformity with the
provisions of Article 6 and the following articles of the Geneva Convention,
the Polish Government is under an obligation to make good the consequent
damage sustained by the aforesaid Companies from July 3rd, 1922, until the
date of the judgment sought;
(2) that the amount of the compensation to be paid by the Polish Government
is 59,400,000 Reichsmarks for the damage caused to the Oberschlesische
Stickstoffwerke Company and 16,775,200 Reichsmarks for the damage
caused to the Bayerische Stickstoffwerke Company;
(3) in regard to the method of payment:

(a) that the Polish Government should pay within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke
Company for the taking possession of the working capital (raw material,
finished and half-manufactured products, stores, etc.) and the compensation
due to the Bayerische Stickstoffwerke Company for the period of exploitation
from July 3rd, 1922, to the date of judgment;
(b) that the Polish Government should pay the sums remaining unpaid by
April 15th, 1928, at latest; [p7]
(c) that, from the date of 3judgment, interest at 6 % per annum should be paid
by the Polish Government;
(d) that the payments mentioned under (a)-(c) should be made without
deduction to the account of the two Companies with the Deutsche Bank at
Berlin;
(e) that, until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy.

[8] These submissions have, in the course of the written or oral proceedings,
undergone modifications which will be indicated below. As the Court has not
in the present suit availed itself of the right conferred upon it under Article 48
of the Statute to make orders as to "the form and time in which each Party
must conclude its arguments", it, in this case, allows the Parties, in
accordance with established precedent, to amend their original submissions,
not only in the Case and Counter-Case (Article 40 of the Rules), but also both
in the subsequent documents of the written proceedings and in declarations
made by them in the course of the hearings (Article 35 of the Rules), subject
only to the condition that the other Party must always have an opportunity of
commenting on the amended submissions.

[9] Submission No. I of the Application has not been subsequently amended.

[10] On the other hand, with regard to submission No. 2, important

amendments have been made. In the Case this submission is worded as
follows:

It is submitted: ....

[Translation.]
(2) that the amount of the compensation to be paid by the Polish Government
is 75,920,000 Reichsmarks, plus the present value of the working capital (raw
materials, finished and half-manufactured products, stores, etc.) taken over on
July 3rd, 1922, for the damage caused to the Oberschlesische Stickstoffwerke
Company, and 20,179,000 Reichsmarks for the damage caused to the
Bayerische Stickstoffwerke Company.

[11] In comparing submission (2) of the Case with submission (2) of the
Application, regard must be had to the following facts resulting from the
Case: [p8]

(a) that the total of 59,400,000 mentioned in the Application as the figure
representing the damage suffered by the Oberschlesische is calculated as on
July 3rd, 1922;
(b) that this sum includes the sum of 1 million for raw materials, finished and
half-manufactured products, stores, etc.
(c) that the. sum of 75,920,000 mentioned in the Case as the figure
representing the damage suffered by the Oberschlesische is made up of
58,400,000 for damages as on July 3rd, 1922, and 17,520,000 for interest at
6% on 58,400,000 for the period July 3rd, 1927, to July 2nd, 1927;
(d) that this sum does not include an amount for "working capital",
compensation for the "present value" of this capital being in the Case sought
in general terms;
(e) that the sum of 16,775,200 mentioned in the Application as the figure
representing the damage suffered by the Bayerische is calculated as on July
3rd, 1922;
(f) that the sum of 20,179,000 mentioned in the Case as representing the
damage suffered by the Bayerische is calculated as on July 2nd (or 3rd),
1927, at a rate of interest of 6 % the amount for the Bayerische indicated in
the Application is said to contain an error of calculation.

[12] Lastly, submission (2) of the Application has been amended in the
German Agent's oral reply as concerns the compensation claimed for the
damage suffered by the Oberschlesische. This submission runs as follows in
the submissions read by the Agent at the conclusion of his oral Reply:

It is submitted:
[Translation.]

that the total of the compensation to be paid to the German Government is

58,400,000 Reichsmarks, plus 1,656,000 Reichsmarks, plus interest at 6% on
this sum as from July 3rd, 1922, until the date of judgment (for the damage
done to the Oberschlesische Stickstoffwerke A.-G.);
that the total of the compensation to be paid to the German Government is
20,179,000 Reichsmarks for the damage done to the Bayerische
Stickstoffwerke A.-G.

[13] It follows that, as regards the Oberschlesische, the German Government

(a) reverts to the sum of 58,400,000 as on [p9] July 3rd, 1922; (b) fixes as
1,656,000 the value of the working capital on that date; (c) claims on these
two sums interest at 6% until the date of judgment, thus abandoning the claim
for a lump sum made in the Case.

[14] As regards submission (3) of the German Government's Application,

amendments both of form and of substance are to be noted in the course of
the subsequent procedure.

[15] As regards form, paragraph (e) of submission (3) of the Application

constitutes by itself a new third submission in the Case, whilst the substance
of paragraphs (a)-(d) of submission No. 3 of the Application has been
embodied in a new submission No. 4 (a)-(d) in the Case. In these
circumstances, it is preferable to trace back the modifications made to each of
the paragraphs of the original third submission.

[16] Paragraph 3 (a) is worded as follows in the Case (where it is numbered 4

(a)):

[Translation.]
that the Polish Government should pay, within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke
Company for the taking possession of the working capital and the
compensation due to the Bayerische Stickstoffwerke Company for the period
of exploitation from July 3rd, 1922, to the date of judgment.

[17] As compared with the Application, therefore, this paragraph has

undergone a purely superficial modification (deletion of an explanatory
remark in parenthesis), and it has not subsequently been amended.

[18] Paragraph 3 (b) is worded as follows in the Case (where it is numbered 4

(b)):

[Translation.]
that the Polish Government should pay the remaining sums by April 15th,
1928, at latest;
in the alternative, that, in so far as payment may be effected in instalments,
the Polish Government shall deliver, within one month from the date of
judgment, bills of exchange for the amounts of the instalments, including
interest, payable on the respective dates on which they fall due to the
Oberschlesische Stickstoffwerke Company and to the Bayerische
Stickstoffwerke Company. [p10]

[19] Thus to the main original submission has been added an alternative
contemplating the possibility of payment by instalments.

[20] The same paragraph is couched in the following terms in the oral reply:

[Translation.]
It is submitted that the Polish Government should pay the remaining sums at
latest within fifteen days after the beginning of the financial year following
the judgment; in the alternative that, in so far as payment may be effected by
instalments, the Polish Government should, within one month from the date
of judgment, give bills of exchange for the amounts of the instalments,
including interest, payable on maturity to the Oberschlesische Stickstoffwerke
A.-G. and to the Bayerische Stickstoffwerke A.-G.

[21] The modification as compared with the previous version consists in the
substitution for the date April 15th, 1928, which had already passed, a time-
limit fixed in relation to the beginning of the Polish financial year.

[22] Paragraph 3 (c) of the submissions of the Application (4 (c) of the Case)
has undergone no subsequent modification.

[23] On the other hand, paragraph 3 (d) of the Application appears in the Case
in the following form (No. 4 (d) of the Case)
[Translation.]
that the Polish Government is not entitled to set off, against the above-
mentioned claim for indemnity of the German Government, its claim in
respect of social insurances in Upper Silesia; that it may not make use of any
other set-off against the above-mentioned claim for indemnity; and that the
payments mentioned under (a)-(c) should be made without any deduction to
the account of the two Companies with the Deutsche Bank at Berlin.

[24] The original submission is contained in the last part of this paragraph,
the principal clause of which now seeks a declaration excluding any
possibility of extra-judicial set-off.

[25] The wording of the Case is retained both in the written and in the oral
reply, except that a new alternative submission is added in regard to the
question of the prohibition of extra-judicial set-off. This addition runs as
follows: [p11]

[Translation.]
In the alternative it is submitted that set-off is only permissible if the Polish
Government puts forward for this purpose a claim in respect of a debt
recognized by the German Government or established by a judgment given
between the two Governments.

[26] Turning lastly to paragraph 3 (e) of the submissions in the Application, it

is to be observed that this reappears unchanged in submission 3 of the Case.
On the other hand, in the written Reply, whilst the submission of the
Application is repeated, the following alternative is added:

[Translation.]
It is submitted that the Polish Government should be obliged to cease the
exploitation of the factory and of the chemical equipment for the
transformation of nitrate of lime into ammonium nitrate, etc.

[27] With this addition, this submission also appears in the oral reply in the
following form:

[Translation.]
in the alternative, should the Court not adopt the points of view set out in
paragraphs 55 and 57 of the Reply, it is submitted that the Polish Government
should be obliged to cease the exploitation of the factory or of the chemical
,equipment for the production of ammonium nitrate, etc.

***

[28] In connection with certain submissions made by the Polish Government

in regard to the compensation of the Oberschlesische, the German
Government has not merely asked the Court to reject these submissions but
has also formulated two other submissions, namely:

[Translation.]
(1) that the Polish Government is not entitled to refuse to pay compensation
to the German Government on the basis of arguments drawn from Article 256
and for motives of respect for the rights of the Reparation Commission and
other third parties;
(2) that the Polish Government's obligation to pay the indemnity awarded by
the Court is in no way set aside by a judgment given or to be given by a
Polish municipal court in a suit concerning the question of the ownership of
the factory at Chorzów. [p12]

[29] These submissions, which were made in the written Reply and in the first
oral statement of the German Agent respectively, have been maintained
unaltered in the oral reply.

[30] Apart from the two additional claims just referred to, the final
submissions of the German Government are therefore as follows :

[Translation.]
(1) that by reason of its attitude in respect of the Oberschlesische
Stickstoffwerke and Bayerische Stickstoffwerke Companies, which attitude
has been declared by the Court not to have been in conformity with the
provisions of Article 6 and the following articles of the Geneva Convention,
the Polish Government is under an obligation to make good the consequent
injury sustained by the aforesaid Companies from July 3rd, 1922, until the
date of the judgment sought;
(2) (a) that the amount of the compensation to be paid to the German
Government is 58,400,000 Reichsmarks, plus 1,656,000 Reichsmarks, plus
interest at 6 % on this sum as from July 3rd, 1922, until the date of judgment
(for the damage caused to the Oberschlesische Stickstoffwerke A.-G.);
(b) that the amount of the compensation to be paid to the German
Government is 20,179,000 Reichsmarks for the damage caused to the
Bayerische Stickstoffwerke A.-G. ;
(3) that until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy;
in the alternative, that the Polish Government should be obliged to cease from
exploiting the factory or the chemical equipment for the production of nitrate
of ammonia, etc.;
(4) (a) that the Polish Government should pay, within one month from the,
date of judgment, the compensation due to the Oberschlesische
Stickstoffwerke A.-G. for the taking possession of the working capital and the
compensation due to the Bayerische Stickstoffwerke A.-G. for the period of
exploitation from July 3rd, 1922, to the date of judgment;
(b) that the Polish Government should pay the remaining sums at latest within
fifteen days after the beginning of the financial year following the judgment;
in the alternative, that, in so far as payment may be effected by instalments,
the Polish Government should within one month from the date of judgment,
give bills of exchange for the amounts of the instalments, including interest,
payable on maturity to the Oberschlesische Stickstoffwerke A.-G. and to the
Bayerische Stickstoffwerke A.-G. ;
(c) that from the date of judgment, interest at 6 % per annum should be paid
by the Polish Government; [p13]
(d) that the Polish Government is not entitled to set off against the above-
mentioned claim for indemnify of the German Government, its claim in
respect of social insurances in Upper Silesia; that it may not make use of any
other set-off against the said claim for indemnity; and that the payments
mentioned under (a) to (c) should be made without any deduction to the
account of the two Companies with the Deutsche Bank at Berlin;
in the alternative, that set-off is only permissible if the Polish Government
puts forward for this purpose a claim in respect of a debt recognized by the
German Government or established by a judgment given between the two
Governments.

[31] The Polish Government has made no formal objection to the

amendments successively made in the original submissions of the German
Government.

***

[32] The submissions formulated by the Polish Government in reply to those

set out in the Application and Case of the German Government are worded as
follows in the Counter-Case:

It is submitted:

[Translation.]
A. In regard to the Oberschlesische:

(1) that the applicant Government's claim should be dismissed;

(2) in the alternative, that the claim for indemnity should be provisionally
suspended;
(3) as a further alternative, in the event of the Court awarding some
compensation, that such compensation should only be payable: (a) after the
previous withdrawal by the said Company of the action brought by it and
pending before the German-Polish Mixed Arbitral Tribunal in regard to the
Chorzów factory and after the formal abandonment by it of any claim against
the Polish Government in respect of the latter's taking possession and
exploitation of the Chorzów factory; (b) when the civil action brought against
the said Company by the Polish Government in respect of the validity of the
entry of its title to ownership in the land register has been finally decided in
favour of the Oberschlesische.
(4) In any case, it is submitted that the German Government should, in the
first place, hand over to the Polish Government the whole of the shares of the
Oberschlesische [p14] Stickstoffwerke Company, of the nominal value of
110,000,000 Marks, which are in its hands under the contract of December
24th, 1919.

B. In regard to the Bayerische:

(1) (a) that the applicant Government’s claim for compensation in respect of
the past, in excess of 1,000,000 Reichsmarks, should be dismissed;
(b) that, pro futuro, an annual rent of 250,000 Reichsmarks, payable as from
January 1st, 1928, until March 31st, 1941, should be awarded;
(c) that these indemnities should only be payable after previous withdrawal
by the said Company of the claim pending before the German-Polish Mixed
Arbitral Tribunal in respect of the Chorzów factory and after the formal
abandonment by it of any claim against the Polish Government in respect of
the latter's taking possession and exploitation of the Chorzów factory ;
(2) that the applicant Government's third submission to the effect that until
June 30th, 1931, no exportation of nitrated lime or nitrate of ammonia should
take place to Germany, the United States of America, France or Italy, should
be dismissed.

C. In regard to the Oberschlesische and Bayerische jointly:

that submission No. 4 – to the effect that it is not permissible for the Polish
Government to set off, against the abovementioned claim for indemnity of the
German Government, its claim in respect of social insurances in Upper
Silesia, that it may not make use of any other set-off against the
abovementioned claim for indemnity, and that the payments mentioned under
4 (a)-(c) should be made without any deduction to the account of the two
Companies with the Deutsche Bank at Berlin-should be rejected.

[33] These submissions have not subsequently been amended except that
submission A, 3 (b), was withdrawn by means of a declaration contained in
the written Rejoinder.

[34] The German Government having disputed the right of the Polish
Government to withdraw this submission (the rejection of which had been
demanded by the former) at the stage of the proceedings reached when the
withdrawal took place, the latter Government maintained its withdrawal.

[35] For the reasons given above, the Court holds that there is nothing to
prevent the Polish Government for its part from [p15] amending its original
submissions, especially seeing that this amendment occurred while the
written proceedings were still in progress and took the form of the
abandonment of a part of its submissions. In the Court's opinion, the second
of the "additional claims" of the German Government mentioned above, was
doubtless designed to meet the Polish submission which has been thus
abandoned.

[36] The Court therefore considers that the final submissions of the Polish
Government may be set down as under:

"It is submitted :

A. As regards the Oberschlesische:

(1) that the claim of the applicant Government should be dismissed;

(2) in the alternative, that the claim for indemnity should be provisionally
suspended;
(3) as a further alternative, in the event of the Court awarding some
compensation, that such compensation should only be payable after the
previous withdrawal by the said Company of the action brought by it and
pending before the German-Polish Mixed Arbitral tribunal in regard to the
Chorzów factory, and after the formal abandonment by it of any claim against
the Polish Government in respect of the latter's taking possession and
exploitation of the Chorzów factory.
(4) In any case, it is submitted that the German Government should, in the
first place, hand over to the Polish Government the whole of the shares of the
Oberschlesische Stickstoffwerke Company, of the nominal value of
110,000,000 Marks, which are in its hands under the contract of December
24th, 1919.

B. As regards the Bayerische:

(1) (a) that the applicant Government's claim for compensation in respect of
the past, in excess of 1,000,000 Reichsmarks, should be dismissed;
(b) that, pro futuro, an annual rent of 250,000 Reichsmarks, payable as from
January 1st, 1928, until March 31st, 1941, should be awarded;
(c) that. these indemnities should only be payable after previous withdrawal
by the said Company of the claim pending before the German-Polish Mixed
Arbitral [p16] Tribunal in respect of the Chorzów factory and after the formal
abandonment by it of any claim against the Polish Government in respect of
the latter's taking possession and exploitation of the Chorzów factory;
(2) that the applicant Government's third submission to the effect that until
June 30th, 193,I, no exportation of nitrate of lime or nitrate of ammonia
should take place to Germany, the United States of America, France or Italy.
C. As regards the Oberschlesische and Bayerische jointly:

that submission No. 4-to the effect that it is not permissible for the Polish
Government to set off against the abovementioned claim for indemnity of the
German Government its claim in respect of social insurances in Upper Silesia,
that it may not make use of any other set-off against the abovementioned
claim for indemnity, and that the payments mentioned under 4 (a)-(c) should
be made without any deduction to the account of the two Companies with the
Deutsche Bank at Berlin-should be rejected.

***
[37] A comparison between the German and Polish final submissions as thus
set out leads to the following results :

I. (A) as regards the first German submission: that the Parties are at variance
except in regard to the reparation of the damage sustained by the Bayerische;
(B) as regards submission No. 2 a of the German Government that the Polish
Government asks that it should be dismissed ; and, in the alternative, that the
claim for indemnity should be provisionally suspended; it is doubtless the
alternative claim thus put forward by Poland in reply to submission No. 2 a of
the German Government that the first of the "additional claims" of the latter
Government mentioned above is intended to meet;
(C) as regards submission No. 2 b of the German Government: that the Polish
Government asks that it should be dismissed except as regards the award, in
respect of [p17] the past, of a sum not exceeding 1,000,000 Reichsmarks for
the future, of an annual rent of 250,000 Reichsmarks payable as from January
1st, 1928, until March 31st, 1941;
(D) as regards the German submission No. 3: that the Polish Government asks
that the German Government's principal submission should be dismissed but
does not formulate a definite submission with regard to the alternative
submission under this number;
(E) as regards the German submissions Nos. 4 (a)-(c): that the Polish
Government does not say anything specific concerning these submissions
except in so far as it formulates its submission A 3, regarding the suspension
of payment;
(F) as regards the German Government's submission No. 4 (d): that the Polish
Government submits that the principal submission under this number should
be rejected, but does not formulate any definite submission regarding the
alternative German submission.
II. As regards the Polish submissions: that submission A 4, which goes
beyond the scope of the German submissions, has given rise to a claim for its
rejection on the part of 'the German Government, formulated during the oral
proceedings.

***
[38] It is therefore solely with the points of divergence as set out above that
the Court has to deal in the judgment which it is about to deliver. It is true
that the Parties have, both in the written and oral proceedings, formulated yet
other claims. In so far, however, as these claims do not constitute
developments of the original submissions, or alternatives to them, the Court
cannot regard them otherwise than - to use the expression of the Agent of the
German Government-as "subsidiary arguments" or as mere suggestions as to
the procedure to be adopted; this is certainly the case as regards the numerous
requests with a view to the consultation of experts or the hearing of witnesses.
There is no occasion for the Court [p18] to pass upon all these requests; it
may therefore confine itself to taking them into account, in so far as may be
necessary during the discussion of the arguments advanced by the parties in
support of their submissions, for the purposes of stating the reasons of the
judgment.

***

[39] The Parties have presented to the Court numerous documents either as
annexes to the documents of the written proceedings or in the course of the
hearings, or, lastly, in response to requests made or questions put by the
Court. (Annex.)

THE FACTS.

[40] The facts underlying the present suit have already been succinctly stated
or referred to in judgments Nos. 6, 7, 8 and 11, given by the Court on August
25th, 1925, May 25th, 1926, July 26th, 1927, and December 16th, 1927.

[41] The present judgment, however, must deal with the so-called case of the
factory at Chorzów from a point of view with which the Court has not
hitherto had to concern itself, namely, that of the nature - and, if necessary,
the amount and method of payment - of the reparation which may be due by
Poland in consequence of her having, as established by the Court in Judgment
No. 7, adopted an attitude not in conformity with the Geneva Convention of
May 13th, 1922. Accordingly, it is necessary, before approaching the point of
law raised by the German Application of February 8th, 1927, briefly to trace
out the relevant facts from this particular standpoint.

[42] On March 5th, 1915, a contract was concluded between the Chancellor
of the German Empire, on behalf of the Reich, and the Bayerische, according
to which that Company undertook "to establish for the Reich and forthwith to
begin the construction of", amongst other things, a nitrate factory at Chorzów
in Upper Silesia. The necessary lands were to be acquired on [p19] behalf of
the Reich and entered in its name in the land register. The machinery and
equipment were to be in accordance with the patents and licences of the
Company and the experience gained by it, and the Company undertook to
manage the factory until March 31st, 1941, making use of all patents,
licences, experience gained, innovations and improvements, as also of all
supply and delivery contracts of which it had the benefit. For this purpose, a
special section of the Company was to be formed which was, to a certain
extent, to be subject to the supervision of the Reich, which had the right to a
share of the profits resulting from the working of the factory during each
financial year. The Reich had the right, commencing on March 31st, 1926, to
terminate the contract for the management of the factory by the Company on
March 31st of any year upon giving fifteen months' notice. The contract could
be determined as early as March 31st, 1921, always on condition of fifteen
months' notice being given, if the Reich's share of the surplus did not reach a
fixed level.

[43] This contract was subsequently supplemented by a series of seven

additional contracts, of which, however, only the second and seventh,
concluded on November 16th, 1916, and November 22nd, 1918, respectively,
relate to the Chorzów factory. On May 14th, 1919, the Bayerische brought an
action against the Reich, claiming that the latter was bound to compensate the
Company for the damage said to have been suffered by it, owing to certain
alleged shortcomings with respect to the fulfilment of the contract of March
5th, 1913, and the additional contracts. This matter was, however, settled out
of court by an arrangement concluded on October 24th, 1919, between the
Reich and the Bayerische, an arrangement which replaced the fifth additional
contract and did not relate to the Chorzów factory.

[44] On December 24th, 1919, a series of legal instruments were signed and
legalized at Berlin with a view to the formation of a new Company, the
Oberschlesische Stickstoffwerke A.-G., with a share capital of 250,000
marks, increased subsequently to 110 millions of marks, and the sale by the
Reich to this Company of the factory at Chorzów, that is to say, the whole of
the land, buildings and installations belonging thereto, with all accessories,
reserves, raw material, equipment and stocks. The [p20] management and
working of the factory were to remain in the hands of the Bayerische, which,
for this purpose, was to utilize its patents, licences, experience gained and
contracts. These relations between the two Companies were confirmed by
means of letters dated December 24th and 28th, 1919, exchanged between
them. The Oberschlesische was duly entered, on January 29th, 1920, at the
Amtsgericht of Königshütte, in the Chorzów land register, as owner of the
landed property constituting the nitrate factory at Chorzów. The registered
office of the Oberschlesische which, under the memorandum of association,
was established at Chorzów, was subsequently, by an amendment executed
on January 14th, 1920, transferred to Berlin.

[45] In the contract of December 24th, 1919, between the Reich and the
newly created Oberschlesische, a second limited liability company, founded
the same day and known as the Stickstoff Treuhand Gesellschaft m. b. H.
(hereinafter called the "Treuhand") was also concerned. This Company had a
share capital of 300,000 marks, subsequently increased to 1,000,000 marks.
Under the contract, the whole of the factory for the production of nitrated
lime, with the accessory installations, situated at Chorzów, was ceded by the
Reich to the Oberschlesische at the price of approximately 110 million marks,
- which price was calculated according to certain data indicated in the
contract itself, - the Treuhand taking over, in the place of the Oberschlesische,
as sole and independent debtor, all the obligations imposed by the contract
upon the latter in regard to the Reich, and obtaining in consideration thereof,
without payment, shares of the Oberschlesische - to the nominal value of
109,750,000 marks. Later, the Treuhand also acquired the rest of the shares of
the Oberschlesische, thus becoming the sole shareholder of that Company. As
guarantee for the sums due to the Reich under the contract, the Treuhand
undertook to obtain for the Reich a lien on all the shares of the
Oberschlesische. The Treuhand was to liquidate the purchase price
exclusively by paying to the Reich the dividends on the shares of the
Oberschlesische. Nevertheless, the Treuhand was authorized to pay at any
time the whole or a part of the purchase price ; this would have the effect of
removing the lien on shares of a nominal value corresponding to the payment
[p21] made. The Reich was authorized itself to exercise all the rights resulting
from the possession of the shares, and in particular the right to vote at the
general meeting of shareholders, but agreed that the management. of the
exploitation of the Oberschlesische should be left in the hands of the
Bayerische. An alienation of the shares so pledged would be authorized only
with the approval of the Reich, even after the lien had expired. As a guarantee
for the fulfilment of this obligation, the Reich would, even after expiration of
the lien, retain possession of the shares and the exercise of all rights resulting
from such possession. The price realized in the event of a sale of the shares
was in the first place to be devoted to the liquidation of the balance of the
Reich's claim. Of any surplus, the Reich was to receive either 85% - If the
sale were effected by the Treuhand - or 90% - if it were effected by the Reich;
in both cases, the balance only would fall to the Treuhand which, however, in
the second case, would obtain a right to acquire the shares at the price at
which the Reich wished that they should be disposed of.

[46] On May 15th, 1922, was signed at Geneva between Germany and Poland
the Convention concerning Upper Silesia.

[47] After the signature of this Convention but before the actual cession of
Polish Upper Silesia to Poland, the Treuhand, by a letter dated May 26th,
1922, offered to a Swiss company, the Compagnie d'azote et de fertilisants S.
A. at Geneva, an option until the end of the year for the purchase, at a price of
five million Swiss francs, to be paid by January 2nd, 1923, at latest, of one
half (55 million marks) of the shares of the Oberschlesische, in consideration
of which the Genevese Company would, amongst other things, acquire the
right to take part in the negotiations with the Polish Government. This offer
came to nothing.

[48] On July 1st, 1922, the Polish Court of Huta Krolewska, which had
replaced the Amtsgericht of Königshütte, gave a decision to the effect that the
registration with this Court of the Oberschlesische as owner of the factory,
which was declared null and void, was to be cancelled and the previously
existing situation restored and that the right of ownership in the landed
property in question was to be registered in the name of the [p22] Polish
Treasury. This decision, which cited Article 256 of the Treaty of Versailles
and the Polish laws of July 14th, 1920, and June 16th, 1922, was carried into
effect on the same day.

[49] On July 3rd, 1922, M. Ignacy Moscicki, who was delegated with full
powers to take charge of the factory at Chorzów by a Polish ministerial
decree of June 24th, 1922, took possession of the factory and took over the
management in accordance with the terms of the decree. The German
Government contended, and the Polish Government did not deny, that the
said delegate, in undertaking the control of the working of the factory, at the
same time took possession of the movable property, patents, licences, etc.

[50] After having taken over the factory, the Polish Government entered it in
the list of property transferred to it under Article 256 of the Treaty of
Versailles, which list was duly communicated to the Reparation Commission.
The Polish Government alleges that after the pronouncement of Judgment No.
7 by the Court, the German Government asked that the factory should be
struck out of the list in question; the former Government has not, however,
been informed whether this has been done.

[51] In the meantime, the Oberschlesische, on November I5th, 1922, had

brought an action before the German-Polish Mixed Arbitral Tribunal at Paris,
claiming, amongst other things, that the Polish Government should be ordered
to restore the ,factory. This action, notice of which was served upon the
respondent Government on January 17th, 1923, was withdrawn by the
Oberschlesische in June 1928, before the Tribunal had been able to give a
decision.

[52] The Oberschlesische, on November 24th, 1922, instituted a parallel

action in regard to the movable property existing at Chorzów at the time of
the taking over of the factory, against the Polish Treasury before the Civil
Court of Katowice, with a view to obtaining either the restitution to the
Oberschlesische or the Bayerische of such property, or the payment of the
equivalent value. This action however led to no decision on the merits.

[53] As regards the Bayerische, that Company also, on March 25th, 1925,
brought an action before the German-Polish Mixed [p23] Arbitral Tribunal
against the Polish Treasury with a view to obtaining an annual indemnity
until the restitution of the factory to the Oberschlesische, and to causing the
possession and management of the factory to be restored to it. Notice of this
action was served on the respondent Government on December 16th, 1925 ;
but the case was withdrawn in June 1928, at the same time as the action
brought by the Oberschlesische and in the same circumstances.

[54] The Court's Judgment No. 7 was given on May 75th, 1926. This
judgment was the source of developments tending in two different directions.

[55] On the one hand, at the initiative of the German Government, it formed
the starting point for direct negotiations between the two Governments
concerned. In regard to these negotiations, it is only necessary here to note
that, on January 14th, 1927, the German Government had recognized that the
factory could no longer be restored in kind and that consequently the
reparation due must, in principle, take the form of the payment of
compensation, a statement which is moreover formally repeated in the Case.
The negotiations were unsuccessful owing, amongst other things, to the fact
that, in the opinion of the Polish Government, certain claims which Poland
was said to have against Germany, must be set off against the indemnity to be
awarded to Germany. The failure of the negotiations resulted in the institution
of the present proceedings.

[56] On the other hand, the Court's Judgment No. 7 gave rise on the part of
the Polish Government to the bringing of an action before the Polish Court of
Katowice against the Oberschlesische in order to obtain a declaration that that
Company had not become owner of the landed property at Chorzów; that the
entry in the land register made in its favour on January 29th, 1922, was not
valid, and that-independently of the laws of July 14th, 1920, and June 16th,
1922, - the ownership of the landed property in question fell to the Polish
Treasury. The judgment of the Court in this action¬ which was given by
default - was published on November 12th, 1927, and took effect on January
2nd, 1928 ; it admitted all the submissions of the claimant. [p24]

[57] Meanwhile, on October 18th, 1927, the Court had received a fresh
application from the German Government which, relying on the terms of
Article 60 of the Statute and Article 66 of the Rules of Court, prayed the
Court to give an interpretation of its Judgments Nos. 7, of May 25th, 1926,
and 8, of July 26th, 1927, alleging that a divergence of opinion had arisen
between the two Governments in regard to the meaning and scope of these
two judgments in connection with the point which had given rise to the
proceedings before the Court of Katowice.

[58] The Court, on December 16th, 1927, delivered its judgment in this suit
(No. II). According to this judgment the Court's intention in Judgment No. 7
had been to recognize, with binding effect between the Parties concerned and
in respect of that particular case, amongst other things, the right of ownership
of the Oberschlesische in the Chorzów factory under municipal law.

[59] Whilst the proceedings in connection with the request for an

interpretation were in progress, the German Government, by means of a
Request dated October 14th, 1927, and filed with the Registry on November
15th, besought the Court to indicate to the Polish Government that it should
pay to the German Government, as a provisional measure, the sum of 30
million Reichsmarks.

[60] The Court gave its decision upon this request, which was submitted
under the terms of Article 41 of the Statute, in the form of an Order made on
November 21st, 1927. It held that effect could not be given to the request of
the German Government, since it was to be regarded as designed to obtain not
the indication of measures of protection, but judgment in favour of a part of
the claim formulated in the Application of February 8th, 1927. [p25]

***

THE LAW.

I.

[61] The Court, before proceeding to consider the Parties' submissions, must
determine the import of the application which has given rise to the present
proceedings, in order to ascertain its nature and scope. In the light of the
results of this investigation, it will then proceed to consider the submissions
made in the course of the written and oral proceedings.

[62] In the application the Court is asked:

(1) to declare that the Polish Government, by reason of its attitude in respect
of the Oberschlesische and Bayerische Companies, which attitude the Court
had declared not to be in conformity with the Geneva Convention, is under an
obligation to make good the consequent damage sustained by those
Companies;
(2) to award compensation, the amount of which is indicated in the
application, for the damage caused to each of the respective Companies;
(3) to fix the method of payment, and amongst other things to order the
payments to be made by the Polish Government to be effected to the account
of the two Companies with the Deutsche Bank at Berlin.

[63] In the course of the oral proceedings, a difference of opinion between the
two Parties became apparent as to the nature and scope of the application. The
Agent for the German Government argued in his address to the Court that a
government may content itself with reparation in any form which it may
consider proper, and that reparation need not necessarily consist in the
compensation. of the individuals concerned. The following passage should
especially be noted:

[Translation.]
"It is in fact a question of the German Government's own rights. The German
Government has not brought this suit as representative of the individuals who
have suffered injury, but it may estimate the damage for which it claims
reparation on its own behalf, according to the measure provided by the losses
suffered by the companies whose case it has [p26] taken up. The German
Government may claim the payment of this compensation at any locus
solutionis which it may think fit in this case, whether it be a public or a
private office.

The present dispute is therefore a dispute between governments and nothing

but a dispute between governments. It is very clearly differentiated from an
ordinary action for damages, brought by private persons before a civil court,
as the Polish Government has said in its Rejoinder."

[64] The Agent for the Polish Government in his Rejoinder submitted that
this method of regarding the question involved a modification of the subject
of the dispute and, in some sort also, of the nature of the application, for,
according to Poland's view, the subject of the dispute had been defined by
Germany as the obligation to compensate the two Companies. But damage
and compensation being interdependent conceptions, the German claim
assumed another aspect if it was no longer a question of compensating the
Companies, but of compensating the State for the injury suffered by it. The
Agent for the Polish Government disputed the German Government's right to
make this change at that stage of the proceedings and refused to accept it.

[65] Even should it be possible to construe the terms of the application and of
the subsequent submissions of the Applicant as contemplating compensation
due directly to the two Companies for damages suffered by them and not
reparation due to Germany for a breach of the Geneva Convention, it follows
from the conditions in which the Court has been seized of the present suit,
and from the considerations which led the Court to reserve it by Judgment
No. 8 for decision on the merits, that the object of the German application can
only be to obtain reparation due for a wrong suffered by Germany in her
capacity as a contracting Party to the Geneva Convention.

[66] The present application is explicitly and exclusively based on Judgment

No. 7 which declared that the attitude of the Polish Government in respect of
the two Companies, the Oberschlesische and Bayerische, was not in
conformity with, Article 6 and the following articles of the said Convention.
Already in Judgment No. 6, establishing the Court's jurisdiction to deal with
the alleged violation of the Geneva Convention, the [p27] Court recognized
that - as had been maintained by the Applicant - the matter was exclusively a
dispute between States as to the interpretation and application of a convention
in force between them. Article 23 of the Geneva Convention only
contemplates differences of opinion respecting the interpretation and
application of Articles 6 to 22 of the Geneva Convention arising between the
two Governments. The Court in fact declared itself competent to pass upon
the claim for reparation because it regarded reparation as the corollary of the
violation of the obligations resulting from an engagement between States.
This view of the matter, which is in conformity with the general character of
an international tribunal which, in principle, has cognizance only of interstate
relations, is indicated with peculiar force in this case for the specific reason
that the Geneva Convention, with its very elaborate system of legal remedies,
has created or maintained for certain categories of private claims arbitral
tribunals .of a special international character, such as the Upper Silesian
Arbitral Tribunal and the German-Polish Mixed Arbitral Tribunal. It was on
the basis, amongst other things, of. the purely interstate character of the
dispute decided by Judgment No. 7 that the Court reserved the case for
judgment, notwithstanding the fact that actions brought by the two
Companies were pending before one of the arbitral tribunals above
mentioned, actions which related to the same act of dispossession which led
to the filing with the Court of the German Government's Application now
before it.

[67] The Court, which by Judgment No. 8 reserved the present application for
judgment on the merits, could only do so on the grounds on which it had
already based its Judgment No. 7 which constitutes the starting point for the
claim for compensation now put forward by Germany. Accordingly the
declarations of the Applicant in the present proceedings must be construed in
the light of this conception and this method must also have been followed
even if that Party had not stated its contention as explicitly as it has done in
the German Agent's address to the Court.

[68] It is a principle of international law that the reparation of a wrong may

consist in an indemnity corresponding to the damage which the nationals of
the injured State have suffered [p28] as a result of the act which is contrary to
international law. This is even the most usual form of reparation; it is the
form selected by Germany in this case and the admissibility of it has not been
disputed. The reparation due by one State to another does not however change
its character by reason of the fact that it takes the form of an indemnity for the
calculation of which the damage suffered by a private person is taken as the
measure. The rules of law governing the reparation are the rules of
international law in force between the two States concerned, and not the law
governing relations between the State which has committed a wrongful act
and the individual who has suffered damage. Rights or interests of an
individual the violation of which rights causes damage are always in a
different plane to rights belonging to a State, which rights may also be
infringed by the same act. The damage suffered by an individual is never
therefore identical in kind with that which will be suffered by a State; it can
only afford a convenient scale for the calculation of the reparation due to the
State.

[69] International law does not prevent one State from granting to another the
right to have recourse to international arbitral tribunals in order to obtain the
direct award to nationals of the latter State of compensation for damage
suffered by them as a result of infractions of international law by the first
State. But there is nothing - either in the terms of Article 23 or in the relation
between this provision and certain others of a jurisdictional character included
in the Geneva Convention - which tends to show that the jurisdiction
established by Article 23 extends to reparation other than that due by one of
the contracting Parties to the other in consequence of an infraction of Articles
6 to 22, duly recognized as such by the Court.

[70] This view is moreover readily reconcilable with the submissions of the
Applicant. The first of its submissions, throughout all stages of the
proceedings, aims at the establishment of an obligation to make reparation.
The indemnities to be paid to the German Government, according to No. 2 of
the final submissions, constitute, in the terms of submission 4d, as set out in
both the Case and the oral reply, a debt due to that Government. The claim
formulated in the same submission, to the effect that payment should be made
to the account of the [p29] two Companies with the Deutsche Bank at Berlin,
is interpreted by the Agent for the German Government as solely relating to
the locus solutionis.

[71] The Court therefore is of opinion that the Applicant has not altered the
subject of the dispute in the course of the proceedings.

***

[72] It follows from the foregoing that the application is designed to obtain, in
favour of Germany, reparation the amount of which is determined by the
damage suffered by the Oberschlesische and Bayerische. Three fundamental
questions arise:

(1) The existence of the obligation to make reparation.

(2) The existence of the damage which must serve as a basis for the
calculation of the amount of the indemnity.
(3) The extent of this damage.

[73] As regards the first point, the Court observes that it is a principle of
international law, and even a general conception of law, that any breach of an
engagement involves an obligation to make reparation. In Judgment No. 8,
when deciding on the jurisdiction derived by it from Article 23 of the Geneva
Convention, the Court has already said that reparation is the indispensable
complement of a failure to apply a convention, and there is no necessity for
this to be stated in the convention itself. The existence of the principle
establishing the obligation to make reparation, as an element of positive
international law, has moreover never been disputed in the course of the
proceedings in the various cases concerning the Chorzów factory.

[74] The obligation to make reparation being in principle recognized, it

remains to be ascertained whether a breach of an international engagement
has in fact taken place in the case under consideration. Now this point is res
judicata. The nonconformity of Poland's attitude in respect of the two
Companies with Article 6 and the following articles of the Geneva
Convention is established by No. 2 of the operative provisions of Judgment
No. 7. The application of the principle to the present case is therefore evident.
[p30]

[75] As regards the second point, the question whether damage has resulted
from the wrongful act which is common ground, is in no wise settled by the
Court's previous decisions relating to the Chorzów case. The Applicant
having calculated the amount of the reparation claimed on the basis of the
damage suffered by the two Companies as a result of the Polish Government's
attitude, it is necessary for the Court to ascertain whether these Companies
have in fact suffered damage as a consequence of that attitude.

[76] As regards the Bayerische, Poland admits the existence of a damage

affording ground for reparation; the Parties only differ as to the extent of this
damage and the mode of reparation; on the other hand, Poland denies the
existence of any damage calling for reparation in the case of the
Oberschlesische and consequently submits that Germany's claim should be
dismissed. The fact of the dispossession of the Oberschlesische is in no way
disputed. But notwithstanding this, in the contention of the Polish
Government, that Company has suffered no damage: it argues, first, that the
right of ownership claimed by the Oberschlesische was null and void or
subject to annulment, and, secondly, that the contract of December 24th,
1919, attributed to the Reich rights and benefits so considerable that any
possible damage would not materially affect the Company. In the alternative,
the Polish Government contends that these same circumstances at all events
have the effect of essentially diminishing the extent of the damage to be taken
into account in so far as the said Company is concerned.

[77] Apart from these preliminary objections, the Parties are at issue as to the
amount and method of payment of any compensation which may be awarded.

[78] In these circumstances, the Court must first of all consider whether
damage affording ground for reparation has ensued as regards not only the
Bayerische but also the Oberschlesische. [p31]
II.

[79] On approaching this question, it should first be observed that, in

estimating the damage caused by an unlawful act, only the value of property,
rights and interests which have been affected and the owner of which is the
person on whose behalf compensation is claimed, or the damage done to
whom is to serve as a means of gauging the reparation claimed, must be taken
into account. This principle, which is accepted in the jurisprudence of arbitral
tribunals, has the effect, on the one hand, of excluding from the damage to be
estimated, injury resulting for third parties from the unlawful act and, on the
other hand, of not excluding from the damage the amount of debts and other
obligations for which the injured party is responsible. The damage suffered by
the Oberschlesische in respect of the Chorzów undertaking is therefore
equivalent to the total value - but to that total only - of the property, rights and
interests of this Company in that undertaking, without deducting liabilities.

[80] The Polish Government argues in the first place that the Oberschlesische
has suffered no loss as a result of its dispossession, because it was not the
lawful owner, its right of ownership having never been valid and having in
any case ceased to be so in virtue of the judgment given on November 12th,
1927, by the Court of Katowice; so that from that date at all events no damage
for which reparation should be made could ensue as regards that Company.

[81] In regard to this the Court observes as follows: the Court has already, in
connection with Judgment No. 7, had to consider as an incidental and
preliminary point, the question of the validity of the transactions in virtue of
which the ownership of the Chorzów factory passed from the Reich to the
Oberschlesische. It then arrived at the conclusion that the various transactions
in question were genuine and bona fide; that is why it was able to regard the
Chorzów factory as belonging to a company controlled by German nationals,
namely, the Oberschlesische. Whatever the effect of this incidental decision
may be as regards the right of ownership under municipal law, it is evident
that the fact that the [p32] Chorzów factory belonged to the Oberschlesische
was the necessary condition precedent to the Court's decision that the attitude
of the Polish Government in respect of the Oberschlesische was not in
conformity with Article 6 and the following articles of the Geneva
Convention. For if the factory did not belong to the Oberschlesische
Stickstoffwerke, not only would that Company not have suffered damage as a
result of dispossession, but furthermore it could not have been subjected to a
dispossession contrary to the Geneva Convention, but the Court established
by Judgment No. 7 that such was the case. It should be noted that the Court in
Judgment No. 7 has not confined itself to recording the incompatibility with
the Geneva Convention of the application of the law of July 14th, 1920, to
properties entered in the land register in the name of companies controlled by
German nationals, but has, in replying to the objections put forward by the
Respondent, also had to deal with the question whether such entry was the
outcome of fictitious and fraudulent transactions or of genuine and bona-
¬fide transactions. Poland herself objected in connection with the second
submission of the German Application of May 15th, 1925, that the entry of
the Oberschlesische in the land register was in any case not valid as it was
based on a fictitious and fraudulent transaction and thus caused the Court to
deal with this point.

[82] As the application now under consideration is based on the damage

established by Judgment No. 7, it is impossible that the Oberschlesische's
right to the Chorzów factory should be looked upon differently for the
purposes of that judgment and in relation to the claim for reparation based on
the same judgment. The Court, having been of opinion that the
Oberschlesische's right to the Chorzów factory justified the conclusion that
the Polish Government's attitude in respect of that Company was not in
conformity with Article 6 and the following articles of the Geneva
Convention, must necessarily maintain that opinion when the same situation
at law has to be considered for the purpose of giving judgment in regard to
the reparation claimed as a result of the act which has been declared by the
Court not to be in conformity with the Convention.

[83] The Polish Government now points out that, after Judgment No. 7 had
been rendered, the Civil Court of Katowice [p33] which, under International
Law, doubtless has jurisdiction in disputes at civil law concerning immovable
property situated within its district, has declared the entry of the
Oberschlesische in the land register as owner not to be valid under the
municipal law applicable to the case, and this apart from the Polish laws of
July 14th, 1920, and June 16th, 1922; it further contends that the Court, in
now giving judgment on the question of damages, should bear in mind this
new fact.

[84] There is no need for the Court to consider what would have been the
situation at law as regards the Geneva Convention, if dispossession had been
preceded by a judgment given by a competent tribunal. It will suffice to recall
that the Court in Judgment No. 8 has said that the violation of the Geneva
Convention consisting in the dispossession of an owner protected by Article 6
and following of the Geneva Convention could not be rendered non-existent
by the judgment of a municipal court which, after dispossession had taken
place, nullified the grounds rendering the Convention applicable, which
grounds were relied upon by the Court in Judgment No. 7. The judgment of
the Tribunal of Katowice given on November 12th, 1927, - which judgment
was given by default as regards the Oberschlesische, the Reich not being a
Party to the proceedings, - does not contain in the text known to the Court the
reasons for which the entry of the property in the name of the Oberschlesische
was declared null and void; but it appears from the application upon which
this judgment was given that the reasons advanced by the Polish Treaty are
essentially the same as those already discussed before the Court on the basis
of the Polish Government's submissions in the proceedings leading up to
Judgment No. 7, which reasons, in the opinion of the Court, did not suffice to
show that the Oberschlesische did not fall within the scope of Article 6 and
the following articles of the Geneva Convention. If the Court were to deny the
existence of a damage on the ground that the factory did not belong to the
Oberschlesische, it would be contradicting one of the reasons on which it
based its Judgment No. 7 and it would be attributing to a judgment of a
municipal court power indirectly to invalidate a judgment of an international
court, which is impossible. Whatever the [p34] effect of the judgment of the
Tribunal of Katowice of November 12th, 1927, may be at municipal law, this
judgment can neither render inexistent the violation of the Geneva
Convention recognized by the Court in Judgment No. 7 to have taken place,
nor destroy one of the grounds on which that judgment is based.

[85] It is to the objection dealt with above and to a submission connected

therewith which the Polish Government made in its Counter-Case but
subsequently withdrew, that the following submission of the German
Government relates:

[Translation.]
that the obligation of the Polish Government to pay the indemnity awarded by
the Court is in no way set aside by a judgment given or to be given by a
Polish municipal court in a suit concerning the question of the ownership of
the factory situated at Chorzów.

[86] This submission has been maintained notwithstanding the withdrawal of

the Polish submission referred to.

[87] The Court, being of opinion that this latter submission is to be regarded
as having been validly withdrawn, but that, nevertheless, the objection to
which it referred still subsists, considers that there is no need expressly to
deal with the submission in regard thereto made by the German Government,
save in order to dismiss the submission of the Polish Government based on
the judgment of the Tribunal of Katowice.

***

[88] The Polish Government not only disputes the existence of a damage for
the reason that the Oberschlesische is not or is no longer owner of the factory
at Chorzów, but also contends from various points of view that the rights
possessed by the Reich in the undertaking, having passed into the hands of
Poland, cannot be included amongst the assets to be taken into account in the
calculation of the damage sustained on which calculation will depend the
amount of the reparation due by Poland to Germany.

[89] The Polish Government, admitting, for the sake of argument, that the
contract of December 24th, 1919, was not null and void, but must be regarded
as a genuine and valid legal instrument, holds that, according to that contract,
the German [p35] Government is the owner of the whole of the shares of the
Oberschlesische representing the sole property of that Company, namely the
factory. It deduces from this that the transaction consists in the transformation
of an ordinary State enterprise into a State enterprise with a share capital, and
as it holds that the property of a German company, the whole of the shares of
which belong to the Reich, falls within the category of "property and
possessions belonging to the Empire" acquired by Poland under Article 256
of the Treaty of Versailles, it considers that it is "difficult to see what the
rights of the Oberschlesische were which had been infringed by the Polish
Government".

[90] In developing this argument, it has laid special stress on the allegation
that the Oberschlesische is in reality a company controlled by the German
Government and not a company controlled by German nationals, or even a
private enterprise in which the Reich merely possesses preponderating
interests.

[91] Even if this should not be the case and if the instrument of December
24th, 1919, were, for argument's sake, to be regarded as an effective and
genuine contract for the sale of the factory by the Reich to the
Oberschlesische, the Polish Government contends that it is impossible not to
take into .account the circumstance that the German State retained a whole
complex of rights and interests in the undertaking. As the indemnity claimed
by the German Government is calculated, amongst other things, on the extent
of the damage presumed to have been sustained by the Oberschlesische, it
would not be "logically correct to award to that Company compensation for
rights and interests in the Chorzów undertaking which belonged to the
Reich". These rights should therefore be eliminated from the rights of the
Oberschlesische, which, if this were done, would amount simply to a nudum
jus domini.

[92] The Polish Government also alleges that, under Article 256 of the Treaty
of Versailles, the rights and interests of the German Government in the
Chorzów undertaking are transferred to the Polish State, at latest as from the
date of the transfer to Poland of sovereignty over the part of Upper Silesia
allotted to her, and that, on the supposition that the .contract of December
24th, 1919, gave the German State [p36] the whole of the shares of the
Oberschlesische, as guarantee for its rights, and to enable it to exercise those
rights, these shares, on the possession of which depend the rights of the
Reich, should be transferred to Poland. If the contract of December 24th,
1919, is to be regarded as genuine and effective, the Polish Government holds
that, in order to determine the indemnity which may be due to the
Oberschlesische, the rights of the Reich must first be eliminated; and as it is
of opinion that this can only be done in one way, namely, by the handing over
by Germany to Poland of the shares of the Oberschlesische to the nominal
value of 110 million marks, the Polish Government has in regard to this point
made the following submission (No. A 4) in its Counter-Case:

[Translation.]
"In any case, it is submitted that the German Government should, in the first
place, hand over to the Polish Government the whole of the shares of the
Oberschlesische Company of the nominal value of 110,000,000 marks, which
are in its hands under the contract of December 24th, 1919."

[93] The German Government in its Reply made the following observations
in regard to this submission:

[Translation.]
"In the first place, the Polish Government cites no provision on which it is
possible to base the Court's jurisdiction to take cognizance of this question,
which arises from the interpretation of Article 256. In the previous
proceedings, the Polish Government strongly maintained that the
interpretation of this article would not be admissible even as a question
incidental and preliminary to the interpretation of Articles 6 to 22 Of the
Geneva Convention.

The German Government does not know whether the Polish Government has
on mind the general treaty of arbitration signed at Locarno - according to
which any dispute of a legal nature must be submitted to arbitration, and,
unless some special arbitral tribunal is agreed upon, to the Permanent Court
of International Justice. But, however that may be, the German Government,
being animated by a wish to ensure that full scope shall be given to the Treaty
of Locarno, without pausing to debate questions as to the procedure therein
provided for, and also to see the Chorzów case settled once and for all,
abstains from undertaking a detailed examination of the questions of lack of
jurisdiction or prematurity, even though these questions might enter into
account in connection with the counter-claim which, in the German
Government's [p37] contention, is formulated in submission A 4 of the
Counter-Case. It will simply refer to Article 40, paragraph 2, No. 4, of the
Rules of Court, according to which the Court may give judgment on counter-
claims in so far as the latter come within its jurisdiction. As between
Germany and Poland this applies in respect of any question of law in dispute
between them. The only point which might be disputed is the question
whether, for the application of this article of the Rules, the conditions
respecting forms and times must also be fulfilled, or whether it is enough that
the material conditions should be fulfilled. This point, however, may be left
open, since the German Government accepts the jurisdiction of the Court in
regard to the question raised in the Counter-Case. In the course of the
negotiations in regard to the Chorzów case, the German plenipotentiary had
already proposed to the Polish plenipotentiary that this question should be
referred to the Court."

[94] In the subsequent proceedings, the Polish Government has not made any
statement in regard to the question of the Court's jurisdiction. It is impossible,
therefore, to say whether it accepts the view of the German Government
according to which it may be inferred that such jurisdiction exists under the
Convention between Germany and Poland initialled at Locarno on October
16th, 1925, or whether it contends that the Court has jurisdiction on sortie
other basis. In any case, it is certain that it has not withdrawn its claim and
that, consequently, it wishes the Court to give judgment on the submission in
question. For its part the German Government, though basing the Court's
jurisdiction on the Locarno Convention, seems above all anxious that the
Court should give judgment on the submission in the course of the present
proceedings.

[95] The Parties therefore are agreed in submitting to the Court for decision
the question raised by this submission. As the Court has said in Judgment No.
12, concerning certain rights of minorities in Upper Silesia, Article 36 of the
Statute establishes the principle that the Court's jurisdiction depends on the
will of the Parties ; the Court therefore is always competent once the latter
have accepted its jurisdiction, since there is no dispute which States entitled
to appear before the Court cannot refer to it, save in exceptional cases where a
dispute may be within the exclusive jurisdiction of some other body. [p38]

[96] But this is not the case as regards the submission in question.

[97] The Court also observes that the counter-claim is based on Article 256 of
the Versailles Treaty, which article is the basis of the objection raised by the
Respondent, and that, consequently, it is juridically connected with the
principal claim.

[98] Again, Article 40 of the Rules of Court, which has been cited by the
German Government, lays down amongst other things that counter-cases shall
contain:

“4º conclusions based on the facts stated ; these conclusions may include
counter-claims, in so far as the latter come within the jurisdiction of the
Court."

[99] The claim having been formulated in the Counter-Case, the formal
conditions required by the Rules as regards counter-claims are fulfilled in this
case, as well as the material conditions.

[100] As regards the relationship existing between the German claims and the
Polish submission in question, the Court thinks it well to add the following:
Although in form a counterclaim, since its object is to obtain judgment
against the Applicant for the delivery of certain things to the Respondent - in
reality, having regard to the arguments on which it is based, the submission
constitutes an objection to the German claim designed to obtain from Poland
an indemnity the amount of which is to be calculated, amongst other things,
on the basis of the damage suffered by the Oberschlesische. It is in fact a
question of eliminating from the amount of this indemnity a sum
corresponding to the value of the rights and interests which the Reich
possessed in the enterprise under the contract of December 24th, 1919, which
value, according to the Polish Government, does not constitute a loss to the
Oberschlesische because these rights and interests are said to belong to the
Polish Government itself under Article 256 of the Treaty of Versailles. The
Court, having by Judgment No. 8 accepted jurisdiction, under Article 23 of
the Geneva Convention, to decide as to the reparation due for the damage
caused to the two Companies by the attitude of the Polish Government
towards them, cannot dispense with an examination of the objections the
[p39] aim of which is to show either that no such damage exists or that it is
not so great as it is alleged to be by the Applicant. This being so, it seems
natural on the same grounds also to accept jurisdiction to pass judgment on
the submissions which Poland has made with a view to obtaining the
reduction of the indemnity to an amount corresponding to the damage
actually sustained.

[101] Proceeding now to consider the above-mentioned objections of the

Polish Government, the Court thinks it well first of all to define what is, in its
opinion, the nature of the rights which the German Government possesses in
respect of the Chorzów under-taking under the contract of December 24th,
1919, the main features of which have been described above. Referring to this
description, the Court points out that the Treuhand, a not the Reich, is legally
the owner of the shares of the Oberschlesische. The Reich is the creditor of
the Treuhand and in this capacity has a lien on the shares. It also has, besides
this lien, all rights resulting from possession of the shares, including the right
to the greater portion of the price in the event of the sale of these shares. This
right, which may be regarded as preponderating, is, from an economic
standpoint, very closely akin to ownership, but it is not ownership; and even
from an economic point of view it is impossible to disregard the rights of the
Treuhand.

[102] Such being the situation at law, to endeavour now to identify the
Oberschlesische with the Reich-the effect of which would be that the
ownership of the factory would have passed to Poland under Article 256 of
the Treaty of Versailles-would be in conflict with the view taken by the Court
in Judgment No. 7 and reaffirmed above, on which view is based the decision
to the effect that Poland's attitude as regards both the Oberschlesische and
Bayerische was not in conformity with the provisions of the Geneva
Convention.

[103] The same applies in regard to the contention that the Oberschlesische is
a company controlled not by German nationals but by the Reich. It is true, as
the Polish Government has recalled, that the Court in Judgment No. 7 has
declared [p40] that there was no need for it to consider the question whether
the Oberschlesische, having regard to the rights conferred by the contract of
December 24th, 1919, on the Reich, should be considered as controlled by the
Reich, and, should this be the case, what consequences would ensue as
regards the application of the Geneva Convention. But the reason for this was
that the Court held that the Polish, Government had not raised this question,
and that, apart from its contention as to the fictitious character of the
instruments of December 24th, 1919, that Government did not seem to have
disputed that the Company was controlled by German nationals.

[104] At all events, it is clear that only by regarding the said Company as a
company controlled by German nationals within the meaning of Article 6 of
the Geneva Convention, was the Court able to declare that the attitude of the
Polish Government towards that Company was not in conformity with the
terms of Article 6 and the following articles of the said Convention.

[105] Even if the question were still open and the Court were now free once
more to consider it, it would be bound to conclude that the Oberschlesische
was controlled by the Bayerische. For seeing that, under the contract of
December 24th, 1919, the Reich had declared that it agreed to leave the
management of the Chorzów undertaking in the hands of the Bayerische,
under the conditions previously settled with the Reich, and that, under the
subsequent contract concluded on November 25th, 1920, between the
Bayerische and the Treuhand, it had been stipulated that for this purpose the
Bayerische was to appoint at least two members of its own board as members
of the board of the Oberschlesische, the Court considers that the Bayerische,
rather than the Reich, controls the Oberschlesische.

[106] The Court, therefore, arrives at the conclusion that the Polish contention
to the effect that the Oberschlesische has not suffered damage, because that
Company is to be regarded as identifiable with the Reich, and that the
property of which the said Company was deprived by the action of the Polish
Government has passed to Poland under Article 256 of the Treaty of
Versailles, is not well founded. [p41]

[107] Alternatively, the Polish Government has contended that, even if the
rights possessed by the Reich under the contract of December 24th, 1919, in
the Chorzów undertaking are not to be considered as involving ownership of
the shares of the Oberschlesische, the value of these rights, which fall within
the scope of Article 256 of the Treaty of Versailles, should nevertheless be
deducted from the indemnity claimed as regards the Oberschlesische. The
Court is likewise unable to admit this contention.

[108] In this respect, it should be noted that Article 256 contains two
conditions, namely, that the "property and possessions" with which it deals
must belong to the Empire or to the German States, and that such "property
and possessions" must be "situated" in German territory ceded under the
Treaty.

[109] It must therefore be ascertained, amongst other things, whether the

rights of the Reich under the contract of December 24th, 1919, are "situated"
in the part of Upper Silesia ceded to Poland. In so far as these rights consist in
a claim against the Treuhand, it is clear that this claim cannot be regarded as
situated in Polish Upper Silesia, since the Treuhand is a company whose
registered office is in Germany and whose shares belong to companies which
also have their registered office in Germany and which are undeniably
controlled by German nationals. The fact that this claim is guaranteed by a
lien on the shares on which the profit, as well as the price obtained in the
event of sale, is to be devoted to the payment of this claim, does not, in the
Court's opinion, justify the view that. the rights of the Reich are situated in
Polish Upper Silesia where the factory is. These are only rights in respect of
the shares; and these rights, if not regarded as situated where the shares are,
must be considered as localized at the registered office of the Company which
in this case in at Berlin and not in Polish Upper Silesia. The transfer of the
registered office of the Oberschlesische from Chorzów to Berlin after the
coming into force of the Treaty of Versailles cannot be regarded as illegal and
null: [p42] the reasons for which the Court, in Judgment No. 7, held that
alienations of public property situated in the plebiscite zone were not
prohibited by that Treaty, apply a fortiori in respect of the transfer by a
company of its registered office from this zone to Germany.

[110] It is also in vain that the Polish Government cites paragraph 10 of the
Annex to Articles 297 and 298 of the Treaty of Versailles, which paragraph
lays down that Germany shall deliver "to each Allied or Associated Power all
securities, certificates, deeds, or other documents of title held by its nationals
and relating to property, rights or interests situated in the territory of that
Allied or Associated Power, including any shares, stock, debentures,
debenture stock, or other obligations of any company incorporated in
accordance with the laws of that Power". Even disregarding the circumstances
that the Oberschlesische was constituted under German law and has not been
"incorporated" in accordance with the laws of Poland, the clause quoted has
nothing to do with Article 256 and relates only to the articles to which it is
annexed.

*
[111] Since, as has been shown above, Article 256 of the Treaty of Versailles
is not, in the Court's opinion, applicable to the rights possessed by the Reich
under the contract of December 24th, 1919, it follows that the Polish
Government's contention-based on the applicability of that article - to the
effect that the value of these rights should be eliminated from the amount of
the indemnity to be awarded, must be rejected. The same is true as regards the
Polish Government's submission that the whole of the shares of the
Oberschlesische should be handed over to Poland, a submission the aim of
which is precisely to bring about the elimination referred to. For this
submission is likewise based solely on the alleged applicability of the same
article of the Treaty of Versailles. [p43]

***

[112] Alternatively, and also in regard to the claim for an indemnity based on
the damage sustained by the Oberschlesische, the Polish Government has
asked the Court "provisionally to suspend" its decision on the claim for
indemnity.

[113] The reasons for which it seeks this suspension appear to be as follows:

[114] The Polish Government has notified the Reparation Commission of the
taking over of the Chorzów factory, under Article 236 of the Treaty of
Versailles, by entering it on the list of German State property acquired under
that article. It is for the Reparation Commission to fix the value of such -
property, which value is to be paid to the Commission by the succession State
and credited to Germany on account of the sums due for reparations. Now
after the Court had delivered Judgment No. 7, the German Government asked
the Reparation Commission to strike out the Chorzów factory ,from the list of
property transferred to Poland, but the Commission has not yet taken any
decision in regard to this. The question whether Poland is to be debited with
the value of the factory therefore remains undecided, and the Polish
Government considers that, until this question has been decided .and the
Reparation Commission has struck the Chorzów factory off the list, it - the
Polish Government - cannot be compelled to make a payment in favour of the
Oberschlesische.

[115] In addition to these considerations, the Polish Government also cites the
Armistice Convention and Article 248 of the Treaty of Versailles. The latter
lays down that, "subject to such exceptions as the Reparation Commission
may approve, a first charge upon all the assets and revenues of the German
Empire and its constituent States shall be the cost of reparation and all other
costs arising under the present Treaty or any treaties or agreements
supplementary thereto or under arrangements concluded between Germany
and the Allied and Associated Powers during the armistice or its extensions".
The Polish Government says that in Judgment No. 7 the Court has decided
first that Poland, not having been a party [p44] to the Armistice Convention,
is not entitled to avail itself of the terms of that instrument in order to
establish that the alienation of the factory is null and void, and secondly, that
that country cannot, on her own account, cite Article 248 of the Treaty of
Versailles for the same purpose. It would seem, however, that the said
Government contends that, in view of the right which the States signatory to
the Armistice Convention may have to oppose the sale of the factory and in
view of the right of the Reparation Commission to ensure the discharge of
reparation debts in general and especially in view of the right reserved to it
under Article 248, Poland's obligation to pay to Germany an indemnity in
favour of the Oberschlesische is dependent on the previous approval of the
said States and of the Reparation Commission.

[116] The German Government, for its part, whilst disputing the justice of
these objections of the Polish Government, has accepted the jurisdiction of
the Court to decide upon them has preliminary points in regard to the
questions of form, amount and methods of payment of the indemnities
claimed by it, questions with which the Court has already declared itself
competent to deal". It has asked the Court to dismiss the Polish alternative
submission and to decide:

"that the Polish Government is not justified in refusing to pay compensation

to the German Government on the basis of arguments drawn from Article 256
or for motives of respect for the rights of the Reparation Commission or other
third parties".

[117] The Court considers that there is no doubt as to its jurisdiction to pass
judgment upon the Polish submission in question, but that this submission
must be rejected as not well-founded.

[118] In this respect, it should be observed in the first place that the facts cited
by Poland cannot prevent the Court, which now has before it a claim for
indemnity based on its Judgment No. 7, from passing judgment upon this
claim in so far as concerns the fixing of an indemnity corresponding, amongst
other things, to the amount of the damage sustained by the Oberschlesische,
of which damage the most important element is represented by the loss of the
factory. For the Court, when it declared in Judgment No. 7 that the attitude
[p45] of the Polish Government in regard to the Oberschlesische was not in
conformity with the provisions of Article 6 and the following articles of the
Geneva Convention - which attitude consisted in considering and treating the
Chorzów factory as acquired by Poland under Article 256 of the Treaty of
Versailles-established that, as between the Parties, that article was not
applicable to the Chorzów factory. Again it appears from the documents
submitted to the Court by the Parties that the Reparation Commission does
not claim to be competent to decide whether any particular property is or is
not acquired by a succession State under the said article. The Commission
accepts in this respect the solution arrived at in regard to this question either
by the means at the disposal of those concerned - diplomatic negotiations,
arbitration, etc. - or as the result of a unilateral act on the part of the
succession State itself. The fact that the Parties are now agreed that Poland
must retain the factory has nothing to do with Article 256 of the Treaty of
Versailles, but is owing to the impracticability of returning it. In these
circumstances there seems to be no doubt that Poland incurs no risk of having
again to pay the value of the factory to the Reparation Commission, if, in
accordance with Germany's claim, she pays this value to that State.

[119] With regard to the Armistice Convention and Article 248 of the Treaty
of Versailles, the question assumes a different aspect. The Armistice
Convention appears to have been cited in order to reserve the possibility of
getting the sale of the factory to the Oberschlesische declared invalid by
means of an action to be brought to that end by the States signatory to that
Convention. As, however, the Court, in Judgment No. 7, has held that Poland
cannot avail itself of the provisions of the said Convention to which she is not
a party, the Court cannot without inconsistency admit that country's right to
invoke the Convention in order to delay making reparation for the damage
resulting from her adoption of an attitude not in conformity with her
obligations under the Geneva Convention.

[120] As has already been said, the Court in Judgment No. 7 has declared that
Poland cannot on her own account rely on Article 248 of the Treaty of
Versailles in order to obtain the [p46] annulment of the sale of the factory.
Furthermore, the Court has stated that this article does not involve a
prohibition of alienation, and that the rights reserved to the Allied and
Associated Powers in the article are exercised through the Reparation
Commission. But it would be difficult to understand how these rights could
be affected by the payment to the Reich, as an indemnity, of the value of the
factory, seeing that, without such a payment, the rights of the Reich in the
enterprise would probably lose all value. The objection based on this article
must therefore also be overruled.

[121] The Court considers that it should confine itself to rejecting the
submission whereby the Polish Government asks for a suspension, since by
so doing and by overruling the objections raised by the Polish Government on
the basis of Article 256 of the Treaty of Versailles, it is deciding in
conformity with the German submission to the extent that that submission is
well-founded; the Court cannot, in fact, consider the submission in question
in so far as it relates to third parties who are not specified.

III.

[122] The existence of a damage to be made good being recognized by the

respondent Party as regards the Bayerische, and the objections raised by the
same Party against the existence of any damage that would justify
compensation to the Oberschlesische being set aside, the Court must now lay
down the guiding principles according to which the amount of compensation
due may be determined.

[123] The action of Poland which the Court has judged to be contrary to the
Geneva Convention is not an expropriation - to render which lawful only the
payment of fair compensation would have been wanting; it is a seizure of
property, rights and interests which could not. be expropriated even against
compensation, save under the exceptional conditions fixed by Article 7 of the
said Convention. As the Court has expressly declared in Judgment No. 8,
reparation is in this case the consequence not of the application of Articles 6
to 22 of the Geneva Convention, but of acts contrary to those articles. [p47]

[124] It follows that the compensation due to the German Government is not
necessarily limited to the value of the undertaking at the moment of
dispossession, plus interest to the day of payment. This limitation would only
be admissible if the Polish Government had had the right to expropriate, and
if its wrongful act consisted merely in not having paid to the two Companies
the just price of what was expropriated; in the present case, such a limitation
might result in placing Germany and the interests protected by the Geneva
Convention, on behalf of which interests the German Government is acting,
in a situation more unfavourable than that in which Germany and these
interests would have been if Poland had respected the said Convention. Such
a consequence would not only be unjust, but also and above all incompatible
with the aim of Article 6 and following articles of the Convention - that is to
say, the prohibition, in principle, of the liquidation of the property, rights and
interests of German nationals and of companies controlled by German
nationals in Upper Silesia - since it would be tantamount to rendering lawful
liquidation and unlawful dispossession indistinguishable in so far as their
financial results are concerned.

[125] The essential principle contained in the actual notion of an illegal act - a
principle which seems to be established by international practice and in
particular by the decisions of arbitral tribunals - is that reparation must, as far
as possible, wipe-¬out all the consequences of the illegal act and re-establish
the situation which would, in. all probability, have existed if that act had not
been committed. Restitution in kind, or, if this is not possible, payment of a
sum corresponding to the value which a restitution in kind would bear; the
award, if need be, of damages for loss sustained which would not be covered
by restitution in kind or payment in place of it-such are the principles which
should serve to determine the amount of compensation due for an act contrary
to international law.

[126] This conclusion particularly applies as regards the Geneva Convention,

the object of which is to provide for the maintenance of economic life in
Upper Silesia on the basis of respect for the status quo. The dispossession of
an industrial undertaking - the expropriation of which is prohibited by the
[p48] Geneva Convention - then involves the obligation to restore the
undertaking and, if this be not possible, to pay its value at the time of the
indemnification, which value is designed to take the place of restitution which
has become impossible. To this obligation, in virtue of the general principles
of international law, must be added that of compensating loss sustained as the
result of the seizure. The impossibility, on which the Parties are agreed, of
restoring the Chorzów factory could therefore have no other effect but that of
substituting payment of the value [p49] of the undertaking for restitution ; it
would not be in conformity either with the principles of law or with the wish
of the Parties to infer from that agreement that ,the question of compensation
must henceforth be dealt with as though an expropriation properly so called
was involved.

***

[127] Such being the principles to be followed in fixing the compensation

due, the Court may now consider whether the damage to be made good is to
be estimated separately for each of the two Companies, as the Applicant has
claimed, or whether it is preferable to fix a lump sum.

[128] If the Court were dealing with damage which, though caused by a
single act, had affected persons independent the one of the other, the natural
method to be applied would be a separate assessment of the damage sustained
by each of them; the total amount of compensation thus assessed would then
constitute the amount of reparation due to the State.

[129] In the present case, the situation is different. The economic unity of the
Chorzów undertaking, pointed out by the Court in its Judgment No. 6, is
shown above all in the fact that the interests possessed by the two Companies
in the said undertaking are interdependent and complementary; it follows that
they cannot simply be added together without running the risk of the same
damage being compensated twice over; for all that the Bayerische would have
obtained from its participation in the undertaking (sums due and shares in the
profits) would have been payable by the Oberschlesische. The value of the
Bayerische's option on the factory depended also on the value of the
undertaking. The whole damage suffered by the one or the other Company as
the result of dispossession, in so far as concerns the cessation of the working
and the loss of profit which would have accrued, is determined by the value
of the undertaking as such; and, therefore, compensation under this head must
remain within these limits.

[130] On the other hand, it is clear that the legal relationship between the two
Companies in no way concerns the international proceedings and cannot
hinder the Court from adopting the system of a lump sum corresponding to
the value of the undertaking, if, as is the Court's opinion, such a calculation is
simpler and gives greater guarantees that it will arrive at a just appreciation of
the amount, and avoid awarding double damages.

[131] One reservation must, however, be made. The calculation of a lump

sum referred to above concerns only the Chorzów undertaking, and does not
exclude the possibility of taking into account other damage which the
Companies may have sustained owing to dispossession but which is outside
the undertaking itself. No damage of such a nature has been alleged as regards
the Oberschlesische, and it seems hardly conceivable that such damage
should exist, for the whole activity of the Oberschlesische was concentrated
in the undertaking. On the other hand, it is possible that damage of such a
nature may be shown to exist as regards the Bayerische, which possesses or
works other factories of the same nature as Chorzów; the Court will consider
later whether such damage must be taken into account in fixing the amount of
compensation.

[132] Faced with the task of determining what the sum must be awarded to
the German Government in order to enable it to place the dispossessed
Companies as far as possible in the economic situation in which they would
probably have been if the seizure had not taken place, the Court considers that
it cannot be satisfied with the data for assessment supplied by the Parties.
[p50]

[133] The cost of construction of the Chorzów factory, which the Applicant
has taken as a basis for his calculation as regards compensation to the
Oberschlesische, gave rise to objections and criticisms by the Respondent
which are perhaps not without some foundation. Without entering into this
discussion and without denying the importance which the question of cost of
construction may have in determining the value of the undertaking, the Court
merely observes that it is by no means impossible that the cost of construction
of a factory may not correspond to the value which that factory will have
when built. This possibility must more particularly be considered when, as in
the present case, the factory was built by the State in order to meet the
imperious demands of public necessity and under exceptional circumstances
such as those created by the war.

[134] Nor yet can the Court, on the other hand, be satisfied with the price
stipulated in the contract of December 24th, 1919, between the Reich, the
Oberschlesische and the Treuhand, or with the offer of sale of the shares of
the Oberschlesische to the Geneva Compagnie d'azote et de fertilisants made
on May 26th, 1922. It has already been pointed out above that the value of the
undertaking at the moment of dispossession does not necessarily indicate the
criterion for the fixing of compensation. Now it is certain that the moment of
the contract of sale and that of the negotiations with the Genevese Company
belong to a period of serious economic and monetary crisis; the difference
between the value which the undertaking then had and that which it would
have had at present may therefore be very considerable. And further, it must
be considered that the price stipulated in the contract of 1919 was determined
by circumstances and accompanied by clauses which in reality seem hardly to
admit of its being considered as a true indication of the value which the
Parties placed on the factory; and that the offer to the Genevese Company is
probably to be explained by the fear of measures such as those which the
Polish Government in fact adopted afterwards against the Chorzów
undertaking, and which the Court has judged not to be in conformity with the
Geneva Convention. [p51]

[135] And finally as regards the sum agreed on at one moment by the two
Governments during the negotiations which followed Judgment No. 7 - which
sum, moreover, neither Party thought fit to rely on during the present
proceedings it may again be pointed out that the Court cannot take into
account declarations, admissions or proposals which the Parties may have
made during direct negotiations between themselves, when such negotiations
have not led to a complete agreement.

[136] This being the case, and in order to obtain further enlightenment in the
matter, the Court, before giving any decision as to the compensation to be
paid by the Polish Government to the German Government, will arrange for
the holding of an expert enquiry, in conformity with Article 50 of its Statute
and actually with the suggestions of the Applicant. This expert enquiry,
directions for which are given in an Order of Court of to-day's date, will refer
to the following questions:

I. A. What was the value, on July 3rd, 1922, expressed in Reichsmarks

current at the present time, of the undertaking for the manufacture of nitrate
products of which the factory was situated at Chorzów in Polish Upper
Silesia, in the state in which that undertaking (including the lands, buildings,
equipment, stocks and processes at its disposal, supply and delivery contracts,
goodwill and future prospects) was, on the date indicated, in the hands of the
Bayerische and Oberschlesische Stickstoffwerke?
B. What would have been the financial results, expressed in Reichsmarks
current at the present time (profits or losses), which would probably have
been given by the undertaking thus constituted from July 3rd, 1922., to the
date of the present judgment, if it had been in the hands of the said
Companies?

II. What would be the value at the date of the present judgment, expressed in
Reichsmarks current at the present time, of the same undertaking (Chorzów)
if that undertaking (Including lands, buildings, equipment, stocks, available
processes, supply and delivery contracts, goodwill and future prospects) had
remained in the hands of the Bayerische and Oberschlesische Stickstoffwerke,
and had either remained substantially as it was in 1922 or had been developed
proportionately on [p52] lines similar to those applied in the case of other
undertakings of the same kind, controlled by the Bayerische, for instance, the
undertaking of which the factory is situated at Piesteritz?

[137] The purpose of question 1 is to determine the monetary value, both of

the object which should have been restored in kind and of the additional
damage, on the basis of the estimated value of the undertaking including
stocks at the moment of taking possession by the Polish Government,
together with any probable profit that would have accrued to the undertaking
between the date of taking possession and that of the expert opinion.

[138] On the other hand, question II is directed to the ascertainment of the

present value on the basis of the situation at the moment of the expert enquiry
and leaving aside the situation presumed to exist in 1922.

[139] This question contemplates the present value of the undertaking from
two points of view: firstly, it is supposed that the factory had remained
essentially in the state in which it was on July 3rd, 1922, and secondly, the
factory is to be considered in the state in which it would (hypothetically but
probably) have been in-the hands of the Oberschlesische and Bayerische, if,
instead of being taken in 1922 by Poland, it had been able to continue its
supposedly normal development from that time onwards. The hypothetical
nature of this question is considerably diminished by the possibility of
comparison with other undertakings of the same nature directed by the
Bayerische, and, in particular, with the Piesteritz factory, the analogy of
which with Chorzów, as well as certain differences between the two, have
been many times pointed out during the present proceedings.

[140] In regard to this, it should be observed that the Agent for the German
Government, at the public sitting of June 21st, 1928, handed in two
certificates by notaries containing a summary of contracts concluded on April
16th, 1925, and August 27th, 1927, between the Mitteldeutsche
Stickstoffwerke A.-G. and the Bayerische, and adhered to by the Vereinigte
Industrie-Unternehmungen A.-G., under which contracts the Mitteldeutsche
leased to the Bayerische the landed properties at Piesteritz belonging to it,
together with all installations, etc., connected therewith. The Agent for the
Polish Government [p53], however, in his speech on June 25th, said that, not
being acquainted with the contracts and being entirely unable to form an
opinion as to whether the summaries in question contained all the data
necessary for accurate calculations, he formally objected to the said
summaries being taken as a basis in the present proceedings.

[141] As regards the lucrum cessans, in relation to question II, it may be

remarked that the cost of upkeep of the corporeal objects forming part of the
undertaking and even the cost of improvement and normal development of
the installation and of the industrial property incorporated therein, are bound
to absorb in a large measure the profits, real or supposed, of the undertaking.
Up to a certain point, therefore, any profit may be left out of account, for it
will be included in the real or supposed value of the undertaking at the present
moment. If, however, the reply given by the experts to question I B should
show that after making good the deficits for the years during which the
factory was working at a loss, and after due provision for the cost of upkeep
and normal improvement during the following years, there remains a margin
of profit, the amount of such profit should be added to the compensation to be
awarded.

[142] On the other hand, if the normal development presupposed by question

II represented an enlargement of the undertaking and an investment of fresh
capital, the amount of such sums must be deducted from the value sought for.

[143] The Court does not fail to appreciate the difficulties presented by these
two questions, difficulties which are however inherent in the special case
under consideration, and closely connected with the time that elapsed
between the dispossession and the demand for compensation, and with the
transformations of the factory and the progress made in the industry with
which the factory is concerned. In view of these difficulties, the Court
considers it preferable to endeavour to ascertain the value to be estimated by
several methods, in order to permit of a comparison and if necessary of
completing the results of the one by those of the others. The Court, therefore,
reserves every right to review the valuations referred to in the different
formulæ; basing itself on the results of the said valuations and of facts and
documents submitted to it, it will then [p54] proceed to determine the sum to
be awarded to the German Government, in conformity with the legal
principles set out above.

[144] It must be stated that the Chorzów factory to be valued by the experts
includes also the chemical factory.

[145] Besides the arguments which, in the Polish Government's opinion, tend
to show that the working of the said factory was not established on a
profitable basis-arguments which it will be for the experts to consider-that
Government has claimed that the working depended on a special
authorization, which the Polish authorities were entitled to refuse. But the
Court is of opinion that this argument is not well-founded.

[146] The authorization referred to seems to be that envisaged by paragraph

18 of the Prussian law of 1861, under which, failing international treaty
provisions to the contrary, moral persons of foreign nationality cannot engage
in industry without the authorization of the Government. In the present case,
it is certain that the Geneva Convention does actually constitute the
international treaty which, guaranteeing to industrial undertakings the
continuation of their activities, does away with any necessity for the special
authorization required by the law of 1861.

[147] The fact that the chemical factory was not only not working, but not
even completed, at the time of transfer of the territory to Poland, can be of no
importance; for chemical industry of all kinds was expressly mentioned in the
articles of the Oberschlesische Company as one of the objects of that
Company's activities, and the sections and plant of the chemical factory,
which were, moreover, closely connected with the sections and plant
producing nitrate of lime, had already been provided for and mentioned in the
contract for construction and exploitation of March 5th, 1915 ; thus, the entry
into working of the factory was only the normal and duly foreseen
development of the industrial activity which the Oberschlesische had the right
to exercise in Polish Upper Silesia. [p55]

***

[148] In the Court's Opinion, the value to which the above questions relate
will be sufficient to permit it with a full knowledge of the facts to fix the
amount of compensation to which the German Government is entitled, on the
basis of the damage suffered by the two Companies in connection with the
Chorzów undertaking.

[149] It is true that the German Government has pointed out several times
during the written and oral proceedings that fair compensation for damage
suffered by the Bayerische could not be limited to the value of what has been
called the "contractual rights", namely, the remuneration provided for in the
contracts between the Reich or the Oberschlesische and the said Company for
having made available its patents, licences and experience gained, for the
management and for the organization of the sale of the finished products. The
reason given is that this remuneration, which was accepted in view of the
special relationship -between the Parties, would hardly correspond to the fair
remuneration which the Bayerische might have claimed from any third party,
like the Polish Government, for the same consideration. It was on these
grounds that the German Government proposed to take as a basis for the
calculation of damage suffered by the Bayerische a licence supposed to be
granted by the said Company to a third party under fair and normal
conditions.

[150] The method adopted by the Court in putting the questions set out above
to the experts meets the German Government's contention, in so far as that
contention is justified. For if the Bayerische had demanded a larger sum or
additional payments in its favour, or if it had stipulated for other conditions to
its advantage, the value to the Oberschlesische of its participation would to
the. same extent be diminished; this shows that the relation between value
given and value received does not enter into consideration in calculating the
worth of the enterprise as a, whole. If the Bayerische had not merely managed
but also owned the undertaking, this amount would still be the same ; in fact,
all the elements constituting the [p56] undertaking-the factory and its
accessories on the one hand, the non-corporeal and other values supplied by
the Bayerische on the other-are independent of the advantages which, under
its contracts, each of the two Companies may derive from the undertaking.

[151] For this reason, any difference which might exist between the
conditions fixed in the contracts of 1913, 1919 and 1920 and those laid down
in a contract supposed to be concluded with a third party, is of no importance
in estimating the damage.

***

[152] It therefore only remains to be considered whether, in conformity with

the reservation. made above, the Bayerische has, owing to the dispossession,
suffered damage, other than that sustained by the undertaking, such as might
be considered in calculating the compensation demanded by the German
Government.

[153] Although the position taken up on this subject by the German

Government does not seem clear to it, the Court is, in a position to state that
this Government has not failed to draw attention to certain circumstances
which are said to prove the existence of damage of such a nature. The
possibility of competition injurious to the Bayerische's factories by a third
party, alleged to have unlawfully become acquainted with and have obtained
means of making use of that Company's processes, is certainly the
circumstance which is most important and easiest to appreciate in this
connection.

[154] The Court must however observe that it has not before it the data
necessary to enable it to decide as to the existence and extent of damage
resulting from alleged competition of the Chorzów factory with the
Bayerische factories ; the Court is not even in a position to say for certain
whether the methods of the Bayerische have been or are still being employed
at Chorzów, nor whether the products of that factory are to be found in the
markets in which the Bayerische sells or might sell products from its own
factories. In these circumstances, the Court can only observe that the damage
alleged to have resulted from competition is insufficiently proved. [p57]

[155] Moreover, it would come under the heading of possible but contingent
and indeterminate damage which, in accordance with the jurisprudence of
arbitral tribunals, cannot be taken into account.

[156] This is more especially the case as regards damage which might arise
from the fact that the field in which the Bayerische can carry out its
experiments, perfect its processes and make fresh discoveries has been
limited, and from the fact that the Company can no longer influence the
market in the manner that it have done if it had continued to work the
Chorzów factory.

[157] As the Court has discarded for want of evidence, indemnity for damage
alleged to have been sustained by the Bayerische outside the undertaking, it is
not necessary to consider whether the interests in question would be protected
by Articles 6 to 22 of the Geneva Convention.

***

[158] In addition to pecuniary damages for the benefit of the Bayerische, the
German Government asks the Court to give judgment :

"that, until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy;
in the alternative, that the Polish Government should be obliged to cease
working the factory or the chemical equipment for the production of nitrate of
ammonia, etc."

[159] In regard to these submissions, it should be observed in the first place

that they cannot contemplate damage already sustained, but solely damage
which the Bayerische might suffer in the future.

[160] If the prohibition of export is designed to prevent damage arising from

the competition. which the Chorzów factory might offer to the Bayerische
factories, this claim must be at once dismissed, in view of the result arrived at
above by the Court. To the reasons on which this result was based, it is to be
added, in so far as the prohibition of export is concerned, that the Applicant
has furnished no information [p58] enabling the Court to satisfy itself as to
the justification for the German submission naming certain countries to which
export should not be. allowed and stating a definite period for which this
prohibition should be in force.

[161] It must further be observed that if the object of the prohibition were to
protect the industrial property rights of the Bayerische and to prevent damage
which the latter might suffer as a result of the use of these rights by Poland, in
conflict with licences granted by the Bayerische to other persons or
companies, the German Government should have furnished definite data as
regards the existence and duration of the patents or licences in question. But
notwithstanding the express requests made in this respect by the Polish
Government, the German Government has produced no such data. The
explanation no doubt is that the German Government does not appear to wish
to base its claim respecting a prohibition of export upon the existence of these
patents and licences.

[162] On the contrary, the German Government's claim seems to present the
[p59] prohibition of export as a clause which should have been included in a
fair and equitable licensing contract concluded between the Bayerische and
any third party; in this connection the following remarks should be made:

[163] The mere fact that the produce of any particular undertaking is excluded
from any particular market cannot evidently in itself be in the interests of
such undertaking, nor of the persons who, as such, are interested therein. If
the Bayerische -which, whilst participating with the Oberschlesische in the
Chorzów undertaking, constitutes an entirely separate undertaking from that
of Chorzów and one that may even to a certain extent have interests
conflicting with those of Chorzów -were to Emit in its own favour, by
contract, the number of the markets of that factory, it would follow that the
profit which it would draw from its share in the Chorzów undertaking might
be correspondingly diminished. The Court having, as is said above, adopted,
in calculating the compensation to be awarded to the German Government, a
method by which such compensation shall include the total value of the
undertaking, it follows that the profits of the Bayerische will be estimated
without deducting the advantages which that Company might draw from a
clause limiting export. The prohibition of export asked for by the German
Government cannot therefore be granted, or the same compensation would .be
awarded twice over.

[164] This being so, the Court need not deal with the question whether such a
prohibition, although customary in contracts between individuals, might form
the subject of an injunction issued by the Court to a government, even if that
government were working, as a State enterprise, the factory of which export
was to be limited, nor if the prohibition asked for would be fair and
appropriate in the circumstances.

[165] As regards the German Government's alternative claim for a prohibition

of exploitation, it may be added that this seems hardly compatible with the
award of compensation representing the present value of the undertaking; for
when that compensation, which is to cover future prospects and will consist in
a sum of money bearing interest, has been paid, the Polish Government will
have acquired the right to continue working the undertaking as valued, more
especially as the Parties agree that the factory shall remain in the hands of the
Polish Government. This agreement cannot, in fact, be construed as meaning
that the factory should remain inoperative or be adapted to some other
purpose, if the reparation contemplated did not include, in addition to a
pecuniary indemnity, the prohibition of export sought for. It is moreover very
doubtful whether, apart from any other consideration, prohibition of
exploitation is admissible under the Geneva Convention, the object of which
is to provide for the maintenance of industrial undertakings, and which, for
this purpose, even permits them, in exceptional cases, to be expropriated
(Article 7)

IV.

[166] The Court thinks it preferable not to proceed at this stage to consider
the Parties' submissions concerning certain conditions and methods in regard
to the payment of the indemnity to be awarded, which conditions and
methods are closely connected either with the amount of the sum to be paid or
with circumstances which may exist when the time comes for payment. This
applies more especially as regards the [p60] German submission No. 4 (a)-
(b)-(c), and the Polish submissions A 3 and B 1 (c), which the Court therefore
reserves for the judgment fixing the indemnity.

[167] On the other hand, it is possible and convenient at once to decide the
so-called question of set-off to which submission No. 4 (d) of the Applicant
and submission C of the Respondent respectively relate.

[168] The claim of the German Government in regard to this matter has, in
the last instance, been couched in the following terms:

[Translation.]
"It is submitted that the Polish Government is not entitled to set off, against
the above-mentioned claim for indemnity of the German Government, its
claim in respect of social insurances in Upper Silesia; that it may not make
use of any other set-off against the above-mentioned claim for indemnity; in
the alternative, that set-off is only permissible if the Polish Government puts
forward for this purpose a claim in respect of a debt recognized by the
German Government or established by a judgment given between the two
Governments.”

[169] The Polish Government, for its part, has simply asked for the rejection
of this submission.

[170] If the German submission is read literally, it is possible to regard it as

mainly designed to prevent a specific case of setoff, that is to say, the setting-
off in this case of the claim which the Polish Government contends that it
possesses in respect of social insurances in Upper Silesia, and which was the
cause of the failure of the negotiations between the two Governments
following Judgment No. 7. But, if we consider the submission in the light of
the observations contained in the Case and more especially in the Reply, it is
easy to see that the claim in respect of social insurances in Upper Silesia is
only taken as an example. In reality, the German Government asks the Court
for a decision of principle the effect of which would be either to prevent the
set-off of any counterclaim against the indemnity fixed in the judgment to be
given by the Court, or, alternatively, only to allow such set-off in certain
defined circumstances.

[171] Though, as has been seen, the Polish Government for its part confines
itself in its submission to asking the Court to reject the German submission,
the arguments advanced in [p61] support of its claim clearly show that it
considers the said German submission to be both premature and inadmissible,
and that the Court has therefore no power to deal with it.

[172] The question of the Court's jurisdiction is thus clearly raised. Since
there is no agreement between the Parties to submit to the Court the so-called
question of set-off, it remains first of all to be considered whether the Court
has jurisdiction to pass judgment on the German submission No. 4 (d) in
virtue of any other provision, which, in the present case, could only be Article
23 of the Geneva Convention.

[173] It is clear that the question whether international law allows claims to
be set-off against each other, and if so, under what conditions such set-off is
permitted, is, in itself, outside the jurisdiction derived by the Court from the
said article. But the German Government contends that the question raised by
it only relates to one aspect of the payment which the Polish Government
must make and that, this being so, it constitutes a difference of opinion
covered by the arbitration clause contained in the article.

[174] The Court considers that this argument must be interpreted in the sense
that the prohibition of set-off is asked for in order to ensure that in the present
case reparation shall be really effective.

[175] It may be admitted, as the Court has said in Judgment No. 8, that
jurisdiction as to the reparation due for the violation of an international
convention involves jurisdiction as to the forms and methods of reparation. If
the reparation consists in the payment of a sum of money, the Court may
therefore determine the method of such payment. For this reason it may well
determine to whom the payment shall be made, in what place and at what
moment; in a lump sum or maybe by instalments; where payment shall be
made; who shall bear the costs, etc. It is then a question of applying to a
particular case the general rules regarding payment, and the Court's
jurisdiction arises quite naturally out of its jurisdiction to award monetary
compensation.

[176] But this principle would be quite unjustifiably extended if it were taken
as meaning that the Court might have cognizance of any question whatever of
international law [p62] even quite foreign to the convention under
consideration, for the sole reason that the manner in which such question is
decided may have an influence on the effectiveness of the reparation asked
for. Such an argument seems hardly reconcilable with the fundamental
principles of the Court's jurisdiction, which is limited to cases specially
provided for in treaties and conventions in force.

[177] The German Government's standpoint however is that the power of the
Court to decide on the exclusion of set-off is derived from the power which it
has to provide that reparation shall be effective. Now, it seems clear that this
argument can only refer to a plea of set-off raised against the beneficiary by
the debtor, of such a nature as to deprive reparation of its effectiveness. Such
for instance would be the case if the claim put forward against the claim on
the score of reparation was in dispute and was to lead to proceedings which
would in any case have resulted in delaying the entry into possession by the
person concerned of the compensation awarded to him. On the contrary, if a
liquid and undisputed claim is put forward against the reparation claim, it is
not easy to see why a plea of set-off based on this demand should necessarily
prejudice the effectiveness of the reparation. It follows that the Court's
Jurisdiction under Article 23 of the Geneva Convention could in any case
only be relied on in regard to a plea raised by the respondent Party.

[178] Now it is admitted that Poland has raised no plea of set-off in regard to
any particular claim asserted by her against the German Government.

[179] It is true that in the negotiations which followed Judgment No. 7 Poland
had put forward a claim to set off a part of the indemnity which she would
have undertaken to pay the German Government, against the claim which she
put forward in regard to social insurances in Upper Silesia. But the Court has
already had occasion to state that it can take no account of declarations,
admissions or proposals which the Parties may have made during direct
negotiations between them. Moreover, there is nothing to justify the Court- in
thinking that the Polish Government would wish to put forward, against a
judgment of the Court, claims which it may have thought [p63] fit to raise
during friendly negotiations which the Parties intended should lead to a
compromise. The Court must also draw attention in this connection to what it
has already said in Judgment No. 1 to the effect that it neither can nor should
contemplate 'the contingency of the judgment not being complied with at the
expiration of the time fixed for compliance.

[180] In these circumstances the Court must abstain from passing upon the
submissions in question.

***

[181] For these reasons,

The Court,
having heard both Parties,
by nine votes to three,
(1) gives judgment to the effect that, by reason of the attitude adopted by the
Polish Government in respect of the Oberschlesische Stickstoffwerke and
Bayerische Stickstoffwerke Companies, which attitude has been declared by
the Court not to have been in conformity with the provisions of Article 6 and
the following articles of the Geneva Convention, the Polish Government is
under an obligation to pay, as reparation to the German Government, a
compensation corresponding to the damage sustained by the said Companies
as a result of the aforesaid attitude;
(2) dismisses the pleas of the Polish Government with a view to the exclusion
from the compensation to be paid of an amount corresponding to all or a part
of the damage sustained by the Oberschlesische Stickstoffwerke, which pleas
are based either on the judgment given by the Tribunal of Katowice on
November 12th, 1927, or on Article 256 of the Treaty of Versailles;
(3) dismisses the submission formulated by the Polish Government to the
effect that the German Government should in the first place hand over to the
Polish Government the whole of the shares of the Oberschlesische
Stickstoffwerke Company, of the nominal value of 110,000,000 [p64] marks,
which are in the hands of the German Government under the contract of
December 24th, 1919;
(4) dismisses the alternative submission formulated by the Polish Government
to the effect that the claim for indemnity, in so far as the Oberschlesische
Stickstoffwerke Company is concerned, should be provisionally suspended;
(5) dismisses the submission of the German Government asking for judgment
to the effect that, until June 30th, 1931, no nitrated lime and no nitrate of
ammonia should be exported to Germany, to the United States of America, to
France or to Italy, or, in the alternative, that the Polish Government should be
obliged to cease working the factory or the chemical equipment for the
production of nitrate of ammonia, etc.
(6) gives judgment to the effect that no decision is called for on the
submissions of the German Government asking for judgment to the effect that
the Polish Government is not entitled to set off, against the above-mentioned
claim for indemnity of the German Government, its claim in respect of social
insurances in Upper Silesia; that it may not make use of any other set-off
against the said claim for indemnity, and, in the alternative, that set-off is only
permissible if the Polish Government puts forward for this purpose a claim in
respect of a debt recognized by the German Government or established by a
judgment given between the two Governments;
(7) gives judgment to the effect that the compensation to be paid by the Polish
Government to the German Government shall be fixed as a lump sum;
(8) reserves the fixing of the amount of this compensation for a future
judgment, to be given after receiving the report of experts to be appointed by
the Court for the purpose of enlightening it on the questions set out in the
present judgment and after hearing the Parties on the subject of this report;
(9) also reserves for this future judgment the conditions and methods for the
payment of the compensation in so far as concerns points not decided by the
present judgment. [p65]

[182] Done in French and English, the French text being authoritative, at the
Peace Palace, The Hague, this thirteenth day of September nineteen hundred
and twenty-eight, in three copies, one of which is to be placed in the archives
of the Court, and the others to be forwarded to the Agents of the applicant and
respondent Parties respectively.

(Signed) D. Anzilotti
President.
(Signed) Paul Ruegger
Deputy-Registrar.

[183] M. de Bustamante, Judge, declares that he is unable to concur in the

judgment of the Court as regards No. 8 of the operative portion; he considers
that the questions numbered I B and II in the judgment should not be put to
the experts.

[184] M. Altamira, Judge, declares that he is unable to concur in the judgment

of the Court as regards No. 6 of the operative portion.

[185] M. Rabel, National Judge, desires to add to the judgment the remarks
which follow hereafter.

[186] Lord Finlay, Judge, and M. Ehrlich, National judge, declaring that they
cannot concur in the judgment of the Court and availing themselves of the
right conferred on them by Article 57 of the Statute, have delivered the
separate opinions which follow hereafter.

[187] M. Nyholm, Judge, being unable to concur in the result arrived at by the
judgment, desires to add the remarks which follow hereafter.

(Initialled) D. A.
(Initialled) P. R.

[p66] Observations by M. Rabel.

[188] Whilst in general agreement with the judgment delivered by the Court, I
find myself, to my regret, compelled to disagree with it in regard to some
points, one of which I feel it my duty to deal with below (No. II). Before
doing so, I wish briefly to explain my point of view in accepting the solution
adopted by the Court in regard to the main question concerning the fixing of
the indemnity due by the Respondent (No. I).
[189] I. In Chapter III, the judgment begins by saying that if the expropriation
effected by the Polish Government had been lawful, the compensation due by
it therefore should correspond to the value of the undertaking at the time of
dispossession, plus interest on this sum to the, date of payment. The judgment
goes on to say that this limitation of the compensation is not admissible in the
present case because the Polish Government had no right of expropriation and
that, consequently, the German Government is entitled to be compensated for
all the losses suffered by its nationals as a result of the seizure of the
undertaking.

[190] Being convinced of the justice of these arguments, I have accepted

them, believing that the principles resulting from the unlawful nature of the
expropriation, which principles are subsequently set out in the judgment, are
applicable in practice whenever the damage caused appears greater than the
compensation which would be due if expropriation had been lawful, as may
be the case in the present suit.

[191] It is in fact obvious that the expropriator's responsibility must be

increased by the fact that his action is unlawful. Nevertheless, it is in my
opinion also obvious that the unlawful character of his action can never place
the expropriator in a more favourable position, nor the expropriated Party in a
more unfavourable position, either by reducing the indemnity due or by
increasing the burden of proof resting upon the Applicant. This point of view,
with which the Court in its judgment has not thought fit expressly to deal,
appears to me to be in accordance with the general principles of law. [p67]

[192] It corresponds to the notion which has been very clearly, established,
for instance in the application of German civil law, namely that the fact that
an act is of an unlawful character - in the same way as if it were of a
deceptive or defective character - though in principle aggravating the
consequences of the act, nevertheless leaves intact, in favour of the injured
Party, and to be asserted by him should he choose to do so, the rights to
which the act would have given rise if it had been lawful or less culpable.

[193] It appears to me therefore that the obligation resulting from an unlawful

seizure may be simply expressed as follows: A government which has
expropriated an object - with no right to do so - is obliged to pay the value of
the object at the moment of dispossession plus interest on this value, and it is
also responsible for damage caused in so far as such damage exceeds the
amount mentioned above.

[194] The questions put by the Court to the experts meet this view, though, in
my opinion, they are not in all points necessary or expedient.

[195] II. I cannot concur in the Court's decision in regard to the so-called
question of set-off.

[196] 1. This question first arose in a note of the Polish Government of

February 1st, 1927, to the effect that that Government had claims against
Germany in respect of various amounts, one of which, arising out of social
insurances in Upper Silesia, had been fixed by an award of the League of
Nations at 25 million Reichsmarks. In these circumstances, it contended that
the respective claims should be set off against each other. It is to be observed
that this statement related to the note and aide-memoire of the German
Government, dated January 19th, 1927, which "in regard to the question of
the method, of payment, which tended more and more to become the main
question", demanded "in principle a full and immediate payment" and
proposed, as regards some portions of the payment, the delivery of bills of
exchange.

[197] As will be seen, the Polish Government, in asserting its right to set-off,
did not specify the claims in question, except the claim arising out of social
insurance in Upper Silesia. Now the Arbitral Tribunal of Interpretation,
established between [p68] the Reparation Commission and Germany to hear
disputes concerning the so-called Dawes Plan, gave, on March 24th, 1926, a
decision having the force of res judicata as between Germany and Poland, to
the effect that the payment of the 25 millions referred to is included in the
annuities which, under the Dawes Plan, Germany has to pay to the Agent-
General for Reparation Payments. As these annuities consist of fixed sums,
the Polish Government's contention was therefore designed to make the
German Government - contrarily to the award of the Arbitral Tribunal of
Interpretation - bear the burden of this claim, by causing it to lose the
indemnity due for the dispossession of the Oberschlesische, which had been
established by another international judgment, namely the Court's Judgment
No. 7.

[198] 2. In the course of the proceedings leading up to Judgment No. 8, as

well as those leading up to the present judgment, in spite of the invitations of
the Applicant on the subject and notwithstanding the exhaustive statements
made by both Parties on the question of set-off, the Polish Government has
neither put forward specific claims to which it is entitled, nor said that it
would not maintain its submission that judicial or extra-¬judicial set-off
against the future judgment should be allowed.

[199] The German Government in the course of the proceedings has several
times pressed that the Court should decide this question which, being the real
cause of the breakdown of the diplomatic negotiations, is, in its opinion, a
question of vital importance in this suit, and that, unless it were decided, the
dispute concerning the Chorzów factory would not really be completely
adjusted.
[200] 3. The Court considers that it has not jurisdiction to pass upon this
difference of opinion under Article 23 of the Geneva Convention.

[201] It should be observed that the terms of the judgment which dismisses
the German claim in regard to the question of set-off in so far as they are
based on the said opinion, do not seem to me to have any bearing on claims
directly seeking judgment for an actual payment in money. For the Court,
having decided in its judgment that the said Article 23 of the Geneva
Convention gives it jurisdiction to determine the form and [p69] method of
the reparation due, seems undoubtedly to cover, in this definition of its
jurisdiction the question whether, in this case, a money indemnity should be
actually paid in money or in other values.

[202] 4. The judgment deals rather with the abstract question raised by the
Applicant as to whether and under what conditions a respondent condemned
by a judgment of the Court to pay a certain slim, may put forward a counter-
claim to be set off against this obligation. This question also seems to me to
enter into the present proceedings and not to relate to a point necessarily
distinct from them, such as should only be taken at a subsequent stage.

[203] A judgment imposing a penalty creates an obligation and lays down in

what that obligation consists. In a system of municipal law, the judge may
and should confine himself to certain observations and technical points,
which observations may be read in the light of relevant municipal legislation.
Thus municipal law will define what is meant by a payment which the
defendant is ordered to make and in particular whether and under what
conditions the setting-off of a counterclaim is equivalent to payment in
money of the judgment debt. If, on the other hand, in an international case,
the Parties are at issue as to the action to be taken by the defendant in
complying with the judgment, it appears to me that the nature of this action
must be defined in the judgment in order to avoid any possible uncertainty.

[204] As regards the other conditions necessary for the granting of the claim
in question, I will merely point out that in my opinion they also are fulfilled
in the present case.

(Signed) E. Rabel.

[p70] Dissenting Opinion by Lord Finlay

[205] I regret that I am unable to concur in the judgment that has just been
delivered. I think that question II ought not to have been put to the experts
and am further unable to agree with what is said in the judgment as to the
principles governing the assessment of the indemnity.
I.

[206] In its Memoire, Chapter II, § 2 at page 13, the German Government
renounced its claim to restitution of the undertaking in the following terms:

"Le Gouvernement allemand, qui, au commencement, avait demande la

restitution en nature de l'entreprise expropriée, s'est convaincu, au cours des
négociations, que la restitution n'entre pas en cause, étant donne que l'usine,
qui a été exploitée par I'Etat polonais pendant presque cinq années et qui a été
soustraite aux soins et au développement de l'entrepreneur primitif pour être
adaptée aux besoins de son exploiteur actuel, n'est plus, dans son 6tat actuel,
au point de vue juridique et économique, le même objet qu'elle était à la date
de la reprise, et que, par conséquent, elle n'est pas propre à être restituée."

[207] The Party who has been dispossessed has a choice of remedies. He may
claim restitution of the property taken. This is what is meant by restitutio in
integrum. He may on the other hand abandon any claim to restitution of the
actual property and claim damages instead. The German Government
abandoned its claim to restitution, possibly under the impression - which may
have been correct - that the alterations were not of a nature which would
harmonize with the use to which the German Government intended that the
property should be put. If the German Government had obtained restitutio in
integrum, it would have got the property itself and any enhanced value which
it, had reached would necessarily go to the German Government with the
property. But since the claim to restitution is abandoned, the only claim is for
damages for the wrongful act. A Party who has given up [p71] his right to
restitutio in integrum is not entitled to claim damages on the footing that it is
right that he should have the enhanced value, if any: that he would have got if
he had pressed his claim for restitution. The German Government having
renounced restitution cannot make good a claim to recover an amount
representing the value of the property which would have to be restored. It has
given up restitution and elected to take damages and these damages must be
assessed according to the general rule as at the time of the wrong.

[208] There is no trace of anything from which it could be implied that on

giving up the right to restitutio in integrum, Germany should be entitled in
lieu thereof to get damages on a higher scale than that on which the damages
for a wrongful taking would by law be assessed. If the Parties had intended
this they would have said so. Germany and Poland merely agreed that the
claim for restitution had been abandoned, and that left matters exactly as if
that claim had never been put forward. To construe this transaction as
involving an agreement that the damages should be assessed in any but the
usual way is to make a new agreement for the Parties. What the Parties did
was merely to abandon restitution with the consequence that Germany took
the right to damages to be assessed in the usual way.
[209] In my opinion, according to the general principle of international law,
these damages should be assessed upon the basis of the value of the
undertaking at the time of the seizure, that is the 3rd July, 1922, together with
a fair rate of interest on that value from that date until the date of payment;
and in addition any other damage directly consequent upon the seizure.

[210] It may be that damages so assessed will amount to no more than the
amount which the Polish Government would have had to pay if it had been
able to expropriate the undertaking in conformity with the terms of the
Geneva Convention; but this is immaterial. Germany has selected as the form
of reparation for the wrong done to her at international [p72] law a pecuniary
indemnity corresponding to the loss sustained by her nationals. It is
immaterial whether the result of this selection is to put Germany and the
German Companies in a better or worse position than that in which they
would otherwise have been.

[211] It is said that the general rule as to assessment of damages cannot here
be applied and that some distinction must be made between the consequences
of a wrongful expropriation and those of a lawful expropriation in accordance
with the provisions of the Geneva Convention. The fact that Poland, had she
expropriated in accordance with the Geneva Convention, would have been
bound to pay an indemnity equal to the amount of the damages, if the
damages are assessed according to the general rule of international law, does
not affect the matter. The question is what was the loss inflicted on the two
Companies by the seizure.

[212] It is argued that it would not be equitable that the liability of a mere
wrongdoer should be no greater than that of one who had expropriated the
property in accordance with the terms of the Geneva Convention.

[213] Expropriation in accordance with those terms was at the time

impossible, in the absence of recognition by the Mixed Commission that this
measure was indispensable for the maintenance of the working of the
undertaking (Article 7). No special provision is made in the Convention as to
what is to happen if the Government takes property in contravention of these
provisions: that is left to the general law. It is now however argued that it is
not equitable that the general law should apply in such a case, and an effort is
made to modify it so as to prevent the Government which has so acted being
financially in no worse position than one which has acted under the
provisions of the Geneva Convention.

[214] It seems to me that it is entirely beyond the province of the Court in

effect to introduce provisions of this nature, in the absence of agreement in
treaty or convention to that effect. [p73]

II.
[215] If the relevant time for determining the value of the undertaking is the
time of the seizure, it follows that the value of the undertaking at the present
time, had it remained in the hands of the Oberschlesische and the Bayerische,
is irrelevant except in so far as it may give some assistance in determining the
value at the time of the seizure. It is not necessary to refer to the experts any
question directed to the value at the present time. I think therefore that
question II is unnecessary.

[216] That question is in the following terms:

«Quelle serait la valeur exprimée en Reichsmarks actuels, à la date du présent

arrêt, de ladite entreprise de Chorzów, si cette entreprise (y compris les
terrains, bâti¬ments, outillage, stocks, procèdes disponibles, contrats de
fourniture et de livraison, clientèle et chances d'avenir), étant restée entre les
mains des Bayerische et Oberschle¬sische St. W., soit était demeurée
essentiellement en l'état de 1922, soit avait reçus, toutes proportions gardées,
un développement analogue à celui d'autres entreprises du même genre,
dirigées par la Bayerische, par exemple, l'entreprise dont l'usine est sise à
Piesteritz?»

[Translation.]
"What would be the value at the date of the present judgment, expressed in
Reichsmarks current at the present time, of the same undertaking (Chorzów)
if that undertaking (including lands, buildings, equipment, stocks, available
processes, supply and delivery contracts, goodwill and future prospects) had
remained in the hands of the Bayerische and Oberschlesische Stickstoffwerke,
and had either remained substantially as it was in 1922, or been developed
proportionately on lines similar to those applied in the case of other
undertakings of the same kind, controlled by the Bayerische, for instance, the
undertaking of which the factory is situated at Piesteritz?”

[217] Further, I consider this question unsatisfactory in itself. It is directed to

two values under hypothetical conditions. The first of those values is
dependent upon the hypothesis that the undertaking remained substantially in
the condition in which it was in 1922. It would be difficult to say what the
present day value of the undertaking in such an obsolete [p74] condition
would be. The second of those values is dependent upon a hypothetical
development of the undertaking. The development which the question
assumes is one "proportionately on lines similar to" the development which
has taken place in what are alleged to be parallel undertakings. It would be
difficult to determine the proportions of development applicable. The
question of what undertakings may be taken into consideration for this
purpose seems to be one for the experts themselves, and I think that question
II would present great difficulty in the working.
[218] It is on these two points only that I am unable to concur in the judgment
of the Court in this case; but they are of vital importance.

(Signed) Finlay.

[p75] Dissenting Opinion by M. Ehrlich.

[219] I regret that I disagree on some of the questions decided by the

judgment which has just been given.

I.

[220] In my opinion, the Court should have taken into consideration the
judgment given by the Civil Court of Katowice.

[221] The Parties are agreed, and moreover it follows from the principles
generally applied by arbitral tribunals, that in cases like the present the basis
of the award must be found, not in the enrichment of the Respondent, but in
the loss suffered by the individuals concerned. In this case these are the
Bayerische and Oberschlesische, and the Respondent has contended, among
other things, that the Oberschlesische was not the owner of the lands and
buildings which were entered in its name in the land register, from January,
1920, until this ,entry was vacated, in 1922, in accordance with the Polish law
of 1920.

[222] In my opinion this contention of the Respondent cannot be rejected on

the basis of what the Court has said either in Judgment No. 7 or in Judgment
No. 8.

[223] The judgment which has just been given does not, it is true, rely on res
judicata; this is correct, for it is quite certain, to mention only the case of the
Pious Fund of the Californias, that in international law, one of the conditions
on which the existence of res judicata is dependent is that there must be
"identity of subject matter" and that the point which was decided must relate
to the "merits of the case". It is evident that in the proceedings concluded by
Judgment [p76] No. 7, the question of the ownership of the Oberschlesische
was not a part of the main dispute, but that it was a question to be decided as
a preliminary and incidental point. This is precisely what the Court said in
Judgment No. 7:
"In the next place, it must be observed that the Court, in the exercise of the
jurisdiction granted by Article 23 of the Geneva Convention, will not
examine, save as an incidental or preliminary point, the possible existence of
rights under German municipal law."

[224] German legislation was referred to because, in Polish Upper Silesia, it

is German civil law which determines such questions of real property.

[225] The Court maintained the same standpoint in Judgment No.11, when it
recalled that, in Judgment No. 7, it had recognized the necessity of
examining, though "as an incidental or preliminary point", the contention of
the Polish Government that the contract of 1919 and the transfer of the
factory to the Oberschlesische were of a fictitious and fraudulent character.

[226] It is generally admitted that the principles of litispendency and res

judicata do not apply to questions decided as incidental and preliminary
points.

[227] Without however laying down that there is res judicata, the judgment
which has just been delivered declares that it would be impossible for the
Oberschlesische's right to the Chorzów factory to be defined differently for
the purposes of Judgment No. 7 and in relation to the claim for reparation
which is the subject matter of the present judgment.

[228] On this point I disagree. It is true that facts adduced by one Party and
accepted by the Court as the direct or indirect basis of its decision cannot be
disputed by the same Party in a subsequent suit; similarly, a rule of law
applied as decisive by the Court in one case, should, according to the
principle stare decisis, be applied by the Court as far as possible in its
subsequent decisions. But it may be necessary to view differently the same
situation of fact in a different suit, of which the subject matter is different, and
in which, consequently, different principles should be applied. [p77]

[229] In the proceedings concluded by Judgment No. 7, the Applicant said

that the Chorzów undertaking was not and had never been from the outset
(contract of 1915) an enterprise of the Reich, that the Bayerische was the
business concern which worked it (Publications of the Court, Series C., No.
11 - I, pages 351, 159), and the Applicant maintained, as to what had been the
property of the Reich until 1919-1920, that even admitting the nullity of the
contract of 1919,

"the Oberschlesische Stickstoffwerke were entered in the land registers as

owners and, in accordance with paragraph 891 of the German Civil Code, if a
right is entered in those registers in favour of a certain person, the
presumption is that that person is the possessor of the right. And should the
contents of the registers not be in accordance with the real situation at law,
the interested Party may, under paragraph 894, call upon the person entered to
have the entry rectified.....
If therefore the Polish Government considered that the contract of 1919 was
fictitious, why did it not resort to the legal remedy afforded by the Civil law
in force?"

[230] Then, dealing with the question whether the contract of 1919 was,
fictitious, or concluded in fraudemn creditorum, the Applicant insisted that :

"The most favourable result for the Polish Government would therefore be
that it could bring an action against the Oberschlesische for the transfer to it
of the ownership in the immovable property obtained by the Oberschlesische
under a fraudulent contract."

[231] It is in accordance with these contentions of the Applicant that the

Court, in Judgment No. 7, has said :

"In the present case, in fact, the Court holds that the Oberschlesische's right of
ownership of the Chorzów factory must be regarded as established, its name
having been duly entered as owner in the land register. If Poland wishes to
dispute the validity of this entry, it can, in any case, only be annulled in
pursuance of a decision given by the competent tribunal ; this follows from
the principle of respect for vested rights …..” [p78]

[232] Judgment No. 7, in so far as it relates to the Chorzów case, says, as had
already been said in Judgment No. 7, that the Chorzów undertaking was an
entity of which the factory, which belonged at first to the Reich and
afterwards to the Oberschlesische, was only one constituent part;
consequently, the undertaking as such did not fall within the scope of Article
256 of the Treaty of Versailles. Judgment No. 7 also says in regard to the
Oberschlesische, first, that the sale to the latter by the Reich was permissible
from the point of view of international law, and, secondly, as has been said
above, that the name of the Oberschlesische had been entered in the land
register and that as a result of this, in the absence of a decision to the contrary
by the competent municipal court, the presumption was that the right of the
Oberschlesische was established. The reason expressed in the words "its name
having been duly entered as owner in the land register" suffices to establish
that, while the Geneva, Convention may have been violated by the failure to
observe the rules of municipal law regarding this entry, it is in this failure
alone that the violation of the Geneva Convention consists in this respect.

[233] The violation of the Geneva Convention cannot be effaced, ex post

facto by a decision which should have preceded the vacation of the rights of
the Oberschlesische on the land register. That is all that is to be deduced from
Judgment No. 7 as regards subsequent decisions of competent municipal
courts. As is also said in Judgment No. 8, an examination of the right of
ownership:

"in order to justify such dispossession after it has taken place, cannot undo the
fact that a breach of the Geneva. Convention has already taken place, or affect
the Court's jurisdiction."

[234] But, in the present proceedings, there is no question of deciding

whether the breach was justified, or whether it has been effaced. These two
points are res judicata: both Parties agree that Judgment No. 7, in so far as it
decides that there [p79] has been a breach of the Geneva Convention, cannot
be called in question, and the Respondent has not referred to any possibility
of making good this breach.

[235] The question to be decided now is entirely different. It is this: what was
the loss actually sustained by the Oberschlesische? There is nothing in
Judgment No. 7 to prevent a subsequent decision by the competent tribunals,
as to the existence and extent of property rights at municipal law, nor is there
anything to prevent such a decision being taken into account by the Court.
There is neither in the operative part nor anywhere else in Judgment No. 7
anything which might come either to appear erroneous or to be invalidated, if
the Court, in the present case, were to take into account the decision of the
Tribunal of Katowice of November 12th, 1927. Incidentally, that decision
was given in accordance with the terms of the German Code of Civil
Procedure which is in force in Polish Upper Silesia, and therefore, having
been rendered by default, does not contain a statement of the grounds on
which it is based. The fact that the passages in question in Judgment No. 7
were not made solely with regard to the case then before the Court, clearly
appears also from the interpretative Judgment No. 11 which says in regard to
the passage beginning "If Poland wishes. . .":

"Though from the use of the present tense it may be concluded that the Court
had in view the possibility of the institution by Poland, even after the
judgment, of proceedings with a view to obtaining the annulment of the entry
by means of a decision of the competent municipal tribunals, it would be
contrary to the whole of the reasoning to construe it as a reservation implying
that the binding effect of the judgment given - and more especially of
paragraph 2 (a) of the operative part thereof ("that the attitude of the Polish
Government in regard to the Oberschlesische Stickstoffwerke and Bayerische
Stickstoffwerke Companies was not in conformity with Article 6 and the
following articles of the Geneva Convention")-were to depend on the result of
such proceedings instituted subsequently."
[236] The same conclusion is indicated by the fact that the operative part of
Judgment No. 11 definitely affirms that a declaration of the ownership of the
Oberschlesische had been made (in Judgment No. 7) with binding effect "in
respect of that particular case". [p80]

II.

[237] In my opinion, the objections of the Respondent based on the view that
the rights of the Reich both in the Chorzów enterprise and in the shares (of
the Oberschlesische) have passed to Poland under Article 256 of the Treaty of
Versailles, should have been upheld.

[238] I hold that the Reich is owner of the shares of the Oberschlesische.

[239] I cannot accept the view that the question of the ownership of the shares
is - though not res judicata in virtue of Judgment No. 7 - no longer an open
question since that judgment. All that is said in Judgment No. 7 on the
question of the Treuhand as owner, is to be found in an incidental observation
in the following context :

"Moreover, it was the Bayerische which, in conjunction with another

Company, the Deutsche Petroleum A.-G., had founded the Treuhand which
owned all the shares of the Oberschlesische; and the purchase of the factory
by the latter may therefore be regarded, in a sense, as the exercise, modified
in accordance with circumstances, of the right of purchase possessed under
the contract of March 5th, 1915, by the Bayerische which, by itself, had not
the necessary funds at its disposal."

[240] On December 24th, 1919, were concluded simultaneously:

(1) the memorandum of association of a new limited liability company

(hereinafter called the Treuhand) with a share capital of 300,000 marks,
increased the same day to 1,000,000 marks;
(2) the memorandum of association of a new joint stock company (hereafter
called the Oberschlesische) with a share capital of 250,000 marks, increased
the same day to 110,000,000 marks; [p81]
(3) a contract between the Reich, the Oberschlesische and the Treuhand, by
which the Reich left over to the Oberschlesische the Chorzów factory; the
contract laid down the principles on which the purchase price
(Uberlassungspreis) was to be calculated, and added that this price
represented, according to the documentary evidence then existing, about
110,000,000 marks, and that on this sum would be reckoned interest at 5 %
from December 31st, 1919. The contract continued as follows:

Ҥ 3. The purchase price (Kaufpreis) and the interest will be liquidated by

paying to the Reich the whole of the net profit shown by the balance sheet (of
the Oberschlesische).”

[241] After adding that larger payments in liquidation of the debt would be
permissible at any time, the contract proceeded.

Ҥ 4. The Treuhand will assume in place of the Oberschlesische, as sole

debtor, in accordance with the provisions laid down above, all the obligations
imposed by their contract upon the Oberschlesische in respect of the Reich.
§ 5. The interest and capital of the purchase price shall be liquidated
exclusively by the payment to the Reich of the profits on the shares (of the
Oberschlesische) . . . ."

[242] The contract also stipulated that the Oberschlesische should increase its
capital to a sum equal to the purchase price of the factory and that as
guarantee for the claims of the Reich under this contract, the Treuhand should

"undertake to obtain for the Reich a lien on all existing shares of the
Oberschlesische after this increase, with the effect that the Reich will be
authorized itself to exercise all rights derived from the possession of the
shares and especially the right to vote at general meetings of shareholders".

[243] The, Reich agreed, in its capacity as holder (Inhaber) of the shares, to
maintain the rights of the Bayerische resulting from previous contracts
between the Reich and the Bayerische. The Treuhand might at any time pay
the whole or a part of the capital and interest and, if a part of the purchase
price were refunded, shares of a nominal value corresponding to the payment
would be released from the lien, whereas the reduction of the capital sum by
the payment of the profits of the Oberschlesische would liberate no shares
from the lien. But – [p82] the contract proceeded - the Stickstoffwerke (a
designation used in the contract to denote the Oberschlesische)

"can only claim the handing over of the shares if and in so far as they may sell
shares to a third party with the consent of the Reich. Until such time the
shares will remain in possession of the Reich, which will continue to exercise
all rights derived from possession of the shares, including the right to vote at
general meetings of shareholders."

[244] The contract lays down that any alienation (sale, transfer, pledging,
pooling, leasing, or grant of a right to receive dividends, in short, any kind of
disposal) of the shares or of a part thereof will only be permitted, even after
the expiration of the lien, with the consent of the Reich, and that, as a
guarantee of compliance with this obligation, the Reich will retain possession
of the shares even after the expiration of the lien.

[245] Finally, there were provisions concerning the sale of the shares by the
Reich, in which case the Treuhand might declare its readiness to acquire
(erwerben) the shares at the price which the Reich was prepared to accept,
and if the Treuhand made no such declaration, it was to receive 10 % of the
surplus remaining after deduction of the capital sum and of the arrears of
interest of the price of the factory; if, on the other hand, the Treuhand wished
to dispose of the shares or a part thereof, which it could never do without the
consent of the Reich, the Reich was to obtain out of the purchase price the
total sum due to it and the arrears of interest plus 85 % of the surplus, the
remainder of the surplus going to the Treuhand.

[246] The shares of the Oberschlesische were shares to bearer

(Inhaberaktien); the Treuhand was never mentioned in the contract as owner
of the shares; it could only obtain them, even after having paid the whole of
the debt with all interest, by acquiring (erwerben) them if the Reich were
willing to sell them and if it (the Treuhand) availed itself of the right of
preemption; it could decide nothing as to the sale of the shares without the
Reich's consent; if on the other hand the Reich wished to dispose of them, the
Treuhand had only a right of preemption; it could not exercise the rights of a
shareholder, until it had "acquired" the shares under the conditions indicated
or by permission (by sufferance) of the [p83] Reich. On the other hand, the
Reich was always, in all circumstances, to remain holder of the shares
(Inhaber of the Inhaberaktien) until the moment when it decided to alienate
them.

[247] A limited liability company which had just been formed could hardly
guarantee to the Reich a debt amounting to 110 times its capital. At all events,
the Treuhand's only responsibility towards the Reich was to obtain for it the
shares of the Oberschlesische, a thing which it was able in principle to do
there and then at no expense. Over and above the right of preemption which I
have mentioned, the Treuhand had only a hypothetical right to a commission.
Indeed, it is in the Case of the applicant Government in the proceedings
concluded by Judgment No. 7 that the difference of 5 % has been described as
a "commission" (Publications of the Court, Series C., No. 11 - I, page 356). It
is obvious that an owner does not receive commission on the sale of his own
property.

[248] Even if it be sought to deny that the Reich was owner of the shares of
the Oberschlesische, it is impossible to deny that it had a complete and
perpetual right of antichresis in virtue of which it was the owner in so far as
all third parties were concerned. The only restriction upon it, namely the
obligation to maintain the management in certain hands for a limited time,
cannot be looked upon as a real obligation, but as a purely personal
obligation, which cannot affect the position of the Reich as the actual
shareholder.

[249] The question of the alleged control of the Reich over the
Oberschlesische has been left open by Judgment No. 7.

[250] All that is to be found on the subject in Judgment No. 7 is confined to

the two following paragraphs:

"In a similar connection, the further question might be examined whether the
Oberschlesische, having regard to the rights conferred by the contract of
December 24th, 1919, on the Reich in respect of that Company, should be
regarded as [p84] controlled by the Reich and, should this be the case, what
consequences would ensue as regards the application of the Geneva
Convention.

It is, however, not necessary for the Court to go into this question. The
Respondent, who adopts the standpoint that no measure of liquidation has
been taken by the Polish Government in respect of the Chorzów factory, has
not raised it, even as a subsidiary point, and it would seem that he does not
dispute-apart from.-the argument regarding the fictitious character of the
agreements of December 24th, 1919 - the fact that the Oberschlesische is a
company controlled by German nationals."

[251] It appears from these paragraphs that the Court had not considered the
question of control in Judgment No. 7. It also appears that it "seemed" that
Poland did not dispute the contention that the Oberschlesische was controlled
by German nationals and not by the Reich. Even if the Court had dealt with
this question, it would only have dealt with it as with an incidental and
preliminary point; consequently, even if the Court had decided the point, its
decision would not have the force of res judicata; a fortiori, it is impossible to
argue that because the Respondent did not raise this incidental and
preliminary point, it was thereby debarred from ever raising it.

[252] Even admitting for the sake of argument that the Reich was not the
owner of the Oberschlesische's shares, it would still be true that that Company
was exclusively controlled by the Reich. It would be difficult to conceive a
clearer case of control by the Reich than that of a company of which all the
shares, and bearer shares at that, remained in the hands of the Reich which
had all the rights of a shareholder in perpetuity, subject only to the possibility
of sale if it saw fit, in which case it would receive practically the whole' sale
price, these rights of the Reich being limited only by a contractual obligation
to maintain in certain hands, and for a certain time, the management of the
works owned by the Company.

[253] The right s of the Reich fall within the scope of Article 256 of the
Treaty of Versailles of which paragraph I is as follows: [p85]

"Powers to which German territory is ceded shall acquire all property and
possessions situated therein belonging to the German Empire or to the
German States, and the value of such acquisition shall be fixed by the
Reparation Commission, and paid by the State acquiring the territory to the
Reparation Commission for the credit of the German Government on account
of the sums due for reparation."

[254] The interpretation of this article as found in Judgment No. 7 has not the
force of res judicata.

[255] In declaring that it had jurisdiction to deal with the case decided by
Judgment No. 7, the Court in Judgment No. 6 said :

“It is true that the application of the Geneva Convention is hardly possible
without giving an interpretation of Article 256 of the Treaty of Versailles and
the other international stipulations cited by Poland. But these matters then
constitute merely questions preliminary or incidental to the application of the
Geneva Convention."

[256] This point of view was in accordance with that of the Applicant, on
whose behalf the following observation was made during the hearing in
regard to the question of jurisdiction :

"And if it [Article 256] is to be taken into consideration solely on this ground

(erroneous citation thereof by the Polish Government), it is only as a
preliminary question to be decided incidentally."

[257] If the Reich either was the sole owner of the shares of the
Oberschlesische, or controlled the Oberschlesische, the whole of the property
of that Company in Polish Upper Silesia falls under the provisions of Article
256. Such is actually the case.

[258] But, even if this were not so, the rights of the Reich should in any case
be regarded as situated in Polish Upper Silesia.

[259] It appears to me impossible to hold that these rights consisted entirely

or for the most part, in the so-called claim against the Treuhand, a claim
which was only guaranteed by a lien on the shares. The Treuhand was a
limited liability [p86] company with a capital amounting to less than 1% of
the sale price of the factory; the balance sheet of the Treuhand drawn in 1924,
mentioned a capital of 1,000 RM. so that this Company cannot reasonably be
held to be indebted for value which the applicant Government has estimated
in the present proceedings at a figure in any case exceeding 50,000,000 RM.
Furthermore, it does not appear from the contract of 1919 that the Treuhand
had any obligation towards the Reich; by handing over to it all the shares of
the Oberschlesische, it freed itself from any possible obligation. In the
proceedings leading up to Judgment No. 7, the Applicant stated that the
Treuhand was "merely a legal device for the exercise of shareholders' rights ;
it was not essential. It was created in order to provide a special mechanism for
the sale of the shares and also so as not to burden the balance sheets of the
other companies with the debt arising from the contract of purchase and sale"
(Publications of the Court, Series C., No. 11 - I, page 241). It must be
remembered that the Treuhand was a limited liability company whose
obligations would not therefore involve obligations on the part of the
companies which formed it.

[260] The fact that the Treuhand does not regard itself as the Reich's debtor
also appears from the fact that in its gold-balance sheet drawn up for the first
time in 1924, there appear neither the shares of the Oberschlesische, the value
of which was considered fictitious, nor the debt to the Treasury. This is
explained in a letter from the Treuhand to the Deutsche Bank, submitted to
the Court by the Applicant, in the following terms

"It follows naturally that the balance sheet also cannot include amongst the
liabilities, a debt to the Treasury of the Reich. The value of the shares in the
balance sheet must be set off against the debt. But since it is impossible to
assess the value of the shares in the balance sheet, owing to the seizure of the
factory, our obligation towards the Reich Treasury also disappears
(fallt…fort).

[261] Even admitting for the sake of argument that the Reich had a genuine
claim upon the Treuhand, it cannot be denied [p87] that that claim would be
localized in Polish Upper Silesia, since the Chorzów factory constituted the
only property of the Oberschlesische and since all the net profits of the
Oberschlesische and consequently all the net profits of the undertaking,
except perhaps certain very small deductions, were to be paid to the Reich,
which moreover, in virtue of its position as sole shareholder, had the whole of
the property of the Oberschlesische at its disposal. It appears to me
impossible to deny that the terms of Article 256 of the Treaty of Versailles
would apply to a factory situated in ceded territory, a factory of which all or
nearly all the net profits went to the Reich and over which the Reich had in
fact all possible rights of ownership, except that, for a certain time, it was
obliged by a contract not to change the management.

[262] I find it impossible to hold that the rights of the Reich are not situated
in Upper Silesia, on the ground that these rights are rights as against the
Treuhand, the registered office of which is in Germany. For it would follow
that, contrary to what the Court has laid down in Judgment No. 7, Poland has
not expropriated the contractual rights of the Bayerische, since these rights
were derived from contracts between the Bayerische and the Reich and later,
between the Bayerische and the Oberschlesische, that is to say, between
Parties which, according to the judgment just given, were all domiciled in
Germany. Yet the Court did decide in Judgment No.7 t at these contractual
rights of the Bayerische related to the factory and were so to speak
concentrated in that factory. From this the Court drew the conclusion that
they should not have been expropriated, having regard to the last sentence of
Article 6 of the Geneva Convention, which lays down that, with certain
exceptions, "property, rights and interests of German nationals or of
companies controlled by German nationals, cannot be liquidated in Polish
Upper Silesia".

[263] Article 256 must be construed in good faith and consequently in

accordance with the principle that the real state of things must be ascertained
and that no decisive value must be attached to mere legal forms. Again, the
interpretation of this article [p88] must take into account the economic
conditions of which legal forms are merely an outward expression. Legal
forms such as a joint stock company must serve the objects of economic life,
but they must not obscure economic facts. There is no doubt that a joint stock
company is very closely bound up with its property ; that is why, for instance,
according to the German Commercial Code, which is in force both in
Germany and in Polish Upper Silesia, a total alienation of the property of a
company involves in principle the liquidation of that company. It must be
remembered that the rights of the Oberschlesische in the Chorzów
undertaking constituted its sole property. During and since the world war, it
has been found more and more necessary to define the nationality of joint
stock companies in accordance with economic facts (for instance the question
of control) instead of by means of formal criteria such as the registered office
of the place of registration. Quite recently the House of Lords refused to
admit that a company which was registered in London and had a secretary
there, but of which the whole commercial activity was carried on in Egypt,
was "resident" in England. Lord Sumner, who delivered the leading
judgment, declared the argument to be "too transcendental for acceptance"
(Egyptian Delta Land and Investment Co., Ltd., v. Todd). It seems to me
impossible to deny that for the purposes of Article 256 the commercial
domicile of the Oberschlesische was not at Chorzów, assuming that one
regards that Company as the owner of the factory.

[264] I cannot agree that it is the Bayerische which had control over the [p89]
Oberschlesische. Control is the power of final decision belonging to the
shareholder, but not the power to appoint under an obligation accepted by the
shareholder, the board of management or some of its members. Again, since
the Oberschlesische has, at the utmost, succeeded to the rights of the Reich
and since the Bayerische has only retained the powers held by it under the
contract with the Reich, it cannot be argued that the Bayerische had control
over the owner of the factory; for the owner, before the Oberschlesische, had
been the Reich itself.

III.

[265] Assuming that the Oberschlesische was legally owner of the factory at
Chorzów and that it was neither identical with the Reich as treasury nor
controlled by it, it must also be held that the Oberschlesische has suffered no
material damage.

[266] It is not disputed that if it had suffered such damage, this should have
been taken into account in fixing the amount of the indemnity to be paid to
Germany.

[267] But the indemnity can only include the amount corresponding to the
damage actually sustained by the persons whose losses should, according to
the claim of the German Government, serve as a basis for the assessment of
compensation in the present case. For this reason, damage sustained by any
third person, and amongst others by the Reich Treasury, must be left out of
account ; for the German Government has not asked the Court to take into
account damage suffered by itself (its Treasury). The Court has only to
estimate the loss suffered by the Oberschlesische and Bayerische, in
accordance with the principle non ultra petita.

[268] The loss caused to any given person can only be quantum ejus interest.
If two persons have different rights over a piece of land, one being the owner,
and the other being owner of land in favour of which a servitude over the land
has been established, the reparation due to each of these persons will be
represented by the value of his right, excluding the value of the rights of the
other person. It is true that the amount of debts and other obligations, for
which the injured person is responsible, must not be excluded; but by this is
meant only personal debts and other personal obligations. On the other hand,
the reparation of the loss caused, for instance, by the destruction of a house-
whether the person concerned be owner, tenant, or owner of a property in
favour of which a servitude exists-, would only cover the value of the rights
of the particular person, excluding the rights of every other person. [p90]

[269] Now, if the interests of the Reich be excluded, no material injury could
have been suffered by the Oberschlesische ; for the Reich had, to the
exclusion of anyone else, all rights of ownership in the factory; thus, in the
exercise of its rights as shareholder, it could alienate the factory; it could also
draw from it all the net profits. If the shareholder were not identical with the
Reich, he had never obtained and could never obtain from the factory any
profit except that which the Reich, in the exercise of its rights at the general
meeting of shareholders, chose to grant him.

IV.

[270] Any assessment of the damage resulting from the taking over of the
enterprise must be based on the extent of the damage suffered at the time of
dispossession. If there were delay in payment, the damage may be increased
by the amount of the loss resulting from such delay ; this loss may either be
expressed in terms of interim interest, or may be estimated by taking into
account, according to the circumstances, the balance of the profit and loss
which, in all probability, would have accrued between the date of
dispossession and the date of judgment. It is impossible to take as the date of
assessment a date subsequent to dispossession, unless it were the fault of the
Respondent that the claim could not be brought earlier before the
international tribunal.

[271] Moreover the German Government itself has asked for a sum consisting
of the capital amount and of interest calculated as from 1922.

[272] It should be added that in the present case no subjective consideration

enters into account, such as a wrongful act entailing damages which should be
calculated on some special basis; indeed the Court cannot presume that there
has been anything but an error on the part of Poland in construing and
applying the Geneva Convention.

V.

[273] It is not permissible to infer from the articles of the Oberschlesische, the
existence of a vested right on its part to [p91] work the so-called chemical
factory. The articles of a joint stock company are, from a legal point of view,
only a contract .of private law, which, according to the commercial code,
must be entered in the commercial register. Such an entry merely establishes
that the rules of the commercial code have not been infringed in the formation
of the Company. It does not involve any right to carry on the activities
contemplated in the contract.

(Signed) Ludwik Ehrlich

[p92] Observations by M. Nyholm.

[274] The wish to have recourse to expert opinion for the purpose of
estimating the compensation due in respect of the Chorzów factory is
certainly legitimate, but is it also possible to obtain a result by this means? If
it were a question of an expert report on a purely mathematical basis, such as
the drawing up of a balance sheet prepared from accounts, experts appointed
by the Court and by the Parties - working entirely independently and with no
liaison with the Court, on a footing of equality amongst themselves and
authorized to obtain any information - would doubtless be of decisive
assistance in arriving at a just settlement of the matter. But in this case the
hypothetical nature of the questions involves an equally hypothetical answer.
As it is a question of estimating what financial results the factory would have
produced between 1922 and 1928, if it had remained in German hands, the
experts will find themselves in a sphere in which they will have difficulty in
replying otherwise than by hypothetical answers.

[275] A considerable number of circumstances enter into account. Amongst

others the capacity of the various persons concerned in the management to
undertake technical control and to take advantage of the situation of the
general market and of the formation of the various groups of factories into
consortiums which is a characteristic of the years 1922-1928; the capital
which might have been at the disposal of the factory, the favourable or
unfavourable effect of Polish legislation, etc.

[276] The answer can hardly take the form of the indication of a precise sum
which would enable the affair to be immediately settled.

[277] Even supposing that, thanks to the declarations of the experts, it might
be possible to arrive more nearly at the true situation, the greater or less
degree of progress thus made would not be of much importance in a case
when the Court's estimate must always be based on a number of detailed
decisions, all arrived at separately, in order to reach [p93] the total sum. It
matters but little whether in regard to some points the figure estimated is for
instance 110 instead of 100, if the net result of all the decisions is still in the
nature of an approximation.

[278] It may be wondered therefore whether it is worth while to delay the

settlement of the case and to incur the difficulties connected with an expert
report, including amongst others the choice of the experts who must, if they
are to perform their task properly, possess qualifications but seldom found in
one and the same person.

[279] In the end the Court may be confronted with precisely the same
situation as before the expert report and may find that the discussion upon the
report between the Parties involves a rediscussion of the case on the same
bases as those already considered.

[280] Again, the numerous data afforded by the documents in the case would
appear to make an immediate decision possible. A study of the information
and statistics furnished by the documents in regard for instance to the
condition of the factory and general development in the industry in question
would appear to afford a sufficient basis for the general assessment which the
Court must in any case undertake. The application, mutatis mutandis, of this
information to the sister factory of Piesteritz would seem particularly likely to
produce useful results. There would seem to be a possibility of obtaining
corroborative evidence, for instance, by examining the offer of sale made to
the Swiss Company, taking into account the situation existing at that time.

***

[281] Certain points in this case, which as a whole is of a specific nature, may
attract attention from the point of view of law.

[282] As regards the assessment of the damage, the Respondent again seeks
in the present proceedings to revert to points already dealt with, maintaining
that it should not pay the [p94] indemnity because it is not the two Companies
which are entitled to receive it, but the Reich. These questions have been
decided by Judgment No. 7, which definitely lays down that any damages are
due to the two Companies and not to the Reich, which is not the owner, since
it sold the factory under the contracts of 1919. The judgment therefore
unnecessarily again deals with the Polish objections on this point.

[283] The Polish contention based on Article 256 of the treaty of Versailles,
again seeks to show that the Reich should be regarded as owner. But this
question is already dealt with by the decisions of Judgment No. 7. This is also
the case as regards the position of the Reich as pledgee.
The Court therefore need not again concern itself with this. If Poland is to
succeed in her claim based on Article 256, it must be before some other
tribunal and not this Court. If she succeeded in establishing her claim before
such other tribunal, the result would simply be that Poland would in the future
regain what she has to pay now. This claim, therefore, cannot be opposed to
the decision contained in Judgment No. 7, which is being applied by the
present judgment. There is therefore no reason for again undertaking an
examination of Article 256, as is done in the judgment; nor need the Court
again consider the question whether the Reich has become owner in
consequence of its position as pledgee. This matter, as also the question
regarding Article 256, relates to a stage reached long before the present
judgment, and it cannot be reopened on the pretext that, when the preceding
judgments were given, the question was to establish the principle of damages,
but that now the problem is to estimate these damages. Both are points which
have already been decided.

***

[284] A question of more general legal interest arises as regards the situation
of Germany in the proceedings; that Germany alone, to the exclusion of the
two Companies, can sue, is undeniable, since this is a suit within the
jurisdiction of the Permanent Court, which is open only to States. But what is
[p95] the situation of Germany as regards the claim for indemnity? It cannot
be denied that judgment must in form be given in favour of the German State;
but since the damage has been sustained by others, it is not in the capacity of
owner that Germany can claim an indemnity. The claim put forward in the
Reich's conclusions seems rather to relate to the award of a sum as reparation
for wrong inflicted upon its subjects. In the judgment the expressions vary:
"The amount of compensation to which the German Government is entitled,
on the basis of the damage suffered by the two Companies" (page 55).
Another passage runs as follows: "What sum must be awarded to the German
Government in order to enable it to place the dispossessed Companies.... in
the economic situation... ? " (page 49). A precise indication of the Applicant's
position is not to be found in the judgment. It seems that the problem may be
solved in accordance with the following considerations.

[285] The asset claimed by the two Companies is in itself an asset in the
hands of the Polish State, which may be claimed by civil action against the
Polish Government and under Polish law; but as the result of the Geneva
Convention, the asset has acquired also an international character. In seizing
the factory the Polish Government has also infringed the obligations accepted
by it as regards the German State. In basing its action on this infringement,
Germany is relying on the wrong done to the Companies; but she cannot lay
claim to the indemnity as her own property. Germany may suffer, as the result
of Poland's action, moral damage represented by the demand for an imaginary
sum, and also, maybe, material damage; but the latter is always based on a
fact affecting the State itself. To measure such damage by the actual amount
of damage caused to its subjects is to make a claim that, finds no support save
as regards the special cases where the wrong done to subjects directly affects
the State as being privately interested in the enterprise. In the present affair
such a case might have arisen, owing to the situation of Germany as pledgee;
no such claim has however been put forward in the proceedings. The State
must therefore, as far [p96] as itself is concerned, limit its claim to the moral
or material damage directly caused to it. But at the same time international
precedent has laid down that the State may put forward before an
international court the claims of its subjects, may "take up" their case, with
the result that such claims must then be decided according to international law
(see judgments of the Permanent Court of International Justice - Wimbledon
and Mavrommatis affairs).

[286] In this situation the new question arises, since the creation of the
International Court, whether the State has the right to take upon itself or at
any rate to bring before the Court on its own initiative the claims of
individuals.

[287] As regards this point, it appears that there is no reason for assuming that
in international law any change has taken place in the general principles
which grant to individuals the protection of their property rights. These rights
remain always protected, and the putting forward of a particular claim in
international proceedings can only be the result of the existence of a tacit or
expressed mandate, arising either from a demand or from the consent of the
Parties. That such a mandate exists in the present case cannot be doubted. The
documents in the case show that the German State is working in full
collaboration with the Companies, who have evidently supplied all
information in order that the proceedings may have a favourable issue. From
what precedes it results that the claims must indeed be granted to the German
Government in name, but only as mandatory for the Companies. The Court
cannot therefore award the money to Germany without further comment and
without considering the question whether the German State can in law make
free disposition of the amount of the indemnity as owner, and without the
legal obligation to pay it to the parties dispossesses. The position of the
Applicant must be regarded as one of mandatory.

***

[288] The argument set out above has an effect upon the question of the
award of a lump sum in compensation in favour of the two Companies, the
system adopted by the judgment. In the [p97] documents there is indeed no
trace of the existence of a mandate conferring on the German State the right
to lump together the two claims. On the contrary, the whole of the pleadings
were conducted on the basis of a complete separation.

[289] The amalgamation of the claims of the Oberschlesische and Bayerische,

officially declared by the judgment, seems therefore to have no support in
law. And further, in fact, it meets with great difficulties. The claim of the
Bayerische is composed of one part representing a percentage on the profits
of the Oberschlesische; but there are other special claims, rights resulting
from the management of the factory in relation to other factories united in a
consortium under the direction of the Bayerische. As regards the relations
between the two Companies, the figures cannot be compared -for from a
financial point of view we have on the one hand a balance sheet for the
Oberschlesische for 1928, or a question of capital, and on the other hand, for
the Bayerische, a remuneration for the exploitation running as far as 1941.
There seems therefore to be no reason for departing from the express wishes
of the Parties set out in the pleadings.

[290] As regards the question of set-off, the judgment has concluded that
there was no ground for deciding it, especially because, in any case, the
matter had not been raised by the Respondent. It appears therefore that the
Court decides that it has jurisdiction.

[291] On the other hand, the judgment states (page 61) that: "It is clear that
the question whether international law allows claims to be set off against each
other and if so under what conditions such set-off is permitted is in itself
outside the jurisdiction derived by the Court from Article 23 of the Geneva
Convention."

[292] This paragraph appears to have for consequence a declaration of want

of jurisdiction to deal with the dispute itself.

[293] It appears however that the Court, which has jurisdiction .as regards the
sums in dispute, will also have the right to [p98] hear and determine the
objections. To those which relate to the extinction of the credit claimed may
be added the declaration of a set-off which cancels out the credit. In
international law no principle can be raised which would establish on this
subject a difference between national and international law.

(Signed) D. G. Nyholm.

[p104] Annex.

I. Documents submitted by the agent to the German government:

Contract between the Chancellor Of the Reich and the Bayerische, May 2nd,
19i6 (in German).
Second additional contract between the same Parties, October 21st, 1916 (in
German).
Fourth additional contract between the same Parties, December 22nd, 1916
(in German).
Fifth additional contract between the same Parties, March 20th, 1917 (in
German).
Seventh additional contract between the same Parties, November 13th, 1918
(in German).
Application filed by the Bayerische against the German Treasury, May 14th,
1919 (in German).
Letter from Messrs. Lybrand, Ross Bros. & Montgomery to the management
of the Bayerische (with expert opinion).
Notary's certificate by Dr. Hermann Münch, June 19th, 1928.
Notary's certificate by Dr. Robert Henoch, June 19th, 1928.
Glossen zur Stickstoff-Industrie, lecture by Dr. -X. Caro, Januarv 24th, 1927
(in German).
General Plan of the Piesteritz factory.
Plan of the Reichsstickstoffwerke, Piesteritz.
Panoramic view of the Bayerische Stickstoffwerke, Piesteritz.
General Plan of the Oberschlesische Stickstoffwerke at Chorzów.
Plan of the Reichsstickstoffwerke, Chorzów.
Panoramic view of the factories at Chorzów.
Glossen zur Stickstoff-Industrie, extract from the Chemische Industrie, No.
14, April 9th, 1927 (in German).
Letter from the Oberschlesische to Dr. Ernst Wolff, Berlin, June 19th, 1928
(in German).
Letter from the Bayerische to Dr. Ernst Wolff, Berlin, June 19th, 1928 (in
German).
Annual balance sheets of the Stickstoff Treuhand Gesellschaft, March 31st,
1921, to March 31st, 1928 (in German).

II. Documents submitted by the agent to the Polish government:

Application made to the Tribunal at Katowice, in the name of the Polish
Treasury against the Oberschlesische.
Letter from the Bayerische to the State Factories Section of the Management
of the Chorzów factories, Berlin, July 24th, 1917.
Speech by Deputy Mayer in the Reichstag, November 2nd, 19i6.
Letter from the General commanding Sixth Army Corps to the
Reichsstickstoffwerke, Chorzów, October 20th, 1916.
Letter to the Management of the Railways, Katowice, June 22nd, 1917.
Letter from the War Ministry to the Kriegsamtstelle, Breslau. May 25th 1918.
[p105]
Letter from the Oberschlesische to the Bayerische Stickstoffwerke A.-G.,
Trostberg, October 14th, 1920.
Description bf the factory plant at Chorzów.
Extract from the Gewerbeordnung für das Deutsche Reich, Berlin, 1912.
Table showing the actual cost of production of 1 Kg. of nitrate in the
Chorzów factory.
Statement of stores, etc., taken over at the Chorzów factory, July 3rd, 1922.
Application made to the German-Polish Mixed-Arbitral Tribunal by the
Bayerische against the Polish State, March 25th, 1925.
Note verbale from the German Government to the Polish Legation, Berlin,
May 11th, 1927.
Judgment of the Tribunal of Katowice in the affair Polish Treasury v.
Oberschlesische, November 12th, 1927.
Letter from Dr. Ernst Wolff, advocate, to the German-Polish Mixed Arbitral
Tribunal, January 6th, 1928.
Letter from the German Minister in Warsaw to M. Jackowski, October 24th,
1927.
Letter from the German Minister in Warsaw to M. Jackowski, October 20th,
1927.
 INTERNATIONAL COURT OF JUSTICE

INTERNATIONAL STATUS OF SOUTH WEST AFRICA

ADVISORY OPINION

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BEFORE: President: Basdevant;

Vice-President: Guerrero;
Judges: Alvarez, Hackworth, Winiarski, Zoricic, De Visscher, Sir Arnold McNair,
KI-aestad, Badawi Pasha, Krylov, Read, Hsu Mo, Azevedo

PermaLink http://www.worldcourts.com/icj/eng/decisions/1950.07.11_status_of_SW_Africa.
: htm

International Status of South West Africa, Advisory Opinion, 1950 I.C.J. 128 (July
Citation:
11)

[p128]

The Court,

composed as above,

gives the foliowing Advisory Opinion:

On, December 6th, 1949, the General Assembly of the United Nations adopted the following
resolution :

'' The General Assembly,

Recalling its previous resolutions 65 (1) of 14 December 1946, 141 (II) of I November 1947
and 227 (III) of 26 November 1948 concerning the Territory of South-West Africa,

Considering that it is desirable that the General Assembly, for its further consideration of the
question, should obtain an advisory opinion on its legal aspects,
1. Decides to submit the following questions to the International Court of Justice with a
request for an advisory opinion which shall be transmitted to the General Assembly before its
fifth regular session, if possible:

'What is the international status of the Territory of South-West Africa and what are the
international obligations of the Union of South Africa arising therefrom, in particular:

(a) Does the Union of South Africa continue to have international obligations under the
Mandate for South-West Africa and, if so, what are those obligations?

(b) Are the provisions of Chapter XII of the Charter applicable and, if so, in what manner, to
the Territory of South-West Africa?

(c) Has the Union of South Africa the competence to modify the international status of the
Territory of South-West Africa, or, in the event of a negative reply, where does competence
rest to determine and modify the international status of the Territory?'

2. Requests the Secretary-General to transmit the present resolution to the International Court
of Justice, in accordance with Article 65 of the Statute of the Court, accompanied by all
documents likely to throw light upon the question.

The Secretary-General shall include among these documents the text of Article 22 of the
Covenant of the League of Nations; the text of the Mandate for German South-West Africa,
confirmed by the Council of the League on 17 December 1920; relevant documentation
concerning the objectives and the functions of the Mandates System; the text of the resolution
adopted by the League of Nations on the question of Mandates on 18 April 1946; the text of
Articles 77 and 80 of the Charter and data on the discussion of these articles in the San
Francisco Conference and the General Assembly ; the report of the Fourth Committee and the
official records, including the annexes, of the consideration of the [p130]question of South-
West Africa at the fourth session of the General Assembly."

By letter of December 19th, 1949, filed in the Registry on December 27th, the Secretary-
General of the United Nations transmitted to the Court a certified true copy of the General
Assembly's resolution.

On December 3oth, 1949, in accordance with Article 66, paragraph 1, of the Statute, the
Registrar gave notice of the request to all States entitled to appear before the Court. In
addition, as the question submitted to the Court for advisory opinion by the General Assembly
concerned Chapter XII of the Charter, the Registrar, on the same date, informed all Members
of the United Nations, by means of a special and direct communication as provided in Article
66, paragraph 2, of the Statute that the Court was prepared to receive from them written
statements on the question. By an order of the same date the President, the Court not being in
session, appointed Monday, March 20th, 1950, as the date of expiry of the time-limit for the
submission of written statements, and reserved the rest of the procedure for further decision.

Written statements were received within the prescribed time-limit from the following States:
Egypt, Union of South Africa, the United States of America, India and Poland.

On March 7th, 1950, the Board of Directors of the International League of the Rights of Man
sent a communication to the Court asking permission to submit written an8 oral statements on
the question. On March 16th, the Court decided that it would receive from this organization a
written statement to be filed before April 10th and confined to the legal questions which had
been submitted to the Court. On the same day, the League was notified accordingly, but it did
not send any communication within the time-limit prescribed.

By letter of January 23rd, 1950, the Secretary-General of the United Nations announced that
he had designated Dr. I. Kerno, Assistant Secretary-General in charge of the Legal
Department, as his representative before the Court, and that Dr. Kerno was authorized to
submit any written or oral statements likely to furnish information to the Court on the
question.

By letters dated March 1st and March 20th, 1950, filed in the Registry on March 8th and April
tth, respectively, the Secretary-General transmitted to the Registry the documents which he
was instructed to submit according to the resolution of the General Assembly and Article 65
of the Statute. All these documents are enumerated in the list annexed to this Opinion.

By telegrams dated March 15th and April 29th, the Government of the Philippines announced
its intention to present an oral statement. The Government of the Union of South Africa
announced the same intention by letter of March 28th. [p131]

At public sittings held from May 16th to May 23rd, 1950, the Court heard oral statements
submitted :

on behalf of the Secretary-General of the United Nations by Dr. Ivan Kerno, Assistant
Secretary-General in charge of the Legal Department;

on behalf of the Government of the Philippines by Judge José D. Ingles, member of the
Philippine Permanent Delegation to the United Nations;

on behalf of the Government of the Union of South Africa by Dr. L. Steyn, K.C., Senior Legal
Adviser of the Ministry of Justice of the South-African Government.

***

The request for an opinion begins with a general question as follows :

"What is the international status of the Territory of South-West Africa and what are the
international obligations of the Union of South Africa arising therefrom?"

The Court is of opinion that an examination of the three particular questions submitted to it
will furnish a sufficient answer to this general question and that it is not neccessary to
consider the general question separately. It will therefore begin at once with an examination
of the particular questions.

Question (a) :

"Does the Union of South Africa continue to have international obligations under the Mandate
for South-West Africa and, if so, what are those obligations ?"

The Territory of South-West-Africa was one of the German overseas possessions in respect of
which Germany, by Article 119 of the Treaty of Versailles, renounced all her rights and titles
in favour of the Principal Allied and Associated Powers. When a decision was to be taken
with regard to the future of these possessions as well as of other territories which, as a
consequence of the war of 1914-1918, had ceased to be under the sovereignty of the States
which formerly governed them, and which were inhabited by peoples not yet able to assume a
full measure of self-government, two principles were considered to be of paramount
importance : the principle of non-annexation and the principle that the well-being and
development of such peoples form "a sacred trust of civilization".

With a view to giving practical effect to these principles, an international régime, the
Mandates System, was created by Article 22 of the Covenant of the League of Nations. A
"tutelage" was to be established for these peoples, and this tutelage was to be entrusted to
certain advanced nations and exercised by them "as mandatories on behalf of the
League".[p132]

Accordingly, the Principal Allied and Associated Powers agreed that a Mandate for the
Territory of South-West Africa should be conferred upon His Britannic Majesty to be
exercised on his behalf by the Government of the Union of South Africa and proposed the
terms of this Mandate. His Britannic Majesty, for and on behalf of the Government of the
Union of South Africa, agreed to accept the Mandate and undertook to exercise it on behalf of
the League of Nations in accordance with the proposed terms. On December 17th, 1920, the
Council of the League of Nations, confirming the Mandate, defined its terms.

In accordance with these terms, the Union of South Africa (the "Mandatory") was to have full
power of administration and legislation over the Territory as an integral portion of the Union
and could apply the laws of the Union to the Territory subject to such local modifications as
circumstances might require. On the other hand, the Mandatory was to observe a number of
obligations, and the Council of the League was to supervise the administration and see to it
that these obligations were fulfilled.

The terms of this Mandate, as well as the provisions of Article 22 of the Covenant and the
principles embodied therein, show that the creation of this new international institution did
not involve any cession of territory or transfer of sovereignty to the Union of South Africa.
The Union Government was to exercise an international function of administration on behalf
of the League, with the object of promoting the well-being and development of the
inhabitants.

It is now contended on behalf of the Union Government that this Mandate has lapsed, because
the League has ceased to exist. This contention is based on a misconception of the legal
situation created by Article 22 of the Covenant and by the Mandate itself. The League was
not, as alleged by that Government, a "mandator" in the sense in which this term is. used in
the national law of certain States. It had only assumed an international function of supervision
and control. The "Mandate" had only the name in common with the several notions of
mandate in national law. The object of the Mandate regulated by international rules far
exceeded that of contractual relations regulated by national law. The Mandate was created, in
the interest of the inhabitants of the territory, and of humanity in general, as an international
institution with an international object—a sacred trust of civilization. It is therefore not
possible to draw any conclusion by analogy from the notions of mandate in national law or
from any other legal conception of that law. The international rules regulating the Mandate
constituted an international status for the Territory recognized by all the Members of the
League of Nations, including the Union of South Africa. [p133]

The essentially international character of the functions which had been entrusted to the Union
of South Africa appears particularly from the fact that by Article 22 of the Covenant and
Article 6 of the Mandate the exercise of these functions was subjected to the supervision of
the Council of the League of Nations and to the obligation to present annual reports to it; it
also appears from the fact that any Member of the League of Nations could, according to
Article 7 of the Mandate, submit to the Permanent Court of International Justice any dispute
with the Union Government relating to the interpretation or the application of the provisions
of the Mandate.

The authority which the Union Government exercises over the Territory is based on the
Mandate. If the Mandate lapsed, as the Union Government contends, the latter's authority
would equally have lapsed. To retain the rights derived from the Mandate and to deny the
obligations thereunder could not be justified.

These international obligations, assumed by the Union of South Africa, were of two kinds.
One kind was directly related to the administration of the Territory, and corresponded to the
sacred trust of civilization referred to in Article 22 of the Covenant. The other related to the
machinery for implementation, and was closely linked to the supervision and control of the
League. It corresponded to the "securities for the performance of this trust" referred to in the
same article.

The first-mentioned group of obligations are defined in Article 22 of the Covenant and in
Articles 2 to 5 of the Mandate. The Union undertook the general obligation to promote to the
utmost the material and moral well-being and the social progress of the inhabitants. It
assumed particular obligations relating to slave trade, forced labour, traffic in arms and
ammunition, intoxicating spirits and beverages, military training and establishments, as well
as obligations relating to freedom of conscience and free exercise of worship, including
special obligations with regard to missionaries.

These obligations represent the very essence of the sacred trust of civilization. Their raison
d'être and original object remain. Since their fulfilment did not depend on the existence of the
League of Nations, they could not be brought to an end merely because this supervisory organ
ceased to exist. Nor could the right of the population to have the Territory administered in
accordance with these rules depend thereon.

This view is confirmed by Article 80, paragraph 1, of the Charter, which maintains the rights
of States and peoples and the terms of existing international instruments until the territories in
question are placed under the Trusteeship System. It is true that this provi-[p134]sion only
says that nothing in Chapter XII shall be construed to alter the rights of States or peoples or
the terms of existing international instruments. But—as far as mandated territories are
concerned, to which paragraph 2 of this article refers—this provision presupposes that the
rights of States and peoples shall not lapse automatically on the dissolution of the League of
Sations. It obviously was the intention to safeguard the rights of States and peoples under all
circumstances and in all respects, until each territory should be placed under the Trusteeship
System.

This view results, moreover from the Resolution of the League of Nations of April 18th,
1946, which said :

"Recalling that Article 22 of the Covenant applies to certain territories placed under Mandate
the principle that the well-being and development of peoples not yet able to stand alone in the
strenuous conditions of the modern world form a sacred trust of civilization :
…………………………………………………………………………………………………
…

3. Recognizes that, on the termination of the League's existence, its functions with respect to
the mandated territories will come to an end, but notes that Chapters XI, XII and XIII of the
Charter of the United Nations embody principles corresponding to those declared in Article
22 of the Covenant of the League ;

4. Takes note of the expressed intentions of the Members of the League now administering
territories under Mandate to continue to administer them for the well-being and development
of the peoples concerned in accordance with the obligations contained in the respective
Mandates, until other arrangements have been agreed between the United Nations and the
respective mandatory Powers."

As will be seen from this resolution, the Assembly said that the League's functions with
respect to mandated territories would come to an end ; it did not say that the Mandates
themselves came to an end. In confining itself to this statement, and in taking note, on the
other hand, of the expressed intentions of the mandatory Powers to continue to administer the
mandated territories in accordance with their respective Mandates, until other arrangements
had been agreed upon between the United Nations and those Powers, the Assembly
manifested its understanding that the Mandates were to continue in existence until "other
arrangements" were established.

A similar view has on various occasions been expressed by the Union of South Africa. In
declarations made to the League of Nations, as well as to the United Nations, the Union
Government has acknowledged that its obligations under the Mandate continued [p135] after
the disappearance of the League. In a declaration made on April 9th, 1946, in the Assembly of
the League of Nations, the representative of the Union Government, after having declared his
Government's intention to seek international recognition for the Territory of South-West
Africa as an integral part of the Union, stated: "In the meantime, the Union will continue to
administer the Territory scrupulously in accordance with the obligations of the Mandate for
the advancement and promotion of the interests of the inhabitants as she has done during the
past six years when meetings of the Mandates Commission could not be held." After having
said that ,the disappearance of the Mandates Commission and of the League Council would
"necessarily preclude complete compliance with the letter of the Mandate", he added : "The
Union Government will nevertheless regard the dissolution of the League as in no way
diminishing its obligations under the Mandate, which it will continue to discharge with the
full and proper appreciation of its responsibilities until such time as other arrangements are
agreed upon concerning the future status of the Territory."

In a memorandum submitted on October 17th, 1946, by the South-African Legation in

Washington to the Secretary-General of the United Nations, expression was given to a similar
view. Though the League had at that time disappeared, the Union Government continued to
refer to its responsibility under the Mandate. It stated: "This responsibility of the Union
Government as Mandatory is necessarily inalienable." On November 4th, 1946, the Prime
Minister of the Union, in a statement to the Fourth Committee of the United Nations General
Assembly, repeated the declaration which the representative of the Union had made
previously to the League of Nations.

In a letter of July 23rd, 1947, to the Secretary-General of the United Nations, the Legation of
the Union referred to a resolution of the Union Parliament in which it was declared "that the
Government should continue to render reports to the United Nations Organization as it has
done heretofore under the Mandate". It was further stated in that letter: "In the circumstances
the Union Government have no alternative but to maintain the status quo and to continue to
administer the Territory in the spirit of the existing Mandate."

These declarations constitute recognition by the Union Government of the continuance of its
obligations under the Mandate and not a mere indication of the future conduct of that
Government. Interpretations placed upon legal instruments by the parties to them, though not
conclusive as to their meaning, have considerable [p136] probative value when they contain
recognition by a party of its own obligations under an instrument. In this case the declarations
of the Union of South Africa support the conclusions already reached by the Court.

***

The Court will now consider the above-mentioned second group of obligations. These
obligations related to the machinery for implementation and were closely linked to the
supervisory functions of the League of Nations—particularly the obligation of the Union of
South Africa to submit to the supervision and control of the Council of the League and the
obligation to render to it annual reports in accordance with Article 22 of the Covenant and
Article 6 of the Mandate. Since the Council disappeared by the dissolution of the League, the
question arises whether these supervisory functions are to be exercised by the new
international organization created by the Charter, and whether the Union of South Africa is
under an obligation to submit to a supervision by this new organ and to render annual reports
to it.

Some doubts might arise from the fact that the supervisory functions of the League with
regard to mandated territories not placed under the new Trusteeship System were neither
expressly transferred to the United Nations nor expressly assumed by that organization.
Nevertheless, there seem to be decisive reasons for an affirmative answer to the above-
mentioned question.

The obligation incumbent upon a mandatory State to accept international supervision and to
submit reports is an important part of the Mandates System. When the authors of the
Covenant created this system, they considered that the effective performance of the sacred
trust of civilization by the mandatory Powers required that the administration of mandated
territories should be subject to international supervision. The authors of the Charter had in
mind the same necessity when they organized an International Trusteeship System. The
necessity for supervision continues to exist despite the disappearance of the supervisory organ
under the Mandates System. It cannot be admitted that the obligation to submit to supervision
has disappeared merely because the supervisory organ has ceased to exist, when the United
Nations has another international organ performing similar, though not identical, supervisory
functions.

These general considerations are confirmed by Article 80, paragraph 1, of the Charter, as this
clause has been interpreted above. It purports to safeguard, not only the rights of States, but
also the rights of the peoples of mandated territories until Trusteeship Agreements are
concluded. The purpose must have been to provide a real [p137] protection for those rights;
but no such rights of the peoples could be effectively safeguarded without international
supervision and a duty to render reports to a supervisory organ.

The Assembly of the League of Nations, in its Resolution of April 18th, 1946, gave
expression to a corresponding view. It recognized, as mentioned above, that the League's
functions with regard to the mandated territories would come to an end, but noted that
Chapters XI, XII and XIII of the Charter of the United Nations embody principles
corresponding to those declared in Article 22 of the Covenant. It further took note of the
intentions of the mandatory States to continue to administer the territories in accordance with
the obligations contained in the Mandates until other arrangements should be agreed upon
between the United Nations and the mandatory Powers. This resolution presupposes that the
supervisory functions exercised by the League would be taken over by the United Nations.

The competence of the General Assembly of the United Nations to exercise such supervision
and to receive and examine reports is derived from the provisions of Article 10 of the Charter,
which authorizes the General Assembly to discuss any questions or any matters within the
scope of the Charter and to make recommendations on these questions or matters to the
Members of the United Nations. This competence was in fact exercised by the General
Assembly in Resolution 141 (II) of November 1st, 1947, and in Resolution 227 (III) of
November 26th, 1948, confirmed by Resolution 337 (IV) of December 6th, 1949.
For the above reasons, the Court has arrived at the conclusion that the General Assembly of
the United Nations is legally qualified to exercise the supervisory functions previously
exercised by the League of Nations with regard to the administration of the Territory, and that
the Union of South Africa is under an obligation to submit to supervision and control of the
General Assembly and to render annual reports to it.

The right of petition was not mentioned by Article 22 of the Covenant or by the provisions of
the Mandate. But on January 31st, 1923, the Council of the League of Nations adopted certain
rules relating to this matter. Petitions to the League from communities or sections of the
populations of mandated territories were to be transmitted by the mandatory Governments,
which were to attach to these petitions such comments as they might consider desirable. By
this innovation the supervisory function of the Council was rendered more effective.

The Court is of opinion that 'this right, which the inhabitants of South-West Africa had thus
acquired, is maintained by Article 80, [p138] paragraph 1, of the Charter, as this clause has
been interpreted above. In view of the result at which the Court has arrived with respect to the
exercise of the supervisory functions by the United Nations and the obligation of the Union
Government to submit to such supervision, and having regard to the fact that the dispatch and
examination of petitions form a part of that supervision, the Court is of the opinion that
petitions are to be transmitted by that Government to the General Assembly of the United
Nations, which is legally qualified to deal with them.

It follows from what is said above that South-West Africa is still to be considered as a
territory held under the Mandate of December 17th, 1920. The degree of supervision to be
exercised by the General Assembly should not therefore exceed that which applied under the
Mandates System, and should conform as far as possible to the procedure followed in this
respect by the Council of the League of Nations. These observations are particularly
applicable to annual reports and petitions.

According to Article 7 of the Mandate, disputes between the mandatory State and another
Member of the League of Nations relating to the interpretation or the application of the
provisions of the Mandate, if not settled by negotiation, should be submitted to the Permanent
Court of International Justice. Having regard to Article 37 of the Statute of the International
Court of Justice, and Article 80, paragraph 1, of the Charter, the Court is of opinion that this
clause in the Mandate is still in force and that, therefore, the Union of South Africa is under
an obligation to accept the compulsory jurisdiction of the Court according to those provisions.

***

Reference to Chapter XI of the Charter was made by various Governments in written and oral
statements presented to the Court. Having regard to the results at which the Court has arrived,
the question whether the provisions of that chapter are applicable does not arise for the
purpose of the present Opinion. It is not included in the questions submitted to the Court and
it is unnecessary to consider it.
***

Question (b):

"Are the provisions of Chapter XII of the Charter applicable and, if so, in what manner, to the
Territory of South-West Africa?"

Territories held under Mandate were not by the Charter automatically placed under the new
International Trusteeship System.[p139]

This system should, according to Articles 75 and 77, apply to territories which are placed
thereunder by means of Trusteeship Agreements. South-West Africa, being a territory held
under Mandate (Article 77 a), may be placed under the Trusteeship System in accordance
with the provisions of Chapter XII. In this sense, that chapter is applicable to the Territory.

Question (b) further asks in what manner Chapter XII is applicable to the Territory. It appears
from a number of documents submitted to the Court in accordance with the General
Assembly's Resolution of December 6th, 1949, as well as from the written and the oral
observations of several Governments, that the General Assembly, in asking about the manner
of application of Chapter XII, was referring to the question whether the Charter imposes upon
the Union of South Africa an obligation to place the Territory under the Trusteeship System
by means of a Trusteeship Agreement.

Articles 75 and 77 show, in the opinion of the Court, that this question must be answered in
the negative. The language used in both articles is permissive ("as may be placed
thereunder"). Both refer to subsequent agreements by which the territories in question may be
placed under the Trusteeship System. An "agreement" implies consent of the parties
concerned, including the mandatory Power in the case of territories held under Mandate
(Article 79). The parties must be free to accept or reject the terms of a contemplated
agreement. No party can impose its terms on the other party. Article 77, paragraph 2,
moreover, presupposes agreement not only with regard to its particular terms, but also as to
which territories will be brought under the Trusteeship System.

It has been contended that the word "voluntarily", used in Article 77 with respect to category
(c) only, shows that the placing of other territories under Trusteeship is compulsory. This
word alone cannot, however, over-ride the principle derived from Articles 75, 77 and 79
considered as a whole. An obligation for a mandatory State to place the Territory under
Trusteeship would have been expressed in a direct manner. The word "voluntarily"
incorporated in category (c) can be explained as having been used out of an abundance of
caution and as an added assurance of freedom of initiative to States having territories falling
within that category.

It has also been contended that paragraph 2 of Article 80 imposes on mandatory States a duty
to negotiate and conclude Trusteeship Agreements. The Court finds no justification for this
contention. The paragraph merely States that the first paragraph of the article shall not be
interpreted as giving grounds for delay or postponement of the negotiation and conclusion of
agreements for placing mandated and other territories under the Trusteeship System as
provided for in Article 77. There is nothing to suggest that the [p140] provision was intended
as an exception to the principle derived from Articles 75, 77 and 79. The provision is entirely
negative in character and cannot be said to create an obligation to negotiate and conclude an
agreement. Had the parties to the Charter intended to create an obligation of this kind for a
mandatory State, such intention would necessarily have been expressed in positive terms.

It has further been maintained that Article 80, paragraph 2, creates an obligation for
mandatory States to enter into negotiations with a view to concluding a Trusteeship
Agreement. But an obligation to negotiate without any obligation to conclude an agreement
can hardly be derived from this provision, which expressly refers to delay or postponement of
"the negotiation and conclusion" of agreements. It is not limited to negotiations only.
Moreover, it refers to the negotiation and conclusion of agreements for placing "mandated and
other territories under the Trusteeship System as provided for in Article 77". In other words, it
refers not merely to territories held under Mandate, but also to the territories mentioned in
Article 77 (b) and (c). It is, however, evident that there can be no obligation to enter into
negotiations with a view to concluding Trusteeship Agreements for those territories.

It is contended that the Trusteeship System created by the Charter would have no more than a
theoretical existence if the mandatory Powers were not under an obligation to enter into
negotiations with a view to concluding Trusteeship Agreements. This contention is not
convincing, since an obligation merely to negotiate does not of itself assure the conclusion of
Trusteeship Agreements. Nor was the Trusteeship System created only for mandated
territories.

It is true that, while Members of the League of Nations regarded the Mandates System as the
best method for discharging the sacred trust of civilization provided for in Article 22 of the
Covenant, the Members of the United Nations considered the International Trusteeship
System to be the best method for discharging a similar mission. It is equally true that the
Charter has contemplated and regulated only a single system, the International Trusteeship
System. It did not contemplate or regulate a co-existing Mandates System. It may thus be
concluded that it was expected that the mandatory States would follow the normal course
indicated by the Charter, namely, conclude Trusteeship Agreements. The Court is, however,
unable to deduce from these general considerations any legal obligation for mandatory States
to conclude or to negotiate such agreements. It is not for the Court to pronounce on the
political or moral duties which these considerations may involve.
For these reasons, the Court considers that the Charter does not impose on the Union an
obligation to place South-West Africa under the Trusteeship System. [p141]

***
Question (c) :

"Has the Union of South Africa the competence to modify the international status of the
Territory of South-West Africa, or, in the event of a negative reply, where does competence
rest to determine and modify the international status of the Territory ?"
The international status of the Territory results from the international rules regulating the
rights, powers and obligations relating to the administration of the Territory and the
supervision of that administration, as embodied in Article 22 of the Covenant and in the
Mandate. It is clear that the Union has no competence to modify unilaterally the international
status of the Territory or any of these international rules. This -is shown by Article 7 of the
Mandate, which expressly provides that the consent of the Council of the League of Nations is
required for any modification of the terms of the Mandate.

The Court is further requested to Say where competence to determine and modify the
international status of the Territory rests.

Before answering this question, the Court repeats that the normal way of modifying the
international status of the Territory would be to place it under the Trusteeship System by
means of a Trusteeship Agreement in accordance with the provisions of Chapter XII of the
Charter.

The competence to modify in other ways the international status of the Territory depended on
the rules governing the amendment of Article 22 of the Covenant and the modification of the
terms of the Mandate.

Article 26 of the Covenant laid down the procedure for amending provisions of the Covenant,
including Article 22. On the other hand, Article 7 of the Mandate stipulates that the consent of
the Council of the League was required for any modification of the terms of that Mandate.
The rules thus laid down have become inapplicable following the dissolution of the League of
Nations. But one cannot conclude therefrom that no proper procedure exists for modifying the
international status of South-West Africa.

Article 7 of the Mandate, in requiring the consent of the Council of the League of Nations for
any modification of its terms, brought into operation for this purpose the same organ which
was invested with powers of supervision in respect of the administration of the Mandates. In
accordance with the reply given above to Question (a), those powers of supervision now
belong to the General Assembly of the United Nations. On the other hand, Articles 79 and 85
of the Charter require that a Trusteeship Agreement be concluded by the mandatory Power
and approved by the General Assembly [p142] before the International Trusteeship System
may be substituted for the Mandates System. These articles also give the General Assembly
authority to approve alterations or amendments of Trusteeship Agreements. By analogy, it can
be inferred that the same procedure is applicable to any modification of the international
status of a territory under Mandate which would not have for its purpose the placing of the
territory under the Trusteeship System. This conclusion is strengthened by the action taken by
the General Assembly and the attitude adopted by the Union of South Africa which is at
present the only existing mandatory Power.

On January 22nd, 1946, before the Fourth Committee of the General Assembly, the
representative of the Union of South Africa explained the special relationship between the
Union and the Territory under its Mandate. There would—he said—be no attempt to draw up
an agreement until the freely expressed will of both the European and native populations had
been ascertained. He continued : "When that had been done, the decision of the Union would
be submitted to the General Assembly for judgment."

On April 9th, 1946, before the Assembly of the League of Nations, the Union representative
declared that "it is the intention of the Union Government, at the forthcoming session of the
United Nations General Assembly in New York, to formulate its case for according South-
West Africa a status under which it would be internationally recognized as an integral part of
the Union".

In accordance with these declarations, the Union Government, by letter of August 12th, 1946,
from its Legation in Washington, requested that the question of the desirability of the
territorial, integration in, and the annexation to, the Union of South Africa of the mandated
Territory of South-West Africa, be included in the Agenda of the General Assembly. In a
subsequent letter of October 9th, 1946, it was requested that the text of the item to be included
in the Agenda be amended as follows : "Statement by the Government of the Union of South
Africa on the outcome of their consultations with the peoples of South-West Africa as to the
future status of the mandated Territory, and implementation to be given to the wishes thus
expressed."

On November 4th, 1946, before the Fourth Committee, the Prime Minister of the Union of
South Africa stated that the Union clearly understood "that its international responsibility
precluded it from taking advantage of the war situation by effecting a change in the status of
South-West Africa without proper consultation either of all the peoples of the Territory itself,
or with the competent international organs".

By thus submitting the question of the future international status of the Territory to the
"judgment" of the General Assembly as the "competent international organ", the Union
Government recognized the competence of the General Assembly in the matter.[p143]

The General Assembly, on the other hand, affirmed its competence by Resolution 65 (1) of
December 14th, 1946. It noted with satisfaction that the step taken by the Union showed the
recognition of the interest and concern of the United Nations in the matter. It expressed the
desire "that agreement between the United Nations and the Union of South Africa may
hereafter be reached regarding the future status of the Mandated Territory of South-West
Africa", and concluded: "The General Assembly, therefore, is unable to accede to the
incorporation of the Territory of South-West Africa in the Union of South Africa."

Following the adoption of this resolution, the Union Government decided not to proceed with
the incorporation of the Territory, but to maintain the status quo. The General Assembly took
note of this decision in its Resolution 141 (II) of November 1st, 1947.

On the basis of these considerations, the Court concludes that competence to determine and
modify the international status of South-West Africa rests with the Union of South Africa
acting with the consent of the United Nations.

For these reasons,

The Court is of opinion,

On the General Question :

unanimously,

that South-West Africa is a territory under the international Mandate assumed by the Union of
South Africa on December 17th, 1920;

On Question (a) :

by twelve votes to two,

that the Union of South Africa continues to have the international obligations stated in Article
22 of the Covenant of the League of Nations and in the Mandate for South-West Africa as
well as the obligation to transmit petitions from the inhabitants of that Territory, the
supervisory functions to be exercised by the United Nations, to which the annual reports and
the petitions are to be submitted, and the reference to the Permanent Court of International
Justice to be replaced by a reference to the International Court of Justice, in accordance with
Article 7 of the Mandate and Article 37 of the Statute of the Court;[p144]
On Question (b) :

unanimously,

that the provisions of Chapter XII of the Charter are applicable to the Territory of South-West
Africa in the sense that they provide a means by which the Territory may be brought under the
Trusteeship System;

and by eight votes to six,

that the provisions of Chapter XII of the Charter do not impose on the Union of South Africa
a legal obligation to place the Territory under the Trusteeship System ;

On Question (c) :

unanimously,

that the Union of South Africa acting alone has not the competence to modify the
international status of the Territory of South-West Africa, and that the competence to
determine and modify the international status of the Territory rests with the Union of South
Africa acting with the consent of the United Nations.

Done in English and French, the English text being authoritative, at the Peace Palace, The
Hague, this eleventh day of July, one thousand nine hundred and fifty, in two copies, one of
which will be placed in the archives of the Court and the other transmitted to the Secretary-
General of the United Sations.

(Signed) Basdevant,
President.

(Signed) E. Hambro,
Registrar

Vice-President Guerrero regrets that he is unable to concur in the opinion of the Court on the
answer to the question under letter (b) and declares that in his opinion the Charter imposes on
the Union of South Africa an obligation to place the Territory of [p145] South-West Africa
under the Trusteeship System, and that therefore the Union is bound under paragraph 2 of
Article 80 of the Charter not to delay or postpone the negotiation and conclusion of an
agreement for placing the Territory under the Trusteeship System. Otherwise Article 80 of the
Charter would have no meaning. On this point and on the text in general, Mr. Guerrero shares
the views expressed by Judge De Visscher.

Judges Zoričic and Badawi Pasha declare that they regret to be unable to concur in the answer
given by the Court to the second part of the question under letter (b). They share in general
the views expressed on this point in the dissenting Opinion of Judge De Visscher.

Judge Sir Arnold McNair and Judge Read, availing themselves of the right conferred on them
by Article 57 of the Statute, have appended to the Opinion of the Court statements of their
separate Opinions.

Judges Alvarez, De Visscher and Krylov, availing themselves of the right conferred on them
by Article 57 of the Statute, have appended to the Opinion of the Court statements of their
dissenting Opinions
.
(Initialled), J. B.

(Initialled) E. H. [p146]

SEPARATE OPINION BY SIR ARNOLD McNAIR

I concur in the Replies given by the majority of the Court to the General Question and to
Questions (b) and (c). As to Question (a), I regret that 1 differ as to the obligation to make
reports and as to the transfer of the administrative supervision of the Council of the League of
Nations (including its Rules of Procedure in respect of Petitions) to the United Nations. As
my approach to the main problems differs somewhat from that of the majority, I shall give my
own reasons for answering each question, except in regard to Question (b).

General Question, and Question (a)

The crucial problems raised by Question (a) submitted to the Court are : What is the effect of
the dissolution of the League of Nations in April, 1946, upon the Mandate for South-West
Africa, and which, if any, of the obligations arising from it are still binding upon the Union of
South Africa (which I shall also refer to as "the Union").

The solution submitted by Counsel for the Union Government for the first of these problems
can be .stated very simply : the Mandate is based on the analogy of the contract of mandate in
private law, the League being the Mandator and the Union the Mandatory ; the relationship
cannot subsist without a Mandator at one end and a Mandatory at the other ; "as between the
League and the Union Government, the Mandate therefore came to an end, and that means
that, as from the dissolution of the League, there has been no Mandate" ; "the Mandates
lapsed and the Covenant itself ceased to be a legally valid document" ; and "the dissolution of
the League had the effect of extinguishing all international legal rights and obligations under
the Mandates System". This conclusion left it to be inferred that the Union Government
would thereupon be free to regulate the future status of South-West Africa as a domestic
matter.

For three separate reasons I have formed the opinion that a Mandate is a more durable and a
more complex institution than this solution suggests, and I cannot accept it. My reasons rest
on : [p147]

1. The legal nature of the Mandates System.

2. The objective character of Article 22 of the Covenant of the League of Nations.
3. The terms of the Mandate for South-West Africa and their legal nature.

***

I. The legal nature of the Mandates System. The principal documents responsible for the
creation of the Mandates System are Article 22 of the Covenant of the League of Nations and
the several Mandates confirmed in pursuance of it by the Council of the League. The main
rule of policy proclaimed by Article 22 of the Covenant is that to certain territories "which are
inhabited by peoples not yet able to stand by themselves under the strenuous conditions of the
modern world, there should be applied the principle that the well-being and development of
such peoples form a sacred trust of civilization and that securities for the performance of this
trust should be embodied in this Covenant". This policy was applied to certain colonies and
territories, including South-West Africa, "which, as a consequence of the [then] late war have
ceased to be under the sovereignty of the States which formerly governed them". The earliest
document (or at any rate one of the earliest documents to contain an exposition of this new
policy is the Memorandum by General Smuts, called "The League of Nations : A Practical
Suggestion", which will be found in Volume II, pages 23-60, of Hunter Miller's book, "The
Drafting of the Covenant". This Memorandum, so far as the Mandates System is concerned,
deals with policy and principles rather than with legal machinery. Its author held the view that
the "authority, control or administration" of these dependent territories should be vested in the
League, but that, as "joint international administration in so far as it has been applied to
territories or peoples, has been found wanting wherever it has been tried", it would be
preferable that the League, instead of exercising these powers itself, should delegate them to a
"mandatory State". Beyond that the Memorandum does not discuss the legal nature of the
relations between the League and the Mandatory. From page 508 of Volume 1 of the same
book, it seems probable that, in the course of the preparatory work for the treaties-of peace,
the critical resolution regarding the Mandates System was presented and adopted in English ;
in the French text there appear the words "mandat", "mandataire" and "tutelle".[p148]

What is the duty of an international tribunal when confronted with a new legal institution the
object and terminology of which are reminiscent of the rules and institutions of private law?
To what extent is it useful or necessary to examine what may at first sight appear to be
relevant analogies in private law systems and draw help and inspiration from them?
International law has recruited and continues to recruit many of its rules and institutions from
private systems of law. Article 38 (1) (c) of the Statute of the Court bears witness that this
process is still active, and it will be noted that this article authorizes the Court to "apply .... (c)
the general principles of law recognized by civilized nations". The way in which international
law borrows from this source is not by means of importing private law institutions "lock,
stock and barrel", ready-made and fully equipped with a set of rules. It would be difficult to
reconcile such a process with the application of "the general principles of law". In my
opinion, the true view of the duty of international tribunals in this matter is to regard any
features or terminology which are reminiscent of the rules and institutions of private law as an
indication of policy and principles rather than as directly importing these rules and
institutions. I quote a sentence from a judgment by Chief Justice Innes in the decision of the
Supreme Court of South Africa in Rex v. Christian, South African Law Reports [1924],
Appellate Division, 101, 112 :

"Article 22 [of the Covenant] describes the administration of the territories and peoples with
which it deals as a tutelage to be exercised by the governing Power as mandatory on behalf of
the League. Those terms were probably employed, not in their strict legal sense, but as
indicating the policy which the governing authority should pursue. The relationship between
the League and the mandatory could not with any legal accuracy be described as that of
principal and agent."

Let us then seek to discover the underlying policy and principles of Article 22 and of the
Mandates. No technical significance can be attached to the words "sacred trust of
civilization", but they are an apt description of the policy of the authors of the Mandates
System, and the words "sacred trust" were not used here for the first time in relation to
dependent peoples (see Duncan Hall, Mandates, Dependencies and Trusteeships, pp. 97-100).
Any English lawyer who was instructed to prepare the legal instruments required to give
effect to the policy of Article 22 would inevitably be reminded of, and influenced by, the trust
of English and American law, though he would soon realize the need of much adaptation for
the purposes of the new international institution. Professor Brierly's opinion, stated in the
British Year Book of International Law, 1929, pages 217-219, that the governing principle of
the Mandates [p149]
System is to be found in the trust, and his quotation from an article by M. Lepaulle, are here
very much in point, and it is worth noting that the historical basis of the legal enforcement of
the English trust is that it was something which was binding upon the conscience of the
trustee; that is why it was legally enforced. It also seems probable that the conception of the
Mandates System owes something to the French tutelle.
Nearly every legal system possesses some institution whereby the property (and sometimes
the persons) of those who are not sui juris, such as a minor or a lunatic, can be entrusted to
some responsible person as a trustee or tuteur or curateur. The Anglo-American trust serves
this purpose, and another purpose even more closely akin to the Mandates System, namely,
the vesting of property in trustees, and its management by them in order that the public or
some class of the public may derive benefit or that some public purpose may be served. The
trust has frequently been used to protect the weak and the dependent, in cases where there is
"great might on the one side and unmight on the other", and the English courts have for many
centuries pursued a vigorous policy in the administration and enforcement of trusts.

There are three general principles which are common to all these institutions :

(a) that the control of the trustee, tuteur or curateur over the property is limited in one way or
another ; he is not in the position of the normal complete owner, who can do what he likes
with his own, because he is precluded from administering the property for his own personal
benefit;
(b) that the trustee, tuteur or curateur is under some kind of legal obligation, based on
confidence and conscience, to carry out the trust or mission confided to him for the benefit of
some other person or for some public purpose ;
(c) that any attempt by one of these persons to absorb the property entrusted to him into his
own patrimony would be illegal and would be prevented by the law.

These are some of the general principles of private law which throw light upon this new
institution, and I am convinced that in its future development the law governing the trust is a
source from which much can be derived. The importance of the Mandates System is marked
by the fact that, after the experience of a quarter of a century, the Charter of the United
Nations made provision for an "International Trusteeship System", which was described by a
[p150] Resolution of the Assembly of the League of April 18th, 1946, as embodying
"principles corresponding to those declared in Article 22 of the Covenant of the League".

Upon sovereignty a very few words will suffice. The Mandates System (and the
"corresponding principles" of the International Trusteeship System) is a new institution-—a
new relationship between territory and its inhabitants on the one hand and the government
which represents them internationally on the other— a new species of international
government, which does not fit into the old conception of sovereignty and which is alien to it.
The doctrine of sovereignty has no application to this new system. Sovereignty over a
Mandated Territory is in abeyance ; if and when the inhabitants of the Territory obtain
recognition as an independent State, as has already happened in the case of some of the
Mandates, sovereignty will revive and vest in the new State. What matters in considering this
new institution is not where sovereignty lies, but what are the rights and duties of the
Mandatory in regard to the area of territory being administered by it. The answer to that
question depends on the international agreements creating the system and the rules of law
which they attract. Its essence is that the Mandatory acquires only a limited title to the
territory entrusted to it, and that the measure of its powers is what is necessary for the purpose
of carrying out the Mandate. "The Mandatory's rights, like the trustee's, have their foundation
in his obligations ; they are 'tools given to him in order to achieve the work assigned to him' ;
he has 'all the tools necessary for such end, but only those'." (See Brierly, referred to above.)

Some practical confirmation of these suggestions of the relevant principles can be obtained
from judgments delivered by the Courts of two Mandatories—the Union of South Africa and
the Common-wealth of Australia. (As the Reports of these decisions are riot available
everywhere, I must quote extracts from them.) In Rex v. Christian, already cited, before the
Supreme Court of South Africa, the Honourable J. de Villiers, Judge of ,4ppeal, said :

"It is true there is no cession of the territory to the Union Government as in the case of other
possessions which formerly belonged to Germany. By Article 257 South-West Africa is said
to be transferred to the Union Government in its capacity as mandatory. But, as I shall show,
by that is meant that the Union Government is bound by the terms of the treaty, as well as in
honour, scrupulously to carry out the terms of the Mandate. South-West Africa is transferred
to the people of the Union not by way of absolute property, but in the same way as a trustee is
in possession of the property of the cestui que trust or a guardian of the property of his [p151]
ward. The former has the administration and control of the property, but the property has to be
administered exclusively in the interests of the latter. The legal terms employed in Article
22—trust, tutelage, mandate—cannot be taken literally as expressing the definite conceptions
for which they stand in law. They are to be understood as indicating rather the spirit in which
the advanced nation who is honoured with a mandate should administer the territory entrusted
to its care and discharge its duties to the inhabitants of the territory, more especially towards
the indigenous populations. In how far the legal principles of these analogous municipal
institutions should be applied in these international relations I shall not take upon myself to
pronounce. But I may be permitted to say that in my opinion the use of the term shows that, in
so far as those legal principles are reasonably applicable to these novel institutions, they
should loyally be applied. No doubt most difficult questions will arise. In municipal law a
principal can, e.g., revoke his authority at his own mere pleasure. Such is the rule. Could this
be done in the case of South-West Africa where the Union Government, if there is a principal
at all, must be considered as a joint principal together with all the other high contracting
parties ?" (P. 121.)

And Sir J. W. Wessels, Judge of Appeal, said :

"This leaves us with the mandatory power. Now although the term mandatory power seems to
imply that the mandatory acts as the agent of the League of Nations or of the associated
powers, yet in fact that is not so. Neither by the Treaty of Versailles nor by the mandate of the
League of Nations has the Union of South Africa been appointed as a mere agent. There is no
question here of respondent superior...." (P. 136.)

I share this view that the legal character of the Mandates cannot be explained by reference to
the private law contract of mandate or agency. The words "Mandate" and "Mandatory" were
employed as non-technical terms to denote that the Mandatory was doing something "on
behalf of the League", and that that is all that can be extracted from their use. It is primarily
from the principles of the trust that help can be obtained on the side of private law.
In Ffrost v. Stevenson (1937), 58 Commonwealth Law Reports 528, Annual Digest and
Reports of Public International Law Cases, 1935-1937, Case No. 29, the High Court of
Australia, on appeal from the Supreme Court of New South Wales, had to decide, on a matter
of extradition, whether or not "the Mandated Territory of New Guinea [also a C Mandate] is a
place out of His Majesty's Dominions in which His Majesty has jurisdiction....". The High
Court gave an affirmative answer. This decision involved a consider-[p152]ation of the nature
of a Mandate and the powers of a Mandatory, and the following extracts from the judgments
of Chief Justice Latham and Mr. Justice Evatt are of interest. The former said :
"The grant of mandates introduced a new principle into international law...." (P. 550.)

"The position of a mandatory in relation to a mandated territory must be regarded as sui

generis. The Treaty of Peace, read as a whole, avoids cession of territory to the mandatory,
and, in the absence of definite evidence to the contrary, it must, I think, be taken that New
Guinea has not become part of the dominions of the Crown." (P. 552.)

"The intention of this provision [Article 257 of the Treaty of Peace] must be taken to have
been to provide for the transfer of the territory to the mandatory, but only in its capacity as a
mandatory. The mandatory, as a kind of international trustee, receives the territory subject to
the provisions of the mandate which limit the exercise of the governmental powers of the
mandatory. Thus the article quoted, while recognizing that the territory is actually to be
transferred to the mandatory, emphasizes the conditions and limitations upon governmental
power which constitute the essence of the mandatory system. Thus the title under which the
territory is to be held as a mandated territory is different from that under which a territory
transferred by simple cession would have been held. The article shows that the intention was
to achieve a transfer of a territory without making that territory in the ordinary sense a
possession of the mandatory. A territory which is a 'possession' can be ceded by a power to
another power so that the latter power will have complete authority in relation to that territory.
Such a cession by a mandatory power would be quite inconsistent with the whole conception
of a mandate. A mandated territory is not a possession of a power in the ordinary sense." (Pp.
552, 553.)

Mr. Justice Evatt, after referring to a number of British decisions on the status of
protectorates, said :

"It is quite fallacious to infer from the fact that, in pursuance of its international duties under
the mandate, the Commonwealth of Australia exercises full and complete jurisdiction over the
territory as though it possessed unlimited sovereignty therein, either that the territory (a) is a
British possession, or (b) is within the King's dominions, or (c) has ever been assimilated or
incorporated within the Commonwealth or its territories...." (P. 551.)

"Therefore, it can be stated that, despite certain differences of opinion as to such questions as
sovereignty in relation to the mandated territories, every recognized authority in international
law accepts the view that the Mandated Territory of New Guinea is not part of the King's
dominions. Over and over again this fact [p153]has been recognized by the leading jurists of
Europe including many who have closely analyzed such matters in relation to the organization
and administration of the League of Nations." (P. 582.)
He then adopted Professor Brierly's view, referred to above, as to 'the governing principle of
the Mandates System.

Reference should also be made to Mr. Justice Evatt's judgment in Jolley v. Mainka (1933), 49
Commonwealth Law Reports 242, at pages 264-292, Annual Digest, 1933-1934, Case No. 17,
relating to the same Mandated Territory.

***

2. The objective character of Article 22 of the Covenant of the League of Nations

From time to time it happens that a group of great Powers, or a large number of States both
great and small, assume a power to create by a multipartite treaty some new international
régime or status, which soon acquires a degree of acceptance and durability extending beyond
the limits of the actual contracting parties, and giving it an objective existence. This power is
used when some public interest is involved, and its exercise often occurs in the course of the
peace settlement at the end of a great war. In 1920 the Council of the League had to deal with
a dispute between Finland and Sweden, Which, inter alia, involved an examination of the
existing condition of a Convention dated March 30, 1856, between France and Great Britain
on the one hand and Russia on the other, whereby Russia, in compliance with the desire of the
other two States, declared "that the Aaland Islands shall not be fortified, and that no military
or naval base shall be maintained or created there". (This Convention was attached to and
became all integral part of the General Treaty of Peace of the same date, made between seven
States, which brought the Crimean War to an end.) Sweden claimed that this status of
demilitarization was still in force in 1920 in spite of many intervening events, and that she,
though not a party to the Convention or Peace Treaty of 1856, was entitled to the benefit of it;
her claim was based on the allegation of an international servitude. As the Permanent Court of
International Justice had not then come into existence, the Council of the League set up a
Commission of Jurists; Professor F. Larnaude (President), Professor A. Struycken and
Professor Max Huber, and referred certain legal questions to them. They received written
statements and heard oral arguments on behalf of Finland and Sweden. The Jurists rejected
the argument based on an alleged servitude and reported that the provisions of the Convention
and Treaty of 1856 for demilitarization were still in force.[p154]

"These provisions [they said] were laid down in European interests. They constituted a special
international status. relating to military considerations, for the Aaland Islands. It follows that
until these provisions are duly replaced by others, every State interested [including Sweden
which was not a party] has the right to insist upon compliance with them. It also follows that
any State in possession of the Islands must conform to the obligations binding upon it, arising
out of the system of demilitarization established by these provisions."

The Report [FN1] contains many expressions which illuminate this conclusion, e.g.,

-----------------------------------------------------------------------------------------------------------------
-----------
[FN1] L. N. Off. Jo. Oct. 1920, Spec. Sup. No. 3.
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-----------

"The Powers have, on many occasions since 1815, and especially at the conclusion of peace
treaties, tried to create true objective law, a real political status the effects of which are felt
outside the immediate circle of contracting parties",

and again, "the character of a settlement regulating European interests", "European law", and
"the objective nature of the settlement".

It may seem a far cry from the Aaland Islands to South-West Africa, but reference to this case
is demanded by the high standing of the members of the Commission and by the relevance of
their reasoning to the present problems. I may also refer to the statement by the Permanent
Court in the SS. Wimbledon case (Series A. No. 1, p. 22) that as a result of Article 380 of the
Treaty of Versailles of 1919 the Kiel Canal "has become an international waterway intended
to provide under treaty guarantee easier access to the Baltic for the benefit of all nations of the
world"-—which was referred to as "its new regime".

The Mandates System seems to me to be an a fortiori case. The occasion was the end of a
world war. The parties to the treaties of peace incorporating the Covenant of the League and
establishing the system numbered thirty. The public interest extended far beyond Europe.
Article 22 proclaimed "the principle that the well-being and development of such peoples
form a sacred trust of civilization and that securities for the performance of this trust should
be embodied in the Covenant". A large part of the civilized world concurred in opening a new
chapter in the life of between fifteen and twenty millions of people, and this article was the
instrument adopted to give effect to their desire. In my opinion, the new régime established in
pursuance of this "principle" has more than a purely contractual basis, and the territories
subjected to it are impressed with a special legal status, designed to last [p155] until modified
in the manner indicated by Article 22. The dissolution of the League has produced certain
difficulties, but, as I shall explain, they are mechanical difficulties, and the policy and
principles of the new institution have survived the impact of the events of 1939 to 946, and
have indeed been reincarnated by the Charter under the name of the "International Trusteeship
System", with a new lease of life

3. The terms of the Mandate for South-West Africa and their legal nature

What obligations and other legal effects were produced by the Mandate for South-West Africa
? From the first paragraph of Article 22 of the Covenant it appears that German sovereignty
had already disappeared before the Mandate was granted on December 17, 1920. Nothing
more is said about sovereignty. The penultimate paragraph tells us that the Council of the
League will define "the degree of authority, control or administration to be exercised by the
Mandatory": this is not the language of sovereignty and indicates some new relationship
between a State and the territory for which it is to become responsible— a title more limited
in character than the normal title of the sovereign State, a title which is possessory rather than
proprietary.
The Mandate in this case is a document dated December 17, 1920, whereby, after a preamble
containing important recitals, the Council of the League : "Confirming the said Mandate,
defines its terms as follows" in seven articles. Article I says that : "The territory over which a
mandate is conferred upon His Britannic Majesty for and on behalf of the Government of the
Union of South Africa .... comprises the territory which formerly constituted the German
Protectorate of South-West Africa." Article 2 provides that : "The Mandatory shall have full
power of administration and legislation over the Territory subject to the present Mandate as
an integral portion of the Union of South Africa, and may apply the laws of the Union of
South Africa to the territory, subject to such local modifications as circumstances may
require. The Mandatory shall promote to the utmost the material and moral well-being and the
social progress of the inhabitants subject to the present Mandate." This language does not
make the Territory a part of the territory of the Union of South Africa, and negatives any such
inference. Article 3 relates to the slave trade, forced labour, the traffic in arms and
ammunition, and the supply of intoxicating spirits and beverages to the natives. Article 4
prohibits the military training of the natives "otherwise than for purposes of internal police
and the local [p156] defence of the territory", the establishment of military or naval bases and
the erection of fortifications. Article 5 provides for "freedom of conscience and the free
exercise of all forms of worship" and for the admission, travel and residence of missionaries
who are nationals of any State Member of the League of Nations. Article 6 provides that :

"The mandatory shall make to the Council of the League of Nations an annual report to the
satisfaction of the Council, containing full information with regard to the Territory and
indicating the measures taken to carry out the obligations assumed under Articles 2, 3, 4 and
5."

Article 7 provides that :

"The consent of the Council of the League of Nations is required for any modification of the
terms of the present Mandate.

The Mandatory agrees that, if any dispute whatever should arise between the Mandatory and
another Member of the League of Nations relating to the interpretation or the application of
the provisions of the Mandate, such dispute, if it cannot be settled by negotiation, shall be
submitted to the Permanent Court of International Justice provided for by Article 14 of the
Covenant of the League of Nations...."

These obligations possess two distinct characters. The provisions of the Mandate are in part
contractual 'and in part "dispositive" (upon which term see Westlake, International Law (2nd
edition), ii, pp. 60, 294). In English terminology, it is both a "contract" and a "conveyance",
that is to Say, a document which transfers or creates rights connected with property or
possession. In addition to the personal rights and obligations referred to above, it also created
certain "real" rights and obligations. Coupled with the effect of the assent of the Principal
Allied and Associated Powers, in whose favour Germany renounced her rights and titles over
South-West Africa and who are expressly described in the preamble of the Mandate as the
proposers of the Mandate, the Mandate transferred to the Mandatory, or created and
recognized in the hands of the Mandatory, certain rights of possession and government
(administrative and legislative) which are valid in rem—erga omnes, that is, against the whole
world, or at any rate against every State which was a Member of the League or in any other
way recognized the Mandate ; moreover, there are certain obligations binding every State that
is responsible for the control of territory and available to other States.

In short, the Mandate created a status for South-West Africa. This fact is important in
assessing the effect of the dissolution of the League. This status—valid in rem—supplies the
element of [p157]
permanence which would enable the legal condition of the Territory to survive the
disappearance of the League, even if there were no surviving personal obligations between the
Union and other former Members of the League. "Real" rights created by an international
agreement have a greater degree of permanence than personal rights, because these rights
acquire an objective existence which is more resistant than are personal rights to the
dislocating effects of international events. The importance of this point is that it makes it
unnecessary to determine the respective roles of the Principal Allied and Associated Powers
and the Council of the League in the creation of the Mandate or to consider whether those
Powers became functi oficio after the allocation and confirmation of the Mandate, as was
submitted by counsel for the Union Government, or not. As Chief Justice Marshall said in
Chirac v. Chirac (1817), 2 Wheaton 259, 277 (cited in Moore, Digest of International Law,
Section 780), speaking of a treaty which had expired :

"A right once vested does not require, for its preservation, the continued existence of the
power by which it was acquired. If a treaty, or any other law, has performed its office by
giving a right, the expiration of the treaty or law can not extinguish that right."

***

I now turn to consider the effect of the dissolution of the League.

The dissolution of the League on April 19, 1946, did not automatically terminate the
Mandates. Each Mandate has to be considered separately to ascertain the date and the mode of
its termination. Take the case of Palestine. It is instructive to note that on November 29, 1947,
the General Assembly of the United Nations adopted a resolution approving a plan of
partition of Palestine, which was firmly based on the view that the Palestine Mandate still
continued, as is evident from Articles I and 2 of Part A and Article 12 of Part B of the Plan.
Again, in the Peace Treaty with Italy of February 10, 1947, it was considered necessary
(Article 40) that Italy should renounce all her rights under the Mandates System and in respect
of any mandated territory.

The Mandate for South-West Africa was never formally terminated, and I can find no events
which can be said to have brought about its termination by implication. Paragraph 3 of the
Resolution of the Assembly of the League regarding the Mandates, dated April 18, 1946, does
not Say that the Mandates come to an end but that, "on the termination of the League's
existence, its functions with respect to the Mandated Territories will come to an end".[p158]
Which then of the obligations and other legal effects resulting from the Mandate remain to-
day ? The Mandatory owed to the League and to its Members a general obligation to carry out
the terms of the Mandate and also certain specific obligations, such as the obligation of
Article 6 to make an annual report to the Council of the League. The obligations owed to the
League itself have come to an end. The obligations owed to former Members of the League,
at any rate, those who were Members at the date of its dissolution, subsist, except in so far as
their performance involves the actual co-operation of the League, which is now impossible. (I
shall deal with Article G and the first paragraph of Article 7 later.) Moreover, the international
status created for South-West Africa, namely that of a territory governed by a State in
pursuance of a limited title as defined in a Mandate, subsists.

Although there is no longer any League to supervise the exercise of the Mandate, it would be
an error to think that there is no control over the Mandatory. Every State which was a
Member of the League at the time of its dissolution still has a legal interest in the proper
exercise of the Mandate. The Mandate provides two kinds of machinery for its supervision—
judicial, by means of the right of any Member of the League under Article 7 to bring the
Mandatory compulsorily before the Permanent Court, and admin-istrative, by means of annual
reports and their examination by the Permanent Mandates Commission of the League.

The judicial supervision has been expressly preserved by means of Article 37 of the Statute of
the International Court of Justice adopted in 1945 :

"Whenever a treaty or convention in force provides for reference of a matter to a tribunal to

have been instituted by the League of Nations, or to the Permanent Court of International
Justice, the matter shall, as between the parties to the present Statute, be referred to the
International Court of Justice."

This article effected a succession by the International Court to the compulsory jurisdiction
conferred upon the Permanent Court by Article 7 of the Mandate ; for there can be no doubt
that the Mandate, which embodies international obligations, belongs to the category of treaty
or convention ; in the judgment of the Permanent Court in the Mavrommatis Palestine
Concessions (Jurisdiction) case, Series A, No. 2, p. 35, the Palestine Mandate was referred to
as an "international agreement" ; and I have endeavoured to show that the agreement between
the Mandatory and other Members of the League embodied in the Mandate is still "in force".
The expression "Member of the League of Nations"
[p159] is descriptive, in my opinion, not conditional, and does not mean "so long as the
League exists and they are Members of it" ; their interest in the performance of the obligations
of the Mandate did not ,accrue to them merely from membership of the League, as an
examination of the content of the Mandate makes clear. Moreover, the Statute of the
International Court empowers it to call from the parties for "any document" or "any
explanations" (Article 49) ; and to entrust any "individual, body, bureau, commission or other
organization that it may select, with the task of carrying out an enquiry..-" (Article 50). Article
94 of the Charter empowers the Security Council of the United Nations to "make
recommendations or decide upon measures to be taken to give effect to the judgment" of the
Court, in the event of a party to a case failing to carry out a judgment of the Court. In
addition, the General Assembly or the Security Council of the United Nations may request the
Court to give an advisory opinion on any legal question (Article 96 of the Charter).

On the other hand, the administrative supervision by the Council of the League, as advised by
the Permanent Mandates Commission, has lapsed, including the obligation imposed by Article
22 of the Covenant and Article 6 of the Mandate to make, in the words of the Mandate, "to the
Council of the League of Nations an annual report to the satisfaction of the Council....". This
supervision has lapsed because the League and its Council and Permanent Mandates
Commission—the organs which were designated (i) to receive the reports, (ii) to be satisfied
with them and (iii) to examine and advise upon them—no longer exist, so that it has become
impossible to perform this obligation. (When a particular Mandate was under discussion by
the Council, the Mandatory, if not a Member of the Council, was invited to sit with the
Council, with full power of speaking and voting.)

But it was contended on several grounds in the statements submitted by certain governments
to the Court, that the Union of South Africa is nevertheless under an obligation to accept the
administrative supervision of the Mandate by the United Nations, and in particular to send
annual reports to that Organization.

The first contention was that there had been an automatic succession by the United Nations to
the rights and functions of the Council of the League in this respect; but this is pure inference,
as the Charter contains no provision for a succession such as Article 37 of the Statute of the
International Court operates in the case of the compulsory jurisdiction of the Permanent Court
in regard to the Mandates. The succession of the United Nations to the administrative
functions of the League of Nations in regard to the Mandates could have been expressly
preserved and vested in the United Nations in a similar manner, but this was not done. At the
San Francisco Conference in May, 1945, when the Charter [p160] was being drafted, the
Union Government circulated to the delegations present a statement intimating that in due
course it would claim "that the Mandate should be terminated and that the Territory should be
incorporated as part of the Union of South Africa" (printed in United Nations General
Assembly Official Records, 1st session, 2nd Part, Fourth Committee, Part 1, p. 201). But
either it was hoped that in spite of this intimation the Union Government would voluntarily
elect to convert its Mandate into a Trusteeship Agreement under Chapters XII and XIII of the
Charter, or the question of preserving the administrative supervision of the Mandate was
overlooked.

A second contention was based on the expression occurring in Article 80, paragraph 1, of the
Charter that "nothing in this Chapter [XII] shall be construed in or of itself to alter in any
manner the rights whatsoever of any States or peoples or the terms of existing international
instruments to which Members of the United Nations may respectively be parties". But the
cause of the lapse of the supervision of the League and of Article 6 of the Mandate is not
anything contained in Chapter XII of the Charter but is the dissolution of the League, so that it
is difficult to see the relevance of this article.

A third contention was based on statements made on behalf of the Union Government in
letters and in the speeches of its delegates attending meetings of the organs of the United
Nations and generally upon the conduct of that Government since the dissolution of the
League. An example of these passages—one which was received a considerable degree of
prominence—occurs in the following extract from a speech by Mr. Leif Egeland, delegate of
the Union Government, at a meeting of the Assembly of the League on April 9, 1946 :

"...: it is the intention of the Union Government, at the forthcoming session of the United
Nations General Assembly in New York, to formulate its case for according South-West
Africa a status under which it would be internationally recognized as an integral part of the
Union. As the Assembly will know, it is already administered under the terms of the Mandate
as an integral part of the Union. In the meantime, the Union will continue to administer the
Territory scrupulously, in accordance with the obligations of the Mandate, for the
advancement and promotion of the interests of the inhabitants, as she has done during the past
six years when meetings of the Mandates Commission could not be held.

The disappearance of those organs of the League concerned with the supervision of Mandates,
primarily the Mandates Commission and the League Council, will necessarily preclude
complete com-[p161]pliance with the letter of the Mandate. The Union Government will
nevertheless regard the dissolution of the League as in no way diminishing its obligations
under the' Mandate, which it will continue to discharge with the full and proper appreciation
of its responsibilities until such time as other arrangements are agreed upon concerning the
future status of the territory."

There are also many statements to the effect that the Union Government will continue to
administer the Territory "in the spirit of the Mandate". These statements are in the aggregate
contradictory and inconsistent; and I do not find in them adequate evidence that the Union
Government has either assented to an implied succession by the United Nations to the
administrative supervision exercised by the League up to the outbreak of the war in 1939, or
has entered into a new obligation towards the United Nations to revive the pre-war system of
supervision.

A fourth contention is based on a Resolution on the Mandates adopted by the Assembly of the
League on April 18, 1946, by virtue of which, the Assembly

"3. Recognizes that, on the termination of the League's existence, its functions with respect to
the Mandated Territories will come to an end, but notes that Chapters XI, XII and XIII of the
Charter of the United Nations embody principles corresponding to those declared in Article
22 of the Covenant of the League;

4. Takes note of the expressed intentions of the Members of the League now administering
Territories under Mandate to continue to administer them for the well-being and development
of the peoples concerned in accordance with the obligations contained in the respective
Mandates, until other arrangements have been agreed between the United Nations and the
respective Man-datory Powers."

By this Resolution the Assembly recognized that the functions of the League had come to an
end ; but it did not purport to transfer them, with the consent of all States interested therein, to
the United Nations. I do not see how this Resolution can be construed as having created a
legal obligation by the Union to make annual reports to the United Nations and to transfer to
that Organization the pre-war supervision of its Mandate by the League. At the most it could
impose an obligation to perform those obligations of the Mandate—and there are many—
which did not involve the activity of the League.

In these circumstances, I cannot find any legal ground on which the Court would be justified
in replacing the Council of the League by the United Nations for the purposes of exercising
the administrative supervision of the Mandate and the receipt and examin-[p162]ation of
reports. It would amount to imposing a new obligation upon the Union Government and
would be a piece of judicial legislation. In saying this, I do not overlook the competence of
the 7General Assembly of the United Nations, under Article 10 of the Charter, to discuss the
Mandate for South-West Africa and to make recommendations concerning it, but that
competence depends not upon any theory of implied succession but upon the provisions of the
Charter.

For these reasons I am of the opinion that the continuing international obligations of the
Union of South Africa under the Mandate for South-West Africa do not include the obligation
to accept the administrative supervision of the United Nations and to render annual reports to
that Organization.

***
Question (b)

I concur in the Opinion of the majority of the Court with respect to this question.

***
Question (c)

There remains to be considered the effect of the dissolution of the League upon the first
paragraph of Article 7 of the Mandate, whereby "the consent of the Council of, the League of
Nations is required for any modification of the terms of the present Mandate" —a provision
which appears in all the Mandates. The effect of this paragraph is that thereby the Members of
the League, as the States interested in the Mandate, empowered the Council of the League on
their behalf to consent to any modification of the Mandate which the Council might consider
to be appropriate.

The party who was expected to bring about any modifications which the passage of years
might show to be necessary was the Mandatory but, as I have endeavoured to show in
answering Question (a), the Mandatory's title is limited and it has no power, acting alone, to
modify the international status of the Territory, either by incorporating it into its own territory
or otherwise.

What then is the effect of the disappearance of the League and the ensuing impossibility of
obtaining the consent of its Council ? In my opinion, the effect is that the first paragraph of
Article 7 of the Mandate has now lapsed. But this event in no way alters the quality or amount
of the Mandatory's title or enlarges its power to modify the terms of the Mandate, because the
international obligations affecting the Territory (except those which, as I have stated, have
already lapsed) and the international status of the Territory continue to exist. Moreover, the
Charter provides one [p163] method by which the international status of the Territory can
lawfully be modified by the Mandatory, namely, by negotiating with the United Nations and
placing it under a trusteeship agreement, as described in Chapters XII and XIII of the Charter.

On the last day of the existence of the League, April 18, 1946, the Assembly adopted a
Resolution on the subject of Mandates of which paragraphs 3 and 4 have been quoted above
on page 112.

My reply to Question (c) is that the effect of this Resolution is that the League and those
States which were Members of it at the date of its dissolution consented to any arrangements
for the modification of the terms of the Mandate that might be agreed between the United
Nations and the Union Government, and that competence to determine and modify the
international status of the Territory rests with the Union of South Africa acting with the
consent of the United Nations.

{Signed) Arnold D. McNair. [p164]

SEPARATE OPINION BY JUDGE READ

I concur in the part of the Opinion which answers Questions (b) and (c)—dealing with the
application of Chapter XII of the Charter, and competence to determine and modify the
international status of South-West Africa—and am in general agreement with the reasons by
which the answers are justified. I also concur in the part of the answer to Question (a) which
relates to the continued substantive international obligations of the Union of South Africa
arising under the Mandate. I am, however, unable to concur in the part of the answer which is
concerned with accountability to, and supervision by, the United Nations or in the reasons by
which it is justified. Accordingly, and with regret, I feel bound to state the reasons which have
led me to dissent.

The Court is asked whether the Union continues "to have international obligations under the
mandate for South-West Africa and, if so, what are those obligations ?" To answer this
question, it is necessary to examine the international obligations under the Mandate as they
existed before the dissolution of the League, to consider the effect of the dissolution, and to
ascertain whether any other factors have affected the continuance of those obligations.

For this purpose, it is unnecessary to retrace the ground covered by the Opinion of the Court.
It is sufficient to note that the international status of South-West Africa was that of a
mandated territory. The Union of South Africa exercised most of the powers which are
inherent in sovereignty, but the residual elements were neither exercised nor possessed by the
Union. It was subject to three kinds of international obligations.

The first, and the most important, were obligations designed to secure and protect the well-
being of the inhabitants. They did not enure to the benefit of the Members of the League,,
although each and every Member had a legal right to insist upon their discharge. The most
important, the corner-stone of the Mandates System, was "the principle that the well-being
and development of such peoples forms a sacred trust of civilization", a principle which was
established in paragraph I of Article 22 of the Covenant.

The second kind of obligations comprised those which were due to, and enured to, thc benefit
of the Members of the League : e.g., in respect of missioinaries and nationals.[p165]

The third kind of obligations comprised the legal duties which were concerned with the
supervision and enforcement of the first and the second. There was the compulsory
jurisdiction of the Permanent Court, established by Article 7 of the Mandate Agreement ; and
there was the system of report, accountability, supervision and modification, under paragraphs
7, S and 9 of Article 22, and Articles 6 and 7 of the Mandate Agreement. This third class of
obligations was the new element in the Mandates System, and its importance should not be
underrated. At the same time it should not be overestimated. The disappearance of the
obligations included in the first and the second classes would bring the Mandates System to
an end. The disappearance of the regime of report, accountability, supervision and
modification, through the Council and the Permanent Mandates Commission, might weaken
the Mandates System; but it would not bring it to an end. As a matter of fact, the record shows
that the paralysis of those agencies during six war years had no detrimental effect upon the
maintenance of the well-being and development of the peoples.

These obligations have one point in common. Each Member of the League had a legal
interest, vis-à-vis the Mandatory Power, in matters "relating to the interpretation or the
application of the provisions of the Mandate" ; and had a legal right to assert its interest
against the Union by invoking the compulsory jurisdiction of the Permanent Court (Article 7
of the Mandate Agreement). Further, each Member, at the time of dissolution, had substantive
legal rights against the Union in respect of the Mandate. A substantial number of Members of
the League were not signatories of the Charter, and have not since been admitted to
membership in the United Nations. It is a principle of international law that the parties to a
multilateral treaty, regardless of their number or importance, cannot prejudice the legal rights
of other States. The United Nations, by signing and ratifying the Charter, could and did
establish the competence of the Organization to perform functions in relation to the mandated
territories. They could not, in law, transfer functions from the League to the Organization,
without the consent and authority of the League, or of Members of the League whose legal
rights would thus be impaired. Consequently, while the Charter had come into force and the
organization of the United Nations had come into being before the dissolution of the League,
the legal rights of many States, which were not members of the new Organization, as regards
the mandated territories including South-West Africa, remained in full force and vigor.

Bearing in mind the nature of the international status of South-West Africa under the
Mandates System, it is necessary to consider the effect of the dissolution of the League. In
this matter, I concur [p166] in the view of my colleagues that the international status of South-
West Africa, as a mandated territory, survived the League. I also agree with their view that the
international obligations of the Union under the Mandate continued. On the other hand, I
differ from the majority on two points: (1) I regard as significant the survival of the rights and
legal interests of the Members of the League ; and (2) in the effect of the dissolution upon
certain of the auxiliary obligations under the Mandate.

With regard to the first point, the same reasons which justify the conclusion that the Mandate
and the obligations of the Union were not brought to an end by the dissolution of the League,
lead inevitably to the conclusion that the legal rights and interests of the Members, under the
Mandate, survived. If the obligations of the Union, one of the "Mandatories on behalf of the
League", continued, the legal rights and interests of the Members of the League must, by
parity of reasoning, have been maintained. It is therefore necessary to find, and to rely on,
some disposition of the Mandate which, under the rules of international law, would be capable
of impairing or extinguishing the legal rights and interests of the Members of the League,
including those which are not members of the United Nations. No provisions of the Charter
could be sufficient for the purpose. Only action by the League, or the consent of the Members
of the League, could have that effect.

The second point relates to the auxiliary obligations, the third kind of obligations mentioned
above as arising under the Mandate. No problem exists, as regards the compulsory jurisdiction
of the Permanent Court, which was transferred to this Court by Article 37 of the Statute.

The obligations in relation to report and accountability to, and supervision by, the League,
under paragraphs 7 and 8 of Article 22 of the Covenant and Articles 6 and 7 of the Mandate
Agreement, present more difficulty. The discharge of these obligations directly involved the
participation of the Council and the Permanent Mandates Commission. The League, by its
Resolution of April 18th, 1946, paragraph 3, recognized "that, on the termination of the
League's existence, its functions with respect to the mandated territories will come to an end",
and noted "that Chapters XI, XII and XIII of the Charter of the United Nations embody
principles corresponding to those declared in Article 22 of the Covenant of the League". It
was no longer possible for the Union to send reports to a non-existent Council, or to be
accountable to, or supervised by, a non-existent Permanent Mandates Commission. It is,
therefore, necessary to give close consideration to the action taken at Geneva, in April 1946,
in order to determine [p167] the effect of the termination of the League's existence upon these
auxiliary obligations.

The Assembly which met at Geneva in April, 1946, was not an ordinary Assembly engaged in
routine business. It was not attempting to amend the Covenant, or the provisions of the
Mandates. It was winding up the League. Its most important resolution read as follows:

"1. (1) With effect from the day following the close of the present session of the Assembly,
the League of Nations shall cease to exist except for the sole purpose of the liquidation of its
affairs as provided in the present resolution."

There is no doubt that the Assembly succeeded in its purpose. The League has, in fact, come
to an end. The only question, and one which has been raised by eminent jurists, is whether the
Assembly was legally competent to do what it did.

I am of the opinion that the Assembly was competent to liquidate the League, on two grounds.
The first is that which is indicated by the preamble : "Considering that, under Article 3,
paragraph 3, of the Covenant, the Assembly may deal with any matter within the sphere of
action of the League." Mortality is an essential attribute of human organization. In the field of
municipal law, it is possible to provide, by legislation, for supervised liquidation, but, in
international law, there is no super-State or supreme legislative authority. In the case of an
international organization, and in the absence of express provisions in its charter, a legal
power of liquidation arises by necessary implication. Under the Covenant, the Assembly,
representing all of the Members, was clearly justified in proceeding upon the assumption that
this power to liquidate could be exercised by it, and by no other organ or agency of the
League.

The second ground is based upon a general principle of law recognized by civilized nations.
Any legal position, or system of legal relationships, can be brought to an end by the consent
of all persons having legal rights and interests which might be affected by their termination.
The Assembly, in liquidating the League, was not merely clothed with the authority conferred
upon it by the Covenant. Its action, in winding up the League and the Mandates System,
expressed the consent of all the Members of the League, present or absent, to the measures
adopted ; and waived, on their behalf, any rights or any objections that they might have raised
to the course of action approved by its resolutions.

The Assembly, in providing for the liquidation of the Mandates System, was faced with
practical problems, some of which are relevant to the present case. There was the need to
enable Man-[p168]datory Powers to conclude trusteeship agreements. The Mandatory Power,
as such, was not the sovereign of the territory. It had no right of disposition, no jus disponendi
: it was merely a Mandatory on behalf of the League. Only the League and its Members could
authorize a Mandatory to conclude a trusteeship agreement; or, indee8, to take any action
which would impair rights or obligations under a Mandate or bring a Mandate to an end.
Similarly, only the League could make legal provision for the proposal by the Union, which
involved the termination of the Mandate for South-West Africa by incorporation of the
Territory as an integral part of the Union with international recognition conferred by the
General Assembly of the United Nations. Further, in view of the provisions of the Charter,
there would, of necessity, be a period of indefinite duration, between the dissolution of the
League and the conclusion of trusteeship agreements or other disposition of the Mandates. To
cover this period, it might be essential, in the interest of the well-being and development of
the peoples of the territories under Mandate, to make some provision for the discharge of the
League functions, in respect of accountability, supervision and modification, by the United
Nations.
The action of the Assembly was expressed in the Resolution of April 18th, 1946, which
included the following provision :

"4. Takes note of the expressed intentions of the Members of the League now administering
territories under Mandate to continue to administer them for the well-being and development
of the peoples concerned in accordance with the obligations contained in the respective
Mandates, until other arrangements have been agreed between the United Nations and the
respective mandatory Powers."
The resolution was not expressed in technical legal language, but rather as a political
document. It did, however, set forth the intention of the League and its Members that the
Mandates should survive the League. It expressed the consent of the League and its Members
to the disposition of the Mandates by other arrangements agreed between the United Nations
and the respective Mandatory Powers. The language used was broad enough to cover the
practical problems referred to above : to give legal authority to a Mandatory to terminate a
Mandate by concluding a trusteeship agreement; to sanction the termination of a Mandate by
emancipation, incorporation or merger ; or to enable a modification of a Mandate by
establishing report and accountability to, or supervision by, the United Nations. These ends
could only be accomplished by arrangements agreed between the United Nations and the
Mandatory Power. There can be no doubt that the competence of the Assembly and Members
to wind up the League extended [p169] to the Mandates System and included executory
measures of this sort, which were essential elements of effective liquidation.

As a result of the foregoing considerations, it is possible to summarize the position, as regards

the international status of South-West Africa and the international obligations of the Union
arising therefrom, after the termination of the existence of the League :

First : the Mandate survived, together with all of the essential and substantive obligations of
the Union.

Second : the legal rights and interests of the Members of the League, in respect of the
Mandate, survived with one important exception—in the case of Members that did not
become parties to the Statute of this Court, their right to implead the Union before the
Permanent Court lapsed.

Third : the obligations in respect of report and accountability to, and supervision by, the
League and its organs, and in respect of modification, were affected by impossibility of
performance, due to the disappearance of the Council and Permanent Mandates Commission.

Fourth: the position, as regards report, accountability and supervision was subject to
modification by arrangement agreed between the United Nations and the Union.

With regard to the other factors which may have affected the continuance of the international
obligations of the Union, there is one which cannot be overlooked. A territory, held under
Mandate by a Member of the United Nations, is not left to the uncontrolled administration of
the Mandatory Power. In the present instance, the Union, in the case of disputes relating to the
interpretation or the application of the provisions of the Mandate, is subject to the compulsory
jurisdiction of this Court—under the provisions of Article 7 of the Mandate Agreement and
Article 37 of the Statute, reinforced by Article 94 of the Charter. The importance of these
provisions cannot be measured by the frequency of their exercise. The very existence of a
judicial tribunal, clothed with compulsory jurisdiction, is enough to ensure respect for legal
obligations. In addition, the General Assembly has wide powers under Article 10 and other
articles of the Charter. There is, therefore, no lack of adequate provision in the Charter for
dealing with the position of a territory under Mandate during the period intervening between
the dissolution of the League and the termination of the Mandate, whether by conclusion of a
trusteeship agreement or in some other way.

There remains the question—the fourth point in the above summary—whether the position, as
regards report, accountability [p170] and supervision, has since been modified by
arrangement agreed between the United Nations and the Union of South Africa ; or, in other
words, was there an "arrangement agreed between" the United Nations and the Union
whereby the United Nations was to be substituted for the Council and the Permanent
Mandates Commission of the League, in the matters of report, accountability and supervision
?

It is unnecessary to discuss the juridical nature of an international agreement. It is sufficient,

for present purposes, to state that an "arrangement agreed between" the United Nations and
the Union necessarily included two elements : a meeting of the minds ; and an intention to
constitute a legal obligation.

It has been suggested, in the written statements of the governments and in the argument, that
there was agreement between the Union and the United Nations, and that the latter was
substituted for the League organs, as regards report, accountability and supervision. In
reviewing the evidence upon which this suggestion is founded, it will be convenient to
concentrate upon the single question whether there was a meeting of the minds ; i.e., whether
an agreement was reached between the Union and the United Nations, in the course of the
proceedings before the General Assembly and its Committees.

At a meeting of the Fourth Committee, November 13th, 1946, the representative of the Union
made the original proposal, in the following words :

"In particular the Union would, in accordance with Article 73, paragraph (e), of the Charter,
transmit regularly to the Secretary-General of the United Nations 'for information purposes,
subject to such limitations as security and constitutional regulations might require, statistical
and other information of a technical nature relating to economic, social and educational
conditions' in South West Africa...."

This proposal was renewed from time to time and its nature and scope were confirmed,
explained and clarified by different representatives of the Union. It is unnecessary to cite all
the instances. Fortunately, there is on record a statement, which received the unanimous
approval of the Fourth Committee, and which gives a detailed explanation of the proposal as
understood both by the representative of the Union and by the members of the Fourth
Committee. The Rapporteur's Report, October 27th, 1947, stated :

"At the thirty-third meeting of the Committee on 37 September 1947, in response to a request
by the representative of Denmark for amplification of the proposal to maintain the status quo
in South West Africa and to continue to administer the Territory in the spirit of the mandate,
particularly with regard to the United Nations and its organs, the representative of the Union
of South Africa explained that the annual report which his Government would submit on
South West Africa would contain the same type of information on the Territory as is required
for Non-Self-Governing Territories under Article 73 (e) of the Charter. It was the [p171]
assumption of his Government, he said, that the report would not be considered by the
Trusteeship Council and would not be dealt with as if a trusteeship agreement had in fact been
concluded. He further explained that, since the League of Nations had ceased to exist, the
right to submit petitions could no longer be exercised, since that right presupposes a
jurisdiction which would only exist where there is a right of control or supervision, and in the
view of the Union of South Africa no such jurisdiction is vested in the United Nations with
regard to South West Africa."

The terms of a letter from the deputy permanent representative of the Union, May 31st, 1948,
show that the proposal could no longer be regarded as standing. Even if the original proposal
could have been regarded as having been made with a view to a legal obligation, it could no
longer be so regarded after the Union had indicated that the transmission of information was
on a voluntary basis. It is, therefore, necessary to ascertain whether an arrangement was
agreed between the Union and the United Nations before that date.

It is clear, from the record, that the Government of the Union was not prepared to put forward
any proposal which went beyond the following elements :

(a) an undertaking to transmit annual reports, in accordance with, and in the terms of, Article
j3 (e) of the Charter, for the information of the United Nations ;

(b) by virtue of the provisions of the Charter, this information would be available to the
General Assembly, in the exercise of its functions under Article 10 and other articles of the
Charter, in any matter in which the functions might concern South-West Africa.

It is equally clear, from the record, that the General Assembly was not prepared to agree to an
arrangement on such a limited basis.

On the other hand, it is doubtful whether the General Assembly was willing, at any stage, to
agree to any arrangement that did not involve a trusteeship agreement for South-West Africa.
It is certain that the General Assembly was not prepared to agree to any arrangement that did
not involve the following: reports of the same nature and scope as those which had been due
to the Council under the provisions of Article 22 of the Covenant and the Mandate
Agreement; substitution of the United Nations for the Council and Permanent Mandates
Commission, as regards report, accountability and supervision ; review of reports by the
Trusteeship Council. It is equally certain that the Union was not ready -to agree to an
arrangement involving these elements.

In these circumstances, it is necessary to conclude that there was no arrangement agreed

between the Union and the United Nations, in the matter of report, accountability and
supervision.[p172]

In the absence of such an arrangement, the only other possible bases for the obligations in
question would be succession by the United Nations to the functions, powers and
responsibilities of the League in respect of Mandates. Such a succession could not be based
upon the provisions of the Charter, because, as I have stated above, no provisions of the
Charter could legally affect an institution founded upon the Covenant, or impair or extinguish
legal rights and interests of those Members of the League which are not members of the
United Nations. It could not be based on implications or inferences drawn from the nature of
the League and the United Nations or from any similarity in the functions of the
organizations. Such a succession could not be implied, either in fact or in law, in the absence
of consent, express or implied by the League, the United Nations and the Mandatory Power.
There was no such consent.

Reference to the terms of the Resolution of the General Assembly, February 12th, 1946, XIV-
1 (1), Clause 3 C, shows that the General Assembly's action was inconsistent with the doctrine
of succession. Paragraph 3 read :

"3. The General Assembly declares that the United Nations is willing in principle, and subject
to the provisions of this resolution and of the Charter of the United Nations, to assume the
exercise of certain functions and powers previously entrusted to the League of Nations, and
adopts the following decisions, set forth in A, B, and C below."

The decision C read :

"C. Functions and Powers under Treaties. International Conventions, Agreements and Other
Instruments Having a Political Character

The General Assembly will itself examine, or will submit to the appropriate organ of the
United Nations, any request from the parties that the United Nations should assume the
exercise of functions or powers entrusted to the League of Nations by treaties, international
conventions, agreements and other instruments having a political character."

The Mandate involves functions and powers of a political character. It is founded upon a
treaty and an agreement. The parties are the League and the Union of South Africa. In
substance, decision C provides that the General Assembly will examine a request from the
Union of South Africa and other interested parties that the United Nations should assume
League functions, as regards report, accountability and supervision over the South-West
African Mandate. No such request has been forthcoming, and the General Assembly has not
had occasion to act under decision C. The very existence of this express provision, however,
makes it impossible to justify succession based upon implicaion.[p173]

In the case of the League, there was no consent to succession in the case of Mandates ; and it
is impossible to imply consent, in view of the express provision of paragraph 4 of the
Resolution of April 18th, 1946, cited and discussed above, with regard to arrangements
between the United Nations and the Mandatory Powers. It will be observed that the provisions
of paragraph 4 are complementary to, and in complete accord with, those of decision C. This
may be explained by the fact that the members of the First Committee of the League, who
drafted the resolution, were fully aware of the provisions of decision C.

Accordingly, in the absence of an "arrangement agreed between" the United Nations and the
Union, and in the absence of succession by the United Nations to the political functions of the
League, in respect of the Mandates, I am obliged to conclude that the Union of South Africa is
not under an obligation, arising under the Mandate, to render annual reports, under paragraph
7 of Article 22 of the Covenant and Article 6 of the Mandate Agreement, to the United
Nations. For the same reasons, the Union is not under any obligation, arising under the
Mandate, as regards accountability to, and supervision by, the United Nations.

With regard to the so-called right of petition, the foregoing considerations would be
applicable. There are, however, additional reasons, which prevent me from concurring in the
answer given by the Court and the reasons by which it is justified. The regulation of petitions
was based upon rules of procedure adopted by the Council of the League on January 31st,
1923. Obligations which the Union may have incurred as a result of the adoption of these
rules cannot possibly be regarded as "international obligations under the mandate for South-
West Africa", within the meaning of Question (a). Further, even if the United Nations
succeeded to the functions of the League, in respect of mandated territories, it would not
follow that the General Assembly would be bound by the rules of procedure adopted by the
Council of the League, as regards petitions or any other aspects of the problem. The General
Assembly could make its own rules, acting under the provisions of Article 21 of the Charter.

(Signed) J. E. Read. [p174]

DISSENTING OPINION OF Mr. ALVAREZ

[Translation.]

The questions which are now referred to the Court in the request for advisory opinion from
the General Assembly of the United Nations are of great importance not only from the point
of view of international law, but also from the social, economic and international political
points of view.

From the social point of view, for the first time in the history of mankind, States, through a
great change in their international outlook, have proclaimed (Article 22 of the Covenant of the
League of Nations) that the well-being and the development of peoples not yet able to govern
themselves form, for the civilized countries, a sacred trust of civilization. To this end, they
established a new institution, the Mandates System. This idea has been taken up and
developed in the United Nations Charter in the establishment of the Trusteeship System.

From the economic point of view, one of the concerns of Our time is the improvement of
under-developed territories in order to obtain the best possible results for the benefit of the
general community. An economic conference has just opened where the delegates of almost
every nation of the world have established a programme of technical aid to those peoples and
a financial pool has been created to that effect.
From the international political point of view, the institutions of Mandate and Trusteeship
have considerably modified the international position of certain continents by preparing many
backward peoples for independent statehood.

But it is from the angle of international law that the creation of those institutions presents the
greatest interest. The spirit and certain characteristics of what may be called the new
international law have thereby been introduced in international law. In the same spirit, and by
resorting to the same characteristics, it will be possible in future to create similar institutions
for the general or continental interests.

II

The questions concerning the Territory of South-West Africa submitted to the Court for
opinion have been complicated and even made obscure in the discussions which have taken
place for several years' between various Governments and in the Councils and Assemblies of
the League of Nations and the United Nations.[p175]

They have been dealt with from various angles : from the angle of private law, when the
nature of the mandate, its termination, the nature of the obligations, the lapsing of contracts,
etc., were considered, and from the angle of international law, when sovereignty, treaties and
their purposes, certain provisions of the League of Nations Covenant and the United Nations
Charter were being discussed. This was done on the basis of traditional views in these matters,
and by applying the classical method of interpretation of conventions and treaties.

In fact, the question is an entirely new one and comes under the new international law. It is
the duty of the Court therefore to consider it, not only in the light of principles laid down in
the Covenant or the Charter, but also, as we shall see later, in accordance with the nature,
aims and purposes of this law.

III

For this reason, we must first consider briefly the nature of this new international law and the
new criterion which must be applied to the questions before the Court.

This law is the result and outcome of the great transformations in the life of nations which
have taken place since the first world war, and mostly after the 1939 cataclysm.

The community of States, which had hitherto remained anarchical, has become in fact an
organized international society. This transformation is a fact which does not require the
consecration of an international agreement. This society consists not only of States, groups
and even associations of States, but also of other international entities. It has an existence and
a personality distinct from those of its members. It has its own purposes. On the other hand,
international relations present various aspects : political, economic, psychological, etc., and
to-day possess a dynamic character, complexity and variety which they did not show
formerly.
All these transformations have had a great influence on international law : a new international
law has emerged. It is new for three reasons : it includes new questions in addition to
traditional questions in a new form ; it rests on the basic reconstruction of fundamental
principles of classical international law, and brings them into harmony with the new
conditions of the life of peoples ; finally, it is based on the new social régime which has
appeared, the régime of interdependence, which is taking the place of the individualistic
régime which has, up to now, provided the basis of both national and international life. This
new régime has given rise to what may be called social interdependence which is taking the
place of traditional indi7iidzialism. I prefer the expres-[p176]sion "social interdependence" to
"social solidarity" which has a variety of connotations.

The purposes of the new international law, based on social interdependence differ from those
of classical international law : they are to harmonize the rights of States, to promote co-
operation between them and to give ample room to common interests; its purpose is also to
favour cultural and social progress. In short, its purpose is to bring about what may be called
international social justice.

To achieve these purposes this law must lay stress on the notion of obligation of States, not
only between themselves, but also toward the international community. It must limit absolute
international sovereignty of States according to the new requirements of the life of peoples,
and must yield to the changing necessities of that life.

Because of these characteristics the new international law is not of an exclusively juridical
character. It has also political, economic, social, and psychological characteristics.

It is not a mere abstraction, a doctrinal speculation without any foundation in fact, as some
would have it. In reality it takes root in the new conditions and the new requirements of the
life of peoples in numerous recent social institutions of several countries in 'the international
judicial conscience which has been awakened mainly since the upheaval of 1914 ; in the
Covenant of the League of Nations and in particular in the United Nations Charter (preamble,
Art. 1, 2, Chapters IV, V, IX, X, XI, XII, XIII, etc.) and in several resolutions and drafts of
the Assemblies of those organizations ; and in the declarations of the heads of former allied
countries which have subsequently received the support of the people. It also springs from
various resolutions of the last Pan-american Conferences, some of which tend to incorporate
new great moral, political and social ideas, either in continental international law, or in world
international law.

Therefore, the new international law has a more positive basis than classical international law,
which rests on principles and rules often derived from speculation and from doctrines and
customs, many of which have become obsolete.

This new law is in formation. It is for the International Court of Justice to develop it by its
judgments or its advisory opinions, and in laying down valuable precedents. The theories of
jurists must also share in the development of this law.

At this point, I want to stress the idea which I have already expressed in previous individual
opinions : the Court must not apply international law such as it existed before the upheavals
of 1914 and 1939 but must apply the law which actually exists to-day. [p177]

Indeed, since that time the international life of peoples and, consequently, the law of nations
have consistently undergone profound changes and have assumed new directions and
tendencies which must be taken into consideration.

The Court must, therefore, declare what is the new international law which is based upon the
present requirements and conditions of the life of peoples : otherwise, it would be applying a
law which is obsolete in many respects, and would disregard these requirements and
conditions as well as the spirit of the Charter which is the principal source of the new
international law.

In so doing, it may be said that the Court creates the law ; it creates it by modifying classical
law ; in fact it merely declares what is the law to-day. Herein lies the new and important
purpose of the Court.

The Court, moreover, already exercised this faculty of creating the law in its Advisory
Opinion concerning Reparation for injuries suffered in the service of the United Nations ; it
declared on that occasion that the United Nations was entitled to present an international
claim ; until that time only States had been recognized as possessing this right.

The action of the International Court of Justice combined with the action of the Assembly of
the United Nations which has very broad international powers (Article 10 of the Charter) will
greatly contribute to the rapid development of the new international law.

IV

To find the solution of the questions put to the Court in the present case, let us now consider,
according to the elements of the new international law, what are the characteristics of
international obligations and how conventions and rules of international law are to be
interpreted.

Because the new international law is based on social interdependence, many cases may be
found in which States are under obligations without the beneficiary of the rights relating to
these obligations being known. The beneficiary is the international community. For the same
reason it is not necessary that all obligations be expressly laid down by a text. Because of the
diversity and the complexity of international relations it is not possible to provide for every
contingency. Many obligations result from the very nature of institutions or the requirements
of social life.
On the other hand, besides legal obligations there are also moral obligations and obligations
of a political international character or duties. The latter derive from the interdependence of
States and the international organization. The duty to co-operate indicated in the United
Nations Charter is a typical example of this last [p178] category of obligations. The non-
performance of such obligations may result in political sanctions applied by the United
Nations.
In each case, the Court must decide whether a State has certain obligations or not, and what is
their nature.

The conventions and rules of international law are to be interpreted by applying a criterion
different from that which hitherto prevailed.

At present, the strict literal sense of the text is sought and to clarify it, recourse is had to
travaux préparatoires. Use is also made of- postulates, axioms and traditional precepts of
general law, in particular of Roman law, and even natural law (except in Anglo-saxon
countries where attention is mostly paid to diplomatic precedents), and of postulates, axioms
and precepts of classical international law. Not only are the immediate consequences not
drawn from these elements, but deductions are made, by pushing logic too far. To this end a
whole juridical technique is brought into play, and as a result, solutions are often found which
are unreasonable and unacceptable to public opinion.

Important studies have recently been published by publicists of authority on the interpretation
of treaties, but they follow the traditional line and, therefore, are open to criticism.

In future, postulates, axioms and general principles of law or of international law, which have
hitherto been accepted may be relied upon only after they have been subject to the test of
close scrutiny because many of them have become obsolete and may be replaced by others
which will provide the basis of the new international law. This work of reconstruction is
mainly a matter of doctrine, but it must also be effected by the International Court of Justice
whenever the opportunity arises.

Extreme logic, dialectics and exclusively juridical technique must also be banished. Reality,
the requirements of the life of nations, the common interest, social justice, must never be
forgotten.

An isolated text may seem clear, but it may cease to be so when it is considered in relation to
other texts on the same question and with the general spirit of the institution concerned. In the
latter case the spirit must take precedence.

It may also happen that a text contains expressions of a clearly defined legal scope, but that,
by reason of the nature of the institution, these expressions appear to have been taken in a
different sense. This is exactly the case of the questions now before the Court: the words
"Mandate" and "Trusteeship" have a different meaning in the Covenant and the Charter than
they have in domestic law.[p179]

Let us now consider the nature of the Mandate conferred upon the Union of South Africa and
its consequences on the questions before the Court in the light of the provisions of the
Covenant of the League of Nations and of the United Nations Charter, and the spirit of the
new international law. In this connexion I shall not dwell upon the declarations of the Union
Government or its representatives, these declarations having been examined in the Court's
Opinion.
Under Article 22 of the League of Nations Covenant the well-being and development of the
inhabitants of colonies and territories which, as a consequence of the war, had ceased to be
under the sovereignty of the States which formerly governed them, and were not capable of
standing by themselves under the strenuous conditions of the modern world, form a sacred
trust of civilization. The article goes on: "the best method of giving practical effect to this
principle is that the tutelage of such peoples should be entrusted to advanced nations who, by
reason of their resources, their experience or their geographical position, can best undertake
this responsibility, and who are willing to accept it". Article 22 also lays down the conditions
and guarantees for the performance of that great trust.

The United Nations Charter has not only taken up these ideas, but it has developed them
(Chapters XI and XII).

Our starting point must be the existence of the sacred trust of civilization. The ideas and aims
contained in this expression and the general principles of the new international law must be
Our compass in Our quest for the answers to the questions put to the Court. We must not
resort to a textual interpretation of certain articles of the Covenant or of the Charter, or to
minor considerations.

Article 119 of the Versailles Treaty provides that "Germany renounces in favour of the
Principal Allied and Associated Powers all her rights and titles over her oversea possessions".

The Mandate over South-West Africa established by the Council of the League on December
17th, 1920, says: "The Principal Allied and Associated Powers agreed that, in accordance
with Article 22 of the Covenant of the League of Nations, a Mandate should be conferred
upon His Britannic Majesty to be exercised on his behalf by the Government of the Union of
South Africa to administer the territory afore mentioned."

The Union thus received not an ordinary mandate, but a sacred trust of civilization, which is
quite another thing. The act which has been created is not a fidei-commissum, a trust or a
contract deriving from any other similar national or international institution. The ordinary
Mandate is a contract mainly in the interests [p180] of the principal, regulated by the rules of
civil law, whereas the mission under consideration is an honorific and disinterested charge for
the benefit of certain populations. It is an international function regulated by principles which
conform to its nature. It is impossible, therefore to apply, even by analogy, the national rules
applicable to the Mandate or the other institutions which I have mentioned. Nor is it a treaty
between the League of Nations and the Union of South Africa. The League of Nations has
undertaken no obligation and has acquired very important rights indicated in the Mandate. It
has also other political rights which have not been expressly provided for, such as the right to
terminate the Mandate.

VI

Very important consequences follow from the sacred trust of civilization which is a
characteristic of the international Mandate and from the new international law, and these
consequences will help us permit to find the answer to the questions before the Court.

Here are the most important :

1° Since the creation of the Mandates System there are in international law four categories of
peoples : those which are still colonies or protectorates; those backward civilizations which
have not been placed under a Mandate or Trusteeship; those which have been placed under
one of those regimes ; and finally, those which have reached a sufficient degree of civilization
and are fully developed States. In the past the peoples of the second and third categories fell,
like those in the first category, under the domination of other peoples, for instance, the great
Powers. Now they are protected and must be prepared for independent life.

It is only to the peoples in the fourth category that international law grants certain attributes
which it does not grant to other groups, however important they may be : independence,
personality, sovereignty, legal equality. These attributes are inherent in the State and are
inalienable.

Because the peoples of the second and third categories which may be called "States in the
making" do not yet enjoy the status and the attributes of fully-developed States, we need not
attempt to determine, as has been done at length, where sovereignty resides, whether with
South-West Africa or with the Union of South Africa. In fact, no question of sovereignty is
raised : the question does not arise with regard to South-West Africa. As to the Union of
South-Africa, she cannot exercise a sovereignty which the Man-dated Territory does not
possess. She has not acquired any sovereignty over the Territory. She has only certain
faculties, particularly [p181] in matters of administration, under the mission which has been
entrusted to her.

2° The Court, in considering the questions before it, must examine critically the applicable
postulates, the fundamental elements, and the great principles of traditional international law.
In particular :

a) it must stress the pre-eminence of international law over domestic law ;

b) it must adapt the concept of sovereignty to social interdependence ;

c) it must recognize and declare that States may have certain obligations although these may
not be formally expressed in a text.

3° The question of the international status of mandated territories is entirely within the scope
of international law. It can in no way be said that it is part of the domestic jurisdiction of the
mandatory State. The matter must therefore be regulated by principles of international law.
Any act of the mandatory State contrary to international law or the nature of the Mandate
institution, such as a plebiscite, a more or less disguised annexation, etc., is null and void and
may even involve the liability of the State.

4° Whilst the traditional international law concerns itself with the problem of the succession
of States, it does not consider succession between international organs nor floes it consider
succession between international institutions because these are new problems and must be
dealt with according to the spirit of the new international law.

Three cases may arise :

A) An organization, for instance the League of Nations, is liquidated and is not replaced by
any other one. In that case there is no doubt that all subordinate organs cease to function : the
Council, the Assembly, etc. But the effects of resolutions adopted by them do not come to an
end. Likewise, certain institutions created by these organs continue. Therefore, Mandates
conferred continue in existence, and it is impossible to apply here the rules of private law to
the effect that the Mandate terminates with the disappearance of the mandator.

As we have seen, the Mandate created by the League of Nations is a sacred trust of
civilization, a social function which cannot terminate with the League of Nations, even if no
other organ takes its place. The countries which have created this institution must safeguard
those territories In the present and the future. Should they lose interest, these territories may
fall back into the position they occupied before they were placed under Mandate : they may
be colonized, even annexed by other States, including the former mandatory Power without
this constituting a violation of the rules of traditional international law.[p182]

B) An international organization like the League of Nations disappears and another one is
created, without any indication as to whether the latter replaced the former. If the first
organization has created an institution, such as the Mandate, having for its purpose the same
sacred trust of civilization as the Trusteeship created by the second institution, then the latter
must be considered as succeeding the former ipso facto. There can be no interruption in the
continuous performance of this trust.

C) The new organization shows in what conditions an institution which it has created will
succeed a similar institution created by the previous organization. In the present case the
Charter has declared that mandated territories will come under Trusteeship by virtue of
agreements between the United Nations and the former mandatory Power (Articles 75 and
77). As long as this agreement has not been concluded the territorial status of South-West
Africa is that of a mandated territory with the obligations resulting therefrom for the Union of
South Africa. The Mandate, as I have already said, continues. I shall refer to this point again
under No. VII.

5° The mandatory State, in this case the Union of South Africa, cannot modify unilaterally the
international status of the territory under Mandate, South-West Africa, nor can it modify any
one of its obligations under the Mandate.

6° The question whether the Union of South Africa was under obligation to report on its
administration to the United Nations has been discussed. Some hold that this obligation
existed only with regard to the League of Nations, and that the latter's disappearance has put
an end to the resulting obligations. This reasoning, which is based on the application of
principles regulating the mandate in private law, cannot be accepted. The United Nations has
taken the place of the League of Nations and consequently the United Nations Assembly has
the right to request the presentation of the report and to exercise control and supervision over
the administration of the South-West African Territory. With regard to this report and control
we need not confine ourselves to the obligations under the Mandate. We may also consider
those resulting from the provisions of Articles S7 and 88 of the Charter.

7° The obligation for the Union of South Africa to transmit petitions from the inhabitants of
South-West Africa to the United Nations has been discussed at length. This obligation derives
from the nature of the Mandate conferred by the League of Nations. It need not have been
expressly provided for.

8° It may happen that a mandatory State does not perform the obligations resulting from its
Mandat?. In that case the United Nations Assembly may make admonitions, and if necessary,
revoke the Mandate. It has this right under Article 10 of the Charter. [p183]

9° The Assembly may terminate a mandate if it is established that the local population is
capable of governing itself, and it may do so in spite of the contrary opinion of the mandatory
State.

10° The United Nations, Assembly may also terminate a mandate for political considerations.
International Mandates are not, as we have already said, ordinary contracts or treaties. They
are a trust, a social function. The Assembly having the faculty to confer that trust has also the
faculty to revoke it. In so doing, however, it must not abuse its right.
11° The mandatory State, in this case the Union of South Africa, cannot unilaterally annex the
mandated territory (South-West Africa) nor can it proclaim its independence.

12° It may happen that the mandatory Power reports that the local population over which it
exercises a mandate will never be able, for anthropological or other reasons, to reach a
sufficient degree of civilization to become capable of self-government. In that case, the
United Nations Assembly should call for an enquiry and if these statements are proved to be
true, it may authorize the mandatory Power to annex this territory, for it cannot remain
without a protector or a guide.

VII

We must give special attention to the question of whether the Union of South-Africa is
obliged to transform the Mandate conferred upon it by the League of Nations into Trusteeship
by concluding an agreement with the United Nations. We must determine the exact scope and
the spirit of Articles 75 and 77, and even of Article 80, No. 2, of the Charter.

It has been said that under these Articles the Union of South Africa has no legal obligation to
conclude an agreement with the United Nations to transform its Mandate into Trusteeship,
and that it only has the obligation to negotiate this agreement.

In my opinion the Union of South-Africa is under the legal obligation not only to negotiate
this agreement, bat also to conclude it. This obligation derives from the spirit of the Charter,
which leaves no place for the future co-existence of the Mandates System and the Trusteeship
System. The latter alone must exist as being the more appropriate.

On the other hand, the word "may" in Article 75 and the sentence "as may be placed
thereunder [the Trusteeship System] by means of subsequent trusteeship agreements" in
Article 77, referred to in support of the view that there is no legal obligation [p184] to
conclude such an agreement, may also apply to the case when this obligation exists.

What is to be done if no agreement can be reached ? It then becomes necessary to refer to

arbitrat2ori. It would not be possible to admit that, in an organized society under the régime of
interdependence, an agreement which is intended to fix an important international status
cannot be established solely because of the opposition, the negligence or the bad faith of one
of the parties. One would then have to seek an amicable solution, or to submit the case to the
International Court of Justice.

Even admitting that there is no legal obligation to conclude an agreement, there is, at least, a
political obligation, a duty which derives from social interdependence and which can be
sanctioned by the Assembly of the U.N.

This is the place to refer to the League of Nations Assembly Resolution of 1946, which said :
"The Assembly .... takes note of the expressed intentions of the Members of the League now
administering territories under Mandate to continue to administer them for the well-being and
development of the peoples concerned in accordance with the obligations contained in the
respective Mandates until other arrangements have been agreed between the United Nations
and the respective mandatory Powers."

VIII

The foregoing considerations make it possible to formulate the answers to the questions put to
the Court by the United Nations Assembly :

I. The international status of the South-\Vest African territory is the same as that which
existed under the League of Nations until an arrangement is agreed upon between the Union
of South Africa and the United Nations.

(a) The Union of South Africa has therefore the same international obligations as under the
Mandate conferred upon her by the League of Nations and those resulting from Article 22 of
the Covenant. In particular it is under obligation to report on its administration to the United
Nations Assembly. The latter is qualified to exercise control in this respect. It has this faculty
under Article IO of the Charter.

(b) The provisions of Chapter XII of the Charter apply to the Territory of South-West Africa.
This is in harmony with the spirit of the Charter.

The Union of South Africa under Articles 75, 77 and 80, No. 2, of the Charter, and especially
in accordance with the spirit of the Charter, has the legal obligation to negotiate and conclude
an agreement with the United Nations to place South-West Africa under Trusteeship. If this
agreement cannot be made, the case must be referred to arbitration. [p185]

Even if it be admitted that South Africa is under no legal obligation to conclude this
agreement, it has at any rate the political international obligation or a duty to conclude such an
agreement. If it is impossible to reach such an agreement, the United Nations must then take
the appropriate measures which it is empowered to take under Article IO of the Charter.

(c) The Union of South Africa is not competent unilaterally to modify the international status
of South-West Africa. This competence belongs to the Union of South Africa acting in
concert with the United Nations under Article 79 of the Charter.

(Signed) A. Alvarez. [p186]

DISSENTING OPINION OF Mr. DE VISSCHER

[ Translation.]

I regret that I am unable to concur in the second part of the Court's answer to the question
under letter (b). I concede that the provisions of Chapter XII of the Charter do not impose on
the Union of South Africa a legal obligation to conclude a Trusteeship Agreement, in the
sense that the Union is free to accept or to refuse the particular terms of a draft agreement. On
the other hand, I consider that these provisions impose on the Union of South Africa an
obligation to take part in negotiations with a view to concluding an agreement. In this respect,
the Court's answer falls short of XI opinion on the obligations resulting from the Charter for
the Mandatory Power. My opinion is based on an interpretation of tests which differs from
that adopted in the Court's Opinion.

The Opinion says : "The Charter has contemplated and regulated only a single system, the
International Trusteeship System. It did not contemplate or regulate a co-existing Mandates
System." Furthermore, the relevant articles of Chapter XII dealing with the International
Trusteeship System are clearly imperative: Article 75 : "The United Nations shall establish
under its authority an International Trusteeship System...." , "L'Organisation des N'ations
Unies établira, sous son autorité, un régime de tutelle...." ; Article 77 : "The Trusteeship
System shall apply...." ; "Le Régime de Tutelle s'appliquera....".

The Mandates System was maintained by Article 80 of the Charter only as a transitional
measure. The terms of the first paragraph alone : "and until such agreements have been
concluded" exclude the possibility of prolonged co-existence of the two régimes. As to Article
80, paragraph 2, its legal bearing in this connexion is clearly defined. It provides that the
preceding paragraph, which maintains the status quo until such agreements have been
concluded (the so-called safeguarding clause), "shall not be interpreted as giving grounds for
delay or postponement of the negotiation and conclusion of agreements for placing mandated
and other territories under the Trusteeship System as provided for in Article 77".
I consider that the Opinion does not give to these provisions their proper place in the general
framework of the provisions of Chapter XII, and, as a result, does not deduce from them all
the consequences which follow therefrom. The Opinion minimizes their import to the point of
considering them merely as expres-[p187] sing the expectation that "the mandatory States
would follow the normal course indicated by the Charter, namely, conclude Trusteeship
Agreements".

It is an acknowledged rule of interpretation that treaty clauses must not only be considered as
a whole, but must also be interpreted so as to avoid as much as possible depriving one of them
of practical effect for the benefit of others. This rule is particularly applicable to the
interpretation of a text of a treaty of a constitutional character like the United Nations Charter,
above all when, as in this case, its provisions create a well-defined international régime, and
for that reason may be considered as complementary to one another.

I cannot readily believe that the authors of the Charter would have warned the mandatory
Powers, by means of an express and particularly emphatic provision, that the negotiation and
conclusion of Trusteeship Agreements could not, by reason of the status quo temporarily
guaranteed under Article 80, paragraph 1, "give grounds for delay or postponement" if the
scope of this provision amounted simply to the expression of an expectation or, at the most, of
a wish or an advice. The terms of article 80, paragraph 2, do not favour this interpretation.

The negative character of the phrase is not an argument in favour of the absence of an
obligation. The warning given to the mandatory Powers that the status quo referred to in the
preceding paragraph gives no valid ground for delaying or postponing the agreements which,
as will be shown later, are the instrument for the application of the Trusteeship System, is
clearly, in my opinion, a direction to those Powers to be ready, at the earliest opportunity, to
negotiate with a view to concluding such agreements. What Article 80, paragraph 2, intended
to prevent was that a mandatory Power, while invoking on the one hand the disappearance of
the League of Nations, should refuse on the other hand to recognize the United Nations or to
consider submitting itself to the only régime contemplated in the Charter, namely, the
Trusteeship System. What this same provision intended to enact was that the mandatory
Power should take appropriate measures for the negotiation of a Trusteeship Agreement.

If, as has already been said, we must endeavour to reconcile the texts rather than to set them
in opposition to one another, and attempt to give each one its due by preserving its practical
effect within the system as a whole, we are led to the following conclusions.

The wording of Articles 75, 77 and 79 is permissive in the sense that the placing under
Trusteeship is contingent upon the conclusion of subsequent agreements, the mandatory
Power being free to accept or to reject the terms of a proposed agreement. [p188]

This is where the so-called "optional" character of the Trusteeship appears. It is impossible,
however, to reconcile these permissive provisions with Article 80, paragraph 2, and with the
clear intent of the authors of the Charter to substitute the Trusteeship System for the Mandates
System, without admitting that the mandatory Power, while remaining free to reject the
particular terms of a proposed agreement, has the legal obligation to be ready to take part in
negotiations and to conduct them in good faith with a view to concluding an agreement.

That an obligation so understood may form the valid and practical object of an international
undertaking has been clearly recognized by the Permanent Court of International Justice in the
following passage in its Advisory Opinion of October 15th, 1931 : "The Court is indeed
justified in considering that the engagement incumbent on the two Governments in
conformity with the Council's Resolution is not only to enter into negotiations, but also to
pursue them as far as possible with a view to concluding agreements." The Court added,
however : "But an obligation to negotiate does not imply an obligation to reach an agreement.
“ [FN1]

-----------------------------------------------------------------------------------------------------------------
-----------
[FN1] Publications of the Permanent Court of International Justice, Series A/B, fasc. No. 42,
p. 116.
-----------------------------------------------------------------------------------------------------------------
-----------

It is reasonable to believe that Article 80, paragraph 2, which mentions "the conclusion" in
addition to "the negotiation", had no other meaning : the obligation to be ready to negotiate
with a view to concluding an agreement.

Nor should we overlook the psychological value of the opening of negotiations, particularly
when the object of the negotiations, as is the case here, is only to apply in practice principles
forming part of a pre-established international régime. The opening of such negotiations is
often a decisive step toward the conclusion of an agreement.

Difficulties of interpretation have arisen in connexion with the word "voluntarily" which
appears in Article 77 only in respect of territories in category (c). It seems to me impossible
that this provision, which is so clearly in contrast with the absence of any similar indication
regarding territories in categories (a) and (b), should have been inserted without any definite
purpose and should not correspond in the general framework of the system to a. well-defined
interest.

The word "voluntarily" has here the meaning of "spontaneously". It defines the unilateral act
by which a State, while free from any obligation, decides of its own initiative to place a
territory under the Trusteeship System by concluding a subsequent agreement as indicated in
Chapter XII. It would be distorting the natural meaning of the word "voluntarily" and
depriving it of its signification in the context to treat it as an equivalent of by agreement, thus
making it a synonym to the terms "by means [p189] of Trusteeship Agreements" which
appear at the beginning of Article 77, or the terms "a subsequent agreement" in paragraph 2 of
the same article. The Trusteeship Agreement is a condition common to the three categories of
territories enumerated by Article 77 as territories which may be placed under Trusteeship,
whereas, on the contrary, the voluntary decision, that is the spontaneous decision of a State to
place under Trusteeship a territory in category (c), is a condition peculiar to the last category.
The decision precedes the agreement; it is by no means identified with it.
The term "voluntarily" which thus finds its own place in the context and its practical effect,
shows that it is only with regard to territories in category (c) that the conclusion of a
Trusteeship Agreement has been contemplated by the Charter as being free from any pre-
existing obligation, even in the realm of negotiations. The difference in the wording is easy to
explain by taking into consideration the differences between the territories enumerated in
Article 77 from the point of view of the international interest which they respectively
presented at the time of the drafting of the Charter : those in category (a) were already subject
to an international régime, and moreover, were clearly known and defined ; those in category
(b) were detached from enemy States by the common victory of the Allied Powers. For
various reasons they both possessed an international element, which marked them out as
being prima facie the necessary objects of regulation by international agreement. The position
of territories in category (c) was quite different in this respect. Complete freedom of decision
was left to the States responsible for their administration to place them "voluntarily" under the
system and consequently to consent to negotiations to that effect, or to refuse to take part in
such negotiations.

The Charter has created an international system which would never have had more than
theoretical existence if the mandatory Powers had considered themselves under no obligation
to negotiate agreements to convert their Mandates into Trusteeship Agreements. In fact, apart
from instances of accession to independence and from the case of Palestine, all mandatory
Powers other than the Union of South Africa have consented to this conversion. The
obligation to be ready to negotiate with a view to concluding an agreement represented the
minimum of international co-operation without which the entire régime contemplated and
regulated by the Charter would have been frustrated. In this connexion one must bear in mind
that in the interpretation of a great international constitutional instrument, like the United
Nations Charter, the individualistic concepts which are generally adequate in the
interpretation of ordinary treaties, do not suffice. Under Article 76 of the Charter, "the basic
objectives of the Trusteeship System" conform to "the purposes of the United Nations laid
down in Article I of the present Charter". In [p190] recognizing its obligation to be ready to
negotiate with a view to concluding a Trusteeship Agreement, a mandatory Power, without
thereby jeopardizing its freedom to accept or refuse the terms of such an Agreement, co-
operates in a particularly important field in the attainment of the highest objectives of the
United Nations.

(Signed) Ch. De Visscher. [p191]

DISSENTING OPINION OF JUDGE KRYLOV

[Translation.]
I share the Court's Opinion on the General Question and on Questions (a) and (c) put by the
Assembly. I would observe, however, that the analysis of Article 79, as given by the Court,
does not exhaust all the questions which may be raised in this connexion.

But I cannot concur in the second part of the reply given by the Court to Question (b). My
 reasons are as follows :

In its Opinion, the Court notes that : (a) the Charter contemplated only the Trusteeship System
; (b) the Charter did not contemplate the continuance of the Mandates System in addition to
the Trusteeship System. On the other hand, the Court is of the opinion that the Charter does
not impose upon the Union of South Africa an obligation to place the Territory under the
Trusteeship System.

In its reasoning, the Court stresses the permissive wording of Chapter XII of the Charter, in
respect of the conclusion of Trusteeship Agreements. In my opinion, however, this is due to
the fact that the Territory under Mandate need not necessarily be placed under the Trusteeship
System, because it may be proclaimed independent (and this is the only other possibility).

I think that the letter and the spirit of the Charter alike lead to only one interpretation, namely:
that the Union of South Africa is under the legal obligation to negotiate with a view to
concluding a Trusteeship Agreement for placing the mandated Territory under the Trusteeship
System. In barring expressly the possibility of postponing or delaying the negotiation and the
conclusion of Trusteeship Agreements, Article 80, paragraph 2, implies the existence of a
legal obligation to negotiate with a view to concluding such agreements. Any other
interpretation would deprive Article 80, paragraph 2, of any meaning whatever, which would
be contrary to a well-established rule of interpretation of international treaties.

The obligation of the mandatory Power to negotiate with a view to concluding the Trusteeship
Agreement is also clearly demonstrated in Article 77, paragraph I (c), of the Charter. This
article declares that colonial territories may be placed under the Trusteeship System by States
responsible for their administration by voluntary procedure only. Thus, the Charter contains
different provisions for territories mentioned under (a) and (b) of this paragraph. In particular,
territories under Mandate [p192] are to be placed under the Trusteeship System by the method
already indicated (negotiation with a view to concluding an agreement).

The Court's answer to the second part of Question (b) may prolong the co-existence of the
Mandate System and the Trusteeship System. This would be contrary to the intentions of the
authors of the Charter, who expected mandatory States to follow without delay the normal
course indicated by the Charter and conclude Trusteeship Agreements.

(Signed) S. Krylov. [p193]

International Status Of South West Africa Case

Facts Edit

After WWII, the Union of South Africa, alleging that the Mandate it had been given by the League of Nations
to administer South West Africa had lapsed, sought the recognition of the United Nations to the integration of
the Territory in the Union. The UN General Assembly asked the Court to advise on the international status of
South West Africa (now Namibia). The Court was asked to determine the meaning of the “sacred trust of
civilization” accepted by South Africa under the Mandate.

Issue Edit

1. What is the status of the relationship between South West Africa and South Africa?

Decision Edit

South West Africa is a territory under the Mandate and South Africa is not competent to modify the
international status of South West Africa.

Reasons Edit

McNair, in a separate opinion, set out how the Court finds and applies general principles of law. Article
38(I)(c) allows the Court to apply “the general principles of law recognized by civilized nations.” This is done
by regarding any features or terminology which are reminiscent of the rules and institutions of private law as
an indication of policy and principles rather than as directly importing these rules and institutions.
Applying this to the case at bar, the Court was tasked with interpreting "sacred trust of civilization”. The
historical basis of the legal enforcement of the English trust was that it was binding upon the conscience of the
trustee and thus should be enforceable in law. Nearly every legal system possesses some institution whereby
the property and sometimes the person of those who are not sui juris, such as a minor or disabled person, can
be entrusted to some responsible person as a trustee; the trust has been used to protect the weak and the
dependent.

There are three general principles which are common to all these institutions:

1. the control of the trustee over the property is limited in one way or another; he is not in the position of
the normal complete owner, who can do what he likes with his own, as he is precluded from
administering the property for his own personal benefit;
2. the trustee is under some kind of legal obligation, based on confidence and conscience, to carry out the
trust or mission confided to him for the benefit of some other person or for some public purposes; and
3. any attempt by one of these persons to absorb the property entrusted to him into his own patrimony
would be illegal and would be prevented by the law.
As a result, it would be in violation of the trust to absorb South West Africa into South Africa.

Ratio Edit

Demonstrative of the process by which principles of private, municipal law can be brought into international
law.
Libyan American Oil Co. (“LIAMCO”) v. Libya, 17 I.L.M. 3 (1978), 4 Y.B. COM.
ARB. 177 (1979)
The LIAMCO case was one of a trio of arbitral decisions arising from Libya’s nationalization of its
oil sector in 1973. LIAMCO, a US company, had entered into a number of concessions with Libya
in 1955. After the nationalizations imposed by the then-new Qaddafi regime, LIAMCO initiated
arbitration proceedings under its Concession Agreements, requesting as its primary remedy the
reinstatement of its concessions and as an alternative, damages in the amount of
US$207,652,667 plus interest. That amount consisted of the following three components: (1)
Physical Plant and Equipment — US$13,882,667; (2) Concession — 20 US$186,270,000 (lost
profits); and (3) Concession 17 — US$ 7,500,000 (lost profits).
Initially, the sole arbitrator ruled that he could not award restitution, stating among other
things that “it is impossible to compel a State to make restitution; this would constitute in fact
an intolerable interference in the internal sovereignty of States.” As to LIAMCO’s alternate
claim for damages, turning first to the physical property, the arbitrator said that “there is no
difficulty also that the indemnity should include as a minimum the damnum emergens, e.g., the
value of the nationalized corporeal property, including all assets, installations, and various
expenses incurred.” For these assets and expenses, the arbitrator awarded LIAMCO the full
amount of its claim.
With respect to the two concessions, the arbitrator first undertook a full conceptual analysis of
the recoverability of lost profits. He found that (1) most municipal law systems permit lost
profits as part of the damages for breach of contract; (2) both Libyan law and Islamic law also
allow the recovery of lost profits; and (3) classical international law allows the recovery of lost
profits for both wrongful taking of property and lawful nationalizations. He noted, however,
that the recent evolution of international law indicated there was no constant and uniform rule
for the compensation of lost profits for nationalizations, at least not all future profits.
Turning next to the specific claims of quantum, as for Concession 20, the arbitrator considered
that to award lost profits for all future concession reserves would be an “extreme” position. In
lieu of this “extreme,” the arbitrator held that “it would be reasonable and just to adopt the
formula of ‘equitable compensation’ as a measure for the estimation of damages...” Relying on
this compensation formula, the arbitrator awarded LIAMCO only US$66 million (out of its
US$186 million claim) for its rights in Concession No. 20.
The situation for Concession 17 was different. Unlike Concession 20, no oil had ever been
produced from that field, but LIAMCO argued that the increase in the price of oil would have
rendered the field economic, such that LIAMCO should be compensated US$7.5 million for its
lost opportunity. But the arbitrator awarded nothing on this claim, reasoning that such profits
were not “certain and direct,” were doubtful, and were probably not realizable.
As for interest, LIAMCO requested a 12% rate on all amounts claimed, although it recognized
that setting the rate was a matter for the arbitrator’s discretion. The arbitrator concluded that
it was “just and equitable to consider the interest claimed not as usury (ribd), but as a
compensatory equivalent consideration of the said discount rate ....” The arbitrator elected the
5% rate allowed by Libyan law for commercial cases but granted interest only from the date of
the final assessment of damages on the theory that interest cannot be awarded on
unliquidated damages before they are ascertained.
As for costs, the arbitrator awarded LIAMCO US$203,000, pointing to Libyan law and a clause in
the contract that suggested costs could be allocated in an appropriate manner in light of
LIAMCO’s success in pursuing some but not all of its claims.
The LIAMCO case is an interesting one to read in light of more recent international
jurisprudence on quantum. The arbitrator’s decision conflicts with some recent cases on the
power to award restitution, against a State as well as the “full” compensation standard.
Nonetheless, the arbitrator’s reasoning on awarding LIAMCO only about a third of its claimed
damages mirrors to some extent the conservative approach to compensation taken by many
modern tribunals, even those applying an ostensibly more robust standard. In addition, the
arbitrator’s general analysis on lost profits, as well as his decisions on interest and costs, are
likewise reflective of much current jurisprudence on these issues, except that his decision to
award interest only from the date of the award is inconsistent with the requirements of most
modern bilateral investment treaties.