Bank of Ethiopia v.

National Bank of Egypt and Liguori

Source: The American Journal of International Law, Vol. 31, No. 4 (Oct., 1937), pp. 742-747
Published by: Cambridge University Press
Stable URL: https://www.jstor.org/stable/2190692
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742 THE AMERICAN JOURNAL OF INTERNATIONAL LAW

GREAT BRITAIN: HIGH COURT OF JUSTICE

CHANCERY DIVISION
BANK OF ETHIOPIA V. NATIONAL BANK OF EGYPT AND LIGUORI *

May 11, 1937

An Italian decree promulgated after the capture of Addis Ababa in 1936 purported to
dissolve the Bank of Ethiopia. That bank claimed certain accounts and orders against the
National Bank of Egypt and against the liquidator appointed under the Italian decree,
and an issue was directed to be tried whether the Bank of Ethiopia had been dissolved or
had otherwise ceased to exist, and, if not, whether it had authorized the bringing of the
action.
Held, (1) That the Bank of Ethiopia had been dissolved by the Italian decree, which was
the act of a de facto government in entire control of the territory occupied and therefore
having complete governmental control over that territory.
(2) That the action, having been brought otherwise than by the liquidator's authority,
had not been authorized by the Bank of Ethiopia.
Semble, that all the acts of a de facto government have the status of acts of a fully
responsible Government.

Mr. JUSTICE CLAUSON. Before the year 1931 an Egyptian company, the
Bank of Abyssinia, conducted the business of banking at Addis Ababa, the
capital city of Ethiopia, under a government concession. This arrangement
was brought to an end in 1931 when a company, the Bank of Ethiopia, was
formed under the law of Ethiopia. Its constitution provided for a board of
management of ten persons, six to be appointed by the Government of Ethiopia
(who held six-tenths of the capital) and four by the holders of the remaining
capital. An important function of the company was to be a bank of issue, and
it appears in fact to have acted in close contact with the Minister of Finance
for the time being. As I understand it, there was no other bank in the Ethio-
pian Empire. The bank had branches in various parts of the country and a
forwarding agency in Djibouti, within French territory. Mr. Collier, who
gave evidence before me, became governor of the bank on its formation, and
appears to have been in fact in control of its operations. Oddly enough the
constitution of the bank, while providing for the office of governor, does not
define his powers or his duties, but appears to vest control entirely in the
board of management who, as I read the material documents, are to meet at
the "stege social" of the company-that is, at Addis Ababa, and are to func-
tion with a quorum of five. There is a proviso that a member of the board
who absents himself for six months from the meetings is to cease to hold office.
In April, 1935, Mr. Collier left Addis Ababa on six months' leave of absence
for Europe, where he seems to have been acting on behalf of the bank and (as
it would appear) of the Government with regard to the provision of war-like
personnel and stores in anticipation, apparently, of a threatened outbreak of
hostilities between the Ethiopian Government and Italy. The affairs of the
bank in Ethiopia were left under the control of Mr. Wright, who in February,
1936, was formally constituted a member of the board. In the autumn of 1935
hostilities in fact began. Mr. Collier did not return to Ethiopia, but continued
* Reported by K. R. A. Hart, Esq., Barrister-at-Law. 53 Times Law Reports, p. 751.

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 JUDICIAL DECISIONS 743

his activities in Europe, further leave of absence being granted to him. If

regard is to be paid to the letter of the bank's constitution, there would seem
to be good ground for saying that Mr. Collier ceased, towards the latter part
of 1935, to be a director, and it may be (though this is obscure) that he no
longer had general authority, as governor or otherwise, to act on behalf of the
bank. However, no question seems to have been raised and, though absent
from Addis Ababa, Mr. Collier continued to represent the bank in Europe
and, so far as communications remained open between him in Europe andMr.
Wright in Addis Ababa, to exercise general control, through Mr. Wright, over
the activities of the bank. Subject to a general adherence to Mr. Collier's
instructions Mr. Wright seems to have been in control at Addis Ababa. It
would seem that until the events of May, 1936, about to be related, board meet-
ings were held periodically at Addis Ababa, and anything which Mr. Wright
did seems to have been done either with the authorization or with the ac-
quiescence of such meetings.
In due course the fortunes of war turned against the Ethiopian Government.
At the end of April, 1936, the Italian Army approached the capital. On the
night of May 1, or early on May 2, the Emperor left the capital and the
country. There was an interval in which the capital appears to have been
given over in great measure to looting and rioting. On May 5 the Italian
Army entered the capital and, from and after May 6, the affairs of the bank
in the capital were conducted by Mr. Wright and his staff under the supervi-
sion of the representative of the Italian authorities. The country branches of
the bank had been gradually closed down as the Italian Army obtained control
of the areas in which they were situated, the last being closed on or about
May 8. There was, however, an agency at Gore, in the remote west of the
country in a part where the Italian forces did not obtain effective control until
August or September, 1936, and the staff there seems to have kept the agency
open in some sense or other until about August or September.
On May 9, 1936, the Italian Government issued an annexation proclama-
tion. Marshal Badoglio, on May 9, 1936, was appointed Governor-General
and Viceroy as representing the King of Italy, and from that date it appears
as a fact from the evidence before me that the Italian Government, through its
officers, exercised effective governmental control over Addis Ababa, the siege
social of the bank, and over a gradually increasing tract of Ethiopian territory.
In the middle of December, at which date .the territory under Italian control
seems to have covered the whole of the portion of Ethiopian territory in which
any activities of the bank had ever been carried on, his Majesty's Government,
as I am authoritatively informed by a communication from one of his
Majesty's principal Secretaries of State, recognized the Italian Government
as being in fact (de facto) the Government of the area then under Italian
control.
The effect of that communication is that I am bound to treat the acts of the
Government which was so recognized as acts which cannot be impugned on

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744 THE AMERICAN JOURNAL OF INTERNATIONAL LAW

the ground that they were not the acts of a rightful but a usurping Govern-
ment. That follows from the decision of the Court of Appeal in Aksionair-
noye Obschestvo A. M. Luther v. James Sagor and Co. (37 The Times L. R.
777; [1921] 3 K. B. 532), and my last observation applies not only to acts
done after the date when his Majesty's Government recognized the Italian
Government as the de facto Government, but also to any acts of that Govern-
ment done at any time at which, on the facts proved before me, they were in
fact the Government, though not yet recognized as such by his Majesty. For
this proposition it is sufficient for me to refer to the decision of the Court of
Appeal in White, Child and Beney, Limited, v. Eagle Star and British Do-
minions Insurance Company, Limited (38 The Times L. R. 616).
A very experienced Italian lawyer gave clear evidence of the law as admin-
istered by the de facto Government in Ethiopia, and he referred to authenti-
cated copies of various decrees made under that governmental authority. In
view of this evidence I find the facts to be as follows.
The Italian troops having, as I mentioned above, entered the capital on
May 5, 1936, the governmental control of an area which included the whole
of those portions of Ethiopia in which the Bank of Ethiopia was carrying on
or ever had carried on business (save so far as the agency at Gore was con-
cerned) was on May 9 effectively assumed by Marshal Badoglio on behalf
of the Italian Government. On or about June 1 a regular governmental ad-
ministration was set up which was expressed to cover the whole of Ethiopia
and did effectively cover at least the area in which the bank operated or (with
the trifling exception already mentioned) had ever operated. From May 5
onwards the operations of the bank were controlled by the authorities of the
Italian Government. Early in June Mr. Wright was directed to suspend
business save for the purpose of getting in credits. On June 20 a government
decree, valid according to the law as recognized and administered by the
de facto Government, placed the bank in liquidation and appointed one
Costagnaro its liquidator. The effect of that decree, according to the law as
recognized and administered by the de facto Government, and, accordingly,
prevailing at that time in the area controlled by the Italian Government, was
to dissolve the bank save in so far as it might be necessary to keep it on foot
for the purposes of liquidation. Further, this governmental act had, accord-
ing to law administered by the de facto Government, the effect of putting an
end to the authority of any person, other than the liquidator or those acting
under his authority, to represent, act for, or bind the company. I am satis-
fied on the evidence that if today the courts of the de facto Government at
Addis Ababa had before them the questions which I have had to consider-
namely, whether the Bank of Ethiopia has been dissolved and has, accord-
ingly, ceased to exist except in so far as may be necessary for the liquidation
of its affairs, and whether anyone, acting otherwise than under the authority
of the liquidator of the bank, appointed as I have mentioned, can conduct
litigation on behalf of the bank-the answers given would unquestionably be

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 JUDICIAL DECISIONS 745

in the affirmative to the first question and in the negative to the second ques-
tion. The original liquidator, Mr. Costagnaro, has been replaced by Mr.
Liguori, but it is not suggested that that circumstance makes any difference
apart from the change in the person of the liquidator.
A good deal of discussion took place before me as to the validity of certain
meetings of shareholders and of directors which were subsequently convened.
The shareholders' meetings took place in Addis Ababa, and it may well be
that they were irregular as tested by the provisions of the bank's statutes.
Various meetings of directors were convened by Mr. Collier in Europe, and
it may well be (and, indeed, I think it was) the case that, tested by the pro-
visions of the bank's statutes, they were entirely irregular and ineffective for
any purpose. At the last moment there was produced in court a decree,
signed by the fugitive Emperor of Abyssinia at Bath in this country, which,
it was suggested, had the effect of altering or modifying the legal position with
regard to the regularity or effectiveness of those meetings of directors. I can-
not imagine any ground on which it could be seriously argued that I could
pay any attention to this decree. I do not propose, however, to go into any
of those matters, because it appears to me that if the decree, which placed the
bank in liquidation, has the effect which I have indicated, these matters
become entirely irrelevant.
I must, however, deal with the grounds on which it was suggested by counsel
instructed to appear for the Bank of Ethiopia that the liquidation was ineffec-
tive. The argument, as I understood it, was as follows. It was said that the
present case was entirely novel in that at the same time there was on the one
hand a de facto Government recognized as such by his Majesty's Government,
and on the other hand a sovereign-namely, the fugitive Emperor-recog-
nized by his Majesty's Government as a de jure monarch.
It was suggested that in these circumstances it was open to this court to
depart from the duty carefully laid down by Lord Justice Bankes in Aksio-
nairnoye Obschestvo A. M. Luther v. James Sagor and Co. (supra) -namely,
the duty of treating the acts of the de facto Government with all the respect
due to the acts of a duly recognized foreign sovereign state, and that it was
open to this court, and, indeed, that it was its duty, to test the validity of
those acts by some special test, the first suggested being whether the acts in
question were necessary to secure the safety of the occupying army the pres-
ence of which secured the Government in its position of de facto control. It
may be-though it is not necessary to express or even to form an opinion on
the topic-that such a test may be applicable to measures adopted by the
authorities of an army occupying part of the territory of an organized state.
But the test seems to me to have no relevance in principle to the case of a
de facto government set up in an area from which the former government has
departed and in which there is no governmental authority except that of the
de facto government. The de facto government must necessarily make such
provision as may be proper for regulating the concerns of the inhabitants and

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746 THE AMERICAN JOURNAL OF INTERNATIONAL LAW

it cannot confine itself to the protection of its military forces. It must neces-
sarily, in such circumstances, assume the full responsibility of government
and its acts must, I should have thought, necessarily have the status of acts
of a fully responsible government.
It was then sought to argue that the recognition of some measure of sover-
eignty de jure in the fugitive Emperor logically led to the denial of full
sovereignty to the de facto Government. And it was suggested that there
existed this limitation on the acts of the de facto Government which are to be
recognized as internationally valid-namely, that they must be acts which
were strictly necessary for preserving peace, order and good government
within the area controlled by the de facto Government. This seems to me
to be entirely inconsistent with the authorities to which I have already re-
ferred and to be fallacious in principle. The recognition of the fugitive
Emperor as a de jure monarch appears to me to mean nothing but this, that,
while the recognized de facto Government must for all purposes, while con-
tinuing to occupy its de facto position, be treated as a duly recognized foreign
sovereign state, his Majesty's Government recognizes that the de jure mon-
arch has some right (not, in fact, at the moment enforceable) to reclaim the
governmental control of which he has in fact been deprived. Where, how-
ever, his Majesty's Government has recognized a de facto government, there
is, as it appears to me, no ground for suggesting that the de jure monarch's
theoretical rights (for ex hypothesi he has no practical power of enforcing
them) can be taken into account in any way in any of his Majesty's courts.
This being my view it is perhaps superfluous to point out that, even if I
could accede to the last-mentioned argument, and if I were free to test the
acts of the de facto Government by the test of such acts being necessary for
preserving peace, order and good government, the test could hardly fail to
lead to my accepting as valid the acts questioned in the present case. It is
difficult to see how confusion could fail to ensue if the only bank of issue in
the country were allowed to continue its business under the control of persons
who, until the last moment, seem to have been engaged in strenuous attempts
to assist the displaced government to resist the attacks of those who have
become the de facto government. But I need not pursue this topic, since, in
my view, I am not free to apply any such test.
I turn now to the proceedings in the present case. This action was started
on November 29, 1936, in the name of the Bank of Ethiopia, under the au-
thority of some person or persons (apparently Mr. Collier and various persons
in Europe who before the liquidation were directors of the bank) who are not
acting under the direction or with the approval of the liquidator. The de-
fendants are the National Bank of Egypt, who appear to have been the cor-
respondents of the Bank of Ethiopia in Cairo and London. The Bank of
Ethiopia in substance claims a settlement of outstanding accounts between
the two banks. As I understand it, there is no dispute that these accounts
must, as between the proper parties, be ultimately adjusted, but the question

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 JUDICIAI DECISIONS 747

at once emerged whether the right party to adjust the accounts with the Na-
tional Bank of Egypt is not the liquidator appointed as I have stated. The
matter has been brought to a head by the settlement of two preliminary
issues, and these issues now come before me for trial. They are as follows:
(1) Whether the Bank of Ethiopia has been dissolved or has otherwise
ceased to exist as a company under or by virtue of the laws of the country
under which it was incorporated.
(2) If it has not so ceased to exist, whether it has authorized this action
to be brought.
Since the issues were settled the liquidator appointed in accordance with
the law as administered by the de facto Government in Ethiopia has been
added as a party. In my view, as already stated, of the facts and the law
I must, on these issues, make declarations to the following effect:
(1) That the Bank of Ethiopia has, under or by virtue of the laws of the
country in which it was incorporated, been dissolved and has accordingly
ceased to exist except in so far as may be necessary for the liquidation of its
affairs.
(2) That this action, having been brought otherwise than by or under the
authority of the defendant Liguori, the duly constituted liquidator of the
Bank of Ethiopia, has not been authorized by the Bank of Ethiopia.

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