COUNSEL: Leslie Scott K.C. and H. L. Murphy for the appellants.
Barrington-Ward K.C. and St. John Field for the respondents.

SOLICITORS: For appellants: H. W. & S. Patey.
For respondents: Linklaters & Paines.

JUDGES: Bankes, Warrington, and Scrutton L.JJ.

DATES 1921 April 29; May 2, 12.
 

International Law – Recognition of Foreign Government – Russian Soviet Republic – Confiscatory Act – Sale of confiscated Goods – Validity of Sale.

The Courts of this country will not inquire into the validity of the acts of a foreign government which has been recognized by the Government of this country. In this respect it is all one whether the foreign government has been recognized as a government de jure or de facto.

The Russian Socialist Federal Soviet Republic passed a decree in June, 1918, declaring all mechanical sawmills of a certain capital value and all woodworking establishments belonging to private or limited companies to be the property of the Republic. In 1919 agents of the Republic seized the plaintiffs’ mill or factory in Russia and the stock of manufactured wood therein. In August, 1920, agents of the Republic purported to sell a quantity of the stock so seized to the defendants, who imported it into England.

In letters dated in April, 1921, the Secretary of State for Foreign Affairs stated that His Majesty’s Government recognized the Soviet Government as the de facto Government of Russia; that a government known as the Provisional Government came into power in March, 1917, and was recognized by His Majesty’s Government, and remained in session until December 13, 1917, and was then dispersed by the Soviet authorities.

In an action by the plaintiffs for a declaration that they were entitled to the wood above mentioned:—

Held, that the Government of this country had recognized the Soviet Government as the de facto Government of Russia existing at a date before the decree of June, 1918; that therefore the validity of that decree and the sale of the wood to the defendants could not be impugned, and that the defendants were therefore entitled to judgment.

Judgment of Roche J. [1921] 1 K. B. 456 reversed on further facts.

APPEAL from the judgment of Roche J. (2) in an action tried before the learned judge without a jury.

The plaintiffs were a company incorporated in 1898 in the Empire of Russia according to the laws of Russia. Their

(1) [ Sic in the record; the transliteration is not quite correct or consistent. – F. P.]

(2) [1921] 1 K. B. 456.

[*533] head office was at Reval, where they had a factory for the manufacture of veneer or plywood. They also had a factory or mill at Staraja Russa, about 140 miles south of Petrograd, and there in the year 1919 they had a large stock, not less than 1500 cubic metres, of manufactured boards stamped with the name “Venesta” or the letters “V. L.,” the name or trade mark of Venesta, Ld., a British company.

On June 20, 1918, a confiscatory decree purporting to issue from the Government of Russia was passed. The following translation was accepted by the parties in the Court below as giving the meaning of the material portions of the decree.

“Decree of Council of Commissars for the People of June 20, 1918, which appeared in ‘Izviestia’ in Moscow on June 30, 1918. No. 134.

“By Article 1: All industrial and commercial establishments mentioned below with their capital and assets of whatever nature are declared the property of the Russian Socialist Federative Republic (inter alia);

“(17) All the mechanical saw mills of limited or private companies which have a capital of at least 1,000,000 roubles;

“(18) All woodworking establishments equipped with machinery which belonged to private or limited companies. “Decree signed by Lenin in presence of Council of Commissars and by Commissars of the People;

“TSIRIOUP NAGUINE RIKOF,

“Business Director.

“BOVITCH-BROVENITSCH,

“Secretary of the Council.”

In January, 1919, certain Commissaries or officials armed with authority from the Soviet Government took possession of the plaintiffs’ factory or mill at Staraja Russa and of the manufactured goods lying there.

On August 14, 1920, a contract was made in London between L. B. Krassin, the representative of the Russian Commercial Delegation in London, and the defendants whereby Krassin on behalf of the Russian Commercial Delegation [*534] sold to the defendants, a firm carrying on business in London, a quantity of birch, alder, and aspen plywood including the 1500 cubic metres of plywood seized by the Commissaries as above stated. The contract was signed on behalf of the Russian Commercial Delegation by “Commissary to Foreign Trade, Krassin; Secretary, Klishko.” It was under the seal of the Agents of the Soviets of the People’s Commissaries.

Under this contract the defendants obtained possession of the 1500 cubic metres of plywood boards and imported them into England.

The plaintiffs claimed a declaration that these goods were their property; an injunction restraining the defendants their servants and agents from selling, pledging, or in any way dealing with them; and damages for conversion and detention of them.

The defendants contended that the decree of June 20, 1918, and the subsequent seizure of the goods and sale of them to the defendants were the acts of the Russian Socialist Federal Soviet Republic, a sovereign state, and were valid and effectual to deprive the plaintiffs of the property in the goods and to transfer the same to the defendants.

The following letters relating to the position of L. B. Krassin, the Russian Commercial Delegation, and the Russian Socialist Federal Soviet Republic were received in evidence before Roche J.:—

(1.) A letter dated July 28, 1920, written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the solicitors for L. B. Krassin. It stated that Krassin was the authorized representative of the Soviet Government and had been received by His Majesty’s Government for the purpose of carrying out certain negotiations. It further stated that His Majesty’s Secretary of State regarded Krassin as a foreign representative and as one who in view of the negotiations should be exempt from the process of the Courts.

(2.) A letter of October 5, 1920, written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the defendants’ solicitors which stated that: “His Majesty’s [*535] Government assent to the claim of the Delegation to represent in this country a State Government of Russia.”

(3.) A letter dated November 27, 1920, written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the plaintiffs’ solicitors which stated that “for a certain limited purpose His Majesty’s Government has regarded Monsieur Krassin as exempt from the process of the Courts, and also for the like limited purpose His Majesty’s Government has assented to the claim that that which Monsieur Krassin represents in this country is a State Government of Russia, but that beyond these propositions the Foreign Office has not gone, nor moreover do these expressions of opinion purport to decide difficult and, it may be, very special questions of law, upon which it may become necessary for the Courts to pronounce. I am to add that His Majesty’s Government have never officially recognized the Soviet Government in any way.”

The defendants also contended that, by a treaty of peace concluded on February 2, 1920, between the Republic of Esthonia and the Russian Soviet Republic, Reval was recognized as within Esthonian territory and Staraja Russa as within the territory of the Russian Soviet Republic; that consequently the plaintiffs, whose head office was in Reval, had become an Esthonian company; that they as Esthonian citizens were making a claim to property situate in Russia; that under art. XIV. of the treaty mixed Russo-Esthonian Commissions had been established for deciding all such claims; and that any claim of the plaintiffs to property which at the date of the treaty was at Staraja Russa must be made through the mixed commissions and not otherwise.

Roche J. upon the evidence before him found that His Majesty’s Government had not recognized the Russian Soviet Government as the government of a sovereign state or power. He also found that the plaintiffs had not become an Esthonian company but had elected to remain a Russian company, which the treaty of February 2, 1920, enabled them to do. He therefore gave judgment for the plaintiffs.

The defendants appealed.

[*536] After the date of the judgment further information was obtained from the Foreign Office touching the status of the Soviet Government of Russia. The appellants applied for and obtained leave to bring this further information before the Court. It was conveyed in the following letters:—

On April 12, 1921, the appellants’ solicitors wrote to the Under-Secretary of State for Foreign Affairs asking for a certificate for production to the Court of Appeal that the Government of the Russian Socialist Federal Soviet Republic had been recognized by His Majesty’s Government as the de facto Government of Russia.

In answer to this request they received a letter dated April 20, 1921, in these terms: “(1.) I am directed by Earl Curzon of Kedleston to refer to your letter of April 12, asking for information as to the relations between His Majesty’s Government and the Soviet Government of Russia.

“(2.) I am to inform you that His Majesty’s Government recognize the Soviet Government as the de facto Government of Russia.”

In answer to a request for information concerning the Provisional Government, its duration and status, a letter was written from the Foreign Office on April 22 stating that on the termination of the Imperial Government on March 14, 1917, the Provisional Government came into power and was recognized by His Majesty’s Government as the then existing Government of Russia, that it remained in power until December 13, 1917, and was then dispersed by the Soviet authorities.

On March 16, 1921, a trade agreement was executed between His Majesty’s Government and the Government of the Russian Socialist Federal Soviet Republic. It was signed at London by Sir R. S. Horne on behalf of His Majesty’s Government and by L. Krassin on behalf of the Russian Soviet Government. By clause 10 of this agreement the Russian Soviet Government undertook “to make no claim to dispose in any way of the funds or other property of the late Imperial and Provisional Russian Governments in the United [*537] Kingdom.” His Majesty’s Government gave a corresponding undertaking as regards British Government funds and property in Russia.

Leslie Scott K.C. and H. L. Murphy for the appellants. The letters of April 20 and April 22, 1921, from the Foreign Office make it clear (1.) that on April 20 the Soviet Government was recognized by His Majesty’s Government as the de facto Government of Russia; (2.) that it succeeded the Provisional Government which came into power on March 14, 1917, first under Prince Lvov and then under M. Kerensky, and lasted until December, 1917; (3.) that the Provisional Government while in existence was recognized by His Majesty’s Government. The recognition of a government involves the recognition of its acts from the commencement of its existence: Williams v. Bruffy (1); Underhill v. Hernandez (2); Oetjen v. Central Leather Co. (3) It is plain that the Soviet Government commenced its existence in December, 1917. Acts done by that Government since December, 1917, will not be questioned by His Majesty’s Courts of Justice, because the acts of a recognized government are not the subject of adjudication in the Courts of the recognizing government: Underhill v. Hernandez (4); and the Courts of one country will not sit in judgment on the acts of the government of another done within its own territory: Underhill v. Hernandez (5); Oetjen v. Central Leather Co. (6) It follows that the decree of June 20, 1918, the seizure of the respondents’ goods in January, 1919, and the sale on August 14, 1920, by L. B. Krassin on behalf of the Russian Commercial Delegation, which was recognized as representing a State Government of Russia by His Majesty’s Government, as appears from the letter of October 5, 1920, were acts the validity of which must be taken for granted.

Secondly, the claim of the respondents is a matter to be settled between the Russian and Esthonian Governments

(1) (1877) 96 U. S. 176.

(2) (1897) 168 U. S. 250.

(3) (1917) 246 U. S. 297.

(4) 168 U. S. 250, 254.

(5) 168 U. S. 252.

(6) 246 U. S. 303.

[*538] under the treaty of peace of February 2, 1920. Roche J. decided against the appellants on this point on the ground that the respondents were in truth a Russian and not an Esthonian company. That is not a question to be decided by the Courts of this country, but by the mixed commissions set up by the treaty.

Barrington-Ward K.C. and St. John Field for the respondents. The recognition of a foreign government may or may not have a retrospective operation. If the government is recognized as the government de jure the recognition is retrospective and the acts of that government from the beginning of its existence must be recognized as valid acts by the Courts of the sovereign recognizing the foreign government. But if the foreign government is merely recognized as the government de facto the recognition has no retrospective operation. The acts complained of were all done before the Russian Soviet Republic was recognized. It is clear from the letter from the Foreign Office of November 27, 1920, that the Soviet Republic was not recognized until after that date. The alleged sale to the respondents took place in the preceding August. Assuming therefore that the Russian Commercial Delegation, which is supposed to have effected the sale, is the Russian Soviet Republic subsequently recognized, which is by no means clear, the acts of the Delegation were never recognized by His Majesty’s Government.

Secondly, the Courts of this country are not bound to accept as valid all acts of what nature or kind soever done by a recognized foreign government: Folliott v. Ogden (1), affirmed in Ogden v. Folliott (2); Wolff v. Oxholm (3); Republic of Peru v. Dreyfus (4); Lecouturier v. Rey. (5) If the act is contrary to the morality or political institutions of this country His Majesty’s Courts of Justice may treat it as null and void: Simpson v. Fogo (6); Kaufman v. Gerson (7); Dicey on Conflict of Laws.(8) The decree of

(1) (1789) 1 H. Bl. 123.

(2) (1790) 3 T. R. 726.

(3) (1817) 6 M. & S. 92.

(4) (1888) 38 Ch. D. 348.

(5) [1910] A. C. 262.

(6) (1862) 1 H. & M. 195.

(7) [1904] 1 K. B. 591.

(8) 2nd ed. (1908), p. 36.

[*539] June 20, 1918, is not an act to command respect by any innate justice or morality. It is contrary to English political principles and ought to be disregarded. The alleged sale by L. B. Krassin should meet with the same fate. There is then nothing to bar the respondents’ claim.

Leslie Scott K.C. in reply. There is no difference in effect between recognition of a government as a government de jure and recognition of a government as a government de facto. In either case the recognition validates acts done by the government from the time when it can be ascertained as the government which is subsequently recognized. After it has been recognized its acts cannot be questioned in a Court of law. It may be a question for private speculation whether the decree of June 20, 1918, was a wise or an improvident one, a barbarous or a civilized institution. “But here we must take it as the law of an independent country, and the laws of every country must be equally regarded in Courts of justice here, whether in private speculation they are wise or foolish”: Wright v. Nutt . (1)

May 12. The following written judgments were delivered:—

BANKES L.J. The action was brought to establish the plaintiff company’s right to a quantity of veneer or plywood which had been imported by the defendants from Russia. The plaintiffs’ case was that they are a Russian company having a factory or mill at Staraja Russa in Russia for the manufacture of veneer or plywood, and that in the year 1919 the so-called Republican Government of Russia without any right or title to do so seized all the stock at their mill and subsequently purported to sell the quantity in dispute in this action to the defendants. The plaintiffs contended that the so-called Republican Government had no existence as a government, that it had never been recognized by His Majesty’s Government, and that the seizure of their goods was pure robbery. As an alternative they contended that the decree of the so-called government nationalizing all factories, as a result of which their goods were seized,

(1) (1789) 1 H. Bl. 136, 149.

[*540] ] is not a decree which the Courts of this country would recognize.

The answer of the defendants was two-fold. In the first place they contended that the Republican Government which had passed the decree nationalizing all factories was the de facto Government of Russia at the time, and had been recognized by His Majesty’s Government as such, and that the decree was one to which the Courts of this country could not refuse recognition. Secondly they contended that the plaintiff company was an Esthonian and not a Russian company, and that as a result of the provisions of the treaty of peace between Russia and Esthonia the plaintiffs’ complaint must be dealt with by a commission set up in pursuance of art. XIV. of that treaty. Roche J. decided the two main points in the plaintiffs’ favour. Upon the evidence which was before the learned judge I think that his decision was quite right. As the case was presented in the Court below the appellants relied on certain letters from the Foreign Office as establishing that His Majesty’s Government had recognized the Soviet Government as the de facto Government of Russia. The principal letters are referred to by the learned judge in his judgment. He took the view that the letters relied on did not establish the appellants’ contention. In this view I entirely agree.

In this Court the appellants asked leave to adduce further evidence, and as the respondents raised no objection, the evidence was given. It consisted of two letters from the Foreign Office dated respectively April 20 and 22, 1921. The first is in reply to a letter dated April 12, which the appellants’ solicitors wrote to the Under Secretary of State for Foreign Affairs, asking for a “Certificate for production to the Court of Appeal that the Government of the Russian Socialist Federal Soviet Republic is recognized by His Majesty’s Government as the de facto Government of Russia.” To this request a reply was received dated April 20, 1921, in these terms: “I am directed by Earl Curzon of Kedleston to refer to your letter of April 12, asking for information as to the relations between His Majesty’s Government and [*541] the Soviet Government of Russia. (2.) I am to inform you that His Majesty’s Government recognize the Soviet Government as the de facto Government of Russia.” The letter of April 22 is in reply to a request for information whether His Majesty’s Government recognized the Provisional Government of Russia, and as to the period of its duration, and the extent of its jurisdiction. The answer contains (inter alia) the statement that the Provisional Government came into power on March 14, 1917, that it was recognized by His Majesty’s Government as the then existing Government of Russia, and that the Constituent Assembly remained in session until December 13, 1917, when it was dispersed by the Soviet authorities. The statement contained in the letter of April 20 is accepted by the respondents’ counsel as the proper and sufficient proof of the recognition of the Soviet Government as the de facto Government of Russia.

Under these circumstances the whole aspect of the cases is changed, and it becomes necessary to consider matters which were not material in the Court below. The first is a question of law of very considerable importance – namely, what is the effect of the recognition by His Majesty’s Government in April, 1921, of the Soviet Government as the de facto Government of Russia upon the past acts of that Government, and how far back, if at all, does that recognition extend. The second is a question of fact, whether sufficient evidence was given to establish the identity of the Soviet Government now recognized by His Majesty’s Government with the Government which seized and confiscated and sold the appellants’ goods.

On the first point counsel have been unable to refer the Court to any English authority. Attention has been called to three cases decided in the Supreme Court of the United States: Williams v. Bruffy (1); Underhill v. Hernandez (2); and Oetjen v. Central Leather Co. (3) In none of these cases is any distinction attempted to be drawn in argument between the effect of a recognition of a government as a de facto

(1) 96 U. S. 176.

(2) 168 U. S. 250.

(3) 246 U. S. 297.

[*542] government and a recognition of a government as a government de jure, nor is any decision given upon that point; nor, except incidentally, is any mention made as to the effect of the recognition of a government upon its past acts. The mention occurs in two passages, one in the judgment of Field J. in Williams v. Bruffy (1), where, after discussing the essential differences between the Government of the Confederate States and the two kinds of de facto governments which he says may exist, he explains that the second of the two kinds exists where a portion of the inhabitants of a country have separated themselves from the parent state and established an independent government. “The validity of its acts,” he says, “both against the parent state and its citizens or subjects, depends entirely upon its ultimate success. If it fail to establish itself permanently, all such acts perish with it. If it succeed, and become recognized, its acts from the commencement of its existence are upheld as those of an independent nation.” The second mention of the point occurs in the judgment of Fuller C.J. in Underhill v. Hernandez. (2) He says, in speaking of civil wars: “If the party seeking to dislodge the existing government succeeds, and the independence of the government it has set up is recognized, then the acts of such government from the commencement of its existence are regarded as those of an independent nation.” These are weighty expressions of opinion on a question of international law. Neither learned judge cites any authority for his proposition. Each appears to treat the matter as one resting on principle. On principle the views put forward by these learned judges appear to me to be sound, though there may be cases in which the Courts of a country whose government has recognized the government of some other country as the de facto government of that country may have to consider at what stage in its development the government so recognized can, to use the language to which I have already referred of those learned judges, be said to have “commenced its existence.” No difficulty of that kind arises in the present case, because, upon the construction

(1) 96 U. S. 186.

(2) 168 U. S. 253.

[*543] which I place upon the communication of the Foreign Office to which I have referred, this Court must treat the Soviet Government, which the Government of this country has now recognized as the de facto Government of Russia, as having commenced its existence at a date anterior to any date material to the dispute between the parties to this appeal.

An attempt was made by the respondents’ counsel to draw a distinction between the effect of a recognition of a government as a de facto government and the effect of a recognition of a government as a government de jure, and to say that the latter form of recognition might relate back to acts of state of a date earlier than the date of recognition, whereas the former could not. Wheaton quoting from Mountague Bernard states the distinction between a de jure and a de facto government thus (1): “A de jure government is one which, in the opinion of the person using the phrase, ought to possess the powers of sovereignty, though at the time it may be deprived of them. A de facto government is one which is really in possession of them, although the possession may be wrongful or precarious.” For some purposes no doubt a distinction can be drawn between the effect of the recognition by a sovereign state of the one form of government or of the other, but for the present purpose in my opinion no distinction can be drawn. The Government of this country having, to use the language just quoted, recognized the Soviet Government as the Government really in possession of the powers of sovereignty in Russia, the acts of that Government must be treated by the Courts of this country with all the respect due to the acts of a duly recognized foreign sovereign state.

It becomes material now to consider whether the appellants have given sufficient evidence to establish that the confiscation and subsequent sale of the respondents’ property were the acts of the Government which His Majesty’s Government have now recognized as the de facto Government of Russia. In my opinion they have. The decree of confiscation as set out in the judgment of Roche J. as reported

(1) International Law, 5th English edition (1916), p. 36.

[*544] in the Law Reports (1) purports to be “A decree of Council of Commissars for the People.” The contract of sale of the goods to the appellants dated August 14, 1920, purports to be made by L. B. Krassin on behalf of the Russian Commercial Delegation. The trade agreement between this country and Russia of March 16, 1921, is made between His Majesty’s Government and the Government of the Russian Socialist Federal Soviet Republic, thereinafter referred to as the Russian Soviet Government, and is signed by M. Krassin as the representative of that Government. From the letter from the Foreign Office addressed to Messrs. Linklater of April 22, 1921, it appears that the Soviet authorities dispersed the then Constituent Assembly on December 13, 1917, from which date I think it must be accepted that the Soviet Government assumed the position of the sovereign Government and purported to act as such. The witness Rastorgoueff explained that the Council of Commissars for the People is the executive body of the Soviet Republic. The witness Schotter deposed to the seizure of the plaintiffs’ goods at the factory being made by persons holding official documents from the Soviet Government, and to the fact that at that time and up to the date of the trial the power (as he expressed it) was in the hands of the Bolshevists. The witness Muller who described himself as confidential clerk to the Russian Trade Delegation of the Russian Socialist Federal Soviet Republic, of which M. Krassin was the head, deposed to the fact that since the end of 1917 the Russian Socialist Federal Soviet Republic had in fact been ruling over that part of Russia in which the plaintiffs’ factory at Staraja Russa is situate. Upon these materials I consider that it is established that the decree of confiscation of June, 1918, the seizure of the plaintiffs’ goods in January, 1919, and the subsequent sale of them to the defendants in August, 1920, were all acts of the Soviet Government which has now been recognized by His Majesty’s Government as the de facto Government of Russia, and must be accepted by the Courts of this country as such.

(1) [1921] 1 K. B. 470.

[*545] It is necessary now to deal with the point made by the respondents, that the decree of confiscation of June, 1918, even if made by the Government which is now recognized by His Majesty’s Government as the de facto Government of Russia, is in its nature so immoral, and so contrary to the principles of justice as recognized by this country, that the Courts of this country ought not to pay any attention to it. This is a bold proposition. The question before the Court is not one in which the assistance of the Court is asked to enforce the law of some foreign country to which legitimate objection might be taken, as in Hope v. Hope (1) and Kaufman v. Gerson. (2) The question before the Court is as to the title to goods lying in a foreign country which a subject of that country, being the owner of them by the law of that country, has sold under an f.o.b. contract for export to this country. The Court is asked to ignore the law of the foreign country under which the vendor acquired his title, and to lend its assistance to prevent the purchaser dealing with the goods. I do not think that any authority can be produced to support the contention. Authority appears to negative it. In Santos v. Illidge (3) Blackburn J. says: “Assuming the taking to have been prohibited by a British act, still the taking having been of property locally situated in a foreign country, in a manner lawful according to the laws of that country, I apprehend that the property actually passed by the sale, and vested in the purchasers, though they committed a felony according to our law by taking it. It would be otherwise if the transfer were by a British subject of personal property situated within the British dominions; for, the contract passing the property, being prohibited, would be held void, and so the property would not vest; and it would be questionable how the case would have been, if it had been shown that the vendor was a domiciled British subject, though the property was locally situated in Brazil. But, where, as we must take it to be here, a Brazilian vendor, in Brazil, transferred property locally situated in Brazil,

(1) (1857) 8 D. M. & G. 731.

(2) [1904] 1 K. B. 591.

(3) (1860) 8 C. B. (N. S.) 861, 876.

[*546] I apprehend that though the vendees were British subjects the validity of the transfer must on every principle of law depend upon the local law of Brazil, and not upon that of the country of the purchaser. See Story on the Conflict of Laws, c. ix., p. 308 (ed. 1835).” (1) The respondents’ position is rendered all the more difficult from the fact that the vendor in the present case is a duly recognized sovereign state whose law conferred the title which is challenged. Even if it was open to the Courts of this country to consider the morality or justice of the decree of June, 1918, I do not see how the Courts could treat this particular decree otherwise than as the expression by the de facto government of a civilized country of a policy which it considered to be in the best interest of that country. It must be quite immaterial for present purposes that the same views are not entertained by the Government of this country, are repudiated by the vast majority of its citizens, and are not recognized by our laws. Taking the view I do of the point I do not consider it necessary to discuss the authorities to which our attention has been called.

The only remaining point is one that does not become material having regard to my view of the evidence now before this Court. In the Court below the appellants contended that the Courts of this country had no jurisdiction to entertain the present dispute because the respondents are really an Esthonian company and not a Russian company, and that by the terms of the treaty of peace the present claim is one which must be adjudicated upon by a commission appointed under the treaty. There is in my opinion no substance in the point. Even if the appellants were right on their facts they fail in my opinion in making out either that the present dispute falls within the language of the treaty or that if it did the language of the treaty ousts the jurisdiction of the Courts of this country. Upon the facts, in my opinion, Roche J. was quite right in deciding that the respondents never ceased to be a Russian company. Although I consider

(1) This edition was published in Edinburgh. The corresponding page in the 8th edition (Boston, 1883) is p. 533.

[*547] that upon the materials before him the learned judge’s judgment was quite correct, I think that upon the fresh materials before this Court the appeal succeeds and the judgment must be set aside and entered for the appellants. As the respondents succeeded, as I consider, rightly upon the evidence upon which the appellants relied in the Court below, I think that the respondents should have the costs of the action, and the appellants should have the costs of this appeal.

Since writing this judgment a further communication from the Foreign Office dated May 4, 1921, has been supplied by the respondents’ solicitors to the members of the Court, and to the appellants’ solicitors. The communication was made to a firm of solicitors interested in some other litigation. In the communication the writer states that he is instructed to state that His Majesty’s Government recognize the Soviet Government of Russia as the de facto Government of that country as from March 16, 1921. I have ascertained that the words “as from” should be read “as on.” So read the communication adds nothing to the information already before the Court and I need not refer to it further.

WARRINGTON L.J. The question in this case is whether the plaintiffs, or the defendants, are to be treated in this country as the owners of certain goods formerly the property of the plaintiffs, but since seized and sold to the defendants by persons purporting to act as the agents of the Russian Soviet Government. Roche J. has given judgment in favour of the plaintiffs’ claim, and the defendants appeal. Roche J. founded his judgment on the conclusion of fact arrived at by him on the evidence before him that the Russian Soviet Government had not been recognized by the Government of this country, and therefore the Courts could not recognize it or hold that it had sovereign power, or was able to deprive the plaintiff company of its property. With this finding on the materials before the learned judge I entirely agree. Since the date of the judgment, however, it appears by a letter dated April 20, 1921, written by the Foreign Office [*548] to the defendants’ solicitors that His Majesty’s Government recognize the Soviet Government as the de facto Government of Russia, and it appears as the result of the further letters referred to by Bankes L.J. that the recognition took effect on March 16, 1921, the date of the trade agreement between this country and Russia. The case therefore comes before us upon fresh materials of which we are bound to take notice, and which make a radical alteration in the circumstances under which the question is to be decided.

It is quite unnecessary to state the facts in detail, they are sufficiently stated in the judgment of Roche J., and for the present I will assume that the decree of June 20, 1918, declaring the establishments capital and assets of certain companies, including such a company as the plaintiffs, to be the property of the Russian Socialist Federal Republic was a decree of the same government as that which has since been recognized, and that the persons who afterwards seized the goods in question and those who sold them to the defendants were acting as the agents of that government.

The question then is whether the Court has any power to question the validity of the proceedings under which the property in the goods has prima facie been transferred to the defendants. The letter of the Secretary of State is clearly conclusive as to the status of the Soviet Government – namely, that it is an independent sovereign Government: see Mighell v. The Sultan of Johore, per Lord Esher M.R. (1) It is well settled that the validity of the acts of an independent sovereign government in relation to property and persons within its jurisdiction cannot be questioned in the Courts of this country: “Every sovereign state is bound to respect the independence of every other sovereign state, and the Courts of one country will not sit in judgment on the acts of the Government of another done within its own territory”: per Clarke J. delivering the judgment of the Supreme Court of the United States of America in Oetjen v. Central Leather Co. (2) The existence of this principle of law is implicit in the speeches of both Lord Macnaghten and Lord Shaw

(1) [1894] 1 Q. B. 149, 158.

(2) 268 U. S. 297, 303.

[*549] in Lecouturier v. Rey (1), and is not disputed by counsel for the respondents in the present case.

Some reliance was placed by the respondents upon the principle enunciated in such cases as Kaufman v. Gerson (2), that the Courts of this country will not enforce a contract invalid by our law as being in contravention of some essential principle of justice or morality, notwithstanding that by the law of the country where it was made no such objection could be raised to it. In my opinion this principle has no application. The appellants are not seeking to enforce such a contract. They are resisting an endeavour on the part of the respondents to induce the Court to ignore and override legislative and executive acts of the Government of Russia and its agents affecting the title to property in that country; it is that which, in my opinion, we are not at liberty to do.

But then it is said that at the time when the legislative or executive acts were done the persons assuming to act as the Government of Russia had not been recognized by this country, and those acts therefore are not entitled to the respect due to the acts of an independent sovereign state. This contention raises the question whether recognition is retroactive to any and what extent. Assuming that the acts in question are those of the government subsequently recognized I should have thought that in principle recognition would be retroactive at any rate to such date as our Government accept as that by which the government in question in fact established its authority. It appears from the letter of the Foreign Office dated April 22, 1921, that that date is anterior to any of the events material to the present case. “Recognition is the act through which it becomes apparent that an old state is ready to deal with a new state as an international person and a member of the family of nations.” (3) If this is so then provided the act in question was an act of the state so recognized it must, in my opinion, be entitled to the same respect as the act of a sovereign state, whether done before or after recognition.

(1) [1910] A. C. 262.

(2) [1904] 1 K. B. 591.

(3) Oppenheim, International Law, vol. i., 3rd ed. (1920), p. 135.

[*550] We have not been referred to, nor have I found, any authority in English law on the point, but there are decisions of the Supreme Court of America directly supporting the view I have expressed. The first of those is the judgment of Field J. delivering the opinion of the Supreme Court in Williams v. Bruffy. (1) Speaking of de facto governments he says: “The latter are of two kinds. One of them is such as exists after it has expelled the regularly constituted authorities from the seats of power and the public offices, and established its own functionaries in their places, so as to represent in fact the sovereignty of the nation. .... As far as other nations are concerned, such a government is treated as in most respects possessing rightful authority; its contracts and treaties are usually enforced; its acquisitions are retained; its legislation is in general recognized; and the rights acquired under it are, with few exceptions respected after the restoration of the authorities which were expelled.” It is true that there are here no express words affirming the validity of the acts of such a de facto government as from the commencement of its existence, but that such a view is implied is clear; the learned judge is obviously speaking of all the acts of such a government after it has come to represent the sovereignty of the nation. In the case of the other kind of de facto governments – namely, “where a portion of the inhabitants of a country have separated themselves from the parent state and established an independent government,” his view is quite plainly expressed. He says: “If it succeed, and become recognized, its acts from the commencement of its existence are upheld as those of an independent nation,” and (speaking of the American States after their separation from Great Britain) he says: “Having made good their declaration of independence, everything they did from that date was as valid as if their independence had been at once acknowledged.” (2) The same view is expressed in the judgment already referred to in Oetjen v. Central Leather Co. (3) It is true that in this case

(1) 96 U. S. 176, 185.

(2) 96 U. S. 186.

(3) 246 U. S. 297, 302.

[*551] the Court is applying the principle to a government recognized as the de jure government, but in my opinion there is no difference for the present purpose between a government recognized as such de jure and one recognized de facto, In the latter case, as well as in the former, the government in question acquires the right to be treated by the recognizing state as an independent sovereign state, and none the less that our Government does not pretend to express any opinion on the legality or otherwise of the means by which its power has been obtained. In fact I rather think a de jure government in international law means “one which, in the opinion of the person using the phrase, ought to possess the powers of sovereignty, though at the time it may be deprived of them”; while a de facto government is one which is “really in possession of them, although the possession may be wrongful or precarious.” (1) I express no opinion on the question whether the retroactive effect of recognition is so wide as to cover every act of the recognized government from the commencement of its existence. It is unnecessary to do so in the present case for the reason that our Government clearly treats the Soviet Government as having effectively displaced the previous Government at a date anterior to the earliest of the relevant events. I am of opinion, therefore, that on the assumptions mentioned above the Court is not in a position to question the validity of the acts whereby the property in the goods in question has been taken from the plaintiffs and transferred to the defendants.

I have now to consider whether those assumptions are justified. I think they are. In my opinion it is sufficiently proved that the Council of Commissars by whom the decree of June 20, 1918, purported to have been made were the persons at that time exercising supreme authority in Russia, and that the actual seizure of the goods in question was in pursuance of that decree, and by persons acting under the authority of the Government. The contract for sale to the defendants was made by M. Krassin as the representative of the Commercial Delegation in this country, which was

(1) Wheaton, International Law, 5th English edition (1916), p. 36.

[*552] treated by our Government as representing “A State Government of Russia.” (See the letter of October 5, 1920, from the Foreign Office.) Was the Government afterwards recognized the same Government as that by which the several acts above referred to were done? There is no evidence of any change of government in Russia since before June 20, 1918, and in clause 10 of the trade agreement between this country and the Russian Soviet Government the succession of Governments in Russia is described as “The late Imperial and Provisional Russian Governments,” and the Russian Soviet Government, and in the letter of April 22, 1921, already referred to, it is stated that it was the Soviet authorities who displaced the Provisional Government. I think, therefore, we are entitled to infer that the Government recognized as the Soviet Government existed before the date of the decree, and has been the Government of Russia ever since.

A further point was taken by the appellants founded on the suggestion that the plaintiff company must, since the recognition of Esthonia as a separate independent state, be treated as an Esthonian subject, and that its rights are regulated exclusively by certain treaty stipulations between Russia and Esthonia. Roche J. decided against the appellants on this point. I am quite content with his judgment in this respect, and desire to add nothing thereto. On the other point, however, I am of opinion that the appeal succeeds, and that judgment ought to have been entered and ought now to be entered for the defendants in the action.

SCRUTTON L.J. This appeal, which raises questions of general importance, relates to the ownership of certain wood goods which came to England from Russia by way of Esthonia. The plaintiffs, a Russian company, claim them as their property because they were made by the company’s servants in Russia in 1918, at their factory at Staraja Russa. The defendants, an American firm, claim them under a purchase on August 14, 1920, from one Krassin, claiming to be the representative in England of the Government in Russia, [*553] and selling the goods as the property of that Government. Going a step further, the defendants allege that the goods became the property of that Government by virtue of a Government decree of June 20, 1918, nationalizing all wood factories and their property, followed by a taking possession of the goods by the Government under that decree in January, 1919. Roche J. decided in favour of the plaintiffs, and the defendants appeal.

The plaintiffs’ head office before the war was in Reval, then in Russia. One of the defendants’ points was that now by the treaty of peace between Russia and Esthonia Reval formed part of Esthonian territory; that the plaintiffs had thus become an Esthonian company, and were therefore confined in their remedies to the method prescribed by that treaty of peace. On this I agree with Roche J. that by their proceedings in evidence before us the company preserved themselves as a Russian company. If they had failed I am not satisfied that the treaty prevented them from protecting their rights of property in foreign countries.

On the more serious question of the position of the Government of Russia, this Court is in a different position from Roche J. In his judgment on December 21, 1920, he stated that he was satisfied that His Majesty’s Government had not recognized the Soviet Government as the Government of a Russian Federal Republic or of any sovereign state or power. There were laid before us letters from the Foreign Office, one dated April 20, 1921, stating “that His Majesty’s Government recognize the Soviet Government as the de facto Government of Russia”; one dated April 22, 1921, stating that the Provisional Government (the Government of M. Kerensky) was displaced by the All Russian Congress of Workmen’s, Soldiers’, and Peasants’ deputies on November 8, 1917, and the Constituent Assembly dispersed by the Soviet authorities on December 13, 1917; and also a trade agreement made on March 16, 1921, between the Government of the United Kingdom and the Government of the Russian Socialist Federal Soviet Republic, acting by L. Krassin. This gentleman is the person who sold [*554] the goods to the defendants on behalf of the Russian Commercial Delegation. There was evidence that this delegation was a department of the Russian Socialist Federal Soviet Republic, as was the Soviet of People’s Commissaries by whom the decree nationalizing woodworking factories was made.

An appeal to this Court is a rehearing, and it has been frequently decided that the Court must give the judgment which the judge below would have given had any retrospective statute, passed since the date of his judgment, been in force at that date. His Majesty’s Government having in 1921 clearly recognized the Soviet Government as the de facto Government of Russia, the questions argued before us were (1.) Whether that recognition extended back to August 14, 1920, when L. B. Krassin sold the goods in question to the defendants, or to June 20, 1918, when the decree nationalizing the factories was passed. This would include the question whether the government de facto on those dates was the same government as was recognized by the British Government in 1921, or a predecessor in title of that government; (2.) whether, assuming that recognition to extend to the dates in question, yet the legislation in question in confiscating private property without compensation was so contrary to British moral and political ideas that the English Courts would decline to recognize it, or to give effect to rights derived from it.

The principle of the immunity of foreign states from the jurisdiction of this country was stated by this Court in the Parlement Belge (1): “We are of opinion that the proposition deduced from the earlier cases in an earlier part of this judgment is the correct exposition of the law of nations, viz., that as a consequence of the absolute independence of every sovereign authority and of the international comity which induces every sovereign state to respect the independence of every other sovereign state, each and every one declines to exercise by means of any of its Courts, any of its territorial jurisdiction over the person of any sovereign or ambassador

(1) (1880) 5 P. D. 197, 217.

[*555] of any other state, or over the public property of any state which is destined to its public use, or over the property of any ambassador, though such sovereign, ambassador or property be within its territory, and therefore, but for the common agreement, subject to its jurisdiction.” On this question the case of Vavasseur v. Krupp (1) is instructive. Shells alleged to infringe an English patent were landed in this country, but on the Mikado of Japan claiming the goods as the public property of his state the Court ordered them to be released to him, without any inquiry whether in fact they infringed an English patent and so were, if found in England, liable to destruction. If M. Krassin had brought these goods with him into England, and declared on behalf of his Government that they were the property of the Russian Government, in my view no English Court could investigate the truth of that statement. To do so would not be consistent with the comity of nations as between independent sovereign states. In Morgan v. Larivi¸re (2) the opinions as to the power of the Court to deal with a trust fund in which a foreign government was interested were obiter dicta – as the Court held there was in fact no trust fund. If by any misadventure the authorized representative of a sovereign state should claim property not really belonging to the state it appears to me that the remedy is by diplomatic mean between states, not by legal proceedings against an independent sovereign. The case may be different where the sovereign state submits to the jurisdiction as plaintiff, and asks the Court to use its remedies in favour of the plaintiff. But where the sovereign state is defendant I cannot conceive the Courts investigating the truth of its allegation that the goods in question, which it exported from its own territory, are its public property. In Vavasseur v. Krupp (1) the Mikado, in joining as defendant, was held only to have done so in order more effectively to call the attention of the Court to the fact that inadvertently it had interfered by injunction with the property of a sovereign state. What the Court cannot do directly it cannot in my view do indirectly. If it

(1) (1878) 9 Ch. D. 351.

(2) (1875) L. R. 7 H. L. 423, 430.

[*556] could not question the title of the Government of Russia to goods brought by that Government to England, it cannot indirectly question it in the hands of a purchaser from that Government by denying that the Government could confer any good title to the property. This immunity follows from recognition as a sovereign state. Should there be any government which appropriates other people’s property without compensation, the remedy appears to be to refuse to recognize it as a sovereign state. Then the Courts could investigate the title without infringing the comity of nations. But it is impossible to recognize a government and yet claim to exercise jurisdiction over its person or property against its will. Further, the Courts in questions whether a particular person or institution is a sovereign must be guided only by the statement of the sovereign on whose behalf they exercise jurisdiction. As was said by this Court in Mighell v. Sultan of Johore (1): “When once there is the authoritative certificate of the Queen through her minister of state as to the status of another sovereign, that in the Courts of this country is decisive.” In the present case we have from the Foreign Office a recognition of the Soviet Republic in 1921 as the de facto Government, and a statement that in 1917 the Soviet authorities expelled the previous Government recognized by His Majesty. It appears to me that this binds us to recognize the decree of 1918 by a department of the Soviet Republic, and the sale in 1920 by the Soviet Republic of property claimed by them to be theirs under that decree, as acts of a sovereign state the validity of which cannot be questioned by the Courts of this country, unless it is possible to do so for the second reason argued before us, incompatibility with the moral and political policy of the United Kingdom.

This view renders it unnecessary for me to express a final opinion whether and to what extent a recognition of a de facto government is retrospective to previous acts and times. It appears to me that a recognition of a government as de facto the government in one year does not necessarily

(1) [1894] 1 Q. B. 149, 158.

[*557] recognize that it was the de facto government from the first moment when some of the individuals supporting its cause began to resist or to attack the then established government. It may well be a question when first the struggling body attained such power that it was a government de facto, and over what area, and that you cannot answer that question by knowing that some years later the Sovereign recognized it as the government de facto over a particular area. When that question is to be answered, the Courts must ask the Sovereign for information; but here the Foreign Office letters appear to show that since the beginning of 1918 the Soviet Republic has been the Government de facto of Russia. On the first point therefore I am of opinion that the defendants show a title derived from a recognized sovereign state, which by the comity of nations cannot be questioned in these Courts unless the second ground to be referred to is sufficient justification for questioning it. We were referred to decisions of the Supreme Court of the United States dealing with a similar state of facts: Oetjen v. Central Leather Co. (1); Underhill v. Hernandez (2); Williams v. Bruffy. (3) These decisions, while deserving of the highest respect in our Courts, are not binding on us. But it is satisfactory to find that the principles there stated are in accordance with the views already expressed, except that I should prefer at present to reserve my opinion as to the exact meaning to be given to the principle that “when a Government which originates in revolution or revolt is recognized by the political department of our Government as the de jure Government of the country in which it is established, such recognition is retroactive in effect and validates all the actions and conduct of the Government so recognized from the commencement of its existence.” (4) The definition of the last six words may require very careful consideration.

It remains to consider the argument that the English Courts should refuse to recognize the Soviet legislation and

(1) 246 U. S. 297.

(2) 168 U. S. 250.

(3) 96 U. S. 176.

(4) 246 U. S. 302, 303.

[*558] titles derived under it as confiscatory and unjust. This was based on the general principle stated by Mr. Dicey in his work on the Conflict of Laws (1) that “English Courts will not enforce a right otherwise duly acquired under the law of a foreign country .... (B) where the enforcement of such right is inconsistent with the policy of English law, or with the moral rules upheld by English law, or with the maintenance of English political institutions.” When this is expanded later in the same work (2), the only head applicable to this case is (Inconsistency with) “Morality,” i.e., as supported by English Courts. There are very few instances in which this principle has been applied. Rights derived from a contract for the sale of slaves made in a country where such a sale is legal have been enforced by English Courts: Santos v. Illidge. (3) Gaming debts incurred abroad where gaming is legal have been enforced here: Quarrier v. Colston (4); though securities payable in England for gaming debts of the same character have not been enforced: Moulis v. Owen. (5) Two cases in particular in which English Courts have ignored foreign law of which they disapproved, Simpson v. Fogo (6) and Kaufman v. Gerson (7), have been the subject of considerable adverse comment. The former can perhaps be treated as a retaliation by English Courts on foreign states whose tribunals refuse to recognize rights acquired by English law. The latter decision, in which English Courts refused to recognize a contract validly made in France on the ground that it was contrary to English principles of morality, is adversely criticized by Mr. Dicey (8), who treats it as a mistaken application of the sound principle that English Courts will not enforce foreign contracts, valid where made, where the Court deems the contract to be in contravention of some essential principle of justice and morality. But it appears a serious breach of international comity, if a state is recognized as a sovereign independent state, to

(1) 2nd ed. (1908), p. 33.

(2) Ibid. p. 36.

(3) 8 C. B. (N. S.) 861.

(4) (1842) 1 Ph. 147.

(5) [1907] 1 K. B. 746.

(6) 1 H. & M. 195, 247.

(7) [1904] 1 K. B. 591.

(8) Conflict of Laws, 2nd ed. (1908), App. Note 3, p. 727.

[*559] postulate that its legislation is “contrary to essential principles of justice and morality.” Such an allegation might well with a susceptible foreign government become a casus belli; and should in my view be the action of the Sovereign through his ministers, and not of the judges in reference to a state which their Sovereign has recognized. The English Courts act on the rule “that an intention to take away the property of a subject without giving to him a legal right to compensation for the loss of it is not to be imputed to the Legislature unless that intention is expressed in unequivocal terms”: Central Control Board v. Cannon Brewery Co. (1) If it were they must give effect to it, and can hardly be more rigid in their dealings with foreign legislation. Individuals must contribute to the welfare of the state, and at present British citizens who may contribute to the state more than half their income in income tax and super tax, and a large proportion of their capital in death duties, can hardly declare a foreign state immoral which considers (though we may think wrongly) that to vest individual property in the state as representing all the citizens is the best form of proprietary right. I do not feel able to come to the conclusion that the legislation of a state recognized by my Sovereign as an independent sovereign state is so contrary to moral principle that the judges ought not to recognize it. The responsibility for recognition or non-recognition with the consequences of each rests on the political advisers of the Sovereign and not on the judges.

In my view, therefore, on the new materials available since the judgment of Roche J., the plaintiffs fail in their action, and the judgment below should be set aside.

As to costs I agree with the judgment of Bankes L.J.

Appeal allowed.

(1) [1919] A. C. 744, 752.

W. H. G.