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 DIPLOMATIC PROTECTION OF CITIZENS 
 ABROAD 
 
 BY 
 
 EDWIN M. BORCHARD 
 
 SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS 
 FOR THE DEGREE OF DOCTOR OF PHILOSOPHY 
 
 IN THE 
 
 Faculty of Political Science 
 Columbia University 
 
 NEW YORK 
 
 1914 
 

THE 
 
 DIPLOMATIC PROTECTION OF CITIZENS 
 ABROAD 
 
 BY 
 
 EDWIN M. BORCHARD 
 
 SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS 
 FOR THE DEGREE OF DOCTOR OF PHILOSOPHY 
 
 IN THE 
 
 Faculty of Political Science 
 Columbia University 
 
 Reprinted from 
 
 American Journal of International Law, v. 7, No. 3, pp. 497-520, and the August, 1913, 
 
 Quarterly of the Society for Judicial Settlement of International Disputes 
 
 NEW YORK 
 1914 
 
3 # 
 
PREFACE 
 
 This monograph consists of two studies which will be used as chap- 
 ters of a larger work, The Diplomatic Protection of Citizens Abroad, 
 now in preparation. The first study is a theoretical consideration of 
 .the legal principles involved in the protection, under public interna- 
 tional law and through diplomatic agencies, of citizens in foreign 
 countries. It is intended to serve as the introductory chapter of the 
 larger work. This work will deal with the practical problems of in- 
 ternational law growing out of the residence of citizens abroad, the 
 defense of their rights and the reparation of injuries they may sus- 
 tain while so resident. These questions are among the most important 
 which present themselves for solution to the Department of State of 
 the United States and to the foreign offices of other governments. 
 The second study is a practical consideration of one class of cases 
 in which the diplomatic protection of the government is frequently 
 invoked, namely, international claims based upon contract. 
 
 The practice and the science of international law owe to Professor 
 John Bassett Moore an immeasurable debt. Apart from his invalu- 
 able personal services to various administrations, he has, by the pub- 
 lication of his monumental works, the Digest of International Law 
 and the Digest of International Arbitrations, furnished to the officials 
 of the Department of State constant and trustworthy guidance in the 
 conduct of the country's foreign relations. The writer's personal in- 
 debtedness to Professor Moore is but feebly expressed in owning the 
 gratitude which he feels for friendly counsel always generously placed 
 at his disposal and for the stimulus to sound scholarship which Pro- 
 fessor Moore unconsciously inspires. 
 
 In the preparation of this dissertation for publication the writer has 
 received useful practical suggestions from Professors Munroe Smith 
 and Thomas Reed Powell of Columbia University, whose kind as- 
 sistance is herewith acknowledged. 
 
 April 1st. 1914. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF 
 CITIZENS ABROAD * 
 
 The diplomatic protection of citizens abroad is a comparatively 
 modern phenomenon in the evolution of the state, in constitutional and 
 in international law. Not until the legal position of the state toward 
 individuals, both its own citizens and aliens, and of states between 
 themselves, had become clearly defined in modern public law, did dip- 
 lomatic protection become a factor in international intercourse. A dis- 
 cussion of the subject therefore involves a preliminary study of three 
 distinct legal relations, first, between the state and its own citizen; 
 secondly, between the state and aliens resident within it; and, lastly, 
 the relations of states among themselves with respect to their rights 
 over and their international responsibility for delinquencies toward 
 aliens. 
 
 The history of the legal relation between the state and individuals, 
 its own citizens and aliens, is largely a history of the transition from the 
 system of personal laws to the territoriality of law, accompanied both 
 by a growing control of a central power over the individuals within its 
 jurisdiction and by the appearance of certain characteristics, territorial 
 independence and sovereignty, as essential qualifications for admis- 
 sion of a state into the society of states. 1 
 
 GROWTH OF TERRITORIALITY OF LAW 
 
 The territoriality of law, an accepted phenomenon of modern times, 
 was a matter of slow development. The Roman law was not applicable 
 to foreigners. Strictly speaking, the foreigner was an outlaw. Com- 
 
 * Published with permission of the Banks Law Publishing Company. 
 
 1 The growth of the state and of modern political society can not be here discussed. 
 The subject is ably treated by Professor Edward Jenks in his History of Politics, 
 London, New York, 1900, and in his Law and Politics in the Middle Ages, London, 
 1898. 
 
 497 
 
 Reprinted from The American Journal of International Law for July, 1913 
 
■ - . 
 
 
 498 THE AMERICAL JOURNAL OF INTERNATIONAL LAW 
 
 merce, custom and religion brought about an amelioration of his harsh 
 condition to the extent of permitting the application of the foreigner's 
 own law in legal relations among themselves and in certain commercial 
 relations with Roman citizens. Even this privilege, however, was ex- 
 tended only to friendly peoples. The German tribes were more hos- 
 pitable to the foreigner, although strictly he was a person without rights. 
 By permitting the foreigner to reside among them if unchallenged by a 
 member of the tribe, the foreigner acquired a precarious measure of 
 protection, usually assumed by the king or leader of the tribe. 2 
 
 In the commingling of tribes in the Frankish Empire and in the ab- 
 sence of any centralized or stable legal system or judicial organization 
 previous to the time of Charlemagne, each tribe lived under its own 
 law and the personal rights and acts of the individual and his legal 
 status were regulated and judged according to the code of the tribe or 
 nation to which he belonged. 
 
 This system of the application of the personal laws, as they were 
 called, was by no means analogous to the privilege of living under their 
 own law which Rome had extended to certain classes of friendly aliens. 
 In the Frankish Empire, there was an equality between all the personal 
 systems. In Rome, only the Roman law was universal, and its enjoy- 
 ment was limited to Roman citizens alone. The use of foreign systems 
 was a special concession due to the unwillingness of Rome to permit 
 foreigners to share in the benefits of the Roman civil law. In the Frank- 
 ish Empire, the various tribes and their members were equal; in Rome 
 the position of the non-Roman was one of legal inferiority and such 
 advantages as he came to enjoy consisted in the removal of restrictions 
 imposed by the Roman law. The Germanic peoples, before their in- 
 vasion of Rome, knew no system of personal laws, for it was their uni- 
 
 2 Bar, L. von, Theory and practice of private international law (Gillespie's transla- 
 tion), Edinburgh, 1892, p. 12; Bernheim, A. C, History of the law of aliens, New 
 York, 1885, p. 7, et seq., p. 18; Frisch, Hans von, Das Fremdenrecht, Berlin, 1910, 
 pp. 5-22. For the legal position of aliens in early law see the following works: 
 Demangeat, Charles, Histoire de la condition civile des etrangers en France dans 
 Vancien et dans le nouveau droit, Paris, 1844; Sapey, C. A., Les etrangers en France 
 .sows Vancien et le nouveau droit, Paris, 1843; Catellani, E., II diritto internazionale 
 privato e sui recenti progressi, Torino, 1895, 2nd ed., v. 1, p. 13 et seq.; Weiss, A., 
 Traite" de droit international prive, 2nd ed., Paris, 1908, v. 2, chap. 1. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 499 
 
 versal custom that the law of the conquering tribe replaced that of the 
 conquered. The master abolished the law of his slave, and substituted 
 his own. 3 The conditions arising out of the conquest of such a cultured 
 people as the Romans changed this custom, and in the coordinate exist- 
 ence of the Roman system and the body of tribal systems the germ was 
 laid for the recognition of the personality of laws. 4 The Roman law 
 existed side by side with that of the dominant conquering tribe. 5 
 
 The two great exceptions to the rule of the personality of laws were 
 in cases where the person's individual law could not be recognized and 
 those where such recognition was contrary to public interest. The 
 first exception applied to aliens and non-Christians, aliens being those 
 whose nations were not included under the Empire. As we have said, 
 aliens had no rights and were under public protection and governed by 
 the law of their protector. An individual personal law, moreover, could 
 not interfere with public law; so, for example, the criminal law soon 
 became local and territorial. 
 
 In the later Middle Ages, various influences led to a transition from the 
 principle of the personality of law to that of territoriality of law. With 
 the development of agriculture, came a greater permanency of habita- 
 tion on the part of the Germanic nations. The fixed attachment to a 
 city or community, and intermarriage between members of the different 
 Germanic nations, made it difficult, after a generation or two, to keep 
 in mind individual personal laws; so that courts began to apply their 
 own law, derived largely from the capitularies of the Emperor which 
 applied to all within the empire without discrimination of race or na- 
 
 3 Bar, L. von., op. cit., p. 18. 
 
 4 Continental Legal History Series, v. 1, General survey of events, sources, persons, 
 and movements in continental legal history, Boston, 1912, pp. 60 et seq. 
 
 6 At the present day we may note the survival of the system of personal laws in 
 the fact that Europeans live in various parts of the world (Turkey, India, the Malay 
 peninsula, the Barbary States) under their own law, as do the Indians while on their 
 reservations in this country. See also Asser-Rivier, Elements de droit international 
 prive, Paris, 1884, p. 7, footnote. In the conflict of laws there are numerous cases 
 in which a legal relation is judged by the so-called "personal statute," either the 
 law of the domicil or of nationality of the individual in question, though this is 
 rather an outgrowth of the jus gentium of the Romans than an illustration of the 
 modern survival of the personality of laws. See also Savigny, F. C, A treatise on 
 the conflict of laws, translation of v. 8 of his System des heutigen romischen Rechts 
 (1849) by William Guthrie, Edinburgh, 1880, p. 58, pp. 60-62. 
 
500 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 tion. Although local customs continued to prevail, they applied, in- 
 stead of to distinct individuals, to all those within a certain locality. 
 The church, by its dominance in certain spheres of law, particularly 
 the family relations, helped to substitute legal uniformity, for the di- 
 versity of personal laws. Feudalism, however, was the most vital fac- 
 tor in breaking down the principle of personality. With the intermin- 
 gling of the races under a fixed home life, with the final acceptance of 
 one religion to replace paganism, with the centralization of legal rela- 
 tions around the idea of land ownership, personal systems lost their 
 utility. In most private legal relations one rule had become dominant 
 over the many conflicting rules previously applied. In the field of pub- 
 lic law the feudal fief became the unit of administration, and within it 
 all classes of persons having identical rights in land, had identical rights 
 and duties with respect to their lord. Within the various classes of 
 liegemen rights were equal. 
 
 These influences ultimately brought about the disappearance of per- 
 sonality as the criterion of the application of law and substituted terri- 
 toriality and local uniformity, notwithstanding the fact that certain 
 groups such as the citizens of certain towns, members of certain guilds, 
 and churchmen were accorded special privileges within the territorial 
 limits. 6 
 
 In the ieudal system we find some of the primary elements of the 
 relation between the state and its citizen and the protective functions 
 of the state. Feudalism embodied the notion of the territoriality of 
 rights with the personal relation between lord and liegeman now known 
 under modern transformations as sovereignty. Although land owner- 
 ship became an index of rights and duties, thus strengthening the terri- 
 torial principle, and the oath of personal allegiance established the 
 reciprocal obligations of protection and service between the feudal lord 
 and his liegeman, it is to be noted that the lord's jurisdiction and control 
 over his man did not transcend the boundaries of his fief. 
 
 NATIONALITY 
 
 The Thirty Years' War was an epoch-making event in the history of 
 international law. It was not merely a great struggle between Protes- 
 6 General survey of continental legal history, pp. 80-83; Savigny, op. cit. pp. 63-64. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 501 
 
 tantism and Roman Catholicism, but from it emerged the principle of 
 territorial independence as opposed to imperialism. 7 The international 
 system of the present day was definitely marked out and the character- 
 istics of the modern state denned. While unequal in power, the states 
 in the system were recognized each as independent, as legally equal, 
 and as exercising exclusive jurisdiction within certain definite territorial 
 limits. The removal of the common superior fostered what had in fact 
 for years been a sense of national independence and national conscious- 
 ness. Overshadowed for a time by the religious attributes of the Ref- 
 ormation, and obscured by feudal particularism, 8 nationality emerged 
 at the Peace of Westphalia as a phenomenon distinct from religion. 
 
 The relation between the state and individuals, both its own subjects 
 and aliens, brings up the important questions of the legal and political 
 nature of the state and the reciprocal rights and obligations existing 
 between it and individuals. 
 
 Citizenship (or nationality) is the status of an individual as subject 
 or citizen in relation to a particular sovereign or state, and signifies 
 membership in a political community. It traces its origin to the time 
 when the city was the largest autonomous unit to which the individual 
 was attached and its meaning has expanded with the growth of that 
 unit into the modern state. It involves a legal and political relationship 
 between the state and the citizen, by virtue of which he is endowed with 
 certain qualities distinguishing him from other individuals. 9 The con- 
 ditions on which citizenship shall be acquired and granted, the individuals 
 to whom this status shall be extended, and the rights and obligations 
 incurred by the relationship are fixed by the municipal public law of 
 each state. Allegiance, the tie which binds the citizen to the political 
 group to which he belongs, is due to the state, the juristic personality 
 of the nation. "The machinery through which [the state] operates is 
 its government. The persons who operate this machinery constitute 
 its magistracy. The rules of conduct which the state utters or enforces 
 
 7 Walker, T. A., A history of the law of nations, v. 1, Cambridge, 1899, p. 148 et seq. 
 
 8 Brissaud, J., A history of French private law, Boston, 1912, p. 874. 
 
 9 Gerber, C. F., Grundzuge des deutschen Staatsrechts, Leipzig, 1880, 3rd ed., p. 229; 
 Morse, A. P., A treatise on citizenship, Boston, 1881, p. x, p. 4, p. 36; Foote, J. A., 
 Foreign and domestic law, Private international jurisprudence, London, 1904, 3rd ed., 
 p. 1. 
 
502 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 are its law, and manifest its will. This will, viewed as legally supreme, 
 is its sovereignty." 10 
 
 Citizenship is essentially a personal relationship, as is sovereignty or 
 the supreme legal authority of the state over those whom it controls. 
 The subjects of the state are all those persons over whom it exercises 
 sovereignty, which in constitutional law include not merely citizens, 
 but aliens residing within its territory or otherwise subject to its con- 
 trol. A territory is not in fact an essential element of sovereignty, 
 although international law has arbitrarily conditioned the enjoyment 
 of membership in the international community on the possession of a 
 territory. 11 It is by virtue of the personal relationship involved in 
 sovereignty and citizenship that the state may declare its laws binding 
 on its citizens even when abroad and by virtue of which its obligations 
 to those non-resident citizens continue to exist. 12 
 
 Jurisdiction, or the right of physical control over persons, has, how- 
 ever, become territorial, and thus it occurs that the laws of the state, 
 while theoretically binding on the subject so far as made applicable to 
 him, are unenforceable beyond the territorial limits of the state, unless 
 accompanied by jurisdiction or enforced by the foreign sovereign by 
 international arrangement. 13 In exterritorial countries both sovereignty 
 and jurisdiction may be exercised beyond the territorial limits, as is il- 
 
 10 Willoughby, W. W., Citizenship and allegiance in constitutional and international 
 law, Amer. Journ. Int. Law, v. 1 (1907), pp. 914, 915. 
 
 11 Crane, Robert T., The state in constitutional and international law, Baltimore, 
 1907, p. 69; Hall, International law, 6th ed., Oxford, 1909, pp. 17, 19. 
 
 12 Congress exercises the right to regulate certain acts of United States citizens 
 abroad and attach prescribed consequences to those acts. E. P. Wheeler, The re- 
 lation of a citizen in a foreign country, in Amer. Journ. Int. Law, v. 3 (Oct. 1909), 
 p. 871 and cases cited. In England this right rests on Crown prerogative, acts of 
 Parliament and common law. See Hall, W. E., Foreign powers and jurisdiction of 
 the British Crown, Oxford, 1894, pp. 8-13. See also Fiore, P., Nouveau droit inter- 
 national public (Antoine's trans.), Paris, 1885, v. 1, sec. 644; Lomonaco, G., Trat- 
 tato di diritto intemazionale pubblico, Napoli, 1905, p. 166; Martens, F. de, Traite 
 de droit international, Paris, 1883, v. 1, p. 442; Despagnet, Frantz, Cours de droit 
 international public, 4th ed., Paris, 1910, p. 467. 
 
 13 The notion that citizens, resident abroad, by virtue of their allegiance, still fall 
 under the operation of the laws of their national state, is a fallacy often encoun- 
 tered in the writings of publicists. They are subject only to such national laws as 
 the legislature expressly makes binding upon them. See Piggott, Nationality, Lon- 
 don, 1906, v. 1, p. 3. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 503 
 
 lustrated by the consular courts of various Powers of the first class in 
 countries like China and Turkey. The will of the state, therefore, is 
 not merely limited in its expression by its constitution and laws, but its 
 enforcement is limited internally by the character of its people and 
 government and externally by the territorial boundaries of the state. 14 
 
 In pure constitutional theory, citizenship is imposed by the state by 
 virtue of its sovereignty, on whomsoever it will, and independently of 
 the will of the person. It is not created by or at the consent of the in- 
 dividual. 15 The theory is limited in its application by the international 
 rule that states permit their subjects to acquire a new citizenship or 
 rather predicate their recognition of such a change on the condition 
 that it was a voluntary act of the subject accompanied by an actual 
 change of domicil and political affiliation. 
 
 Andre Weiss, the eminent jurist of Paris, has presented an ingenious 
 and plausible argument to show that citizenship or nationality is con- 
 tractual in its nature. 16 "It is to-day generally recognized," says Weiss, 
 "that the bond of nationality is a contractual one; and that the bond 
 which unites to the state each of its citizens is formed by an agree- 
 ment of their wills, express or implied." This theory has been severely 
 criticized, among others by Stoerk 17 and by Piggott, 18 and it is now con- 
 sidered fallacious. Some authors to-day, however, find in the grant of 
 nationality, i. e., naturalization, a public legal act of a bilateral charac- 
 ter, 19 but even these publicists admit that the relation is not analogous 
 to a private contractual obligation but rather to the contract of adop- 
 tion in family law. 
 
 14 Willoughby in Amer. Joiirn. Int. Law, 1907, p. 925; Heilborn, P., System des 
 Volkerrechts, Berlin, 1896, p. 75 et seq., and opinions of Gierke, Oertmann, Gerber 
 and Laband there cited. 
 
 16 Willoughby in Amer. Journ. Int. Law, 1907, p. 924. 
 
 16 Annuaire de VInstitut de Droit International, v. 13 (1894), p. 162 et seq. 
 
 17 Stoerk, F., Les changements de nationalite et le droit des gens in Revue Gen. D. I. 
 P., v. 2 (1895), p. 273 et seq. See also Nys, E., Le droit international, 2nd ed., Brux- 
 elles, 1912, p. 257. 
 
 18 Piggott, F. T., Nationality, London, 1906, v. 1, pp. 5-10. 
 
 19 Laband, Paul, Das Staatsreeht des deutschen Reichs, 5th ed., Leipzig, 1911, p. 177; 
 Jellinek, Georg, System der subjectiven offentlichen Rechte, 2nd ed., Tubingen, 1905, 
 p. 198. The majority of publicists deny that the conceptions of private law furnish 
 any analogy to the peculiar relations created by public law. See Stoerk, Felix, Zur 
 Methodik des offentlichen Rechts, Wien, 1885, and authorities there cited. 
 
504 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 The relation between the citizen and his state is in fact a relation 
 sui generis. Admission into membership in the state and to the status 
 of citizenship is an act of sovereignty. It being neither a contract nor 
 an act of grace, Stoerk has denominated it a sociological fact, a dis- 
 tinguishing mark of the state itself. 20 In discussing expatriation, the 
 United States Supreme Court has on several occasions, prior to the 
 expatriation act of July 27, 1868 (R. S. 1999), expressed the opinion 
 that "the doctrine of allegiance * * * rests on the ground of a 
 mutual compact between the government and the citizen or subject, 
 which it is said, cannot be dissolved by either party without the con- 
 currence of the other.' ' 21 
 
 The theory of a compact in the relations between the state and its 
 citizens has engaged the attention of political philosophers for centuries. 
 It became important in the eighteenth century when some writers in 
 the American colonies, appealing to the Englishman Locke, advanced 
 forcibly the theory that the individual enters the state by voluntary 
 agreement, and may establish the conditions of his membership and 
 the limitations of the power of the state. In France, Montesquieu and 
 Rousseau were its most prominent champions. In arriving at the true 
 legal relation of the state and the individual we are not concerned with 
 either of the political theories (1) that the entire sphere of right of the 
 individual is the product of state concession and permission, or (2) that 
 the state not only creates rights but leaves the individual that measure 
 of liberty which it does not itself require in the interest of the whole. 22 
 
 Foreigners within the state owe it a considerable measure of obedience 
 in return for the local protection they receive while residents. This 
 obedience has often been termed temporary and qualified allegiance in 
 contradistinction to the permanent and absolute allegiance owed by 
 
 20 Stoerk in Rev. Gen. D. I. P., v. 2 (1895), p. 288. 
 
 21 Inglis v. Sailor's Snug Harbor, 3 Peters (1830), p. 124; Talbot v. Janson, 3 Dallas 
 (1795), 162. See also cases cited by Wise, J. S., American citizenship, Northport, 
 1906, pp. 263-264. While not a mutual compact, it is true that as a status im- 
 posed by the state, citizenship and allegiance could only be renounced when per- 
 mitted by the state. In most modern states, except Russia and Turkey, municipal 
 legislation has granted the individual this power. 
 
 12 On this entire subject see Jellinek, G., The declaration of the rights of man and of 
 citizens, New York, 1901 (Max Farrand's translation), pp. 80, 90 and 95. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 505 
 
 the citizen. 23 In truth, it is a misnomer to speak of "temporary alle- 
 giance" due by a foreigner. The nature of the foreigner's subjection to 
 the state of his residence was described by Secretary of State Webster 
 in 1851 in his report on Thrasher's case as follows: 24 
 
 Independently of a residence with intention to continue such resi- 
 dence; independently of any domiciliation; independently of the taking 
 of any oath of allegiance or of renouncing any former allegiance, it is 
 well known that, by the public law, an alien or a stranger born, for so 
 long a time as he continues within the dominions of a foreign govern- 
 ment, owes obedience to the laws of that government, and may be 
 punished for treason or other crimes as a native born subject might be, 
 unless his case is varied by some treaty stipulation. 
 
 The migration of the citizen of one state to another and his residence 
 in the latter brings about in constitutional theory a double citizenship, 
 of primary and organic nature with respect to his home state and of a 
 temporary and qualified nature with respect to the state of residence. 
 It subjects the individual for different purposes and in different degrees 
 to the sovereignty of two states. The conflicting claims of two or more 
 states to the citizenship and obedience of the same individual have been 
 to a great extent settled by mutual forbearances, although differences 
 in municipal legislation in some instances still give rise to cases of double 
 nationality and even of no nationality (Heimatloseri) . 
 
 Nationality (which term is less ambiguous than its synonym citizen- 
 ship) is the most important of the three relations in which a person 
 may be subject to the control of a particular state. These three in the 
 order of the closeness of the bond are actual residence, domicil, and 
 nationality or citizenship (Staatsangehdrigkeit, nationalite) . Used in 
 the ethnographic sense, a nation is a collection of human beings held 
 together by certain common physical or racial characteristics; used in 
 the legal sense, it means a politically united people, and its derivative 
 " nationality" is used to represent the bond which attaches the citizen 
 
 23 Mr. Justice Field in Carlisle v. United States, 16 Wallace, p. 147, at p. 154,- 
 adopted by Willoughby in Amer. Journ. Int. Law, 1907, p. 924. 
 
 24 The works of Daniel Webster, Boston, 1851, v. VI, p. 518, at p. 526, cited also in 
 Carlisle v. United States, 16 Wall. p. 155; see also Mr. Justice Gray in United States 
 v. Wong Kim Ark, 169 U. S. 649. 
 
506 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 by certain qualities to the state. 25 We have already noted that by 
 virtue of the bond, the citizen is provided with certain rights, in par- 
 ticular, political rights, and is charged with the performance of certain 
 duties to his state in return for the benefits of citizenship. 26 Stoerk 
 and Oppenheim believe that nationality is a condition precedent to the 
 enjoyment of international rights, which statement von Bar refutes by 
 showiog that heimatlosen or those without nationality are entitled to 
 these rights. 27 International rights are commonly considered to be 
 those which are universally accorded by the national law of all civilized 
 states to individuals within its jurisdiction. 
 
 Confusion arises because in the present state of our civilization, the 
 individual, as a human being, is accorded certain fundamental rights 
 by all states professing membership in the international community. 
 In constitutional governments, they have often received the name 
 "rights of man." These rights, uncertain as they are in content, were 
 denominated by Blackstone as the absolute rights of all mankind, — 
 the right to personal security, to liberty and to private property. At 
 one period in the history of law they were known as "natural rights/ ' 
 and this conception played a prominent part in justifying the political 
 philosophy of the eighteenth century which culminated in the French 
 Revolution. 28 These rights, as incidental to natural law, the adherents 
 of which school of legal philosophy were the founders of international 
 law, were logically denominated international rights and sometimes 
 human rights. Whether the recognition of these rights is the result 
 of history and the unconscious growth of law or whether it is the result 
 of conscious legislation, 29 it is certain that by legislative and judicial 
 
 25 Bar, op. cit, p. Ill; Stoerk in HoltzendorfPs Handbuch des Volkerrechts, Berlin, 
 1885, II, pp. 589-591. 
 
 26 Stoerk in HoltzendorfFs Handbuch, II, pp. 630-636; Heilborn, op. cit., p. 75 et 
 seq.; Oppenheim, International Law, London, 1912, sec. 291; Gareis, K., Institutionen 
 des Volkerrechts, Giessen, 1901, sec. 53; Cockburn, Alexander, Nationality, London, 
 1869, p. 186; Nys, E., op, cit., p. 257. 
 
 27 Stoerk in HoltzendorfFs Handbuch, II, sec. 114, p. 589; Oppenheim, op. cit., I, 
 sec. 291; Bar, op. cit., p. 111. 
 
 28 For the history of natural rights and the modern theories see Ritchie, D. G., 
 Natural rights, London, 1895, ch. 1 and 2. An analysis of the so-called rights is un- 
 dertaken by Ritchie, ch. 6 et seq. 
 
 29 For a summary account of the history of legal theory and the various schools of 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 507 
 
 declaration certain fundamental rights of the individual in a civilized 
 state have been positivised in the same way that the Roman juriscon- 
 sults by their jus respondendi positivised the principles of the jus na- 
 turale. 30 These rights, like all rights, are really creations of public senti- 
 ment, legally protected interests, which may be expressed either by 
 custom or legislation. 
 
 If these rights of a resident alien are violated without proper redress 
 in the state of residence, his home state is warranted by international 
 law in coming to his assistance and interposing diplomatically in his 
 behalf. Reasoning from this fact, many publicists assert that whatever 
 rights the individual has in a state not his own are derived from inter- 
 national law, and are due him by virtue of his nationality. As a matter 
 of fact, the alien derives his rights, — fundamental or human rights 
 and others, — by grant from the territorial legislature, international 
 law fixing a minimum which cannot be transcended and authorizing 
 certain agencies, usually the national state, to remedy and punisji a 
 breach. Whether these " rights of humanity" have their origin in inter- 
 national law, or are merely concomitants of existence in a civilized 
 state, the recognition of which rights a state must show as a condition 
 of membership in the international community, international law, 
 nevertheless, provides them with a definite sanction. This view, it 
 would seem, is confirmed by the fact that where a state disregards cer- 
 tain rights of its own citizens, over whom presumably it has absolute 
 sovereignty, the other states of the family of nations are authorized by 
 international law to intervene on the grounds of humanity. Where 
 these " human" rights are habitually violated, one or more states may 
 intervene in the name of the society of nations and may take such meas- 
 ures as to substitute at least temporarily, if not permanently, its own 
 sovereignty for that of the state thus controlled. 31 Whatever the origin, 
 
 legal thought see Borchard, E. M., Guide to the law and legal literature of Germany, 
 Washington, 1912, p. 25 et seq. 
 
 30 See Muirhead, James, Historical introduction to the private law of Rome, London, 
 1899, 2nd ed., p. 283. See also Annuaire of the Institute of Int. Law, v. 1, p. 124. 
 
 31 Rougier, La theorie de V intervention d'humanite in Rev. Gen. D. I. P., 1910, p. 472. 
 Thus intervention on behalf of co-religionists in the Orient and elsewhere has on 
 numerous occasions been undertaken. Pillet, A., Principes de droit international 
 prive, Paris, 1903, p. 171. 
 
508 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 therefore, of the rights of the individual, it seems assured that these 
 essential rights rest upon the ultimate sanction of international law, 
 and will be protected, in last resort, by the most appropriate organ of 
 the international community — the national state of the individual 
 or those states whose interests are most directly affected. 
 + The rights of man as proclaimed by the political philosophers of the 
 American and the French revolution were given positive constitutional 
 expression in France and the United States in 1789, 32 and since then 
 have in some form been incorporated in most modern constitutions. 
 The municipal law of each state prescribes the manner in which these 
 rights shall be exercised. 
 
 Among the rights which we now consider the rights of man, are those 
 to which international lawyers have applied the phrase " international 
 rights," those general rights which the individual enjoys in every part 
 of the globe and which are normally protected by every state of the in- 
 ternational family. Martens 33 enumerates these rights as (1) the right 
 to live and procure the necessary means to live; (2) the right to de- 
 velop his intellectual faculties; (3) the right to come and go freely among 
 the states of the international community. Among the imprescriptible 
 rights of man, which flow from these rights, Martens considers freedom 
 of emigration, the right to be respected in person, life, honor and health, 
 and the right of property. The incidental rights of entering into con- 
 tracts, marriage, etc., are equally protected, though regulated, when 
 affected by foreign interests, by that branch of municipal law known as 
 private international law. With this universality of rights of the in- 
 
 32 There had been a definite declaration of rights in Virginia in 1776, and the pre- 
 amble and first paragraph of the Declaration of Independence of July 4, 1776 was 
 in the nature of a declaration of rights. These documents with the French Declara- 
 tion des droits de Vhomme et du citoyen of 1789, as prefixed, with amendments, to sev- 
 eral French constitutions, are to be found in the appendix to Ritchie, op. cit. See 
 also the first ten amendments to the United States Constitution. 
 
 These rights of man had been the subject of discussion by political philosophers 
 of France and England for many years before 1789. They received most forceful 
 expression in the American colonies in numerous pamphlets and tracts, notably 
 those of James Otis and Samuel Adams. See Jellinek, G., The declaration of the 
 rights of man and of citizens (translated by M. Farrand), New York, 1901, pp. 80-84. 
 
 33 Martens, F. de, Traiti de droit international, Paris, 1883, v. 1, p. 440. See also 
 Gareis, op. cit., p. 150. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 509 
 
 dividual in view, Stoerk and others have coined the term "Volker- 
 rechtsindigenat," 3i or, as Bentham has expressed it, " citizen of the 
 world." 35 
 
 Four principles dominate the bond of nationality. The first embodies 
 the idea of legal attachment, expressed in former times by membership 
 in a clan or tribe, advancing later into the broader bond of membership 
 in a city, state and nation. This quality Stoerk calls the civitas or the 
 quality of belonging to some nation, as every vessel at sea is recognized 
 as belonging to some organized community. 36 The second principle 
 is the exclusiveness of nationality. In theory and in aim public law as- 
 cribes only one nationality to an individual, though differences in the 
 municipal law of different states have occasionally endowed an in- 
 dividual with plural nationality. The third is the principle of muta- 
 bility, which permits the individual at the present day to change his 
 nationality; and the fourth, the principle of continuity, by which the 
 nationality of origin is retained until a new one is acquired. Emigra- 
 tion without naturalization in another state does not break the bond of 
 nationality. Such emigration may by municipal law under certain 
 conditions involve a loss of diplomatic protection, but this is only one 
 of the rights incidental to citizenship. 
 
 The same individual, as we have seen, is sometimes claimed as a 
 citizen by two or more states, due to differences in their municipal legis- 
 lation as to when citizenship begins and ends. The concurrent claims 
 of the jus soli and the jus sanguinis, the absolute or conditional refusal 
 of some states, as Russia and Turkey, to permit expatriation, followed 
 nevertheless by the naturalization of their emigrating subjects by other 
 states, or any new naturalization before the bond of allegiance to the 
 original state has been severed, create cases of double nationality which 
 have given rise to serious conflicts. Again, the imposition by some states 
 of a deprivation of nationality as a penalty for certain acts, or a predica- 
 tion of loss of nationality upon mere residence abroad for a certain 
 period, brings about the equally anomalous situation of an individual 
 
 34 Stoerk in Holtzendorff's Handbuch, v. 2, sec. 113-114; Gareis, op. cit., sec. 53. 
 
 35 Extracts printed in Wheaton's History of the law of nations, New York, 1845, 
 pp. 329-331. 
 
 36 Stoerk in Rev. Gen. D. I. P., supra, v. 2 (1895), p. 277 et seq. 
 
510 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 without nationality or the heimatlos.* 7 By international agreements 
 and municipal law, states have within the past forty years endeavored 
 to remove these sources of conflict, or at least by mutual concessions 
 to agree on the circumstances under which protection shall be accorded 
 and permitted. 
 
 In the international sense the citizens of a state are those individuals 
 over whom the state is admitted by the international community to 
 have primary authority. There is, however, a difference between the 
 citizens of international law and those of constitutional law. Leaving 
 aside the broad constitutional principle that the state may impose its 
 citizenship on all those within its sovereignty, there are classes of per- 
 sons who, while not citizens in constitutional law, are nevertheless sub- 
 jects of the state or nationals in international law. So, for example, 
 the negroes before the Civil War, the American Indians, and natives 
 of the unincorporated insular possessions, are citizens of the United 
 States in international law, though not constitutionally citizens. 38 Nor 
 are constitutional disabilities attached to age or sex of any international 
 concern. 
 
 Again, a person may be a citizen in constitutional law without being 
 a citizen in international law. This case occurs in federal nations like 
 the United States for example. A person may be a citizen of a State 
 without being a citizen of the United States. Confusion arises because, 
 whereas the status of citizenship is a national grant, the enjoyment of 
 many of its rights is within the jurisdiction of the States, and from the 
 possession of these rights the term " State citizenship" has arisen. To 
 be a citizen of the United States, birth or naturalization in the United 
 States is necessary; to be a citizen of a State, usually only residence is 
 required. Nor is the right to vote a criterion. This right is not granted 
 
 37 Weiss in Annuaire de VInstitut, v. 13, p. 174-176, has mentioned eight cases in 
 which conflicts in municipal law have most frequently caused cases of double na- 
 tionality. See also Cockburn, op. cit. pp. 108, 186, 187. Many publicists consider 
 municipal penalties of loss of nationality as wrong in principle, as they increase the 
 number of persons without nationality. 
 
 38 Wolf man, Nathan, Status of a foreigner who has declared his intention of becoming 
 a citizen of the United States, in American Law Review, v. 41 (1907), p. 499; Coudert, 
 Frederic R., Jr., Our new peoples: citizens, subjects, nationals or aliens, Columbia 
 Law Review, v. 3 (1903), pp. 13-32. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 511 
 
 or guaranteed by the federal Constitution, but is conferred and regulated 
 by the States. This right is in some States even granted to persons 
 not citizens either of the State or of the United States. 39 In the British 
 Empire, with its scattered dominions, the term " British citizenship" 
 has received a peculiarly local meaning, not extended for example to 
 the natives of India. 40 In our international use of the term citizenship 
 or nationality we are not concerned with variations in the municipal 
 tests or degrees of citizenship, nor need we be detained by any supposed 
 difference between the terms "subject" and "citizen," the former ap- 
 plying generally to nationals of a state whose government is a monarchy, 
 the latter to those where there is no kingship. The term "nationals" 
 is perhaps the most appropriate, inasmuch as it disregards differences 
 in constitution and form of government. 
 
 As we have seen, the mere separation of the individual from his home 
 soil leaves him still subject to the law of his own state in so far as this 
 has been made applicable to him. This remains so until physically and 
 legally he has become incorporated as a citizen of another state. The 
 continuity of the bond is evidence of the continuation of the reciprocal 
 relations between the state and the citizen. We may now briefly enumer- 
 ate the most important of the rights and duties which exist between 
 the state and its citizen abroad. 
 
 First, self-preservation gives the state the necessary right of calling 
 upon its citizen for military duty, for which purpose the state may re- 
 call its absent citizen. 41 The state of residence is not, however, obliged 
 to facilitate his return to fulfill the obligations imposed by his national 
 law, though it is bound not to prevent his performance of these duties. 
 The machinery provided for retaining control of the citizen abroad and 
 for assuring him the enjoyment of certain international rights is the 
 consular and diplomatic office, which is governed by such rules of na- 
 tional municipal law as the territorial state, by comity and the force 
 
 39 Van Dyne, F., Citizenship of the United States, Rochester, 1904, p. 111. 
 
 40 Sargant, E. B., British citizenship in United Empire, v. 3 (May, 1912), p. 366, 
 373. 
 
 41 Stoerk in Holtzendorff's Handbuch, v. 2, pp. 630 et seq.; Bluntschli, Droit inter- 
 national codifie (Lardy's ed.) 5th ed., Paris, 1895, sec. 375; Martens, F. de, op. cit., 
 p. 442; Bonfils, H., Manuel de droit international public, 6th ed. (by Fauchille), Paris, 
 1912, sec. 433. 
 
512 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 of the principle of protective surveillance of the national state over its 
 citizens, has permitted it to apply. 
 
 Again, the state may impose certain taxes upon the citizen abroad, 
 though international practice, except in cases of great national necessity, 
 ascribes the collection of personal taxes to the state of residence. 42 
 Questions of double taxation are still an important source of interna- 
 tional difficulty. 43 
 
 These requirements and injunctions of national law are binding be- 
 tween the state and its citizen, and impose duties upon him. The ex- 
 tent to which they are enforceable and their effect is measured by the 
 application of the territorial principle, according to which, except for 
 such concessions as are made by other states, national law loses its 
 coercive force at the frontiers of its territorial dominions. If effect is 
 given by other states to these provisions of national law it is the result 
 of concession in derogation of local territorial jurisdiction, which con- 
 cessions by custom and comity have become a definite and important 
 part of international law. Nevertheless, the failure to obey national 
 law by a citizen abroad is not without its consequences in the home 
 state. It may be met either immediately by a loss of national protec- 
 tion and sometimes denationalization, or else with penalties inflicted 
 either on property of the individual in the national state or upon rights 
 which he may have retained there, or on his person when he returns. 44 
 Similarly, many states punish their citizens on return for crimes com- 
 mitted abroad. In a general way, the exercise of this right of the state 
 to punish its delinquent citizen depends, (1) upon the intrinsic impor- 
 tance of the offense, — thus some states, as for example, Great Britain 
 and the United States, limit to such punishment the important crimes 
 such as treason, counterfeiting the national coinage, etc.; (2) on its 
 
 42 Stoerk in Holtzendorff's Handbuch, v. 2, p. 631; Bluntschli, op. cit., sec. 376. 
 
 43 Wittmann, Erno, Double imposts, in 24th Report of the International Law As- 
 sociation (at Portland), London, 1908, pp. 214-229; Bar, op. cit., p. 245 et seq. 
 
 44 Germany, by the law of July 1, 1870, Art. 20, reserves the right to punish with 
 denationalization the failure to heed the summons to return. Art. 22 provides the 
 same penalty for those who, having entered the service of a foreign state do not, 
 on demand, resign their office. The Hungarian law of Dec. 20, 1879 (Art. 50, An- 
 nuaire de legislation etrangere, 1880, p. 351) makes a similar provision. See also 
 French civil code, Art. 17, sec. 4, as amended by law of June 26, 1889 and Art. 17, 
 sec. 3. See also Chretien, Principes de droit international public, Paris, 1893, p. 218. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 513 
 
 effect upon his own state and its citizens; and (3) on its punishability 
 by national law and by the lex loci actus. If the penalty has already 
 been paid in the place where the crime was committed, the home state 
 will not usually enforce its own penalty, and this is always the case 
 where the crime is against local law alone. 45 As in most cases where 
 the individual is thus subject to the laws of two states, it is by mutual 
 agreement and concession of the respective states that the rights and 
 obligations of the individual are controlled and regulated, the object 
 being to permit him neither to escape obligations nor twice to be sub- 
 ject to them. 
 
 The control of the national state is again evidenced in the fact that 
 by the legislation of many countries the acceptance of foreign titles is 
 conditioned upon the consent of the national sovereign. 46 So com- 
 pliance with national law is occasionally necessary to the marriage of 
 citizens abroad. National consent is sometimes a prerequisite to the 
 marriage of military officers, as in Austria, Germany and France. 47 
 Those countries which do not admit of divorce, as for example, Italy 
 and Brazil, decline to give legal effect to a divorce of their nationals in 
 a state where such divorce is legal. 48 
 
 There is a large field of private international law in which the in- 
 dividual's national law controls his legal relations abroad. Thus his 
 personal status, and his capacity to enter into certain contracts, as, for 
 example, marriage, his right to succession, questions of guardianship 
 and similar matters are now largely controlled by his national law. 49 
 This personal law of the individual, which the principle of territoriality 
 
 45 An exhaustive comparative study of the subject of extraterritorial crime with 
 extracts from the statutes of the more important countries and quotations from 
 the writings of publicists is to be found in John Bassett Moore's Report on extraterri- 
 torial crime and the Cutting case, Washington, 1887, 129 p. See also Chretien, op. cit., 
 p. 221. 
 
 46 Stoerk in Holtzendorff's Handbuch, v. 2, p. 631; Chretien, op. cit., p. 218; Law 
 of Costa Rica, Dec. 20, 1886, Art. 4, Annuaire de legislation etrangere, 1887, p. 869. 
 
 47 Renton, A. W. & Phillimore, G. G., The Comparative law of marriage and divorce, 
 London, 1910, pp. 253-254. 
 
 48 Buzzati, G. C, he droit international prive d'apres les conventions de la Haye, 
 French translation by Francis Rey, Paris, Larose & Tenin, 1911. 
 
 49 Bluntschli, op. cit., sec. 379; Rolin, A., Principes de droit international prive, 
 Paris, 1897, v. 1, p. 114. 
 
514 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 has recognized, is directly connected with the period of the early Middle 
 Ages when the personal law or personal statute controlled the entire 
 legal status of the individual. 
 
 Before jurisdiction became national within a politically and geo- 
 graphically denned territory, this personal law was usually the law of 
 the domicil, an inheritance from the Roman law. 50 The legislation 
 following the French Revolution (for example, Article 3 of the French 
 Code Napoleon) first gave expression to the principle of nationality as 
 controlling the status and capacity of persons. This principle was fol- 
 lowed in the Austrian Allgemeines burgerliches Gesetzbuch of 1811 (Arti- 
 cle 4), though the capacity of foreigners was still left to the old rule of 
 domicil. The principle of nationality, however, as governing status, 
 capacity and the family relations received its greatest impetus from 
 the Italian school, of which Mancani was the principal apostle, and 
 after adoption in the civil code of Italy, Spain, Germany and to some 
 extent by Switzerland, it has been recognized by almost all the countries 
 of Europe in the Hague Conventions on private international law, re- 
 sulting from the conferences of 1893, 1894, 1900 and 1904. 51 Certain 
 federal states like Switzerland still lend great emphasis to the principle 
 of domicil as the criterion of status and capacity, as do the United 
 States and Great Britain. Where political nationality is distributed 
 throughout the world among various systems of private law, as for ex- 
 ample, British nationality, which exists in Quebec, Scotland and South 
 Africa, this personal law must refer to domicil within the political 
 nationality. 
 
 The state in turn undertakes toward its citizens certain duties which 
 are an outgrowth of the relation itself, but which in their exercise are 
 the result of international agreement and concession. The most im- 
 portant of these duties of the state is the obligation to receive its own 
 
 60 Bar, op. cit., p. 112; see also Savigny, op. tit., p. 88 et seq. 
 
 51 These conventions established rules concerning the adjustment of conflicts of 
 law in matters of marriage, divorce and guardianship. With but slight qualifications, 
 the law of the nationality was adopted as the law governing these legal relations. 
 See Meili, F. und Mamelok, A., Das Internationale Privat-und Zivilprozessrecht auf 
 Grund der Haager Konventionen, Zurich, 1911. See also Westlake, J., A treatise on 
 private international law, 4th ed., London, 1905, p. 27 et seq. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 515 
 
 citizens expelled by other states, or repatriation. 52 This obligation 
 von Bar considers the true kernel of nationality. 53 Banishment is now 
 practically abandoned as a penalty against citizens. No state can 
 legally require other states to receive its banished citizen, and if they 
 were to refuse him admission, it would be obliged to accept him again 
 as a resident member of the national community. 
 
 The second duty which is imposed upon the state by virtue of the 
 relationship is the protection of its citizen abroad. The security of 
 international intercourse depends upon the fact, recognized by the 
 practice of nations, that states assume toward their citizens the obliga- 
 tion, and possess as against other states the right, of assuring their 
 citizen abroad the exercise and enjoyment of certain legal rights. 
 
 PROTECTION ABROAD 
 
 The bond of citizenship implies that the state must watch over its 
 citizens abroad. Too severe an assertion of territorial control over 
 them by the state of residence will be met by the emergence of the pro- 
 tective right of the national state and the potential force of this phenom- 
 enon has largely shaped the rights assumed by states over resident aliens. 
 
 The principles of territorial jurisdiction and personal sovereignty 
 are mutually corrective forces. An excessive application of the terri- 
 torial principle is limited by the custom which grants foreign states 
 certain rights over their citizens abroad, sometimes merely the applica- 
 tion of foreign law by the local courts, sometimes, in acknowledgment 
 of the principle of protection, a certain amount of jurisdiction. In the 
 Orient and in semi-civilized states this often involves a complete sur- 
 render of local jurisdiction in favor of the foreign state, and in states 
 conforming more closely to the highest type of civilized government, 
 it consists in partial derogations from territorial jurisdiction in special 
 classes of cases, e. g., consular jurisdiction in certain commercial dis- 
 putes and over national merchant vessels. 54 These concessions are 
 
 52 Martitz, F. von, Das Recht der Staatsangehorigkeit im internationalen Verkehr 
 in Hirth's Annualen des deutschen Reichs, 1875, p. 794, Stoerk in Rev. Gen. D. I. P., 
 1895, p. 288; also in Holtzendorff's Handbuch, II, sec. 119; Gareis, op. tit., p. 163. 
 
 63 Bar, op. tit., p. 139. 
 
 54 Hall, W. E., Foreign powers and jurisdiction, Oxford, 1894, pp. 4-6. 
 
516 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 made to assure individuals the most appropriate regulative agency for 
 their legal relations. 
 
 It is the obligation of every state to regard the citizens of other states 
 as the subjects of legal rights. 55 Whether such recognition is compelled 
 by international law, or by municipal law in fulfillment of obligations 
 imposed by international law is of some theoretical interest and will be 
 discussed briefly hereafter. 
 
 When the citizen leaves the national territory he enters the domain 
 of international law. By residence abroad he not merely carries with 
 him certain rights and duties imposed by the municipal law of his own 
 state, but he enters into a new sphere of mutual rights and obligations 
 between himself as a resident alien and the state of his residence. A 
 failure on his part to comply with these newly created obligations is 
 met by repression and punishment in the local courts. A failure of the 
 state to fulfill its obligations toward the alien is met by repression on 
 the part of his home estate. The extent of this obligation toward the 
 resident alien has been measured by international law and practice, 
 though the very nature of repressive action has permitted the element 
 of physical power and political expediency at times to obscure and even 
 obliterate purely legal rights. 
 
 Legally, the measure of the obligation of the state of residence to 
 resident aliens is the measure of the national state's right. The extent 
 of the failure to fulfill the obligation, ordinarily known as the interna- 
 tional responsibility of the state, is in exact proportion to the amount of 
 diplomatic pressure or protection which the national state is authorized 
 to interpose. 
 
 States are legal persons and the direct subjects of international law. 
 They are admitted into the international community on condition that 
 they possess certain essential characteristics, such as a defined territory, 
 independence, etc. In addition, they must manifest their power to 
 exercise jurisdiction effectively and, as we shall see, to assure foreigners 
 within it of a minimum of rights. This minimum standard below which 
 a state can not fall without incurring responsibility to the other mem- 
 bers of the international community has been shaped and established 
 by the advance of civilization and the necessities of modern international 
 65 Heilborn, op. cit., p. 75 et seq. 
 
BASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 517 
 
 intercourse on the part of individuals. The nome state of the resident 
 alien is concerned not with the legal legitimacy of a foreign govern- 
 ment, 56 but with its actual ability to fulfill the obligations which this in- 
 ternational standard imposes upon it. The resident alien does not derive 
 his rights directly from international law, but from the municipal law 
 of the state of residence, though international law imposes upon that 
 state certain obligations which under the sanction of responsibility to 
 the other states of the international community, it is compelled to ful- 
 fill. When the local state fails to fulfill these duties, "when it is incap- 
 able of ruling, or rules with patent injustice," the right of diplomatic 
 protection inures to those states whose citizens have been injured by 
 the governmental delinquency. 57 
 
 International law recognizes on the part of each member of the family 
 of nations certain norms or attributes of government for the purpose of 
 assuring the rights of the individual. The independence of states, with 
 the right of administering law and justice uncontrolled by other states, 
 is one of the norms by which this end is attained. In countries which ^ 
 habitually maintain effective government, the protection of the na- 
 tional government of a resident alien is usually limited to calling the 
 attention of the local government to the performance of its international 
 duty. The right, however, is always reserved, and in the case of less^ 
 stable and well-ordered governments frequently exercised, of taking more 
 effective measures to secure to their citizens abroad a measure of fair 
 treatment conforming to the international standard of justice. While 
 the right of every state to exercise sovereignty and jurisdiction within its \ 
 territory over all persons within it is recognized, foreign nations retain • 
 over their citizens abroad a protective surveillance to see that their rights 
 as individuals receive the just measure of recognition established by I 
 the principles of international law. 58 Diplomatic protection, therefore, \ 
 
 66 The assassination of the King of Servia by certain nobles and of President Ma- 
 dero by rebels was of no special international concern, in view of the immediate 
 establishment of a government having the power to fulfill the international obliga- 
 tions of the state. 
 
 57 Hall, W. E., Foreign powers and jurisdiction, p. 4; Bluntschli, op. cit., sec. 
 380. 
 
 58 Address before the American Society of International Law, April 29, 1910, Pro- 
 ceedings of the Fourth Annual Meeting, p. 46; Heilborn, op. cit., p. 64 et seq; Pillet, A., 
 
518 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 is a complementary or reserved right invoked only when the state of 
 residence fails to conform with this international standard. 
 
 The rules of international law in this matter fall with particular 
 severity upon those countries where law and administration frequently 
 deviate from and fall below this standard; for, the fact that their own 
 citizens can be compelled to accept such maladministration is not a 
 criterion for the measure of treatment which the alien can demand, and 
 international practice seems to have denied these countries the right 
 to avail themselves of the usual defense that the alien is given the benefit 
 of the same laws, the same administration, and the same protection 
 as the national. 
 
 The broad principle of international law that when an individual 
 establishes himself in a foreign state he renders himself subject to the 
 territorial jurisdiction of that state and must normally accept the in- 
 stitutions which the inhabitants of the state find suitable to themselves, 
 must be viewed in its relation to the complementary principle that the 
 
 individual in question still owes allegiance to his own state and will 
 )e protected by that state when his rights, as measured not by the local, 
 )ut by the international standard, are invaded. 
 
 THE PROTECTIVE FUNCTION 
 
 In arriving at the basis for the external activity of the state in pro- 
 tecting citizens abroad, we are led into the field of the true function of 
 the state. Being concerned primarily with international law, or the 
 material and external sides of state activity, we can avoid all abstract 
 philosophy, with the attempt to bring the meaning of the term "state" 
 into harmony with a general theory of the universe. 59 
 
 From the beginning of civilization, the relation between the state and 
 the individual and the proper sphere of the activity of each have been 
 discussed by political philosophers. Under the ancient theory of the 
 state, especially among the Greeks, the state was regarded as the ulti- 
 mate aim of human life, an end in itself. 60 Individuals appeared only 
 
 Recherches sur les droits fondamentaux des etats, Paris, 1899, p. 19 et seq., particularly 
 at p. 28. 
 
 69 McKechmie, S. W., The state and the individual, Glasgow, 1896, p. 52. 
 
 60 Bluntschli, J. K., The theory of the state, Oxford, 1898, p. 305. 
 
EASIC ELEMENTS OF DIPLOMATIC PROTECTION OF CITIZENS ABROAD 519 
 
 as parts of the state; their rights and welfare were recognized only to 
 the extent that it was serviceable to the state. By the time of the 
 Romans, with its absence of political freedom but strong protection 
 for private rights, a more just sense of the relations between state and 
 individual obtained, at least so far as the sphere of law is concerned. 
 The Kantian theory of the Rechtstaat considered the sole duty of the 
 state the maintenance of the legal security of each individual. This 
 attempt to narrow the sphere of governmental activity was adopted 
 by the orthodox political economy which reduced the function of the 
 state to the minimum of maintaining security. 61 A more modern theory, 
 entirely individualistic and utilitarian, i ipported strongly by Macaulay, 
 Eentham and John Stuart Mill, regarded the state as a means only to 
 insure and increase the sum of private happiness. 62 
 
 The one-sidedness of each of these views has become more evident 
 with the growth of social legislation during the past generation. The 
 state is not merely an end in itself, nor only a means to secure individual 
 welfare. Just as the nation is something more than a sum of the in- 
 dividuals belonging to it, so the national welfare is more than the sum 
 of individual welfare. National welfare and individual welfare are in- 
 deed intimately bound together. v In an impairment of individual rights, 
 the state, the social solidarity, is affected; 63 yet where, in a particular 
 case, the redress of the individual wrong would involve too great a social 
 cost, it may be overlooked, and the measurement of the balance of 
 advantages is in the discretion of the government. 
 
 The assurance of the welfare of individuals, therefore, is a primary! 
 function of the state, accomplished internally by the agency of muni- 
 cipal public law, and externally through the instrumentalities of inter- 
 national law and diplomacy. The establishment of the machinery to 
 insure this object constitutes an essential function of state activity — 
 within, protecting every member of society from injustice or oppression 
 by every other member; without, protecting its citizens from violence 
 
 61 Duguit, L., Etudes de droit public. 1. L'etat, le droit objectif et la hi positive, 
 Paris, 1901, p. 288. See the theories of Kant and Humboldt as discussed in Blunt- 
 schli, op. cit., p. 68. 
 
 62 McKechmie, op. cit., p. 77; Ritchie, op. cit., p. 87. 
 
 63 Duguit, op. cit., p. 290. 
 
520 THE AMERICAN JOURNAL OF INTERNATIONAL LAW 
 
 and oppression by other states. Authorities differ in giving expression 
 to this function of the state, but modern publicists agree that it finds 
 its basis in the nature of the state and in the doctrine of Locke that 
 "the end of government is the good of mankind." 64 
 
 International lawyers, unwilling to indulge in philosophical specula- 
 tion as to the relation between the state and the individual, assert that 
 the final mission of the state and the aim of international organization 
 culminates in the guaranty of the collective security of the nation and 
 'the personal security of the individual and of his rights, and the pro- 
 motion of social and individual welfare. 65 Diplomatic protection, there- 
 fore, as a governmental function to achieve security and justice, results 
 from the very nature of the state. 66 It is entirely consistent with the 
 principle of independence, when it is recalled that the latter, as an attri- 
 bute of states, is only recognized by international law on the theory 
 that it is the best means of accomplishing state functions. Its basis 
 being practical, international law permits it to be set aside when it is 
 misapplied, by the diplomatic interposition of those states whose in- 
 terests, through their citizens, have been prejudiced by the delinquency. 
 It thus conforms with the aim of international organization — the 
 advancement and perfection of those rights which the modern develop- 
 ment of international law, by custom and treaty, has recognized as 
 inherent in the individual. 
 
 Edwin M. Borchard. 
 
 64 McKechmie, op. cit., p. 74; Bluntschli, op. cit., p. 319 et seq. For an account 
 of the contributions of a long line of publicists to political theory and philosophy, es- 
 pecially as involved in the relation of the state to the individual, and the struggle 
 between authority and liberty, see the works of McKechmie, Bluntschli, and Duguit 
 cited above, and Yeaman, G. H., The study of government, Boston, 1871, and Leroy- 
 Beaulieu, P., The modern state in relation to society and the individual, London, 1891. 
 
 65 See e. g., Martens, op. cit., sec. 75; Holtzendorff's Handbuch, I, sec. 15; and Huber, 
 Beitrage zur Kenntnis der soziologischen Grundlagen des Volkerrechts u. Staatengesell- 
 schaft in Jahrbuch des Offentlichen Rechts, v. 4 (1910), pp. 56-134; Hobhouse, 
 Leonard T., Social evolution and political theory, New York, 1911, Chap. IX; Wilson, 
 Roland K., The province of the state, London, 1911, Chap. I and II. 
 
 66 Pillet, A., he droit international public, ses elements constitutifs, domaine et objet, 
 Rev. Gen. D. I. P., v. 1 (1894), p. 5. 
 
Judicial Settlement 
 
 OF INTERNATIONAL DISPUTES 
 No. 13 
 
 International Contractual Claims and 
 Their Settlement 
 
 By 
 
 EDWIN M. BORCHARD 
 
 Assistant Solicitor, Department of State 
 
 AUGUST, 1 91 3 
 
 Published (Quarterly by American Society for Judicial Settlement of 
 International Disputes 
 
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 Additional copies of this or other issues of the Judicial Settle- 
 ment Quarterly may be obtained without charge from the Assistant 
 Secretary. 
 
 The Volume of Proceedings of the Third National Conference 
 of the Society, Washington, D. C, December 20-21, 19 12, is 
 now ready and has been sent to members. Non-members may 
 obtain it from the publishers, Williams & Wilkins Co., 2427 
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 Garden, London, W. C. ; price, in paper, 3s.; cloth, 4s. 
 
 The program of this Conference was arranged in such a way 
 as to call forth a discussion of the law to be administered by a 
 Permanent International Court. It is believed that the experience 
 in arbitration and judicial settlement which some of the speakers 
 have had will make their papers as valuable as they were timely, 
 and that the proceedings as a whole will be no mean contribution 
 to the cause of judicial settlement. 
 
 Tuvstall Smith, Assistant Secretary, 
 
 The Preston, Baltimore, U. S. A. 
 
International Contractual Claims and 
 Their Settlement* 
 
 By 
 Edwin M. Borchard. 
 
 Diplomatic protection is often invoked by citizens of one 
 country in cases arising out of contracts entered into with 
 citizens of another, or with a foreign government. With 
 the constant growth in international intercourse and the ex- 
 ploitation of backward countries by foreign capital, this 
 class of cases has assumed large proportions and has given 
 rise to many perplexing and delicate diplomatic situations. 
 The foreign offices of some of the more important govern- 
 ments have differentiated these claims from tortious claims 
 arising out of direct injuries committed by an authority 
 of the state against the person or property of their citizens, 
 either by declining to interpose in behalf of their contracting 
 citizens or else by exercising more than ordinary scrutiny 
 over a cause of action having its origin in contract. Funda- 
 mentally it is the denial of justice which is the necessary 
 condition for the interposition of a government on behalf of 
 
 ♦This monograph is in substance a chapter of a forthcoming book by 
 the author, "The Diplomatic Protection of Citizens Abroad," to be pub- 
 lished early in 1914 by the Banks Law Publishing Co., New York. It 
 is issued with the publishers' permission. 
 
4 JUDICIAL SETTLEMENT 
 
 its citizen prejudiced by breach of contract. As a general 
 rule, before a claim originating in a contract can come within 
 the category of a denial of justice it must have been sub- 
 mitted to the courts for such judicial determination as is 
 provided by the local law or in the contract. Until such 
 submission, the government's right of interposition has not 
 yet accrued. The qualifications of this principle we shall 
 consider hereafter. 
 
 There are three important classes of contract claims: 
 first, those arising out of contracts concluded between in- 
 dividuals who are citizens of different countries; second, 
 those arising out of contracts between the citizen and a for- 
 eign government ; and third, claims arising out of the unpaid 
 bonds of a government held by the citizen of another. The 
 failure of some publicists to distinguish these classes clearly 
 in their discussion of the subject, especially the failure to 
 distinguish the second from the third class, has brought 
 about some confusion. When they state, as many of them 
 do, that on principle there can be no intervention in claims 
 arising out of contract, they really mean to confine their 
 assertion to the case of claims arising out of unpaid bonds 
 and not contracts in general. <Jhis distinction, as we shall 
 see hereafter, is important, inasmuch as there is far less 
 reason for governmental intervention to secure the payment 
 of defaulted bonds of a foreign government than there is 
 in the case of breaches of concession and similar contracts) 
 
 Hall fails properly to note the distinction between contract 
 and other claims. He recognizes that there is a difference 
 in the practice of governments in supporting claims arising 
 out of a default of a foreign state in paying the interest 
 or principal of loans made to it, and the complaints of per- 
 sons sustaining injury in other ways. He admits that in the 
 
OF INTERNATIONAL DISPUTES 5 
 
 former case governments generally decline interposition, 
 whereas in the latter it is a matter of expediency whether 
 in the particular case their right of interposition shall be 
 exercised. After giving the reasons why public loans should 
 not become a cause of international intervention, he states 
 that, fundamentally, 
 
 "there is no difference in principle between wrongs inflicted 
 by breach of a monetary agreement and other wrongs for 
 which the state, as itself the wrongdoer, is immediately re- 
 sponsible." 1 
 
 While the statement is technically correct, it is apt to be mis- 
 leading, inasmuch as it treats ordinary contract claims and 
 those arising out of tort as forming one class, whereas there 
 is an essential difference between them. This consists in the 
 fact that in the case of contractual claims the active notice 
 taken by the state of the wrong done its citizen is deferred 
 until he has exhausted his local judicial remedies and a de- 
 nial of justice is established, whereas in claims arising out of 
 tort, if chargeable to a government authority, interposition 
 is generally immediate; and in the further fact that wider 
 discretion is exercised by the protecting state in the enforce- 
 ment of contractual claims than of those purely tortious 
 in origin. 
 
 Westlake is one of the few writers who properly dis- 
 tinguish the case of ordinary contract claims — for example, 
 those arising out of supplies furnished the government or 
 out of concession contracts concluded between a citizen and a 
 
 1 Hall, International Law (6th ed.), 275-276. See also Findlay, com- 
 missioner U. S. -Venezuelan commission of Dec. 5, 1885, who considered 
 the difference one in degree only. He believed that a contractual claim 
 for building a public work and one founded on non-payment of a public 
 debt are the same, both being voluntary engagements. Opinions of the 
 commission (Washington, Gibson Bros., 1890), 335, Moore's Arb.. 3650. 
 
6 JUDICIAL SETTLEMENT 
 
 foreign government — and the case of unpaid bonds which 
 are part of a public loan. 
 
 In the case of ordinary contract claims, he says, 
 "there is a petition of right, a court of claims, or an appro- 
 priate administrative tribunal before which to go. The case 
 is not essentially different from any other arising between 
 man and man. The foreigner who has contracted with the 
 government has not elected to place himself at its mercy, and 
 the rule of equal treatment with nationals requires that he 
 shall have the full benefit of the established procedure, while 
 if in a rare instance there is no such established procedure, 
 or it proves to be a mockery, the other rule of protecting sub- 
 jects against a flagrant denial of justice also comes in. But 
 public loans are contracted by acts of a legislative nature, 
 and when their terms are afterwards modified to the dis- 
 advantage of the bondholders this is done by other acts of a 
 legislative nature, which are not questionable by any pro- 
 ceeding in the country. If therefore the rule of equal treat- 
 ment with nationals be looked to, the foreign bondholder has 
 no case unless he is discriminated against. And if the rule of 
 protecting subjects against a flagrant denial of justice be 
 looked to, the reduction of interest or capital is always put 
 on the ground of the inability of the country to pay more — 
 a foreign government is scarcely able to determine whether 
 or how far that plea is true — supposing it to be true, the 
 provisions which all legislations contain for the relief of in- 
 solvent debtors prove that honest inability to pay is regarded 
 as a title to consideration — and the holder of a bond enforce- 
 able only through the intervention of his government is 
 trying, when he seeks that intervention, to exercise a dif- 
 ferent right from that of a person whose complaint is the 
 gross defect of a remedial process which by general under- 
 standing ought to exist and be effective." 2 
 
 2 Westlake, International Law, vol. I (2nd ed.), 332-333. 
 
OF INTERNATIONAL DISPUTES 7 
 
 Contracts between Individuals. 
 
 The first class of cases, contracts between individuals, can 
 give rise only to an action in the courts for breach of con- 
 tract. The government of the foreigner is in no wise con- 
 cerned unless the local courts deny or unduly delay justice, 
 in which event the government's right of interposition rests 
 on the denial of justice alone and disregards the fact that 
 the claim had its origin in a contract. This rule has gen- 
 erally been followed by the governments of contracting citi- 
 zens, and has been applied by international commissions. 8 
 
 Contracts between Citizen and Foreign Government. 
 
 A more doubtful case arises where the contract has been 
 concluded between the citizen and the foreign government. 
 We shall not here discuss the question of unpaid bonds, for 
 this is a distinct branch of the subject, although some writers 
 do not observe it. The contracts now in question are such 
 as are made with the foreign government for the supply 
 of material, for the execution of public works, and for the 
 exercise of concessions of various kinds. Here again the 
 general rule followed by the United States, although not by 
 all other governments, is that a contract claim can not give 
 rise to the diplomatic interposition of the government un- 
 less, after an exhaustion of local remedies, there has been 
 a denial of justice, or some flagrant violation of interna- 
 tional law. The use of good offices is, however, usually 
 sanctioned. While the rule is fairly clear, its application and 
 
 3 Smith (U. S.) v. Mexico, Act of Congress, Mar. 3, 1849, Moore's 
 Arb., 3456; Rowland (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 
 3458; Hayes (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 3456; Chase 
 (U. S.) v. Mexico, Moore's Arb., 3469-70; La Guaira Light & Power 
 Co. (U. S.) v. Venezuela, Feb. 17, 1903, Ralston I, 182. 
 
8 JUDICIAL SETTLEMENT 
 
 its exceptions are vague, due principally to the fact that the 
 intervening government interprets for itself what is a denial 
 of justice and frequently concludes that harsh treatment of 
 its contracting citizen by the foreign government constitutes 
 a tortious act which takes the case out of the ordinary rule. 
 Broadly speaking, we might state the rule as follows : Diplo- 
 matic interposition will not lie for the natural or anticipated 
 consequences of the contractual relation, but only for arbi- 
 trary incidents or results, such as a denial of justice or fla- 
 grant violation of local or international law. 4 
 
 There are several reasons why governments are and 
 should be less zealous in pressing the claims of their citizens 
 arising out of breach of contract than those arising out of 
 some tortious act. The first reason is that the citizen enter- 
 ing into a contract does so voluntarily and takes into account 
 the probabilities and possibilities of performance by the for- 
 eign government. He has in contemplation all the ordinary 
 risks which attend the execution of the contract. In the 
 second place, by going abroad, he submits impliedly to the 
 local law and the local judicial system. The contract or the 
 law provides remedies for breach of contract. These he 
 must pursue before his own government can become inter- 
 ested in his case. In the third place, practically every civi- 
 lized state may be sued for breach of contract. Even the 
 United States, which renders itself less amenable to suit at 
 the hands of injured individuals than perhaps any other 
 country, recognizes its liability for illegal breaches of con- 
 
 4 F. de Martens, in his essay "Par la justice vers la paix" (pp. 30-31), 
 supports the rule of non-interference by the government until the claim- 
 ant has appealed to the local courts and justice has been denied. Even 
 then he suggests a preliminary judicial examination into the justice of 
 the claim by the government of the claimant. See also Martens' Traite 
 de droit international, vol. I, 446-447. See also Fiore, P. Nouveau 
 droit int. public (Paris, 1885, Antoine's trans.), § 651 ; Lomonaco, Diritto 
 internazionale pubblico (Napoli, 1905), 218-219. 
 
OF INTERNATIONAL DISPUTES 9 
 
 tract. 8 In England, a petition of right is rarely refused ; in 
 the United States, the Court of Claims or a similar body in 
 the states has jurisdiction ; in France and some other coun- 
 tries, the Council of State or some administrative body is the 
 proper forum for suits against the State; in Latin America 
 the Supreme Court is generally given jurisdiction. 
 
 The exceptions to this requirement of exhausting local 
 remedies occur first, where the local judicial organization is 
 so corrupt, or the possibility of local remedy so remote, that 
 it would be folly to compel a citizen to submit his cause of 
 action to local courts. The fact that the protecting govern- 
 ment determines for itself the existence of these qualifying 
 conditions renders the application of the rule uncertain. 
 Secondly, where the breach is one not within the contempla- 
 tion of the contracting parties, but partakes of the nature of 
 an arbitrary tort, the protecting government will relieve its 
 citizen from the ordinary rule of submission to local courts. 
 The position of the injured individual and the protecting 
 government is the same as in cases of ordinary tortious acts 
 of the defendant government and justifies interposition. 
 
 The early publicists seem to have justified reprisals by a 
 government for default of obligations due its citizen on the 
 part of another government. Grotius appears to have sanc- 
 tioned reprisals for the collection of debts due to subjects 
 from a foreign power notwithstanding the claim to be thus 
 satisfied was submitted to the courts of the government in 
 default and by them pronounced unfounded. 6 Vattel simi- 
 larly justified hostile action to enforce contracts concluded 
 between a citizen and a foreign government. But Vattel ad- 
 
 5 Revised Statutes, § 1059, par. 1; § 1060; § 1068; Act of March 3, 1887 
 (Tucker Act), 24 Stat. L, 505, § 1. 
 
 6 Grotius, De jure belli ac pads, 3, 2, 5 ; cf. 1, 5, 2 and 2, 25, 1. 
 
IO JUDICIAL SETTLEMENT 
 
 mits that before the claimant nation proceeds to such ex- 
 tremities (reprisals) it must be able to show that it 
 
 "has ineffectually demanded justice, or at least that [the 
 claimant] has every reason to think it would be vain . . . 
 to demand it." 7 
 
 From that time on, the conviction has gained ground that an 
 attempt to exhaust local justice must be shown before diplo- 
 matic pressure or hostile action is warranted. Modern 
 writers generally agree that where the citizen has at his 
 disposal the legal means of asserting his rights and obtain- 
 ing reparation of his injury by judicial proceedings, the in- 
 terposition of his government is unjustified, for 
 
 "to secure by diplomacy what the individual might secure 
 judicially is to be deemed highly reprehensible." 8 
 
 As we shall see, contractual claims are among the first causes 
 of complaint now largely removed from the field of armed 
 conflict, through the adoption by the Second Hague Con- 
 ference and the general ratification of the convention for the 
 limitation of force to recover contract debts. 
 
 Coming now to the practice of governments we can not 
 say that the countries of continental Europe make any sub- 
 stantial distinction between claims arising out of contract 
 and those arising out of other acts. 9 The United States, 
 
 7 Vattel, Law of Nations (Chitty-Ingraham edition, Phila., 1855), Bk. 
 II, Ch. 14, § 18, 214-216; Ch. 18, §§ 343, 347, 354. See also Wheaton. 
 International Law (Lawrence's edition, 1863), 510. 
 
 8 Fiore, P. Nouveau droit international public (Antoine's trans.), vol. 
 I, § 651. Martens, Traite de droit international, 446. 
 
 9 Germany, Italy and France have at times intervened diplomatically 
 in favor of their subjects in cases arising out of contract, without any 
 question as to the propriety of such action. Germany's and Italy's atti- 
 tude was shown in the action against Venezuela in 1902. See Dulon in 
 38 Amer. Law Rev., 650, and Brook in 30 Law Mag. & Rev., 165. See 
 also case of Kronsberg, a German engineer, against Roumania in 1871, 
 Tchernoff, Protection des nationaux a l'etranger, 188; Martens' Traite, 
 I, 70. See the French action against the Dominican Republic, 1894, For. 
 Rel, 1895, I, 235-243, 397-402. 
 
OF INTERNATIONAL DISPUTES II 
 
 however, and at times Great Britain, have limited their 
 protection considerably in the case of ordinary contract 
 claims. The fact that the citizen entered voluntarily into 
 the contract seems to have been a determining factor in the 
 policy of the United States not to interpose diplomatically 
 in behalf of its citizens prejudiced through breach of a con- 
 tract concluded by them with a foreign government. John 
 Quincy Adams' statement as Secretary of State has been 
 quoted frequently by his successors in the Department of 
 State. Adams' ruling was as follows : 
 
 "With regard to the contracts of an individual born in one 
 country with the government of another, most especially 
 when the individual contracting is domiciliated in the coun- 
 try with whose government he contracts, and formed the 
 contract voluntarily, for his own private emolument and 
 without the privity of the nation under whose protection he 
 has been born, he has no claim whatsoever to call upon the 
 government of his nativity to espouse his claim, this govern- 
 ment having no right to compel that with which he volun- 
 tarily contracted to the performance of that contract." 10 
 
 Mr. Marcy in 1856 made the following apt statement of 
 the rule of the Department of State : 
 
 "The government of the United States is not bound to in- 
 terfere to secure the fulfillment of contracts made between 
 their citizens and foreign governments, it being presumed 
 that before entering into such contracts the disposition and 
 ability of the foreign power to perform its obligations was 
 examined, and the risk of failure taken into consideration." 11 
 
 10 John Quincy Adams, Secretary of State, to Mr. Salmon (April 29, 
 1823), Am. St. Pap., For. Rel., vol. 5, 403, quoted in Wharton II, 654, 
 Moore's Dig., VI, 708, and notes there cited. See also the Landreau 
 case, Sec'y of State Bayard to Mr. Cowie (June 15, 1885), Moore's Dig., 
 VI, 715 ; and the Fiedler case, Mr. Bayard, Sec'y of State, to Mr. Jarvis 
 (Mar. 22, 1886), Moore's Dig, VI, 715. 
 
 11 Mr. Marcy, Sec'y of State, to Mr. Fowler (July 17, 1856), Wharton 
 II, 655. 
 
12 JUDICIAL SETTLEMENT 
 
 While diplomatic interposition or pressure is declined, the 
 use of friendly good offices by the diplomatic representatives 
 of the United States abroad is authorized. Secretary Fish 
 expressed as follows the practice of the Department in this 
 respect : 
 
 "Our long-settled policy and practice has been to decline 
 the formal intervention of the government except in cases of 
 wrong and injury to persons and property, such as the com- 
 mon law denominates torts and regards as inflicted by force, 
 and not the results of voluntary engagements or contracts. 
 
 "In cases founded upon contract the practice of this gov- 
 ernment is to confine itself to allowing its minister to exert 
 his friendly good offices in recommending the claim to the 
 equitable consideration of the debtor without committing his 
 own government to any ulterior proceedings." 12 
 
 What is meant by "good offices" and the extent to which 
 they may be exerted has on several occasions been construed 
 by secretaries of state. Mr. Fish defined the use of "good 
 offices" as a direction to a diplomatic agent 
 
 "to investigate the subject, and if [he] shall find the facts as 
 represented [he] will seek an interview with the minister for 
 foreign affairs and request such explanations as it may be in 
 his power to afford." 13 
 
 Good offices are in the nature of unofficial personal recom- 
 mendations and are not tendered officially, although appar- 
 ently the government may authorize or direct a diplomatic 
 representative to extend them. Perhaps the best statement 
 
 12 Mr. Fish, Secy of State, to Mr. Muller (May 16, 1871), Wharton 
 II, 656, Moore's Dig., VI, 710. See the long list of cases cited by Whar- 
 ton (II, 655) and by Moore (VI, 705-707) in support of the rule that 
 "it is not usual for the Government of the United States to interfere, 
 except by its good offices, for the prosecution of claims founded on con- 
 tracts with foreign governments." 
 
 13 Mr. Fish, Sec'y of State, to Mr. Osborn (Mar. 4, 1876), Wharton 
 II, 658, Moore's Dig., VI, 711. 
 
OF INTERNATIONAL DISPUTES 1 3 
 
 of the practice of the United States in the matter of contract 
 claims was made by Secretary Bayard in 1885 : 
 
 "It is not necessary to remind you that an appeal by one 
 sovereign on behalf of a subject to obtain from another sov- 
 ereign the payment of a debt alleged to be due such subject 
 is the exercise of a very delicate and peculiar prerogative, 
 which, by principles definitely settled in this Department, is 
 placed under the following limitations : 
 
 "1. All that our government undertakes, when the claim 
 is merely contractual, is to interpose its good offices ; in other 
 words, to ask the attention of the foreign sovereign to the 
 claim ; and this is only done when the claim is one suscepti- 
 ble of strong and clear proof. 
 
 "2. If the sovereign appealed to denies the validity of the 
 claim or refuses its payment, the matter drops, since it is not 
 consistent with the dignity of the United States to press, 
 after such a refusal or denial, a contractual claim for the 
 repudiation of which there is by the law of nations no re- 
 dress. * * * 
 
 "3. When the alleged debtor sovereign declares that his 
 courts are open to the pursuit of the claim, this by itself is a 
 ground for a refusal to interpose. Since the establishment 
 of the Court of Claims, for instance, the government of the 
 United States remands all claims held abroad, as well as at 
 home, to the action of that court, and declines to accept for 
 its executive department cognizance of matters which by 
 its own system it assigns to the judiciary. 
 
 "4. When this Department has been appealed to for diplo- 
 matic intervention of this class, and this intervention is re- 
 fused, this refusal is regarded as final unless after-discovered 
 evidence be presented which, under the ordinary rules ap- 
 plied by the courts in motions for a new trial, ought to 
 change the result, or unless fraud be shown in the concoc- 
 tion of the decision." 14 
 
 14 Mr. Bavard. Sec'v of State, to Mr. Bispham (June 24, 1885), Whar- 
 ton II, 656, Moore's Dig., VI, 716. 
 
14 JUDICIAL SETTLEMENT 
 
 Even good offices will, however, be refused 
 
 "when the debt was of a speculative character, or when it 
 was incurred to aid the debtor government to make war on a 
 country with which the United States was at peace." 15 
 
 From this we may infer that the State Department takes 
 some official interest in the extension of good offices. 
 
 The United States will not promise protection in advance 
 to secure the execution of a contract between a citizen and 
 a foreign government. The American-China Development 
 Company in entering upon contracts with China requested 
 such advance protection and alleged that the English in- 
 vestors in their enterprise would receive such guaranty 
 from the British foreign office. Secretary of State Day 
 gave as the reason for his unwillingness to extend such a 
 guaranty as the British government was said to have ex- 
 tended, that the British Crown, exercising the executive 
 power in Great Britain, possesses both the war-making and 
 the treaty-making power, and is therefore authorized, in in- 
 ternational relations, to give guarantees and enter into en- 
 gagements which the Executive of the United States would 
 not alone be competent to assume. 16 
 
 Secretary Marcy in 1855 gave a somwhat similar explana- 
 tion for the unwillingness of the United States to interfere 
 officially in a case of alleged breach by a foreign government 
 of a contract with citizens of the United States. 17 The pos- 
 sibility of Congress declining to support the action of the 
 Executive does not, however, appear to have been as prom- 
 
 15 Mr. Seward, Sec'y of State, to Messrs. Leavitt & Co. (May 6, 1868), 
 Wharton II, 656, Moore's Dig., VI, 710. 
 
 1C Sec'y of State Day to Messrs. Cary & Whitridge (Aug. 24, 1898), 
 in the case of the American- China Development Co., Moore's Dig., 
 VI, 288. 
 
 17 Mr. Marcy, Sec'y of State, to Mr. Clay, Minister to Peru (May 24, 
 1855), Moore's Dig., VI, 709. 
 
OF INTERNATIONAL DISPUTES 1 5 
 
 inently in the minds of other secretaries of state in dealing 
 with international claims. While the Department of State 
 will rarely protest in advance against a proposed law of a 
 foreign country interfering merely with contractual rights 
 of American citizens, there have been occasions where such 
 action was taken. 18 
 
 The general belief that Great Britain does not in practice 
 interfere in claims arising out of contract, is erroneously 
 based upon the frequently quoted circular of Lord Palmer- 
 ston, Secretary of State for Foreign Affairs, directed in 1848 
 to the British representatives in foreign states. 19 Palmerston 
 declared that while the government had the right to inter- 
 vene, it was merely a question of discretion with the British 
 government whether the pecuniary claims of subjects should 
 be taken up or not by diplomatic negotiation, and "the de- 
 cision of that question of discretion turns entirely upon Brit- 
 ish and domestic considerations." 20 This language is broad 
 enough indeed to cover any class of claim, but it must be 
 understood that Palmerston's ruling was made with refer- 
 ence to claims arising out of unpaid bonds of foreign states 
 held by British subjects, a case in which intervention is for 
 various reasons, as we shall show, even less justifiable than 
 in the case of ordinary contracts. 
 
 18 Mr. Webster, Sec'y of State, to Mr. Letcher (August 24, 1850), 
 protesting against any violation by decree of the Tehuantepec conces- 
 sion, adding that this would be regarded as a national grievance. Sen. 
 Doc. 97, 32nd Cong., 1st Sess. 
 
 19 The instruction in full is printed in Phillimore on International 
 Law (3rd ed., London, 1882), vol. 2, 9-11. 
 
 20 In fact, Great Britain has often interposed to redress breaches of 
 private contract. See, for example, the intervention in Bolivia in 1853, 
 Lord Clarendon to Mr. Lloyd, 56 St. Pap., 1003, and the criticism of 
 Great Britain's action by Baty, Int. Law, p. 127. Great Britain freely 
 extends good offices. See, for example, case of Dixon v. Portugal, 75 
 St. Pap., 1196. 
 
1 6 JUDICIAL SETTLEMENT 
 
 In applying the rule of refusing diplomatic interposition 
 on contract claims, the United States has always been care- 
 ful to limit its strict interpretation to cases entirely free 
 from the qualifying factors of a denial of justice or other 
 tortious element. If in any respect a denial of justice could 
 be discerned in the case, or if any arbitrary act or confisca- 
 tory breach of the contract had taken place, the rule has been 
 considered as no longer applying. A brief enumeration of 
 these exceptions to the rule may be of interest. 
 
 i. The United States has on several occasions insisted 
 that its citizens entering into foreign contracts shall have 
 free and fair access to the courts and that the courts shall 
 be so organized that the dispensing of justice may be pre- 
 sumed. Secretary of State Evarts once said that when a 
 government does not hold itself amenable to judicial suit by 
 foreign claimants on contracts made with it, their claims may 
 be held to form an exception to the general rule as to con- 
 tracts, 21 and in a subsequent case in Hayti, the Lazare case, 
 Mr. Evarts added : 
 
 "the Government of the United States will insist on fair and 
 impartial examination and adjudication by Hayti, without 
 discrimination as to nationality, of a contractual claim of a 
 citizen of the United States against Hayti. 22 
 
 Mr. Bayard in stating the general rule of refusal to press 
 contract claims excepted the case of discrimination against a 
 citizen by the debtor government and a denial of a judicial 
 remedy against it. 23 In the celebrated Idler case the fact 
 
 21 Mr. Evarts to Mr. Gibbs (Oct. 31, 1877), Wharton II, 662. This 
 statement occurs in Mr. Evarts' opinion in the case of Sparrow v. Peru, 
 Moore's Dig., VI, 720. See also For. Rel., 1895-6, Pt. II, 1036-1055. 
 
 22 Mr. Evarts to Mr. Langston, Minister to Hayti (Dec. 13, 1877), 
 Moore's Dig., VI, 724. For a history of the Lazare case, see Moore's 
 Arb., 1749 et seq. 
 
 23 Mr. Bayard, Sec'y of State, to Mr. Hall, Minister to Central Amer- 
 ica (Mar. 27, 1888), For. Rel., 1888, Pt. I, 136. See also Moore's Dig., 
 VI, 727. 
 
OF INTERNATIONAL DISPUTES 1 7 
 
 that Venezuela had illegally invoked the remedy of restitutio 
 in integrum and by executive action had arbitrarily changed 
 the personnel of the court and district attorney for that par- 
 ticular case was held by the mixed commission under the 
 convention of Dec. 5, 1885, to have been a denial of justice 
 and to warrant an award. 2 * 
 
 2. Cases have frequently occurred in which the contracts 
 of citizens of the United States with foreign governments 
 were arbitrarily annulled by the contracting government 
 without recourse to a judicial determination of the contract 
 or of the legitimacy of its act. An act of this kind has gen- 
 erally been held by the Department of State to be a confisca- 
 tory breach of the contract and to warrant diplomatic inter- 
 position as in cases of tort. Any weakening of the judicial 
 remedy of the citizen has been held equally to relieve the 
 government from the ordinary rule of non-intervention in 
 contract cases. The rule in such cases has perhaps been best 
 
 stated by Lewis Cass, when Secretary of State, as follows : 
 
 • 
 
 "It is quite true, for example, that under ordinary circum- 
 stances when citizens of the United States go to a for- 
 eign country they go with an implied understanding that} 
 they are to obey its laws, and submit themselves, in good 
 faith, to its established tribunals. When they do business 
 with its citizens, or make private contracts there, it is not 
 to be expected that either their own or the foreign govern- 
 ment is to be made a party to this business or these contracts, 
 or will undertake to determine any disputes to which they 
 may give rise. The case, however, is very much changed 
 when no impartial tribunals can be said to exist in a foreign 
 country, or when they have been arbitrarily controlled by 
 the government to the injury of our citizens. So, also, the 
 case is widely different when the foreign government be- 
 
 24 Idler (U. S.) v. Venezuela, Dec. 5, 1885, Moore's Arb., 3517. 
 
1 8 JUDICIAL SETTLEMENT 
 
 comes itself a party to important contracts, and then not 
 only fails to fulfill them, but capriciously annuls them, to 
 the great loss of those who have invested their time and 
 labor and capital from a reliance upon its own good faith 
 and justice." 25 
 
 In a previous communication to Mr. Lamar, Minister to 
 Central America, Mr. Cass stated : 
 
 "What the United States demand is that in all cases 
 where their citizens have entered into contracts with the 
 proper Nicaraguan authorities, and questions have arisen or 
 shall arise respecting the fidelity of their execution, no decla- 
 ration of forfeiture, either past or to come, shall possess any 
 binding force unless pronounced in conformity with the pro- 
 visions of the contract, if there are any; or if there is no 
 provision for that purpose, then unless there has been a fair 
 and impartial investigation in such a manner as to satisfy 
 the United States that the proceeding has been just and that 
 the decision ought to be submitted to/' 26 
 
 The forcible deprivation of the property and franchises 
 of a citizen of the United States without due process of law 
 and a fair trial is considered as a tort and the claim will be 
 pressed on that ground regardless of its contractual origin. 
 
 Madison, at an early date in our history, distinguished be- 
 tween "compulsory measures" practised upon United States 
 citizens and "voluntary contracts," the possible results of 
 which may be presumed to have been in the contemplation 
 of the parties. 27 
 
 25 Mr. Cass, Sec'y of State, to Mr. Dimitry (May 3, 1860), Moore's 
 Dig., VI, 287. 
 
 20 Mr. Cass, Sec'y of State, to Mr. Lamar, Minister to Central Amer- 
 ica (July 25, 1858), Wharton II, 661, Moore's Dig., VI, 723-724. See 
 also Mr. Cass to Mr. Jerez (May 5, 1859), Moore's Dig., VI. 724; Mr. 
 Bayard, Sec'y of State, to Mr. Scott, Minister to Venezuela (June 23, 
 1887), Moore's Dig., VI, 725. 
 
 27 Mr. Madison, Sec'y of State, to Mr. Livingston (Oct. 27. 1803), 
 Moore's Dig., VI, 707. 
 
OF INTERNATIONAL DISPUTES IO, 
 
 Perhaps the most zealous interposition on the part of the 
 United States has been in cases where the confiscatory act 
 of the foreign government consisted in the arbitrary annul- 
 ment of the entire contract or of some of its essential pro- 
 visions without a resort to the courts. 28 
 
 Numerous other cases have occurred, particularly in Ven- 
 ezuela, where the arbitrary annulment of a contract by the 
 Executive without appeal to the courts was held to justify 
 diplomatic intervention and to render the government liable. 29 
 Xor has the presence of the Calvo clause in the contract, by 
 which the alien contractor undertakes to make the local 
 courts his final forum and to forego his right to claim the 
 diplomatic protection of his own government, denied to the 
 claimant's government the right to interpose in his behalf 
 where there has been an arbitrary annulment of the contract 
 
 28 Delagoa Bay Railroad case, McMurdo (U. S.) v. Portugal, For. 
 Rel., 1900. 903: 1902. 848-852. See also Moore's Dig., VI, 727-728, 
 Moore s Arb, 1865-1899. 
 
 For the El Triunfo case, Salvador Commercial Co. (U. S.) v. Salva- 
 dor, see For. Rel., 1902, 838-880, and the learned arguments of Hon. 
 W. L. Penfield, Solicitor of the Department of State, 839-848. See also 
 the legal opinion (Gutachten) of Professor Ludwig von Bar, given at 
 the request of the Government of Salvador, which is printed under the 
 title "Eine internationale Rechtsstreitigkeit," in Jhering's Jahrbiicher, 
 vol. 45, 161-210. 
 
 See also the case of May (U. S.) v. Guatemala, For. Rel., 1900, 648- 
 674, Jenner Arbitrator, Moore's Dig., VI, 730. In Oliva (Italy) v. Ven- 
 ezuela, Feb. 13, May 7, 1903, it was held that claimant's unlawful expul- 
 sion, preventing compliance with the contract, was an arbitrary act, 
 justifying damages for money expended and time lost. Ralston I, 771. 
 See also Paquet (Belgium) v. Venezuela, March 7, 1903, Ralston I, 269; 
 Aboilard (France) v. Hayti, June 15, 1904, Arbitrators Vignaud, Re- 
 nault and Solon Menos, Rev. gen. de droit int. pub., vol. 12 (1905), 
 Documents, 12, 13-17; Punchard et al., Antioquia Railway (Gt. Brit.) v. 
 Colombia, July 31, 1896, La Fontaine Pasicrisie Internationale, 544; 
 Cedroni (Italy) v. Guatemala, March 18, 1898; La Fontaine, op. cit, 
 606; the concessions in the last case were gratuitous. 
 
 » Senate Document 413, 60th Cong., 1st Sess., p. 105. Rudloff (U. S.) 
 v. Venezuela. Feb. 17, 1903, Ralston I, 187: Kunhardt (U. S.) v. Vene- 
 zuela, Morris's Rep., Senate Document 317, 58th Cong., 2nd Sess., 189- 
 190; Selwyn (Gt. Brit.) v. Venezuela, Feb. 13, 1903, Ralston I, 322; 
 North & South America Construction Co. (U. S.) v. Chile, Aug. 7, 
 1892, Moore's Arb., 2938, and final settlement in For. Rel., 1895, 1, 85-86; 
 Milligan (U. S.) v. Peru, Dec. 4, 1868, Moore's Arb, 1643. 
 
20 JUDICIAL SETTLEMENT 
 
 by the local government. This conclusion has been based 
 on one of several grounds. In some cases the arbitrary 
 action of the government was held to be a tort, thus render- 
 ing the construction of the contract unnecessary. In other 
 cases the arbitrary action and the failure of the government 
 to secure a judicial construction in first instance was held 
 to relieve the claimant from his own stipulation to resort 
 to the local courts and forego the diplomatic protection of his 
 government. In any event, it was held that the citizen could 
 not contract away the right of his own government to inter- 
 pose diplomatically in his behalf, the right of his government 
 to intervene being superior to the right or competency of 
 the individual to contract it away. 30 
 
 3. Various acts of foreign governments have been con- 
 strued as sufficiently arbitrary to warrant the United States 
 in intervening in contract claims or to authorize interna- 
 tional commissions to award indemnities. Thus the pro- 
 posed depreciation by Hayti of the value of certain bonds 
 issued to American citizens for work and materials was held 
 to justify the United States in protesting and eventually in- 
 tervening. 31 Lord Salisbury, 32 the British foreign secretary, 
 protested likewise against a proposed act of Peru tending to 
 weaken certain security hypothecated to the holders of Peru- 
 vian bonds. So the diversion of the security of certain rev- 
 
 30 Martini (U. S.) v. Venezuela, Feb. 13, 1903, Ralston I, 819; Selwyn 
 (Gt. Brit.) v. Venezuela, Feb. 13, 1903, Ralston I, 322; Milligan (U. S.) 
 v. Peru, Dec. 4, 1868, Moore's Arb., 1643 ; Delagoa Bay Railway case, 
 McMurdo (U. S. and Great Britain) v. Portugal, June 13, 1891, Moore's 
 Arb., 1865; see also International Law Association, 24th Rep. (1908), 
 address of Jackson H. Ralston, pp. 192, 193 ; Mr. Bayard to Mr. Scott, 
 Minister to Venezuela (June 23, 1887), Moore's Dig., VI, 725. 
 
 31 Mr. Sherman, Sec'y of State, to Mr. Powell, Minister to Hayti 
 (Oct. 26, 1897), Moore's Dig., VI, 729. 
 
 32 Lord Salisbury, British Foreign Sec'y. to Senor Pividal, Peruvian 
 Minister (Nov. 26, 1879), quoted from Parliamentary Papers in Moore's 
 Dig., VI, 724. 
 
OF INTERNATIONAL DISPUTES 21 
 
 enue pledged to the payment of the claims of citizens of the 
 United States, even when contractual in origin, has been 
 held to warrant interposition. 33 
 
 4. The United States has on several occasions intervened 
 to secure the payment to one of its citizens of the damages 
 arising through breach of contract by a foreign government 
 where such breach involved an element of tort. Thus the 
 seizure by the President of the Dominican Republic of the 
 Ozama bridge brought about the diplomatic interposition of 
 the United States in behalf of Thurston, an American engi- 
 neer who had built the bridge under contract with that gov- 
 ernment. 34 The most recent case of this character was the 
 arbitrary expulsion of Treasurer-General Shuster from Per- 
 sia, in which case the Department of State took an interest 
 and by its firm position helped to secure the full payment of 
 salary for the entire unexpired time of the contract. 35 
 
 5. The equitable character of the claim has at times in- 
 duced the Department of State to recede from its rigorous 
 position of declining interposition where the claim orig- 
 inated in a contract. 30 
 
 Equitable considerations alone, however, have rarely in- 
 duced any stronger action than the use of good offices. 
 
 6. Where a definite arrangement for the liquidation of the 
 claim has been made between the alien and the government, 
 
 33 Walter (U. S.) v. Venezuela, Dec. 5, 1885, Moore's Arb., 3567-3568; 
 Moses (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3465. 
 
 34 Ozama Bridge claim, Thurston (U. S.) v. Dominican Republic, 
 For. Rel., 1898, 274-291. 
 
 35 Article of Clement L. Bouve, Russia's Liability in Tort for Persia's 
 Breach of Contract, citing note of Secretary of State Knox of Dec. 1, 
 1911, American Journal of International Law. vol. 6, 396-407. 
 
 36 Letter of Evarts.Sec'y of State, to Sir E. Thornton (May 2, 1879), 
 Wharton's Dig., II, 658; see also correspondence between Mr. Fish and 
 Mr. Thomas in 1874 in the Landreau case v. Peru, Moore's Dig., VI, 
 714-715. 
 
22 JUDICIAL SETTLEMENT 
 
 it will generally be enforced by diplomatic pressure, notwith- 
 standing its contractual origin. 37 
 
 Arbitration. 
 7. Whatever hesitation there may have been on the part 
 of the Executive to interpose diplomatically in behalf of citi- 
 zens injured through the breach of a contract concluded with 
 a foreign government, the Department of State has gen- 
 erally been willing to submit contract claims to the adjudica- 
 tion of international commissions, and these commissions 
 have in general exercised jurisdiction over contract claims 
 as over other claims. 38 In instructions given by Mr. Pick- 
 ering on October 22, 1JW, to the American plenipotentiaries 
 to France, the envoys were directed to secure the adjustment 
 of "all claims" of citizens of the United States against that 
 government, and among these there were expressly enumer- 
 ated the "sums due" to American citizens by contracts with 
 the French Government, or its agents. 39 
 
 37 Lord John Russell, British Foreign Sec'y, to Sir C. L. Wyke (Mar. 
 30, 1861), 52 St. Pap., 238, quoted also in Moore's Dig., VI, 719; Claim 
 of Waring Brothers, railroad contractors (Gt. Brit.) v. Brazil, in 
 which Great Britain insisted on the carrying out by Brazil of a decree 
 which appropriated an indemnity for the loss sustained by Waring 
 Brothers due to the government rescinding the contract. Moore's Dig., 
 VI, 720-721, For. Rel., 1887, 54, 55. The French claims against Vene- 
 zuela liquidated under the convention of June 29, 1864, Moore's Dig., 
 VI, 711-712. See also the settlement of the claim of W. R. Grace 
 (U. S.) v. Peru, in which the failure of the government to carry out a 
 judgment against it was construed as a denial of justice warranting 
 diplomatic intervention. Mr. Neill to Mr. Hay, Sec'y of State (Nov. 19, 
 1903), For. Rel., 1904, 678. 
 
 33 Contract claims have been submitted to general mixed commissions 
 dealing with general claims (as, for example, the U. S.-Mexican com- 
 missions of 1839 and 1868, the U. S.-yenezuelan commissions of 1885 
 and 1903 and many others) and to special commissions instituted to de- 
 cide single claims (as, for example, the claim of Metzger & Co. (U. S.) 
 
 V. Hayti, October 18, 1899, Day, Arbitrator, For. Rel., 1901, 262-276, and 
 that of the San Domingo Improvement Co. (U. S.) v. Dominican Re- 
 public, Jan. 31, 1903, For. Rel. 1904, 270. General mixed commissions 
 have assumed jurisdiction of contract claims under the customary inclu- 
 sive terms of the protocol "all claims," and even "claims" arising out of 
 "injury to person or property of citizens." 
 
 39 Am. St. Pap., For. Rel., vol. 2, 242, 301, 303 ; see also Moore's Dig., 
 
 VI, 707-708. 
 
OF INTERNATIONAL DISPUTES 23 
 
 By the convention between the two countries of April 30, 
 1803, for the "payment of sums due" by France to citizens 
 of the United States, provision was made for the satisfaction 
 of "debts." 40 In the treaty of February 22, 18 19, between 
 the United States and Spain by which either government 
 renounced "all claims" of its citizens or subjects against 
 the other government, Mr. Adams, Secretary of State, con- 
 sidered that contract claims had been included among those 
 renounced. 41 Mr. Adams added that there was no doubt of 
 the right of the government to include such claims in the 
 provisions of the treaty. 
 
 Practically all international commissions, where the terms 
 of submission in the protocol could be construed as suffi- 
 ciently broad, have exercised jurisdiction over contract 
 claims, for example, the United States-Spanish Commission 
 of February 22, 18 19, the three Mexican commissions of 
 April 11, 1839, of March 3, 1849, (Domestic Commission), 
 of July 4, 1868, the United States-British Commission of 
 February 8, 1853, and August 18, 1910, the United States- 
 Peruvian Commission of January 12, 1863, the United 
 States-French Commission of January 15, 1880, the United 
 States- Venezuelan Commission of December 5, 1885, the 
 Venezuelan Commission of 1903 sitting at Caracas, and 
 many others. 42 A conflict arose in the commission of July 
 
 40 Moore's Dig., VI, 708. 
 
 « Moore's Dig., VI, 717-718; Moore's Arb., 4502-4505. 
 
 42 See Moore's Dig., VI, 718; Ralston I, Report of Venezuelan Com- 
 missions ; Moore's Arb., 3425-3590; J. Hubley Ashton, agent of the 
 United States before the Mixed Commission with Mexico of July 4, 
 1868, in an elaborate argument in the case of the State Bank of Hart- 
 ford (No. 535) and other similar cases, opposing a motion to dismiss 
 for want of jurisdiction over contract claims, analyzed minutely the 
 practice of the United States and the jurisdiction of international com- 
 missions in the matter of contract claims, especially under a protocol 
 submitting "all claims . . . arising out of injuries to . . . person or 
 property." He cited decisions of municipal courts and international 
 
24 JUDICIAL SETTLEMENT 
 
 4, 1868, due to the difficulty of reconciling vacillating opin- 
 ions with proper judicial action. Commissioners Wads- 
 worth, Palacio and Umpire Lieber (though the latter was 
 not always consistent) had allowed claims on contracts 
 concluded between citizens of the United States and agents 
 of Mexico for the furnishing of arms, munitions, and other 
 material to the Mexican Government, on the ground that the 
 failure to pay for such goods constituted an "injury" to the 
 "property" of an American citizen under the terms of the 
 protocol. The Mexican Commissioner, Palacio, while ad- 
 hering to the view of his colleagues that contract claims 
 were within the jurisdiction of the commission, believed that 
 a demand and refusal of payment was a condition precedent 
 to the allowance of the claim. Subsequently upon the death 
 of Dr. Lieber and the resignation of Commissioner Palacio, 
 Sir Edward Thornton became umpire and Senor Zamacona 
 the Mexican Commissioner. Thereupon a different view 
 was taken as to the jurisdiction of the commission over con- 
 tract claims. Sir Edward Thornton considered that he 
 ought to follow the practice of the Executive of exercising 
 discretion in assuming jurisdiction of contract claims, for 
 which reason, while admitting the jurisdiction of the com- 
 mission over contract claims, he declined to allow such as 
 were based upon voluntary contract, in the absence of clear 
 proof of the contract and proof that gross injustice had been 
 done by the defendant government. The decisions of the 
 
 tribunals to show that under the terms "all claims" and "injuries" 
 breaches of contract were included. Among others he cited decisions 
 of the commissions under the treaty with Spain, 1819 (8 Stat. L., 258) ; 
 with Great Britain, 1853 (10 Stat. L., 998); with New Granada, 1857 
 (12 Stat. L, 985) ; with Gosta Rica, 1860 (12 Stat. L., 1139) ; with Co- 
 lombia, 1864 (13 Stat. L., 685) ; with Ecuador, 1862 (13 Stat. L., 633) ; 
 with Peru, 1863 (13 Stat. L., 639) ; with Venezuela, 1866 (16 Stat. L., 
 316), and with Peru, 1868 (16 Stat. L., 349). He also mentioned the 
 three Mexican commissions. The argument is on file in the Department 
 of State Library. 
 
OF INTERNATIONAL DISPUTES 25 
 
 commission, therefore, are at times contradictory, claims of 
 exactly the same nature having been allowed by Wadsworth, 
 Palacio and Lieber, and rejected when Zamacona became the 
 Mexican Commissioner and Thornton the umpire. 43 
 
 There have been occasions when international commis- 
 sions would not exercise jurisdiction over contract claims. 44 
 It was agreed by the United States and Spain in the claims 
 convention of February 12, 1871, that the arbitrators were 
 not to have jurisdiction of claims growing out of contract. 45 
 
 Where jurisdiction is exercised by mixed commissions, as 
 is the general rule, the contract will be examined as would 
 any other instrument open to judicial construction. 40 Among 
 other factors the authority of the person contracting as 
 
 43 A full discussion of this perplexing question before the commission 
 was undertaken by Mr. Commissioner Wadsworth in the case of Tread- 
 well & Co. (U. S.) v. Mexico, July 4, 1868, quoted at length in Opinions 
 of the Commission, vol. 4, 248, and vol. 7, 383. The claims were al- 
 lowed in the cases of Manasse, Moore's Arb., 3462-3464 ; Iturria, Moore's 
 Arb., 3464; Moses, Assignee, Moore's Arb., 3465; Newton, Moore's 
 Arb., 3465 ; Morrill, Moore's Arb., 3465, and were disallowed by Thorn- 
 ton, umpire, in cases of supplies furnished, services rendered and other 
 claims based on voluntary contract in the Phipps case, Moore's Arb., 
 3468; Treadwell, Moore's Arb., 3468; Pond, Moore's Arb., 3467; Nolan, 
 Moore's Arb., 3484; Light, Moore's Arb.. 3484; Wallace, Moore's Arb., 
 3475; Kennedy & King, Moore's Arb., 3474; State Bank of Hartford, 
 Moore's Arb., 3473; Shumaker, Moore's Arb., 3472; Chase, Moore's 
 Arb., 3469; Kearney, Moore's Arb., 3468; Sturm (dictum), Moore's 
 Arb., 2756; Dennison, Msoore's Arb., 2766; De Witt, Moore's Arb., 
 3466; Widman, Moore's Arb., 3467. Lieber's decision in disallowing 
 the claim of Thore de Lespes for the hire of a steam tug to Mexico 
 (Moore's Arb., 3466) is inconsistent with his other opinions. 
 
 44 U. S.-British Mixed Commission of May 7, 1871. See Hubbell 
 (U. S.) v. Great Britain, Moore's Arb., 3484-6; Hale's Rep., 40; How- 
 ard's Rep., 160, 752, 754. 
 
 4 5 Agreement of Feb. 11-12, 1871, art. 15, Moore's Arb., 4802-4803. 
 46 Turnbull, Manoa, Limited, Orinoco, et al. (U. S.) v. Venezuela, 
 
 Feb. 17, 1903, Ralston I, 244, where Barge held a certain contract void 
 ab initio. See also American Electric and Manufacturing Co. (U. S.) 
 v. Venezuela, Feb. 17, 1903, Ralston 1. 250, where Barge held a promise 
 to declare void an existing contract as an illegal promise. See also 
 Frear (U. S.) v. France, Jan. 15, 1880, Moore's Arb., 3488-3491; Bout- 
 well's Rep., 202, where it was found that the claimant had not per- 
 formed the contract on his part. 
 
26 JUDICIAL SETTLEMENT 
 
 agent for the government is always closely examined. The 
 general rules of agency are applied, 47 although municipal 
 courts have made distinctions between cases in which the 
 government rather than a private individual is the principal. 
 
 A contract for unneutral service will as a general rule not 
 be enforced either by municipal 48 or international 49 courts. 
 There have been a few occasions where international com- 
 missions on the ground of equity or waiver of the illegality 
 have made awards on unneutral contracts. This is especially 
 so where the political party aided was successful or became 
 at least a de facto government. 50 
 
 The domestic commission under the act of March 3, 1849, 
 held that while the United States was not justified in press- 
 ing a claim growing out of services in violation of the claim- 
 ant's neutrality as a citizen of a neutral nation, yet if Mex- 
 ico, the nation against whom such claim existed, sees proper 
 to waive the objection and agrees to recognize the claim, the 
 
 47 Lew Wallace (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3475- 
 3476, in which case the Mexican agent had acted beyond the scope of his 
 authority, for which reason the contract was held not binding on 
 Mexico. See also Beales, Nobles & Garrison case (U. S.) v. Vene- 
 zuela, Dec. 5, 1885, Moore's Arb., 3548-3564. In Zander (U. S.) v. 
 Mexico, March 3, 1849, Moore's Arb., 3433, the failure to show the 
 original authority of the agent or the subsequent ratification of his acts 
 by the government barred the claim. In Trumbull (Chile) v. United 
 States, Aug. 7, 1892, an award was made on the ground that claimant 
 had a right to assume that the United States minister in engaging his 
 legal services was authorized so to do. 
 
 48 Kennett et al. v. Chambers, 14 How., 38 ; Du Wurtz v. Hendricks, 
 9 Moore's C. B. Rep., 586; see also Kent's Commentaries, I, 116. 
 
 4®CucuIlu (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3478-3479; 
 Fitch (U. S.) r. Mexico, July 4, 1868, Moore's Arb., 3476-3477; Wallace 
 (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3475-3476. 
 
 so Lake (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 2755, Opinion 
 by Palacio, Commissioner; Chew (U. S.) v. Mexico, April 11, 1839, 
 Moore's Arb., 3428, and other cases there cited ; Hunter, Duncan et al. 
 (U. S.) v. Mexico, April 11, 1839, Moore's Arb., 3427; Cucullu (U. S.) 
 V. Mexico, July 4, 1868, Moore's Arb., 3478-3479; claims of Stephen 
 Codman, No. 86, and John and Robert Gamble, No. 1783, were allowed 
 by the mixed commission under the treaty with Spain of 1819, cited in 
 Ashton's argument, supra. 
 
OF INTERNATIONAL DISPUTES 2J 
 
 tribunal cannot assume for it a defense expressly waived. 51 
 Speculative contracts are not enforced." The service 
 itself where of an extraordinary character, such as the giv- 
 ing of advice in battle, has been held not measurable in 
 money damages, but calling rather for a monument or some 
 other mark of national gratitude. 53 While we have seen that 
 as a general rule a claim for voluntary services is not pressed 
 by the Department of State, international commissions, with 
 the exception of the United States-Mexican Commission of 
 1868 after Thornton became Umpire, have not hesitated to 
 allow damages for services thus rendered. They have occa- 
 sionally held, however, that a demand for payment must be 
 made upon the debtor government. 54 Where the debt has 
 been acknowledged there is usually no hesitation either on 
 the part of the government or of international commissions 
 respectively to demand and to allow damages on claims 
 
 51 Meade (U. S.) v. M-xico, Act of March 3, 1849, Moore's Arb., 
 
 3430, 3432. Other commissions have held that only the nation whose 
 laws have been violated can waive the illegality, and not the state aided 
 by the unneutral act. 
 
 *2 Taussig (U .S.) v. Mexico, July 4, 1868, Moore's Arb., 3472-3473, 
 'where the nonfulfillment of a contract for the sale of vessels, etc., to a 
 government, said vessels having been purchased as a speculation on 
 their subsequent sale, was held not to be an injury to person or prop- 
 erty within the meaning of the protocol. See also Oliva (Italy) v. 
 Venezuela, Feb. 13, 1903, Ralston I, 780 ; see also American Trading Co. 
 v. Chinese Indemnity Fund, 47 Ct. CI., 563, 569. 
 
 53 O'Dwyer (U. S.) v. Venezuela, Dec. 5, 1885, Moore's Arb., 3568. 
 
 ^Cucullu (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3483. 
 Palacio in a dictum said that under the word "injury" a mere omission 
 of payment of a debt makes it necessary to bring it to the knowledge of 
 the defendant government. Throughout the commission Palacio held 
 that notice and a refusal of payment were conditions precedent to a 
 valid claim. Union Land Company et al. (U. S.) v. Mexico, Act of 
 Congress, Mar. 3, 1849, Moore's Arb., 3440, service rendered in securing 
 immigrants. Meade (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 
 
 3431, expenses incurred in fitting out vessel in service of Mexico. The 
 "Hermon," Green (U. S.) v. Mexico, April 11, 1839, Moore's Arb., 3425, 
 repairs and ship stores furnished to a vessel of war. Boulton et al. 
 (U. S.) v. Venezuela, Feb. 17, 1903, Ralston I, 26-29, carrying the mails. 
 Turini (U. S.) v. Venezuela, Feb. 17, 1903, Ralston I, 51-52, services 
 rendered as a sculptor. The Great Venezuelan Railroad (Germany) v. 
 
28 JUDICIAL SETTLEMENT 
 
 arising out of contract. 5 " 5 . Such acknowledgment has even 
 been held to purge the contract of illegality, as, for example, 
 the unneutral character of the act. 
 
 Bonds of Public Debt. 
 
 We come now to the third class of contract claims, those 
 arising out of a foreign government's unpaid bonds, held by 
 a citizen. These obligations of the State differ in many re- 
 spects from the contractual obligations arising out of a 
 contract for concessions or the execution of public works. 
 In the latter case, the government has entered into relations 
 with a definite person; in the former, as bonds are usually 
 payable to bearer and negotiable by mere delivery, the State 
 
 Venezuela, Feb. 13, 1903, Ralston I, 638, railroad forcibly used to carry 
 troops. Hudson Bay Co. (Gt. Brit.) v. U. S., Feb. 8, 1853, Moore's 
 Arb., 3459, goods supplied to shipwrecked sailors and other citizens of 
 the United States to secure their relief from captivity by savage Indians 
 and in repelling attacks, which service the government should have ren- 
 dered. Eldredge (U. S.) v. Peru, Jan. 12, 1863, Moore's Arb., 3462, sup- 
 plies furnished to Peruvian army. Dundonald (Gt. Brit.) v. Brazil, 
 April 22, 1873; Moore's Arb., 2107-2108, military service rendered by 
 Admiral Lord Cochrane. Arbitration between Great Britain and Por- 
 tugal in 1840, for compensation due British soldiers and officers for 
 services rendered to Portugal in her war of liberation, La Fontaine, 
 op. cit, 93, 636. Underhill (U. S.) v. Mexico, Mar. 3, 1849, Moore's 
 Arb., 3433, charter of a vessel. Ulrick (U. S.) v. Mexico, Mar. 3, 1849, 
 Moore's Arb., 3434, lease of house for legation. 
 
 On the services rendered to Mexico by American citizens see a 
 pamphlet, "The Republic of Mexico and its American creditors. The 
 unfulfilled obligations of the Mexican Republic to citizens of the U. S. 
 from whom it obtained material aid on credit." (Indianapolis, Douglass 
 & Conner, 1869, 94 pp.) 
 
 5 5 Sparrow (U. S.) v. Peru, For. Rel., 1895, Pt. II, 1036-1055 ; settled 
 in 1896, For. Rel., 1896, 492-494. Lord J. Russell to Sir C. K. Wyke 
 (Mar. 30, 1861) in the case of British bondholders whose unpaid bonds 
 were converted into a liquidated debt against Mexico, St. Pap., vol. 52, 
 238-239. Cox & Elkins (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 
 3430. Parrott (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 3430. 
 Eckford (U. S.) v. Mexico, Mar. 3, 1849, Op. 435 (not in Moore) ; 
 Mercantile Insurance Co. (U. S.) v. Mexico, Mar. 3, 1849, Moore's 
 Arb., 3429. Meyer (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 2380. 
 Rosenwig, Crosby et al. (U. S.) v. Peru, Dec. 4, 1868, Moore's Arb., 
 1651-1652. Hammaken (U. S.) v. Mexico, Mar. 3, 1849, Moore's Arb., 
 3471. Corcuera (Spain) v. Venezuela, Feb. 13, 1903, Ralston I, 936. 
 
OF INTERNATIONAL DISPUTES 20, 
 
 never knows to whom it is indebted until the bonds are pre- 
 sented for payment. 
 
 Some publicists regard such a bond as a contractual obli- 
 gation subject to the same rules, both in interpretation and 
 enforcement, as ordinary contract debts. 56 Hall even goes 
 so far as to liken in principle a breach of a monetary agree- 
 ment, e. g., the non-payment of public loans, to tortious in- 
 juries committed by the government, though he admits a 
 difference in practice in enforcing the two classes of claims. 67 
 The unpaid bond of a foreign government held by a citizen 
 has been a frequent and most perplexing cause of interna- 
 tional conflict. 
 
 Before discussing the nature of the enforcement of rights 
 arising out of public debts, let us examine the nature of the 
 contract and the law governing the transaction of subscrib- 
 ing to the public loan of a foreign state. If the lending citi- 
 zen is domiciled in the country emitting the loan, we may for 
 many purposes regard the contract as subject to the law of 
 the debtor country. When, however, as is generally the 
 case in external loans, the lending citizen or subsequent 
 transferee-holder is domiciled not in the debtor country, but 
 in his own or some other state, we meet difficult questions in 
 the conflict of laws and in international law. Is the trans- 
 action one of private or public law, and if private, what 
 law governs its interpretation? 
 
 In the first place we may admit that a contract has been 
 concluded. If it is a contract of private law concluded by 
 the state in its capacity as an ordinary contractor (jure geyf- 
 
 seVattel, Law of Nations. Bk. II, Ch. XIV, §§ 214-216; Phillimore. 
 International Law (3rd ed.), vol. II. Ch. Ill, 8 et scq. See opinion of 
 Findlay, commissioner, in case of Aspinwall before U. S.- Venezuelan 
 commission of 1885, Moore's Arb., 3650. 
 
 57 Hall, International Law (6th ed.), 276. 
 
30 JUDICIAL SETTLEMENT 
 
 tionis)™ there would be some ground for asserting that 
 the contract is subject to the local law of the debtor state, 5 ' 
 or as the contract is often to be performed in the country of 
 the lending citizen, where the interest and principal are some- 
 times to be paid, that the law of the place of performance 
 governs. Again, the loan may be subscribed in a third state, 
 as, for example, where a Chinese loan is underwritten by a 
 New York banker, the individual bonds being held by citi- 
 zens of Germany; the loan having been made in a third 
 state, the lex loci might be regarded as the law governing 
 the contract. Other possibilities have been suggested, as, 
 for example, where the loan has been guaranteed, that the 
 law of the guaranteeing state governs, 60 or that the parties 
 themselves may agree on the law governing the contract. 61 
 
 If the contract were concluded between individuals or be- 
 tween a municipal corporation and an individual, the above 
 theories might warrant consideration. The factor which 
 makes the public loan a contract sui generis is that one of 
 the contracting parties is a sovereign and therefore not sub- 
 
 58 We cannot here discuss the distinctions between contracts made by 
 a government in its capacity as a business corporation and engagements 
 contracted in its character as a sovereign. We may merely note the 
 usual rule of the suability of the government on contracts of the former 
 category, and its immunity in the case of contracts of the latter descrip- 
 tion. 
 
 59 Freund, G. S. : Die Rechtsverhaltnisse der offentlichen Anleihen 
 (Berlin, 1907), 64 et seq. This is probably the most thoughtful book 
 on the subject of public loans. Loening, Edgar: Die Gerichtsbarkeit 
 iiber fremde Staaten und Souverane (Halle, 1903), 256 and authorities 
 there cited. See also Freund, G. S. Der Schutz der Glaubiger gegeniiber 
 auswartigera Schuldnerstaaten (Berlin, 1910), 14. Pflug, Karl: Staats- 
 bankerott und internationales Recht (Miinchen, 1898), 15-16. Cuvelier 
 in Rev. de droit international (1888), 111. 
 
 60 Wuarin, Albert: Essai sur les emprunts d'etats (Paris, 1907), 88 
 et seq. Imbert, Henri M. : Les emprunts d'etats etrangers (Paris, 1905), 
 50 et seq., 96. 
 
 61 Meili, Fr. : Das internationale Zivil- und Handelsrecht, II, 57. 
 Clerin, Georges : Inexecution par un etat de ses engagements financiers 
 exterieurs (Dijon, 1908). 
 
OF INTERNATIONAL DISPUTES 3 1 
 
 ject to the ordinary rules of legal obligation, and the other a 
 non-resident alien, against whom the local territorial law is 
 not enforceable. 62 The debt is generally authorized and 
 created by an act of legislation, which escapes all judicial re- 
 view. (The inherent reservation of the possibility of modify- 
 ing the terms of the loan, suspending or even repudiating it 
 by an act of sovereignty similar to that which created it, has 
 led some writers to the conclusion that the obligation of the 
 state is one of honor only, a moral, and not a legal obliga- 
 tion/ 3 so far at least as its enforcement in municipal courts 
 is concerned.^ Freund tells us that several German writers 
 regard it as discretionary with the state whether it will take 
 up foreign loans. 64 Zorn even regards the payment of in- 
 terest as the exercise of a sovereign right. 65 The failure of 
 a state therefore to take up a public loan, not being justicia- 
 ble in municipal courts, has been regarded as not legally a 
 breach of a contractual obligation. This confuses the nature 
 of the contract with the means of its enforcement. 
 
 The foreign citizen would never lend his money on such 
 uncertain security. He does in no sense regard himself as 
 subject to the local law of the debtor state, as he has never 
 entered its territorial jurisdiction. His rights as lender and 
 the obligations of the debtor are derived from the contract 
 of loan which neither the creditor nor his government re- 
 gards as purely one of private law to be interpreted by the 
 local courts of the debtor state. 
 
 62 Freund, Der Schutz der Glaubiger, etc., 15 ; Wuarin, op. cit, 34. 
 
 63 Bar, Ludwig von. The theory and practice of private international 
 law (2nd ed., trans, by G. R. Gillespie, Edinburgh, 1892), 1152, and 
 certain French cases there cited. Politis, Nicholas E. : Les emprunts 
 d'etat en droit international (Paris, 1894), 280. Milanowitsch, cited by 
 FreuncL Rechtsverhaltnisse, etc., 56. 
 
 ^JPreund, Schutz der Glaubiger, 13. 
 ^5 Zorn in Bankarchiv, VI, 106, cited by Freund, Schutz der Glau- 
 biger, 13. 
 
\ 
 
 32 JUDICIAL SETTLEMENT 
 
 The mixed private and public nature of the transaction of 
 subscribing to a foreign loan shows that it partakes of the 
 nature of an international contract, and that its breach, if 
 not justiciable before municipal courts, does give rise, under 
 certain circumstances, to the diplomatic interposition of the 
 national government of the creditor, and in practice has at 
 times resulted in armed intervention. These questions we 
 shall discuss hereafter. 
 
 The transaction of subscription to a foreign public loan 
 is not purely an international contract, for this could be con- 
 cluded only by states and not by a state and the subjects of 
 another state. The contract is, however, by its nature under 
 the protection of international law and is what Bluntschli 
 called a quasi-international contract. 66 There is certainly 
 some analogy between a contract (1) between Venezuela 
 and Germany and (2) between Venezuela and a German 
 citizen for the building of a vessel or the borrowing of 
 money. Neither contracting party in these cases would be 
 willing to submit to the national municipal law of the other. 
 
 If we turn to the jurisdiction of courts and the means of 
 enforcement of the contract, the international nature of the 
 legal relation created will become apparent. While in theory 
 the jurisdiction of the courts of the debtor state may be in- 
 voked, several contingencies in connection with the public 
 loan must always be borne in mind. First, the debtor state 
 
 66 Bluntschli, Das moderne Volkerrecht der civilisirten Staaten (Ndrd- 
 lingen, 1878, 3rd ed.), §§ 442, 433 (b). Pflug, op. cit, 40-41. 
 
 The argument against the international nature of the contract of pub- 
 lic loan, that individuals cannot derive rights from international agree- 
 ments, as they are not subjects of international law, has been greatly 
 weakened by the Hague Convention for the establishment of an inter- 
 national prize court, and the growing opinion, shared by authorities like 
 Westlake and Bonfils, that individuals may derive subjective rights from 
 international agreements. See aso art. 2 of the Convention establishing 
 the Central American Court of Justice. 
 
OF INTERNATIONAL DISPUTES 33 
 
 may or may not permit itself to be sued. 67 While most 
 states now freely subject themselves to suit in cases of or- 
 dinary contracts, many states still decline to extend this 
 right so far as the public debt is concerned. Many states 
 of the United States have repudiated their debts and have 
 declined to permit themselves to be sued on them. 08 Again, 
 as the public loan is created by legislation, an act of sov- 
 ereignty, so it may be suspended, reduced or even repudi- 
 ated by a similar act of sovereignty, by which the national 
 courts are bound. The creditor, therefore, is juridically 
 opposed to a sovereign who may with perfect legality, by an 
 act of sovereignty, deprive him of his substantive right and 
 of his remedy. In other words, the state in the exercise 
 of its sovereign powers may regulate the execution of its 
 contract of loan in any manner conformable with its public 
 interest. 69 Again, the improbability in many states of se- 
 curing an impartial judicial determination by national courts 
 in cases of this kind makes the creditor's position precarious. 
 To sue the debtor state on a public loan, therefore, is prac- 
 tically useless. There are some states whose national courts 
 might grant a creditor relief. These are the states that are 
 never sued on their national debts. 
 
 67 Twycross v. Dreyfus, 36 Law Times Rep. (N. S.) (July 21. 1877), 
 752, 755. See also Moulin, La Doctrine de Drago (Paris, 1908), 86 
 et seq. 
 
 68 Scott, William A. The repudiation of state debts (New York, 
 1893), particularly Chap. I, in which the constitutional and legal aspects, 
 with the decisions of the Supreme Court and state courts are lucidly 
 presented. 
 
 69 Lewandowski, Maurice. De la protection des capitaux empruntes 
 en France par les Etats etrangers (Paris, 1896), 24 et seq. While ap- 
 parently accepted as a principle, the theory is by no means undisputed 
 that a state contracts a public loan in its character as a sovereign, jure 
 imperii, and is not bound contractually to its creditors. See Moulin, 
 H. A., La Doctrine de Drago (Paris, 1908), 76 et seq.; Freund. Rechts- 
 verhaltnisse, etc., 59-61 ; speech of M. Ruy Barbosa (July 23, 1907) at 
 the Hague Conference of 1907, Actes et Discours de M. Ruy Barbosa, 
 60 et seq.; see also the recent case of De Andrade v. the government of 
 Brazil, reported in Clunet (1913), vol. 40, 237. 
 
34 JUDICIAL SETTLEMENT 
 
 To sue the debtor state before the courts of the creditor is 
 still less practicable. As a general rule municipal courts de- 
 cline to take jurisdiction over foreign states as defendants. 70 
 The exception of voluntary submission and questions con- 
 cerning real estate are hardly of practical significance for the 
 present case. 
 
 The French courts take the firm position that bondholders 
 of the debt of a foreign state cannot sue before the French 
 courts. 71 The English courts have usually declined to exer- 
 cise jurisdiction over foreign states, and in the case of bond- 
 holders of foreign debts have unequivocably declared them- 
 selves jurisdictionally incompetent. 72 This is the rule of the 
 German and Austrian courts 73 and has been the uniform 
 
 70 Bynkershoek is the father of this theory. 
 
 Loening, E. Die Gerichtsbarkeit iiber fremde Staaten u Souverane 
 (Halle. 1903) is one of the leading works on the subject. The opinions 
 of courts are discussed, p. 23 et seq.; the opinions of writers, p. 55 et 
 seq. See also Brie, Fischer & Fleischmann, Zwangsvollstreckung gegen 
 fremde Staaten u Kompetenzkonflikt (Breslau, 1910), containing three 
 opinions rendered at the request of Russia in the case of Hellfeld v. 
 Russia on the question of the jurisdiction of German courts over funds 
 of Russia in Germany and the possibility of execution against them. 
 The translation of the decision of the German court for the determina- 
 tion of jurisdictional conflicts in the now famous Hellfeld case may be 
 found in 5 Amer. Journ. of Int. Law (1911), 490-519. 
 
 See on the whole subject an able article by Droop in Gruchot's Bei- 
 trage zur Erlauterung des deutschen Rechts, vol. 26, 289-316, in which 
 the decisions of courts are carefully reviewed. Some writers have made 
 a distinction as to jurisdiction over foreign states, depending upon 
 whether the transaction in question involved the defendant state in its 
 capacity as a sovereign (Jure imperii) or as a fiscus (jure gentionis), 
 granting immunity from jurisdiction in the former case, but asserting it 
 in the latter. The most noteworthy of these writers are Laurent, Droit 
 civil international (Paris, 1880), vol. 3, 42-103, and von Bar, op. cit., 
 1101 et seq. They have been followed by a number of courts, notably 
 those of Belgium and Italy. 
 
 71 See the cases cited in Weiss, A. Traite de droit international prive, 
 vol. 5, 94 ; Loening, op. cit., 45. 
 
 72 Westlake, J. A treatise on private international law (London, 
 1905, 4th ed.), §§ 190, 192 and cases there cited. See particularly Twy- 
 cross v. Dreyfus (1877), 36 Law Times Rep. (N. S.), 755, 757, decision 
 of Jessel, M. R. 
 
 73 Citations of cases in Brie, op. cit., and Loening, op. cit, 23 et seq. 
 
OF INTERNATIONAL DISPUTES 35 
 
 rule in courts of the United States. 74 In Belgium and Italy 
 the courts seem to have adopted the distinction of adminis- 
 trative law between transactions of the state undertaken jure 
 imperii and jure gestionis, and to have exeroised jurisdiction 
 in the latter case. 15 
 
 If there were still any doubt as to the impracticability of 
 relief by suit against a foreign government in municipal 
 courts, it would be dispelled by the certainty that execution 
 of the judgment, even if obtainable, is practically impossible. 
 No legal process lies against the property of a foreign state, 
 and even the jurisdictional distinction made by some courts 
 between acts jure imperii and jure gestionis is disregarded 
 in the matter of execution. The exception of actions involv- 
 ing real estate does not concern us here. Even attachment 
 and garnishment proceedings against the movable property 
 of foreign sovereigns are almost uniformly dismissed. 79 
 
 It is thus apparent that national municipal courts, either 
 of the debtor state or of the country of the creditor, are un- 
 able to secure the unpaid creditor any remedy. He is not 
 left helpless, however. The sanction for a violation of his 
 rights is found in international law and practice, in that 
 states have frequently interfered in behalf of their creditor 
 subjects to secure the payment of unfulfilled national obliga- 
 tions of foreign states. Before examining the legitimacy of 
 diplomatic interposition and intervention for such unpaid 
 
 74 Moore, J. B., in his American notes to Dicey, A. V. A digest of 
 the laws of England with reference to the conflict of laws (London, 
 1896), p. 229. See leading case of Schooner Exchange v. McFaddon 
 (1812), 7 Cranch, 116; 30 Cyc, 104, and cases there cited. 
 
 75 Cases cited in Loening, op. cit., 52-54. 
 
 76 Brie, op. cit, 45 et seq.; Loening, op. cit., 139 et seq. The cases of 
 von Hellfeld v. Russia, supra, Mason v. Intercolonial Railway of Can- 
 ada (1908), 197 Mass., 349. See article by Nathan Wolf man, "Sover- 
 eigns as Defendants," in 4 Amer. Journ. of Int. Law (1910), 373-383, 
 in which a departure from the general rule is urged in favor of jurisdic- 
 tion over property engaged in private or commercial undertakings. 
 
36 JUDICIAL SETTLEMENT 
 
 creditors, let us inquire into the nature of the transaction by 
 which a citizen becomes a holder of a share in the public debt 
 of a foreign nation. 
 
 We have already seen that the emission of a public loan 
 takes place by legislative act. The individual abroad may 
 obtain the bond either through a direct transaction with the 
 government or through a banker who has underwritten the 
 loan. As a general rule, however, the bonds are purchased 
 in the open market as industrial securities would be, with- 
 out any direct relation with the debtor government. Being 
 payable to bearer, they pass from hand to hand, from na- 
 tional to national, by mere delivery. 
 
 Again, the price paid takes into account the value of the 
 security, both intrinsically and as an investment. Thus the 
 solvability of the government bears a direct relation to the 
 price of its bond. Weak and unstable governments must 
 sell below par and pay high rates of interest. The original 
 capitalist takes advantage of the necessities of the borrowing 
 state and exacts discounts and interest accordingly, and sub- 
 sequent dealers in the bond know the conditions equally well. 
 The legal fact that the emission was an act of sovereignty, 
 that the debt may be repudiated or reduced by a similar act, 
 that the usual civil remedies are barred, and that the state 
 is the sole judge of its ability to pay, are known to all parties 
 to the transaction. The investor therefore buys with full no- 
 tice and assumption of the risks, and has weighed the proba- 
 bilities of large profits against the danger of loss. 
 
 It is for these reasons that it seems unfair, both to the 
 debtor state and to the fellow nationals of the creditors 
 (who may indeed change from day to day), that the gov- 
 ernment of the creditor should make the breach of such a 
 contractual obligation to a citizen who accidentally holds a 
 
OF INTERNATIONAL DISPUTES 37 
 
 foreign public bond a cause for armed international action 
 involving the whole nation in the burden, and making the 
 government in effect the underwriter and guarantor of his 
 investment in the securities of a foreign government. 
 
 This is the principal argument of the Drago Doctrine, first 
 advanced in the celebrated note of December 29, 1902, from 
 Dr. Luis Drago, Minister of Foreign Affairs of Argentine, 
 to the Argentine Minister at Washington, and by him sub- 
 mitted to the Department of State, on the occasion of the 
 joint intervention of Great Britain, Italy and Germany 
 against Venezuela. The argument led up to the recom- 
 mendation of proposed policy, intended to be a corollary to 
 the Monroe Doctrine, that "the public debt [of an American 
 state] cannot occasion armed intervention, nor even the 
 actual occupation of the territory of American nations by a 
 European power." 77 
 
 We may note that Drago protests only against the use of 
 armed force in the collection of public debts and not directly 
 against diplomatic interposition. Most of the writers who 
 
 77 The text of the Drago note will be found in Foreign Relations 1903, 
 1-5. Dr. Drago has written the following monographs on the doctrine 
 which has been named after him. Cobro coercitivo de deudas publicas 
 (Buenos Ayres, 1906) ; Les emprunts d'Etat et leurs rapports avec la 
 politique internationale, Revue Generale de droit international public, 
 vol. 14, 251, translated practically in full in his article "State loans in 
 their relation to international policy," in 1 Amer. Journ. of Int. Law 
 (1907), 692-726. Among the best literature in English are two thought- 
 ful articles by George Winfield Scott, "International law and the Drago 
 doctrine" in North American Review, Oct., 1906, 602-610, and "Hague 
 convention restricting the use of force to recover contract claims" in 
 2 Amer. Journ. of Int. Law, 1908, 78-94 ; an article by Amos S. Hershey, 
 The Calvo and Drago doctrines, in 1 Amer. Journ. of Int. Law, 1907, 
 26-45 ; and Chapter VIII. vol. 1, pp. 386-422. of James Brown Scott's 
 The Hague Peace conferences of 1899 and 1907 (Baltimore, 1909). One 
 of the best books is Moulin's La doctrine de Drago (Paris, 1908), and a 
 useful collection of documents is to be found in S. Perez Triana, La 
 doctrina Drago (Londres, .1908). Further references to foreign litera- 
 ture may be found in Bonfils, Manuel (6th ed.. 1912), 186, n. 4. See 
 also a recent work by Vivot, A. N. La doctrina Drago, Buenos Aires, 
 1911. 
 
6 
 
 8 JUDICIAL SETTLEMENT 
 
 have discussed the question have failed to note this distinc- 
 tion, possibly because a denial of forcible measures deprives 
 interposition of its most effective sanction. They therefore 
 consider the protest against the sanction as directed against 
 the whole remedy, though even without the potential use of 
 force it still has some room for application. In expressly 
 stating that he did not intend to make his "doctrine" a de- 
 fense "for bad faith, disorder and deliberate and voluntary 
 insolvency," Dr. Drago has, we believe, set the proper 
 bounds to his principle, although, as we shall point out, the 
 creditor state is still (except as restrained by the Porter 
 proposition) left the sole judge of the existence of these lim- 
 iting conditions. 
 
 Before proceeding further, we may discuss briefly the 
 opinions of publicists and the practice of nations in the mat- 
 ter of intervention to collect public debts, by which we mean 
 diplomatic interposition followed by force. Westlake, as 
 we have seen (supra, p. 6), has properly recognized the dis- 
 tinction in substance and in remedial process between con- 
 tracts made with the state in its character as a fiscus or busi- 
 ness administrator and those arising out of subscription to 
 or transfer of a public bond. He regards honest inability to 
 pay as a title to consideration, and unless the defaulting gov- 
 ernment presumes to treat its internal and external debts on 
 terms of inequality unfavorable to the latter, he thinks "the 
 assistance of their state ought not to be granted to the bond- 
 holders of public loans." 
 
 Some of the earlier writers, prominent among them 
 Grotius and Vattel, admitted the legitimacy of reprisals 
 against a state or sovereign who refused to pay a lawful debt 
 (supra, p. 9). Inability and refusal to pay are not, however, 
 identical. Phillimore and Hall, supporting the views of the 
 
OF INTERNATIONAL DISPUTES 39 
 
 British government, contend that a debt contracted by a for- 
 eign government toward a citizen constitutes an obligation 
 of which the country of the lender has a right to require 
 and enforce the fulfillment. 78 Yet Phillimore approves, as 
 he says, "the proposition of Martens . . . that the for- 
 eigner can only claim to be put on the same footing as 
 the native creditor of the state." 79 Rivier, one of the fore- 
 most authorities, has in this respect asserted a far-reaching 
 right of intervention under circumstances far more unrea- 
 sonable than those admitted by other publicists. Unless we 
 may assume that the words we have underlined presuppose 
 fraud and bad faith, his doctrine will hardly find general 
 support, though it must be admitted that the weaker states 
 have at times found themselves intervened against under cir- 
 cumstances no harsher than those mentioned by Rivier : 
 
 "The fortune of individuals, subjects of the state, forms 
 an element of the riches and prosperity of the state itself. It 
 has an interest in the maintenance and increase of that for- 
 tune. If it is compromised by the act of a foreign state 
 which administers its finances badly, which betrays the 
 confidence individuals placed in it when they subscribed to 
 loans on conditions that are not observed, and which violates 
 its engagements in regard to them, the state to which the in- 
 jured individuals belong is evidently authorized to take their 
 interests in hand in any manner which it shall deem suitable ; 
 it may proceed either by diplomacy or by reprisals . . . 
 Individuals have not, as a general rule, the right to require 
 of the state that it shall thus take their cause in hand. The 
 state may refuse to act in their favor for reasons of which 
 it is the sole judge; but if it acts, it only exercises its right. 
 It may see to it, perchance, according to the circumstances, 
 that its subjects are better treated than those of other states, 
 
 "8 Phillimore, Int. Law (3rd ed.), vol. 2, Ch. Ill, 8 et seq.; Hall, Int. 
 Law (6th ed.), 275-276. 
 
 79 Phillimore, op. cit., vol. 2. 14. 
 
40 JUDICIAL SETTLEMENT 
 
 or than those of the insolvent state. This is, from the legal 
 point of view, a matter of absolute indifference." 80 
 
 G. F. de Martens sanctions intervention in case of 'Vio- 
 lent financial operations" of the debtor state depriving cred- 
 itors of their loans, but he adds that creditors cannot demand 
 better treatment than nationals. Although cited by Philli- 
 more as an advocate of intervention, opponents may also find 
 support in his ambiguous doctrines. 81 
 
 The majority of writers consider armed intervention for 
 the mere non-payment of public debts an unjustifiable pro- 
 cedure, their reasons being similar to those advanced by Dr. 
 Drago, to wit : That hazardous loans should be discouraged ; 
 that those making them have full notice of the risks ; that 
 foreigners cannot expect to be preferred to native creditors ; 
 that force is never resorted to except against weak states 
 and is often a pretext for aggression or conquest; and, 
 finally, that the loss of credit and standing incurred by the 
 state is an ample and effective penalty for the failure to ful- 
 fill its obligations. 82 The objections of writers, however, 
 
 80 Rivier, Alphonse. Principes du droit des gens (Paris, 1896), 
 vol. 1, 272. 
 
 81 G. F. de Martens, Precis du droit des gens (Paris, 1864), vol. 1, 
 298, § 110. See also Phillimore, op. cit., 14, and Pradier-Fodere, Traite, 
 vol. 1, § 405, p. 623, note. 
 
 82 These authorities are enumerated and citations to their works given 
 in the second part of footnote 34 of Hershey's article in 1 Amer. Journ. 
 of Int. Law (1907), 37; in the work of Wuarin, op. cit., 155-159, and in 
 the address of Gen. Horace Porter before the Second Hague Confer- 
 ence on July 16, 1907, in presenting the American proposition for the 
 limitation of force in the collection of contractual debts. La deuxieme 
 Conference internationale de la Paix, vol. II, 229-233. Also printed in 
 English (Hague, 1907). The principal publicists who oppose what we 
 may call financial intervention are F. de Martens, Westlake, Holland, 
 Bonfils, Calvo, Pradier-Fodere, Rolin-Jacquemyns, Despagnet, von Bar, 
 Liszt, Geffcken, Kebedgy, Nys, Merignhac, Feraud-Giraud, Weiss, 
 Olivecrona and Floecker. Gen. Porter also cited Rivier, but this must 
 have been an oversight. See also Collas, Der Staatsbankerott und seine 
 Abwicklung (Stuttgart, 1904), 51, and Freund, Rechtsverhaltnisse, etc., 
 
OF INTERNATIONAL DISPUTES 41 
 
 are directed not to diplomatic interposition, but rather to an 
 excess of interposition in the use of armed force to collect 
 unpaid public loans. 
 
 The preponderance of opinion is, however, that under cer- 
 tain circumstances intervention to secure the payment of 
 public loans is legitimate. Authorities differ merely as to 
 the nature of the circumstances. In general we may say that 
 intervention is not warranted in the case of an honest in- 
 ability of the state to pay its debts, but only when, the means 
 being at hand, the debtor state wilfully refuses to pay; or fur- 
 ther, when foreign creditors are illegally treated, especially 
 if they are discriminated against in favor of national cred- 
 itors, or if certain categories of creditors are preferred to 
 others; or when special funds assigned as security to the 
 payment of certain debts are diverted or suppressed; — in 
 short, when bad faith may be considered the moving cause 
 of the non-payment. In the present condition of interna- 
 tional law. in which states, large and small, have no com- 
 mon superior to control or check them, each state has the 
 legal right of deciding for itself whether the conditions war- 
 ranting intervention exist. In the use of this right, the 
 power of enforcing its demands has often been a factor 
 more controlling than the mere legitimacy or fairness of 
 its action.™ 
 
 83 The decision of the Hague Permanent Court of Arbitration in the 
 Preferential Claims case of Germany, Great Britain and Italy against 
 Venezuela has been considered an approval of the use of force in the 
 collection of claims based on contract or public debt. While it is true 
 that the use of force appears to have been sanctioned by the tribunal by 
 the allowance of preferential treatment of the three blockading powers, 
 it is certain that only a small part of the claims pressed arose out of con- 
 tractual debts. The primary reason of the blockade was the stubborn 
 reiteration by Venezuela of the exclusive jurisdiction of its national 
 courts and the absolute refusal to arbitrate. Castro's arrogance ex- 
 hausted the patience and temper of the powers. See article by Basde- 
 vant, Jules : L'action coercitive Anglo-Germano-Italienne contre le 
 Venezuela (1902-1903), Rev. gen. de droit int. pub., vol. 11, 363-458. 
 
42 JUDICIAL SETTLEMENT 
 
 There is, in fact, no definite rule as to diplomatic interven- 
 tion in the matter of unpaid public loans, except in so far as 
 the convention of the Second Hague Conference for the lim- 
 itation of the use of force in the collection of contractual 
 debts will operate as a check by requiring under certain 
 conditions a preliminary resort to arbitration. 
 
 The European powers have on several occasions inter- 
 vened to secure the payment of public loans due their sub- 
 jects. Their action has taken various forms. Sometimes 
 it has been merely the use of good offices and an approval 
 of arrangements for financial control made by national bank- 
 ers or associations of bondholders with the debtor state, as 
 in the case of Turkey (1881) and Servia (1904) ; an as- 
 sumption of limited governmental control, as in the case of 
 the United States in the Dominican Republic (1907); or 
 joint intervention of several powers assuming financial con- 
 trol as in the case of Tunis ( 1868), of Greece 84 ( 1897) and 
 of Egypt (1880). 85 This is intervention in the true sense, 
 in that it involves an administrative control over a certain 
 
 Hershey, Amos S. : The Venezuelan affair in the light of international 
 law, American Law Register, vol. 51, 249-267. The Hague decision 
 is criticised by Andre Mallarme in an article L'arbitrage ven- 
 ezuelien in Revue generale, vol. 13, 423-500. For the correspondence 
 see Asuntos Internacionales, two volumes of the Yellow Book of Vene- 
 zuela published in 1903 and extracts printed in the Appendix to Ral- 
 ston's Report of the Venezuelan Arbitrations. 
 
 84 Kebedgy, Michel S. Les difficultes financieres de la Grece et Inter- 
 vention des etats etrangers. Revue generale, vol. 1, 261-271. Imbert, 
 Henri Marc, Les emprunts d'etats etrangers (Paris, 1905) gives an ac- 
 count of the various cases of intervention in Turkey, Egypt, Portugal, 
 Greece, Tunis (pp. 60-99). Kebedgy, M. S. De la protection des cre- 
 ancers d'un Etat etranger, Clunet, vol. 21, 59-72, 504-519. See also 
 Wuarin, Freund and Politis, op. cit. Meili, Fr. Der Staatsbankerott und 
 die moderne Rechtswissenschaft (Berlin, 1895). Wuarin, article in 
 Clunet, Vol. 29, 25 et seq., 420-431. 
 
 85 Kauffmann, Wilhelm. Das internationale Recht der egyptischen 
 Staatschuld (Berlin, 1891). See also article by same author in Revue 
 de droit international, vol. 22, 556-586; vol. 23, 48-75, 144-175, 266-316. 
 A bibliography on the Egyptian 1 debt will be found in Clunet, vol. 30, 
 681-683. 
 
OF INTERNATIONAL DISPUTES 43 
 
 portion of national resources and revenues. It seems to be 
 more proper on the part of a state or states guaranteeing the 
 debt of some weak state placed under their guardianship. 
 Both this form of action and the collection of loans by force 
 of arms without complete intervention, as the joint oper- 
 ations against Mexico in 1861 and against Venezuela in 
 1902, have invariably been carried out against weak states. 
 When Spain, Italy, Austria and Hungary at different times 
 suspended or reduced their public obligations there was no 
 intervention on the part of the powers whose subjects had 
 shares in the unpaid or underpaid loans. This is at least 
 cumulative evidence in establishing that intervention or the 
 use of anus to collect public loans is a question of power 
 and politics rather than a rule of law. 
 
 Notwithstanding Great Britain's participation in the oper- 
 ations against Mexico in 1861, against Egypt in 1880 and 
 against Venezuela in 1902, her statesmen have always as- 
 serted it to be England's policy not to interpose diplomati- 
 cally in behalf of British holders of bonds of foreign govern- 
 ments, though reserving their liberty of action. The Brit- 
 ish view was expressed in its now accepted form in the cele- 
 brated circular sent by Lord Palmerston in 1848 to the Brit- 
 ish representatives in foreign states. He then declared : 
 
 "It is therefore simply a question of discretion with the 
 British government whether this matter [the non-payment' 
 of public loans] should or should not be taken up by diplo- 
 matic negotiation, and the decision of that question of dis- 
 cretion turns entirely upon British and domestic consider- 
 ations." 
 
 Referring to the economic disapproval of British invest- 
 ments in foreign loans, as against British enterprises, he 
 added that the British government has 
 
44 JUDICIAL SETTLEMENT 
 
 "hitherto thought it the best policy to abstain from taking up 
 as international questions the complaints made by British 
 subjects against foreign governments which have failed to 
 make good their engagements in regard to such pecuniary 
 transactions . . ." 
 
 "But, nevertheless, it might happen that the loss occa- 
 sioned to British subjects by the non-payment of interest 
 upon loans made by them to foreign governments might be- 
 come so great that it would be too high a price for the na- 
 tion to pay for such a warning as to the future, and in such 
 a state of things it might become the duty of the British 
 government to make these matters the subject of diplomatic 
 negotiations." 86 
 
 Palmerston's note has occasionally been misinterpreted by 
 writers who use his note in support of an argument for non- 
 intervention. When he stated that interference was "for the 
 Britisn government entirely a question of discretion, and by 
 no means a question of international right," he did not in- 
 tend to cast any doubt on the right of Great Britain to inter- 
 fere (as some writers have quoted him), but he meant that 
 there was no question about the right to interfere. This is 
 clearly shown by the following sentence of the note . 87 
 
 Subsequent secretaries for foreign affairs, emphasizing the 
 speculative character of the transaction of subscription to a 
 foreign loan, have declined to do more than exercise their 
 good offices in behalf of unpaid bondholders. Great Brit- 
 
 86 Palmerston's circular is quoted in full by Phillimore, op. cit., II, 
 9-11, and by Hall, 276-277. Other secretaries for foreign affairs of 
 Great Britain have expressed, in language even more unreserved than 
 that of Palmerston, the policy of non-interference. See, for example, 
 Canning and Aberdeen (St. Pap., 28, pp. 961, 967, 969), Russell (St. 
 Pap. 52, pp. 237-239), Derby, Granville (quoted by Phillimore, op. cit., 
 pp. 12-13), and Salisbury (cited by Hall, note p. 277). Balfour, when 
 Prime Minister in 1902, supported this view; see Scott's Hague Peace 
 Conferences, vol. 1, 402. 
 
 87 See, for example, Gen. Porter's address of July 16, 1907, printed 
 separately and quoted in Scott's Hague Peace Conferences, vol. 1, 402. 
 
OF INTERNATIONAL DISPUTES 45 
 
 ain's practice of non-interference is entirely a matter of 
 policy and is not to be construed as the recognition of an 
 international legal principle. 870 
 
 The practice of non-interference of the United States on 
 the other hand has been not only a matter of policy, but the 
 carrying out of a fundamental principle that the diplomatic 
 interposition of the United States cannot be invoked (within 
 the recognized limitations) in behalf of contractual claims. 88 
 If certain revenue or security has been set aside for the re- 
 payment of a loan, it seems probable that the United States 
 would, following the practice of other nations, interpose dip- 
 lomatically to prevent any diversion of the security or the 
 pledged revenue. 89 Attorney-General Cushing in the course 
 of an elaborate opinion on the Texas bonds question de- 
 clared that 
 
 "A public creditor, like a private creditor, has a general 
 right to receive payment out of the property, income, or 
 means of his debtor. A special pledge of this or that source 
 of revenue, of this or that direct tax, when made by a gov- 
 ernment, renders such source of revenue, like a mortgage or 
 deed of trust given by a private individual to his creditor, a 
 specific lien, a fixed incumbrance, which the government 
 ought not, in justice to the creditor, to abolish, lessen, or 
 alienate until the debt has been satisfied/' 90 
 
 In the case of certain bonds issued by Hayti to American 
 citizens for work and materials furnished, Secretary of State 
 Sherman protested against a proposed law of Hayti having 
 
 87a The recent threat of Great Britain to c#ispatch a warship to Guate- 
 mala to collect the unpaid interest and capital on bonds held by British 
 subjects may be charged to the action of Guatemala in diverting the 
 security of the loan, an export tax on coffee, to other purposes. 
 
 88 Citations noted in Moore and Wharton, supra, p. 463. 
 
 89 Cases cited, supra. See also opinion of Little, commissioner, in 
 Aspinwall (U. S.) v. Venezuela. Dec. 5, 1885, Moore's Arb., 3641-3642. 
 
 90 Opinion of Sept. 26, 1853, 6 Opin. Atty.-Gen., 130, 143. 
 
46 JUDICIAL SETTLEMENT 
 
 in view the conversion of the bonds at a rate greatly depre- 
 ciatory of their value. 91 There would indeed seem to be 
 some difference between bonds purchased in the open mar- 
 ket as an investment and bonds received in payment for 
 services and goods, in the hands of the original parties. 
 
 Where the loan has been liquidated and a new agreement 
 for payment made, the origin of the debt seems to have 
 been no deterrent against its enforcement. So in Mexico, 
 in 1 86 1, Lord John Russell withheld recognition of the 
 Mexican government until Mexico had agreed to carry out 
 an arrangement made with British bondholders. 92 
 
 Both the United States and Great Britain have authorized 
 their representatives abroad to receive payment for their citi- 
 zen bondholders, as a matter of convenience both to the 
 debtor government and to the citizen, 93 and where the bonds 
 of one foreign government have been wholly or largely held 
 by the citizens of another, the United States has on one 
 occasion at least sanctioned the endeavor of the government 
 of the creditors to effect by diplomatic negotiation an adjust- 
 ment of their claim. 9 * 
 
 Dr. Drago, in advancing his doctrine as a corollary to the 
 Monroe Doctrine, had some reason to expect the approval 
 of the United States, not only because of its interest in the 
 maintenance of the Monroe Doctrine, but because of its tra- 
 ditional attitude in the matter of contract claims. Dr. Drago 
 quoted from Monroe's message that the United States 
 
 91 Mr. Sherman, Sec'y of State, to Mr. Powell (Oct. 26, 1897), 
 Moore's Dig., VI, 729. 
 
 »2 Lord J. Russell to Sir C Wyke (Mar. 30, 1861), St. Pap, vol. 52, 
 237,239. 
 
 93 Mr. Frelinghuysen, Sec'y of State, to Mr. Wright (Jan. 17, 1884), 
 Moore's Dig, VI, 713 ; Phillimore, op. cit. vol. 2, 13. 
 
 94 Mr. Frelinghuysen, Sec'y of State, to Mr. Wright (Jan. 17, 1884), 
 Moore's Dig, VI, 713. He stated, however, that the occasions on which 
 this had been done were not common enough to form a rule of action. 
 
OF INTERNATIONAL DISPUTES 47 
 
 "could not view any interposition for the purpose of op- 
 pressing [the countries of the American continent] , or con- 
 trolling in any other manner their destiny, by any European 
 power, in any other light than as the manifestation of an un- 
 friendly spirit toward the United States." 95 
 
 In Secretary of State Hay's reply to the Drago note (one of 
 "cordial evasion," as Dr. Drago himself has expressed it), 
 Mr. Hay quoted from President Roosevelt's message of 
 1 90 1 to the effect that 
 
 "we do not guarantee any state against punishment if it mis- 
 conducts itself, provided that punishment does not take the 
 form of the acquisition of territory by any non-American 
 power," 98 
 
 but added an unequivocal approval of arbitration of claims 
 growing out of alleged wrongs to individuals. 
 
 Both Mr. Root, as Secretary of State, and President Roose- 
 velt, having in mind the difficulties of Venezuela in 1903 
 and those of the Dominican Republic in 1894 and 1904 in 
 endeavoring to ward off foreign intervention, were anxious 
 to have the question of the use of force in the collection of 
 contractual claims settled by the agreement of states. Mr. 
 Root therefore on June 18, 1906, instructed the delegates 
 of the United States to the Third American Conference 
 of American States at Rio Janeiro as follows : 
 
 "It has long been the established policy of the United 
 States not to use its armed forces for the collection of or- 
 dinary contract debts due to its citizens by other govern- 
 ments." 
 
 95 President Monroe's Annual Message (Dec. 2, 1823), Amer. St 
 Pap., For. Rel., V, 246, 250, quoted in Moore's Dig., VI, 401, 402. Rich- 
 ardson's Messages, vol. 2, 209 et seq. 
 
 M Mr. Hay, Sec'y of State, to Seiior Garcia Merou (Feb. 17, 1903), 
 For. Rel., 1903, 5-6. 
 
48 JUDICIAL SETTLEMENT 
 
 After deprecating its injurious effect upon the welfare of 
 weak and disordered states, whose development ought to be 
 encouraged in the interests of civilization, he added : 
 
 "It is doubtless true that the non-payment of public debts 
 may be accompanied by such circumstances of fraud and 
 wrong-doing or violation of treaties as to justify the use of 
 force. This government would be glad to see an interna- 
 tional consideration of the subject which shall discriminate 
 between such cases and the simple non-performance of a 
 contract with a private person, and a resolution in favor of 
 reliance upon peaceful means in cases of the latter class." 97 
 
 He recommended, however, that as most of the American 
 states were still debtors and would, by such a resolution, re- 
 solve how their creditors should act, it would be more fitting 
 that they should request the Hague Conference to consider 
 the subject, where both creditors and debtors would be as- 
 sembled. 
 
 The Rio Conference made such a request, and the United 
 States delegation at The Hague, on instructions from Mr. 
 Root, as Secretary of State, brought forward a proposition 
 to the effect that the use of force for the collection of con- 
 tract debts is not permissible until after the justice and 
 amount of the debt, as well as the time and manner of pay- 
 ment, shall have been determined by arbitration. 98 
 
 Gen. Horace Porter took charge of this proposition, and 
 made the principal address in its support. After several 
 amendments to his original draft, the conference by a vote 
 
 97 Senate Doc. 365, 59th Cong., 2nd Sess., 41-42. 
 
 98 In the Russian program of the First Peace Conference of 1899 re- 
 garding international arbitration a clause had been included providing 
 that arbitration shall be obligatory "in the case of differences or con- 
 flicts regarding pecuniary damages suffered by a state or its citizens 
 in consequence of illegal or negligent action on the part of any state or 
 the citizens of the latter." This proposition for the arbitration of pecu- 
 niary claims was for various reasons dropped. 
 
OF INTERNATIONAL DISPUTES 49 
 
 of 39 in favor and 5 abstentions (Belgium, Roumania, Swe- 
 den, Switzerland and Venezuela) adopted the following 
 convention — a few states making special reservations : 
 
 "The Contracting Powers agree not to have recourse to 
 armed force for the recovery of contract debts claimed from 
 the government of one country by the government of an- 
 other country as being due to its nationals. 
 
 "This undertaking is, however, not applicable when the 
 debtor state refuses or neglects to reply to an offer of arbi- 
 tration, or. after accepting the offer, prevents any compromis 
 from being agreed on, or, after the arbitration, fails to sub- 
 mit to the award." 
 
 While not rejecting completely the possibility of forcibly 
 collecting contract debts, the convention represents a con- 
 siderable step in advance, inasmuch as it makes the use of 
 force conditional upon (1) a refusal to arbitrate; (2) mak- 
 ing a formulation of an agreement impossible after arbitra- 
 tion is accepted; (3) failure to carry out the award. These 
 are more definite and more appropriate limitations than the 
 vague terms "bad faith," "deliberate and voluntary in- 
 solvency," etc., which we may infer even the opponents of 
 intervention and Dr. Drago himself would consider as justi- 
 fiable causes of intervention." 
 
 A few countries either declined to subscribe to the con- 
 vention or in adhering registered important reservations. 
 Switzerland and Venezuela declined to sign the convention 
 (although the latter was very willing to accept the renuncia- 
 tion of force) on the ground that it ousted the national 
 
 99 A good account of the preliminary instructions and principal 
 speeches and proposals in connection with this convention for the limita- 
 tion of the employment of force, with appropriate quotations, may be 
 fcund in J. B. Scott's Hague Peace Conferences, vol. 1, Chap. VIII, 
 386-422. See also article by G. W. Scott, supra, in 2 Amer. Journ. of 
 Int. Law (1908), 78-94. The convention in fulMs printed in Scott's 
 Hague Peace Conferences, vol. 2 (Documents), 357-361. 
 
50 JUDICIAL SETTLEMENT 
 
 courts of jurisdiction. One can understand Switzerland's 
 unwillingness to be bound to arbitrate a question in which 
 its courts, internationally recognized as impartial, have juris- 
 diction. 100 Venezuela's protest, which took the following 
 form — 
 
 "recourse to arbitration should be permitted only in the case 
 of denial of justice after the judicial remedies of the debtor 
 state had been exhausted" — 
 
 is to be regarded as traditional. Unless its judicial organ- 
 ization is acknowledged as more independent now than in 
 1902, it is unlikely that mere protests will be of any more 
 avail than they were in 1902. Seven other Latin-American 
 republics, by way of reservation, joined in the objection of 
 Venezuela. 
 
 The principal reservation was made by Dr. Drago himself, 
 on the part of Argentine. After declaring that ordinary 
 contracts should be arbitrable only in case of denial of justice 
 after the exhaustion of local remedies, he added : 
 
 "Public loans with bond issues constituting the national 
 debt cannot in any case give rise to military aggression nor 
 to the occupation of the soil of American states." 
 
 In this reservation Argentine was joined by Colombia, 
 Ecuador, Guatemala, Nicaragua, Paraguay, Peru and Uru- 
 guay. 101 
 
 100 In theory at least the strong and well-organized states have re- 
 nounced an inherent right. Dr. Heinrich Pohl in the Zeitschrift fur 
 Politik (vol. 4, 134, 138) criticises Germany for having ratified the 
 Porter Proposition (Reichsgesetzblatt, 1910, 59-81), for he states that 
 Germany may sometimes be a defendant state and will be bound by the 
 agreement to arbitrate, thus ousting its courts of jurisdiction. 
 
 101 See table of reservations in J. B. Scott's Hague Peace Conferences, 
 vol. 2, 532-534, and article by G. W. Scott, supra, p. 89. See also 
 Zeitschr. fur Volkerr. u Bundesstaatsrecht, vol. 3, 72, 73. 
 
OF INTERNATIONAL DISPUTES 5 1 
 
 Another reservation by Peru, in which Uruguay joined, 
 sought to protect the so-called Calvo clause from possible 
 infringement. The reservation reads : 
 
 "That the principles adopted in this proposition cannot be 
 applied to claims or differences arising from contracts be- 
 tween the government of one country and foreign subjects, 
 when it has been expressly stipulated that the claims or dif- 
 ferences must be submitted to the judges and tribunals of the 
 contracting country/' 
 
 The general futility of this clause in so far as it seeks to 
 attain the exclusive jurisdiction of local courts and the avoid- 
 ance of diplomatic interposition, has been demonstrated by 
 international practice. 
 
 It will be seen that this Hague convention for the limita- 
 tion of the use of force in the collection of contractual debts, 
 popularly known as the Porter proposition, is at once nar- 
 rower and wider in scope than the Drago doctrine. It is 
 narrower inasmuch as it recognizes the ultimate legality of 
 the use of force. As a definite check upon the use of force in 
 first instance, and an important extension of the principle of 
 international arbitration, it is to be welcomed, for pacific 
 blockades, threats of hostilities, and rumors of warlike prep- 
 arations, have a most disturbing effect on international com- 
 merce, and as General Porter showed, the disposition of neu- 
 tral states to refuse to recognize pacific blockade leads to the 
 more effective blockade of actual war, and as Mr. Roosevelt 
 on a number of occasions has stated, the seizure of custom 
 houses easily leads to a more permanent occupation of terri- 
 tory. 
 
 Moreover, the interruption of the commerce of the debtor 
 nation diminishes its means and opportunities to pay the 
 very debts for which the hostilities are undertaken and acts 
 unfairly toward creditors of other nations. Many of these 
 difficulties will now be avoided. 
 
52 JUDICIAL SETTLEMENT 
 
 The Porter proposition is wider in scope than the Drago 
 doctrine in that its provisions apply to all contractual debts, 
 whereas Dr. Drago confined his policy to claims arising out 
 of the non-payment of public loans. Nevertheless, doubt 
 has been raised, both in the sub-committee of the conference 
 and since then, as to the meaning of "contractual debts." 102 
 
 Without entering into the various interpretations to which 
 the term is subject, it seems clear that it does include public 
 loans. 
 
 There is a class of cases, however, on the "contractual" 
 nature of which there may be some doubt. When a contract 
 has been concluded between a government and an individual 
 for the carrying on of some public work, it has happened 
 that a subsequent act of the legislature, acting not as a busi- 
 ness fiscus but as a sovereign, diminishes the contractor's 
 rights under the contract National courts, as, for example, 
 the United States Court of Claims, have held that the two 
 functions which the government possesses as a fiscus and as 
 a sovereign are distinct, and that the United States when 
 sued in the one character cannot be made liable for acts 
 done in the other : 
 
 "Whatever acts the government may do, be they legisla- 
 tive or executive, so long as they be public and general, can- 
 not be deemed specially to alter, modify, obstruct or violate 
 the particular contracts into which it enters with private 
 persons." 103 
 
 The question arises whether these distinctions of national 
 law which exclude the case mentioned from the category of 
 
 102 A full discussion of these doubts and possible interpretations is 
 contained in Moulin, op. cit., 308-320. See also article by G. W. Scott, 
 supra, 90-93. 
 
 i03Deming v. United States, 1 Ct CI. (1865), 190-191; Jones and 
 Brown v. United States, 1 Ct. CI. (1865), 384-399; Wilson v. United 
 States, 11 Ct. CI. (1875), 513-522. French courts have held the govern- 
 ment liable for breach of contract by an act of legislation. 
 
OF INTERNATIONAL DISPUTES 53 
 
 contractual debts will be maintained by the international 
 forum in the interpretation of the term "contractual debts/' 
 We have seen that foreign offices in dealing with the Latin- 
 American Republics have considered it as a violation of the 
 contract, and an arbitrary measure, thus to reduce the con- 
 tractor's rights by a subsequent legislative act. It seems 
 reasonable to assume that this will be the interpretation of 
 the term "contractual debt" by an international court. 
 
 Bond cases have come before international tribunals on 
 several occasions. Very little light is thrown upon the sub- 
 ject by the results of these arbitrations, except as by their 
 dicta the commissions express the opinion that governments 
 have the right to press the claims of bondholders of a for- 
 eign debt, though they generally admit that in practice such 
 claims are not diplomatically presented. As a general rule, 
 however, jurisdiction has been declined — usually for the rea- 
 son that governments are not in the habit of presenting such 
 claims diplomatically and because of the unwillingness of 
 commissions to assume that they were intended to exercise 
 jurisdiction in the absence of express words in the proto- 
 col. 104 It has been so held even where the protocol provided 
 for the settlement of "all claims." 105 This last decision, ren- 
 dered by Sir Frederick Bruce, Umpire, was severely criti- 
 cised by Mr. Commissioner Little in the Aspinwall case be- 
 fore the United States- Venezuelan commission of December 
 5, 1885. He held, with Mr. Findlay (Andrade dissenting), 
 that the inclusive term "all claims" embraced bond claims. 
 This case constitutes one important exception, prior to the 
 
 104 Overdue Mexican coupons, Du Pont de Nemours (U. S.) v. Mex- 
 ico, July 4, 1868, Moore's Arb., 3616. Opinion by Wadsworth. Zama- 
 cona concurred. See dictum of Thornton, Umpire, in Widman (U. S.) 
 v. Mexico, July 4, 1868, Moore's Arb., 3467. 
 
 105 Colombian Bond case9, Riggs, Oliver, Fisher (U. S.) v. Colombia 
 (February 10, 1864), Moore's Arb., 3612-3616. 
 
54 JUDICIAL SETTLEMENT 
 
 Venezuelan Arbitration of 1903, to the general rule that 
 jurisdiction over bond claims is not exercised by interna- 
 tional commissions. 106 
 
 Before the Venezuelan commissions, sitting at Caracas, 
 four bond claims were presented, with various decisions. In 
 the case of the Comp. Generate/ des Eaux de Caracas (Bel- 
 gium), 107 Venezuelan bonds payable to bearer had been 
 issued to the corporation for certain public works. From 
 the decision it would seem that the general rule of non- 
 enforcement of bond claims may be held not applicable 
 where the bonds are issued in payment of property rights 
 transferred to the government. Although many of the 
 stockholders were not Belgians, an award was made with 
 the peculiar provision that the money should be deposited in 
 a Belgian bank and the bonds paid on being turned in. The 
 production of the bonds naturally was made a necessary con- 
 dition for the making of an award, so where, in the case of 
 Ballistini (France), 108 the original bonds were not produced, 
 
 106 Venezuelan Bond cases, Aspinwall, Executor of G. G. Howland 
 et al. (U. S.) z: Venezuela, Dec. 5, 1885, Moore's Arb., 3616-3641. This 
 claim was dismissed by the mixed commission under the convention of 
 April 25, 1866. The findings of this commission were reopened because 
 of the alleged fraud of the arbitrators. Under a strict construction of 
 the protocol, Bates, Umpire, dismissed the Texas Bond cases before the 
 British-U. S. Commission of Feb. 8, 1853, Moore's Arb., 3594. One 
 reason was that they had not been treated by Great Britain as a subject 
 for diplomatic interposition. The decision is criticised by Westlake, vol. 
 1. 77-78, citing Dana in Dana's Wheaton, § 30, n. 18. Jurisdiction was 
 exercised by the Mexican commission of 1868 over a stolen bond, 
 Keller (U. S.) v. Mexico, July 4, 1868, Moore's Arb., 3065, on the 
 ground of fraudulent destruction of specific property having a definite 
 value and certain assurances by the government. See also Eldredge 
 (U. S.) v. Peru, Jan. 12, 1863, Moore's Arb., 3462. The failure to 
 fulfill the obligations of a bond issued for supplies was held not an 
 "injury to property" by the U. S.-Mexican Commission of 1868 (Ma- 
 nasse case, Moore's Arb., 3463) , although the failure to pay for supplies 
 furnished under contract had been so construed. 
 
 107 Comp. Generate des Eaux de Caracas (Belgium) v. Venezuela, 
 March 7, 1903, Ralston I, 271-290. 
 
 k* Ballistini (France) v. Venezuela, Feb. 27, 1903, Ralston I, 503-506. 
 
OF INTERNATIONAL DISPUTES 55 
 
 the claim was dismissed, Paul, Commissioner, in a dictum 
 giving expression to the usual rule of the non-enforcement 
 of bond claims before international commissions. In the 
 case of Boccardo (Italy), 109 where national bonds were de- 
 livered to claimant in payment for articles furnished and 
 were never transferred by him, judgment was rendered on 
 the authority of the Aspinwall case before the Venezuelan 
 Commission of 1885. The fourth case, Jarvis (U. S.), 110 
 was dismissed because the service and the supplies for which 
 the bonds were issued (by a temporary dictator of Vene- 
 zuela) were furnished to an unsuccessful revolution, which 
 had not been recognized by the government of the United 
 States, and hence presumably they were not valid obligations 
 of Venezuela. 
 
 The United States, in its endeavor to be consistent with 
 the maintenance of the Monroe Doctrine and with the dec- 
 laration of President Roosevelt that that doctrine could not 
 be used by any nation of this continent to shield it from the 
 consequences of its own misdeeds, has at times been placed 
 in the most delicate position when foreign nations have at- 
 tempted to seek redress for the alleged violation of inter- 
 national rights. So in the settlement of numerous difficulties 
 between European nations and Latin-American states aris- 
 ing out of pecuniary claims the United States has had an 
 active interest. Especially where the occupation of Ameri- 
 can territory seemed imminent, the United States, by virtue 
 of its responsibilities under the Monroe Doctrine, has felt 
 called upon to undertake what may be called friendly inter- 
 
 109 Boccardo (Italy) v. Venezuela, Feb. 13, 1903, cited in note to 
 Ralston I, 505 (not reported). See, however, the brief statement given 
 by Mr. Ralston in his address before the International Law Association, 
 24th Report, 193-194. 
 
 n ° Jarvis (U. S.) v. Venezuela, Feb. 17, 1903, Ralston I, 145-151. 
 
56 JUDICIAL SETTLEMENT 
 
 vcntion to prevent such occupation and yet satisfy the cred- 
 itor nations. 
 
 President Roosevelt, in his message to Congress of Dec. 5, 
 1905, stated these embarrassing conditions, pointing out at 
 the same time the method by which relief from this critical 
 situation could be most equitably and practically secured. 
 In his message he said : 
 
 "Our own government has always refused to enforce 
 such contractual obligations on behalf of its citizens by an 
 appeal to arms. It is much to be wished that all foreign gov- 
 ernments would take the same view. But they do not, and 
 in consequence we are liable at any time to be brought face 
 to face with disagreeable alternatives. On the one hand, this 
 country would certainly decline to go to war to prevent a 
 foreign government from collecting a just debt ; on the other 
 hand, it is very inadvisable to permit any foreign power to 
 take possession, even temporarily, of the custom-houses of 
 an American Republic in order to enforce the payment of its 
 obligations, for such temporary occupation might turn into a 
 permanent occupation. The only escape from these alterna- 
 tives may at any time be that we must ourselves undertake 
 to bring about some arrangement by which so much as pos- 
 sible of a just obligation shall be paid. It is far better that 
 this country should put through such an arrangement rather 
 than allow any foreign country to undertake it. To do so 
 insures the defaulting republic from having to pay debts of 
 an improper character under duress, while it also insures 
 honest creditors of the republic from being passed by in the 
 interest of dishonest or grasping creditors." 111 
 
 This method of administering the finances of bankrupt 
 and unstable governments has in fact been applied in the 
 Dominican Republic. In 1905 it was effective in restraining 
 the forcible attempt of Germany, Spain and Italy to secure 
 
 111 For. Rel., 1905, H. Doc. 1, 59th Cong., 1st Sess., 34-35. 
 
OF INTERNATIONAL DISPUTES 57 
 
 payment of arrears of interest and pledged revenues to their 
 subject creditors. International practice seems to have given 
 a sanction to this form of intervention. It might be called 
 benevolent intervention in the interests of the debtor state 
 and of its creditors, and however the paternal control of the 
 temporary guardian may hurt the pride of the citizens of the 
 bankrupt nation, the advantages resulting to world peace 
 exceed by far such minor disadvantages as the disapproval 
 of a few patriotic nationals. 111 * Nevertheless, in the absence 
 of an international forum, it does not seem apparent how 
 grossly exaggerated claims against these states can be 
 avoided, for presumably the financial administration looks 
 only to the payment of the current expenses and of the na- 
 tional debts and makes no provision for the judicial exami- 
 nation of the legitimacy of the latter. The unratified 
 treaties of 191 1 between the United States, Honduras and 
 Nicaragua and the proposed "protectorate" treaty with Nic- 
 aragua, all of which were invited by these small republics, 
 indicate a necessary policy of this government, whether by 
 temporary receivership or supplementary administrative 
 control, to secure the financial rehabilitation of the weaker 
 states of Latin-America, and thus reassure foreign creditors 
 and maintain domestic peace and prosperity on terms most 
 favorable to Latin-America. 112 
 
 ilia This Latin-American disapproval of the policy of the United 
 States as evidenced in the unratified treaties of 1911 with Honduras and 
 Nicaragua is expressed in a series of pamphlets: United States and 
 Latin America, Dollar Diplomacy, by Juan Leets, New Orleans, 1912; 
 Nicaraguan Affairs, San Jose, 1912; the Morgan-Honduras Loan, 3 
 parts, New Orleans, 1911-12. 
 
 112 European countries have adopted practices of various kinds to 
 assure the successful operation of a loan contract concluded between a 
 foreign nation and their subjects. Thus Great Britain has provided in 
 such cases for the selection of a British supervisor of the loan and the 
 government "takes cognizance" of the contract. In the Dominican and 
 
58 JUDICIAL SETTLEMENT 
 
 Conclusion. 
 
 The Porter proposition is by no means a complete remedy 
 for existing evils, except in so far as it protects a debtor 
 state from the immediate use of force. It still permits of 
 much injustice to the debtor nation, inasmuch as claims are 
 still presented on ex parte evidence without a judicial exami- 
 nation of the merits of the case. Experience has shown that 
 claims are generally greatly exaggerated. Again, the cred- 
 itor's national government is not required to arbitrate. The 
 failure to make or accept the offer of arbitration simply pre- 
 cludes the use of force in first instance, but not the use of 
 other methods of oppression. Experience has shown that it 
 is only against weak states that governments will interpose 
 to secure the payment of contract debts. Moreover, there 
 
 the unratified Honduras and Nicaraguan treaties, diplomatic protection 
 is extended to the receiver or supervisor in the performance of his du- 
 ties. See the treaties between the United States and Dominican Re- 
 public, Feb. 7, 1907, Honduras, Jan. 26, 1911, and Nicaragua, June 8, 
 1911. See also editorial comment on the treaties in Amer. Journ. of 
 Int. Law (1911), 1046-1051. A discussion of the treaties by Sec'y of 
 State Knox is contained in his speech before the New York State Bar 
 Association (1912), 311-318. An elaborate explanation and justification 
 of the policy of the United States in negotiating the treaties is to be 
 found in President Roosevelt's message in connection with the customs 
 revenues of the Dominican Republic, Confidential Executive, V, 58th 
 Cong., 3rd Sess. See also speeches incident to the visit of Philander C. 
 Knox to the countries of the Caribbean, Feb. 23 to April 17, 1912 
 (Washington, 1913, Ch. Ill and IV). France has apparently no objec- 
 tion to using its subjects' foreign loans to foster its commercial interests. 
 Speech of M. Pichon, Minister of Foreign Affairs, in the Chamber of 
 Deputies, Jan. 13, 1911. Journal Officiel, Jan. 14, 1911. Notwithstanding 
 the disapproval of the present Administration of "dollar diplomacy" — 
 an ill-defined and much-abused term — as evidenced in the withdrawal 
 from the Chinese loan, the Administration has clearly indicated by the 
 proposed so-called "protectorate" treaty with Nicaragua its necessary 
 interest in the financial stability of the small Latin-American states. 
 The recent threat of Great Britain to dispatch a warship to Guatemala 
 to secure the payment of debts and the resulting appeal of Guatemala 
 to the United States presents a familiar situation in our Latin-American 
 relations. By reason of the Monroe Doctrine, we cannot avoid an active 
 concern in the adjustment of these difficulties, and had better sanction 
 a method of peaceful administrative supervision most conformable to 
 the interests of all parties concerned. 
 
OF INTERNATIONAL DISPUTES 59 
 
 is a question whether the debtor government can demand 
 arbitration. 113 This should certainly be made possible. 
 
 On the other hand, the unpaid creditor has no individual 
 right to bring about the adjustment of his claim. The action 
 of his government in his behalf depends upon political con- 
 siderations and is entirely a matter of expediency and policy. 
 If his government for any reason declines to become inter- 
 ested in his case or to espouse his claim against the foreign 
 government, the creditor is without a remedy. A legal right 
 of the individual may therefore be sacrificed to the political 
 exigencies of his government. With the constant growth of 
 international contractual relations between individuals and 
 foreign governments, the fulfillment and enforcement of 
 legal obligations toward individuals should be divorced from 
 political considerations. The difference in the practice of 
 governments in the support of contract claims gives an un- 
 equal advantage to the nationals of some states and corre- 
 spondingly embarrasses the governments whose policy or 
 practice it is to decline diplomatic pressure in such cases. 
 
 These various defects of the system as it still exists, with 
 its possibilities of injustice either to the debtor state or the 
 unpaid creditor, or both, lend much weight to the proposal, 
 advanced with greatest emphasis in Germany, that an inter- 
 national court be created by international agreement for the 
 adjustment of these essentially legal claims. The individual 
 should be given the right to bring suit against the debtor 
 nation before this international tribunal, as has been done in 
 the convention for the establishment of an international prize 
 court and in the treaty of Washington for the establishment 
 of a Central American Court of Arbitration. The creditor 
 
 113 O. Nippold in Ztschr. fur internationales privat. u. dffentliches 
 Recht, vol. 18, 260. 
 
•60 *•* *-'**'* ••*••» -JUDICIAL SETTLEMENT 
 
 will be assured of a hearing, the debtor state will be secured 
 against the pressure of exorbitant claims accompanied by 
 disagreeable diplomatic coercion, the government of the 
 claimant zvill avoid what is always a potential germ of inter- 
 national difficulties and ill-will, with the incidental expense 
 of pressing a diplomatic claim, and the peace of the world 
 zvill be fostered by the removal of one great source of inter- 
 national conflict. The details of the organization and opera- 
 tion of this international court may be left to the delegates of 
 the Third Hague Peace Conference, who may profitably ex- 
 amine the proposals of several learned Germans. 114 The 
 prospect and opportunity for thus advancing the cause of 
 international justice, toward which goal the Porter proposi- 
 tion makes only a slight forward step, must command uni- 
 versal support. 
 
 114 See the Denkschrift or memorial of the Altesten der Kaufmann- 
 schaft von Berlin to the Imperial Chancellor Sept. 30, 1910, reprinted 
 in Niemeyer's Zeitschrift fur internationales Recht, vol. 20, 594-599, and 
 the Denkschrift of May 20, 1912, summing up the whole matter, re- 
 printed in Berliner Jahrbuch fiir Handel and Industrie, 497-514. See 
 also the following works: Freund, G. S. Der Schutz der Glaubiger 
 (Berlin, 1910), § 5, 43 et seq.; Wehberg, Hans, Ein internationaler Ge- 
 richtshof fiir Privat-klagen (Berlin, 1911), in which plans for the 
 organization and operation of an international tribunal are carefully 
 worked out. See also Wehberg's article, Die Durchsetzung von Pri- 
 vatanspruchen gegen Schuldnerstaaten, in Jahrbuch f. d. int. Rechtsver- 
 kehr, 1912-13, 391-402, and an article in Deutsche Wirtschafts-Zeitung, 
 1912, 704-710, Zur Errichtung eines internationalen Schiedsgerichtes 
 fur Streitigkeiten zwischen Privatpersonen und auslandischen Staaten. 
 Fischer, Otto, Die Verfolgung vermogensrechtlicher Anspruche gegen 
 auslandische Staaten (Leipzig, 1912) and references to the proposals of 
 others mentioned on pp. 15-16. See also a further note by Fischer in 
 Ztschr. f. deutschen Zivilprozess, vol. 43, 282-284, and works already 
 cited, Meili, Staatsbankerott, etc., 41, 50, 58, 59 and 63, and Pflug, 58-70. 
 
Ammran g>urlrtu for 3uMrial &fttlrtnrnt of 
 Jntmtaltanal DiBjmira 
 
 A&utaury Ctountil 
 
 Lyman Abbott, New York. 
 
 Edwin A. Alderman, Virginia. 
 
 James B. Angell, Michigan. 
 
 Simeon E. Baldwin, Connecticut. 
 
 Richard Bartholdt, Missouri. 
 
 Alexander Graham Bell, Washington, D. C. 
 
 R. L. Borden, Ottawa, Ontario. 
 
 Theodore E. Burton, Ohio. • 
 
 Joaquin D. Casasus, Mexico City, Mexico. 
 
 George E. Chamberlain, Oregon. 
 
 Winston Churchill, New Hampshire. 
 
 George B. Cutten, Wolfville, N. S. 
 
 William R. Day, Ohio. 
 
 Jacob M. Dickinson, Washington, D. C. 
 
 Andrew S. Draper, New York. 
 
 Charles W. Eliot, Massachusetts. 
 
 William Dudley Foulke, Indiana. 
 
 James Cardinal Gibbons, Maryland. 
 
 George Gray, Delaware. 
 
 Charles Noble Gregory, Washington, D. C. 
 
 Peter S. Grosscup, Illinois. 
 
 Bayard Henry, Pennsylvania. 
 
 Joseph F. Johnston, Alabama. 
 
 David Starr Jordan, California. 
 
 Harry Pratt Judson, Illinois. 
 
 William H. King, Utah. 
 
 George W. Kirchwey. New York. 
 
 Philander C. Knox, Washington, D. C. 
 
 Charles F. Libby, Maine. 
 
 Francis B. Loomis, Washington, D. C. 
 
 Horace H. Lurton, Tennessee. 
 
 R. McBride, Victoria, B. C. 
 
 Pablo Macedo, Mexico City, Mexico. 
 
 Charles Marcil, Ottawa, Ontario. 
 
 Sidney E. Mezes, Texas. 
 
 S. C. Mitchell, South Carolina. 
 
 Don Romulo S. NaOn, Argentine Republic. 
 
 Francis G. Newlands, Nevada. 
 
 L. Oppenheimer, Cambridge, England. 
 
 Thomas Nelson Page, Washington, D. C. 
 
 Walter H. Page, New York. 
 
 W. Peterson, Montreal. 
 
 Sir Thomas Raleigh, London, England. 
 
 William Renwick Riddell, Toronto, Ontario. 
 
 Uriah M. Rose, Arkansas. 
 
 A. C. Rutherford, Edmonton, Alberta. 
 
 Walter Scott, Regina, Saskatchewan. 
 
 Albert Shaw, New York. 
 
 Hoke Smith, Georgia. 
 
 Bishop Robert Strange, North Carolina. 
 
 Sir Charles Hibbert Tupper, Vancouver, B. C. 
 
 George Turner, Washington. 
 
 Charles R. Van Hise, Wisconsin. 
 
 Benjamin Ide Wheeler, California. 
 
 William Allen White, Kansas. 
 
 George G. Wilson, Massachusetts. 
 
 Prince de Cassano, Italy. 
 
Publications of the American Society for Judicial Settle- 
 ment of International Disputes — 
 
 1. The New Era of International Courts, by Simeon E. 
 Baldwin. August, 1910. 
 
 2. The Necessity of a Permanent Tribunal, by Ernest Nys. 
 November, 1910. 
 
 Supplement — The American Society for Judicial Settlement 
 of International Disputes, by James Brown Scott. November, 
 1910. 
 
 3. The Importance of Judicial Settlement, by Elihu Root. 
 February, 1911. 
 
 4. The Development of the American Doctrine of Jurisdic- 
 tion of Courts Over States, by Alpheus H. Snow. May, 1911. 
 
 5. An International Court of Justice the Next Step, by 
 George Grafton Wilson. Salient Thoughts, by Theodore Mar- 
 burg. August, 1911. 
 
 6. The Work of the Hague Court, by N. Politis. Novem- 
 ber, 1911. 
 
 7. The Proposed Arbitration Treaties with Great Britain 
 and France, by William Howard Taft. February, 1912. 
 
 8. Non-Justiciable Disputes and the Peace Treaties, by 
 Omer F. Hershey. May, 1912. 
 
 9. The International Grand Jury, by William I. Hull. 
 August, 1912. 
 
 10. The Court of Arbitral Justice, by James Brown Scott. 
 November, 1912. 
 
 11. Legal Problems Capable of Settlement by Arbitration, 
 by Charles Cheney Hyde. February, 1913. 
 
 12. Precedent and Codification in International Law, by 
 Paul S. Reinsch. May, 1913. 
 
 13. International Contractual Claims and Their Settlement, 
 by Edwin M. Borchard. August, 19 13. 
 
VITA 
 
 Edwin M. Borchard was born in the city of New York October 17, 
 1884. After attending the public schools of the city he entered the 
 College of the City of New York, which he left in 1902 in the Junior 
 year. From 1902 to 1905 he attended the New York Law School, 
 where he received the degree of LL. B cum laude. In 1906 he entered 
 Columbia. While completing the necessary studies for the B. S. de- 
 gree (which was conferred in 1908, with election to Phi Beta Kappa) 
 he attended lectures on private law in the Columbia law school. 
 In 1907 he spent several months in Berlin, during which he heard 
 the lectures of Professors Kohler, Kahl and von Martitz at the Uni- 
 versity of Berlin. In that year he was admitted to the bar. In 1908 
 and 1909 he pursued his graduate studies in public law at Columbia 
 University, specializing in international law and comparative law 
 and jurisprudence. This work was carried on under Professors Moore, 
 Munroe Smith, Goodnow, Scott and Seligman. In 1909 he was ap- 
 pointed Assistant to the Law Librarian in the Library of Congress 
 and was placed in charge of the work on foreign law and international 
 law. In the development of the collections of the Library further 
 studies were pursued privately and in the George Washington Uni- 
 versity Law School in Roman law, the conflict of laws and compara- 
 tive civil law. In 1910 he was appointed by the Secretary of State as 
 "Expert on International Law" to the American counsel in the North 
 Atlantic Coast Fisheries Arbitration at the Hague and was associated 
 with counsel in the preparation and presentation of that case before 
 the Court of Arbitration at the Hague. In connection with the Arbi- 
 tration, he edited the work Coastal Waters (Washington, G. P. O., 
 1910, 362 p.). At the conclusion of the Fisheries Arbitration he was 
 commissioned by the Librarian of Congress to undertake a journey 
 (Studienreise) through the countries of western Europe to study 
 continental systems of law and continental legal literature. He there- 
 upon spent several months visiting European law schools, courts and 
 
law libraries, and consulting many professors, judges and lawyers. 
 Shortly after his return to the United States he was appointed (Janu- 
 ary, 1911) Law Librarian of Congress and the Supreme Court. In 
 order to make the foreign law collections of the Library of Congress 
 generally available the enterprise was begun of publishing guides 
 to foreign law. Two volumes have already been published as a part 
 of this undertaking: Guide to the Law and Legal Literature of Ger- 
 many (Washington, G. P. O., 1912) and The Bibliography of Inter- 
 national Law and Continental Law (Washington, G. P. O., 1913). 
 A Guide to the Law and Legal Literature of Spain and Spanish 
 America is now in preparation in collaboration with Mr. T. W. Pal- 
 mer, Jr., of Harvard University. A Guide to the Law of France is 
 contemplated for publication in 1915. 
 
 In September, 1913, Mr. Borchard was appointed Assistant Solic- 
 itor of the Department of State, which position he now holds. Mr. 
 Borchard is American Editor of the Bibliography of Legal Science 
 (published in Berlin) and an Associate Editor of the Comparative 
 Law Bulletin of the American Bar Association. Besides the works 
 mentioned above, he has published a monograph on State Indemnity 
 for Errors of Criminal Justice (Sen. Doc. 974, 62d Cong., 3d Sess.) 
 and has contributed articles on topics in international law and com- 
 parative law to the Columbia Law Review, American Law Review, 
 Journal of Criminal Law and Criminology, Annals of the American 
 Academy of Political and Social Science, American Journal of Inter- 
 national Law, Comparative Law Bulletin, American Political Science 
 Reviezv, Zeitschrift fur Volkerrecht und Bundesstaatsrecht, and Re- 
 vue de Droit International (Brussels). He has also contributed to 
 other publications, including the reports of the proceedings of various 
 learned societies. He has in preparation a work, The Diplomatic 
 Protection of Citizens Abroad (of which this dissertation comprises, 
 in substance, two chapters) which is to be published during 1914 by 
 the Banks Law Publishing Company. He is under contract to the 
 Carnegie Endowment for International Peace to translate and write 
 an introduction to Fiore's 77 Diritto Internationale Codiiicato. 
 

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