1. The question of the propriety, under New York practice, of
grounding a motion for summary judgment in this case on the record
in
Moscow Fire Ins. Co. v. Bank of New York & Trust
Co., 280 N.Y. 286, is one of state law, upon which the
decision of the highest court of the State is final. P.
315 U. S.
216.
2. The
Moscow case is not
res judicata here,
since the respondent was not a party to that suit. P.
315 U. S.
216.
3. The affirmance here by an equally divided court of the
judgment in the
Moscow case, 309 U.S. 624, although
conclusive and binding upon the parties to that controversy, cannot
be regarded as an authoritative determination of the principles of
law there involved. P.
315 U. S.
216.
4. Judicial notice may here be taken of the record in this Court
of the
Moscow case. P.
315 U. S.
216.
5. The claim of the United States in this case, based on the
Litvinov Assignment -- whereby the Russian Government, incidentally
to its recognition by the United States in 1933, assigned certain
claims to the United States -- raises a federal question. P.
315 U. S.
217.
6. Upon review of a judgment of a state court, this Court will
determine independently all questions on which a federal right is
necessarily dependent. P.
315 U. S.
217.
7. The determination of what title the United States obtained to
the New York assets of a Russian insurance company by virtue of the
Litvinov Assignment and the Russian decrees of 1918 and 1919
nationalizing the insurance business, involves questions of
Page 315 U. S. 204
foreign law upon which the decision of the state court is not
conclusive. P.
315 U.S.
218.
8. An official declaration by the Commissariat for Justice of
the R.S.F.S.R. as to the intended effect of a decree of the Russian
Government nationalizing insurance companies, tendered to the court
below pursuant to § 391 of the New York Civil Practice Act, was
properly before that court on appeal, though not a part of the
record, and may be considered here. P.
315 U. S.
220.
9. The Russian Government's decree nationalizing the insurance
business was intended to embrace the property of the New York
branch of the Russian insurance company involved in this case. P.
315 U. S.
221.
The Commissariat for Justice is empowered to interpret existing
Russian law; its declaration as to the intended extraterritorial
effect of the nationalization decree is conclusive.
10. Claims of the kind here in question were embraced in the
Litvinov Assignment. P.
315 U. S.
224.
11. The Litvinov Assignment is broad and inclusive as to the
claims embraced. Its purpose to eliminate all possible sources of
friction between the countries requires that it be construed
liberally. P.
315 U. S.
224.
12. Incidentally to its recognition by the United States in
1933, the Russian Government, by the Litvinov Assignment, assigned
certain claims to the United States. Previously, the Russian
Government had, by decree, nationalized the insurance business. A
balance of the assets of a New York branch of a Russian insurance
corporation, remaining after the payment of domestic creditors, was
claimed by the United States, seeking to protect claims which it
held, and claims of its nationals, against Russia or its nationals.
A New York state court directed other distribution of the
assets.
Held:
By the nationalization decree, the property in question became
vested in the Russian Government; the right of the Russian
Government passed to the United States under the Litvinov
Assignment, and the United States is entitled to the property as
against the corporation and its foreign creditors. P.
315 U. S.
234.
13. Although aliens are entitled to the protection of the Fifth
Amendment, that Amendment does not preclude giving full force and
effect to the Litvinov Assignment. P.
315 U. S.
228.
14. The Federal Government is not barred by the Fifth Amendment
from securing for itself and its nationals priority over creditors
who are nationals of foreign countries and whose claims arose
abroad. P.
315 U. S.
228.
Page 315 U. S. 205
The fact that New York has marshaled the claims of the foreign
creditors here involved and authorized their payment does not
except them from the application of this principle.
15. The powers of the President in the conduct of foreign
relations included the power, without consent of the Senate, to
determine the public policy of the United States with respect to
the Russian nationalization decrees. P.
315 U. S.
229.
16. The power of the President in respect to the recognition of
a foreign government, includes the power to remove such obstacles
to full recognition as the settlement of claims of our nationals.
P.
315 U. S.
229.
Recognition of the Russian Government and the Litvinov
Assignment were interdependent.
17. The decision of the Executive with respect to the
recognition of the Russian Government and acceptance of the
Litvinov Assignment are conclusive on the courts. P.
315 U. S.
230.
18. State law must yield when it is inconsistent with or impairs
the policy or provisions of a treaty or of an international compact
or agreement. P.
315 U. S.
230.
19. Enforcement in this case of the policy of the State of New
York would conflict with the federal policy, whether the State's
policy was premised on the absence of extraterritorial effect of
the Russian decrees, the conception of the New York branch as a
distinct juristic personality, or disapproval by New York of the
Russian program of nationalization. P.
315 U.S. 231.
20. Power over external affairs is not shared by the States; it
is vested exclusively in the National Government. P.
315 U. S.
233.
284 N.Y. 555, 32 N.E.2d 552, reversed.
CERTIORARI, 313 U.S. 553, to review a judgment affirming the
dismissal of the complaint in a suit by the United States to
recover a balance of the assets of the New York branch of a Russian
insurance company.
See 259 App.Div. 871, 20 N.Y.S.2d
665.
Page 315 U. S. 210
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This action was brought by the United States to recover the
assets of the New York branch of the First Russian Insurance Co.
which remained in the hands of respondent after the payment of all
domestic creditors. The material allegations of the complaint were,
in brief, as follows:
The First Russian Insurance Co., organized under the laws of the
former Empire of Russia, established a New York branch in 1907. It
deposited with the Superintendent of Insurance, pursuant to the
laws of New York, certain assets to secure payment of claims
resulting from transactions of its New York branch. By certain
laws, decrees, enactments and orders, in 1918 and 1919, the Russian
Government nationalized the business of insurance and all of the
property, wherever situated, of all Russian insurance companies
(including the First Russian
Page 315 U. S. 211
Insurance Co.), and discharged and cancelled all the debts of
such companies and the rights of all shareholders in all such
property. The New York branch of the First Russian Insurance Co.
continued to do business in New York until 1925. At that time,
respondent, pursuant to an order of the Supreme Court of New York,
took possession of its assets for a determination and report upon
the claims of the policyholders and creditors in the United States.
Thereafter, all claims of domestic creditors,
i.e., all
claims arising out of the business of the New York branch, were
paid by respondent, leaving a balance in his hands of more than
$1,000,000. In 1931, the New York Court of Appeals (255 N.Y. 415,
175 N.E. 114) directed respondent to dispose of that balance as
follows: first, to pay claims of foreign creditors who had filed
attachment prior to the commencement of the liquidation proceeding,
and also such claims as were filed prior to the entry of the order
on remittitur of that court, and second, to pay any surplus to a
quorum of the board of directors of the company. Pursuant to that
mandate, respondent proceeded with the liquidation of the claims of
the foreign creditors. Some payments were made thereon. The major
portion of the allowed claims, however, were not paid, a stay
having been granted pending disposition of the claim of the United
States. On November 16, 1933, the United States recognized the
Union of Soviet Socialist Republics as the
de jure
Government of Russia, and, as an incident to that recognition,
accepted an assignment (known as the Litvinov Assignment) of
certain claims. [
Footnote 1]
The Litvinov Assignment was in the form of a letter, dated November
16, 1933, to the President of the United States from Maxim
Litvinov, People's Commissar for Foreign Affairs, reading as
follows:
Page 315 U. S. 212
"Following our conversations, I have the honor to inform you
that the Government of the Union of Soviet Socialist Republics
agrees that, preparatory to a final settlement of the claims and
counterclaims between the Governments of the Union of Soviet
Socialist Republics and the United States of America and the claims
of their nationals, the Government of the Union of Soviet Socialist
Republics will not take any steps to enforce any decisions of
courts or initiate any new litigations for the amounts admitted to
be due or that may be found to be due it, as the successor of prior
Governments of Russia, or otherwise, from American nationals,
including corporations, companies, partnerships, or associations,
and also the claim against the United States of the Russian
Volunteer Fleet, now in litigation in the United States Court of
Claims, and will not object to such amounts being assigned, and
does hereby release and assign all such amounts to the Government
of the United States, the Government of the Union of Soviet
Socialist Republics to be duly notified in each case of any amount
realized by the Government of the United States from such release
and assignment."
"The Government of the Union of Soviet Socialist Republics
further agrees, preparatory to the settlement referred to above,
not to make any claims with respect to:"
"(a) judgments rendered or that may be rendered by American
courts insofar as they relate to property, or rights, or interests
therein, in which the Union of Soviet Socialist Republics or its
nationals may have had or may claim to have an interest; or,"
"(b) acts done or settlements made by or with the Government of
the United States, or public officials in the United States, or its
nationals, relating to property, credits, or obligations of any
Government of Russia or nationals thereof."
This was acknowledged by the President on the same date. The
acknowledgment, after setting forth the terms of the assignment,
concluded:
Page 315 U. S. 213
"I am glad to have these undertakings by your Government, and I
shall be pleased to notify your Government in each case of any
amount realized by the Government of the United States from the
release and assignment to it of the amounts admitted to be due, or
that may be found to be due, the Government of the Union of Soviet
Socialist Republics, and of the amount that may be found to be due
on the claim of the Russian Volunteer Fleet."
On November 14, 1934, the United States brought an action in the
federal District Court for the Southern District of New York,
seeking to recover the assets in the hands of respondent. This
Court held, in
United States v. Bank of New York & Trust
Co., 296 U. S. 463,
that the well settled "principles governing the convenient and
orderly administration of justice require that the jurisdiction of
the state court should be respected" (p.
296 U. S.
480), and that, whatever might be "the effect of
recognition" of the Russian Government, it did not terminate the
state proceedings. P.
296 U. S. 479.
The United States was remitted to the state court for determination
of its claim, no opinion being intimated on the merits. P.
296 U. S. 481. The
United States then moved for leave to intervene in the liquidation
proceedings. Its motion was denied "without prejudice to the
institution of the time-honored form of action." That order was
affirmed on appeal.
Thereafter, the present suit was instituted in the Supreme Court
of New York. The defendants, other than respondent, were certain
designated policyholders and other creditors who had presented in
the liquidation proceedings claims against the corporation. The
complaint prayed,
inter alia, that the United States be
adjudged to be the sole and exclusive owner entitled to immediate
possession of the entire surplus fund in the hands of the
respondent.
Respondent's answer denied the allegations of the complaint that
title to the funds in question passed to the
Page 315 U. S. 214
United States and that the Russian decrees had the effect
claimed. It also set forth various affirmative defenses -- that the
order of distribution pursuant to the decree in 255 N.Y. 415, 175
N.E. 114, could not be affected by the Litvinov Assignment; that
the Litvinov Assignment was unenforceable because it was
conditioned upon a final settlement of claims and counterclaims
which had not been accomplished; that, under Russian law, the
nationalization decrees in question had no effect on property not
factually taken into possession by the Russian Government prior to
May 22, 1922; that the Russian decrees had no extraterritorial
effect, according to Russian law; that, if the decrees were given
extraterritorial effect, they were confiscatory, and their
recognition would be unconstitutional and contrary to the public
policy of the United States and of the State of New York, and that
the United States, under the Litvinov Assignment, acted merely as a
collection agency for the Russian Government, and hence was
foreclosed from asserting any title to the property in
question.
The answer was filed in March, 1938. In April, 1939, the New
York Court of Appeals decided
Moscow Fire Ins. Co. v. Banc of
New York & Trust Co., 280 N.Y. 286, 20 N.E.2d 758. In May,
1939, respondent (but not the other defendants) moved, pursuant to
Rule 113 of the Rules of the New York Civil Practice Act and § 476
of that Act, for an order dismissing the complaint and awarding
summary judgment in favor of respondent "on the ground that there
is no merit to the action, and that it is insufficient in law." The
affidavit in support of the motion stated that there was "no
dispute as to the facts"; that the separate defenses to the
complaint "need not now be considered, for the complaint, standing
alone, is insufficient in law"; that the facts in the
Moscow case and the instant one, so far as material, were
"parallel" and the Russian decrees
Page 315 U. S. 215
the same, and that the
Moscow case authoritatively
settled the principles of law governing the instant one. The
affidavit read in opposition to the motion stated that a petition
for certiorari in the
Moscow case was about to be filed in
this Court; that the motion was premature, and should be denied, or
decision thereon withheld pending the final decision of this Court.
On June 29, 1939, the Supreme Court of New York granted the motion
and dismissed the complaint "on the merits," citing only the
Moscow case in support of its action. On September 2,
1939, a petition for certiorari in the
Moscow case was
filed in this Court. The judgment in that case was affirmed here by
an equally divided Court. 309 U.S. 624. Subsequently, the Appellate
Division of the Supreme Court of New York affirmed, without
opinion, the order of dismissal in the instant case. The Court of
Appeals affirmed with a per curiam opinion (284 N.Y. 555, 32 N.E.2d
552) which, after noting that the decision below was "in accord
with the decision" in the
Moscow case, stated:
"Three of the judges of this court concurred in a forceful
opinion dissenting from the court's decision in that case, but the
decision left open no question which has been argued upon this
appeal. We are agreed that, without again considering such
questions, this court should, in determining title to assets of
First Russian Insurance Company, deposited in this State, apply in
this case the same rules of law which the court applied in the
earlier case in determining title to the assets of Moscow Fire
Insurance Company deposited here."
We granted the petition for certiorari because of the nature and
public importance of the questions raised.
First. Respondent insists that the complaint in this
action was identical in substance and sought the same relief as the
petition of the United States in the
Moscow case, and that
his answer set up the same defenses as were successfully
Page 315 U. S. 216
sustained against the United States by the defendants in that
case. He also maintains that both parties agreed, on the motion for
summary judgment, that the decision in the
Moscow case
governed this cause, leaving no issues to be tried. We agree with
those contentions. It is in accord not only with the motion papers,
but also with the ruling of the New York Court of Appeals that the
Moscow case "left open no question which has been argued
upon this appeal." In view of that ruling, we are not free to
inquire, as petitioner suggests, into the propriety under New York
practice of grounding the motion for summary judgment on the record
in the
Moscow case. That is distinctly a question of state
law, on which New York has the last word.
But it does not follow, as respondent urges, that the writ
should be dismissed as improvidently granted. The
Moscow
case is not
res judicata, since respondent was not a party
to that suit.
Stone v. Farmers' Bank of Kentucky,
174 U. S. 409;
Rudd v. Cornell, 171 N.Y. 114, 127-128, 63 N.E.2d 823;
St. John v. Fowler, 229 N.Y. 270, 274, 128 N.E. 199. Nor
was our affirmance of the judgment in that case by an equally
divided court an authoritative precedent. While it was conclusive
and binding upon the parties as respects that controversy
(
Durant v. Essex
Company, 7 Wall. 107), the lack of an agreement by
a majority of the Court on the principles of law involved prevents
it from being an authoritative determination for other cases.
Hertz v. Woodman, 218 U. S. 205,
218 U. S.
213-214.
The upshot of the matter is that we now reach the issues in the
Moscow case insofar as they are embraced in the pleadings
in this case. And there is no reason why we cannot take judicial
notice of the record in this Court of the
Moscow case.
Bienville Water Supply Co. v. Mobile, 186 U.
S. 212,
186 U. S. 217;
Dimmick v. Tompkins, 194 U. S. 540,
194 U. S. 548;
Freshman v. Atkins, 269 U. S. 121,
269 U. S.
124.
Page 315 U. S. 217
Second. The New York Court of Appeals held in the
Moscow case that the Russian decrees [
Footnote 2] in question had no extraterritorial
effect. If that is true, it is decisive of the present controversy.
For the United States acquired, under the Litvinov Assignment, only
such rights as Russia had.
Guaranty Trust Co. v. United
States, 304 U. S. 126,
304 U. S. 143.
If the Russian decrees left the New York assets of the Russian
insurance companies unaffected, then Russia had nothing here to
assign. But that question of foreign law is not to be determined
exclusively by the state court. The claim of the United States
based on the Litvinov Assignment raises a federal question.
United States v. Belmont, 301 U.
S. 324. This Court will review or independently
determine all questions on which a federal right is necessarily
dependent.
United States v. Ansonia
Brass &
Page 315 U. S. 218
Copper Co., 218 U. S. 452,
218 U. S.
462-463,
218 U. S. 471;
Ancient Egyptian Order v. Michaux, 279 U.
S. 737,
279 U. S.
744-745;
Broad River Power Co. v. South
Carolina, 281 U. S. 537,
281 U. S. 540;
Pierre v. Louisiana, 306 U. S. 354,
306 U. S. 35.
Here, title obtained under the Litvinov Assignment depends on a
correct interpretation of Russian law. As in cases arising under
the full faith and credit clause (
Huntington v. Attrill,
146 U. S. 657,
146 U. S. 684;
Adam v. Saenger, 303 U. S. 59,
303 U. S. 64),
these questions of foreign law on which the asserted federal right
is based are not peculiarly within the cognizance of the local
courts. While deference will be given to the determination of the
state court, its conclusion is not accepted as final.
We do not stop to review all the evidence in the voluminous
record of the
Moscow case bearing on the question of the
extraterritorial effect of the Russian decrees of nationalization,
except to note that the expert testimony tendered by the United
States gave great credence to its position. Subsequently to the
hearings in that case, however, the United States, through
diplomatic channels, requested the Commissariat for Foreign Affairs
of the Russian Government to obtain an official declaration by the
Commissariat for Justice of the R.S.F.S.R. which would make clear,
as a matter of Russian law, the intended effect of the Russian
decrees [
Footnote 3]
nationalizing insurance companies
Page 315 U. S. 219
upon the funds of such companies outside of Russia. The official
declaration, dated November 28, 1937, reads as follows:
"The People's Commissariat for Justice of the R.S.F.S.R.
certifies that, by virtue of the laws of the organs of the Soviet
Government all nationalized funds and property of
Page 315 U. S. 220
former private enterprises and companies, in particular by
virtue of the decree of November 28, 1918 (Collection of Laws of
the R.S.F.S.R., 1918, No. 86, Article 904), the funds and property
of former insurance companies, constitute the property of the
State, irrespective of the nature of the property and irrespective
of whether it was situated within the territorial limits of the
R.S.F.S.R. or abroad."
The referee in the
Moscow case found, and the evidence
supported his finding, that the Commissariat for Justice has power
to interpret existing Russian law. That being true, this official
declaration is conclusive so far as the intended extraterritorial
effect of the Russian decree is concerned. This official
declaration was before the court below, though it was not a part of
the record. It was tendered pursuant to § 391 of the New York Civil
Practice Act, as amended by L.1933, c. 690. [
Footnote 4] In New York, it would seem that
foreign law must be found by the court (or in case of a jury trial,
binding instructions must be
Page 315 U. S. 221
given), though procedural considerations require it to be
presented as a question of fact.
Fitzpatrick v. International
Railway Co., 252 N.Y. 127, 169 N.E. 112;
Petroradsky M. K.
Bank v. National City Bank, 253 N.Y. 23, 170 N.E. 479. And
under § 391, as amended, it is clear that the New York appellate
court has authority to consider appropriate decisions interpreting
foreign law even though they are rendered subsequently to the
trial.
Los Angeles Investment Securities Corp. v. Joslyn,
282 N.Y. 438, 26 N.E.2d 968. We can take such notice of the foreign
law as the New York court could have taken. [
Footnote 5]
Adam v. Saenger, supra. We
conclude that this official declaration of Russian law was not only
properly before the court on appeal, but also that it was embraced
within those "written authorities" which § 391 authorizes the court
to consider, even though not introduced in evidence on the trial.
For, while it was not "printed," it would seem to be "other written
law" of unquestioned authenticity and authority, within the meaning
of § 391.
We hold that, so far as its intended effect [
Footnote 6] is concerned, the Russian decree
embraced the New York assets of the First Russian Insurance Co.
Third. The question of whether the decree should be
given extraterritorial effect is, of course, a distinct matter. One
primary issue raised in that connection is whether, under our
constitutional system, New York law can be allowed to stand in the
way.
The decision of the New York Court of Appeals in the
Moscow case is unequivocal. It held that, "under the law
of this State, such confiscatory decrees do not affect the property
claimed here" (280 N.Y. 314, 20 N.E.2d 769);
Page 315 U. S. 222
that the property of the New York branch acquired a "character
of its own" which was "dependent" on the law of New York (p. 310);
that no
"rule of comity and no act of the United States government
constrains this State to abandon any part of its control or to
share it with a foreign State"
(p. 310); that, although the Russian decree effected the death
of the parent company, the situs of the property of the New York
branch was in New York, and that no principle of law forces New
York to forsake the method of distribution authorized in the
earlier appeal (255 N.Y. 415, 175 N.E. 114) and to hold that
"the method which in 1931 conformed to the exactions of justice
and equity must be rejected because retroactively it has become
unlawful"
(p. 312).
It is one thing to hold, as was done in
Guaranty Trust Co.
v. United States, supra, 304 U.S. at p.
304 U. S. 142,
that, under the Litvinov Assignment, the United States did not
acquire "a right free of a preexisting infirmity," such as the
running of the statute of limitations against the Russian
Government, its assignor. Unlike the problem presented here and in
the
Moscow case, that holding in no way sanctions the
asserted power of New York to deny enforcement of a claim under the
Litvinov Assignment because of an overriding policy of the State
which denies validity in New York of the Russian decrees on which
the assigned claims rest. That power was denied New York in
United States v. Belmont, supra, 301 U.
S. 324. With one qualification, to be noted, the
Belmont case is determinative of the present
controversy.
That case involved the right of the United States under the
Litvinov Assignment to recover, from a custodian or stakeholder in
New York, funds which had been nationalized and appropriated by the
Russian decrees.
This Court, speaking through Mr. Justice Sutherland, held that
the conduct of foreign relations is committed by the Constitution
to the political departments of the Federal
Page 315 U. S. 223
Government; that the propriety of the exercise of that power is
not open to judicial inquiry, and that recognition of a foreign
sovereign conclusively binds the courts and "is retroactive, and
validates all actions and conduct of the government so recognized
from the commencement of its existence." 301 U.S. at p.
301 U. S. 328.
It further held (p.
301 U. S. 330)
that recognition of the Soviet Government, the establishment of
diplomatic relations with it, and the Litvinov Assignment were "all
parts of one transaction, resulting in an international compact
between the two governments." After stating that, "in respect of
what was done here, the Executive had authority to speak as the
sole organ" of the national government, it added (p.
301 U. S.
330):
"The assignment and the agreements in connection therewith did
not, as in the case of treaties, as that term is used in the treaty
making clause of the Constitution (Art. II, § 2), require the
advice and consent of the Senate."
It held (p.
301 U. S. 331)
that the
"external powers of the United States are to be exercised
without regard to state laws or policies. The supremacy of a treaty
in this respect has been recognized from the beginning."
And it added that "all international compacts and agreements"
are to be treated with similar dignity, for the reason that
"complete power over international affairs is in the national
government, and is not and cannot be subject to any curtailment or
interference on the part of the several states."
P.
301 U. S. 331.
This Court did not stop to inquire whether, in fact, there was any
policy of New York which enforcement of the Litvinov Assignment
would infringe, since "no state policy can prevail against the
international compact here involved." P.
301 U. S.
327.
The New York Court of Appeals, in the
Moscow case (280
N.Y. 309, 20 N.E.2d 758), distinguished the
Belmont case
on the ground that it was decided on the sufficiency of the
pleadings, the demurrer to the complaint admitting that, under the
Russian decree, the property was confiscated by the Russian
Government and then transferred
Page 315 U. S. 224
to the United States under the Litvinov Assignment. But, as we
have seen, the Russian decree in question was intended to have an
extraterritorial effect, and to embrace funds of the kind which are
here involved. Nor can there be any serious doubt that claims of
the kind here in question were included in the Litvinov Assignment.
[
Footnote 7] It is broad and
inclusive. It should be interpreted
Page 315 U. S. 225
consonantly with the purpose of the compact to eliminate all
possible sources of friction between these two great nations.
See Tucker v. Alexandroff, 183 U.
S. 424,
183 U. S. 437;
Jordan v. Tashiro, 278 U. S. 123,
278 U. S. 127.
Strict construction would run counter to that national policy. For,
as we shall see, the existence of unpaid claims against Russia and
its nationals, which were held in this country and which the
Litvinov Assignment was intended to secure, had long been one
impediment to resumption of friendly relations between these two
great powers.
Page 315 U. S. 226
The holding in the
Belmont case is therefore
determinative of the present controversy unless the stake of the
foreign creditors in this liquidation proceeding and the provision
which New York has provided for their protection call for a
different result.
Fourth. The
Belmont case forecloses any relief
to the Russian corporation. For this Court held in that case (301
U.S. at p.
301 U. S.
332):
". . . our Constitution, laws and policies have no
extraterritorial operation, unless in respect of our own citizens.
. . . What another country has done in the way of taking over
property of its nationals, and especially of its corporations, is
not a matter for judicial consideration here. Such nationals must
look to their own government for any redress to which they may be
entitled."
But it is urged that different considerations apply in case of
the foreign creditors [
Footnote
8] to whom the New York Court of Appeals (255 N.Y. 415, 175
N.E. 114) ordered distribution of these funds. The argument is that
their rights in these funds have vested by virtue of the New York
decree; that to deprive them of the property would violate the
Fifth Amendment, which extends its protection to aliens as well as
to citizens, and that the Litvinov Assignment cannot deprive New
York of its power to administer the balance of the fund in
accordance with its laws for the benefit of these creditors.
At the outset, it should be noted that, so far as appears, all
creditors whose claims arose out of dealings with the New York
branch have been paid. Thus, we are not faced with the question
whether New York's policy of protecting
Page 315 U. S. 227
the so-called local creditors by giving them priority in the
assets deposited with the State (
Matter of People, 242
N.Y. 148, 15159, 151 N.E. 159) should be recognized within the rule
of
Clark v. Williard, 294 U. S. 211, or
should yield to the Federal policy expressed in the international
compact or agreement.
Santovincenzo v. Egan, 284 U. S.
30,
284 U. S. 40;
United States v. Belmont, supra. We intimate no opinion on
that question. The contest here is between the United States and
creditors of the Russian corporation who, we assume, are not
citizens of this country and whose claims did not arise out of
transactions with the New York branch. The United States is seeking
to protect not only claims which it holds, but also claims of its
nationals. H.Rep. No. 865, 76th Cong., 1st Sess. Such claims did
not arise out of transactions with this Russian corporation; they
are, however, claims against Russia or its nationals. The existence
of such claims and their nonpayment had for years been one of the
barriers to recognition of the Soviet regime by the Executive
Department. Graham, Russian-American Relations, 1917-1933: An
Interpretation, 28 Am.Pol.Sci.Rev. 387; 1 Hackworth, Digest of
International Law (1940), pp. 302-304. The purpose of the
discussions leading to the policy of recognition was to resolve
"all questions outstanding" between the two nations. Establishment
of Diplomatic Relations with the Union of Soviet Socialist
Republics, Dept. of State, Eastern European Series, No. 1 (1933),
p. 1. Settlement of all American claims against Russia was one
method of removing some of the prior objections to recognition
based on the Soviet policy of nationalization. The Litvinov
Assignment was not only part and parcel of the new policy of
recognition (
id., p. 13), it was also the method adopted
by the Executive Department for alleviating in this country the
rigors of nationalization. Congress tacitly recognized that policy.
Acting in anti
Page 315 U. S. 228
Assignment (H.Rep. No. 865, 76th Cong., 1st Sess.), it
authorized the appointment of a Commissioner to determine the
claims of American nationals against the Soviet Government. Joint
Resolution of August 4, 1939, 53 Stat. 1199.
If the President had the power to determine the policy which was
to govern the question of recognition, then the Fifth Amendment
does not stand in the way of giving full force and effect to the
Litvinov Assignment. To be sure, aliens as well as citizens are
entitled to the protection of the Fifth Amendment.
Russian
Volunteer Fleet v. United States, 282 U.
S. 481. A State is not precluded, however, by the
Fourteenth Amendment from according priority to local creditors as
against creditors who are nationals of foreign countries and whose
claims arose abroad.
Disconto Gesellschaft v. Umbreit,
208 U. S. 570. By
the same token, the Federal Government is not barred by the Fifth
Amendment from securing for itself and our nationals priority
against such creditors. And it matters not that the procedure
adopted by the Federal Government is globular, and involves a
regrouping of assets. There is no Constitutional reason why this
Government need act as the collection agent for nationals of other
countries when it takes steps to protect itself or its own
nationals on external debts. There is no reason why it may not,
through such devices as the Litvinov Assignment, make itself and
its nationals whole from assets here before it permits such assets
to go abroad in satisfaction of claims of aliens made elsewhere and
not incurred in connection with business conducted in this country.
The fact that New York has marshaled the claims of the foreign
creditors here involved and authorized their payment does not give
them immunity from that general rule.
If the priority had been accorded American claims by treaty with
Russia, there would be no doubt as to its validity.
Cf.
Santovincenzo v. Egan, supra. The same result
Page 315 U. S. 229
obtains here. The powers of the President in the conduct of
foreign relations included the power, without consent of the
Senate, to determine the public policy of the United States with
respect to the Russian nationalization decrees.
"What government is to be regarded here as representative of a
foreign sovereign state is a political, rather than a judicial,
question, and is to be determined by the political department of
the government."
Guaranty Trust Co. v. United States, supra, 304 U.S. at
p.
304 U. S. 137.
That authority is not limited to a determination of the government
to be recognized. It includes the power to determine the policy
which is to govern the question of recognition. Objections to the
underlying policy, as well as objections to recognition, are to be
addressed to the political department, and not to the courts.
See Guaranty Trust Co. v. United States, supra, p.
304 U. S. 138;
Kennett v.
Chambers, 14 How. 38,
55 U. S. 50-51.
As we have noted, this Court in the
Belmont case
recognized that the Litvinov Assignment was an international
compact which did not require the participation of the Senate. It
stated (301 U.S. pp.
301 U. S.
330-331):
"There are many such compacts, of which a protocol, a
modus
vivendi, & postal convention, and agreements like that now
under consideration are illustrations."
And see Monaco v. Mississippi, 292 U.
S. 313,
292 U. S. 331;
United States v. Curtiss-Wright Corp., 299 U.
S. 304,
299 U. S. 318.
Recognition is not always absolute; it is sometimes conditional. 1
Moore, International Law Digest (1906), pp. 73-74; 1 Hackworth,
Digest of International Law (1940), pp. 192-195. Power to remove
such obstacles to full recognition as settlement of claims of our
nationals (Levitan, Executive Agreements, 35 Ill.L.Rev. 365,
382-385) certainly is a modest implied power of the President, who
is the "sole organ of the federal government in the field of
international relations."
United States v. Curtiss-Wright
Corp., supra, p.
299 U. S. 320.
Effectiveness in handling the delicate problems of foreign
relations requires no less. Unless
Page 315 U. S. 230
such a power exists, the power of recognition might be thwarted
or seriously diluted. No such obstacle can be placed in the way of
rehabilitation of relations between this country and another nation
unless the historic conception of the powers and responsibilities
of the President in the conduct of foreign affairs (
see
Moore, Treaties and Executive Agreements, 20 Pol.Sci.Q. 385,
403-417) is to be drastically revised. It was the judgment of the
political department that full recognition of the Soviet Government
required the settlement of all outstanding problems, including the
claims of our nationals. Recognition and the Litvinov Assignment
were interdependent. We would usurp the executive function if we
held that that decision was not final and conclusive in the
courts.
"All constitutional acts of power, whether in the executive or
in the judicial department, have as much legal validity and
obligation as if they proceeded from the legislature, . . ."
The Federalist, No. 64. A treaty is a "Law of the Land" under
the supremacy clause (Art. VI, Cl. 2) of the Constitution. Such
international compacts and agreements as the Litvinov Assignment
have a similar dignity.
United States v. Belmont, supra,
301 U.S. at p.
301 U. S. 331.
See Corwin, The President, Office & Powers (1940), pp.
228-240.
It is, of course, true that even treaties with foreign nations
will be carefully construed so as not to derogate from the
authority and jurisdiction of the States of this nation unless
clearly necessary to effectuate the national policy.
Guaranty
Trust Co. v. United States, supra, p.
304 U. S. 143
and cases cited. For example, in
Todok v. Union State
Bank, 281 U. S. 449,
this Court took pains in its construction of a treaty, relating to
the power of an alien to dispose of property in this country, not
to invalidate the provisions of state law governing such
dispositions. Frequently, the obligation of a treaty will be
dependent on state law.
Prevost v.
Greneaux, 19 How. 1. But state
Page 315 U. S. 231
law must yield when it is inconsistent with, or impairs the
policy or provisions of, a treaty or of an international compact or
agreement.
See Nielsen v. Johnson, 279 U. S.
47. Then, the power of a State to refuse enforcement of
rights based on foreign law which runs counter to the public policy
of the forum (
Griffin v. McCoach, 313 U.
S. 498,
313 U. S. 506)
must give way before the superior Federal policy evidenced by a
treaty or international compact or agreement.
Santovincenzo v.
Egan, supra, 284 U.S.
284
U. S. 30;
United States v. Belmont, supra.
Enforcement of New York's policy as formulated by the
Moscow case would collide with and subtract from the
Federal policy whether it was premised on the absence of
extraterritorial effect of the Russian decrees, the conception of
the New York branch as a distinct juristic personality, or
disapproval by New York of the Russian program of nationalization.
[
Footnote 9] For the
Moscow case refuses to give effect or recognition in New
York to acts of the Soviet Government which the United States, by
its policy of recognition, agreed no longer to question.
Enforcement of such state policies would indeed tend to restore
some of the precise impediments to friendly relations which the
President intended to remove on inauguration of the policy of
recognition of the Soviet Government. In the
Page 315 U. S. 232
first place, such action by New York, no matter what gloss be
given it, amounts to official disapproval or nonrecognition of the
nationalization program of the Soviet Government. That disapproval
or nonrecognition is in the face of a disavowal by the United
States of any official concern with that program. It is in the face
of the underlying policy adopted by the United States when it
recognized the Soviet Government. In the second place, to the
extent that the action of the State in refusing enforcement of the
Litvinov Assignment results in reduction or nonpayment of claims of
our nationals, it helps keep alive one source of friction which the
policy of recognition intended to remove. Thus, the action of New
York tends to restore some of the precise irritants which had long
affected the relations between these two great nations and which
the policy of recognition was designed to eliminate.
We recently stated in
Hines v. Davidowitz, 312 U. S.
52,
312 U. S. 68,
that the field which affects international relations is
"the one aspect of our government that, from the first, has been
most generally conceded imperatively to demand broad national
authority,"
and that any state power which may exist "is restricted to the
narrowest of limits." There, we were dealing with the question as
to whether a state statute regulating aliens survived a similar
federal statute. We held that it did not. Here, we are dealing with
an exclusive federal function. If state laws and policies did not
yield before the exercise of the external powers of the United
States, then our foreign policy might be thwarted. These are
delicate matters. If state action could defeat or alter our foreign
policy, serious consequences might ensue. The nation as a whole
would be held to answer if a State created difficulties with a
foreign power.
Cf. Chy Lung v. Freeman, 92 U. S.
275,
92 U. S.
279-280. Certainly, the conditions for "enduring
friendship" between the nations, which the policy of recognition in
this instance was designed
Page 315 U. S. 233
to effectuate, [
Footnote
10] are not likely to flourish where, contrary to national
policy, a lingering atmosphere of hostility is created by state
action.
Such considerations underlie the principle of
Oetjen v.
Central Leather Co., 246 U. S. 297,
246 U. S.
302-303, that, when a revolutionary government is
recognized as a
de jure government,
"such recognition is retroactive in effect, and validates all
the actions and conduct of the government so recognized from the
commencement of its existence."
They also explain the rule expressed in
Underhill v.
Hernandez, 168 U. S. 250,
168 U. S. 252,
that "the courts of one country will not sit in judgment on the
acts of the government of another done within its own
territory."
The action of New York in this case amounts in substance to a
rejection of a part of the policy underlying recognition by this
nation of Soviet Russia. Such power is not accorded a State in our
constitutional system. To permit it would be to sanction a
dangerous invasion of Federal authority. For it would "imperil the
amicable relations between governments and vex the peace of
nations."
Oetjen v. Central Leather Co., supra, p.
246 U. S. 304. It
would tend to disturb that equilibrium in our foreign relations
which the political departments of our national government had
diligently endeavored to establish.
We repeat that there are limitations on the sovereignty of the
States. No State can rewrite our foreign policy to conform to its
own domestic policies. Power over external affairs is not shared by
the States; it is vested in the national government exclusively. It
need not be so exercised as to conform to state laws or state
policies, whether they be expressed in constitutions, statutes, or
judicial decrees. And the policies of the States become wholly
irrelevant to judicial inquiry when the United States, acting
Page 315 U. S. 234
within its constitutional sphere, seeks enforcement of its
foreign policy in the courts. For such reasons, Mr. Justice
Sutherland stated in
United States v. Belmont, supra, 301
U.S. at p.
301 U. S.
331,
"In respect of all international negotiations and compacts, and
in respect of our foreign relations generally, state lines
disappear. As to such purposes, the State of New York does not
exist."
We hold that the right to the funds or property in question
became vested in the Soviet Government as the successor to the
First Russian Insurance Co.; that this right has passed to the
United States under the Litvinov Assignment, and that the United
States is entitled to the property as against the corporation and
the foreign creditors.
The judgment is reversed, and the cause is remanded to the
Supreme Court of New York for proceedings not inconsistent with
this opinion.
Reversed.
MR. JUSTICE REED and MR. JUSTICE JACKSON did not participate in
the consideration or decision of this case.
[
Footnote 1]
See Establishment of Diplomatic Relations with the
Union of Soviet Socialist Republics, Dept. of State, Eastern
European Series, No. 1 (1933) for the various documents pertaining
to recognition.
[
Footnote 2]
The three decrees on which the United States placed primary
emphasis (apart from the one set forth in
note 3 infra) were described in the findings
of the referee in the
Moscow case as follows:
"88. The decree of November 18, 1919, on the annulment of life
insurance contracts abolished insurance of life in all its forms in
the Republic and annulled all contracts with insurance companies
and savings banks with respect to the insurance of life, capital
and income."
"89. The decree of the Soviet of People's Commissars dated March
4, 1919, on the liquidation of obligations of State enterprises,
provided that stock certificates and shares of joint stock
companies, whose enterprises have been either nationalized or
sequestered, are annulled and also provided that such enterprises
are free from the payment of all debts to private persons and
enterprises which have arisen prior to the nationalization of these
enterprises, including payments on bond loans with the exception
only of wages due to workers and employees."
"90. The decree of the Soviet of People's Commissars dated June
28, 1918, provides in Article I that the commercial and industrial
enterprises enumerated therein, which are located within the
boundaries of the Soviet Republic, together with all their capital
and property, regardless of what the latter may consist, are
declared the property of the Republic."
[
Footnote 3]
Relevant portions of the Insurance Decree dated November 28,
1918, translated in accordance with the findings of the referee in
the
Moscow case, are:
"603. On the organization of the insurance business in the
Russian Republic."
"(1) Insurance in all its forms, such as: fire insurance,
insurance on shipments, life insurance, accident insurance, hail
insurance, livestock insurance, insurance against failure of crops,
etc. is hereby proclaimed as a State monopoly."
"Note. Mutual insurance of movable goods and merchandise by the
cooperative organizations is conducted on a special basis."
"(2) All private insurance companies and organizations (stock
and share holding, also mutual) upon issuance of this decree are
subject to liquidation; former rural* (People's Soviet) and
municipal mutual insurance organizations operating within the
boundaries of the Russian Republic are hereby proclaimed the
property of the Russian Socialist Federated Soviet Republic."
"(3) For the immediate organization of the insurance business
and for the liquidation of parts of insurance institutions, which
have become the property of the Russian Socialist Federated Soviet
Republic, a Commission is established under the Supreme Soviet of
National Economy, consisting of representatives of the Supreme
Soviet of National Economy, the People's Commissariats of Commerce
and Industry, Interior Affairs, the Commissar of Insurance and Fire
Prevention, Finances, Labor, and State Control, and of Soviet
Insurance Organizations (People's Soviet and Municipal
Mutual)."
" Note. The same commission is charged with the liquidating of
private insurance organizations, all property and assets of which,
remaining on hand after their liquidation, shall become the
property of the Russian Socialist Federated Soviet Republic."
"(4) The above-mentioned reorganization and liquidation of
existing insurance organizations and institutions shall be
accomplished not later than the first day of April, 1919."
"
* * * *"
"(8) The present decree comes into force on the day of its
publication."
------
* "zemskie."
The referee in the
Moscow case found that, upon
publication of this decree, all Russian insurance companies were
prohibited from engaging in the insurance business in Russia; that
they became subject to liquidation and were dissolved; that all of
their assets in Russia became the property of the State; that, on
publication of the decree, the directors of the companies lost all
power to act as directors or conservators of the property, or to
represent the companies in any way, and that the Russian Government
became the statutory successor and domiciliary liquidator of
companies whose property was nationalized.
[
Footnote 4]
That section reads:
"A printed copy of a statute, or other written law, of another
state, or of a territory, or of a foreign country, or a printed
copy of a proclamation, edict, decree or ordinance, by the
executive power thereof, contained in a book or publication
purporting or proved to have been published by the authority
thereof, or proved to be commonly admitted as evidence of the
existing law in the judicial tribunals thereof, is presumptive
evidence of the statute, law, proclamation, edict, decree or
ordinance. The unwritten or common law of another state, or of a
territory, or of a foreign country, may be proved as a fact by oral
evidence. The books of reports of cases adjudged in the courts
thereof must also be admitted as presumptive evidence of the
unwritten or common law thereof. The law of such state or territory
or foreign country is to be determined by the court or referee and
included in the findings of the court or referee or charged to the
jury, as the case may be. Such finding or charge is subject to
review on appeal. In determining such law, neither the trial court
nor any appellate court shall be limited to the evidence produced
on the trial by the parties, but may consult any of the written
authorities above named in this section, with the same force and
effect as if the same had been admitted in evidence."
[
Footnote 5]
Hence, the denial of the motion of the United States to certify
the official declaration as part of the record of the
Moscow case in this Court (281 N.Y. 818, 24 N.E.2d 487)
would seem immaterial to our right to consult it.
[
Footnote 6]
See also note 7
infra.
[
Footnote 7]
A clarification of the Litvinov Assignment was made in an
exchange of letters between the American Charge d'Affaires and the
People's Commissar for Foreign Affairs on January 7, 1937. The
letter of the former read:
"I have the honor to inform you that it is the understanding of
the Government of the United States that the Government of the
Union of Soviet Socialist Republics considers that, by and upon the
formation of the Union of Soviet Socialist Republics and the
adoption of the Constitution of 1923 of the Union of Soviet
Socialist Republics, the Union of Soviet Socialist Republics
acquired the right to dispose of the property, rights, or interests
therein located abroad of all corporations and companies which had
theretofore been nationalized by decrees of the constituent
republics or their predecessors."
"The Government of the United States further understands that it
was the purpose and intention of the Government of the Union of
Soviet Socialist Republics to assign to the Government of the
United States, among other amounts, all the amounts admitted to be
due or that may be found to be due not only the Union of Soviet
Socialist Republics, but also the constituent republics of the
Union of Soviet Socialist Republics or their predecessors from
American nationals, including corporations, companies,
partnerships, or associations, and also the claim against the
United States of the Russian Volunteer Fleet, in litigation in the
United States Court of Claims, and that the Government of the Union
of Soviet Socialist Republics did release and assign all such
amounts to the Government of the United States by virtue of the
note addressed by you to the President of the United States on
November 16, 1933."
"Will you be good enough to confirm the understanding which the
Government of the United States has in this matter concerning the
law of the Russian Socialist Federated Soviet Republic, the
Constitution and laws of the Union of Soviet Socialist Republics,
and the intention and purpose of the Government of the Union of
Soviet Socialist Republics in the above-mentioned assignment?"
The reply of the People's Commissar for Foreign Affairs was:
"In reply to your note of January 7, 1937, I have the honor to
inform you that the Government of the Union of Soviet Socialist
Republics considers that, by and upon the formation of the Union of
Soviet Socialist Republics and the adoption of the Constitution of
1923 of the Union of Soviet Socialist Republics, the Union of
Soviet Socialist Republics acquired the right to dispose of the
property, rights, or interests therein located abroad of all
corporations and companies which had theretofore been nationalized
by decrees of the constituent republics or their predecessors."
"You are further informed that it was the purpose and intention
of the Government of the Union of Soviet Socialist Republics to
assign to the Government of the United States, among other amounts,
all the amounts admitted to be due or that may be found to be due
not only the Union of Soviet Socialist Republics, but also the
constituent republics of the Union of Soviet Socialist Republics or
their predecessors from American nationals, including corporations,
companies, partnerships, or associations, and also the claim
against the United States of the Russian Volunteer Fleet, in
litigation in the United States Court of Claims, and that the
Government of the Union of Soviet Socialist Republics did release
and assign all such amounts to the Government of the United States
by virtue of the note addressed by me to the President of the
United States on November 16, 1933."
"I have the honor, therefore, to confirm the understanding, as
expressed in your note of January 7, 1937, which the Government of
the United States has in this matter concerning the law of the
Russian Socialist Federated Soviet Republic, the Constitution and
laws of the Union of Soviet Socialist Republics, and the intention
and purpose of the Government of the Union of Soviet Socialist
Republics in the above-mentioned assignment."
[
Footnote 8]
In view of the disposition which we make of this case, we
express no view on whether these creditors would be barred from
asserting their claims here by virtue of the ruling in
Canada
Southern Ry. Co. v. Gebhard, 109 U. S. 527,
109 U. S. 538,
that
"anything done at the legal home of the corporation, under the
authority of such laws, which discharges it from liability there,
discharges it everywhere."
[
Footnote 9]
In this connection, it should be noted that § 977(b) of the New
York Civil Practice Act provides for the appointment of a receiver
to liquidate local assets of a foreign corporation where,
inter
alia, it has been dissolved, liquidated, or nationalized.
Subdivision 19 of that section provides in part:
". . . such liquidation, dissolution, nationalization,
expiration of its existence, or repeal, suspension, revocation or
annulment of its charter or organic law in the country of its
domicile, or any confiscatory law or decree thereof, shall not be
deemed to have any extraterritorial effect or validity as to the
property, tangible or intangible, debts, demands or choses in
action of such corporation within the state or any debts or
obligations owing to such corporation from persons, firms or
corporations residing, sojourning or doing business in the
state."
[
Footnote 10]
Establishment of Diplomatic Relation with the Union of Soviet
Socialist Republic,
supra, note 1 p. 20.
MR. JUSTICE FRANKFURTER:
The nature of the controversy makes it appropriate to add a few
observations to my Brother DOUGLAS' opinion.
Legal ideas, like other organisms, cannot survive severance from
their congenial environment. Concepts like "situs" and
"jurisdiction" and "comity" summarize views evolved by the judicial
process, in the absence of controlling legislation, for the
settlement of domestic issues. To utilize such concepts for the
solution of controversies international in nature, even though they
are presented to the courts in the form of a private litigation, is
to invoke a narrow and inadmissible frame of reference.
The expropriation decrees of the U.S.S.R. gave rise to extensive
litigation among various classes of claimants to
Page 315 U. S. 235
funds belonging to Russian companies doing business or keeping
accounts abroad. England and New York were the most active centers
of this litigation. The opinions in the many cases before their
courts constitute a sizeable library. They all derive from a single
theme -- the effect of the Russian expropriation decrees upon
particular claims, in some cases before and in some cases after
recognition of the U.S.S.R., either
de jure or
de
facto. One cannot read this body of judicial opinions, in the
Divisional Court, the Court of Appeal and the House of Lords, in
the New York Supreme Court, the Appellate Division, and the Court
of Appeals, and not be left with the conviction that they are the
product largely of casuistry, confusion, and indecision.
See Jaffee, Judicial Aspects of Foreign Relations,
passim. The difficulties were inherent in the problems
that confronted the courts. They were due to what Chief Judge
Cardozo called "the hazards and embarrassments growing out of the
confiscatory decrees of the Russian Soviet Republic,"
Matter of
People (Russian Reinsurance Co.), 55 N.Y. 415, 420, 175 N.E.
114, 115, and to the endeavor to adjust these "hazards and
embarrassments" to "the largest considerations of public policy and
justice,"
James & Co. v. Second Russian Insurance Co.,
239 N.Y. 248, 256, 146 N.E. 369, 370, when private claims to funds
covered by the expropriation decrees were before the courts,
particularly at a time when nonrecognition was our national
policy.
The opinions show both the English and the New York courts
struggling to deal with these business consequences of major
international complications through the application of traditional
judicial concepts. "Situs," "jurisdiction," "comity,"
"domestication" and "dissolution" of corporations, and other legal
ideas that often enough in litigation of a purely domestic nature
prove their limitations as instruments for solution or even as
means for analysis, were pressed into service for adjudicating
claims
Page 315 U. S. 236
whose international implications could not be sterilized. This
accounts for the divergence of views among the judges and for such
contradictory and confusing rulings as the series of New York
cases, from
Wulfsohn v. Russian Republic, 234 N.Y. 372,
138 N.E. 24, to the ruling now under review,
Moscow Fire Ins.
Co. v. Bank of New York & Trust Co., 280 N.Y. 286, 20
N.E.2d 758, accounts for
Russian Commercial & Industrial
Bank v. Comptoir d'Escompte de Mulhouse, [1925] A.C. 112,
compared with
Lazard Brothers & Co. v. Midland Bank,
[1933] A.C. 289, and for the fantastic result of the decision in
Lehigh Valley R. Co. v. State of Russia, 21 F.2d 396, in
which the Kerensky regime was, in accordance with diplomatic
determination, treated as the existing Russian government a decade
after its extinction.
Courts could hardly escape perplexities when citizens asserted
claims to Russian funds within the control of the forum. But a
totally different situation was presented when all claims of local
creditors were satisfied, and only the conflicting claims of Russia
and of former Russian creditors were involved. In the particular
circumstances of Russian insurance companies doing business in New
York, the State Superintendent of Insurance took possession of the
assets of the Russian branches in New York to conserve them for the
benefit of those entitled to them. Liquidation followed, domestic
creditors and policy holders were paid, and the Superintendent
found a large surplus on his hands. As statutory liquidator, the
Superintendent of Insurance took the ground that,
"in view of the hazards and uncertainties of the Russian
situation, the surplus should not be paid to anyone, but should be
left in his hands indefinitely, until a government recognized by
the United States shall function in the territory of what was once
the Russian Empire."
255 N.Y. 415, 421, 175 N.E. 114, 115. So the Appellate Division
decreed. 229 App.Div. 637, 243 N.Y.S. 35. But the Court of
Appeals
Page 315 U. S. 237
reversed and the scramble among the foreign claimants was
allowed to proceed. 255 N.Y. 415, 17 N.E. 114. The Court of Appeals
held that the retention of the surplus funds in the custody of the
Superintendent of Insurance until the international relations
between the United States and Russia had been formalized "did not
solve the problem. It adjourned it
sine die." But
adjournment, it may be suggested, is sometimes a constructive
interim solution to avoid a temporizing and premature measure
giving rise to new difficulties. Such I believe to have been the
mischief that was bound to follow the rejection of the
Superintendent's policy of conservation of the surplus Russian
funds until recognition. Their disposition was inescapably
entangled in recognition.
In the immediate case, the United States sues, in effect, as the
assignee of the Russian government for claims by that government
against the Russian Insurance Company for monies in deposit in New
York to which no American citizen makes claim. No manner of speech
can change the central fact that here are monies which belonged to
a Russian company and for which the Russian government has decreed
payment to itself.
And so the question is whether New York can bar Russia from
realizing on its decrees against these funds in New York after
formal recognition by the United States of Russia and in light of
the circumstances that led up to recognition and the exchange of
notes that attended it. For New York to deny the effectiveness of
these Russian decrees under such circumstances would be to oppose,
at least in some respects, its notions as to the effect which
should be accorded recognition as against that entertained by the
national authority for conducting our foreign affairs. And the
result is the same whether New York accomplishes it because its
courts invoke judicial views regarding the enforcement of foreign
expropriation decrees, or regarding the survival in New York of a
Russian
Page 315 U. S. 238
business which according to Russian law had ceased to exist, or
regarding the power of New York courts over funds of Russian
companies owing from New York creditors. If this Court is not bound
by the construction which the New York Court of Appeals places upon
complicated transactions in New York in determining whether they
come within the protection of the Constitution against impairing
the obligations of contract, we certainly should not be bound by
that court's construction of transactions so entangled in
international significance as the status of New York branches of
Russian companies and the disposition of their assets.
Compare
Appleby v. City of New York, 271 U. S. 364,
and Irving Trust Co. v. Day, 314 U.
S. 556. When the decision of a question of fact or of
local law is so interwoven with the decision of a question of
national authority that the one necessarily involves the other, we
are not foreclosed by the state court's determination of the facts
or of the local law. Otherwise, national authority could be
frustrated by local rulings.
See Creswill v. Knights of
Pythias, 225 U. S. 246;
Davis v. Wechsler, 263 U. S. 22.
It is not consonant with the sturdy conduct of our foreign
relations that the effect of Russian decrees upon Russian funds in
this country should depend on such gossamer distinctions as those
by which courts have determined that Russian branches survive the
death of their Russian origin. When courts deal with such
essentially political phenomena as the taking over of Russian
businesses by the Russian government by resorting to the forms and
phrases of conventional corporation law, they inevitably fall into
a dialectic quagmire. With commendable candor, the House of Lords
frankly confessed as much when it practically overruled
Russian
Commercial & Industrial Bank v. Comptoir d'Escompte de
Mulhouse, supra, saying through Lord Wright, "the whole matter
has now to be reconsidered in the light of new evidence and of the
historical evolution
Page 315 U. S. 239
of ten years."
Lazard Brothers & Co. v. Midland
Bank, [1933] A.C. 289, 300.
For we are not dealing here with physical property -- whether
chattels or realty. We are dealing with intangible rights, with
choses in action. The fact that these claims were reduced to money
does not change the character of the claims, and certainly is too
tenuous a thread on which to determine issues affecting the
relation between nations. Corporeal property may give rise to rules
of law which, we have held, even in purely domestic controversies,
ought not to be transferred to the adjudication of impalpable
claims such as are here in controversy.
Curry v.
McCanless, 307 U. S. 357,
307 U. S. 363
et seq.
As between the states, due regard for their respective
governmental acts is written into the Constitution by the Full
Faith and Credit Clause (Art. IV, § 1). But the scope of its
operation -- when may the policy of one state deny the consequences
of a transaction authorized by the laws of another -- has given
rise to a long history of judicial subtleties which hardly commend
themselves for transfer to the solution of analogous problems
between friendly nations.
See Huntington v. Attrill,
146 U. S. 657;
Finney v. Guy, 189 U. S. 335;
Milwaukee County v. White Co., 296 U.
S. 268;
Pacific Ins. Co. v. Industrial Comm'n,
306 U. S. 493,
306 U. S. 502;
Pink v. A.A.A. Highway Express, 314 U.
S. 201.
For more than fifteen years, formal relations between the United
States and Russia were broken because of serious differences
between the two countries regarding the consequences to us of two
major Russian policies. This complicated process of friction,
abstention from friendly relations, efforts at accommodation, and
negotiations for removing the causes of friction, are summarized by
the delusively simple concept of "nonrecognition." The history of
Russo-American relations leaves no room for doubt that the two
underlying sources of difficulty were
Page 315 U. S. 240
Russian propaganda and expropriation. Had any state court during
this period given comfort to the Russian views in this contest
between its government and ours, it would, to that extent, have
interfered with the conduct of our foreign relations by the
Executive, even if it had purported to do so under the guise of
enforcing state law in a matter of local policy. On the contrary,
during this period of nonrecognition, New York denied Russia access
to her courts, and did so on the single and conclusive ground: "We
should do nothing to thwart the policy which the United States has
adopted."
Russian Republic v. Cibrario, 235 N.Y. 255, 263,
139 N.E. 259, 262. Similarly, no invocation of a local rule
governing "situs" or the survival of a domesticated corporation,
however applicable in an ordinary case, is within the competence of
a state court if it would thwart to any extent "the policy which
the United States has adopted" when the President reestablished
friendly relations in 1933.
And it would be thwarted if the judgment below were allowed to
stand.
That the President's control of foreign relations includes the
settlement of claims is indisputable. Thus, referring to the
adhesion of the United States to the Dawes Plan, Secretary of State
Hughes reported that
"this agreement was negotiated under the long-recognized
authority of the President to arrange for the payment of claims in
favor of the United States and its nationals. The exercise of this
authority has many illustrations, one of which is the Agreement of
1901 for the so-called Boxer Indemnity."
(Secretary Hughes to President Coolidge, February 3, 1925, MS.,
Department of State, quoted in 5 Hackworth, Digest of Int.Law, c.
16, § 514.) The President's power to negotiate such a settlement is
the same whether it is an isolated transaction between this country
and a friendly nation or is part of a complicated negotiation to
restore normal relations, as was the case with Russia.
Page 315 U. S. 241
That the power to establish such normal relations with a foreign
country belongs to the President is equally indisputable.
Recognition of a foreign country is not a theoretical problem or an
exercise in abstract symbolism. It is the assertion of national
power directed towards safeguarding and promoting our interests and
those of civilization. Recognition of a revolutionary government
normally involves the removal of areas of friction. As often as
not, areas of friction are removed by the adjustment of claims
pressed by this country on behalf of its nationals against a new
regime.
Such a settlement was made by the President when this country
resumed normal relations with Russia. The two chief barriers to
renewed friendship with Russia -- intrusive propaganda and the
effects of expropriation decrees upon our nationals -- were at the
core of our negotiations in 1933, as they had been for a good many
years. The exchanges between the President and M. Litvinov must be
read not in isolation, but as the culmination of difficulties and
dealings extending over fifteen years. And they must be read not as
self-contained technical documents, like a marine insurance
contract or a bill of lading, but as characteristically delicate
and elusive expressions of diplomacy. The draftsmen of such notes
must save sensibilities and avoid the explicitness on which
diplomatic negotiations so easily founder.
The controlling history of the Soviet regime and of this
country's relations with it must be read between the lines of the
Roosevelt-Litvinov Agreement. One needs to be no expert in Russian
law to know that the expropriation decrees intended to sweep the
assets of Russian companies taken over by that government into
Russia's control no matter where those assets were credited.
Equally clear is it that the assignment by Russia meant to give the
United States, as part of the comprehensive settlement, everything
that Russia claimed under its laws against
Page 315 U. S. 242
Russians. It does violence to the course of negotiations between
the United States and Russia, and to the scope of the final
adjustment, to assume that a settlement thus made on behalf of the
United States -- to settle both money claims and to soothe feelings
-- was to be qualified by the variant notions of the courts of the
forty-eight states regarding "situs" or "jurisdiction" over
intangibles or the survival of extinct Russian corporations. In our
dealings with the outside world, the United States speaks with one
voice and acts as one, unembarrassed by the complications as to
domestic issues which are inherent in the distribution of political
power between the national government and the individual
states.
MR. CHIEF JUSTICE STONE, dissenting:
I think the judgment should be affirmed.
As my brethren are content to rest their decision on the
authority of the dictum in
United States v. Belmont,
301 U. S. 324,
without the aid of any pertinent decision of this Court, I think a
word should be said of the authority and reasoning of the
Belmont case and of the principles which I think are
controlling here.
In the
Belmont case, the United States brought suit in
the federal court to recover a debt alleged to be due upon a
deposit account of a Russian national with a New York banker. The
complaint set up the confiscation of the account by decrees of the
Soviet Government and the transfer of the debt to the United States
by the Litvinov assignment, concurrently with our diplomatic
recognition of that Government. It was not alleged, nor did it
appear, that the New York courts had, subsequent to recognition,
refused to give effect to the Soviet decrees as operating to
transfer the title of Russian nationals to property located in New
York. No such national or any adverse claimant was a party to the
suit. In sustaining the complaint against demurrer, this Court said
(p.
301 U. S.
332):
"In so holding,
Page 315 U. S. 243
we deal only with the case as now presented and with the parties
now before us. We do not consider the status of adverse claims, if
there be any, of others not parties to this action. And nothing we
have said is to be construed as foreclosing the assertion of any
such claim to the fund involved, by intervention or other
appropriate proceeding. We decide only that the complaint alleges
facts sufficient to constitute a cause of action against the
respondents."
The questions thus explicitly reserved are presented by the case
now before us. The courts of New York, in the exercise of the
constitutional authority ordinarily possessed by state courts to
declare the rules of law applicable to property located within
their territorial limits, have refused to recognize the Soviet
decrees as depriving creditors and other claimants representing the
interests of the insurance company of their rights under New York
law. Numerous individual creditors and other claimants, and the New
York Superintendent of Insurance, who represents all claimants, are
parties to the present suit and assert their claims to the
exclusion of the United States.
It is true that this Court, in the
Belmont case,
indulged in some remarks as to the effect on New York law of our
diplomatic recognition of the Soviet Government and of the
assignment of all its claims against American nationals to the
United States. Upon the basis of these observations, it thought
that the New York courts were bound to recognize and apply the
Soviet decrees to property which was located in New York when the
decrees were promulgated. But all this was predicated upon the
mistaken assumption that, by disregarding the decrees, the New York
courts would be giving an extraterritorial effect to New York law.
These observations were irrelevant to the decision there announced,
and, for reasons shortly to be given, I think plainly inapplicable
here. They were but
obiter dicta which, so far as they
have not been discredited by
Page 315 U. S. 244
our decision in
Guaranty Trust Co. v. United States,
304 U. S. 126, and
so far as they now merit it "may be respected, but ought not to
control the judgment in a subsequent suit, when the very point is
presented for decision." Chief Justice Marshall in
Cohens v.
Virginia, 6 Wheat. 264,
19 U. S. 399;
Mr. Justice Sutherland, in
Williams v. United States,
289 U. S. 553,
289 U. S.
568.
We have no concern here with the wisdom of the rules of law
which the New York courts have adopted in this case or their
consonance with the most enlightened principles of jurisprudence.
State questions do not become federal questions because they are
difficult or because we may think that the state courts have given
wrong answers to them. The only questions before us are whether New
York has constitutional authority to adopt its own rules of law
defining rights in property located in the state, and, if so,
whether that authority has been curtailed by the exercise of a
superior federal power by recognition of the Soviet Government and
acceptance of its assignment to the United States of claims against
American nationals, including the New York property.
I shall state my grounds for thinking that the pronouncements in
the
Belmont case, on which the Court relies for the answer
to these questions, are without the support of reason or accepted
principles of law. No one doubts that the Soviet decrees are the
acts of the government of the Russian state, which is sovereign in
its own territory, and that, in consequence of our recognition of
that government, they will be so treated by our State Department.
As such, when they affect property which was located in Russia at
the time of their promulgation, they are subject to inquiry, if at
all, only through our State Department, and not in our courts.
Underhill v. Hernandez, 168 U. S. 250;
Oetjen v. Central Leather Co., 246 U.
S. 297;
Ricaud v. American Metal Co.,
246 U. S. 304,
246 U. S.
308-310;
Salimoff & Co. v. Standard Oil
Co., 262 N.Y. 220,
Page 315 U. S. 245
186 N.E. 679. But the property to which the New York judgment
relates has at all relevant times been in New York in the custody
of the Superintendent of Insurance as security for the policies of
the insurance company, and is now in the Superintendent's custody
as Liquidator acting under the direction of the New York courts.
United States v. Bank of New York Co., 296 U.
S. 463,
296 U. S.
478-479. In administering and distributing the property
thus within their control, the New York courts are free to apply
their own rules of law, including their own doctrines of conflict
of laws,
see Erie R. Co. v. Tompkins, 304 U. S.
64,
304 U. S. 78;
Griffin v. McCoach, 313 U. S. 498;
Kryger v. Wilson, 242 U. S. 171,
242 U. S. 176,
except insofar as they are subject to the requirements of the full
faith and credit clause -- a clause applicable only to the
judgments and public acts of states of the Union, and not those of
foreign states.
Aetna Life Insurance Co. v. Tremblay,
223 U. S. 185;
cf. 38 U. S.
Earle, 13 Pet. 519,
38 U. S.
589-590;
Bond v. Hume, 243 U. S.
15,
243 U. S.
21-22.
This Court has repeatedly decided that the extent to which a
state court will follow the rules of law of a recognized foreign
country in preference to its own is wholly a matter of comity, and
that, in the absence of relevant treaty obligations, the
application in the courts of a state of its own rules of law,
rather than those of a foreign country, raises no federal question.
Rose v. Himely,
4 Cranch 241;
Harrison v.
Sterry, 5 Cranch 289;
United
States v. Crosby, 7 Cranch 115;
Oakey v.
Bennett, 11 How. 33,
52 U. S. 43-46;
Hilton v. Guyot, 159 U. S. 113,
159 U. S.
165-66;
Disconto Gesellschaft v. Umbreit,
208 U. S. 570;
cf. Baglin v. Cusenier Co., 221 U.
S. 580,
221 U. S.
594-597;
United States v. Guaranty Trust Co.,
293 U. S. 340,
293 U. S.
345-347. This is equally the case when a state of the
Union refuses to apply the law of a sister state, if there is no
question of full faith and credit,
Kryger v. Wilson, supra;
Finney v. Guy, 189 U. S. 335,
189 U. S. 340,
189 U. S. 346;
Alropa Corp. v. Kirchwehm, 313 U.S. 549;
See Milwaukee
County
Page 315 U. S. 246
v. White Co., 296 U. S. 268,
296 U. S.
272-273, or due process,
Home Ins. Co. v. Dick,
281 U. S. 397. So
clearly was this thought to be an appropriate exercise of the power
of a forum over property within its territorial jurisdiction that
this Court, in
Ingenohl v. Olsen & Co., 273 U.
S. 541,
273 U. S.
544-545, accepted as beyond all doubt the right of the
British courts in Hong Kong to refuse recognition to the American
alien property custodian's transfer of exclusive rights to the use
of a trademark in Hong Kong, and the Court gave effect here to the
Hong Kong judgment.
In the application of this doctrine, this Court has often held
that a state, following its own law and policy, may refuse to give
effect to a transfer made elsewhere of property which is within its
own territorial limits.
Green v. Van
Buskirk, 5 Wall. 307,
72 U. S.
311-312;
Hervey v. Rhode Island Locomotive
Works, 93 U. S. 664;
Security Trust Co. v. Dodd, Mead & Co., 173 U.
S. 624;
Clark v. Williard, 292 U.
S. 112,
292 U. S. 122;
Clark v. Williard, 294 U. S. 211. So
far is a state free in this respect that the full faith and credit
clause does not preclude the attachment by local creditors of the
property within the state of a foreign corporation, all of whose
property has been previously transferred in the state of its
incorporation to a statutory successor for the benefit of
creditors.
Clark v. Williard, supra; Fischer v. American United
Life Ins. Co., 314 U. S. 549. Due
process under the Fifth Amendment, the benefits of which extend to
alien friends as well as to citizens,
Russian Volunteer Fleet
v. United States, 282 U. S. 481,
does not call for any different conclusion.
Disconto
Gesellschaft v. Umbreit, supra, 208 U. S.
579-580.
At least since 1797,
Barclay v. Russell, 3 Vesey, Jr.,
424, 428, 433, the English courts have consistently held that
foreign confiscatory decrees do not operate to transfer title to
property located in England, even if the decrees were so intended,
whether the foreign government has or has not been recognized by
the British Government.
Lecouturier
Page 315 U. S. 247
v. Rey, [1910] A.C. 262, 265.
Cf. also Folliott v.
Oden, 1 H. Black. 123, 135-36, affirmed 3 T. R. 726,
affirmed, 4 Brown's Cases in Parl., 111, and
Wolff v.
Oxholm, 6 M. & S. 92, both of which may have carried the
doctrine of nonrecognition of foreign confiscatory decrees even
further.
See Holdsworth, The History of Acts of State in
English Law, 41 Columbia L.Rev. 1313, 1325-1326. The English courts
have applied this rule in litigation arising out of the Russian
decrees, holding that they are not effectual to transfer title to
property situated in Great Britain.
Sedgwick Collins & Co.
v. Rossia Insurance Co., [1926] 1 K.B. 1, 15,
affirmed, [1927] A.C. 95;
The Jupiter (No. 3),
[1927] P. 122, 144-46,
affirmed, [1927] P. 250, 253-55;
In re Russian Bank for Foreign Trade, [1933] 1 Ch. 745,
767-768. The same doctrine has prevailed in the case of the Spanish
confiscatory decrees,
Banco de Vizcaya v. Don Alfonso,
[1935] 1 K.B. 140, 144-145, as well as with respect to seizures by
the American alien property custodian.
Sutherland v.
Administrator of German Property, [1934] 1 K.B. 423,
and
see the decision of the British court for Hong Kong discussed
in
Ingenohl v. Olsen & Co., supra, and the Privy
Council's decision in
Ingenohl v. Wing On & Co., 44
Patents Journal 343, 359-360. In no case in which there was
occasion to decide the question has recognition been thought to
have subordinated the law of the forum, with respect to property
situated within its territorial jurisdiction, to that of the
recognized state. Never has the forum's refusal to follow foreign
transfers of title to such property been considered inconsistent
with the most friendly relations with the recognized foreign
government, or even with an active military alliance at the time of
the transfer.
It is plain that, under New York law, the claimants in this
case, both creditors and those asserting rights of the insurance
company, have enforceable rights, with respect to the property
located there, which have been recognized
Page 315 U. S. 248
though not created by the judgments of its courts. The
conclusion is inescapable that, had there been no assignment and
this suit had been maintained by the Soviet Government subsequent
to recognition, or by a private individual claiming under an
assignment from it, the decision of the New York court would have
presented no question reviewable here.
The only question remaining is whether the circumstances in the
present case, that the Russian decrees preceded recognition and
that the assignment was to the United States, which here appears in
the role of plaintiff, call for any different result. If they do,
then recognition and the assignment have operated to give to the
United States rights which its assignor did not have. They have
compelled the state to surrender its own rules of law applicable to
property within its limits, and to substitute rules of Russian law
for them. A potency would thus be attributed to the recognition and
assignment which is lacking to the full faith and credit clause of
the Constitution.
See Clark v. Williard, supra; Fischer v.
American United Life Ins. Co., supra.
In deciding any federal question involved, it can make no
difference to us whether New York has chosen to express its public
policy by statute or merely by the common law determinations of its
courts.
Erie R. Co. v. Tompkins, supra, 304 U. S.
64;
Skiriotes v. Florida, 313 U. S.
69,
313 U. S. 79;
Hebert v. Louisiana, 272 U. S. 312,
272 U. S. 316.
The state court's repeated declaration of a policy of treating the
New York branch of the insurance company as a "complete and
separate organization" would permit satisfaction of whatever claims
of foreign creditors, as well as those of sister states, that New
York deems provable against the local fund. But if my brethren are
correct in concluding that all foreign creditors must be deprived
of access to the fund, it would seem to follow -- since the Soviet
decrees have exempted no class of creditors -- that the rights
of
Page 315 U. S. 249
creditors in New York or in sister states, or any other rights
in the property recognized by New York law, must equally be ousted
by virtue of the extraterritorial effect given to the decrees by
the present decision. For statutory priorities of New York
policyholders or New York lienholders, and the common law
priorities and system of distribution which the judgment below
endeavored to effectuate and preserve intact, must alike yield to
the superior force said to have been imparted to the Soviet decrees
by the recognition and assignment. Nothing in the Litvinov
assignment or in the negotiations for recognition suggests an
intention to impose upon the states discriminations between New
York and other creditors which would sustain the former's liens
while obliterating those of the latter. If the Litvinov assignment
overrides state policies which protect foreign creditors, it can
hardly be thought to do less to domestic creditors, whether of New
York or a sister state.
I assume for present purposes that these sweeping alterations of
the rights of states and of persons could be achieved by treaty or
even executive agreement, although we are referred to no authority
which would sustain such an exercise of power as is said to have
been exerted here by mere assignment unratified by the Senate. It
is true that, in according recognition and in establishing friendly
relations with a foreign country, this Government speaks for all
the forty-eight states. But it was never true that recognition
alters the substantive law of any state or prescribes uniform state
law for the nationals of the recognized country. On the contrary,
it does not even secure for them equality of treatment in the
several states, or equal treatment with citizens in any state, save
as the Constitution demands it.
Patsone v. Pennsylvania,
232 U. S. 138;
Terrace v. Thompson, 263 U. S. 197;
Clarke v. Deckebach, 274 U. S. 392, and
cases cited. Those are ends which can be achieved only by the
assumption of some
Page 315 U. S. 250
form of obligation expressed or fairly to be inferred from its
words.
Recognition, like treaty making, is a political act, and both
may be upon terms and conditions. But that fact no more forecloses
this Court, where it is called upon to adjudicate private rights,
from inquiry as to what those terms and conditions are than it
precludes, in like circumstances, a court's ascertaining the true
scope and meaning of a treaty. Of course, the national power may,
by appropriate constitutional means, override the power of states
and the rights of individuals. But, without collision between them,
there is no such loss of power or impairment of rights, and it
cannot be known whether state law and private rights collide with
political acts expressed in treaties or executive agreements until
their respective boundaries are defined.
It would seem, therefore, that in deciding this case, some
inquiry should have been made to ascertain what public policy or
binding rule of conduct with respect to state power and individual
rights has been proclaimed by the recognition of the Soviet
Government and the assignment of its claims to the United States.
The mere act of recognition and the bare transfer of the claims of
the Soviet Government to the United States can, of themselves,
hardly be taken to have any such effect, and they can be regarded
as intended to do so only if that purpose is made evident by their
terms, read in the light of diplomatic exchanges between the two
countries and of the surrounding circumstances. Even when courts
deal with the language of diplomacy, some foundation must be laid
for inferring an obligation where previously there was none, and
some expression must be found in the conduct of foreign relations
which fairly indicates an intention to assume it. Otherwise,
courts, rather than the executive, may shape and define foreign
policy which the executive has not adopted.
Page 315 U. S. 251
We are not pointed to anything on the face of the documents or
in the diplomatic correspondence which even suggests that the
United States was to be placed in a better position, with respect
to the claim which it now asserts, than was the Soviet Government
and nationals. Nor is there any intimation in them that recognition
was to give to prior public acts of the Soviet Government any
greater extraterritorial effect than attaches to such acts
occurring after recognition -- acts which, by the common
understanding of English and American courts, are ordinarily deemed
to be without extraterritorial force, and which, in any event, have
never before been considered to restrict the power of the states to
apply their own rules of law to foreign-owned property within their
territory. As we decided in
Guaranty Trust Co. v. United
States, supra, 304 U.S. at
304 U. S. 143,
and as the opinion of the Court now appears to concede, there is
nothing in any of the relevant documents
"to suggest that the United States was to acquire or exert any
greater rights than its transferor or that the President, by mere
executive action, purported or intended to alter or diminish the
rights of the [New York] debtor with respect to any assigned
claims, or that the United States, as assignee, is to do more than
the Soviet Government could have done after diplomatic recognition
-- that is, collect the claims in conformity to local law."
Recognition opens our courts to the recognized government and
its nationals,
see Guaranty Trust Co. v. United States,
supra, 304 U. S. 140.
It accepts the acts of that government within its own territory as
the acts of the sovereign, including its acts as a
de
facto government before recognition,
see Underhill v.
Hernandez, supra, 168 U. S. 250;
Oetjen v. Central Leather Co., supra, 246 U.
S. 297;
Ricaud v. American Metal Co., supra,
246 U. S. 304.
But, until now, recognition of a foreign government by this
Government has never been thought to serve as a full faith and
Page 315 U. S. 252
credit clause compelling obedience here to the laws and public
acts of the recognized government with respect to property and
transactions in this country. One could as well argue that, by the
Soviet Government's recognition of our own Government, which
accompanied the transactions now under consideration, it had
undertaken to apply in Russia the New York law applicable to
Russian property in New York.
Cf. Ingenohl v. Olsen & Co.,
supra, 273 U. S. 541;
Pacific Ins. Co. v. Industrial Comm'n, 306 U.
S. 493,
306 U. S.
501-502.
In
Guaranty Trust Co. v. United States, supra, this
Court unanimously rejected the contention that the recognition of
the Soviet Government operated to curtail or impair rights derived
from the application of state laws and policy within the state's
own territory. It was argued by the Government that recognition
operated retroactively, for the period of the
de facto
government, to set aside rights acquired in the United States in
consequence of this Government's prior recognition of the Russian
Provisional Government. This argument, we said, p.
304 U. S.
140,
"ignores the distinction between the effect of our recognition
of a foreign government with respect to its acts within its own
territory prior to recognition, and the effect upon previous
transactions consummated here between its predecessor and our own
nationals. The one operates only to validate to a limited extent
acts of a
de facto government which, by virtue of the
recognition, has become a government
de jure. But it does
not follow that recognition renders of no effect transactions here
with a prior recognized government in conformity to the declared
policy of our own Government."
Even though the two governments might have stipulated for
alteration by this Government of its municipal law, and the
consequent surrender of the rights of individuals, the substance of
the Court's decision was that such an abdication of domestic law
and policy is not a necessary or customary incident
Page 315 U. S. 253
of recognition, or fairly to be inferred from it. No more can
recognition be said to imply a deprivation of the constitutional
rights of states of the Union, and of individuals arising out of
their laws and policy, which are binding on the Federal Government
except as the act of recognition is accompanied by some affirmative
exercise of federal power which purports to set them aside.
Nor can I find in the surrounding circumstances or in the
history of the diplomatic relations of the two countries any basis
for saying that there was any policy of either to give a different
or larger effect to recognition and the assignment than would
ordinarily attach to them. It is significant that the account of
the negotiations published by the State Department (Establishment
of Diplomatic Relations with the Union of Soviet Socialist
Republics, Eastern European Series No. 1), and the report of
subsequent negotiations for adjustment of the claims of the two
countries submitted to Congress by the Secretary of State (H.Rep.
No. 865, 76th Cong., 1st Sess.) give no intimation of such a
policy. Even the diplomatic correspondence between the two
countries, of January 7, 1937, to which the opinion of the Court
refers, and which occurred long after the United States had entered
the
Moscow Fire Insurance Company litigation, merely
repeated the language of the assignment without suggesting that its
purpose had been to override applicable state law.
That the assignment after recognition had wide scope for
application without reading into it any attempt to set aside our
local laws and rights accruing under them is evident. It was not
limited in its application to property alleged to be confiscated
under the Soviet decrees. Included in the assignment, by its terms,
were all
"amounts admitted to be due or that may be found to be due it
[the Soviet Government], as the successor of prior Governments of
Russia, or otherwise, from American nationals."
It included claims of the prior governments of
Page 315 U. S. 254
Russia, not arising out of confiscatory decrees, and also claims
like that of the Russian Volunteer Fleet, growing out of our own
expropriation during the war of the property of Russian nationals.
The assignment was far from an idle ceremony if treated as
transferring only the rights which it purports to assign. Large
sums of money have already been collected under it, and other
amounts are in process of collection, without overturning the law
of the states where the claims have been asserted.
*
At the time of the assignment, it was not known what position
the courts of this country would take with respect to property here
claimed to have been confiscated by the Soviet decrees. But it must
have been known to the two governments that the English courts,
notwithstanding British recognition of the Soviet Government, had
refused to apply the Soviet decrees as affecting property located
in England.
Sedgwick Collins & Co. v. Rossia Insurance Co.,
supra; The Jupiter (No. 3), supra; In re Russian Bank for Foreign
Trade, supra. It must also have been known that the similar
views expressed by the New York courts before recognition with
respect to property situated in New York raised at least a strong
possibility that mere recognition would not alter the result in
that state.
Sokoloff v. National City Bank, 239 N.Y. 158,
.167-69, 145 N.E. 917;
James & Co. v. Second Russian Ins.
Co., 239 N.Y. 248, 257, 146 N.E. 369;
Joint Stock Co. v.
National City Bank, 240 N.Y. 368, 148 N.E. 552;
Petrogradsky M. K. Bank v. National City Bank, 253 N.Y.
23, 29, 170 N.E. 479. The assignment plainly contemplated that
this, like every other question affecting liability, was to be
litigated in the courts of this country, since the
Page 315 U. S. 255
assignment only purported to assign amounts admitted to be due
or "that may be found to be due." It was only in the courts where
the debtor or the property was located that the amounts assigned
would normally be "found to be due."
Cf. United States v. Bank
of New York Co., supra, 296 U. S. 463.
By transferring claims of every kind, against American
nationals, to the United States and leaving to it their collection,
the parties necessarily remitted to the courts of this country the
determination of the amounts due upon this Government's undertaking
to report the amounts collected as "preparatory to a final
settlement of the claims and counterclaims" asserted by the two
governments. They thus ended the necessity of diplomatic discussion
of the validity of the claims, and so removed a probable source of
friction between the two countries. In all this, I can find no hint
that the rule of decision in American courts were not to be those
afforded by the law customarily applied in those courts. But if it
was the purpose of either government to override local law and
policy of the states and to prescribe a different rule of decision
from that hitherto recognized by any court, it would seem to have
been both natural and needful to have expressed it in some form of
undertaking indicating such an intention. The only obligation to be
found in the assignment and its acknowledgment by the President is
that of the United States, already mentioned, to report the amounts
collected. This can hardly be said to be an undertaking to strike
down valid defenses to the assigned claims. Treaties, to say
nothing of executive agreements and assignments which are mere
transfers of rights, have hitherto been construed not to override
state law or policy unless it is reasonably evident from their
language that such was the intention.
Guaranty Trust Co. v.
United States, supra, 304 U.S. at
304 U. S. 143;
Todok v. Union State Bank, 281 U.
S. 449,
281 U. S. 454;
Rocca v. Thompson, 223 U. S. 317,
223 U. S.
329-334;
Disconto
Page 315 U. S. 256
Gesellschaft v. Umbreit, supra, 208 U.S. at
208 U. S. 582;
Pearl Assurance Co. v. Harrington, 38 F. Supp.
411, 413-14;
affirmed, 313 U.S. 549;
Patsone v.
Pennsylvania, 232 U. S. 138,
232 U. S.
145-146;
cf. 77 U. S. Co. v.
Massachusetts, 10 Wall. 566,
77 U. S. 568,
77 U. S.
576-577. The practical consequences of the present
decision would seem to be, in every case of recognition of a
foreign government, to foist upon the executive the responsibility
for subordinating domestic to foreign law in conflicts cases,
whether intended or not, unless such a purpose is affirmatively
disclaimed.
Under our dual system of government, there are many
circumstances in which the legislative and executive branches of
the national government may, by affirmative action expressing its
policy, enlarge the exercise of federal authority, and thus
diminish the power which otherwise might be exercised by the
states. It is indispensable to the orderly administration of the
system that such alteration of powers and the consequent impairment
of state and private rights should not turn on conceptions of
policy which, if ever entertained by the only branch of the
government authorized to adopt it, has been left unexpressed. It is
not for this Court to adopt policy the making of which has been by
the Constitution committed to other branches of the government. It
is not its function to supply a policy where none has been declared
or defined, and none can be inferred.
MR. JUSTICE ROBERTS joins in this opinion.
* By June 30, 1938, the sums collected by virtue of the Litvinov
assignment amounted to $1,706,443. Report of the Attorney General
for 1938, p. 122. Other claims are apparently still in litigation.
See the Report for 1939, p. 99;
also H.Rep. No.
865, 76th Cong., 1st Sess., p. 2.