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[p15] The
Permanent Court of International Justice,
composed as above,
after deliberation,
having regard to Articles 40 and 48 of the Statute,
having regard to Article 62 of the Rules of Court,
Makes the following Order:
AS REGARDS THE POSITION OF THE PROCEEDINGS:
[1] Whereas the Swiss Confederation, by means of an Application filed and
registered in the Registry of the Court on November 23rd, 1935, instituted
proceedings before the Permanent Court of International Justice against the
Kingdom of Yugoslavia, asking the Court for judgment to the effect that the
Yugoslav Government cannot claim release from the terms of an arbitration
clause in a contract concluded between it and the Swiss Société anonyme
Losinger & Cie, by adducing legislation subsequent in date to that contract;
[p16]
[2] Whereas the Application was submitted in accordance with Article 40 of
the Statute of the Court and with Article 35 of the Rules in force prior to
March 11th, 1936;
[3] Whereas the Federal Government, in its Application, relies upon the
declarations made by Switzerland and Yugoslavia accepting the Optional
Clause in Article 36, paragraph 2, of the Statute ; whereas Switzerland, on
March 1st, 1926, renewed for ten years as from July 24th, 1926, the
declaration of acceptance which she had made in 1921; whereas Yugoslavia
accepted the compulsory jurisdiction of the Court by a declaration made on
May 16th, 1930, which came into force on November 24th of that year, for a
period of five years; and whereas this point is not in dispute between the
Parties;
[4] Whereas the declarations of acceptance in force at the time of the
submission of the Application were worded as follows:
[5] The Swiss declaration:
"On behalf of the Swiss Confederation and subject to ratification, the
undersigned recognizes, in relation to any other Member of the League of
Nations or State accepting the same obligation, that is to say, on the sole
condition of reciprocity, the jurisdiction of the Court as compulsory, ipso
facto and without special convention, for a period of ten years to be
reckoned as from the deposit of the instrument of ratification."
[6] The Yugoslav declaration:
"On behalf of the Kingdom of Yugoslavia and subject to ratification, I
recognize, as compulsory ipso facto and without special agreement, in
relation to any other Member of the League of Nations or State the
government of which is recognized by the Kingdom of Yugoslavia, and
accepting the same obligation, that is to say, on condition of reciprocity,
the jurisdiction of the Permanent Court of International Justice in
conformity with Article 36 of its Statute, for a period of five years from
the date of the deposit of the instrument of ratification, in any disputes
arising after the ratification of the present declaration, except disputes
with regard to questions which by international law fall exclusively within
the jurisdiction of the Kingdom of Yugoslavia, and except in cases where the
parties have agreed or shall agree to have recourse to some other method of
peaceful settlement";
[7] Whereas in its Application the Swiss Confederation stated that it would
present in its Memorial the submissions required under Article 40 of the
Rules in force when the Application was filed;
[8] Whereas the Application was notified to the Yugoslav Government on
November 23rd, 1935; [p17]
[9] Whereas the Court includes on the Bench no judge of the nationality of
the Parties, the Swiss and Yugoslav Governments have each availed themselves
of their right under Article 31 of the Statute to nominate a judge;
[10] Whereas, by an Order made on December nth, 1935, the President of the
Court, as the Court was not sitting, fixed the time-limits for the
presentation of the Memorial of the Swiss Confederation and of the
Counter-Memorial of the Yugoslav Government on the merits; whereas the
Memorial was filed within the time-limit thus fixed; whereas the Yugoslav
Government, after obtaimng two extensions of the time-limit originally fixed
for the filing of the Counter-Memorial, filed, within the time-limit as
finally fixed, a document entitled "Document submitting to the Permanent
Court of International Justice the objection lodged by the Royal Yugoslav
Government in the case concerning the non-observance of the arbitration
clause contained in a contract between the Yugoslav Government and the firm
of Losinger & Co., brought before the Court by the Application of the Swiss
Federal Council";
[11] Whereas, when this document was filed, the Rules of March nth, 1936,
had come into force; whereas the lodging of the objection involved the
suspension of the proceedings on the merits of the case ; whereas,
accordingly, the President of the Court, as the Court was not sitting,
fixed, under Article 62 of these Rules, the time-limit within which the
Swiss Confederation might present a written statement of its observations
and submissions in regard to the objection; and whereas the Government of
the Swiss Confederation duly filed its written observations and submissions
within the time thus fixed;
[12] Whereas at public hearings held on June 4th, 5th, 8th and 9th, 1936,
the Court heard the statements, reply and rejoinder upon the objection of
the Yugoslav Government of M. Stoykovitch, Agent for the Yugoslav
Government, on behalf of Yugoslavia, and of M. Sauser-Hall, Agent for the
Government of the Swiss Confederation, on behalf of Switzerland;
Whereas in its Memorial the Swiss Government prays the Court:
"I. To declare that the Government of the Kingdom of Yugoslavia cannot,
founding itself on the Yugoslav law of July 19th, 1934, concerning the
conduct of State litigation, which came into force on October 19th, 1934,
release itself from the observance of an arbitration clause in a contract
concluded prior to this legislative measure with the firm of Losinger & Co.,
S. A., of Berne;
II. To declare that the denial of jurisdiction lodged by the Government of
the Kingdom of Yugoslavia, at the hearing [p18] on October 7th, 1935, and
founded on this law, before the umpire in the arbitration proceedings
pending between the State of Yugoslavia and the firm of Losinger & Co., S.
A., is contrary to the principles of the law of nations";
[13] Whereas the document submitting the Yugoslav Government's preliminary
objection prays the Court:
"(1) to declare that it has no jurisdiction to adjudicate upon the dispute
submitted by the Swiss Federal Council under Article 36 of the Court's
Statute;
(2) alternatively, to declare that the application of the Swiss Federal
Council cannot be entertained because the means of obtaining redress placed
at the disposal of the firm of Losinger & Co. by Yugoslav municipal law have
not been exhausted";
[14] Whereas the Swiss Confederation for its part, in its written
Observations, prays the Court:
"I. As to form,
to declare the document submitting the objection of the Royal Yugoslav
Government dated March 27th, 1936, invalid, because it was not filed in
conformity with the terms of the Rules of Court.
II. As to substance,
to declare the preliminary objection lodged by the said Royal Government
ill-founded;
and accordingly,
(1) to declare that it has jurisdiction to adjudicate upon the dispute
submitted to it by the Application of the Swiss Federal Council of November
23rd, 1935;
(2) to reject the alternative submission presented by the respondent Party
to the effect that the application cannot be entertained because the means
of obtaining redress afforded by the Yugoslav municipal courts have not been
exhausted;
(3) to fix fresh time-limits for the further proceedings";
[15] Whereas at the conclusion of his oral statement in regard to the
objection lodged by his Government, the Agent for the Yugoslav Government
restated his submissions in the following terms:
"May it please the Court:
(1) To declare ill-founded the Swiss Government's contention that the
document submitting the Yugoslav Government's objection is invalid for
reasons of form;
(2) To declare that it has no jurisdiction to adjudicate upon the Swiss
Government's application under Article 36, paragraph 2, (b) and (c); of the
Statute;
(3) Alternatively, to declare that the Swiss Government's application cannot
be entertained because the rule as to the [p19] previous exhaustion of the
remedies provided by Yugoslav municipal law has not been observed by the
firm Losinger & Co.";
[16] Whereas the Agent for the Swiss Confederation limited him-self, in his
oral statement upon the said objection, to asking the Court to give judgment
in favour of the submissions already presented in the written Observations
of the Swiss Government;
[17] Whereas in these circumstances it is incumbent on the Court, under
Article 62, paragraph 5, of the Rules now in force, either to give its
decision on the objection or join the objection to the merits;
AS REGARDS THE FACTS OF THE CASE:
[18] Whereas the facts of the case, in so far as they are relevant from the
point of view of this Order, may be summarized as follows:
On March 2nd, 1929, a Company registered in the State of Delaware in the
United States of America, known as the "Orientconstruct, American Oriental
Construction Syndicate", of the one part, and the Autonomous Administration
of the District of Pozarevac (Kingdom of the Serbs, Croats and Slovenes), of
the other part, entered into a contract for the construction of certain
railway lines in the district, for which the District had secured a
concession from the Government, and for the financing of such construction.
[19] The contract, which was approved by the Yugoslav Ministry of Finance,
contained the following arbitration clause:
"Article XVI. - Disputes. - Any differences of opinion or disputes which may
arise between the contracting Parties in connection with the carrying out or
interpretation of the clauses and conditions of this contract shall be
settled by compulsory arbitration, if a friendly settlement cannot be
reached by the contracting Parties. Within thirty days of a demand made by
either of the contracting Parties, each Party shall appoint an arbitrator
for the joint settlement of the disputes. If these two arbitrators fail to
agree, or if one of the Parties fails to appoint an arbitrator within the
time specified, the case shall be referred either to the President of the
Swiss Federal Court or to a neutral person who shall be appointed by the
latter and who shall in the capacity of umpire give his decision alone upon
the dispute. The same shall apply if the arbitrators have not made a final
award within six months, reckoned from the date on which the last of them
was appointed or within an extended period fixed by mutual agreement between
them. The award of the arbitrators or of the umpire shall be rendered in
Yugoslavia. There shall be no appeal from this decision." [p20]
[20] Subsequently, the firm of Losinger & Co., S. A., of Berne, under
another clause of the contract and in agreement with the Ministry of Finance
and the President of the Yugoslav Council of Ministers, was substituted for
the Orientconstruct as a Party to the contract, while the Royal Yugoslav
Government took the place of the Autonomous Administration of the District
of Pozarevac. Nevertheless, the substitution of Losinger & Co. for the
Orientconstruct was only in respect of such parts of the contract of March
2nd, 1929, as concerned the actual construction of the railway lines, the
question of financing forming the subject of a fresh arrangement by means of
a direct agreement between the Yugoslav Minister of Finance and the Kompass
Bank of Vienna, this agreement being concluded on the basis of an agreement
made between Losinger & Co. and the Bank.
[21] The various agreements effecting the substitution of new Parties to the
contract of March 2nd, 1929, were authorized by a Yugoslav law of June 19th,
1931, which came into force on June 26th, 1931.
[22] A beginning had already been made with the execution of the 1929
contract before the substitution took place. Subsequently, the carrying out
of the contract was proceeded with for about two years by the contracting
Parties. In 1933, when difficulties arose, a first recourse was had to the
arbitration clause of the 1929 contract at the instance of Losinger & Co.,
S. A., and of the Kompass Bank. The two arbitrators appointed by the Parties
to the dispute were unable to agree upon a settlement and after recording
their disagreement declared their mission at an end. In accordance with the
arbitration clause, the President of the Swiss Federal Court, who at that
time was. M. Henri Thelin, was then asked to undertake the duties of umpire;
he agreed to do so, and on October 31st, 1934, gave his award.
[23] In the meantime, on July 30th, 1934, the Royal Yugoslav Government had
cancelled the contract with Losinger & Co., S. A., and on October 19th,
1934, a law dated July 19th, 1934, came into force concerning the conduct of
State litigation in Yugoslavia ; Article 24 of this law was as follows:
"Article 24. - Actions against the State may only be brought before the
ordinary courts of the State."
[24] In November 1934, Losinger & Co., S. A., once more resorted to
arbitration as provided for in the agreement with the State of Yugoslavia.
As the latter did not appoint its arbitrator within the time-limit laid down
in the arbitration clause, the Swiss firm again submitted the case to the
President of the Swiss Federal Tribunal in the capacity of umpire. M. Thélin
[p21] having in the meantime ceased to be President of the Swiss Federal
Tribunal, his successor appointed him "as umpire in (your) capacity as a
'neutral person'" within the meaning of the arbitration clause. Proceedings
were opened, but the "representatives of the Kingdom of Yugoslavia", before
the beginning of the oral pleadings at the hearing on October 7th, 1935,
filed three written pleas, on which they asked the umpire to adjudicate as
preliminary questions. The essential part of one of these pleas ran as
follows:
"Under the law concerning the conduct of State litigation in the Kingdom of
Yugoslavia, published in the Official Gazette of July 19th, 1934, and in
force from October 19th, 1934, and in particular under Article 24 of that
law, according to which any dispute with the State may only be brought
before the ordinary courts of the State, we submit the following plea, which
calls for a preliminary decision:
Plea:
that the umpire should declare himself to have no jurisdiction to adjudicate
upon the dispute set out in the claim of the firm of Losinger & Co., S. A.,
dated February 25th, 1935, and that the claimant Party, the firm of Losinger
& Co., S. A., should be invited to submit its case to the ordinary courts of
the Kingdom of Yugoslavia."
[25] On October 11th, 1935, the umpire gave his decision upon the
preliminary pleas of the representatives of the State of Yugoslavia ; with
regard to the plea founded on Article 24 of the Yugoslav law which came into
force on October 19th, 1934, the umpire said that he had no jurisdiction to
adjudicate upon it and left "the Parties to submit this question to the
competent authorities"; without relinquishing the case, he "suspended the
arbitration proceedings until the law had been ascertained".
[26] In the proceedings before the Court, it was, inter alia, stated on
behalf of the Yugoslav Government that the Yugoslav law of July 19th, 1934,
"contains no provision stating that it operates retrospectively"; but it was
added that, "on this point, its character remains to be determined by the
Yugoslav courts". In this connection the Agent stated in Court that "Article
323 of the Yugoslav Code of Procedure furnished Losinger & Co. with a means
of obtaining a legal decision from the competent Yugoslav authorities upon
the question of the validity of the arbitration clause". Furthermore, it is
stated in the document submitting the Yugoslav Government's preliminary
objection that "if the ordinary Yugoslav courts had ruled that the plea to
the jurisdiction submitted by the State was not well-founded, the Yugoslav
Government would have abandoned that argument", that is to say the argument
which caused the umpire to suspend the arbitration proceedings. [p22]
AS REGARDS THE ALLEGED INVALIDITY, FOR REASONS OF FORM, OF THE DOCUMENT
SUBMITTING THE YUGOSLAV GOVERNMENT'S OBJECTION:
[27] Whereas the claim formulated under this heading by the Swiss Government
in its submissions appears to be based on the two following considerations:
(1) only one copy of the document submitting the objection was filed within
the prescribed time-limit ; fifty printed copies were not filed till after
the expiry of the time-limit; hence, the Yugoslav Government failed to
comply with the provisions of Article 40, paragraphs 1 and 4, of the Rules
of Court now in force ;
(2) the Yugoslav Government's objection was not submitted within the
time-limit originally prescribed for the filing of the Counter-Memorial, but
only within the time-limit as fixed after two extensions had been granted by
the Court at the request of the said Government; the latter thus acted in
conflict with the spirit of Article 38 of the Rules of Court in force prior
to March nth, 1936, and of Article 62, paragraph 1, of the Rules now in
force; when the period within which a preliminary objection must be filed
was defined in those Articles, what was meant was only the time-limit
originally fixed by the Court and the definition did not cover "extensions
subsequently granted by the Court to a party";
[28] Whereas, as a matter of fact, the document submitting the objection was
accepted by the Court and formed the subject of an Order made by the
President, followed by written and oral proceedings; whereas the question
raised by the Swiss Government is one that concerns the organization and
internal administration of the Court, rather than the rights of the parties;
and whereas, in any case, the Court would have power under paragraph 4 of
Article 37 of its Rules to decide, in certain circumstances, that "a
proceeding taken after the expiration of a time-limit shall be considered as
valid";
[29] Whereas, in regard more especially to the first of the reasons advanced
by the Swiss Government, both the consistent practice of the Court and the
history of Article 40 of the Rules point to the conclusion that the words
"document of the written proceedings" as used in this Article refer only to
the Memorial, Counter-Memorial, Reply and Rejoinder (Art. 43 of the Statute;
Art. 41 of the Rules), and do not cover documents instituting proceedings,
whether applications or special agreements; whereas this interpretation is
also deducible from the context (Art. 39, para. 4, of the Rules) and from
the position of Article 40 in the Rules; and whereas, in the Court's
practice and in accordance with the principles laid down for keeping the
General List (Art. 20 [p23] of the Rules), documents submitting preliminary
objections are, for the present purpose, assimilated to documents
instituting proceedings;
[30] Whereas, in regard to the second reason adduced by the Swiss
Government, a time-limit which has been extended is, in principle, for all
purposes the same time-limit as the time-limit originally fixed;
[31] Whereas, in consequence, there is no ground for considering the
document submitting the Yugoslav Government's objection to be invalid for
reasons of form;
AS REGARDS THE PRELIMINARY OBJECTION:
[32] Whereas the Yugoslav Government's preliminary objection, as finally
formulated during the oral proceedings, seeks to obtain a declaration from
the Court, primarily, that it has no jurisdiction to decide "upon the Swiss
Government's application", and alternatively, that the said application
cannot be entertained, and whereas therefore the Yugoslav Government's
objection includes, besides a plea to the Court's jurisdiction, an
alternative objection to the admissibility of the application;
[33] Whereas - having regard, in particular, to the submissions in the
document lodging the objection, whereby the Court is prayed to declare that
it has no jurisdiction "to adjudicate upon the dispute submitted to it by
the Swiss Federal Council" - the real purpose of the objection is to prevent
the Court from adjudicating on the submissions in the Swiss Government's
Memorial on the merits; and whereas, in consequence, the competence of the
Court and its power to entertain the application depend upon the meaning and
purport attaching to those submissions ;
[34] Whereas the aforesaid submissions, though they may have been the
subject of divergent interpretations, raise questions which are intimately
connected with those raised by the Yugoslav Government's plea to the
jurisdiction;
[35] Whereas the latter plea may be regarded, from this point of view, as a
part of the defence on the merits, or at any rate as being founded on
arguments which might be employed for the purposes of that defence;
[36] Whereas, in those circumstances, the Court might be in danger, were it
to adjudicate now upon the plea to the jurisdiction, of passing upon
questions which appertain to the merits of the case, or of prejudging their
solution;
[37] Whereas the Court cannot enter in any way on the merits of a case that
has been submitted to it by Application under Article 36, paragraph 2, of
the Statute, before the [p24] Parties have had an opportunity of exercising
the right conferred upon them by the Statute and the Rules of Court of each
submitting two written pleadings, and of making oral statements on the
merits of the dispute ; and whereas, in the present case, the Court has only
received one Memorial dealing with the merits;
[38] Whereas, in view of these considerations, the objection to the
jurisdiction should be joined to the merits, so that the Court will give its
decision upon it, and if need be, on the merits, in one and the same
judgment;
[39] Whereas, firstly, the objection relating to the admissibility of the
suit is submitted as an alternative to the plea to the Court's jurisdiction,
and secondly, both in the written and oral proceedings, the facts and
arguments adduced for or against the two objections are largely
interconnected and even, in some respects, indistinguishable;
[40] Whereas, in consequence, the objection to the admissibility of the
Application must be treated in the same way as the objection to the
jurisdiction, that is to say, it must be joined to the merits, so that the
Court will have to adjudicate upon it in the judgment referred to above,
should the Court in that judgment assume jurisdiction;
AS REGARDS THE FURTHER PROCEEDINGS:
[41] Whereas, under Article 62, paragraph 5, of the Rules now in force, it
is incumbent upon the Court, when it joins an objection to the merits, once
more to fix time-limits for the further proceedings;
[42] Whereas in the present case one document only of the written
proceedings has been filed, and the Court has, there-fore, to fix
time-limits for the filing of the Counter-Memorial, the Reply and the
Rejoinder on the merits;
[43] Whereas the time-limits originally fixed for the Memorial and the
Counter-Memorial were about five weeks each, and those for the Reply and the
Rejoinder about two weeks each; and whereas the Swiss Government's Memorial
was in fact submitted within the time-limit prescribed as above;
[44] Whereas the time-limits in question should now be fixed without
prejudice to any modifications which it might seem desirable to make, in
case those concerned, or one of them, should decide to resort to the means
of redress mentioned by the Agent of the Yugoslav Government, as stated
above, and which might produce results conducive to the solution of the
different questions submitted to the Court, or in case the Parties should
enter into negotiations for an amicable settlement; [p25]
[45] THE COURT
(1) joins the objection of the Yugoslav Government to the merits in the
proceedings instituted by the Application of the Swiss Confederation filed
with the Registry on November 23rd, 1935, in order that it may adjudicate in
one and the same judgment upon this objection and, if need be, on the
merits;
(2) fixes as follows the time-limits for the filing of the subsequent
documents on the merits:
(a) for the Counter-Memorial of the Yugoslav Government: August 3rd, 1936;
(b) for the Reply of the Swiss Government : August 21st, 1936;
(c) for the Rejoinder of the Yugoslav Government: September nth, 1936.
[46] Done at the Peace Palace, The Hague, this twenty-seventh day of June,
one thousand nine hundred and thirty-six, in three copies, of which one will
be filed in the Archives of the Court and the others will be transmitted
respectively to the Swiss and Yugoslav Governments.
(Signed) Cecil J. B. Hurst,
President.
(Signed) Å. Hammarskjöld,
Registrar.
[47] M. Altamira and Jonkheer Van Eysinga, Judges, declare that they are
unable to agree with the present Order and attach thereto the statement of
their dissent.
(Initialled) С J. В. Н.
(Initialled) A. H.
Zoričič,
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