General List No. 64 and 67

27 June 1936

 

PERMANENT COURT OF INTERNATIONAL JUSTICE

Judicial Year 1936

 

The Losinger & Co. Case (Preliminary Objection)

 

Switzerland v. Yugoslavia

Order

 
BEFORE: President: Sir Cecil Hurst
Vice-President: Guerrero
Judges: Count Rostworowski, Fromageot, De Bustamante, Altamira, Anzilotti, Urrutia, Negulesco, Jhr. Van Eysinga, Nagaoka,
Judge(s) ad hoc: Huber, Zoričič
    
Perm. Link: http://www.worldcourts.com/pcij/eng/decisions/1936.06.27_losinger.htm
  
Citation: Losinger & Co. (Switz. v. Yugo.), 1936 P.C.I.J. (ser. A/B) No. 67 (Order of June 27)
Publication: Publications of the Permanent Court of International Justice Series A./B. No. 67; Collection of Judgments, Orders and Advisory Opinions A.W. Sijthoff’s Publishing Company, Leyden, 1936.
  
 

  

[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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