General List No. 74 and 76

Judgment No. 29

 28 February 1939

 

PERMANENT COURT OF INTERNATIONAL JUSTICE

Judicial Year 1939

 

The Panevezys-Saldutiskis Railway Case

 

Estonia v. Lithuania

Judgment

 

BEFORE:

President:

Guerrero

Vice-President:

Sir Cecil Hurst

Judges:

Count Rostworowski, Fromageot, Altamira, Negulesco, Jhr. Van Eysinga, Nagaoka, Cheng, Hudson, De Visscher, Erich,

Judge(s) ad hoc:

Strandman, Römer'is

     

Represented By:

Estonia:

Baron Boris Nolde, as Agent

Lithuania:

M. Andre Mandelstam, as Agent

    

Perm. Link:

http://www.worldcourts.com/pcij/eng/decisions/1938.02.28_panevezys-saldutiskis.htm

  

Citation:

Panevezys-Saldutiskis Railway (Est. v. Lith.), 1938 P.C.I.J. (ser. A/B) No. 76 (Feb. 28)

Publication:

Publications of the Permanent Court of International JusticeSeries A./B. No. 76; Collection of Judgments, Orders and Advisory Opinions A.W. Sijthoff’s Publishing Company, Leyden, 1939.

  

 


  

[p5] The Court,
composed as above,
delivers the following judgment:

[1] By an Application filed with the Registry of the Court on November 2nd, 1937, under Article 40 of the Statute, the Estonian Government instituted proceedings before the Court against the Lithuanian Government owing to the refusal of the latter Government to recognize the proprietary and concessionary rights claimed by a Company known as the Esimene Juurdeveo Raudteede Selts Venemaal in respect of the Panevezys-Saldutiskis railway, which had been seized and operated by the Lithuanian Government. The Applicant, in submitting the case, relies upon the declarations of Estonia and Lithuania accepting the compulsory jurisdiction of the Court as provided in Article 36, paragraph 2, of the Statute of the Court.

[2] After a succinct statement of the facts and arguments adduced in support of the claim, the Application prays the Court to adjudge and declare:

"1. That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line.
2. That the Lithuanian Government is under an obligation to make good the prejudice which has been thus sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated, the proposals for a compromise made by that Company having been withdrawn, at the sum of 14, 000, 000 Gold Lits, with interest at 6% per annum as from January 1st, 1937. "

[3] On November 2nd, 1937, notice of the Application of the Estonian Government was given to the Lithuanian Government, and on November 5th the communications provided for in Article 40 of the Statute and Article 34 of the Rules of Court were duly despatched. [p6]

[4] As the Court does not include upon the Bench any judge of the nationality of either of the Parties to the case, the Estonian Government and the Lithuanian Government availed themselves of their right under Article 31 of the Statute each to nominate a judge, and nominated respectively M. Otto Strandman and M. Mykolas Römer'is. The two Governments appointed as Agents: the Estonian Government, Baron Boris Nolde, and the Lithuanian Government, M. André Mandelstam.

[5] By an Order made on November 15th, 1937, the President of the Court fixed the time-limits for the filing of the Memorial, Counter-Memorial, Reply and Rejoinder.

[6] In its Memorial, duly filed within the prescribed time-limit, the Estonian Government prays the Court to adjudge and declare:

"1. That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line.
2. That the Lithuanian Government is under an obligation to make good the prejudice which has been sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated at (I) the sum of 6, 850, 000 Gold Lits, representing the price of the railway, plus (II) a sum representing the annual payments due in respect of the exploitation of the railway by the Lithuanian authorities from the date of seizure to the date of payment, each annual payment being reckoned as equal to six per cent on the price of the railway fixed as above. "

[7] On March 15th, 1938, the date fixed for the filing of its Counter-Memorial, the Lithuanian Government submitted preliminary objections accompanied by a preliminary Counter-Memorial.

[8] The objections raised by the Lithuanian Government to the claims of the Estonian Government were two in number, the first being based on "the non-observance by the Estonian Government of the rule of international law to the effect that a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered", and the second "on the non-observance by the Estonian Government of the rule of international law requiring the exhaustion of the remedies afforded by municipal law". The Lithuanian Government prayed the Court to declare that the claims of the Estonian Government cannot be entertained.

[9] The proceedings on the merits having, under Article 62, paragraph 3, of the Rules of Court, been suspended by the filing of the objections, the President of the Court, on March 15th, 1938, made an Order fixing April 30th, 1938, as the date of [p7] expiration of the time allowed to the Estonian Government for the presentation of a written statement of its observations and submissions in regard to the objections raised by the Lithuanian Government.

[10] The written proceedings in regard to the objections were brought to a close by the filing within the prescribed time-limit of this statement in which it was submitted that the Court should "overrule the objections".

[11] After hearings held on June 13th, 14th, 15th, 17th and 18th, 1938, the Court, on June 30th, 1938, made an Order whereby, under Article 62, paragraph 5, of the Rules, it joined "the objections raised by the Lithuanian Government to the merits of the proceedings instituted by the Application of the Estonian Government filed with the Registry on November 2nd, 1937, in order that it may adjudicate in one and the same judgment upon these objections and, if need be, on the merits". At the same time the Court fixed new time-limits for the filing of the Counter-Memorial, Reply and Rejoinder.

[12] These documents were duly filed within the prescribed time-limits, the last of which, that for the Rejoinder, expired on November 25th, 1938. Accordingly on that date the case became ready for hearing.

[13] In its Counter-Memorial, the Lithuanian Government presented the following submissions:

"The Lithuanian Government, reserving the right subsequently to present any further arguments or submissions,
Prays the Permanent Court of International Justice to dismiss the claims of the Estonian Government.
Alternatively,
And subject to the subsequent presentation of any further arguments and evidence,
In case the Court should hold that the legal personality of the former First Russian Company persists in the Esimene Company and should recognize that the latter is entitled to reparation, the Lithuanian Government, in accordance with Article 63 of the Rules of Court, now presents a counter-claim" against the Estonian Government, estimating the amount of the prejudice sustained at the sum of 7, 337, 271 Lits 98 cents, with interest at 6% per annum as from September 1st, 1938, until the date of payment,
And prays the Permanent Court of International Justice to award it the amount of this counter-claim. "

[14] In its Reply, the Estonian Government maintained. the submissions contained in its Memorial and written statement and prayed the Court "to overrule the counter-claim of the Lithuanian Government". [p8]

[15] In its Rejoinder, the Lithuanian Government maintained the submissions which it had already made.

[16] In the course of public sittings held on January 19th, 20th, 24th, 25th, 27th and 30th, 1939, the Court heard the Agents of the two Parties, who at the conclusion of their oral arguments presented the following final submissions.

[17] The Agent for the Estonian Government prayed the Court

"To dismiss the counter-claim of the Lithuanian Government presented in its Counter-Memorial of August 30th, 1938,
To adjudge and declare
That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line;
That the Lithuanian Government is under an obligation to make good the prejudice which has thus been sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated at (1) the sum of 6, 850, 000 Gold Lits representing the price of the railway, plus (2) interest on this sum calculated at the rate of six per cent per annum from the date of seizure to the date of payment;
That the above payment shall be made in the course of the month following delivery of the judgment by means of a payment in pounds sterling to the account of the Estonian State Bank (Eesti Pank) with the Royal Scotland Bank in London, for the compensation of the Esimene Juurdeveo Raudteede Selts Venemaal Company;
That the said payment will involve total and final release of the Panevezys-Saldutiskis railway and all the movable and immovable property appertaining thereto, from all mortgages or liens which may belong to the bondholders of the First Company of Secondary Railways in Russia (or the Esimene Juurdeveo Raudteede Selts Venemaal Company). "

[18] The Agent for the Lithuanian Government, maintaining all submissions and arguments previously presented by his Government, prayed the Permanent Court of International Justice

"to declare that the claims of the Estonian Government cannot be entertained.
With regard to the merits, to dismiss the claims of the Estonian Government.
Alternatively,
In case the Court should hold that the legal personality of the former First Russian Company persists in the Esimene Company and should recognize that the latter is entitled to compensation, [p9]
To award to the Lithuanian Government the amount of its counter-claim, assessing the prejudice sustained at the sum of 7, 337, 271 Lits 98 cents, with interest at 6 % per -annum from September 1st, 1938, until the date of payment. "

[19] Documents in support of their contentions were filed on behalf of each Party [FN1].

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[FN1] See list in Annex
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[20] The above being the state of the proceedings, the Court must now adjudicate.

***

[21] The facts are as follows:

[22] In 1892 a company was founded at St. Petersburg under the name of the "First Company of Secondary Railways in Russia", and its statutes were approved by Imperial decree on March 26th, 1892.

[23] Under § 1 of its statutes, the Company had for its object "the construction and operation of broad and narrow gauge approach and secondary railways in general for public and private use, and the construction, operation and sale of transportable railways". Under § 2, the Company was authorized, subject to obtaining where necessary the sanction of the competent administrative body, inter alia, to construct and operate railways of every kind and type on its own account and at its own risk. The Company might engage in these activities throughout the whole of the Russian Empire. Under § 26, the registered offices of the Company were established at St. Petersburg.

[24] By an Imperial decree of November 21st, 1897, the Company was authorized to construct and operate (under the conditions fixed by a decree of June 27th, 1894, for another line, the Sventziany to Gloubokoïe line) a railway between the station at Sventziany, on the St. Petersburg-Warsaw railway, and the station at Panevezys, on the Libau-Romny railway. The Company also possessed other lines in various parts of the Russian Empire, in particular in the Baltic provinces and in the Ukraine.

[25] The statutes of the Company were revised and received Imperial sanction on July 3rd, 1898, and subsequently various partial amendments were approved by Imperial decrees of April 11th, 1900, November 6th, 1901, and April 24th, 1912.

[26] A general meeting of shareholders appears to have taken place in July 1917. Three months later, the Bolshevist revolution — the so-called October revolution — took place. Almost [p10] immediately afterwards, December 14th, 1917, a decree of the Central Executive Committee concerning the nationalization of banks placed in the hands of the Soviet Government the shares, assets and liabilities of companies existing in Russia. Among these companies was the "First Company of Secondary Railways"

[27] Political events then followed in rapid succession: on February 16th, 1918, Lithuania proclaimed itself an independent State; on February 24th the same thing happened in Estonia, and some days later, March 3rd, the Treaty of Brest-Litovsk between Germany and her allies and Russia confirmed the abandonment of Russian sovereignty over the former Baltic provinces and Lithuania which, however, remained in the occupation of German troops.

[28] Furthermore, the Bolshevist leaders hurried on measures intended to establish the communist Soviet regime confiscating private property throughout Russian territory. On June 28th, 1918, a decree was promulgated declaring "to be the property of the Russian Socialist Federated Soviet Republic" all industrial and commercial undertakings in Soviet Russia including "all the undertakings of private and secondary railway companies, whether in operation or under construction" (Art. I). The competent sections of the Supreme Council of National Economy were instructed to work out and carry through as-speedily as possible the organization of the administration of the nationalized undertakings; in so far as railways were concerned, the task was entrusted to the Commissariat of the People for Communications, subject to the approval of the Council of Commissaries of the People (Art. II). Until special orders were issued, undertakings which had been declared the property of the Soviet Republic were "regarded as leased rent free to the former owners; the Boards of Directors and former owners financing them under the old conditions and receiving the revenues as before" (Art. III). The directors and other managers responsible for nationalized undertakings were responsible for the maintenance, upkeep and operation of the undertaking. If they abandoned their posts or showed negligence, they incurred criminal liability (Art. IV). The responsible administrators were declared to be in the service of the Russian Socialist Federated Soviet Republic. If they abandoned their posts, members of the technical and administrative staff were to be held responsible before the Revolutionary Tribunal "with the utmost rigour of the law" (Art. V). Finally, all moneys belonging personally to members of Boards, to the shareholders and owners of nationalized undertakings were provisionally attached. [p11]

[29] Shortly afterwards, on September 4th, 1918, a second Soviet decree was promulgated which was designed "to supplement" the preceding decree, particularly with regard to railways. The Boards of former private railways which now became the property of the Republic were abolished and replaced by a so-called liquidation commission for each line.

[30] Some months later, March 4th, 1919, a third Soviet decree provided as follows: "Article 1. — The shares and foundation shares of joint-stock companies the undertakings of which have been nationalized or sequestrated are annulled even in cases where such undertakings have not yet passed under the control of governmental boards and where they have been leased to the former owners rent free. "

[31] In September 1919, the Lithuanian Government took possession of the Panevezys-Sventziany railway which was situated in territory which had become part of the State of Lithuania.

[32] Some months later, on February 2nd, 1920, the Russian Socialist Federated Soviet Republic signed its first treaty with the new Baltic States: the Treaty of Tartu with Estonia [FN1], which was followed on July 12th, 1920, by the Treaty concluded at Moscow with Lithuania [FN2] and, on August 11th, 1920, by the Treaty with Latvia [FN3], also signed at Moscow.

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[FN1] League of Nations, Treaty Series, Vol. XI, pp. 29-71.
[FN2] League of Nations, Treaty Series, Vol. III, pp. 105-137.
[FN3] League of Nations, Treaty Series, Vol. II, pp. 195-231.
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[33] In the present case, the Treaty of Tartu of February 2nd, 1920, concluded between the Soviet Republic and Estonia merits special attention for the reason that, unlike the two other treaties which followed it, it contains detailed provisions as to the fate of private property situated in Estonian territory, particularly as to the property of joint-stock companies.

[34] Under Article XI of this Treaty, of which the meaning and perhaps even the translation are disputed between the Parties, Russia renounces "all the rights of the Russian Treasury to the movable and immovable property of individuals which previously did not belong to her, in so far as such property may be situated in Estonian territory". All such property became "the sole property of Estonia" and was freed from all obligations as from December 14th, 1917, which, as has been seen, was the date of the decree nationalizing the banks.

[35] Further, an article supplementary to this Article XI provides that: "The Russian Government will hand over to the Estonian Government inter alia the shares of those joint-stock companies which had undertakings in Estonian territory, in so far as such shares may be at the disposal of the Russian [p12] Government as a result of the decree of the Central Executive Committee regarding the nationalization of the banks of December 14th, 1917.... Similarly, the Russian Government agrees that the registered offices of the joint-stock companies above mentioned shall be regarded as transferred to Reval and that the Estonian authorities shall be entitled to amend the statutes of such companies in accordance with the rules to be laid down by those authorities. " But the Treaty points out that "the above-mentioned shares shall only confer on Estonia rights in respect of those undertakings of the joint-stock companies which may be situated in Estonian territory and that in no case shall the rights of Estonia extend to undertakings of the same companies outside the confines of Estonia".

[36] The Treaty then expressly mentions the "First Company of Secondary Railways" as included amongst these joint-stock companies.

[37] The exchange of ratifications of the Treaty of Tartu took place on March 29th, 1920.

[38] In October 1920, some kilometres of the Panevezys-Sventziany railway line situated between the latter station and Saldutiskis ceased to be under Lithuanian sovereignty and passed subsequently into that of Poland.

[39] Some days after the coming into force of the Treaty of Tartu, the relevant provisions of which have been quoted above, the Estonian Government promulgated, on April 7th, 1920, a first set of provisional regulations regarding joint-stock companies whose statutes had been approved by the Russian Government, and which possessed undertakings or property in Estonian territory and had hitherto not had themselves registered by the Estonian courts in accordance with the regulations laid down. These companies apparently had to hold general meetings within two months after the decree, since the decree provided that, if they did not do so, all the powers of members of the Board of Directors would be held to have lapsed, and that curators appointed by the courts would undertake the administration and, if need be, the liquidation of the undertakings and property of such companies, such undertakings and property being treated as ownerless property.

[40] In order to establish the validity of a general meeting, the documentary evidence was to be accompanied by the statutes which had been approved by the Russian Government; the purpose of such general meeting was to be the bringing of the statutes into conformity with Estonian law and a decision to have them "registered by the judicial authorities of Estonia".

[41] A second Estonian ordinance, dated October 1st, 1921, provided that a company would be no longer subject to curatorship when the general meeting of its shareholders had elected its [p13] officers in accordance with the statutes approved by the former Russian Government and had had its statutes registered in accordance with Estonian law.

[42] On May 21st, 1922, the "First Company of Secondary Railways in Russia", which had been sequestrated on April 7th, was placed under curatorship by order of the District Court of Tallinn-Hapsal.

[43] It does not appear that any general meeting of this Company was held at this period in Estonia. On the other hand, the documents produced to the Court show that, on November 23rd, 1922, a general meeting of the Company — the first since the meeting of July 1917 — was held, not in Estonia, but at Riga in Latvia, with the sanction of the Latvian Government and under Latvian law, and that at this meeting the Board of Directors was instructed to take the necessary steps to reacquire possession of and to operate the property of the Company in Lithuania and Poland; while the portion of the system situated in Latvia was to be ceded to a Latvian company which was to be formed.

[44] On August 4th, 1923, a law was promulgated in Estonia declaring that, "in accordance with § 19 of the concession of the 'First Company of Secondary Railways in Russia', all railways of this Company in the territory of the Estonian Republic shall be bought out and become the property of the Treasury as from October 1st, 1923". The concession referred to is that granted by the Czar in 1897, and § 19 concerns the Imperial Government's right of redemption.

[45] The next thing that happened was that the Estonian Government, on September 7th, 1923, authorized the holding of a general meeting of the Company (which, as has been seen, had been under curatorship since May 21st, 1922) and the curators, "in accordance with the statutes (§ 60)", proceeded to convene a general meeting for October 19th of the same year.

[46] This general meeting was actually held in Tallinn on November 2nd, 1923. It proceeded to revise and amend the statutes in accordance with Estonian law and with a view to the exercise of the powers thenceforward to be enjoyed by the Company in Estonia: namely in respect of operation, works, tariffs, exemption from taxes, the right of expropriation, subjection to the laws and regulations in regard to railways, etc. The registered offices of the Company were fixed in Tallinn.

[47] These new statutes were approved on November 8th, 1923, and registered on November 23rd.

[48] As stated in the Estonian Memorial, the "First Company of Secondary Railways in Russia" was thus transformed "into an Estonian company having its registered offices in Estonia under the name of the Esimene Juurdeveo Raudteede Selts Venemaal [p14] — a translation into Estonian of the name of the Russian company.

[49] On March 10th, 1924, a general meeting of the Esimene held in Tallinn authorized the Board of Directors to sell the line situated in Lithuania and the lines in Latvia and Poland. On October 3rd, 1924, another general meeting appears to have been held at which particular consideration was given to the question of the Panevezys-Saldutiskis railway.
On March 5th, 1925, a request was sent on behalf of the Board of the Esimene to the Lithuanian Government, asking it "to give instructions for the necessary steps to be taken for the handing over of the Panevezys-Saldutiskis line to its legal owners".

[50] It does not appear that any answer was made to this petition, and several years elapsed in the course of which further petitions were made.

[51] On November 14th, 1931, a memorandum accompanied by a petition from the Board of the Esimene was transmitted to the Lithuanian Government. In this memorandum the Esimene pointed out that it was the former Russian company transformed into an Estonian company with the same titles and rights, and accordingly it claimed "in that capacity" fair compensation for the Panevezys line which belonged to it and of which it had been unjustifiably deprived.

[52] On April 29th, 1932, after the chairman of the Company had approached the Lithuanian Government, the Board of Directors, in a further petition of May 20th, 1932, stated that they consented to the non-restitution of the line in question but hoped on the other hand that some equitable method would be found of compensating the Company for the property of which it had been deprived.

[53] Further petitions were sent by the Board of Directors of the Esimene, in particular one on May 20th, 1932.

[54] On January 25th, 1933, the Lithuanian Government referred to its Council of State, which, under the organic law of August 21st, 1928, is an advisory body, the question whether the Esimene Company was justified in putting forward a claim in law against the Lithuanian Government in respect of the Panevezys railway. The opinion given was in the negative.

[55] On September 15th, 1933, and October 25th, 1933, the Esimene Company presented further petitions to which the Lithuanian Government replied, refusing to admit the claim of the Company to be entitled to the rights of the former company which, in its contention, no longer existed.

[56] The negotiations were thenceforward continued between the Estonian Minister in Kaunas and the Lithuanian Government, the Company proposing the purchase of its line by the Lithuanian Government (proposals of September 7th, 1934, September 14th, [p15] 1936, and letter of December 3rd, 1936, addressed by the Estonian Minister to the Lithuanian Government).

[57] In a letter of December 30th, 1936, the Lithuanian Government replied that the dispute was a matter of civil law and within the jurisdiction of the Lithuanian courts.

[58] On February 1st, 1937, the Estonian Government renewed its representations, the dispute bearing as before both on the question of the recognition of the Esimene as entitled to the rights of the Russian company and on the question of the jurisdiction of the Lithuanian courts. It was also argued that there had been a violation of the Commercial Convention concluded on January 13th, 1934, between Estonia and Lithuania and a denial of justice.

[59] On May 5th, 1937, the Lithuanian Government replied that it could not entertain the Estonian claim.

[60] On August 20th, 1937, the Estonian Government informed the Lithuanian Government that it intended to bring the case before the Permanent Court of International Justice. The Lithuanian Government then replied that, while maintaining its own view on the question of law, the friendly relations between the two States might make it possible to reach a friendly settlement of the dispute, should the Esimene Company not win its case before the Lithuanian courts.

[61] Such are the facts, which moreover do not appear to be disputed by the Parties, and on the basis of which the Estonian Government on November 2nd, 1937, filed with the Court the Application instituting the proceedings referred to at the beginning of this judgment.

***

[62] Within the time-limit fixed for the filing of the Counter-Memorial by the Lithuanian Government, the Agent for that Government submitted two preliminary objections. After the usual proceedings and hearings in connection with these objections, the Court, as has been explained, joined these objections to the merits by its Order of June 30th, 1938, saying in the course of that Order that at the then stage of the proceedings the Court could not take a decision either as to the preliminary character of the objections or as to whether they were well founded, for any such decision would raise questions of fact and law in regard to which the Parties were in several respects in disagreement and which were too closely linked to the merits for the Court to adjudicate upon them at that stage. Now that it has heard the arguments of the Parties on the merits of the case as well as on the objections, the Court is in a position to give its decision on the objections. [p16]

[63] Both the objections were submitted as preliminary objections under Article 62 of the Rules of Court. It is clear that Article 62 covers more than objections to the jurisdiction of the Court. Both the wording and the substance of the Article show that it covers any objection of which the effect will be, if the objection is upheld, to interrupt further proceedings in the case, and which it will therefore be appropriate for the Court to deal with before enquiring into the merits.

[64] The Lithuanian objections are based on the non-observance by the Estonian Government: (1) of the rule of international law that a claim must be national not only at the time of its presentation but also at the time of the injury; and (2) of the rule requiring the exhaustion of the remedies afforded by municipal law.

[65] In the opinion of the Court, the rule of international law on which the first Lithuanian objection is based is that in taking up the case of one of its nationals, by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own right, the right to ensure in the person of its nationals respect for the rules of international law. This right is necessarily limited to intervention on behalf of its own nationals because, in the absence of a special agreement, it is the bond of nationality between the State and the individual which alone confers upon the State the right of diplomatic protection, and it is as a part of the function of diplomatic protection that the right to take up a claim and to ensure respect for the rules of international law must be envisaged. Where the injury was done to the national of some other State, no claim to which such injury may give rise falls within the scope of the diplomatic protection which a State is entitled to afford nor can it give rise to a claim which that State is entitled to espouse.

[66] The Estonian Agent both in the written pleadings and in the oral arguments has endeavoured to discredit this rule of international law, if not to deny its existence. He cited a certain number of precedents, but when these precedents are examined it will be seen that they are cases where the governments concerned had agreed to waive the strict application of the rule, cases where the two governments had agreed to establish an international tribunal with jurisdiction to adjudicate on claims even if this condition as to nationality were not fulfilled. In the present case no grounds exist for holding that the Parties intended to exclude the application of the rule. The Lithuanian Agent is therefore right in maintaining that Estonia must prove that at the time when the injury occurred which is alleged to involve the international responsibility of [p17] Lithuania the company suffering the injury possessed Estonian nationality.

[67] Though it is true that an objection disputing the national character of a claim is in principle of a preliminary character, this is not so in the actual case before the Court. This is because the grounds on which Lithuania disputes Estonia's right to take up the case on behalf of the Company, viz. that the claim lacks national character, cannot be separated from those on which Lithuania disputes the Company's alleged right to the ownership of the Panevezys-Saldutiskis railway.

[68] The question whether the Esimene Company is to be regarded as the owner or concessionaire of the Panevezys-Saldutiskis railway undoubtedly forms part of the merits of the dispute. The ground on which the Company claims the railway is that it is the same as, or the successor to, the Russian company. The issue as to whether or not it is so involves a decision with regard to the effect of the events and the legislation in Russia at the time of the Bolshevist revolution, for it has been argued that the events and the legislation in Russia put an end to the company's existence and left the devolution of its property outside Russia to be governed by the law of the country in which the property was situated. This question, however, closely affects also the question whether or not there was in existence at the time of the Lithuanian acts giving rise to the present claim an Estonian national whose cause the Estonian Government was entitled to espouse.

[69] Similarly it would be necessary for the Court in dealing with the merits of the Estonian claim to adjudicate on the interpretation of the Treaty of Tartu, for it has been argued that the effect of that Treaty was to preserve the existence of the Russian company and convert it automatically into an Estonian company. Here again this same question has an intimate bearing on the nationality issue raised by the first Lithuanian objection. If for the purpose of deciding the Lithuanian objection the Court were to give a decision on the effect on Russian companies of the measures of the Soviet Government at the time of the Russian revolution, and as to the meaning and effects of the Treaty of Tartu, it would also have decided questions which form an important part of the merits of the dispute.

[70] For these reasons the Court cannot regard the first Lithuanian objection as one which in the particular circumstances of the case can be decided without passing on the merits. The [p18] Court cannot therefore admit the objection as a preliminary objection within the meaning of Article 62 of the Rules of Court.

[71] The second Lithuanian objection is based on the non-observance by the Estonian Government of "the rule of international law requiring the exhaustion of the remedies afforded by municipal law". The existence of this rule which in principle subordinates the presentation of an international claim to such an exhaustion is not contested by the Estonian Agent; his contention is that the case falls within one or more of the admitted exceptions to the rule.
First it is maintained that the courts in Lithuania cannot entertain a suit in this case. Secondly it is said that on one point — and that a point which constitutes an essential element in the Estonian case — the highest court in Lithuania has already given a decision adverse to the Estonian company's claim.

[72] If either of these points could be substantiated, the Court would be bound to overrule the second Lithuanian objection. There can be no need to resort to the municipal courts if those courts have no jurisdiction to afford relief; nor is it necessary again to resort to those courts if the result must be a repetition of a decision already given.

[73] Before examining in detail the second Lithuanian objection, it should be observed that the Estonian submission in this case is based on Lithuania's refusal to recognize the Esimene Company's proprietary and concessionary rights in the Pane-vezys-Saldutiskis railway, i. e., it is based on a dispute as to the non-recognition of a claim by an individual to a property right and to a contractual right. In principle, the property rights and the contractual rights of individuals depend in every State on municipal law and fall therefore more particularly within the jurisdiction of municipal tribunals.

[74] The Estonian Agent has argued that the Lithuanian courts have no jurisdiction to entertain a suit by the Esimene Company to establish the Company's title to the Panevezys-Saldutiskis railway. His allegation is met with an emphatic assertion by the Lithuanian Agent that the courts in Lithuania possess such jurisdiction. The Lithuanian Agent also points to Article 2 of the Lithuanian Code of Civil Procedure where it is laid down that "private persons.... whose legal rights are infringed by decisions of administrative institutes or persons may bring an action in the courts". [p19]

[75] The question whether or not the Lithuanian courts have jurisdiction to entertain a particular suit depends on Lithuanian law and is one on which the Lithuanian courts alone can pronounce a final decision. It is not for this Court to consider the arguments which have been addressed to it for the purpose either of establishing the jurisdiction of the Lithuanian tribunals by adducing particular provisions of the laws in force in Lithuania, or of denying the jurisdiction of those tribunals by attributing a particular character (seizure jure imperii) to the act of the Lithuanian Government. Until it has been clearly shown that the Lithuanian courts have no jurisdiction to entertain a suit by the Esimene Company as to its title to the Panevezys-Saldutiskis railway, the Court cannot accept the contention of the Estonian Agent that the rule as to the exhaustion of local remedies does not apply in this case because Lithuanian law affords no means of redress.

[76] The second ground on which the Estonian Agent has maintained that the rule as to the exhaustion of local remedies does not apply in this case is that the highest court, the Supreme Court in Lithuania, has already held that there is no continuity between the Russian company and the Estonian company, and has therefore already given an adverse decision on a point which constitutes an essential element in the Esimene Company's claim to the Panevezys-Saldutiskis railway. The rule of international law as to the exhaustion of local remedies has never, it is contended, been held to require that a claimant should be bound to institute proceedings on a point on which the highest court has already given a decision.

[77] The Court does not regard the argument as applicable in this instance.

[78] The case in which it is alleged that the Supreme Tribunal in Lithuania gave such a decision on March 26th, 1934,. is a suit brought against the Esimene Company in the Lithuanian courts by one Jeglinas to recover the capital value and the arrears of interest due on one of the bonds issued by the Russian company for the construction of the railway in question, and to obtain a decision that holders of the bonds were entitled to be paid in priority to other creditors, and also to obtain a ruling as to the rate of exchange as between roubles and lits.

[79] The Lithuanian Agent stated that the Jeglinas case was not a genuine case. Whatever may be the case on this point, it is sufficient for the Court to make the following observations. [p20]

[80] After the case had been dealt with in the Court of the juge de paix and the Tribunal d'arrondissement, Jeglinas entered an appeal to the Supreme Court in Lithuania. The judges in that court ignored the contentions and admissions of the parties, annulled the judgment of the Tribunal d'arrondissement and quashed all the proceedings upon the ground that there was no properly qualified defendant before the court. The following are the important paragraphs of the judgment according to the French translation supplied to the Court:

"The defendant cited in this case as liable for the bond is not the First Company of Secondary Railways in Russia, with its Board of Directors in Petrograd, but the First Company of Secondary Railways in Russia, with its Board of Directors at Tallinn in Estonia and whose managing director, Paul Klompus, at present resides in Kaunas, at the Lithuania Hotel, No. 9, Daukant Street. Consequently, in order to bring this case within the jurisdiction of the Lithuanian courts, a domicile has been artificially created in breach of Article 220 of the Code of Civil Procedure which indicates where a company is to be sued.
More especially since, as may be seen from the evidence produced by the defendant, no company exists in Estonia in whose name the bond was issued and whose statutes were in force in 1892, but there is a company newly founded under the name of Esimene Juurdeveo Raudteede Selts Venemaal (which, translated, may mean: 'First Company of Secondary Railways in Russia').
Evidence has not been produced in this case that the said Estonian company can be recognized by our laws or by international treaties as successor to the old Russian company, and the Court knows of no such laws or treaties. Only companies whose statutes are registered in accordance with our laws and duly published (law concerning joint-stock companies, 'Government Gazette', No. 179) may operate in Lithuania. And only such joint-stock companies are entitled to have their enterprises there, especially enterprises of such great importance as railways. Moreover the Tribunal d'arrondissement, with the participation of the representative of the Estonian company and on the basis of § 14 of the bond, gave the claimant a preferential right of execution upon the movable and immovable property of the Sventziany-Ponévège railway, although, as has been stated., part of this line is in the possession of the Lithuanian Ministry of Communications.
In view of the foregoing, there is no ground for regarding Paul Klompus, the director of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as a defendant entitled to answer for bond No. 0742, issued by the 'First Company of Secondary Railways in Russia', i. e., as qualified to be the defendant in accordance with Article 4 of the Code of Civil Procedure, and consequently the whole of the proceedings in this case which have taken place without the real defendant [p21] having been summoned or heard must be annulled and the appeal in cassation cannot be considered [FN1]."

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[FN1] Translation by the Registry
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[81] The passage quoted above in which it is said that the proofs had not been submitted in the case to show that the Estonian company could be recognized as the successor of the former Russian company has been thought to mean that the Supreme Tribunal examined the evidence and gave a decision as to its effect. An examination of the judgment shows however that the passage in the judgment means no more than that no evidence had been submitted to the Lithuanian courts to show the identity of the two companies.

[82] It must also be pointed out that if the Esimene Company instituted proceedings in the Lithuanian court as to their right to be regarded as the owners and concessionaires of the Panevezys-Saldutiskis railway, the parties to the suit would not be the same as those in the Jeglinas case — so that no question of res judicata could arise; nor is there anything to show that the Esimene Company would find itself confronted by a course of decisions (jurisprudence constante) of the Lithuanian courts which would render the Company's suit hopeless, despite the difference of the parties.

[83] The Estonian Agent has also drawn the attention of the Court to an opinion rendered by the Lithuanian Council of State on January 25th, 1933, as to the juridical basis of the Esimene Company's claim to the Panevezys-Saldutiskis railway. The conclusion reached by the Council of State was that the Esimene Company was neither the same as nor the successor to the Russian company and therefore had no claim to the railway.

[84] The function of the Council of State in Lithuania is among others to notify to the Council of Ministers or to the particular Minister concerned any case in which the orders, regulations or instructions of the executive authorities are inconsistent with the laws in force. It is not a judicial authority the opinions of which would be binding on the Lithuanian courts. For this reason the fact that in 1933 it rendered an opinion to the Lithuanian Government adverse to the validity of the Esimene Company's claim cannot be regarded as excusing that Company from seeking redress in the Lithuanian courts.

[85] Neither of the reasons put forward by the Estonian Agent for the non-application of the rule as to the exhaustion of the local means of redress can therefore be regarded as holding good in the present case. [p22]

[86] In consequence, on the one hand, the second Lithuanian preliminary objection having been submitted for the purpose of excluding an examination by the Court of the merits of the case, and being one upon which the Court can give a decision without in any way adjudicating upon the merits, must be accepted as a preliminary objection within the meaning of Article 62 of the Rules. On the other hand, as regards the merits of the objection, it is common ground between the Parties that the Estonian company has not instituted any legal proceedings before the Lithuanian courts in order to establish its title to the Panevezys-Saldutiskis railway.

[87] The objection must therefore be regarded as one that can be entertained as an objection of a preliminary character and as well-founded as regards its substance.

[88] FOR THESE REASONS,
The Court,
by ten votes to four,
Declares that the objection regarding the non-exhaustion of the remedies afforded by municipal law is well founded, and declares that the claim presented by the Estonian Government cannot be entertained.

[89] The present judgment has been drawn up in French and English, the French text being authoritative.

[90] Done at the Peace Palace, The Hague, this twenty-eighth day of February, one thousand nine hundred and thirty-nine, in three copies, one of which will be deposited in the archives of the Court and the others will be communicated to the Estonian Government and to the Lithuanian Government respectively.


(Signed) J. G. Guerrero,
President.
(Signed) J. López Oliván,
Registrar. [p23]

[91] Count Rostworowski and M. De Visscher, Judges, declare that they are unable to concur in that part of the judgment given by the Court concerning the first objection raised by the Lithuanian Government and, availing themselves of the right conferred upon them by Article 57 of the Statute, have appended to the judgment the separate opinion which follows.

[92] M. Altamira, Judge, declares that he is unable to concur in this judgment in regard either to the operative clause or to the grounds on which it is based.

[93] Jonkheer Van Eysinga, Mr. Hudson and M. Erich, Judges, declare that they are unable to concur in the judgment given by the Court and, availing themselves of the right conferred upon them by Article 57 of the Statute, have appended to the judgment the respective separate opinions which follow.

[94] M. Römer'is, Judge ad hoc, while in agreement with the operative clause of the judgment, declares, with regard to the fact that the Court has refrained from adjudicating upon the first Lithuanian preliminary objection on the ground that it would be impossible to do so without entering into the merits, that he is unable to concur in the opinion of the Court on this point and is in agreement with the separate opinion delivered by M. De Visscher and Count Rostworowski, Judges.

(Initialled) J. G. G.
(Initialled) J. L. O. [p24]

Separate Opinion by M. De Visscher and Count Rostworowski.

[Translation]

[95] We regret that we are unable to concur in the decision by which the Court has declined to adjudicate on the validity of the first objection, lodged by the Lithuanian Government in reply to the Estonian application, its decision being based on. the ground that that objection could not "in the particular circumstances of the case be decided without passing on the merits". We are of opinion that this objection, which is based upon the absence of Estonian nationality from the interests injured at the time when the damage was suffered, is a preliminary objection ; that at the present stage of the case there was reason to adjudicate upon it and, lastly, that it is well-founded.

[96] The Court's Order of June 30th, 1938, joining the objections to the merits in no way prejudged the issue as to the preliminary character of these objections nor as to their justice. In joining them to the merits, the Court merely adjourned its decision upon these two points until the moment when, having gained a full understanding of all the aspects of the dispute, it would be in a position to deliver judgment with a knowledge of the whole of the facts. It is therefore on those two points that the Court in the present proceedings was required to adjudicate.

[97] Article 62 of the Rules of Court deals with preliminary objections from the point of view of their submission during the course of the proceedings ; it does not define them in such a way as to fix their essential features. Obviously, however, if under this Article the preliminary objection suspends procedure on the merits, that is because it aims at preventing in limine litis any examination of the merits, that is, any decision as to the justice or injustice of the claim.

[98] It follows that an objection is prima facie preliminary when, by its nature or its purpose, it appears directed against the judicial proceedings, that is, against the conditions governing the institution of the proceedings and not against the law on which they rest. In order, however, that it may definitely be granted this character, it is necessary in each case to weigh the arguments cited in its support. The objection will be treated either as preliminary or as a defence of the merits, according as these arguments may or may not prejudge the justice or injustice of the claim. In the present case the very purpose of joining the objections to the merits was to enable [p25] the Court, being fully informed on all aspects of the case and thoroughly acquainted with the arguments advanced in support of the objections, to determine their real character as well as to pronounce upon their justice.

[99] It goes without saying, however, that an objection lodged in limine litis cannot be treated as an argument on merits, simply because the Court, in order to pass upon it, is obliged to refer to some extent to facts connected with the merits, when the examination of these facts is in the first place essential to a decision about the objection and, in the second place, does not prejudge the merits. With these reservations the Court admitted, in its Judgment of August 25th, 1925 (Judgment No. 6, Case concerning certain German interests in Polish Upper Silesia, p. 15), that a decision concerning an objection to jurisdiction may "involve touching upon subjects belonging to the merits of the case". It thus admitted the possibility of referring to matters connected with the merits on condition that it did not encroach upon those merits, that is, did not in any way compromise the position taken up by each party in regard to them. This course appears especially justified after an Order has joined the objections to the merits, since the very reason for. that Order is to allow the Court to take account of certain matters concerned with merits which are necessarily related either to the character of the objection or to its justice.

[100] Applying these rules to the case now before the Court, we consider that the objection derived by the Lithuanian Government from the absence of nationality in respect of the interests impaired at the time the injury was suffered, is a preliminary objection. The Court could pass upon it without in any way prejudging the merits.

[101] To prove this point, we must first determine what here constitutes the merits of the dispute and next fix the nature and the date of the illegal international act of which the Estonian Government complains.

[102] In this matter the Estonian Government has not intervened in the defence of any public or national interest ; its intervention is solely intended to protect private interests against an act which is represented as a breach of international law. In these circumstances the relation of nationality is simply the title of a given State to submit a claim, and that title is independent of the merits of the claim itself. The merits of the question, in a case like this, do not consist of the title to intervene ; they consist in the justice or injustice of the claim for reparation. In principle, therefore, and prima facie, the dispute over the relation of nationality, in an affair of this kind, does not involve any appraisement of the justice of the claim as such. Far from involving the merits, it aims at preventing their judicial examination. [p26]

[103] It remains to be seen, however, whether, in this case, the character of the arguments invoked in support of the objection is not such as to prejudge certain matters upon which the justice or injustice of the claim depends.

[104] Confronted with the objection derived from the absence of the claim's nationality at the time when the injury was suffered, the judgment makes no mention of essential particulars of this objection; it mentions neither the act of injury complained of by the Estonian Government, nor the date of such act. Now, the determination of these two particulars, as they figure in the submission of the applicant Government, furnishes the necessary and fully ample basis upon which to decide both the preliminary character of the objection and its justice.

[105] The written memorials plainly show that the seizure, that is, the taking possession of the Panevezys-Saldutiskis railway, is the initial offence complained of by the Estonian Government; its subsequent operation is only a result or consequence of that first offence. Submission No. 1 of the Estonian Government prays the Court to adjudge and declare :

"1. That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate that Company for the illegal seizure and operation of this line."

[106] In the first part of the sentence the Estonian Government only asks the Court for a statement of law, declaring that the refusal of Lithuania in the past to recognize the Company's rights is illegal. In the second part of the sentence, beginning with the words "and to compensate", the applicant Government defines the acts which in its view involve the international responsibility of the defendant Government and justify the compensation claimed "for the illegal seizure and operation of this line".

[107] Seizure then is here put forward as the illegal international act which, according to the Estonian Government, involves the international responsiblity of Lithuania. The Estonian Memorial, in Chapter VIII, entitled "International Responsibility of the Lithuanian Government" (pp. 26-28), is definite on this point. The Estonian Government there states that "the seizure and detention of the railway .... are in its opinion an infringement of the property rights of the Esimene and, for that reason, an infringement of Estonia's own right' " (p. 27). A little later it is still more explicit : "For these breaches of [p27] international law and of treaties the Lithuanian Government is directly responsible. The seizure of the Panevezys-Saldutiskis railway was the act of organs of the Government." (P. 28.) The same conclusion follows from the following passage in the Estonian Government's Reply, where it explains the nature and amount of the damage caused "by seizure of the Panevezys-Saldutiskis line" : "This damage is twofold: in the first place, seizure by Lithuania dispossessed the First Company of property that belonged to it ; in the second place, the Company from 1919 onwards was deprived of the enjoyment of its concession."

[108] Finally - if further evidence were needed - these definite pronouncements are strongly confirmed by the whole attitude of the Estonian Government, which, when confronted with the Lithuanian objection based on the absence of nationality at the time when the loss was suffered, has never throughout the proceedings disputed that the initial act of injury it complains of was the seizure of 1919.

[109] As to the date of the seizure or taking possession of the railway, the Parties agree in fixing this in 1919. It thus only remains to consider, in order to determine the character of the objection, whether the absence of Estonian nationality from the interests alleged to have been damaged by the seizure at that time can be proved without prejudging certain matters upon which the decision as to merits depends.

[110] The following argument, in our opinion, furnishes an affirmative answer to that question. The Estonian Government has tried to prove that the rule of law underlying the objection is subject to various qualifications, but it has not claimed that in 1919 the interests damaged by the seizure had already acquired Estonian character. On its own admission, the First Russian Company, which is said to have survived the nationalization decrees, was only transformed into an Estonian company as a result of the Treaty of Tartu of February 2nd, 1920, and, to quote the words of the Estonian Agent, "at the time and by the fact of the treaty of peace" (oral statement of the Agent for the Estonian Government, June 14th, 1938; Oral Statements, p. 40). Accordingly, even if it could be agreed that the change of nationality dates back to the Treaty of Tartu, the change could still not operate in regard to a fact which the Parties agree in dating 1919. Finally, either the interests affected by the seizure were at that time still represented by the Russian company, according to the Estonian Government's theory of survival, or they were no longer represented by any company at all, according to the argument of the Lithuanian Government to the effect that the nationalization decrees destroyed the Company's legal personality. In either case - and this fact is alone decisive - there was in 1919 [p28] no Estonian company, and therefore the bond of nationality required by international law to have existed at the time the injury was suffered, was manifestly lacking.

[111] The Estonian Government has tried in vain to attach this question of nationality to a question of merits, by arguing that a decision which denied Estonian character to the Company at the time of seizure, but recognized it at a later date, would constitute an implicit admission of the continuity of the Company, a question which forms an essential aspect of the merits of the case (oral statement by the Agent for the Estonian Government, June 14th, 1938, Oral Statements, p. 36). This argument, which turns rather upon words, has no relevance. The objection does not depend upon the continuity or lack of continuity of the First Company's legal personality. The decision to be taken upon it would be the same if we were to accept the Estonian argument and were to regard the Esimene Company as a continuation of the Russian company. For the question raised in the objection is not a question of identity, but a question of nationality. This question affects a company in the same way as an individual: an individual whose identity since suffering injury had never been disputed, would be equally without title to claim the diplomatic protection of a State, if, at the time the injury was sustained, he was not a national of that State.

[112] We are therefore of opinion that the arguments invoked in support of the first objection are altogether independent of the merits of the case and we cannot accept the Court's view that "the basis of the objection whereby Lithuania disputes the right of Estonia to intervene on the Company's behalf, that is, the claim's lack of nationality, is inseparable from that same Government's reason for disputing the Company's alleged right to the ownership of the Panevezys-Saldutiskis railway".

[113] The close relation which the judgment here seeks to establish between the dispute about nationality and the denial of ownership rights seems to us ill-founded. The judgment only arrives at this result by introducing into the argument the idea of the identity or continuity of the companies. But, as we have seen, the dispute over nationality is quite independent of that consideration.

[114] Since a decision upon the first objection, regarded as a preliminary objection, is in our opinion possible, we consider that it should have been adjudicated upon and that, by application of the rule on which it is based, it should have been declared well-founded. [p29]

[115] The two objections lodged by the Lithuanian Government have neither the same character nor the same scope, which makes it impossible to regard them as equivalent and to fix upon one or the other indifferently. The first objection involves the very title of the applicant State to intervene on the Company's behalf, a question which logically precedes the question of exhausting local remedies raised by the second objection. But it should be particularly noted that, unlike the second objection, the first is of a decisive or peremptory character: if recognized to be well-founded, its effect would have been to rule out altogether the claim by the Estonian Government on behalf of the Esimene Company. By submitting it first in order, the Lithuanian Government could hope for the final dismissal of an intervention which the Court's judgment does not dispose of definitely.

[116] The validity of the objection is sufficiently evident from the considerations we have already mentioned: the non-Estonian character of the interests damaged in 1919, the date at which the railway was seized, is obvious. This fact alone suffices to justify the objection based on failure to observe the rule of international law which requires that the claim shall be national not only at the time when it is submitted, but at the time when the damage is suffered.

[117] The arguments adduced in general terms in favour of various qualifications of this rule may have some force in the case of the protection of individuals, but they can hardly apply to companies, whose nationality is determined by conditions very different from those governing the nationality of private persons.

(Signed) De Visscher.
( ,, ) Rostworowski. [p30]


Dissenting Opinion by Jonkheer Van Eysinga.

[Translation]

[118] The judgment decides that the first objection raised by the Lithuanian Government as a preliminary objection does not possess that character. This decision had not yet been taken by the Court's Order of June 30th, 1938. The result of this way of proceeding would be that if it were necessary to adjudicate on the merits of this dispute between Estonia and Lithuania, the Court could only do so in a third phase of the proceedings. It may be questioned whether this way of proceeding is a very happy one. It is moreover not in accordance with the procedure laid down by Article 62 of the Rules of Court with regard to preliminary objections. Under that Article, which was introduced after mature reflection in 1926 as Article 38, the Court must decide as to the preliminary character of objections as soon as they are raised as such, after which, unless the Court upholds the objections, it has the choice of rejecting them or joining them to the merits. Article 62 of the Rules very rightly does not contemplate a third possibility consisting in leaving open the question whether objections are or are not preliminary in character and joining them nevertheless to the merits.

***

[119] The first preliminary objection of the Lithuanian Government to the Estonian Government's claims is to the effect that the latter Government has not observed "the rule of international law according to which a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered".

[120] In this connection, the following observations should be made.

[121] It appears from the memorials and oral arguments which were already before the Court in the first stage of the proceedings in regard to this dispute, that is to say in June 1938, that the unlawful act complained of by the Estonian Government is the seizure by the Lithuanian Government in September 1919 of the Panevezys-Saldutiskis railway. And it is not denied that at that date the Esimene Juurdeveo Raudteede Selts Venemaal (First Company of Secondary Railways in Russia), whose case the Estonian Government has taken up, could not possess Estonian nationality.

[122] The Lithuanian Government contends that the Company was only founded in 1923 and that consequently it then received [p31] Estonian nationality. On the other hand, the Estonian Government contends that the Estonian Company is none other than the First Russian Company, founded in 1892, the nationality and statutes of which were altered following the world war and after 1919. It is therefore unnecessary to settle the question which of the two Parties is right with regard to this point —a thing which it would only be possible to do by entering upon the merits of the dispute — in order to decide whether or not we are dealing with a preliminary objection. For no matter which of the two lines of argument is correct, the fact remains that at the time when the injury was suffered, the Company did not possess Estonian nationality and that, consequently, the rule of international law which the Lithuanian Government adduces is applicable, at all events if it exists in the absolute form attributed to it by that Government.

[123] But it is precisely in regard to this point that there appears to be ground for serious doubt; for the Lithuanian Agent has not succeeded in establishing the existence of the rule in the absolute form attributed to it according to the Lithuanian argument.

[124] To decide the question whether an unwritten rule of international law is really a hard and fast rule, it does not suffice to present general considerations — which in some circumstances may be sufficient; it is also necessary to consider the legal situation in which the rule has to be applied in a particular case. This has not been done in the present case.

[125] It should be added that, if the Estonian contention that the Esimene is no other than the First Company were correct, the rule adduced by the first Lithuanian objection would be open to other criticisms besides that relating to the lack of proof of the existence of such a rule. These criticisms will be set out first in the following observations, which will do not more than touch upon the merits of the dispute.

[126] The train of events underlying the present dispute falls within the branch of international law known as State succession. At a certain moment portions of the old Russian Empire, including Lithuania, became independent States ; what had previously been a part of Russia, of the Russian people and of the Russian authorities, was now Estonia, the Estonian people and the Estonian authorities. All the powers which the Estonian Government can now exercise are new in the sense that these same powers previously belonged to another State, namely Russia.

[127] There exists no general statute governing the part of international law relating to State succession, and the treaties which deal with the matter, such as the Treaty of Peace of Tartu between Russia and Estonia, signed on February 2nd, 1920, which came into force on March 29th, 1920, define sometimes [p32] one part, sometimes another of the law of State succession; all depends on the degree of importance attributed by the parties to the particular treaty to these sections of international law in the actual conditions which confront them. That being so, it will be seen that the question of the transfer of the registered offices of joint-stock companies and consequently the question of their nationality would have assumed another aspect if Russia had not passed through a tremendous revolution leading to a very far-reaching nationalization of private property, but had remained a State attaching great importance to the inviolability of private property.

[128] A treaty such as the Treaty of Tartu may provide that the local inhabitants and likewise corporations, whether joint-stock companies or otherwise, which are situated in the territory of the new State, shall acquire the latter's nationality. The Treaty of Tartu does not say so expressis verbis. On the other hand, other aspects of the law of State succession were dealt with therein in special articles covering such matters as debts due to the Russian Treasury by Estonian subjects, which debts passed into the hands of Estonia under Article XI, paragraph 2.

[129] But whether or not dealt with in the Treaty, the legal life of the new State in all its aspects proceeds in succession to the legal life of the old State. Thus in all matters where the Government of the latter had jurisdiction, its place is now' taken by the Government of the new State. This holds good as regards diplomatic protection. If the Estonian contention that the Esimene is the same as the First Company were correct, the diplomatic protection of the Company would until a certain date have been a matter for the Russian Government, but after that date it would have fallen to the Estonian Government. It is the same principle as that found in Article XI, paragraph 2, under which at a certain date debts owing to the Russian Treasury passed into the hands of Estonia, and it is difficult to see why a "claim" against a third State arising out of an unlawful act should not also pass from the old to the new State. Regarded from this aspect of the law of State succession — and this is how the present dispute should be envisaged — there is nothing surprising in the fact that Estonia should have had the right to take up a case which previously only Russia could have espoused. Such a "succession" is an absolutely characteristic and even essential feature of the law of State succession. The successor State is continually exercising rights which previously belonged exclusively to the old State, and the same holds good as regards obligations. Accordingly it would be quite normal that in this case the successor State should have protected both diplomatically and before [p33] the Court a company the diplomatic protection of which formerly fell to Russia alone.

[130] As has already been said, the rule that a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered, if it were really a hard and fast rule, would apply not only if the Lithuanian contention that the Esimene was only founded in 1923 were correct, but also if the Estonian contention were well-founded. It follows from what has been said above that it cannot be applied in the latter alternative. But apart from this the Lithuanian Agent has not succeeded in establishing the existence of the rule in the absolute form imputed to it by the Lithuanian argument.

[131] Those who maintain that this is a hard and fast rule rely mainly on the jurisprudence of the Claims Commissions (Mixed Commissions). So does the Lithuanian Agent.

[132] The Mixed Commissions are set up by treaty when, especially after stormy events such as a revolution or civil war, a great number of the nationals of both parties to the treaty have suffered injury. A desire to liquidate all these claims leads the two parties to refer them by treaty to a commission set up especially to deal with them. Accordingly the commission is a special tribunal for certain groups of the nationals of both sides, and it is obvious that such treaties have in view only the nationals of the two parties who have suffered injury, but not non-nationals, who may be in the same situation and who, in order to take advantage of the existence of the commission, get themselves naturalized, or nationals who may have bought the claims of non-nationals. In the domain of treaties setting up Mixed Commissions, the rule relied on by the Lithuanian Agent is perfectly comprehensible and perhaps in this sphere it is possible to speak of a rule of international law in the sense that, in the absence of a definite treaty provision, it must be observed by the Mixed Commissions.

[133] The Lithuanian Agent, in order to support his contention as to the hard and fast character of the rule adduced by him, has frequently cited the American publicist Borchard. In this connection it should be observed that the quotation on page 19 of the Lithuanian Preliminary Objections gives the impression that Borchard, in his classic work, had laid down the rule that a claim must be a national claim not only at the time of its presentation but also at the time of the injury as a rule of general application. But if one continues to read on page 660 of Diplomatic Protection of Citizens abroad, one realizes that Borchard really only has in mind the line of [p34] conduct of the United States Department of State in the sphere of the Claims Commissions. And the heading of paragraph 306 of Borchard explains that this paragraph is merely concerned with the impossibility of "nationalizing" a claim whether by the naturalization of the person advancing it or by the assignment of the claim to a national. Accordingly he is dealing with abuses with which the Mixed Commissions have constantly had to contend, but which are not present in the Panevezys-Saldutiskis railway case.

[134] If therefore Borchard's book is not relevant in the present case, the same applies with regard to the learned note of MM. de Lapradelle and Politis on the Washington Mixed Commission of December 31st, 1862, which note is cited on page 21 of the Lithuanian Preliminary Objections. In this note the part devoted to the question of nationality begins with the following sentence : "Questions of nationality are frequently put to Mixed Commissions." And some lines later: "In Mixed Commissions, protection and nationality coincide. The States which set them up only make them available to their respective nationals." It follows that this note is only concerned with "Claims Commissions" set up by conventions and which the contracting parties place at the exclusive disposal of their nationals. Moreover there is nothing surprising in this, since the note deals only with such a mixed commission and is not concerned with international jurisdiction in general.

[135] The passage quoted on page 21 of the Lithuanian Preliminary Objections : "In the Medina case the theory of nationality is definitely and frankly introduced into arbitration proceedings. And since then it has consistently developed", might give the impression that the passage was intended to cover the whole sphere of arbitration. But the context shows that this is not so. Moreover the note is careful to emphasize the distinction between Mixed Commissions and arbitration properly so-called: on page 179 it says that, in special circumstances, that is to say when all the claims come from one side only — when therefore reciprocity is absent — "the Mixed Commission nearly approaches an arbitration properly so-called".

[136] In the Institute of International Law, Borchard attempted to generalize that which in his book related only to Mixed Commissions, and he then said a thing which should be stressed and which indeed is quoted on page 20 of the Preliminary Objections. "An extensive jurisprudence has established and crystallized the rule to the effect that a claimant must have possessed the nationality of the claimant State when the claim originated" (Year Book of the Institute of International Law, 1931, I, p. 282). The jurisprudence referred to by Borchard and quoted [p35] by him is still that of Mixed Commissions. It may be that this jurisprudence has crystallized the rule which Borchard has in mind. But it may be observed that "crystallize" implies the idea of rigidity. When the Court has to apply unwritten law, of course it often encounters difficulties. But there are also advantages, in particular the advantage that such rules of law, not being written, are precisely not rigid. It will suffice to read, inter alia, the observations of M. Politis (Year Book, 1931, II, pp. 206-209) to see that it is a happy thing that the rule adduced by Lithuania, which may be binding in a certain number of cases, is by no means crystallized as a general rule. And in this connection the question also arises whether it is reasonable to describe as an unwritten rule of international law a rule which would entail that, when a change of sovereignty takes place, the new State or the State which has increased its territory would not be able to espouse any claim of any of its new nationals in regard to injury suffered before the change of nationality. It may also be questioned whether indeed it is any part of the Court's task to contribute towards the crystallization of unwritten rules of law which would lead to such inequitable results.

[137] It follows from the foregoing that the Lithuanian Agent has not succeeded in establishing the existence, in the absolute form alleged by him, of the rule of international law to the effect that a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered, and that this rule cannot resist the normal operation of the law of State succession.

[138] As the basis on which the first Lithuanian preliminary objection rests is thus shown to be non-existant, that objection should have been rejected, and its rejection would have been possible without prejudging the merits of the case.

***

[139] The second Lithuanian objection, which is likewise preliminary in character, is of the same pattern as the first. It also adduces a rule of international law, "the rule requiring the exhaustion of local remedies". The Lithuanian Agent in his speech on June 13th, 1938, said that the rule would always be binding as between the two States unless it had been set aside by a treaty, and, in Lithuania's contention, no such treaty existed.

[140] It is this latter point which is open to doubt. It would seem that Lithuania cannot rely upon this rule as against Estonia for the very reason that the acceptance by the two [p36] States of the Court's compulsory jurisdiction under Article 36 of the Court's Statute, which acceptance is unreserved (Series D., No. 6, p. 42 ; Series E., No. 11, p. 257), implies the setting aside of the rule in question in relations between the two States. We have here an exception to the rule which is accepted in principle by Lithuania, but which in that country's contention does not operate in the present case.

[141] The rule that the means of redress afforded by the national courts must be exhausted before a government can take up the case of one of its nationals against a foreign government is a rule of conduct which has been observed for a very long time. It is a rule the observance of which dates back to the remote past, a past antedating by far the "general and logically coordinated theory of State responsibility", as M. De Visscher has called it, a theory which dates from the beginning of this century and which owes its origin to the remarkable German science of Laband and after him of Triepel.

[142] When a person approaches his government with a view to getting it to take up his case against a foreign government, the former government will begin by ascertaining whether the remedies afforded by the latter's courts have been exhausted. If they have not, it will advise its national to apply to those courts before it can take up the case on his behalf.

[143] Reciprocally, when a government receives a diplomatic complaint regarding a foreigner, if the latter has not yet exhausted the remedies afforded him by the national courts, that government will reply to the other government that the outcome of action before the national courts or other authorities must be awaited. The same will hold good if the diplomatic representations take the form of a proposal for arbitration.

[144] The application of the local remedies rule is not restricted solely to diplomatic relations between governments. Instances of its application are also to be found in other spheres of international administration. Thus when the Central Commission on the Navigation of the Rhine was assigned the task 6i dealing with complaints regarding the non-observance of international law governing the Rhine, it also determined to apply the rule.

[145] Though therefore the rule is normally followed in international practice, there are also cases where it has not been followed. There are for instance cases where a settlement of the claim by diplomacy has been effected notwithstanding the non-exhaustion of local remedies, and also cases where an arbitrator has been appointed who was to adjudicate in spite of the fact that all the national courts competent to deal with [p37] the claim had not rendered a decision. When an arbitrator is appointed in such circumstances, this constitutes a "prorogation" of jurisdiction.

[146] The local remedies rule encountered an important landmark in its history when ad hoc arbitrations, the special agreements for which are not based on compulsory arbitration clauses which at that date did not yet exist, began to be replaced by such clauses or even by general arbitration conventions in which the contracting States agreed beforehand to submit to arbitration certain categories of legal disputes or even all such disputes which might arise. Compulsory or institutional arbitration, as Lammasch calls it, constitutes, in so far as concerns disputes in which one government is taking up the case of one of its nationals, a "prorogation" of jurisdiction provided for in advance. As regards a particular dispute it has the same effect as an agreement ad hoc with reference to a dispute in which the local remedies have not been exhausted. In fact, compulsory arbitration, accepted unconditionally, constitutes an exception to the applicability of the local remedies rule.

[147] So true is this that when, at the instigation of the 1899 Peace Conference, governments began to conclude general arbitration conventions, they realized the necessity of making an explicit reservation in such conventions regarding the local remedies rule if they wished to maintain that rule. Without such a reservation, compulsory arbitration accepted beforehand, unconditionally, would constitute a "prorogation" of jurisdiction whenever arbitration was obligatorily resorted to before local remedies had been exhausted. On the other hand, the making of a reservation postpones compulsory arbitration until the local courts have adjudicated.

[148] One of the first examples of this reservation is to be found in the General Arbitration Convention between Denmark and the Netherlands of February 12th, 1904; and in Article 6 of the General Treaty of Arbitration between Italy and the Netherlands of November 20th, 1909, we already find a formula very much like that to be met with more and more frequently in compulsory jurisdiction or arbitration conventions. Article 6 of the General Arbitration Treaty between Italy and the Netherlands is as follows :

"In questions falling under the jurisdiction of the national judicial authorities, according to the territorial laws, the Contracting Parties are entitled not to submit the dispute to arbitration until the competent national courts have delivered a final decision, except in the case of a denial of justice." [p38]

[149] A perusal of the collection of texts governing the Court's jurisdiction in Series D., No. 6, and in the addenda to that collection, will suffice to realize that in a very large number of conventions providing for the Court's compulsory jurisdiction, this compulsory jurisdiction does not exist so long as local remedies have not been exhausted. Thus for instance Article 3 of the Locarno Arbitration Conventions of 1925 runs as follows :

"In the case of a dispute the occasion of which, according to the municipal law of one of the Parties, falls within the competence of the national courts of such Party, the matter in dispute shall not be submitted to the procedure laid down in the present Convention until a judgment with final effect has been pronounced, within a reasonable time, by the competent national judicial authority."

[150] The General Act of Conciliation, Judicial Settlement and Arbitration, signed at Geneva on September 26th, 1928, contains an article — No. 31 — the wording of which very much resembles that of the Locarno instruments. This article is as follows:

"1. In the case of a dispute the occasion of which, according to the municipal law of one of the Parties, falls within the competence of its judicial or administrative authorities, the Party in question may object to the matter in dispute being submitted for settlement by the different methods laid down in the present General Act until a decision with final effect has been pronounced, within a reasonable time, by the competent authority.
2. In such a case, the Party which desires to resort to the procedures laid down in the present General Act must notify the other Party of its intention within a period of one year from the date of the afore-mentioned decision."

[151] It is not without interest to observe that both the text of Locarno and that of the General Act, as well as the numerous treaties based on the text of these important instruments, speak of disputes between States the subject (occasion) of which falls within the competence of the courts (judicial or administrative authorities) of one of the parties to the treaty. In a case where one of the parties has espoused the claim of a physical or juristic person, the dispute between the two States has therefore precisely the same subject (occasion) as the dispute between the physical or juristic person and one of the two States.

[152] It seems clear that in all cases where the jurisdiction of the Court is conditional upon the exhaustion of local remedies, an objection to the effect that an application presented before such remedies have been exhausted cannot be entertained must be sustained by the Court.

[153] The position however is different when the Court's jurisdiction is accepted unconditionally. In the case, the Court's compulsory [p39] jurisdiction, if all the remedies afforded by the national courts have not been exhausted, constitutes a "prorogation" of jurisdiction; the Court is competent even before exhaustion of local remedies.

[154] This is the position in the present case; for neither Article 36, paragraph 2, of the Court's Statute nor the Lithuanian and Estonian declarations contain a reservation respecting the exhaustion of local remedies.

[155] It follows from the foregoing that the local remedies rule cannot operate in the present case. It is set aside by the unconditional acceptance of the Court's jurisdiction.

[156] The same would hold good if an objection had been lodged based, not on the non-exhaustion of the remedies afforded by the national courts but on the non-exhaustion of international remedies, that is to say the diplomatic channel. In this connection, the Court in Judgment No. 6, in the case concerning certain German interests in Polish Upper Silesia, says that if a compulsory jurisdiction clause does not stipulate that diplomatic negotiations must first be tried, recourse may be had to the Court as soon as one of the parties considers that a difference of opinion exists (p. 14).

[157] It is true that some States have been led to attach very great importance to the local remedies rule because pressure, which has sometimes been unjustified, has been brought to bear on them in order to induce them to recognize private claims espoused by a government, although the remedies of municipal law have not been exhausted. This circumstance however cannot invalidate the foregoing considerations.

[158] Three further observations may be made.

[159] In the first place it has been said that the local remedies rule is implied in Article 36 of the Court's Statute. When one considers the influence which the new conception of compulsory arbitration has exercised on the old practice in regard to the local remedies rule and that in order to maintain that rule in force side by side with compulsory arbitration, it has been held necessary to make an express reservation regarding it in general arbitration or jurisdictional conventions, it will perhaps be realized that it is difficult to admit the existence of an implied reference in view of so many explicit reservations.

[160] It has also been said that if the view put forward above were correct, the result would be that governments would hesitate much before renewing or signing declarations accepting the optional clause. It would seem that such hesitation is unnecessary, for practice shows that these declarations often comprise a fairly wide range of reservations. Thus, several Dominions when signing their declarations have, in certain [p40] conditions, made a reservation respecting prior recourse to the Council of the League of Nations. Accordingly, there is nothing to prevent States from making a condition respecting the exhaustion of local remedies.

[161] In the third place, it has been said that since the Court, under Article 38 of the. Statute of the Court, must apply the general principles of law recognized by civilized nations, it must apply the local remedies rule. This obligation is not denied. But one must also not lose sight of the fact that this is a rule to which there are many exceptions. It is by no means a rule of public police which States must treat as sacrosanct. They do not do so when they arrange an ad hoc arbitration without previous exhaustion of local remedies ; they neither do when they accept the Court's jurisdiction in advance without making the usual reservation concerning the rule. The Court itself in Judgment No. 14, page 19 (the Serbian Loans case), recalled that there were cases in which the rule did not apply.

[162] Even disregarding for the moment what has been said above, it is to be observed that the highest court in Lithuania, the Lithuanian Supreme Court, in its judgment of March 16th/26th, 1934, pronounced so definitely in regard to a cardinal point which, if accepted by the Court, would entail complete success for Lithuania in this case, that it would be useless for the Company to apply to the Lithuanian courts before the Estonian Government took up its case before the Court. I refer to the question whether the legal personality of the First Company persists in the Esimene Company, or whether on the contrary the Esimene is a new company. The Supreme Court of Lithuania definitely said that the Esimene was a new company. The following are the relevant passages :

"The defendant cited in this case as liable for the bond is not the First Company of Secondary Railways in Russia, with its Board of Directors in Petrograd, but the First Company of Secondary Railways in Russia, with its Board of Directors at Tallinn in Estonia and whose managing director, Paul Klompus, at present resides at Kaunas, at the Lithuania Hotel, No. 9, Daukant Street. Consequently, in order to bring this case within the jurisdiction of the Lithuanian courts, a domicile has been artificially created in breach of Article 220 of the Code of Civil Procedure, which indicates where a company is to be sued.
More especially since, as may be seen from the evidence produced by the defendant, no company exists in Estonia in whose name the bond was issued and whose statutes were in force in 1892, but there is a company newly founded under the name [p41] of the Esimene Juurdeveo Raudteede Selts Venemaal (which, translated, may mean : 'First Company of Secondary Railways in Russia')."

[163] It is difficult to imagine a clearer example of a definite pronouncement by a highest national court on a question which decides the issue in favour of one of the two Parties before the Court. In such a case an objection based on the local remedies rule is inapplicable, even apart from what had been said concerning the impossibility of presenting this objection in view of the unconditional acceptance by the two Parties of the Court's compulsory jurisdiction under Article 36 of the Court's Statute.

(Signed) V. Eysinga. [p42]

Dissenting Opinion by Mr. Hudson.

[164] This is the first occasion in its history upon which this Court has upheld a preliminary objection not offered as a challenge to the Court's jurisdiction. The taking of this step is a matter of importance, and as I am unable to share the views which have led to it, I feel that it is incumbent upon me to set forth my opinion in dissent.

[165] At the threshold of this case is the question whether the two objections presented by the Lithuanian Government — the one relating to the national character of the Estonian claims at the time of the injury complained of, and the other relating to the alleged non-exhaustion of local remedies — have a character which requires them to be dealt with as preliminary objections. The Estonian Government contends that the objections lack this character, that instead of being preliminary objections they are in reality defenses offered by the Lithuanian Government to the action instituted by Estonia, and that they should therefore be rejected as preliminary objections.

[166] To a certain extent, it may be thought that this question has already been answered, for in two stages procedural provisions of Article 62 of the Rules of Court have been applied to the Lithuanian objections. In a first stage, paragraph 3 of Article 62 of the Rules providing for the suspension of the proceedings on the merits and the fixing of time-limits for the presentation of observations on the objections, was applied as a matter of routine by the President's Order of March 15th, 1938. In a second stage, paragraph 5 of Article 62 of the Rules providing for a possible joinder of objections to the merits, was applied by the Court's Order of June 30th, 1938 (Series A/B, No. 75). Yet it was expressly stated in the Court's Order (p. 6) that, "at the present stage of the proceedings, a decision cannot be taken either as to the preliminary character of the objections or on the question whether they are well-founded" ; it being thought that "any such decision would raise questions of fact and law .... closely linked to the merits". Even if it must be said, therefore, that in June of last year the Lithuanian objections were found to have a preliminary character for the purpose of applying a procedural provision in Article 62 of the Rules, the question is still open whether at the present stage of the case the objections have such a preliminary character that the Court is now required to deal with them before proceeding to give a judgment on the merits. [p43]

[167] The purpose of the joinder effected by the Court's Order of June 30th, 1938, was stated to be to enable the Court to "adjudicate in one and the same judgment upon the objections and, if need be, on the merits". If either of the objections has preliminary character, it is now for the Court to adjudge whether it is well-founded. If either objection does not have preliminary character, it should be rejected by the Court ; but as the Court recognized at least implicitly in the Borchgrave case (Series A/B, No. 72), the rejection of an objection will not prevent the same question from being raised as a defense to the merits of the case.

***

[168] It is essentially a question of procedure whether an objection has preliminary character. The answer to this question is not to be found in the Statute of the Court, for preliminary objections are not there referred to ; the framers of the Statute wisely left to the Court (Art. 30) a wide latitude in framing "rules for regulating its procedure". Nor is the question answered by the Rules of Court adopted in pursuance of the provision in Article 30 of the Statute. The 1922 Rules included no mention of preliminary objections; Article 38 of the 1926 Rules, which was continued without change in the 1931 Rules and which served as the basis of Article 62 of the 1936 Rules, contained no definition of a preliminary objection ; and Article 62 similarly leaves open the question now before the Court. One may say that Article 62 of the 1936 Rules furnishes some aid for framing a definition in the distinction so sharply drawn between proceedings relating to the merits and proceedings relating to an objection ; but much more is needed for definite guidance. It would seem that when the Rules on preliminary objections were being drafted, the attention of the Court was chiefly concerned with objections to jurisdiction (Series D, addendum to No. 2, pp. 78-94; third addendum to No. 2, pp. 84-97, 148-150, 644-649, 705-708).

[169] One turns next, in search of the elements of preliminary character, to the jurisprudence of the Court. When it was first confronted with an objection, in the Mavrommatis case in 1924, the Court referred to the silence of the Statute and Rules regarding the procedure to be followed, and asserted a "liberty [p44] to adopt the principle which it considers best calculated to ensure the [good] administration of justice, most suited to procedure before an international tribunal and most in conformity with the fundamental principles of international law" (Series A, No. 2, p. 16). Though objections have been made in a number of cases before the Court, it has not always been necessary to adjudicate upon them. In a number of cases objections relating to the Court's jurisdiction have been upheld; in a somewhat larger number of cases such objections have been rejected. Indeed, objections which have been the subject of adjudication have related almost invariably [FN1] to the jurisdiction or competence of the Court. It may be partly for this reason that the adjudications have not established any criteria for determining when an objection is to be classed as preliminary.

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[FN1] An objection to the admissibility of the suit was overruled in the case relating to German interests in Polish Upper Silesia (Series A, No. 6, pp. 18-21); and a fin de non-recevoir "incidentally raised" in the same case was also rejected (pp. 21-22).
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[170] Nor can definite criteria for determining preliminary character be derived from a study of the jurisprudence of other international tribunals. The procedure of such tribunals varies greatly, and it is not infrequently shaped with reference to special provisions in the comfromis creating the tribunal. For example, the claims commissions set up a decade or more ago by Mexico in co-operation with the United States of America, Great Britain, France, Germany, Italy and Spain, employed various forms of dilatory pleas — demurrers, motions to dismiss, motions to reject, and motions to declare claims inadmissible ; and these forms were made to serve a variety of purposes. (See Feller, Mexican Claims Commissions, 1935, pp. 241-246.)

[171] Leaving aside objections relating to the Court's jurisdiction either ratione personæ or ratione materiæ, can any logical line be drawn which would determine the preliminary character of an objection ? It serves little purpose to say that any objection is preliminary which is presented as a bar to the consideration of a case on the merits ; that merely has the effect of replacing one problem by another — it would substitute the problem of defining merits for the problem of defining preliminary objections.

[172] If the Court is not bound by logic to give a particular solution to this procedural question, it is bound to consider the consequences which its own system of procedure would attach to a determination that an objection is preliminary. Not all [p45] of these consequences are set forth in Article 62 of the Rules of Court. The filing of a preliminary objection has the effect of suspending the normal course of the procedure in a case, and for the normal procedure it substitutes at least temporarily a special procedure relating to the objection only. In a sense, it may be said that the proceeding on the preliminary objection is independent of the proceeding which for the time being it replaces. A new entry of it is made in the "General List of cases submitted to the Court" provided for in Article 20 of the Rules ; thus, No. 74 of that list is entitled "Panevezys-Saldutiskis Railway (merits)", while No. 76 is entitled "Panevezys-Saldutiskis Railway (preliminary objections)". (See Series E, No. 14, pp. 108-109.) In the new proceeding, the State which has presented the objection occupies a position in some respects equivalent to that of an applicant. (Series E, No. 3, p. 207.) Under the practice and procedure now prevailing, unless a preliminary objection is sustained, the parties thus have to bear the burden of an expenditure of time, effort and money for what is, in fact, a double appearance before the Court.

[173] It must be admitted that the consequences which attach, or may attach, to the presentation of a preliminary objection under the present practice are therefore serious, so serious that the Court can hardly be justified in greatly enlarging the category of preliminary objections. Objections to the jurisdiction of the Court have a character which definitely stamps them as preliminary ; but it is not necessary that objections which do not relate to the Court's jurisdiction should be too readily admitted to that category. No essential interest will be neglected if in some cases — perhaps the lines are not to be rigidly drawn in advance — the objection is denied to have a character which requires it to be considered apart from and in advance of the defenses offered on the merits.

[174] I conclude, therefore, that the Court must reserve to itself some latitude in dealing with objections presented as preliminary, and that in exercising the "liberty to adopt the prin¬ciple which it considers best calculated to ensure the [good] administration of justice", it may hesitate to admit the preliminary character of certain types of objections which do not raise questions of jurisdiction.

***

[175] After these preliminary observations, I must address myself to the special problem of this case, whether the two objections [p46] presented by the Lithuanian Government should be said to have preliminary character in the sense that they must be considered apart from and prior to any consideration of the defenses on the merits which have been advanced by Lithuania.

*

[176] It may first be observed that neither of the Lithuanian objections can be said to relate to the jurisdiction of the Court to deal with this case. The Estonian application referred to the declarations made by Estonia and Lithuania under Article 36, paragraph 2, of the Statute ; and the Lithuanian Government has at no time challenged this basis of the Court's jurisdiction. The question raised by the first objection as to the national character of the Estonian claims is sometimes said to relate to the qualification of the State to espouse a claim ; but it is in no sense a question as to the competence of the Court. Cases might arise in which the exhaustion of local remedies would be presented as a jurisdictional question — for example, Article 31 of the Geneva General Act of September 26th, 1928, follows provisions in numerous arbitration treaties in permitting a party to a dispute to object to the dispute's "being submitted for settlement by the different methods laid down in the present General Act" until its competent judicial or administrative authority has pronounced a final decision ; but no such provision obtains between Estonia and Lithuania.

*

[177] I agree with the conclusion reached by the Court that the first Lithuanian objection, to the effect that the Estonian Government has failed to observe a rule of international law which requires that "a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered", is not a preliminary objection in the sense that it must be considered by the Court apart from and prior to a consideration of defenses presented on the merits.

[178] The objection would call for a decision by the Court, not only as to whether such a rule of international law exists, but also as to its applicability to the facts of this case. Assuming that the rule may be said to exist, Estonia cannot be found to have failed to observe it in this case without an enquiry into numerous questions which have been raised in presenting the case on its merits. Asked to say whether Estonia's claims possessed Estonian national character at the time of the injury [p47] complained of, the Court can reply to this question only after enquiring into the effect of various Soviet decrees on the existence of the Russian company, the effect of certain provisions of the Treaty of Tartu between Estonia and the Russian Socialist Federated Soviet Republic, the application of Estonian laws concerning Russian companies, the extent to which the alleged change of nationality of the Russian company was voluntary, and other questions. In other terms, the objection raises the principal question discussed in connection with the merits, that of the identity of the Esimene Company with the Russian company, or of the former's succession to the latter.

[179] Where an objection thus raises so many of the questions which pertain to the merits of a case, no useful purpose is to be served by requiring it to be dealt with apart from a consideration of the merits. Hence, this first Lithuanian objection should be rejected as lacking a preliminary character.

*

[180] I cannot agree with the conclusion reached by the Court that the second Lithuanian objection, based upon the alleged "non-observance by the Estonian Government of the rule of international law requiring the exhaustion of the remedies afforded by municipal law", has a preliminary character which requires it to be dealt with apart from and prior to a consideration of the defenses presented on the merits, and which in this case justifies a holding that the Estonian claim cannot be entertained. In my view, the objection lacks that character, and it ought to be rejected ; hence the Estonian claim should be entertained, even if the principal Estonian submissions should later have to be rejected because of the non-exhaustion of local remedies.

[181] It is a very important rule of international law that local remedies must have been exhausted without redress before a State may successfully espouse a claim of its national against another State. This is not a rule of procedure. It is not merely a matter of orderly conduct. It is a part of the substantive law as to international, i.e. State-to-State, responsibility. If adequate redress for the injury is available to the person who suffered it, if such person has only to reach out to avail himself of such redress, there is no basis for a claim to be espoused by the State of which such person is a national. Until the available means of local redress have been exhausted, no international responsibility can arise. [p48]

[182] This is not a rule of thumb, however, to be applied in a more or less automatic fashion. In each case account is to be taken of the circumstances surrounding the means of redress which a State may hold out to the nationals of other States, and the facts may justify an international tribunal in saying that international responsibility has arisen even though local remedies have not been exhausted. Hence it is sometimes said that there are exceptions to the rule ; that the rule does not apply if in fact there are no local remedies to exhaust, or if it can be known in advance that the exhaustion of local remedies would yield no redress.

[183] The second Lithuanian objection raises the question whether the rule is to be applied on the facts of this case. Even if this question is susceptible of segregation, I can see no advantage in saying that it must be dealt with apart from and prior to a consideration of the defenses made on the merits. It is a question of substantive law. As such I think it can better be dealt with as one of the defenses to the Estonian case, along with the other defenses advanced. This solution would have the added advantage of enabling the Court to deal with the other defenses, and perhaps thus to contribute more helpfully to a settlement of the dispute between the Parties.

(Signed) Manley O. Hudson. [p49]

Dissenting Opinion by M. Erich.

[Translation.]
[184] Being unable, much to my regret, to concur in the Court's judgment, I feel called upon to state my separate opinion on the points in the case upon which the judgment gives a decision.

[185] In reply to the application by the Estonian Government, the Government of Lithuania lodged with the Court two preliminary objections, one of which is of a peremptory character, precluding debate, while the second may, in this case, leave open the possibility of the Court's subsequently examining the merits of the case to which its judgment refers.

[186] Both objections are in my opinion strictly preliminary. The defendant Party placed them rightly in the order in which they stand. The first objection, in its essence, is even more preliminary than the second, for the following reasons :

[187] The so-called nationality of the claim is really a metaphorical way of speaking, an inexact term likely to cause some confusion and even at times to be construed too widely. The alleged absence from the claim of a certain "nationality" does not affect the claim itself. It refers to the relation between a private person and a State. The individual or legal personality concerned may also have a claim which is materially well-founded, but in order that he may be able to assert it in the international sphere and bring an action against a foreign State, the State to which he has recourse must be duly qualified to intervene on his behalf.

[188] The purpose of the first objection is to dispute Estonia's right to defend the action brought by the Esimene Company. The objection opposes the institution by Estonia of the proceedings before the Court. The terms in which it is couched may conceal its purpose, but, stripped of its outward form, it aims at disqualifying the applicant Party, at excluding it as a party to the proceedings and at preventing the whole examination of the case by the Court.

[189] Accordingly, the first question that arises is this : can Estonia today grant her diplomatic protection to a national, even if the latter's claim dates from a time when he could not then possess Estonian nationality, because at that time such nationality did not exist in law ? Is this legal capacity of Estonia well-founded, supposing that Estonian nationality has been required through some international event? [p50]

[190] Had the objection been lodged in that form, its preliminary character would have been unmistakable.

[191] In replying to such a question, we pronounce upon Estonia's capacity, at the present time, to sue before the Court and we do not prejudge our later attitude towards the merits of the case.

[192] If, in such circumstances, we admit the principle that Estonia has the necessary title to espouse the cause of the Esimene Company, we are not in any way prejudging subsequent questions as to the origin of the Company, its possible connection, or even identity, with the former Russian Company referred to in the additional Article XI of the Treaty of Tartu, the interpretation of certain clauses in that Treaty, etc. Should it appear later that the Company was mistaken about its origins and the date at which it acquired its legal personality, it will thereby be established that the Estonian State, despite the tie of nationality between itself and the protected person, was wrong in espousing the case of a person who is himself not qualified in the particular matter at issue. However, the real preliminary question concerning Estonia's present capacity as a Party to the proceedings falls in the first place to be considered in the more limited sense mentioned above. If that capacity had been admitted, the proceedings could have taken their normal course without any relevant point being prejudged.

[193] I am not unaware that the first objection has been taken as it stands, on its literal terms, on the basis of the "nationality of the claim", the "nationality of interests", and without extracting the essential meaning of the objection, namely, the incapacity of Estonia as a Party to the case at issue.

[194] On this basis it may admittedly be difficult to dispose of the first objection without touching upon certain questions of merit necessarily related thereto. I think, however, that we can do so without committing ourselves to an opinion and without prejudice to - our final decision. According to an oft-cited formula, it is permissible and on occasions necessary to "touch upon" merits when deciding upon a preliminary objection. Lithuania's first objection may, I think, be dealt with in this way, even when examined in the light of the terms used in it.

[195] In any event, it was essential, in my opinion, to decide before all else upon the fundamental point upon which the whole case rests, namely, Estonia's legal capacity. Estonia's title in this matter having been disputed, it should have been decided whether she could or could not appear as a Party to the proceedings; in any event, this objection, which is essentially a peremptory one, should in my opinion have taken [p51] precedence of any other. It may be argued that a decision allowing the first objection would rule out the second. But what interest could still attach to the second, in that case ? None whatever for Estonia, if she were disqualified, and practically none for the private company, if thus deprived of international protection.

[196] A decision concerning the second objection, given before a decision on the first, appears to imply at any rate a provisional recognition of Estonia as a qualified Party in the case. The Agent for the Lithuanian Government may have had this consequence in mind, when he advanced the following argument, which incidentally is inconsistent with the first objection (Oral Statements, Preliminary Objections, p. 64) : 'The Lithuanian Government only asks that, before submitting to the Court a claim regarding the alleged violation of its national's rights, the Estonian Government shall observe the rule prescribing the preliminary exhaustion of all local remedies."

[197] I may be allowed to mention a point which may serve to emphasize some of the arguments I have been developing. In 1936, that is, at the beginning of the diplomatic conversations between the two Governments, the Government of Lithuania, being in full possession of the facts, should, once it desired to dispute the right of the other Party to intervene, have lodged this objection, reserving the right to maintain it, if necessary, despite the continued conversations on the merits of the claim. If this had been done, Estonia would have been justified in regarding this difference of opinion as involving a point of international law which could be submitted directly to the Court under Article 36, paragraph 2, of the Statute. The dispute in that case would have been strictly a dispute between States.

***

[198] With regard to the second objection, which the Court has allowed, I have the following remarks to make :

[199] Its text is not altogether correctly worded. It speaks of the non-observance by the Estonian Government of the rule requiring exhaustion of remedies afforded by municipal law. This condition, however, applies to the national concerned, and not to the protecting State. It is for the State whose protection is asked to see that the applicant has fulfilled the necessary condition.

[200] The rule of international law concerning exhaustion of local remedies is generally accepted. It figures in many bilateral [p52] treaties and in general terms in the "General Act" of 1928, Article 31 of which provides: "In the case of a dispute the occasion of which, according to the municipal law of one of the parties, falls within the competence of its judicial or administrative authorities, the party in question may object to the matter in dispute being submitted for settlement by the different methods laid down in the present General Act until a decision with final effect has been pronounced, within a reasonable time, by the competent authority."

[201] If the rule were to be strictly and rigidly observed, and assuming there to be no doubt that the Esimene's claim falls within the jurisdiction of the Lithuanian courts, it would have to be admitted that the Company itself has not exhausted local remedies and that its claim has not yet encountered a final decision.

[202] The rule is generally recognized, but all agree that it is subject to certain reservations and exceptions; but the terms and scope of these are not easily defined by definite formulæ. It is therefore difficult to prove convincingly that an exception is valid.

[203] The rule is intended to protect States against ill-founded or premature claims which have not been adequately considered by the competent national authorities. It is a principle of law the aim of which is eminently practical.

[204] The essential feature of the rule concerning the exhaustion of local remedies is not therefore that certain things shall have been done or certain formalities observed before diplomatic protection, in its various forms, can begin to operate on behalf of the individuals concerned. It may happen that the State to which a claim is presented may be quite prepared to discuss its merits or even prepared to submit the claim to an international tribunal, although no final decision has been rendered by the competent judicial or administrative authority of the country. If in a particular case it appears from the attitude of the government that it waives this condition and that it is so to speak prepared to transfer the claim directly to the international plane., it cannot subsequently retreat from that position.

[205] From the nature of the rule it follows that, practically speaking, local remedies may have been exhausted even though the interested party itself has not gone as far as the ultimate tribunal open to it. In actual fact it may happen either that passage through all the courts to the final court of appeal would be of no real use or effect, or that the competent authorities may — at all events implicitly — have passed upon [p53] essential points of the case in such a way that practically speaking there remains nothing to "exhaust". A situation of this kind may be tantamount to the position which the rule as to the exhaustion of local remedies by the interested party itself is designed to create.

[206] Certain arbitral decisions regarding the question of the exhaustion of local remedies are based on considerations of this kind. Very rightly a distinction is drawn between the procedure followed and the practical exhaustion of remedies. In some cases where the claimant has not gone as far as the ultimate court of appeal theoretically open to him, it has been held that an exception to the strict rule was nevertheless justified.

[207] The case now before the Court is a somewhat curious one. When the Lithuanian Government assures us that local remedies are fully open to the Esimene Company, its statement is clearly correct. But the essential point is not whether at the present time these remedies are available or not, but rather what the situation was before the proceedings now before the Court. And it cannot be denied that the situation was somewhat obscure. The legal title of the public authorities to possession of the railway seems to have been more or less vague. Only in the course of the proceedings before the Court has Lithuania invoked Articles 406 and 408 of the Civil Law. Even in the Counter-Memorial (p. 27) the Soviet Government is indicated as the owner of all property belonging to the "First Company" ; the decree of June 28th, 1918, referred to all its property, "even that outside the borders of the Soviet Republic". The Lithuanian Council of State declared in its opinion of January 25th, 1933, inter alia: "Having regard to the fact that the Russian nationalization decrees did not affect .... the property of the First Company, the Lithuanian Government has only succeeded to the rights which belonged to Russia, in accordance with the concession granted to that Company...." With regard to the Esimene Company, the Council of State pronounced upon its legal status in this passage: "The Esimene Company .... is not legally entitled to submit to the Lithuanian State any claim in civil law to the Panevezys-Saldutiskis narrow-gauge railway." It would not appear necessary to consider more closely the question of the competence of the Lithuanian courts in order to reach that conclusion.

[208] In view of this complexity of the legal position, the Lithuanian courts, if the Esimene's claim had been referred to them, would probably have been much embarrassed. No one can say how they would have decided the question of their own jurisdiction. Now, a reasonable application of the rule concerning the [p54] exhaustion of local remedies would seem to require that the competent authorities should be clearly determined in law. In so far as one can judge from the evidence produced, the authorities have barely informed the Esimene that the courts were at their disposal; the Company has remained for years under the impression that a solution of the question could be reached by way of negotiations.

[209] Some features of the Jeglinas case present a somewhat extraordinary and irregular aspect, but this does not detract from the important nature of the findings and conclusions of the High Court. The Supreme Court passed upon the question of identity proprio motu, declaring quite categorically that there was no continuity of legal personality between the First Russian Company and Esimene. It is to be supposed that it was after careful consideration that the Court found that the alleged defendant was not the person against whom the action had been brought. Of course the Lithuanian Government does not appear as a party in the case, but its views were doubtless well known.

[210] The Jeglinas case naturally differed from the dispute underlying the Estonian application to this Court. There is no identity between the said action actually submitted to the Lithuanian courts and an action that we are imagining brought by Esimene against the Lithuanian State in virtue of certain rights. However, the arguments contained in the Supreme Court's judgment, which results in no operative provisions, but simply annuls the whole proceedings, are of exceptional importance. The findings and conclusions are decisive in respect of the essence of the claim submitted by the Esimene Company.

[211] From the point of view of the Lithuanian courts, the judgment of the Supreme Court dealt a blow to the legal capacity of the Esimene Company to present a claim respecting the Panevezys-Saldutiskis railway. It seems quite impossible that any new arguments or evidence capable of overcoming the conviction of the Court could be produced.

[212] It is clear that the judgment of the Court of Cassation cannot constitute res judicata with respect to the Esimene's claim. If it were so, there would be no reason to justify a departure from the general rule. The Court disputes the basis of that claim by implication only, but nevertheless categorically. Nor can it be imagined that the judgment of the Supreme Court would have been substantially different if a case had been brought before it in due form by the Esimene Company against the State of Lithuania. [p55]

[213] It is also evident that in this matter there is and can be no question of a fixed rule. The Court was not concerned with the interpretation of certain rules of law; it denned a legal situation proprio motu. A fixed rule in a case of this kind seems inconceivable.

[214] The opinion given by the Lithuanian Council of State in 1933, which of course has no binding force in law, must be regarded as an additional factor of some importance. In every country the considered opinion of an authority invested with powers such as those possessed by the Council, is entitled to serious respect, especially if it seeks to determine a specific legal situation. The attitude of the Lithuanian Government appears to be based upon this opinion. Incidentally, it should be noted that the French translation uses the expression : "the Council of State enacts".

[215] The Lithuanian Government's Rejoinder (p. 38) says: "If the Lithuanian Government has not restored the railway to the Esimene Company, that is simply because it is convinced that the Esimene is not the company referred to in the Act of 1897." If that is in the last resort the argument of the defendant Party, it may be questioned whether the strict observance of the local remedies rule is not implicitly admitted to be almost entirely superfluous.

***

[216] For the above reasons and after pondering deeply the various aspects of the question, I have come to the conclusion that in this case there were reasons for allowing a departure from the general rule for the exhaustion of local remedies. I would emphasize that such a departure does not in any way invalidate this recognized rule of international law.

(Signed) R. Erich. [p56]

Annex.

Documents Submitted To The Court.

I.—Documents Produced By The Estonian Government.

Preliminary objections.

A. — Written proceedings :

1. Statutes of the First Company of Secondary Railways in Russia (1898 version).
2. Imperial Decree of November 21st, 1897, granting to the First Company of Secondary Railways in Russia a concession for the construction and operation of the secondary narrow gauge railway between Sventziany and Ponévège.
3. Imperial Decree of June 27th, 1894, granting to the First Company of Secondary Railways in Russia a concession for the construction and operation of the Sventziany secondary railway.
4. Treaty of Peace between Russia and Estonia of February 2nd, 1920 (extract).
5. Provisional regulations adopted by the Government of the Estonian Repub¬lic on April 7th, 1920, regarding the administration of joint-stock companies and partnerships approved by the Russian Government.
6. Ordinance adopted on October 1st, 1921, by the Government of the Estonian Republic regarding the release from trusteeship of the property of joint-stock companies.
7. Ordinance of May 27th, 1922, placing the First Company of Secondary Railways in Russia under trusteeship.
8. Riigi Teataja, lisa 1923, No. 115, p. 1605.
9. Certificate of the Estonian Ministry for Economic Affairs of September 10th,
10. Minutes of the second extraordinary general meeting of shareholders of the First Company of Secondary Railways in Russia, held at Tallinn on November 2nd, 1923.
11. Statutes of the joint-stock company known as the "First Company of Secondary Railways in Russia" (Esimene Juurdeveo Raudteede Selts Venemaal) (1923 version).
12. Law adopted by the Estonian Assembly of State on August 4th, 1923, regarding the repurchase of the railways on the First Company of Secondary Railways in Russia.
13. Law adopted by the Estonian Assembly of State on December 18th, 1925, amending the law concerning the repurchase of the railways of the First Company of Secondary Railways in Russia.
14. Proposal of the Minister of Communications, approved by the Head of the State on June 18th, 1926.
15. Note of the Director-General of Latvian Railways, Riga, September 29th, 1937, No. 904.
16. Note of the Estonian Secretary of State, October 9th, 1931.
17. Note of the Estonian Ministry for Economic Affairs, August 18th, 1932.
18. Letter of the Lithuanian Ministry of Communications, October 25th, 1933. [p57]
19. Opinion of the. Lithuanian Council of State of January 25th, 1933, regarding the legal bases of the claim of the Esimene Juurdeveo Raudteede Selts Venemaal joint-stock company to the Panevezys-Saldutiskis railway line.
20. Conditions governing the issue by the First Company of Secondary Rail¬ ways in Russia of debentures for the construction of the Ponévège-Sventziany railway.
21. Judgment of the Supreme Court of Lithuania of March 16th/26th, 1934, in the case of Jeglinas v. the First Company.
22. Note of the Estonian Minister in Kaunas, December 3rd, 1936.
23. Note of the Lithuanian Minister for For. Aff., December 30th, 1936.
24. Note of the Estonian Minister in Kaunas, February 1st, 1937.
25. Note of the Lithuanian Minister for For. Aff., May 5th, 1937.
26. Soviet decree of June 28th, 1918, concerning the nationalization of the most important undertakings.
27. Soviet Decree of September 4th, 1918, concerning the liquidation of private railways.
28. Extract from the commentary on Article 406 of the Civil Law in Worms and Eliachévitch, Civil Law, II, Moscow, 1913, 167-185.
29. Judgments of the Court of Cassation concerning Article 406 of the Civil Law.
30. Judgments of the Court of Cassation concerning the jurisdiction of the courts in cases against the Administration.
31. The case of Jeglinas v. the First Company of Secondary Railways in Russia.

B.— Oral proceedings :

1. Supplementary articles to the Treaty of Tartu of February 2nd, 1920. Certified correct French translation.
2. Collection of treaties, agreements and conventions concluded by the R. S. F. S. R. with foreign States. (Edition of the Commissariat of the People for For. Aff. ; fasc. I-V, 1922-1923.)

Continuation of the proceedings.

A. — Written proceedings :

1. Latvian law of April 20th, 1921, concerning joint-stock companies and partnerships.
2. Judgment of the English Court of Appeal of May 6th, 1929, in the case of Hoff Trading Company v. Union Insurance Society and others.
3. Minutes of the extraordinary general meeting of shareholders of the First Company of Secondary Railways in Russia of March 10th, 1924.
4. Regulations of the Council of Commissaries of the People of March 4th, 1919, concerning the liquidation of the liabilities of State enterprises.
5. Judgment of the Court of Appeal of Paris (1st Chamber) of June 15th, 1937 in the case of Nobel v. Lessner and others.
6. Judgment of the Appeal Division of the Mixed Tribunal of Tangiers of May 21st, 1937, in the case of Stella and Johanna Preyer v. Baron de Nolde.
7. The Treaty of Peace between Estonia and Russia signed at Tartu on February 2nd, 1920 (Art. XI).
8. Letter of Professor Piip, former member of the Estonian delegation to the Peace Conference between Estonia and Russia, former Estonian Minister for For. Aff., April 2nd, 1938.
9. Estonian law of March 1st, 1928, concerning the restitution of shares handed over to the Estonian Government under the Treaty of Peace between Estonia and Russia (extract).

10. Certificate of the Estonian Chamber of Commerce and Industry, March 31st, 1938.
11. Minutes of the Commission of Chief Engineer Sabalauskas (1927). [p58]

B. — Oral proceedings :

1. Letter sent on December 21st, 1938, by the Estonian Legation in Lithuania to the Board of Directors of the Esimene Juurdeveo Raudteede Selts Venemaal (with two annexes).
2. Observations of the Estonian Government concerning the operation of the Panevezys-Saldutiskis railway and the expenditure incurred for its. reorganization after the great war and the revolution.
3. (a) Deposit certificate for 10,120 shares of the First Company made out by the Swiss Bank Corporation in London, June 22nd, 1925.
(b) Proxy of the same Bank of the same date.
(c) Proxy of the same Bank of December 3rd, 1926, in respect of 9.959 shares of the First Company deposited with the Bank.
(d) Certificate of Lloyd's Bank, London, dated December 2nd, 1926, in respect of the deposit of 8,200 shares of the First Company.
(e) Certificate of the same Bank and bearing the same date in respect of the deposit of 3,500 shares of the First Company.
4. Map showing the approximate position of the railways which belonged to the First Company of Secondary Railways in Russia.

II. — Documents Produced By The Lithuanian Government.

Preliminary objections.

A. — Written proceedings :

1. The Soviet Decree of December 10th, 1921, published on December 28th, 1921, regarding undertakings having become the property of the State (extract).
2. The Soviet Decree of March 4th, 1919, concerning the liquidation of duties falling upon State undertakings (extract).
3. Request of the Board of Directors of the First Company of Secondary Railways, dated March 5th, 1925.
4. Memorandum transmitted by the First Company of Secondary Railways on November 14th, 1931 (extract).
5. Request of the Board of Directors of the First Company of Secondary Railways, dated November 14th, 1931.
6. Request of the Board of Directors of the First Company of Secondary Railways, dated May 20th, 1932.
7. Request of the Board of Directors of the First Company of Secondary Railways, dated September 15th, 1933 (extract).
8. Letter from the Lithuanian Ministry of Communications, October 25th, 1933.
9. Articles 406 and 408 of the civil laws in force in Lithuania.
10. Interpretation of Article 406 (extracts from the commentary on the civil laws, prepared by A. Worms and V. Eljachevitsch, 1913).
11. Articles 1 and 2 of the Code of Civil Procedure in force in Lithuania,
12. Interpretation of Articles 1 and 2 of the Code of Civil Procedure in force in Lithuania (extracts from the commentary on the laws of civil procedure prepared by V. Isatchenko).
13. Judgment No. 162 rendered in 1887 by the Russian Senate (extract).

B. — Oral proceedings :

— Official text of the Peace Treaty of Tartu of February 2nd, 1920. [p59]

Continuation of the proceedings.

A. — Written proceedings :

1. Minutes of the extraordinary general meeting of shareholders of the First Company of Secondary Railways in Russia held on November 23rd, 1922.
2. Extracts, translated into French, from the judgment in the case of the Trading Company L. and J. Hoff v. Union Insurance Society of Canton Ltd. and C. I. de Rougemont.
3. Request of M. Wolkenstein to the Procurator of the Court of Tallinn-Hapsal.
4. Decree of the Council of Commissaries of the People of June I5th/28th, 1918.
5. Decree of the Council of Commissaries of the People regarding the liquidation of railways.
6. Note of the Commissariat of the People for For. Aff. dated November 14th, 1938.
7. Calculation of the capital invested in the Panevezys-Saldutiskis railway between 1919 and 1926.
8. Statement of the capital invested in the Panevezys-Saldutiskis railway between 1927 and 1937.
9. List of the locomotives in service on the Panevezys-Saldutiskis railway.
10. List of the waggons in service on the Panevezys-Saldutiskis railway.
11. Information concerning freight carried on the Panevezys-Saldutiskis rail way line and on the normal gauge lines for the services of that railway.
12. Information concerning receipts from the carriage of mails on the Pane¬vezys-Saldutiskis railway up to January 1st, 1938.
13. Statement of receipts and expenditure for the period 1919 to 1937 on the Panevezys-Saldutiskis railway.
14. Lloyd's List Law Reports; Vol. 32, No. 9, fasc. of January 3rd, 1929.

B. — Oral proceedings :

— Extract from the minutes of the meeting of the Committee of legal advisers to the Ministries (of the Lithuanian Republic) of November 19th, 1925.


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