KING’S BENCH DIVISION

AKSIONAIRNOYE OBSCHESTVO DLIA MECHANICHESKOYI OBRABOTKY DIEREVA (1) A. M. LUTHER (COMPANY FOR MECHANICAL WOODWORKING A. M. LUTHER) v. JAMES SAGOR AND COMPANY

[1921] 1 K.B 456

[1920. A. 1861.]


DATES: 1920 Nov. 29; 1920 Dec. 8, 21.

JUDGE: ROCHE J.

COUNSEL: Barrington-Ward K.C. and St. John Field for the plaintiffs.
Hogg K.C. and H. L. Murphy for the defendants.

SOLICITORS: For plaintiffs: Linklaters & Paines.
For defendants: H. W. & S. Patey.

HEADNOTE: International Law – Jurisdiction – Status of Russian Soviet Republic – Recognition of Sovereignty – Confiscatory Decree – Validity.

The plaintiff company, which was a Russian company, had a factory or sawmill in Russia. The Russian Soviet Government on June 20, 1918, purported to make a decree declaring (inter alia) that all mechanical sawmills of limited or private companies with a capital of over 1,000,000 roubles and all woodworking establishments equipped with machinery belonging to private or limited companies were the property of the Russian Federative Republic. In 1919 the agents of the Russian Soviet Government took possession of and confiscated the plaintiff company’s mill or factory and the manufactured stock of veneer or plywood. In August, 1920, the agents of the Russian Soviet Government purported to sell to the defendants a quantity of the plaintiff company’s veneer or plywood confiscated. The defendants imported that wood into England, whereupon the plaintiff company brought an action claiming a declaration that they were entitled thereto.

The Secretary of State for Foreign Affairs in a letter to the defendants' solicitors on October 5, 1920, said that “His Majesty’s Government assent to the claim of the [Russian Commercial] Delegation to represent in this country a State Government of Russia.” In a letter to the plaintiffs' solicitors on November 27, 1920, he said that “for a certain limited purpose His Majesty’s Government has regarded M. Krassin as exempt from the process of the Courts, and also for the like limited purpose His Majesty’s Government has assented to the claim that that which M. Krassin represents in this country is a State Government of Russia, but that beyond these propositions the Foreign Office has not gone, nor moreover do these expressions of opinion purport to decide difficult and it may be very special questions of law upon which it may become necessary for the Courts to pronounce. I am to add that His Majesty’s Government have never officially recognised the Soviet Government in any way”:—

Held, that if a foreign government or its sovereignty is not recognized by His Majesty’s Government the Courts of this country will not recognize such foreign government or its sovereignty: that on the facts the Russian Soviet Government had not been recognized by His Majesty’s Government as the government of a Russian Federative

(1) [Sic in the record; the transliteration is not quite correct or consistent. – F. P.]

[*457] Republic or of any sovereign state or power: that accordingly the Court was unable to recognize any such Russian Government or to hold that it had sovereignty or was able by its decree to deprive the plaintiff company of their property.

ACTION tried by Roche J.

The plaintiff company alleged by their statement of claim that they were incorporated in the Empire of Russia according to the laws of Russia in 1898 and that they thereafter carried on business in Russia. They owned a factory or mill at Staraja Russa in the Government of Novogorod in Russia where they manufactured veneer or plywood. They marked or stamped the boards of the veneer or plywood or the crates or packages of the boards with the trade mark or trade name “Venesta” or the mark “V. L.” That trade mark or trade name was the property of a company called Venesta, Ld., which authorized the plaintiff company to use the same for marking or stamping boards or crates or packages of boards and to import into this country boards or crates or packages of boards marked or stamped with that trade mark or trade name.

The plaintiff company alleged that in 1919 they owned and had in their factory at Staraja Russa a large stock of boards of veneer or plywood all or most of which were stamped or marked with the trade mark or trade name “Venesta” or the mark “V. L.” amounting in quantity to not less than 1500 cubic metres. In 1919, certain Russians calling themselves Commissaries and claiming to be, or to be the duly appointed agents of, a Republican Government of Russia wrongfully seized and purported to expropriate and wrongfully deprived the plaintiffs of their factory or mill at Staraja Russa, and wrongfully seized and purported to expropriate and wrongfully deprived the plaintiffs of their stock of boards at their factory or mill. Neither the Russians nor the so-called Republican Government ever paid or made over to the plaintiff company any money or other consideration in respect of the stock of boards. The plaintiffs alleged that no such Republican Government of Russia ever in fact or in law existed and no such Republican Government had ever been [*458] recognized by His Majesty’s Government. Those Russians were therefore in law and in fact mere robbers and wrongdoers.

By a contract dated August 14, 1920, the defendants purported to agree to buy from the so-called Republican Government of Russia the plaintiff company’s stock of boards or not less than 1500 cubic metres. The plaintiffs alleged that the defendants had under that contract obtained possession of and imported into England by the steamships Kajak and Baltibor a quantity of their stock of boards amounting to about 135 tons.

The plaintiffs claimed: (1.) a declaration that the 1500 cubic metres of veneer or plywood, which the defendants purported or agreed to buy as above mentioned, were the unincumbered property of the plaintiffs; (2.) a declaration that the shipments of veneer or plywood on the steamships Kajak and Baltibor were the unincumbered property of the plaintiffs; (3.) an injunction restraining the defendants their servants and agents from selling, pledging or in any manner whatsoever dealing with any part of the 1500 cubic metres of veneer or plywood which they purported to agree to buy under the contract of August 14, 1920, or alternatively with any of the boards or crates or packages of boards contained in the 1500 cubic metres of boards which bore the trade mark or trade name “Venesta” or the mark “V. L.”; and (4.) damages for the wrongful conversion or detention of the 1500 cubic metres of veneer or plywood or alternatively of the shipments mentioned above.

The defendants by their defence said that the plaintiffs were domiciled and resident in the Republic of Esthonia and had their chief seat of business at Reval in that Republic, and that the plaintiffs had not at any material time any seat of business in Russia nor had they carried on business in Russia. The defendants said that the plaintiffs were therefore subjects of the Republic of Esthonia and subject to the laws and treaties made by that Republic, which Republic had been recognized by His Majesty’s Government before January 27, 1919. During the whole of 1919 and up to February 2, 1920, the Republic of Esthonia was at war with [*459] the Russian Soviet Republic. On February 2, 1920, a treaty of peace was concluded between the Republic of Esthonia and the Russian Soviet Republic. By Art. III. of that treaty the State boundary line between Russia and Esthonia was fixed and described, and Staraja Russa was recognized by the Republic of Esthonia as being within the territory and jurisdiction of the Russian Soviet Republic. Art. XIV. of the treaty provided for the establishment of mixed Russo-Esthonian Commissions to decide (inter alia) questions arising between either of the parties to the treaty and the citizens of the other party. Amongst the matters specifically referred to those commissions was the decision of the question of the delivering up of the property of citizens of Esthonia situate in Russia and also the property of Russian citizens situate in Esthonia, and other questions connected with the protection of the interests of citizens in the other country. The defendants said that if the plaintiffs ever had any claim to any property or goods which were at the date of the treaty at Staraja Russa the claim, if any, could by virtue of the facts set out above only be prosecuted through the agency of the mixed commissions.

The defendants said that if any factory or goods at Staraja Russa had been expropriated the act was the act of the Russian Soviet Republic being a sovereign state exercising supreme authority at Staraja Russa, and was valid and effectual to deprive the owners of the factory or goods of the property therein or alternatively to enable the Republic to pass a good title to foreign purchasers of the goods.

The defendants admitted that by a contract in writing of August 14, 1920, expressed to be made between the defendants and one L. B. Krassin, the representative of the Russian Commercial Delegation in London, the defendants purchased from the Russian Soviet Republic certain quantities of plywood (including the plywood claimed in this action) and that 1500 cubic metres of the plywood was therein described as being at “Station Starie Russey.” The defendants denied however that the plywood or any of it ever was the property of the plaintiffs or that the plaintiffs had ever been entitled [*460] to the possession thereof. Alternatively the defendants said that the plywood was manufactured by the servants and/or agents of the Republic wholly from timber the property of the Republic and that that timber never was the property of the plaintiffs.

The defendants said that the Russian Commercial Delegation was present in London with the knowledge, consent, and permission of His Majesty’s Government for the purpose of entering into commercial contracts with traders in this country, who were authorized and permitted by His Majesty’s Government to enter into commercial contracts with the delegation.

By a letter of July 28, 1920, written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the solicitors for L. B. Krassin it was stated that Krassin was the authorized representative of the Soviet Government and had been received by His Majesty’s Government for the purpose of carrying out certain negotiations. It was further stated therein that His Majesty’s Secretary of State regarded Krassin as a foreign representative and as one who in view of the negotiations should be exempt from the processes of the Courts.

In a letter of October 5, 1920, written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the defendants' solicitors it was stated that: “His Majesty’s Government assent to the claim of the Delegation to represent in this country a State Government of Russia.”

The defendants said that the Russian Soviet Republic had thereby been recognized by His Majesty’s Government as the government of a sovereign state exercising authority in territory which included Staraja Russa.

The defendants further said that no demand for delivery up of the goods claimed was made before action brought by the plaintiffs or by any person on their behalf.

On November 27, 1920, a letter was written on behalf of His Majesty’s Secretary of State for Foreign Affairs to the plaintiffs' solicitors in answer to a request for information which stated: “I am to inform you that for a certain limited [*461] purpose His Majesty’s Government has regarded Monsieur Krassin as exempt from the process of the Courts, and also for the like limited purpose His Majesty’s Government has assented to the claim that that which Monsieur Krassin represents in this country is a State Government of Russia, but that beyond these propositions the Foreign Office has not gone, nor moreover do these expressions of opinion purport to decide difficult and, it may be, very special questions of law, upon which it may become necessary for the Courts to pronounce. I am to add that His Majesty’s Government have never officially recognised the Soviet Government in any way.”

The facts including the decree of the Russian Soviet Republic under which the wood was confiscated and the contract under which it was sold to the defendants are set out in detail in the judgment.

Barrington-Ward K.C. and St. John Field for the plaintiffs.

Hogg K.C. and H. L. Murphy for the defendants. The plaintiff company had their head office at Reval and were therefore domiciled and resident in Esthonia and were accordingly bound by the treaty of peace between the Republic of Esthonia and the Russian Soviet Republic on February 2, 1920. Under that treaty the plaintiffs were bound to prosecute any claim they might have before the mixed Russo-Esthonian Commissions as provided in Art. XIV. of the treaty and they are not entitled to set up any claim to their property before the Courts of this country. Even if the plaintiff company are not bound by that treaty of peace still they are bound by the acts of the Russian Soviet Republic in taking possession of their property and selling it to the defendants. The Russian Soviet Republic made a decree dated June 20, 1918, under which all woodworking establishments equipped with machinery which belonged to private or limited companies were declared the property of the Russian Socialist Federative Republic. The plaintiff company’s factory and stock of veneer and plywood were taken possession of under that decree. All that the Courts of [*462] this country can consider is whether that decree was made by a state which has been recognized by the Government of this country, and if it was they are bound to recognize acts done under it as binding; they cannot consider whether the decree is a proper decree. The letter from the Foreign Office of October 5, 1920, amounts to a recognition by the British Government of the Russian Soviet Republic as a de facto Government in Russia although it may not be a recognition of the republic as a de jure government. It is sufficient to enable the defendants to contract with the Russian Soviet Republic that that government has been recognized as a de facto government, and it is not necessary that it should also have been recognized as a de jure government: Republic of Peru v. Dreyfus Brothers (1); United States of America v. Prioleau. (2) The certificate of the Foreign Office is conclusive on the point as to the status of the Russian Soviet Republic: Mighell v. Sultan of Johore. (3) In that case the Colonial Office had written a letter stating that the Sultan of Johore “generally speaking, exercises without question the usual attributes of a sovereign ruler” and the Courts held that the letter was conclusive as to his being an independent foreign sovereign, and therefore not subject to the jurisdiction of the Courts of this country. It is true that Sir Robert Phillimore in the case of The Charkieh (4) did not regard the letter of the Foreign Office as to the status of the Khedive of Egypt as conclusive but sought to inform himself from historical and other sources as to his status. Lord Esher M.R. however expressed the opinion in Mighell v. Sultan of Johore (5) that he ought not to have done so, but ought to have accepted the authoritative certificate of the Queen through her minister of state as to the status of another sovereign as decisive. It is unnecessary to discuss how far the rule of the Soviet. Republic extends in Russia because it is admitted that its rule extends over the place where the plaintiffs' factory is situated. In order to entitle the defendants to succeed it is

(1) (1888) 38 Ch. D. 348.
(2) (1865) 2 H. & M. 559.
(3) [1894] 1 Q. B. 149.
(4) (1873) L. R. 4 A. & E. 59.
(5) [1894] 1 Q. B. 158.

[*463] sufficient to show that the Soviet Republic has been recognized by the British Government, and that it has deprived the plaintiffs of their goods under a decree, and that the defendants are in possession of those goods under a contract with the agents of the Soviet Government. In Williams v. Bruffy (1) the Supreme Court of the United States decided that the Confederate Government was a rebel government and not a de facto government as ultimately it was not successful. Field J. in delivering the judgment of the Court discussed the question as to what constitutes a de facto government. He said that one kind of de facto government “is such as exists after it has expelled the regularly constituted authorities from the seats of power and the public offices, and established its own functionaries in their places, so as to represent in fact the sovereignty of the nation. … As far as other nations are concerned, such a government is treated as in most respects possessing rightful authority; its contracts and treaties are usually enforced; its acquisitions are retained; its legislation is in general recognised; and the rights acquired under it are, with few exceptions, respected after the restoration of the authorities which were expelled.” That language applies almost exactly to the position of the Soviet Government. The Court assumed that the acts of a de facto government, even though they are confiscatory, cannot be called in question before the Courts of another country. The Supreme Court of the United States in Oetjen v. Central Leather Co. (2) and Ricaud v. American Metal Co. (3) held that the courts of one country will not sit in judgment on the acts of the government of another country done within its own territory and that redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves. The Court also held that the principle that the conduct of one independent government cannot be successfully questioned in the courts of another country is applicable to a case involving the title to property brought within the

(1) (1877) 96 U. S. R. 176, 185.
(2) (1918) 246 U. S. R. 297.
(3) (1918) 246 U. S. R. 304.

[*464] custody of that Court. As the Russian Soviet Government has been recognized by the Foreign Office as a State Government of Russia it follows that the legality of what that Government has done within the territory over which it rules in Russia cannot be inquired into by this Court. This is an action in detinue. In order to support an action of detinue there must be proof that the detention of the article claimed is wrongful, the mere fact of the possession of the article is not sufficient to support the action. It is therefore necessary in order to support the action that there should have been a demand and a refusal to deliver up possession of the article before action: Clayton v. Le Roy. (1) In the present case there was no demand before action and therefore the action will not lie.

Barrington-Ward K.C. in reply. This action is not brought in detinue but for a declaration that the veneer or plywood is the property of the plaintiffs, therefore the rule that in an action of detinue it is necessary to prove a demand and refusal before action does not apply. It was said in Clayton v. Le Roy (1) that there must be an assertion by the defendant of a hostile right. That was done in the present case by the defendants' letter of October 22, 1920, to Venesta, Ld. The plaintiffs are not bound by the treaty of peace between Esthonia and the Russian Soviet Republic as they are not subjects of Esthonia. By the treaty persons of non-Esthonian origin including juridical persons are entitled to one year within which to decide whether they will become citizens of Esthonia. That year had not expired and the plaintiffs had not elected to become Esthonians. The treaty by Art. XIV. only refers to the decision of the mixed commission questions as to property of Esthonian citizens situated in Russia. The property in this case is not situated in Russia but in England, and therefore the treaty does not apply. The main question in this case is whether or not the Russian Soviet Republic has been recognized by the British Government as an independent sovereign state in that part of Russia where the plaintiffs' factory is situated. If the Government has not

(1) [1911] 2 K. B. 1031.

[*465] been recognized by the British Government it cannot be recognized by the Courts of this country, which in those circumstances are bound to consider the ancient state of things as remaining unaltered: see Halleck’s International Law, 4th ed., vol. i., p. 90. Republic of Peru v. Dreyfus Brothers (1) and United States of America v. Prioleau (2) merely establish the proposition that after a foreign government has been recognized as a de facto government by the British Government the subsequent acts of that de facto government cannot be called in question before the Courts of this country. But until there has been recognition by the British Government of such new state any transaction with such new state is unenforceable before the British Courts: Jones v. Garcia del Rio. (3) In Thompson v. Barclay (4) it was held that a transaction that formed part of a plan for raising a loan for a foreign state, which was a revolted colony of a friendly power, and which had not been recognized by the Government of this country, was illegal, and therefore an action could not be brought in respect of that transaction. The Vice-Chancellor there pointed out that the Courts of this country cannot recognize persons representing themselves to be governments of foreign countries till the Government of this country have recognized them. That statement of law was not dissented from by Lord Brougham L.C. (5) in affirming the decision although he expressed doubts on other points. It had previously been decided in The City of Berne v. Bank of England (6) that a judicial Court cannot take notice of a foreign government not acknowledged by the government of the country in which that Court sits. In The Gagara (7) the Attorney-General stated in open Court that the British Government had, for the time being, recognized the Esthonian National Council as a de facto independent body, and that was held to be a recognition which accorded them the status of a foreign sovereign. In The Annette (8) the Foreign Office

(1) 38 Ch. D. 348.
(2) 2 H. & M. 559.
(3) (1823) T. & R. 297.
(4) (1828) 6 L. J. (O. S.) Ch. 93.
(5) (1831) 9 L. J. (O. S.) Ch. 215.
(6) (1804) 9 Ves. 347.
(7) [1919] P. 95.
(8) [1919] P. 105.

[*466] wrote informing the Court that the Provisional Government of Northern Russia had not been formally recognized by the British Government although the Allied Powers were co-operating with them in opposition to the Russian Soviet Government, and it was held that did not amount to an informal recognition of the Provisional Government as a sovereign independent state. Following the authority of those cases this Court ought to come to the conclusion that there has been no recognition by the British Government of the Russian Soviet Government as a sovereign independent state. Even if the British Government has recognized the Russian Soviet Government, still the Courts of this country will not give effect to the penal laws of the Russian Soviet Government depriving the plaintiffs of their rights. “The penal laws of foreign countries are strictly local, and affect nothing more than they can reach, and can be seized by virtue of their authority; a fugitive who passes hither, comes with all his transitory rights; he may recover money held for his use, stock, obligations and the like; and cannot be affected in this country, by proceedings against him in that which he has left, beyond the limits of which such proceedings do not extend”: Folliott v. Ogden. (1) “No country regards the penal laws of another”: Wolff v. Oxholm. (2) Marshall C.J. said in United States v. Percheman (3): “It is very unusual, even in cases of conquest, for the conqueror to do more than to displace the sovereign and assume dominion over the country. The modern usage of nations, which has become law, would be violated; that sense of justice and of right which is acknowledged and felt by the whole civilized world would be outraged, if private property should be generally confiscated, and private rights annulled.” The letter of the Foreign Office does not amount to more than this, it informs the defendants that they may trade with Krassin without incurring penalties; it does not amount to a recognition of the Soviet Government.

H. L. Murphy in reply on the cases. The point in Folliott v.

(1) (1789) 1 H. Bl. 123, 135; affirmed (1790) 3 T. R. 726.
(2) (1817) 6 M. & S. 92, 99.
(3) (1833) 7 Peters, 51, 86.

[*467] Ogden (1) and Wolff v. Oxholm (2) is covered by the decision in Republic of Peru v. Dreyfus Brothers. (3) City of Berne v. Bank of England (4) is a peculiar case depending upon the particular facts in that case. The case of Dolder v. Lord Huntingfield (5) was brought subsequently in respect of the same funds. At the time the Helvetic Republic had not been recognized by the British Government. In Yrisarri v. Clement (6) the Court of King’s Bench heard evidence as to whether the Republic of Chili was a sovereign independent state before its independence had been recognized by Great Britain. The Court is bound by the unambiguous statement of the Foreign Office that the Soviet Government is a State Government of Russia. If the information supplied by the Foreign Office does not lead to a clear conclusion the Court is not confined to that source of information but may inform itself from other sources as was done in the case of The Charkieh. (7) The Court of Appeal in Mighell v. Sultan of Johore (8) held that Sir R. Phillimore was wrong in so doing, but that was because the information supplied by the Foreign Office in that case was clear and unambiguous. The fact that the Soviet Government is the only Government in existence in that part of Russia where the plaintiffs' factory is and that it has entered into a treaty of peace with Esthonia must not be overlooked in considering whether it is a de facto government. The information supplied by the Foreign Office in the case of The Annette (9) with regard to the recognition of the Government of Northern Russia falls very short of that supplied in the present case with regard to the recognition of the Russian Soviet Government. The Foreign Office have intimated that the head of the Russian Commercial Delegation is entitled to diplomatic immunity and therefore it must be implied that the Government which he represents has been recognized as a de facto government.

Cur. adv. vult.

(1) 1 H. Bl. 123.
(2) 6 M. & S. 92.
(3) 38 Ch. D. 348.
(4) 9 Vesey, 347.
(5) (1805) 11 Vesey, 283.
(6) (1825) 2 C. & P. 223; (1826) 3 Bing. 432.
(7) L. R. 4 A. & E. 59.
(8) [1894] 1 Q. B. 158.
(9) [1919] P. 105.

[*468] 1920. Dec. 21. ROCHE J. read the following judgment. This action raises for determination a dispute as to the property in certain parcels of wood goods which arrived in this country in the autumn of this year in the steamships Kajakand Baltibor. The parties agreed that I should decide questions of principle and liability only, and that all questions of detail and amount as well as certain matters arising under an interlocutory order of the Court should be referred to Mr. Leck K.C.

The facts, so far as it is necessary for me to determine them, I find to be as follows: Before the war Venesta, Ld., a British company, imported into this country large quantities of veneer, or plywood, under the trade mark, or trade name, of “Venesta,” and the brand of “V. L.” This trade mark, or name, was the property of Venesta, Ld. The goods so imported were manufactured at the factory, or mill, of the plaintiff company for Venesta, Ld. This factory, or mill, was at Staraja Russa in Russia. Venesta, Ld., was by far the largest shareholder in the plaintiff company, and had advanced, in addition, large sums to the plaintiff company in respect of goods in process of manufacture, or to be manufactured for Venesta, Ld. The sums outstanding in respect of such advances to provide the plaintiff company with capital were stated to amount to some 200,000l. No veneer or plywood, or none of the description now in question, was manufactured at Staraja Russa after the early part of 1918. This cessation of manufacture was brought about by the prevalence of conditions unfavourable to commerce. A considerable portion of the goods in the Kajak and Baltibornow in question bore the marks of “Venesta,” or “V. L.,” either on the wood, or on the crates in which the goods were packed, and I find that all wood so marked or identifiable was manufactured by the plaintiff company in or before 1918. It is said by the plaintiff company that it can be established that the whole of the parcels were so manufactured. This is a matter which falls to the referee to determine. My decision refers to wood marked, or identifiable, as, or found to be, manufactured at Staraja Russa prior to, or in the year, 1918.

[*469] In January, 1919, the factory or mill passed out of the control of the plaintiff company (whether rightly or wrongly for this immediate purpose I need not consider), and in so far as goods were thereafter manufactured at that factory or mill, or were of other manufacture, they would not fall within this decision and the plaintiff company would fail to satisfy me that the property in such goods was in the plaintiff company. When I say “Whether rightly or wrongly for this immediate purpose I need not consider,” I do not mean by that for my main purpose, but only for the purpose of ascertaining the particular quantity of goods which fall within the judgment.

Such being the history of the veneer in question, and of the connection of Venesta, Ld., therewith, on October 22, 1920, the defendants, a firm carrying on business in London, wrote to Venesta. Ld. as follows:-

“The Managing Director, “Venesta, Limited,

“1, Great Tower Street, E.C.3. “DEAR SIR,

“We have recently purchased a parcel of Birch plywood and duly received information from our agent that the goods have arrived at port, and about 75 tons of plywood out of our parcel is marked 'Venesta.' “We consider that it is our duty to bring this fact to your notice as you may be interested in purchasing the parcel from us. Should you not be interested in doing so, we would like to know if you would prefer us to remove the mark before offering these goods on the market.

“Awaiting your reply, we remain,

“Yours faithfully,

“JAMES SAGOR & Co.”

Thereupon the writ in this action was issued, and by that action the plaintiff company seeks to establish that the goods which the defendants were purporting to sell were the property of the plaintiff company, and not of the defendants.

Between the plaintiff company’s right to the goods in 1918 [*470] and its claim to them in 1920 the defendants interpose matters which they assert have transferred the property to themselves. These matters are: (1.) A confiscatory decree affecting establishments such as that at Staraja Russa purporting to emanate from the Government of Russia, and to bear date June 20, 1918. No official copy of this decree is available, but there was produced before me the following document:—

“Translation made by Official of Commission for collecting

information in Russia.

“‘Board of Trade,

“‘22 Carlisle Place, S.W.1.

“‘From UNE LEGISLATION COMMUNISTE,

“‘Published by Hayot, Paris, 1920.

“‘Decree of Council of Commissars for the People of 20th June, 1918, which appeared in “Izviestia” in Moscow on 30th June, 1918. No. 134.

“‘By Article 1: All industrial and commercial establishments mentioned below with their capital and assets of whatever nature are declared the property of the Russian Socialist Federative Republic (inter alia)

“‘(17) All the mechanical saw mills of limited or private Companies which have a capital of at least 1,000,000 Roubles.

“‘(18) All woodworking establishments equipped with machinery which belonged to private or limited Companies.

“‘Decree signed by Lenin in presence of Council of Commissars and by Commissars of the People.

“‘TSIRIOUP NAGUINE RIKOF,

“‘Business Director.

“‘BOVITCH-BROVENITSCH,

“‘Secretary of the Council.’”

I pause only to observe that the decree claims to be made for, and presumably by, a federative republic, and that a Mr. Muller, who was called before me, and who was a member, or official, of a Soviet Delegation in this country, made it plain that in his view Russia as a whole, including, for example, the Ukraine, was included within the ambit of the [*471] territory and of the legislation or decrees of the Government or body which the delegation represented. (2.) The second matter relied upon was the fact, which was alleged by the plaintiffs and was established by the evidence on both sides, that Commissaries or officials of some central Soviet body or organization, in spite of some resistance from the local workers or Soviets, did succeed in 1919 in taking possession of the factory or mill at Staraja Russa and of the manufactured goods lying there. I am not clear, however, whether the Commissaries, or the Council directing them, really claim as of right to deal with and dispose of such manufactured goods even if the product of foreign capital; but whether by mistake or otherwise, they have in this instance dealt with and sought to dispose of them. (3.) The third matter relied upon was a contract dated in London, August 14, 1920. That is the contract made in London on that date between L. B. Krassin, the representative of the Russian Commercial Delegation in London, and James Sagor & Co. of Coventry House, South Place, Finsbury, London. It sets out that Krassin, on behalf of the Russian Commercial Delegation, sold to Sagor & Co. about 8000 cubic metres of birch, alder, and aspen plywood of different thicknesses and sizes. The contract states, under the heading of “Quality”: “The goods must be sorted to qualities as has been done previous to the war, the goods being accepted by the buyer as to the quality by his agents at the mills. In case if one or another parcel did not correspond to the standard of sorting as has been done previous to the war the buyer has the right to refuse this parcel, and the quantity sold will be reduced by the quantity which is rejected if the buyer will reject of that parcel more than 20 per cent. Sizes: The sizes of the Boards must be about 60” x 60” 60” x 40” 48” x 40” in thicknesses 3 mm., 4 mm., 5 mm., and 6 mm. Boards for tea chests must be cut to the following sizes:— 4 Boards 23 7/8” by 18 5/8”. 2 Boards 18 5/8” by 18 5/8”. Packing: The goods must be packed in bundles well tied up either with rope or with iron hoops and each package must bear the marks of the size of the boards, the quantity of boards, and the quality. After [*472] inspecting the goods at the mills with the representative of the buyer the goods must be sent to ports for loading on the steamers. The goods may be loaded at Petrograd if the British Government have no objection to same, otherwise the goods will be sent to Reval. At any rate, the steamers must be sent during the navigation of 1920, and in each case the seller must be notified three weeks in advance when the steamer comes into port. Loading on each steamer must be done within ten days from the date when the steamer arrives at the port, otherwise demurrage is to be paid by the seller. Payment: James Sagor & Co. undertake themselves to pay for all goods in cash on the following conditions: If the goods will be sent via Reval then as soon as the goods are transferred at Reval to the forwarding agents of the buyer he is to pay 30 per cent. of the value of the goods, and the balance against bills of lading. In case the goods will be shipped from Petrograd then the payment is made against bills of lading. The place of payment is at the option of the seller. If within six weeks of the arrival of the goods at Reval there will be no steamer to load same then the buyer accepts the goods at the place, and pays the full value of same less expenses of loading. In any case all expenses for taking care of the goods at Reval after the expiration of six weeks is to be borne by the buyer. If for some reason which may occur on account of the present negotiations between the British Government and the representatives of the Russian Commercial Delegation the above mentioned goods cannot be transferred to the buyer during this Summer at Petrograd and the seller will not be able to send the whole parcel to Reval then not less than 50 per cent. sold goods must be sent to Reval during this year’s navigation. The balance of the quantity of the Contract must be delivered during the navigation of 1921. The buyer has the option to buy another 8,000 cubic metres to be delivered during 1921. Signed on behalf of the Russian Commercial Delegation. Commissary to the Foreign Trade, Krassin; Secretary, Klishko.” That is under the seal of the agents of the Soviets of the People’s Commissaries. I do not know that that is [*473] a very good translation, but that is the translation which was given to me. It appears from the correspondence, p. 1 (being a letter of May 27, 1920, from the Board of Trade, Department of Overseas Trade), and from the evidence that the negotiations which led up to this contract were instituted by a delegation of Russian co-operative societies known as “A.R.C.O.S.” Mr. Muller’s evidence on this point was to the following effect: “I know Russian Co-operative Societies. They are called 'A.R.C.O.S.' They sent a delegation to this country. Krassin was the head of that, and is the head still of the present delegation. I was secretary of that delegation, and am still. All the officials of the two delegations are the same. Since we came to this country the Central Co-operative Societies have been abolished by the decree of the People’s Commissaries. I do not know whether they asked the Co-operative Societies before they abolished them. We became the representatives of the Soviet Government.”

It does not appear how, or by what title, the co-operative societies came to be dealing with the goods, nor, if they had a title, by what decree their title passed to the body which made the contract now relied upon. Apart from any criticisms or doubts which may arise upon matters arising under the above heads (2.) and (3.), it is clear that the defendants' claim to defeat the plaintiffs' title depends in the first instance upon the decree mentioned under head (1.) being a valid legislative act which can be recognized as such in the Courts of this country. In the view I take of this point it is not necessary further to consider heads (2.) and (3.). I therefore confine my judgment to head (1.).

Whether the decree in question is a valid legislative act which can be recognized as such by the Courts of this country must, in my judgment, depend upon whether the power from which it purports to emanate is what it apparently claims to be, a sovereign power, in this case the sovereign power of the Russian Federative Republic. The proper source of information as to a foreign power, its status and sovereignty, is the Sovereign of this country through the [*474] Government: Mighell v. Sultan of Johore (1); Foster v. Globe Venture Syndicate. (2) In the case of The Charkieh (3) Sir Robert Phillimore had recourse to other sources of information in order to determine a question arising in the year 1873 as to the status and sovereignty of the Khedive of Egypt, but in the opinion of Lord Esher, expressed in his judgment in Mighell v. Sultan of Johore (4), this course was wrong. At all events, even if I were entitled to look elsewhere for information I am certainly not bound to do so, and in this case I know of no other sources of information available to which I can safely or properly resort.

I therefore propose to deal with the case upon the information furnished by His Majesty’s Secretary of State for Foreign Affairs. The attitude proper to be adopted by a Court of this country with regard to foreign governments or powers I understand to be as follows: (1.) If a foreign government is recognized by the Government of this country the Courts of this country may and must recognize the sovereignty of that foreign government and the validity of its acts: see Republic of Peru v. Dreyfus (5), and the cases there cited. (2.) If a foreign government, or its sovereignty, is not recognized by the Government of this country the Courts of this country either cannot, or at least need not, or ought not, to take notice of, or recognize such foreign government or its sovereignty. This negative proposition is, I think, also established and recognized by the judgment of Kay J. in Republic of Peru v. Dreyfus. (6) I think it, however, to be desirable that I should notice some of the earlier decisions. In the City of Berne v. Bank of England (7) the question at issue was the right of an unrecognized foreign government to maintain a suit, but Lord Eldon’s judgment is, I think, an authority for the general proposition I have stated. It was suggested that in Dolder v. Lord Huntingfield (8) Lord Eldon departed from or expressed a doubt with

(1) [1894] 1 Q. B. 149.
(2) [1900] 1 Ch. 811.
(3) L. R. 4 A. & E. 59.
(4) [1894] 1 Q. B. 158.
(5) 38 Ch. D. 348.
(6) 38 Ch. D., pp. 357, 358, and 359.
(7) 9 Ves. 347.
(8) 11 Ves. 283.

[*475] regard to the view he had expressed in the City of Berne Case. (1) I do not agree with this suggestion. Dolder v. Lord Huntingfield (2) turned on points of procedure and pleadings, and left the question of the method of proof as to the status of a foreign state which might arise at a later stage in the suit exactly where it stood before. Indeed, it is quite plain from his judgment in Jones v. Garcia del Rio (3) that Lord Eldon was in the year 1823 of the same opinion as he was when he decided the City of Berne Case (1) in 1804. In Thompson v. Barclay (4) Shadwell V.-C. stated the law with regard to governments of foreign countries to be that “the Courts cannot acknowledge them till the Government of the Country has recognised them.” This case came before Lord Brougham as Lord Chancellor in 1831 (Thompson v. Barclay (5)), and although on some other points he was not in agreement with the Vice-Chancellor, yet on the question of recognition Lord Brougham (6) expressed the same view as the Vice-Chancellor had expressed.

To come to quite recent times, Hill J., in The Annette and The Dora (7), stated the law thus: “I must be satisfied before I can recognise the Provisional Government of Northern Russia as a Sovereign State, for the purposes of this case, that the British Government so recognise it.” The cases of United States of America v. Prioleau (8) and United States of America v. McRae (9), cited by the defendants' counsel, were decided upon principles other than any principle now under discussion, and seem to me not to bear upon the effect of recognition or its absence where matters of sovereignty and status are in question: see West Rand Central Mining Co. v. The King (10) at pp. 411 and 412 for the real point of these decisions.

On the general proposition the Courts of the United States appear to take the same view as our Courts. The Supreme

(1) 9 Ves. 347.
(2) 11 Ves. 283.
(3) T. & R. 297.
(4) 6 L. J. (O. S.) Ch. 93, 97.
(5) 9 L. J. (O. S.) Ch. 215.
( (6) Ib. 221.
(7) [1919] P. 105, 111.
(8) 2 H. & M. 559.
(9) (1869) L. R. 8 Eq. 69.
(10) [1905] 2 K. B. 391.

[*476] Court in Gelston v. Hoyt (1) laid down the law as follows: “No doctrine is better established, than that it belongs exclusively to Governments to recognise new States in the revolutions which may occur in the world; and until such recognition, either by our own Government, or the Government to which the new State belonged, Courts of Justice are bound to consider the ancient state of things as remaining unaltered. This was expressly held by this Court in the case of Rose v. Himely (2), and to that decision on this point we adhere. And the same doctrine is clearly sustained by the judgment of foreign tribunals: The Manilla (3); City of Berne v. Bank of England. (4)” This being the law which must guide and direct my decision, I have to consider whether and in what sense the Government represented by M. Krassin in this matter is recognized by His Majesty’s Government. The materials for a decision have been provided for me by the parties who have each by their solicitors asked for information from His Majesty’s Secretary of State for Foreign Affairs. The information conveyed in reply is summarized in the following letters. At p. 5 of the correspondence there is a letter to the defendants' solicitors which reads as follows:—

“FOREIGN OFFICE,

5th October, 1920.

“Sir,

“I am directed by Earl Curzon of Kedleston to acknowledge the receipt of your letter of the 22nd September, and to inform you that His Majesty’s Government assent to the claim of the Delegation to represent in this country a State Government of Russia.”

That was made more plain and was amplified in a letter of November 27, 1920, to the plaintiffs' solicitors in answer to certain requests for information which were made by them. That letter reads as follows:—

(1) (1818) 3 Wheat. 246, 324.
(2) (1808) 4 Cranch, 241.
(3) (1808) Edw. 1.
(4) 9 Ves. 347.

[*477] “FOREIGN OFFICE,

“27th November, 1920.

“Gentlemen,

“I am directed by Earl Curzon of Kedleston to acknowledge the receipt of your letter FT/A of November 19th, requesting certain information concerning the Russian Trade Delegation in this Country, and the Esthonian-Russian Peace Treaty. I am to inform you that for a certain limited purpose His Majesty’s Government has regarded Monsieur Krassin as exempt from the process of the Courts, and also for the like limited purpose His Majesty’s Government has assented to the claim that that which Monsieur Krassin represents in this Country is a State Government of Russia, but that beyond these propositions the Foreign Office has not gone, nor moreover do these expressions of opinion purport to decide difficult, and it may be very special questions of law upon which it may become necessary for the Courts to pronounce. I am to add that His Majesty’s Government have never officially recognised the Soviet Government in any way.”

It was said on behalf of the defendants that these communications were vague and ambiguous. I should rather say that they were guarded, but as clear as the indeterminate position of affairs in connection with the subject-matter of the communications enabled them to be; but lest it should be deemed that ampler or further information might now be available, I caused communication to be made by a Master of the Crown Office to His Majesty’s Secretary of State for Foreign Affairs, asking whether there was in addition to the letters to the parties or their solicitors further matter or information which should be placed before me. The reply of the Secretary of State was that he had no further information which he desired to place before me. On these materials I am not satisfied that His Majesty’s Government has recognized the Soviet Government as the Government of a Russian Federative Republic or of any sovereign state or power. I therefore am unable to recognize it, or to hold it has sovereignty, or is able by decree to deprive the [*478] plaintiff company of its property. Accordingly I decide this point against the defendants.

The point was taken by the plaintiff company that inasmuch as the decree relied upon by the defendants was confiscatory and not conformable to the usage of nations, it could not be relied upon in this Court. Wolff v. Oxholm (1) was cited in support of this argument, but having regard to my view that I cannot recognize the decree as that of a sovereign power, in my opinion it is unnecessary for me to consider or decide this point, and I do not do so. I merely record that it was taken, and is open to the plaintiff company elsewhere.

A further and entirely different answer to the plaintiffs' claim was raised by the defendants – namely, that the plaintiff company was an Esthonian company, and by reason of certain treaty stipulations was unable to assert a claim to this property in this Court. This matter is dealt with by paras. 3 to 11 of the defence. The facts are shortly as follows: Down to February 2, 1920, the plaintiff company’s head office was at Reval, which is now in Esthonia. Its mill, or factory, was in Russia. On February 2 there was made a treaty of peace between Esthonia and the Soviet Government. The defendants say that the claims of Esthonian subjects are, by the treaty, relegated to the sole arbitrament of a mixed commission thereby set up. Apart from any difficulty which might arise from the absence of recognition of one of the parties to the treaty, there is, as it seems to me on the facts as I find them, a short answer to the defendants' contention. The plaintiff company was not an Esthonian company, but a Russian company before the treaty, and after the treaty it did what the treaty (Art. IV.) entitled it to do, elected to be, or remain, Russian.

The defendants took the further point that at all events this action, which they said was an action in detinue, would not lie, because there was no demand for the goods and no refusal of the demand before writ: Clayton v. Le Roy. (2) The defendants, desiring the main issues between the parties to be decided, asked that a decision on this point should be

(1) 6 M. & S. 92.
(2) [1911] 2 K. B. 1031.

[*479] treated as going only to the question of costs. But although the proposition of law upon which the defendants base this contention is beyond dispute, the contention fails on the facts. The action is framed as claiming certain declarations and consequential relief, and one of the alternative modes of relief available and sought is the award of damages for conversion. I hold that the plaintiffs are entitled, in substance, to the declaration claimed, subject as to the quantity of goods covered by my judgment to further inquiry before the referee, and that the plaintiffs are entitled, with the like reservation, to the injunction prayed. I also hold that the claim of the defendants to sell the goods amounted to conversion. But practically, having regard to the interlocutory order made on November 1, 1920, which embodied in an order a business method of dealing with the matter evolved by the parties, or their advisers, an assessment of damages would seem to be unnecessary. It may, however, and I think it will be desirable in case the matter goes further, that the referee should assess the money value of the goods when he is dealing with the other matters arising for his decision. I give judgment for the plaintiffs with costs.

Judgment for plaintiffs.

R. F. S.