of sovereignty, by which the national courts are bound. The creditor, therefore, is juridically opposed to a sovereign who may with perfect legality, by an act of sovereignty, deprive him of his substantive right and of his remedy. In other words, the state in the exercise of its sovereign powers may regulate the execution of its contract of loan in any manner conformable with its public interest.1 Again, the improbability in many states of securing an impartial judicial determination by national courts in cases of this kind makes the creditor's position precarious. To sue the debtor state on a public loan, therefore, is practically useless. There are some states whose national courts might grant a creditor relief. These are the states that are never sued on their national debts.

To sue the debtor state before the courts of the creditor is still less practicable. As a general rule municipal courts decline to take jurisdiction over foreign states as defendants.2 The exception of voluntary

1 Lewandowski, Maurice, De la protection des capitaux empruntés en France par les Etats étrangers, Paris, 1896, 24 et seq. While apparently accepted as a principle, the theory is by no means undisputed that a state contracts a public loan in its character as a sovereign, jure imperii, and is not bound contractually to its creditors. See Moulin, H. A., La doctrine de Drago, Paris, 1908, 76 et seq.; Freund, Rechtsverhältnisse, etc., 59-61; speech of M. Ruy Barbosa (July 23, 1907) at the Hague Conference of 1907, Actes et Discours de M. Ruy Barbosa, 60 et seq.; see also the recent case of De Andrade v. the government of Brazil, reported in 40 Clunet (1913), 237. 2 Bynkershoek is the father of this theory.

Loening, E., Die Gerichtsbarkeit über fremde Staaten u Souveräne, Halle, 1903 is one of the leading works on the subject. The opinions of courts are discussed, p. 23 et seq.; the opinions of writers, p. 55 et seq.; Christian Meurer, Klagen von Privatpersonen gegen auswärtige Staaten, 8 Ztschr. f. Völkerrecht (1914), 1-47, and supra, §72. See also Brie, Fischer & Fleischmann, Zwangsvollstreckung gegen fremde Staaten u Kompetenzkonflikt, Breslau, 1910, containing three opinions rendered at the request of Russia in the case of Hellfeld v. Russia on the question of the jurisdiction of German courts over funds of Russia in Germany and the possibility of execution against them. The translation of the decision of the German court for the determination of jurisdictional conflicts in the now famous Hellfeld case may be found in 5 A. J. I. L. (1911), 490–519.

See on the whole subject an able article by Droop in 26 Gruchot's Beiträge zur Erläuterung des deutschen Rechts, 289-316, in which the decisions of courts are carefully reviewed. Some writers have made a distinction as to jurisdiction over foreign states, depending upon whether the transaction in question involved the defendant state in its capacity as a sovereign (jure imperii) or as a fiscus (jure gestionis), granting immunity from jurisdiction in the former case, but asserting it in the latter. The most noteworthy of these writers are Laurent, Droit civil international, Paris,

submission and questions concerning real estate are hardly of practical significance for the present case.

The French courts take the firm position that bondholders of the debt of a foreign state cannot sue before the French courts.1 The English courts have usually declined to exercise jurisdiction over foreign states, and in the case of bondholders of foreign debts have unequivocally declared themselves jurisdictionally incompetent.2 This is the rule of the German and Austrian courts 3 and has been the uniform rule in courts of the United States. In Belgium and Italy the courts seem to have adopted the distinction of administrative law between transactions of the state undertaken jure imperii and jure gestionis, and to have exercised jurisdiction in the latter case.5

4

If there were still any doubt as to the impracticability of relief by suit against a foreign government in municipal courts, it would be dispelled by the certainty that execution of the judgment, even if obtainable, is practically impossible. No legal process lies against the property of a foreign state, and even the jurisdictional distinction made by some courts between acts jure imperii and jure gestionis is disregarded in the matter of execution. The exception of actions involving real estate does not concern us here. Even attachment and garnishment proceedings against the movable property of foreign sovereigns are almost uniformly dismissed."

1880, III, 42-103, and von Bar, op. cit., 1101 et seq. They have been followed by a number of courts, notably those of Belgium and Italy. Supra, p. 176.

1 See the cases cited in Weiss, A., Traité de droit international privé, V, 94; Loening, op. cit., 45.

2 Westlake, J., A treatise on private international law, London, 1905, 4th ed., §§ 190, 192 and cases there cited. See particularly Twycross v. Dreyfus (1877), 36 Law Times Rep. (N. S.) 755, 757, decision of Jessel, M. R.

Citations of cases in Brie, op. cit., and Loening, op. cit., 23 et seq.

'Moore, J. B., in his American notes to Dicey, A. V., A digest of the laws of England with reference to the conflict of laws, London, 1896, p. 229. See leading case of Schooner Exchange v. McFaddon (1812), 7 Cranch, 116; 30 Cyc. 104, and cases there cited.

Cases cited in Loening, op. cit., 52-54.

Brie, op. cit., 45 et seq.; Loening, op. cit., 139 et seq. See the cases of von Hellfeld v. Russia, supra; De Reilhac, Trib. civil de la Seine, June 12, 1895, 40 Clunet (1913), 907, and Mason v. Intercolonial Railway of Canada (1908), 197 Mass. 349. See article by Nathan Wolfman, "Sovereigns as defendants," in 4 A. J. I. L. (1910),

It is thus apparent that national municipal courts, either of the debtor state or of the country of the creditor, are unable to secure the unpaid creditor any remedy. He is not left helpless, however. The sanction for a violation of his rights is found in international law and practice, in that states have frequently interfered in behalf of their creditor subjects to secure the payment of unfulfilled national obligations of foreign states. Before examining the legitimacy of diplomatic interposition and intervention for such unpaid creditors, let us inquire into the nature of the transaction by which a citizen becomes a holder of a share in the public debt of a foreign nation.

§ 119. International Remedies. The Drago Doctrine.

It has already been observed that the emission of a public loan takes place by legislative act. The individual abroad may obtain the bond either through a direct transaction with the government or through a banker who has underwritten the loan. As a general rule, however, the bonds are purchased in the open market as industrial securities would be, without any direct relation with the debtor government. Being payable to bearer, they pass from hand to hand, from national to national, by mere delivery.

Again, the price paid takes into account the value of the security, both intrinsically and as an investment. Thus the solvability of the government bears a direct relation to the price of its bonds. Weak and unstable governments must sell below par and pay high rates of interest. The original capitalist takes advantage of the necessities of the borrowing state and exacts discounts and interest accordingly, and subsequent dealers in the bonds know the conditions equally well. The legal fact that the emission was an act of sovereignty, that the debt may be repudiated or reduced by a similar act, that the usual civil remedies are barred, and that the state is the sole judge of its ability to pay, are known to all parties to the transaction. The investor therefore buys with full notice and assumption of the risks, and has weighed the probabilities of large profits against the danger of loss.

It is for these reasons that it seems unfair, both to the debtor state 373-383, in which a departure from the general rule is urged in favor of jurisdiction over property engaged in private or commercial undertakings.

and to the fellow nationals of the creditors (who may indeed change from day to day), that the government of the creditor should make the breach of such a contractual obligation to a citizen who accidentally holds a foreign public bond a cause for armed international action involving the whole nation in the burden, and making the government in effect the underwriter and guarantor of his investment in the securities of a foreign government.

This is the principal argument of the Drago Doctrine, first advanced in the celebrated note of December 29, 1902, from Dr. Luis Drago, Minister of Foreign Affairs of Argentine, to the Argentine Minister at Washington, and by him submitted to the Department of State, on the occasion of the joint intervention of Great Britain, Italy and Germany against Venezuela. The argument led up to the recommendation of proposed policy, intended to be a corollary to the Monroe Doctrine, that "the public debt [of an American state] cannot occasion armed intervention, nor even the actual occupation of the territory of American nations by a European power.1

It may be noted that Drago protests only against the use of armed force in the collection of public debts and not directly against diplomatic interposition. Most of the writers who have discussed the question have failed to note this distinction, possibly because a denial of forcible measures deprives interposition of its most effective sanction.

The text of the Drago note will be found in Foreign Relations 1903, 1-5. Dr. Drago has written the following monographs on the doctrine which has been named after him: Cobro coercitivo de deudas publicas, Buenos Aires, 1906; Les emprunts d'Etat et leurs rapports avec la politique internationale, 14 R. G. D. I. P. 251, translated practically in full in his article "State loans in their relation to international policy," in 1 A. J. I. L. (1907), 692-726. Among the best literature in English are two thoughtful articles by George Winfield Scott, "International law and the Drago doctrine" in North American Review, Oct., 1906, 602-610, and "Hague convention restricting the use of force to recover contract claims" in 2 A. J. I. L. (1908), 78–94; an article by Amos S. Hershey, The Calvo and Drago doctrines, in 1 A. J. I. L. (1907), 26-45; and Chapter VIII, vol. 1, pp. 386-422, of James Brown Scott's The Hague Peace conferences of 1899 and 1907, Baltimore, 1909. One of the best books is Moulin's La doctrine de Drago, Paris, 1908, and a useful collection of documents is to be found in S. Perez Triana, La doctrina Drago, Londres, 1908. Alvarez in 3 A. J. I. L. (1909), 335 contests Moulin's view that the Drago doctrine is a necessary complement of the Monroe doctrine. Further references to foreign literature may be found in Bonfils, Manuel (6th ed., 1912), 186, n. 4. See also a recent work by Vivot, A. N., La doctrina Drago, Buenos Aires, 1911.

They therefore consider the protest against the sanction as directed against the whole remedy, although even without the potential use of force it still has some room for application. In expressly stating that he did not intend to make his "doctrine" a defense "for bad faith, disorder, and deliberate and voluntary insolvency," Dr. Drago has, it is believed, set the proper bounds to his principle, although, as will be pointed out, the creditor state is still (except as restrained by the Porter proposition) left the sole judge of the existence of these limiting conditions.

§ 120. Diplomatic Interposition and Intervention. Opinions of Publicists.

Before proceeding further, it may be appropriate to discuss briefly the opinions of publicists and the practice of nations in the matter of intervention to collect public debts, by which is meant diplomatic interposition followed by force. Westlake, as has been observed (supra, p. 283), has properly recognized the distinction in substance and in remedial process between contracts made with the state in its character as a fiscus or business administrator and those arising out of subscription to or transfer of a public bond. He regards honest inability to pay as a title to consideration, and unless the defaulting government presumes to treat its internal and external debts on terms of inequality unfavorable to the latter, he thinks "the assistance of their state ought not to be granted to the bondholders of public loans."

Some of the earlier writers, prominent among them Grotius and Vattel, admitted the legitimacy of reprisals against a sovereign who refused to pay a lawful debt (supra, p. 286). Inability and refusal to pay are not, however, identical. Phillimore and Hall, supporting the views of the British government, contend that a debt contracted by a foreign government toward a citizen constitutes an obligation of which the country of the lender has a right to require and enforce the fulfillment.1 Yet Phillimore approves, as he says, the proposition of Martens that, in the absence of flagrant misconduct, the foreigner can only

1 Phillimore, 3rd ed., II, ch. III, 8 et seq.; Hall, 6th ed., 275–276. See also Pomeroy, Int. law (Woolsey's ed.), Boston, 1886, §§ 213, 214, and Lorimer, Institutes, Edinburgh, 1883, I, 447-448, who would hold a borrowing nation at least to good