nationality of its creator, regardless of the citizenship of the bondholders or stockholders.1 General claims conventions concluded by the United States usually provide for the adjudication of "all claims on the part of corporations, companies or private individuals, citizens of the United States," or the other claimant government. Even where the protocol was confined to "citizens" or "subjects," it has been held by arbitral commissions to include corporations duly organized under the laws of the claimant government.2

While American incorporation, therefore, affords a prima facie title to American protection, no hard and fast rules governing protection can be laid down. The Department of State, in the exercise of its discretion, requires evidence of the substantial American interest in a corporation before protection is authorized. Thus the Department uniformly requires the party in interest to place on file a properly certified copy of the charter or articles of incorporation, together with a duly executed instrument setting forth the ownership-legal or equitable of the stock and bonds of the corporation, including such a statement of the nationality of the holders as will show in whom the greater part of the real beneficial interest lies. Complete American ownership of the stock or bonds is by no means required. When there is reason to believe that American incorporation was sought merely for the purpose of securing American protection for what is in fact a foreign-owned enterprise, the Department is loath to extend its protection to the corporate entity. Such protection has been refused in cases where the incorporators were all aliens or where the majority of the stock was owned by nationals of the country against which protection was sought, or where the corporation has not been considered to represent sufficient American interests.3 In a case where four-fifths 1 Chauncey (U.S.) v. Chile, Case No. 4, May 24, 1897, U. S. and Chilean Comm. Rep., 1901, 22; For. Rel. 1910, 197.

2 Stirling (Gt. Brit.) v. Chile, No. 4, Sept. 26, 1893, Reclamaciones pres. al Trib. Anglo-Chileno, I, 128, 152, dissenting opinion by Commissioner Aldunate, ibid. 163187; Rosario Nitrate Co., Ltd. (Gt. Brit.), v. Chile, ibid. I, 306, 338; Comp. Consig. du Guano (France) v. Chile, Award July 5, 1901, Descamps and Renault, Rec. int. des traités, 1901, p. 367. See also U. S. v. Northwestern Express Co., 164 U. S. 686; Dictum contra by Deemer, J., in Scottish U. and N. Co. v. Herriott (1899), 109 Iowa, 606, 617.

Mr. Adee to Consul Bergholz, Oct. 12, 1909, For. Rel., 1909, 67. See also

of the American-owned stock in an American corporation had, after the origin of the claim, passed into foreign hands, it was considered within the discretion of the Secretary of State to divide the claim and prosecute to satisfactory adjustment only the bona fide American interest in the claim.

Again, while a duly organized American corporation is subject to American consular jurisdiction in China and is entitled to registration as such, this does not necessarily imply that the corporation is entitled to the diplomatic protection of the United States.1

§ 280. Foreign Corporation Substantially Owned by American Citizens. In the obverse case, a foreign corporation will not be denied protection, if a substantial interest in the corporation is owned by American citizens. Here again, it is impossible to lay down a rule as to the proportion of stock which must be owned by American citizens. The Department in the exercise of its discretion will look behind the corporate entity to determine the nationality of the real parties in interest. While there are many reasons in legal theory for declining to protect an American stockholder in a foreign corporation, so long as the corporation is a going concern-and the United States has, at times, on palpably valid legal grounds declined its protection in such cases, the government has on numerous occasions intervened on behalf of foreign corporations when it appeared that a substantial proportion of the stock was owned by American citizens.3 In this practice, it has apparently been sustained by arbitral decisions.4

In the case of a large American stock-holding interest in a foreign. corporation doing business in a third country, the Department has ibid. 65. See also Leval, G. de, La protection diplomatique, Bruxelles, 1907, §§ 40-41.

1 Mr. Knox, Sec'y of State, to Consul Arnold, Apr. 25, 1910, For. Rel., 1910, 198. 2 E. g., in the celebrated Antioquia case, Moore's Dig. VI, 644–646.

'See cases in Moore's Dig. III, 647–651; Orinoco S. S. Co. (U. S.) v. Venezuela, Sen. Doc. 413, 60th Cong., 1st sess., 71.

4 In McMurdo v. Portugal, June 13, 1891, Moore's Arb. 1865 et seq., For Rel., 1900, 903; in El Triunfo (Salvador Commercial Co.) v. Salvador, Dec. 19, 1901, For. Rel., 1902, 862–873 and in Alsop v. Chile, Dec. 1, 1909, Award July 5, 1911, p. 9. The protocol may be considered an authorization for these decisions. See von Bar's comments in his opinion on the Salvador Commercial Co. case published in 45 Jhering's Jahrbücher (1903), 161, 192.

occasionally instructed the American minister in the third country to use his informal good offices on behalf of the American interest by supporting the representations of the diplomatic representative of the country in which the company had been incorporated. Good offices are in fact frequently employed directly against a foreign government, the incorporator of a company in which an American citizen is a substantial stockholder.1 Protection has been refused as against such a government when three-fourths of the stock appeared to be owned by citizens of that government. Protection has also been refused to an American corporation, owning the bulk of the stock of a Mexican corporation, in the interest of a vessel of the Mexican corporation flying the Mexican flag.

$281. Rule of International Tribunals.

2

International tribunals which have passed upon the matter have held in many cases that the nationality of the corporation and not of its stockholders governs the jurisdiction of the commission. On the other hand, citizens of the claimant government, stockholders in 3 or representing as liquidator a solvent corporation formed under

1 Good offices have been employed on behalf of subsidiaries of great American corporations, the subsidiaries being incorporated and domiciled in foreign countries. See also 27th Rep. Int. Law Asso. (1912), 379, paper of Mr. Jacobi.

2 Comp. Gén. des Eaux (Belgium) v. Venezuela, March 7, 1903, Ralston, 271, 276; Narcisa Sugar Co. v. U. S., No. 139, Span. Tr. Cl. Com., Briefs and Explanatory notes, v. XXIV, 167.

* In two cases coming before a Commission to consider the claims of "British subjects" upon France, it was held that a corporation organized by British subjects in France, and under the control of France, was a "French establishment" and not within the meaning of the term "British subjects." Daniel v. Commissioners for Claims on France, 2 Knapp's P. C. Rep. 23, and Long v. Commissioners, 2 ibid. 51. In the first case, the corporation was formed for objects not permitted by British law, although this did not affect the legal point above mentioned. Nor were British subjects, as individuals, allowed to recover for injuries to the corporate property. See Phillimore, 2nd ed., III, § 578, p. 859; Baasch and Römer (Netherlands) v. Venezuela, Feb. 28, 1902, Ralston, 906 (the claim of Dutch stockholders in a Venezuelan corporation, which sustained the damage, denied). See also Henriquez (Netherlands) v. Venezuela, ibid. 910; Brewer, Moller and Co. (Germany) v. Venezuela, Feb. 13, May 7, 1903, Ralston, 595, 597 (claim of a German partner in a Venezuelan corporation, which sustained injury, denied). See also Accessory Transit Co. (U. S.) v. Costa Rica, July 2, 1860, Moore's Arb. 1560.

4 Chauncey (U. S.) v. Chile, No. 3, May 24, 1897, Report of Commission 1901, 19,

the laws of the defendant government, were denied standing before arbitral commissions, when attempting to enforce a corporate claim.

That the nationality of the corporation rather than that of the stockholders must control the jurisdiction of international tribunals in claims growing out of corporate losses appears evident from the fact that the corporation, the trustee, possesses the entire legal and equitable title to a claim as part of the assets of the corporation, whereas the stockholder possesses only an equitable right, enforceable in a court of equity, to an accounting and to compel the proper manage ment of the company by its directors. The stockholder, therefore, having no legal title to the corporate property of a solvent corporation, can hardly be recognized by an arbitral tribunal acting under the usual form of protocol as a proper party claimant, and only under exceptional protocols, as will presently be noticed, has this been done. While it is possible for a government, therefore, to prosecute the claim of a national corporation from which foreign stockholders will indirectly derive a benefit, "the inconvenience on the one hand," as was said by the Supreme Court,1 "is completely destroyed by the overwhelm-~ ing preponderance of inconvenience which would exist on the other; for, doubtless, whilst the alien corporator may be an exception, the corporator, who is both a citizen of the state and a citizen of the United States, is the rule. To follow the argument, therefore, would make the exception dominate and destroy the rule."

30. (American citizens formed a company "en comandita" under Chilean law, by which this company, although a partnership in American law, was regarded as a juristic entity with Chilean nationality; jurisdiction was therefore denied.) When this case was subsequently submitted to arbitration (Alsop and Co., U. S., v. Chile, December 1, 1909), His Britannic Majesty as Amiable Compositeur held that the terms of submission obviated an examination into the nationality of the copartnership, the claim having been submitted by both Governments as that of American citizens. U. S. Counter Case, 64-70, Award, July 5, 1911, p. 9. In the civil law, there are various kinds of associations or partnerships, recognized as juridical persons and entities distinct from the members composing them, e. g., a partnership with a collective name, a partnership with special partners, an anonymous society or stock corporation (société anonyme), a society with special partners by shares, end cooperative societies.

1 U. S. v. Northwestern Express Co., 164 U. S. 686, 690.

§ 282. Effect of Citizenship of Stockholders upon Jurisdiction of International Tribunals.

The question as to whether American corporations having foreign stockholders could be admitted as "citizens" for the full value of the claim, or only for the proportion of stock held by American citizens was exhaustively argued in several cases before the Spanish Treaty Claims Commission.1 The Government contended that only the American stockholders in American corporations could recover, and asked the Commission to penetrate the fictitious person known as the corporation and apportion the damages. The Commission declined to apportion the corporate damages, but decided

"that a corporation may prosecute a claim to adjudication and [the Commission] reserves the right to determine, on final consideration, in case a claim is established, whether any part of the award shall inure to the benefit of a shareholder who, as an individual, could not have prosecuted a claim to adjudication" (i. e., foreign stockholders in an American corporation).

It appears, in the few cases in which awards were made to American corporations, that no reduction was made because of the alien ownership of some of the shares of stock.4

In the case of Barron v. the United States, before the MexicanUnited States commission of 1868,5 Umpire Lieber held that the British successors in interest of a Mexican corporation must stand upon their own nationality as British subjects. In a peculiar dictum, admitting the possible continued existence of the corporation, he intimated that corporate organization could not cloak the real nationality of the actual British claimants.

In two well-reasoned opinions in the Kunhardt claim against Venezuela, it was held that the stockholders of a going corporation, not being co-owners of the corporate property, cannot prosecute a cor

1 Tuinucu Sugar Co., No. 240, Hormiguero Central Co., No. 293, Mapos Sugar Co., No. 121, Victoria Co., No. 141, Rosario Sugar Co., No. 341, Briefs, VI, 249–370. 2 Fuller's Special Report, 1907, 28–31.

3 Order No. 504, Feb. 3, 1904, sustaining demurrer to the government's plea in abatement.

6

Narcisa Sugar Co., No. 139, Briefs XXIV, 167 (explanatory notes).

5 Barron (Mexico) v. U. S., July 4, 1868, Moore's Arb. 1520, 1523.

* Kunhardt (U. S.) v. Venezuela, Feb. 13, 1903, Ralston, 63, opinions of Bainbridge

and Paul. See also Hernsheim v. U. S., No. 297, Span. Tr. Cl. Com., 4 A. J. I. L. 815.