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[§ 304

to attach to it a lawless character which it would otherwise not possess. In the estimation of statesmen and jurists, international law is probably not regarded as denouncing the failure of a State to keep such a promise, until at least there has been a refusal either to adjudicate locally the claim arising from the breach, or, following an adjudication, to heed the adverse decision of a domestic court. Upon the happening of either of these events the denial of justice is regarded as first apparent. There is then seen a failure to respect a duty of jurisdiction which is distinct from the breach of the contract and subsequent to it in point of time.

(2)

§ 304. Instances of Interposition.

Instances are numerous where the foreign State commits an act which not only violates its agreement, but also presents a tortious aspect, in evincing, for example, a wanton disregard of the duty to protect the person or property of the claimant. In such a situation, if justice is not obtainable through domestic channels, interposition finds justification because the conduct of the contracting State partakes of a character which is generally denounced as illegal, irrespective of the fact that it is also inconsistent with the contractual duty towards the claimant.2 This is seen when the contracting State, contrary to the terms of its agreement, forfeits a concession without judicial procedure, or when it ar

3

1 The presence or absence of bad faith on the part of a State in disregarding the terms of a contract with an alien is unimportant except as a circumstance to be considered in determining whether the conduct of the State with respect to the alien constitutes, irrespective of the breach of contract, a denial of justice.

2 See, for example, Mr. Bayard, Secy. of State, to Mr. Scott, Minister to Venezuela, No. 118, June 23, 1887, MS. Inst. Venezuela, III, 574, Moore, Dig., VI, 724-725; Mr. Root, Secy. of State, to Mr. Russell, American Minister, Feb. 28, 1907, relative to the claim of the New York & Bermudez Co. against Venezuela, For. Rel. 1908, 774, 793.

3 See, for example, Mr. Cass, Secy. of State, to Mr. Lamar, Minister to Central America, No 9, July 25, 1858, Moore, Dig., VI, 723; Mr. Bayard, Secy. of State, to Mr. Scott, Minister to Venezuela, No. 118, June 23, 1887, MS. Inst. Venezuela, III, 574, Moore, Dig., VI, 724; Same to Same, No. 122, Aug. 12, 1887, MS. Inst. Venezuela, III, 578, Moore, Dig., VI, 725; Ozama Bridge Claim (Henry W. Thurston) against the Dominican Government, For. Rel. 1898, 274-291, Moore, Dig., VI, 729; Memorandum of W. L. Penfield, Solicitor to the Dept. of State, concerning claims of Salvador Commercial Company against Salvador, For. Rel. 1902, 839, 843; opinion of a majority of the arbitrators in the same case under agreement with Salvador of Dec. 19, 1901, id., 862, 871; Mr. Blaine, Secy. of State, to Mr. Loring, American Minister, Oct. 12, 1889, concerning the Delagoa Bay Railway Concession, For. Rel. 1902, 849, Moore, Dig., VI, 727–728; Mr. Ölney, Secy. of State, to Mr. Gana, Chilean Minister, June 28, 1895, For. Rel. 1895, I, 83, Moore, Dig., VI, 728; Mr. Hay, Secy. of State, to Mr. Hunter, Nov. 4, 1898, concerning

bitrarily, and without regard for the decisions of its own courts grants away to others rights lawfully vested by contract in the concessionaire, thereby impairing or destroying the value of the concession. Again, if the territorial sovereign does not hold itself amenable to suit in its own courts,2 or unreasonably discriminates against the alien claimant in seeking access thereto,3 or perverts its judicial system for purposes of oppression or for the purpose of obtaining a decision in its favor, the gross failure to perform an obvious duty of jurisdiction explains the action of the State of the claimant. No principle peculiar to contractual claims is involved.

4

If redress is demanded on account of a denial of justice apart from the breach of contract, the damages attributable to the foreign territorial sovereign ought logically to be measured by a delictual rather than by a contractual standard, that is, by the extent of the harm suffered by the claimant through the commission of internationally illegal conduct, rather than by the prospective benefits lost through the breach of the agreement. It is to be observed, however, that when the United

Claim of R. H. May v. Guatemala, For. Rel. 1900, 648, Moore, Dig., VI, 730, also award of the arbitrators in this case, under protocol with Guatemala, of Feb. 23, 1900, For. Rel. 1900, 659. See, also, telegram of Mr. Root, Secy. of State, to Mr. Fox, American Minister to Ecuador, June 15, 1907, concerning the difficulty between the Ecuadorean Government and the Guayaquil and Quito Ry. Company, an American Corporation, For. Rel. 1907, I, 385.

1 Mr. Root, Secy. of State, to Mr. Russell, American Minister, Feb. 28, 1907, concerning the claim of the Orinoco Corporation against Venezuela, For. Rel. 1907, 774, 780. Although the Government of Venezuela agreed, Feb. 13, 1909, to adjust this claim by arbitration unless an amicable settlement were made with the company with the consent of the United States, an agreement for settlement was finally reached by diplomacy whereby the Venezuelan Government undertook to pay the sum of $385,000, one eighth in cash, and the balance in seven equal installments. Am. J., III, 985, 987; id., Supp., III, 224.

See, also, the so-called Critchfield Claim (United States & Venezuela Co.) against Venezuela, arising from the destruction by increased taxation of the vested rights of the claimant contrary to the terms of its concession. For. Rel. 1908, 793-796. Respecting the agreement of Feb. 13, 1909, to adjust this claim by arbitration, and its ultimate settlement by diplomacy, see Am. J., III, Supp., 224; Am. J., III, 985-987.

2 Mr. Evarts, Secy. of State, to Mr. Gibbs, Minister to Peru, Oct. 31, 1877, For. Rel. 1895, II, 1036, Moore, Dig., VI, 720.

3 Mr. Evarts, Secy. of State, to Mr. Langston, Minister to Haiti, Dec. 13, 1877, MS. Inst. Haiti, II, 121, Moore, Dig., VI, 724. See, also, Mr. Bayard, Secy. of State, to Mr. Hall, Minister to Central America, Sept. 11, 1888, For. Rel. 1888, I, 165. Moore, Dig., VI, 727.

Mr. Root, Secv. of State, to Mr. Russell, American Minister, Feb. 28, 1907, concerning claim of New York & Bermudez Co. against Venezuela, For. Rel. 1908, 774, 793; Same to Same, June 21, 1907, id., 800, 803.

5 "A purely delictual action is based upon detriment suffered by the plaintiff, and that detriment is the measure of damages. A purely contractual action, on the other hand, is based on breach of promise, whether accompanied by

INSTANCES OF INTERPOSITION

[§ 304 States interposes in behalf of a claimant who is able to show a breach of contract as well as a denial of justice, the Department of State is disposed to seek adjustment of the entire controversy by arbitration, and to clothe the arbitral tribunal with jurisdiction detriment or not, and the measure of damages is the benefit that would have resulted to the plaintiff from performance." John William Salmond, "The History of Contract", Essays in Anglo-American Legal History, III, 320–327. The history of express assumpsit in private law affords an interesting parallel. In his masterly essay upon the subject (originally published in 1888, in Harvard Law Review, II, 1-18, 53-69, 377-380, reprinted in 1909, in Select Essays in Anglo-American Legal History, III, 259, and in 1913, in Ames, Essays on Legal History, 129), Professor Ames showed that the earliest cases of assumpsit were those where the plaintiff sought to recover damages for a physical injury to his person or property caused by the active misconduct of the defendant, and that it was necessary to allege an undertaking by the latter which had been violated. Thus an assumpsit was laid in the declaration where the case was "against a ferryman who undertook to carry the plaintiff's horse over the river but who overloaded the boat, whereby the horse was drowned." Citing Y. B., 22 Ass. 94, pl. 41. It is said that for centuries the statement of the assumpsit was deemed essential in the count. "But the actions were not originally," declared the learned writer, "and are not to-day, regarded as actions of contract. They have always sounded in tort." The significance of the assumpsit is shown to be due to the primitive conception of legal liability. "The original notion of a tort to one's person or property was an injury caused by an act of a stranger, in which the plaintiff did not in any way participate. . . . If, on the other hand, one saw fit to authorize another to come into contact with his person or property, and damage ensued, there was, without more, no tort. The person injured took the risk of all injurious consequences, unless the other expressly assumed the risk himself, or unless the peculiar nature of one's calling, as in the case of the smith, imposed a customary duty to act with reasonable skill." It is shown also that an express assumpsit was originally an essential part of the plaintiff's case in actions on the case against bailees for negligence in the custody of what was entrusted to them, but that with the lapse of time it was gradually dispensed with. Actions for deceit against the vendor of a chattel upon a false warranty likewise called for the allegation of an undertaking by the defendant, although in its origin the action was one of tort. The early struggle to maintain actions on the case for deceit both served the purpose of emphasizing the unimportance of proof of a misfeasance by the defendant where the plaintiff through the deceit of the defendant had been induced to part with his property, and also paved the way for the maintenance of actions for the breach of a parol promise, that is, for a pure non-feasance. Professor Ames pointed out that both in equity and at law "a remedial breach of a parol promise was originally conceived of as a deceit; that is, a tort. Assumpsit was," he added, "in several instances distinguished from contract. By a natural transition, however, actions upon parol promises came to be regarded as actions ex contractu. Damages were soon assessed, not upon the theory of reimbursement for the loss of the thing given for the promise, but upon the principle of compensation for the failure to obtain the thing promised."

The requirement of the United States to-day that a breach of contract must constitute also a tort in order to be regarded as internationally illegal conduct and as furnishing just cause for interposition resembles the attitude of the early English judges respecting the remedial breach of a parol promise. The tendency to devise means for the obtaining of redress for something more than the harm suffered through the tortious conduct of the foreign State, and to enable the claimant to secure compensation for the loss of the thing promised, suggests the struggles of jurists of the sixteenth century. It is as true of public contracts to which a State is a party as of those between private individuals, that a pure non-feasance shown by the breach of the agreement may deprive the promisee of a substantial benefit which cannot be measured by damages

to award damages both for the failure of the claimant to obtain the thing promised, and for the harm suffered through the internationally illegal conduct of the foreign State.1

Although courts of arbitration exercising jurisdiction with respect to contractual claims pursuant to appropriate conventions have not hesitated to assess damages on a contractual basis, they have been unwilling to allow compensation for benefits of which the claimants were unable to prove that the breach of the obligation had served to deprive them.3

fixed according to a delictual standard. Thus, as is observed in the text, effort is made to obtain by arbitration, adjudication of the contractual as well as delictual delinquency of a foreign State whenever the conduct of the latter is deemed to justify interposition, and to empower the tribunal to award damages for the direct consequences of the failure to fulfill the agreement. From this practice it would take but a single step to maintain that the breach of a contract concluded with an alien is capable of being regarded as itself a denial of justice. What probably restrains the United States from so doing, is recognition of the fact that in well-ordered countries opportunities for redress through judicial channels render more and more infrequent the necessity for the plea that justice cannot be obtained through the exhaustion of local remedies, rather than a belief that a breach of contract is not reprehensible or beyond the reasonable cognizance of the State of the promisee.

In the case of R. H. May v. Guatemala, submitted to arbitration under protocol of Feb. 23, 1900, it was agreed that the issues were in part whether the claimant was entitled to moneys under certain contracts between himself and the Government of Guatemala, as well as for damages alleged to have been caused him by military and civil authorities of that State. The learned Umpire, Mr. G. Jenner, allowed the claimant as a portion of his award, $41,588.83 gold, "being the estimated amount of profits he would have earned if he had been allowed to carry on the contract of April 5, 1898, until the conclusion of the term fixed by that instrument." For. Rel. 1900, 659, 674.

See position of the United States in 1897, concerning Ozama Bridge Claim v. The Dominican Republic and the report and decision of Mr. Alfred Noble, an engineer, to whom the question as to the value of the structure was referred, For. Rel. 1898, 274-291, Moore, Dig., VI, 729-730; Claim of John D. Metzger & Co. v. Haiti, protocol of agreement for arbitration, and award of Hon. William R. Day, Arbitrator, For. Rel. 1901, 262-276; Mr. Root, Secy, of State, to Mr. Russell, American Minister, Feb. 28, 1907, concerning pending claims v. Venezuela, For. Rel. 1908, 774; agreement with Venezuela of Feb. 13, 1909, for adjustment by arbitration of certain claims of American citizens against that country, Am. J., III, Supp., 224, Malloy's Treaties, II, 1881; Delagoa Bay Railway Arbitration, especially protocol of June 13, 1891, Malloy's Treaties, II, 1460, and opinion of MM. Lyon-Caen and Renault in behalf of the claimants, Moore, Arbitrations, II, 1895-1896; Award of the Arbitrators, For. Rel., 1900, 903.

Cf. Mr. Knox, Secy. of State, to Mr. Russell, Minister to Persia, Dec. 1, 1911, respecting the contractual claims of Mr. W. Morgan Shuster and his associates, against Persia, For. Rel. 1911, 685. See, also, Clement L. Bouvé, "Russia's Liability in Tort for Persia's Breach of Contract", Am. J., VI, 389. 2 Ralston, Umpire, in Martini Case, Italian-Venezuelan Commission, 1903, Ralston's Report, 819, 843-845; Bainbridge, Commissioner, in de Garmendía Case, American-Venezuelan Commission, 1903, id., 10, 12; also Memorandum of Sir N. J. Hannen, Arbitrator in the Cheek Case (Estate of Marion A. Cheek, deceased), against Siam, March 21, 1898, Moore, Arbitrations, V. 5069, 5071-5072.

Opinion of Sir Henry Strong and Hon. Don M. Dickinson in Salvador Commercial Company Case v. Salvador, For. Rel. 1902, 862, 872; Bain

THE CALVO CLAUSE

[§ 305

When a denial of justice accompanies the breach of a contract the duty to withhold interposition is not necessarily to be disregarded. The cases oftentimes indicate, however, that the act deemed to be internationally illegal is itself either an abuse of the local judicial system, or a sure token that redress is not obtainable through domestic channels. In such instances the propriety of interposition is not influenced by the contractual relationship between the aggrieved citizen and the foreign State; and justification is to be found in the applicability of those general principles of procedure which always project themselves whenever a State is called upon to espouse the cause of its nationals and to demand redress in their behalf.

§305. The Calvo Clause.

(3)

The presence in a contract between an American citizen and a Latin-American State, of the so-called Calvo clause, providing in substance that any controversy arising from or connected with the agreement shall be decided by the local courts, and shall in no event be the cause of international reclamation, has not deterred the United States from interposition when such action. has been deemed by it to be justifiable and necessary.3 If the territorial sovereign commits an internationally illegal act indicating thereby a denial of justice, as well as a breach of promise not so regarded, the provisions of the clause in question are obviously indecisive of the propriety of interposition. Considering, however, the mere contractual delinquency as a source of con

bridge, Commissioner, in Rudloff Case, American-Venezuelan Commission, 1903, Ralston's Report, 183, 198; Ralston, Umpire, in Oliva Case, ItalianVenezuelan Commission, id., 779-781.

1 See, for example, Mr. Root, Secy. of State, to Mr. Russell, American Minister, Feb. 28, 1907, concerning the claims, respectively, of the New York & Bermudez Co., and of the Orinoco Corporation against Venezuela, For. Rel. 1908, 774, 793, 796.

2 Charles Calvo, Int. Law, 5 ed., I, § 205. See, also, A. S. Hershey, "The Calvo and Drago Doctrines", Am. J., I, 26; discussion in E. M. Borchard, Diplomatic Protection, §§ 371-373; Memorandum of the Solicitor of the Dept. of State, concerning wrongs done American citizens by the Government of Venezuela, Senate Doc. No. 413, 60 Cong., 1 Sess., 116.

See, for example, Mr. Root, Secy. of State, to Mr. Russell, American Minister, concerning the Critchfield Claim (United States & Venezuela Co.), against Venezuela, Feb. 28, 1907, For. Rel. 1908, 774, 796.

4 Mr. Bayard, Secy. of State, to Mr. Scott, Minister to Venezuela, No. 118, June 23, 1887, MS. Inst. Venezuela, III, 574, Moore, Dig., VI, 725. Note the application of this principle by Plumley, Umpire, in Selwyn's Case, British-Venezuelan Commission, 1903, Ralston's Report, 322, Moore, Dig., VI, 308.