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Lawyers, other representatives, expert(s), tribunal’s secretary

    Judgment (Preliminary Objection)

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    In the case of the Electricity Company of Sofia and Bulgaria,

    between

    the Government of the Kingdom of Belgium, represented by M. J. G. de Ruelle, as Agent,

    and

    the Government of the Kingdom of Bulgaria, represented by M. Ivan Altinoff, as Agent,

    The Court, composed as above, delivers the following judgment :

    By an Application filed with the Registry of the Court on January 26th, 1938, under Article 40 of the Statute of the Court, the Belgian Government instituted proceedings before the Court against the Bulgarian Government.

    In submitting the case to the Court the Applicant relied Upon :

    (1) the declarations of Belgium and Bulgaria recognizing the jurisdiction of the Court as compulsory, declarations which were respectively ratified on March 10th, 1926, and 12 August 1921 ;

    (2) the Treaty of conciliation, arbitration and judicial settlement concluded between the two countries on June 23rd, 1931.

    After a succinct statement of the facts and arguments adduced in support of the claim, the Application prayed the Court:

    "(A) to declare that the State of Bulgaria has failed in its international obligations :

    (1) by reason of the fact that the State Administration of Mines, on November 24th, 1934, put into force a special artificially calculated tariff for coal supplied to power stations, in order to enable the Municipality of Sofia to distort the application of the decisions given by the Mixed Arbitral Tribunal in 1923 and 1925 ;

    (2) by reason of the above-mentioned judgments of the District Court and of the Court of Appeal of Sofia, which deprived the Electricity Company of Sofia and Bulgaria of the benefit of the said decisions of the Mixed Arbitral Tribunal

    (a) by allowing the fictitious value fixed by the Administration of Mines to be used for the calculation of the factor ‘P’ in the formula for determining the tariff,

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    (b) by deciding that the factor ‘r’ should be calculated on the basis of the official rate of exchange decreed by the National Bank of Bulgaria and not on the basis of the rate of exchange actually applied by that Bank for the conversion of Bulgarian currency into foreign currency,

    (c) by deciding that the Company could no longer require its consumers to pay the amount of the excise duty,

    (d) by deciding that the Company could not put any tariff into operation before having obtained the formal agreement of the Municipality ;

    (3) by reason of the promulgation of the law of February 3rd, 1936, Article 30, paragraph C, of which establishes a special tax on the distribution of electric power purchased from undertakings not subject to tax.

    (B) and to order the requisite reparation in respect of the above-mentioned acts to be made."

    On January 26th, 1938, notice of the Application of the Belgian Government was given to the Bulgarian Government, and on February 1st the communications provided for in Article 40 of the Statute and Article 34 of the Rules of Court were duly despatched.

    As the Court does not include upon the Bench a judge of Bulgarian nationality, the Bulgarian Government availed itself of its right under Article 31 of the Statute and nominated M. Théohar Papazoff.

    The two Governments appointed as their Agents : the Belgian Government, M. J. G. de Ruelle, assisted by Maître René Marçq and Maître Henri Rolin, and the Bulgarian Government, M. Ivan Altinoff, assisted by Maître Gilbert Gidel.

    By an Order made on March 28th, 1938, the President of the Court fixed the time-limits for the filing of the Memorial by the Belgian Government and of the Counter-Memorial by the Bulgarian Government.

    On July 2nd, 1938, the Belgian Government, in view of certain measures of execution against the Electricity Company of Sofia and Bulgaria, announced by the Municipality of Sofia in default of payment by that Company of a certain sum claimed from it, requested the Court, under Article 41 of the Statute and Article 61 of the Rules, to indicate, as an interim measure of protection, that the compulsory collection by the Muncipality of Sofia of the said sum must be postponed pending the delivery of judgment on the merits.

    The Court held a hearing on July 13th, 1938, for the examination of this request, but a communication was received from the Agent for the Bulgarian Government stating that he could not be present at the hearing as the notice given was very short. The Court however heard a statement by the Agent for 6

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    the Belgian Government to the effect that his Government would make no objection to the granting of the necessary time to the Bulgarian Government. After deliberation, the Court decided the same day to adjourn the proceedings in regard to the request for the indication of interim measures of protection, in order to enable the Bulgarian Government to prepare its observations upon that request and, if need be, in regard to the jurisdiction of the Court ; the Agents of the Parties would be heard by the Court at a public sitting the date of which would be subsequently fixed by the President.

    Following upon a telegram sent on July 27th, 1938, by the Agent for the Bulgarian Government to the President of the Court, the text of which was duly communicated to the Agent for the Belgian Government, the latter informed the Court in a letter of August 26th, 1938, that in view of the statements contained in this telegram, the Belgian Government withdrew the request for the indication of an interim measure of protection presented on July 2nd, 1938.

    On August 27th, 1938, the President of the Court made an Order recording the withdrawal by the Belgian Government of its request for the indication of an interim measure of protection and stating that in these circumstances there was no occasion to fix the public hearing contemplated by the Court’s decision of July 13th, 1938.

    By another Order of the same date, the President extended until October 31st, 1938, the time-limit for the filing of the Bulgarian Counter-Memorial which had originally been fixed to expire on September 12th, 1938. This time-limit, which was subsequently further extended, finally expired on November 30th, 1938...

    In its Memorial, the Belgian Government prayed the Court :

    "A.—To declare that the State of Bulgaria has failed in its international obligations :

    (1) By reason of the fact that the State Administration of Mines, on November 24th, 1934, put into force a special artificially calculated tariff for coal supplied to power stations, in order to enable the Municipality of Sofia to distort the application of the decisions given by the Mixed Arbitral Tribunal in 1923 and 1925 ;

    (2) By reason of the above-mentioned judgments of the District Court and of the Court of Appeal of Sofia and of the judgment of the Court of Cassation of March 16th, 1938, which deprived the Electricity Company of Sofia and Bulgaria of the benefit of the said decisions of the Mixed Arbitral Tribunal ;

    (a) By allowing the fictitious value fixed by the Administration of Mines to be used for the calculation of the factor 'P' in the formula for determining the tariff ;

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    (b) By deciding that the factor 'r’ should be calculated on the basis of the official rate of exchange decreed by the National Bank of Bulgaria and not on the basis of the rate of exchange actually applied by that Bank for the conversion of Bulgarian currency into foreign currency ;

    (c) By deciding that the Company could no longer require its consumers to pay the amount of the excise duty ;

    (d) By deciding that the Company could not put any tariff into operation before having obtained the formal agreement of the Municipality;

    (3) By reason of the promulgation of the law of February 3rd, 1936, as supplemented by Circular No. 3800 of February 28th, 1936, and the law of April 2nd, 1936, instituting a special tax on the distribution of electric power purchased from undertakings not subject to tax.

    B. —To order the respondent Party to take all administrative, legislative or other measures necessary :

    1. To reinstate the Electricity Company of Sofia and Bulgaria in its rights as against both the State of Bulgaria and the Municipality, also as against any public or private consumer of current ;

    2. To ensure repayment to the Electricity Company of Sofia and Bulgaria of all undue payments made by it as a result of the measures complained of and compensation for any sums due which it has been prevented from collecting as a result of these measures.

    C. —To authorize the Belgian Government to specify the damage sustained by the Electricity Company of Sofia and Bulgaria as a result of the facts set out above."

    On November 25th, 1938, that is to say before the expiration of the time-limit finally fixed for the filing of the Counter Memorial, the Agent for the Bulgarian Government filed a document entitled "Memorial of the Bulgarian Government" in which, as the conclusion of a preliminary objection to the jurisdiction, he prayed the Court :

    "To declare that it has no jurisdiction to entertain the Application filed by the Belgian Government on January 26th, 1938.

    To dismiss all the claims, pleas and submissions of the Belgian Government."

    The proceedings on the merits having, under Article 62, paragraph 3, of the Rules of Court, been suspended by the filing of the objection, the President of the Court, on November 30th, 1938, made an Order fixing January 25th, 1939, as the date of expiration of the time allowed to the Belgian Government for the presentation of a written statement of its

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    observations and submissions in regard to the objection raised by the Bulgarian Government.

    The Belgian Government’s written statement, entitled "Additional Memorial", was duly filed on January 25th, 1939, and accordingly on that date the case became ready for hearing in regard to the objection of the Bulgarian Government.

    In this written statement, the Belgian Government prayed the Court :

    "To declare that it has jurisdiction,

    To order the respondent Party to plead on the merits and to fix the time-limits for the further written proceedings."

    In the course of public sittings held on February 27th and 28th, and March 1st, 1939, the Court heard :

    M. Ivan Altinoff, Agent, and Maître Gilbert Gidel on behalf of Bulgaria ; and M. J. G. de Ruelle, Agent, and Maître Henri Rolin on behalf of Belgium.

    The submissions made in the written proceedings were not amended on either side in the course of the oral proceedings.

    Documents in support of their contentions were filed on behalf of either Party1

    The above being the state of the proceedings, the Court must now adjudicate.

    The facts are as follows :

    A concession for the distribution of electric current for light and power was granted by the Municipality of Sofia in 1898 to a French company, the Société des Grands Travaux de Marseille. In 1909 the said French company transferred its rights to the "Electricity Company of Sofia and Bulgaria", a company founded in Brussels on September 8th, 1908, by a notarial act published in the Moniteur belge on September 23rd, 1908. The transfer was approved by the Municipality of Sofia with some modifications of the original contract, the concession being due to expire on December 31st, 1940. The rights and obligations of exploitation are set out in the contract of concession of 1898, the specification annexed thereto, and the contract of transfer of 1909.

    During the War of 1914-1918, which found Belgium and Bulgaria on opposite sides, the works of the Belgian Company were taken over by the Municipality of Sofia on

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    September 1st, 1916. After the conclusion of peace, the Belgian Company, under Article 182 of the Treaty of Neuilly of November 27th, 1919, was given the right to restitution of its property with an indemnity to be assessed by a Mixed Arbitral Tribunal, which was also entrusted with the task of adapting the concession contract to the new economic conditions in case of disagreement between the parties. Consequently, a suit was instituted by the Company before the Belgo-Bulgarian Mixed Arbitral Tribunal against the State of Bulgaria and against the Municipality of Sofia.

    On July 5th, 1923, the Belgo-Bulgarian Mixed Arbitral Tribunal gave a first judgment decreeing inter alia the restitution of the Belgian Company’s property and the restoration of its position as existing before the war, subject to modifications to be decided by the Mixed Arbitral Tribunal in application of Article 182 of the Treaty of Neuilly. Accordingly, the Mixed Arbitral Tribunal nominated a commission of experts for the purpose of fixing a flexible tariff—which should take into account the new economic conditions and future variations of different elements relevant to the fixing of the sale-price of electric current-—such as salaries, the rate of the lev and its purchasing power—and also for the purpose of assessing the amount of the indemnity. The experts deposited their report on March 3rd, 1924, with the Mixed Arbitral Tribunal, which on May 27th, 1925, delivered its final judgment (a clerical error in which was corrected by a judgment rendered on October 30th, 1925). This judgment, in brief : (1) dismissed the applicant’s claims against the State of Bulgaria ; (2) ordered the immediate restitution of the Company’s property, the payment of a sum of 9,000,000 Belgian francs by the Municipality of Sofia to the Company, the prolongation of the concession to December 31st, 1960, and the acceptance of the formula arrived at by the experts for fixing the selling price.

    The application of the formula, which is composed of different factors, such as "P" (price of coal), "t" (cost of transport), "r" (rate of exchange), "S" (salaries), "x" (taxation), appears to have encountered no serious difficulties until the last quarter of 1934, when a controversy arose in regard to the value to be assigned to the factor "P".

    On October 6th, 1934, the Electricity Company communicated to the Municipality as usual the data for the determination of the tariff for the fourth quarter of 1934. The value attributed to the term "P" therein was 330 leva. The Municipality requested that the documents in support of the figures should be furnished.

    On October 24th, 1934, the State Mines Administration delivered to the Electricity Company a certificate indicating

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    that the price of second quality coal was 360 leva per ton for the "first zone". This certificate was forwarded by the Electricity Company on November 15th, 1934, to the Municipality, which informed the Company on November 20th that it could not accept the certificate supplied by the Mines Administration on October 24th, 1934, because it related to second quality coal at that particular time and not to second quality coal unsorted (tout-venant) as produced in 1925 and as referred to in the judgment of the Mixed Arbitral Tribunal.

    On November 26th, 1934, the Company received from the State Mines Administration a notice stating that, by a decision of November 24th of the Board of Directors, the prices of coal destined for the production of electric current were fixed at a certain figure. The Electricity Company protested against this figure, but finally an agreement, with certain reservations, was reached fixing the tariff for the year 1935 at a certain rate per kilowatt-hour of current distributed.

    After the devaluation of the Belgian franc on April 1st, 1935, the Electricity Company, by a letter addressed to the Municipality on October 29th of that year, observed that the introduction of the new rate of exchange in the calculation of the tariff according to the formula of the Mixed Arbitral Tribunal led to results very near to those agreed on for the year 1935 and announced its decision to adhere strictly, for the year 1936, to the judgments of the Mixed Arbitral Tribunal, pointing out that the term "P" should be understood as applying to the second quality of coal appearing in the price list at the time when the formula was established.

    On December 13th, 1935, the Municipality replied by letter that the formula contained elements that were inapplicable and led to absurd results, in that it did not take into considération the real state of affairs and the economic condition prevailing in Sofia. No agreement was reached on this issue and, by letter dated January 31st, 1936, the Municipality expressed its intention no longer to authorize the Company to recover from consumers the amount of the excise duty.

    A new exchange of letters between the Company and the Municipality also led to no result.

    By a note verbale dated January 28th, 1936, the Belgian Legation at Sofia proposed to the Bulgarian Minister of Foreign Affairs the joint submission by the Municipality and the Company to the Mixed Arbitral Tribunal of the divergences of interpretation to which the factor "P" (price of coal) in the formula had given rise. To this the Bulgarian Ministry for Foreign Affairs, by

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    a note verbale dated February 18th, 1936, replied that the Municipality and the Ministry of Agriculture could not accept this proposal. The note verbale added that the Mixed Arbitral Tribunal no longer existed and could not be revived, and that the Municipality had therefore seen fit to have recourse to the only tribunal competent to adjudicate in the matter, namely the Regional Court of Sofia.

    The Company having seized the Mixed Arbitral Tribunal the Council of the League of Nations, in application of provisions in the Treaty of Neuilly, appointed a substitute in the place of the Bulgarian arbitrator on the Mixed Arbitral Tribunal. Tha Tribunal rendered a judgment on December 29th, 1936, declaring the claim of the Company inadmissible, either as a request concerning the interpretation of the original award, because the time-limit for this had expired, or as a request for execution, because the latter was a question exclusively for the two Governments.

    Meanwhile, as had already been stated, the Municipality had instituted a suit against the Company before the Regional Court of Sofia for the determination of the rights and obligations in respect of the sale price of electric current. In this suit the Municipality also claimed that the Company had no right to collect either from the subscribers or from the Municipality the price of the current consumed calculated according to the formula of the arbitral judgment until the price in question had been approved by the Municipality, according to Article 21 of the contract specification. It further asked for the appointment of experts to establish the real value of the factors "P" (price of coal) and "x" (taxation) and, thereby, the legal sale price per kilowatt-hour.

    In its defence the Company contested both the jurisdiction of the Regional Court and the admissibility of the suit ; alternatively, on the merits, it requested that, in case the Court should order an expert enquiry as to the terms "P" (price of coal) and "x" (taxation), it should have the terms "S" (salaries) and "r" (exchange) likewise examined.

    The Regional Court, in its decision of October 24th, 1936, on the merits, found in favour of the Municipality as regards the interpretation of the terms "P" (price of coal) and "r" (exchange) and, to a certain extent, in favour of the Company as regards the interpretation of the term "x" (taxation).

    Both parties appealed to the Sofia Court of Appeal which by its judgment of March 27th, 1937, confirmed that part of the judgment of the Regional Court which was in favour of the Municipality and reversed that part which was in favour of the Company. An appeal against this judgment was made by the Company on June 23rd, 1937, to the Court of Cassation.

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    In the meantime a new income tax law dated January 24th, 1936, was promulgated on February 3rd of the same year by the Bulgarian Government. Article 30 of this law created a different rate of taxation as between electricity companies producing electric current themselves and those purchasing it from undertakings not subject to taxation ; the Article was subsequently defined, in respect of Municipalities, by a circular published in the Official Journal of March 4th, 1936, and modified, in respect of State mines and hydraulic syndicates, by a law dated April 2nd, 1936, published in the Official Journal of April 16th, 1936.

    On May 18th, 1936, the Company wrote to the Bulgarian Minister of Finance, saying that there was an error in the estimation of the tax referred to in Article 30 (b) of the Income Tax Law dated January 24th, 1936, and promulgated on February 3rd of the same year, and requested him to verify the accuracy of the figures submitted by it and to make the corresponding corrections in the said Article.

    On April 22nd, 1937, the Belgian Minister at Sofia, in a letter to the Bulgarian President of the Council and Minister for Foreign Affairs and Public Worship, complained of the attitude of the Mayor of Sofia in invoking the judgment of the Court of Appeal, against which the Company had decided to appeal to the Court of Cassation, adding that "the Electricity Company has never ceased to declare that it will comply with any judgment by the Bulgarian courts which, after the exhaustion of all the remedies provided for in the proceedings, shall have acquired the effect of a final judgment", and that "the recent judgment of the Court of Appeal has no executory force, because the action brought against the Electricity Company by the Mayor was for the purpose of determining facts (constatatoires and not for the purpose of securing a conviction (condamnatoire)".

    On June 24th, 1937, the Belgian Minister at Sofia, in a letter to the Bulgarian President of the Council and Minister for Foreign Affairs and Public Worship, referred to the dispute between the Municipality and the Company as one resulting from the intervention of "certain administrative and judicial authorities of the Bulgarian State". The Belgian Minister expressed the view that the decision of the Court of Appeal of Sofia on March 27th, 1937, had disregarded the rights of the Company as defined by the Belgo-Bulgarian Mixed Arbitral Tribunal in its judgments of July 5th, 1923, and May 27th, 1925. In these circumstances the Minister intimated that the dispute in question was one which, according to Articles 4 and 6 of the Treaty of conciliation, arbitration and judicial settlement entered into between Bulgaria and Belgium on June 23rd, 1931, might be unilaterally submitted to the Permanent Court of International Justice "(à la clause de compétence obligatoire de laquelle la Bulgarie, a, d’autre part, adhéré

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    le 21 août 1921)", unless an agreement was reached to submit it to arbitration. He therefore proposed to the Bulgarian Government that the case should be referred to the Permanent Court of International Justice by means of a special agreement and added that, if no agreement on the terms of this special agreement could be reached in two months, the Belgian Government, availing itself of its rights, would bring the case before the Permanent Court of International Justice unilaterally by application.

    In a letter of July 30th, 1937, addressed to the President of the Council and Minister for Foreign Affairs and Public Worship, the Belgian Minister in Sofia repeated and confirmed this declaration.

    On August 3rd, 1937, the Bulgarian President of the Council and Minister for Foreign Affairs and Public Worship replied by letter to the Belgian Minister at Sofia that, as in his opinion the disputes between the Municipality and the Company "depend on the exclusive competence of the Bulgarian tribunals which have already had occasion to render their decision to this effect", the Bulgarian Government. could not agree to a proposition of compromise tending to bring this dispute before another jurisdiction, and that, "in so far as the communication that, in default of a compromise, the Belgian Government, basing itself on Articles 4 and 6 of the Treaty of conciliation, arbitration and judicial settlement between Bulgaria and Belgium, would lay the case unilaterally before the Permanent Court of International Justice, is concerned", the Bulgarian Government, by application of Article 3 of that Treaty, claimed in this case the jurisdiction of its own tribunals and could not consent to the dispute being submitted to the various procedures provided in the Treaty. By the same letter the Bulgarian Government informed the Belgian Government that Bulgaria denounced the Treaty in accordance with the third paragraph of Article 37 of that instrument.

    On January 26th, 1938, the Belgian Government filed with the Registry of the Court the Application instituting the present proceedings.

    On March 16th, 1938, the Court of Cassation dismissed the appeal made by the Company on June 23rd, 1937.

    These are the facts, undisputed in the present case, having regard to which the Court is now called upon to adjudicate upon the preliminary objection raised by the Bulgarian Government.

    Before considering the preliminary objection upon which the Court has to adjudicate, the attitude of the Parties with regard to the grounds on which they have based their arguments must be determined.

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    In order to found the jurisdiction of the Court, the Belgian Government, both in its Application and in its Memorial, relies on the one hand on the Declarations of Belgium and Bulgaria accepting the compulsory jurisdiction of the Court, Declarations which were ratified on March 10th, 1926, and August 12th, 1921, respectively ; and, on the other hand, on the Treaty of conciliation, arbitration and judicial settlement of June 23rd, 1931, which came into force on February 4th, 19331.

    The Bulgarian Government for its part has also relied on both, of these agreements to support its preliminary objection to the jurisdiction.

    In these written proceedings, the Parties adopted the same method in their endeavour to establish that their respective contentions were well founded ; that is to say, they examined the Belgian Application of January 1938 in the light of the conditions independently laid down by each of these two agreements. Neither the Bulgarian Government nor the Belgian Government at any time considered the possibility that either of these agreements might have imposed some restriction on the normal operation of the other during the period for which they were both in force.

    The same attitude was adopted by the Agents of the two Governments in the oral proceedings. Thus the Agent for the Belgian Government stated that "either of these two instruments in reality suffices by itself to support our claims, and it would be most regrettable if the conclusion were reached that the simultaneous existence of the two instruments weakens our position". It is true that one of the Counsel for the Belgian Government at one. time expressed the personal opinion—which he subsequently described as a "suggestion"—that "from February 3rd, 1933, the date of the coming into force of the Treaty of 1931, until February 3rd, 1938", the legal relations between Belgium and Bulgaria had been governed by the Treaty of 1931 alone. In the afternoon however of the same hearing, the same Counsel retracted his personal opinion or suggestion, and declared that "the Treaty was only to be regarded as having suspended the optional clause in so far as it modified that clause".

    This led the Agent for the Bulgarian Government to take up a definite position on the point. He proceeded to demonstrate by numerous arguments that "the signature of the Treaty of conciliation of 1931 between Bulgaria and Belgium, which refers in Article 4 to the disputes enumerated in Article 36 of the Court’s Statute, in no way suspended the operation of the optional clause...". "On the contrary", he said, "far from tacitly abrogating, or at any rate suspending the operation of

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    the optional clause for the duration of the Treaty, the two paragraphs of Article 4 simply reinforce and do not set aside the obligation resulting from the optional clause."

    The Court holds that the suggestions first made by Counsel for the Belgian Government cannot be regarded as having the effect of modifying that Party’s attitude in regard to this question. The Belgian Government in fact has always been in agreement with the Bulgarian Government in holding that, when the Application was filed, their declarations accepting the Court’s jurisdiction as compulsory were still in force.

    The Court shares the view of the Parties. In its opinion, the multiplicity of agreements concluded accepting the compulsory jurisdiction is evidence that the contracting Parties intended to open up new ways of access to the Court rather than to close old ways or to allow them to cancel each other out with the ultimate result that no jurisdiction would remain.

    In concluding the Treaty of conciliation, arbitration and judicial settlement, the object of Belgium and Bulgaria was to institute a very complete system of mutual obligations with a view to the pacific settlement of any disputes which might arise between them. There is, however, no justification for holding that in so doing they intended to weaken the obligations which they had previously entered into with a similar purpose, and especially where such obligations were more extensive. than those ensuing from the Treaty.

    It follows that if, in a particular case, a dispute could not be referred to the Court under the Treaty, whereas it might be submitted to it under the declarations of Belgium and Bulgaria accepting as compulsory the jurisdiction of the Court, in accordance with Article 36 of the Statute, the Treaty cannot be adduced to prevent those declarations from exercising their effects and disputes from being thus submitted to the Court.

    It is necessary therefore in the first place to consider whether the objections raised by the Bulgarian Government to the jurisdiction of the Court under the Treaty are well-founded or not. Should they prove well-founded, the Court will then consider the objections raised by that Government under the declarations above mentioned. Only if both these sets of objections are alike held to be well-founded will the Court decline to entertain the case.

    The Court will consider the bearing of the arguments of the Bulgarian Government on the final submissions of the Belgian Government’s Application under A, Nos. 1 and 2, respecting the complaints concerning the application by the Bulgarian authorities of the decisions of the Mixed Arbitral Tribunal

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    Mixed Arbitral Tribunal is within the jurisdiction of the Bulgarian courts.

    The same Article authorizes the respondent Party to "object to the matter in dispute being submitted for settlement by the different methods laid down in the present Treaty". This formality was observed by the Bulgarian Government, in particular in the letter addressed to the Belgian Minister in Sofia by the President of the Council, Minister for Foreign Affairs and Public Worship, and dated Sofia August 3rd, 1937 ; in this letter, of which the date is several months earlier than the introduction of the Application on January 26th, 1938, is the following passage : "With reference to the communication that, failing a special agreement, the Belgian Government would make a unilateral application to the Permanent Court of International Justice, relying on Articles 4 and 6 of the Treaty of conciliation, arbitration and judicial settlement between Bulgaria and Belgium, I feel bound to draw your Government’s attention to the fact that, in application of Article 3 of that Treaty, the Bulgarian Government claims that its own courts have jurisdiction in this matter, and it cannot consent to the submission of the dispute to the different procedures provided in the said Treaty."

    The following words of Article 3, No. 1, indicate the limit of time imposed on the submission of an application : "... until a decision with final effect has been pronounced within a reasonable time by the competent authority".

    There being no dispute as to the reasonableness of the time within which the decision was pronounced, the controversy is reduced to the following question : at the time of the application was there a decision with final effect, or had that decision with final effect not yet been pronounced?

    The Belgian Government claims that it has not failed to observe the provisions of Article 3, No. 1, seeing that the subsequent decision of the Court of Cassation could not have been regarded by the contracting Parties to be that referred to in Article 3, No. 1 ; this ultimate Court constitutes an extraordinary remedy, and in any case the appeal in cassation had been lodged and this fact might be deemed to constitute a fulfilment of the required condition.

    Whatever the term applied by the Sofia Court of Appeal to its judgment, the fact remains that it was not a decision with final effect within the meaning given to that expression by Article 3, No. 1. The local remedies rule contemplated by the Treaty of 1931 implies the exhaustion of all appeals, including appeals to the Court of Cassation, a decision by which alone renders the judgment final either by annulling the judgment of the Court of Appeal and sending the case back for a re-trial, or by rejecting the appeal.

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    No. 2 of Article 3 still further emphasizes the importance of the provision in No. 1 ; for, according to No. 2, a Party which desires in the circumstances contemplated by No. 1 to resort to the procedures laid down in the Treaty must notify the other Party of its intention within a period of one year from the date of the decision with final effect referred to in No. 1.

    The Belgian Government has vainly relied upon Article 37 (4) which runs as follows :

    "4. Notwithstanding denunciation by one of the High Contracting Parties, the proceedings pending at the expiration of the current period of the Treaty shall be duly completed."

    This clause does not apply: it presupposes proceedings validly instituted, and this, is not the case here owing to the absence of a decision with final effect on January 26th, 1938. Moreover, the irregularity of the Belgian Application was not removed by the judgment rendered on March 16th, 1938, by the Bulgarian Court of Cassation, for in the meantime, i.e. on February 4th, 1938, the Treaty of 1931 had expired, having been denounced by the Bulgarian Government.

    Accordingly, since the Belgian Application has not been submitted in accordance with the conditions laid down by the Treaty of 1931, the Belgian Government cannot found the jurisdiction of the Court on that Treaty.

    The negative result arrived at by the examination of the first source of jurisdiction does not however dispense the Court from the duty of considering the other source of jurisdiction invoked separately and independently from the first.

    The Court will now proceed to consider the Bulgarian Government’s argument relating to the declarations of adherence to the Optional Clause of the Court’s Statute.

    With regard to their terms, the declarations of adherence of Bulgaria and Belgium differ in that the declaration of the Bulgarian Government runs as follows :

    "On behalf of the Government of the Kingdom of Bulgaria I recognize, in relation to any other Member or State which accepts the same obligation, the jurisdiction of the Court as compulsory ipso facto and without any special convention, unconditionally",

    and contains no reservation apart from the condition of reciprocity, whereas the declaration of the Belgian Government runs as follows :

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    "On behalf of the Belgian Government, I recognize as compulsory, ipso facto and without special agreement, in relation to any other Member or State accepting the same obligations, the jurisdiction of the Court in conformity with Article 36, paragraph 2, of the Statute of the Court for a period of fifteen years, in any disputes arising after the ratification of the present declaration with regard to situations or facts subsequent to this ratification, except in cases where the Parties have agreed or shall agree to have recourse to another method of pacific settlement."

    The Bulgarian Government relies on the limitation ratione temporis embodied in the Belgian declaration concerning the situations or facts with regard to which the dispute has arisen, in order to dispute the jurisdiction of the Court. Although this limitation does not appear in the Bulgarian Government’s own declaration, it is common ground that, in consequence of the condition of reciprocity laid down in paragraph 2 of Article 36 of the Court’s Statute and repeated in the Bulgarian / declaration, it is applicable as between the Parties.

    The Parties agree that the date on which the dispute arose was June 24th, 1937, i.e., after March 10th, 1926—the date of the establishment of the juridical bond between the two States under Article 36 of the Court’s Statute.

    On the other hand, the Bulgarian Government in its argument raises the following point : Although the facts complained of by the Belgian Government in the submissions of its Application under A, Nos. 1 and 2, all date from a period subsequent to March 10th, 1926, the situation with regard to which the dispute arose dates back to a period before that date. This situation was created by the awards of the Belgo-Bulgarian Mixed Arbitral Tribunal and in particular by the formula established by the awards of July 5th, 1923, and May 27th, 1925, for the fixing of the price per kilowatt-hour of power distributed. The complaints made by the Belgian Government concerning the application of this formula by the Bulgarian authorities relate, it is contended, to the working of that formula and make it the centre point of the dispute. It has also been argued that since the situation resulting from that formula dates from before the material date, namely, March 10th, 1926, the Bulgarian Government is justified in holding that the dispute which has arisen in regard to it falls outside the Court’s jurisdiction by reason of the limitation ratione temporis contained in the Belgian declaration.

    The Court cannot accept this view. It is true that it may be said that the awards of the Mixed Arbitral Tribunal established between the Belgian Electricity Company and the Bulgarian authorities a situation which dates from before March 10th,

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    that this objection is closely linked to the merits of the case. The reasoning in fact aims at establishing that there is no international element in the legal relation created between the Belgian Company and the Bulgarian authorities by the awards of the Mixed Arbitral Tribunal. But that amounts not only to encroaching on the merits, but to coming to a decision in regard to one of the fundamental factors of the case. The Court cannot therefore regard this plea as possessing the character of a preliminary objection within the meaning of Article 62 of the Rules.

    In these circumstances, the Court cannot accept the contention that it lacks jurisdiction under the declarations of adherence to the Optional Clause, in so far as this contention is based on the argument ratione temporis ; and in so far as this contention is founded on the argument ratione materiae, the Court does not regard it as preliminary in character and consequently rejects it, though the Parties remain free to take it up again in support of their case on the merits.

    The attempt to prove that the Court lacks jurisdiction under the Optional Clause is thus unsuccessful as regards A, No. 1, and A, No. 2.

    The last complaint adduced by the Belgian Government to the Bulgarian Government—which is formulated in its submissions under A, No. 3, of the Belgian Application, relates to the promulgation of the law of February 3rd, 1936, of which Article 30, paragraph C, institutes a special tax on the distribution of electric power sold to concerns not subject to tax.

    In the contention of the Belgian Government, the promulgation of the law constitutes a failure by the Bulgarian Government to observe its international obligations, owing to the discriminatory character of this law.

    The Bulgarian Government argues that this contention of the Belgian Government is inadmissible because the claim respecting the law of February 3rd, 1936, did not form the subject of a dispute between the two Governments prior to the filing of the Belgian Application.

    The Court considers this argument of the Bulgarian Government to be well-founded. Under either the Treaty of 1931 or the declarations of adherence to the Optional Clause, it rested with the Belgian Government to prove That, before the filing of the Application, a dispute had arisen between the Governments respecting the Bulgarian law of February 3rd, 1936. The Court holds that the Belgian Government has not established the existence of such a dispute and accordingly declares that the Belgian Application cannot be entertained in so far as concerns that part of the claim relating to this law.

    84
    For these reasons,

    The Court, by nine votes to five,

    Adjudicating upon the preliminary objection raised by the Bulgarian Government to the Application of the Belgian Government :

    1. With regard to points 1 and 2 of Submission A of the Application,

    overrules the objection of the Bulgarian Government ;

    reserves this part of the Applicatiôn"of thë Belgian Government for judgment on the merits ;

    states that the time-limits for the continuance of the proceedings will be fixed by an Order bearing the date of the present judgment.

    2. With regard to point 3 of Submission A of the Application,

    upholds the objection of the Bulgarian Government;

    and dismisses this part of the Application of the Belgian Government.

    The present judgment has been drawn up in French in accordance with Article 39, paragraph 1, of the Statute of the Court, the Parties having agreed that the case should be conducted in French.

    Done at the Peace Palace, The Hague, this fourth day of April, one thousand nine hundred and thirty-nine, in three copies, one of which will be deposited in the archives of the Court and the others will be communicated to the Government of the Kingdom of Belgium and to the Government of the Kingdom of Bulgaria, respectively.

    85
    M. Anzilotti, M. Urrutia, Jonkheer van Eysinga, M. Hudson, Judges, and M. Papazoff, Judge ad hoc, declare that they are unable to concur in the judgment given by the Court and, availing themselves of the right conferred upon them by Article 57 of the Statute, have appended to the judgment the separate opinions which follow.

    M. De Visscher and M. Erich, Judges, while in agreement with the operative clause of the judgment, have each appended observations regarding some of the grounds.

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