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

    Judgment

    5
    In the case concerning the Panevezys-Saldutiskis railway,

    between

    the Government of the Republic of Estonia, represented by Baron Boris Nolde, as Agent,

    and

    the Government of the Republic of Lithuania, represented by M. André Mandelstam, as Agent,

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

    By an Application filed with the Registry of the Court on November 2nd, 1937, under Article 40 of the Statute, the Estonian Government instituted proceedings before the Court against the Lithuanian Government owing to the refusal of the latter Government to recognize the proprietary and concessionary rights claimed by a Company known as the Esimene Juurdeveo Raudteede Selts Venemaal in respect of the Panevezys-Saldutiskis railway, which had been seized and operated by the Lithuanian Government. The Applicant, in submitting the case, relies upon the declarations of Estonia and Lithuania accepting the compulsory jurisdiction of the Court as provided in Article 36, paragraph 2, of the Statute of the Court.

    After a succinct statement of the facts and arguments adduced in support of the claim, the Application prays the Court to adjudge and declare :

    "1. That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line.

    2. That the Lithuanian Government is under an obligation to make good the prejudice which has been thus sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated, the proposals for a compromise made by that Company having been withdrawn, at the sum of 14,000,000 Gold Lits, with interest at 6% per annum as from January 1st, 1937."

    On November 2nd, 1937, notice of the Application of the Estonian Government was given to the Lithuanian Government, and on November 5th the communications provided for in Article 40 of the Statute and Article 34 of the Rules of Court were duly despatched.

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    As the Court does not include upon the Bench any judge of the nationality of either of the Parties to the case, the Estonian Government and the Lithuanian Government availed themselves of their right under Article 31 of the Statute each to nominate a judge, and nominated respectively M. Otto Strandman and M. Mykolas Römer’is. The two Governments appointed as Agents : the Estonian Government, Baron Boris Nolde, and the Lithuanian Government, M. André Mandelstam.

    By an Order made on November 15th, 1937, the President of the Court fixed the time-limits for the filing of the Memorial, Counter-Memorial, Reply and Rejoinder.

    In its Memorial, duly filed within the prescribed time-limit, the Estonian Government prays the Court to adjudge and declare :

    "1. That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line.

    2. That the Lithuanian Government is under an obligation to make good the prejudice which has been sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated at (I) the sum of 6,850,000 Gold Lits, representing the price of the railway, plus (II) a sum representing the annual payments due in respect of the exploitation of the railway by the Lithuanian authorities from the date of seizure to the date of payment, each annual payment being reckoned as equal to six per cent on the price of the railway fixed as above."

    On March 15th, 1938, the date fixed for the filing of its Counter-Memorial, the Lithuanian Government submitted preliminary objections accompanied by a preliminary CounterMemorial.

    The objections raised by the Lithuanian Government to the claims of the Estonian Government were two in number, the first being based on "the non-observance by the Estonian Government of the rule of international law to the effect that a claim must be a national claim not only at the time of its presentation but also at the time when the injury was suffered", and the second "on the non-observance by the Estonian Government of the rule of international law requiring the exhaustion of the remedies afforded by municipal law". The Lithuanian Government prayed the Court to declare that the claims of the Estonian Government cannot be entertained.

    The proceedings on the merits having, under Article 62, paragraph 3, of the Rules of Court, been suspended by the filing of the objections, the President of the Court, on March 15th, 1938, made an Order fixing April 30th, 1938, as the date of

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    expiration of the time allowed to the Estonian Government for the presentation of a written statement of its observations and submissions in regard to the objections raised by the Lithuanian Government.

    The written proceedings in regard to the objections were brought to a close by the filing within the prescribed timelimit of this statement in which it was submitted that the Court should "overrule the objections".

    After hearings held on June 13th, 14th, 15th, 17th and 18th, 1938, the Court, on June 30th, 1938, made an Order whereby, under Article 62, paragraph 5, of the Rules, it joined "the objections raised by the Lithuanian Government to the merits of the proceedings instituted by the Application of the Estonian Government filed with the Registry on November 2nd, 1937, in order that it may adjudicate in one and the same judgment upon these objections and, if need be, on the merits". At the same time the Court fixed new time-limits for the filing of the Counter-Memorial, Reply and Rejoinder.

    These documents were duly filed within the prescribed timelimits, the last of which, that for the Rejoinder, expired on November 25th, 1938. Accordingly on that date the case became ready for hearing.

    In its Counter-Memorial, the Lithuanian Government presented the following submissions :

    "The Lithuanian Government, reserving the right subsequently to present any further arguments or submissions,

    Prays the Permanent Court of International Justice to dismiss the claims of the Estonian Government.

    Alternatively,

    And subject to the subsequent presentation of any further arguments and evidence,

    In case the Court should hold that the legal personality of the former First Russian Company persists in the Esimene Company and should recognize that the latter is entitled to reparation, the Lithuanian Government, in accordance with Article 63 of the Rules of Court, now presents a counter-claim" against the Estonian Government, estimating the amount of the prejudice sustained at the sum of 7,337,271 Lits 98 cents, with interest at 6% per annum as from September 1st, 1938, until the date of payment,.

    And prays the Permanent Court of International Justice to award it the amount of this counter-claim."

    In its Reply, the Estonian Government maintained. the submissions contained in its Memorial and written statement and prayed the Court "to overrule the counter-claim of the Lithuanian Government".

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    In its Rejoinder, the Lithuanian Government maintained the submissions which it had already made.

    In the course of public sittings held on January 19th, 20th, 24th, 25th, 27th and 30th, 1939, the Court heard the Agents of the two Parties, who at the conclusion of their oral arguments presented the following final submissions.

    The Agent for the Estonian Government prayed the Court

    "To dismiss the counter-claim of the Lithuanian Government presented in its Counter-Memorial of August 30th, 1938,

    To adjudge and declare

    That the Lithuanian Government has wrongfully refused to recognize the rights of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as owners and concessionaires of the Panevezys-Saldutiskis railway line, and to compensate the Company for the illegal seizure and operation of this line ;

    That the Lithuanian Government is under an obligation to make good the prejudice which has thus been sustained by the Esimene Juurdeveo Raudteede Selts Venemaal Company, and which is estimated at (1) the sum of 6,850,000 Gold Lits representing the price of the railway, plus (2) interest on this sum calculated at the rate of six per cent per annum from the date of seizure to the date of payment;

    That the above payment shall be made in the course of the month following delivery of the judgment by means of a payment in pounds sterling to the account of the Estonian State Bank (Eesti Pank) with the Royal Scotland Bank in London, for the compensation of the Esimene Juurdeveo Raudteede Selts Venemaal Company;

    That the said payment will involve total and final release of the Panevezys-Saldutiskis railway and all the movable and immovable property appertaining thereto, from all mortgages or liens which may belong to the bondholders of the First Company of Secondary Railways in Russia (or the Esimene Juurdeveo Raudteede Selts Venemaal Company)."

    The Agent for the Lithuanian Government, maintaining all submissions and arguments previously presented by his Government, prayed the Permanent Court of International Justice

    "to declare that the claims of the Estonian Government cannot be entertained.

    With regard to the merits, to dismiss the claims of the Estonian Government.

    Alternatively,

    In case the Court should hold that the legal personality of the former First Russian Company persists in the Esimene Company and should recognize that the latter is entitled to compensation,

    9
    To award to the Lithuanian Government the amount of its counter-claim, assessing the prejudice sustained at the sum of 7,337,271 Lits 98 cents, with interest at 6 % per annum from September 1st, 1938, until the date of payment."

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

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

    The facts are as follows :

    In 1892 a company was founded at St. Petersburg under the name of the "First Company of Secondary Railways in Russia", and its statutes were approved by Imperial decree on March 26th, 1892.

    Under § 1 of its statutes, the Company had for its object "the construction and operation of broad and narrow gauge approach and secondary railways in general for public and private use, and the construction, operation and sale of transportable railways". Under § 2, the Company was authorized, subject to obtaining where necessary the sanction of the competent administrative body, inter alia, to construct and operate railways of every kind and type on its own account and at its own risk. The Company might engage in these activities throughout the whole of the Russian Empire. Under § 26, the registered offices of the Company were established at St. Petersburg.

    By an Imperial decree of November 21st, 1897, the Company was authorized to construct and operate (under the conditions fixed by a decree of June 27th, 1894, for another line, the Sventziany to Gloubokoïe line) a railway between the station at Sventziany, on the St. Petersburg-Warsaw railway, and the station at Panevezys, on the Libau-Romny railway. The Company also possessed other lines in various parts of the Russian Empire, in particular in the Baltic provinces and in the Ukraine.

    The statutes of the Company were revised and received Imperial sanction on July 3rd, 1898, and subsequently various partial amendments were approved by Imperial decrees of April 11th, 1900, November 6th, 1901, and April 24th, 1912.

    A general meeting of shareholders appears to have taken place in July 1917. Three months later, the Bolshevist revolution—the so-called October revolution—took place. Almost

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    immediately afterwards, December 14th, 1917, a decree of the Central Executive Committee concerning the nationalization of banks placed in the hands of the Soviet Government the shares, assets and liabilities of companies existing in Russia. Among these companies was the "First Company of Secondary Railways".

    Political events then followed in rapid succession : on February 16th, 1918, Lithuania proclaimed itself an independent State ; on February 24th the same thing happened in Estonia, and some days later, March 3rd, the Treaty of Brest-Litovsk between Germany and her allies and Russia confirmed the abandonment of Russian sovereignty over the former Baltic provinces and Lithuania which, however, remained in the occupation of German troops.

    Furthermore, the Bolshevist leaders hurried on measures intended to establish the communist Soviet régime confiscating private property throughout Russian territory. On June 28th, 1918, a decree was promulgated declaring "to be the property of the Russian Socialist Federated Soviet Republic" all industrial and commercial undertakings in Soviet Russia including "all the undertakings of private and secondary railway companies, whether in operation or under construction" (Art. I). The competent sections of the Supreme Council of National Economy were instructed to work out and carry through as speedily as possible the organization of the administration of the nationalized undertakings; in so far as railways were concerned, the task was entrusted to the Commissariat of the People for Communications, subject to the approval of the Council of Commissaries of the People (Art. II). Until special orders were issued, undertakings which had been declared the property of the Soviet Republic were "regarded as leased rent free to the former owners ; the Boards of Directors and former owners financing them under the old conditions and receiving the revenues as before" (Art. III). The directors and other managers responsible for nationalized undertakings were responsible for the maintenance, upkeep and operation of the undertaking. If they abandoned their posts or showed negligence, they incurred criminal liability (Art. IV). The responsible administrators were declared to be in the service of the Russian Socialist Federated Soviet Republic. If they abandoned their posts, members of the technical and administrative staff were to be held responsible before the Revolutionary Tribunal "with the utmost rigour of the law" (Art. V). Finally, all moneys belonging personally to members of Boards, to the shareholders and owners of nationalized undertakings were provisionally attached.

    11
    Shortly afterwards, on 4 September 1918, a second Soviet decree was promulgated which was designed "to supplement" the preceding decree, particularly with regard to railways. The Boards of former private railways which now became the property of the Republic were abolished and replaced by a so-called liquidation commission for each line.

    Some months later, March 4th, 1919, a third Soviet decree provided as follows : "Article 1.—The shares and foundation shares of joint-stock companies the undertakings of which have been nationalized or sequestrated are annulled even in cases where such undertakings have not yet passed under the control of governmental boards and where they have been leased to the former owners rent free."

    In September 1919, the Lithuanian Government took possession of the Panevezys-Sventziany railway which was situated in territory which had become part of the State of Lithuania.

    Some months later, on February 2nd, 1920, the Russian Socialist Federated Soviet Republic signed its first treaty with the new Baltic States : the Treaty of Tartu with Estonia1 which was followed on July 12th, 1920, by the Treaty concluded at Moscow with Lithuania2 and, on August 11th, 1920, by the Treaty with Latvia3, also signed at Moscow.

    In the present case, the Treaty of Tartu of February 2nd, 1920, concluded between the Soviet Republic and Estonia merits special attention for the reason that, unlike the two other treaties which followed it, it contains detailed provisions as to the fate of private property situated in Estonian territory, particularly as to the property of joint-stock companies.

    Under Article XI of this Treaty, of which the meaning and perhaps even the translation are disputed between the Parties, Russia renounces "all the rights of the Russian Treasury to the movable and immovable property of individuals which previously did not belong to her, in so far as such property may be situated in Estonian territory". All such property became "the sole property of Estonia" and was freed from all obligations as from December 14th, 1917, which, as has been seen, was the date of the decree nationalizing the banks.

    Further, an article supplementary to this Article XI provides that : "The Russian Government will hand over to the Estonian Government inter alia the shares of those joint-stock companies which had undertakings in Estonian territory, in so far as such shares may be at the disposal of the Russian

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    Government as a result of the decree of the Central Executive Committee regarding the nationalization of the banks of December 14th, 1917... Similarly, the Russian Government agrees that the registered offices of the joint-stock companies above mentioned shall be regarded as transferred to Reval and that the Estonian authorities shall be entitled to amend the Statutes of such companies in accordance with the rules to be laid down by those authorities." But the Treaty points out that "the above-mentioned shares shall only confer on Estonia rights in respect of those undertakings of the joint-stock companies which may be situated in Estonian territory and that in no case shall the rights of Estonia extend to undertakings of the same companies outside the confines of Estonia".

    The Treaty then expressly mentions the "First Company of Secondary Railways" as included amongst these joint-stock companies.

    The exchange of ratifications of the Treaty of Tartu took place on March 29th, 1920.

    In October 1920, some kilometres of the Panevezys-Sventziany railway line situated between the latter station and Saldutiskis ceased to be under Lithuanian sovereignty and passed subsequently into that of Poland.

    Some days after the coming into force of the Treaty of Tartu, the relevant provisions of which have been quoted above, the Estonian Government promulgated, on April 7th, 1920, a first set of provisional regulations regarding joint-stock companies whose statutes had been approved by the Russian Government, and which possessed undertakings or property in Estonian territory and had hitherto not had themselves registered by the Estonian courts in accordance with the regulations laid down. These companies apparently had to hold general meetings within two months after the decree, since the decree provided that, if they did not do so, all the powers of members of the Board of Directors would be held to have lapsed, and that curators appointed by the courts would undertake the administration and, if need be, the liquidation of the undertakings and property of such companies, such undertakings and property being treated as ownerless property.

    In order to establish the validity of a general meeting, the documentary evidence was to be accompanied by the statutes which had been approved by the Russian Government ; the purpose of such general meeting was to be the bringing of the statutes into conformity with Estonian law and a decision to have them "registered by the judicial authorities of Estonia".

    A second Estonian ordinance, dated October 1st, 1921, provided that a company would be no longer subject to curatorship when the general meeting of its shareholders had elected its

    13
    officers in accordance with the statutes approved by the former Russian Government and had had its statutes registered in accordance with Estonian law.

    On May 21st, 1922, the "First Company of Secondary Railways in Russia", which had been sequestrated on April 7th, was placed under curatorship by order of the District Court of Tallinn-Hapsal.

    It does not appear that any general meeting of this Company was held at this period in Estonia. On the other hand, the documents produced to the Court show that, on November 23rd, 1922, a general meeting of the Company—the first since the meeting of July 1917—was held, not in Estonia, but at Riga in Latvia, with the sanction of the Latvian Government and under Latvian law, and that at this meeting the Board of Directors was instructed to take the necessary steps to reacquire possession of and to operate the property of the Company in Lithuania and Poland ; while the portion of the system situated in Latvia was to be ceded to a Latvian company which was to be formed.

    On August 4th, 1923, a law was promulgated in Estonia declaring that, "in accordance with § 19 of the concession of the ‘First Company of Secondary Railways in Russia’, all railways of this Company in the territory of the Estonian Republic shall be bought out and become the property of the Treasury as from October 1st, 1923". The concession referred to is that granted by the Czar in 1897, and § 19 concerns the Imperial Government’s right of redemption.

    The next thing that happened was that the Estonian Government, on September 7th, 1923, authorized the holding of a general meeting of the Company (which, as has been seen, had been under curatorship since May 21st, 1922) and the curators, "in accordance with the statutes (§ 60)", proceeded to convene a general meeting for October 19th of the same year.

    This general meeting was actually held in Tallinn on November 2nd, 1923. It proceeded to revise and amend the statutes in accordance with Estonian law and with a view to the exercise of the powers thenceforward to be enjoyed by the Company in Estonia : namely in respect of operation, works, tariffs, exemption from taxes, the right of expropriation, subjection to the laws and regulations in regard to railways, etc. The registered offices of the Company were fixed in Tallinn.

    These new statutes were approved on November 8th, 1923, and registered on November 23rd.

    As stated in the Estonian Memorial, the "First Company of Secondary Railways in Russia" was thus transformed "into an Estonian company having its registered offices in Estonia under the name of the Esimene Juurdeveo Raudteede Selts Venemaal

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    —a translation into Estonian of the name of the Russian company.

    On March 10th, 1924, a general meeting of the Esimene held in Tallinn authorized the Board of Directors to sell the line situated in Lithuania and the lines in Latvia and Poland. On October 3rd, 1924, another general meeting appears to have been held at which particular consideration was given to the question of the Panevezys-Saldutiskis railway.

    On March 5th, 1925, a request was sent on behalf of the Board of the Esimene to the Lithuanian Government, asking it "to give instructions for the necessary steps to be taken for the handing over of the Panevezys-Saldutiskis line to its legal owners".

    It does not appear that any answer was made to this petition, and several years elapsed in the course of which further petitions were made.

    On November 14th, 1931, a memorandum accompanied by a petition from the Board of the Esimene was transmitted to the Lithuanian Government. In this memorandum the Esimene pointed out that it was the former Russian company transformed into an Estonian company with the same titles and rights, and accordingly it claimed "in that capacity" fair compensation for the Panevezys line which belonged to it and of which it had been unjustifiably deprived.

    On April 29th, 1932, after the chairman of the Company had approached the Lithuanian Government, the Board of Directors, in a further petition of May 20th, 1932, stated that they consented to the non-restitution of the line in question but hoped on the other hand that some equitable method would be found of compensating the Company for the property of which it had been deprived.

    Further petitions were sent by the Board of Directors of the Esimene, in particular one on May 20th, 1932.

    On January 25th, 1933, the Lithuanian Government referred to its Council of State, which, under the organic law of August 21st, 1928, is an advisory body, the question whether the Esimene Company was justified in putting forward a claim in law against the Lithuanian Government in respect of the Panevezys railway. The opinion given was in the negative.

    On September 15th, 1933, and October 25th, 1933, the Esimene Company presented further petitions to which the Lithuanian Government replied, refusing to admit the claim of the Company to be entitled to the rights of the former company which, in its contention, no longer existed.

    The negotiations were thenceforward continued between the Estonian Minister in Kaunas and the Lithuanian Government, the Company proposing the purchase of its line by the Lithuanian Government (proposals of September 7th, 1934, September 14th,

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    1936, and letter of December 3rd, 1936, addressed by the Estonian Minister to the Lithuanian Government).

    In a letter of December 30th, 1936, the Lithuanian Government replied that the dispute was a matter of civil law and within the jurisdiction of the Lithuanian courts.

    On February 1st, 1937, the Estonian Government renewed its representations, the dispute bearing as before both on the question of the recognition of the Esimene as entitled to the rights of the Russian company and on the question of the jurisdiction of the Lithuanian courts. It was also argued that there had been a violation of the Commercial Convention concluded on January 13th, 1934, between Estonia and Lithuania and a denial of justice.

    On May 5th, 1937, the Lithuanian Government replied that it could not entertain the Estonian claim.

    On August 20th, 1937, the Estonian Government informed the Lithuanian Government that it intended to bring the case before the Permanent Court of International Justice. The Lithuanian Government then replied that, while maintaining its own view on the question of law, the friendly relations between the two States might make it possible to reach a friendly settlement of the dispute, should the Esimene Company not win its case before the Lithuanian courts.

    Such are the facts, which moreover do not appear to be disputed by the Parties, and on the basis of which the Estonian Government on November 2nd, 1937, filed with the Court the Application instituting the proceedings referred to at the beginning of this judgment.

    Within the time-limit fixed for the filing of the CounterMemorial by the Lithuanian Government, the Agent for that Government submitted two preliminary objections. After the usual proceedings and hearings in connection with these objections, the Court, as has been explained, joined these objections to the merits by its Order of June 30th, 1938, saying in the course of that Order that at the then stage of the proceedings the Court could not take a decision either as to the preliminary character of the objections or as to whether they were well founded, for any such decision would raise questions of fact and law in regard to which the Parties were in several respects in disagreement and which were too closely linked to the merits for the Court to adjudicate upon them at that stage. Now that it has heard the arguments of the Parties on the merits of the case as well as on the objections, the Court is in a position to give its decision on the objections.

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    Both the objections were submitted as preliminary objections under Article 62 of the Rules of Court. It is clear that Article 62 covers more than objections to the jurisdiction of the Court. Both the wording and the substance of the Article show that it covers any objection of which the effect will be, if the objection is upheld, to interrupt further proceedings in the case, and which it will therefore be appropriate for the Court to deal with before enquiring into the merits.

    The Lithuanian objections are based on the non-observance by the Estonian Government : (1) of the rule of international law that a claim must be national not only at the time of its presentation but also at the time of the injury ; and (2) of the rule requiring the exhaustion of the remedies afforded by municipal law.

    In the opinion of the Court, the rule of international law on which the first Lithuanian objection is based is that in taking up the case of one of its nationals, by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own right, the right to ensure in the person of its nationals respect for the rules of international law. This right is necessarily limited to intervention on behalf of its own nationals because, in the absence of a special agreement, it is the bond of nationality between the State and the individual which alone confers upon the State the right of diplomatic protection, and it is as a part of the function of diplomatic protection that the right to take up a claim and to ensure respect for the rules of international law must be envisaged. Where the injury was done to the national of some other State, no claim to which such injury may give rise falls within the scope of the diplomatic protection which a State is entitled to afford nor can it give rise to a claim which that State is entitled to espouse.

    The Estonian Agent both in the written pleadings and in the oral arguments has endeavoured to discredit this rule of international law, if not to deny its existence. He cited a certain number of precedents, but when these precedents are examined it will be seen that they are cases where the governments concerned had agreed to waive the strict application of the rule, cases where the two governments had agreed to establish an international tribunal with jurisdiction to adjudicate on claims even if this condition as to nationality were not fulfilled. In the present case no grounds exist for holding that the Parties intended to exclude the application of the rule. The Lithuanian Agent is therefore right in maintaining that Estonia must prove that at the time when the injury occurred which is alleged to involve the international responsibility of

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    The question whether or not the Lithuanian courts have jurisdiction to entertain a particular suit depends on Lithuanian law and is one on which the Lithuanian courts alone can pronounce a final decision. It is not for this Court to consider the arguments which have been addressed to it for the purpose either of establishing the jurisdiction of the Lithuanian tribunals by adducing particular provisions of the laws in force in Lithuania, or of denying the jurisdiction of those tribunals by attributing a particular character (seizure jure imperii) to the act of the Lithuanian Government. Until it has been clearly shown that the Lithuanian courts have no jurisdiction to entertain a suit by the Esimene Company as to its title to the Panevezys-Saldutiskis railway, the Court cannot accept the contention of the Estonian Agent that the rule as to the exhaustion of local remedies does not apply in this case because Lithuanian law affords no means of redress.

    The second ground on which the Estonian Agent has maintained that the rule as to the exhaustion of local remedies does not apply in this case is that the highest court, the Supreme Court in Lithuania, has already held that there is no continuity between the Russian company and the Estonian company, and has therefore already given an adverse decision on a point which constitutes an essential element in the Esimene Company’s claim to the Panevezys-Saldutiskis railway. The rule of international law as to the exhaustion of local remedies has never, it is contended, been held to require that a claimant should be bound to institute proceedings on a point on which the highest court has already given a decision.

    The Court does not regard the argument as applicable in this instance.

    The case in which it is alleged that the Supreme Tribunal in Lithuania gave such a decision on March 26th, 1934, is a suit brought against the Esimene Company in the Lithuanian courts by one Jeglinas to recover the capital value and the arrears of interest due on one of the bonds issued by the Russian company for the construction of the railway in question, and to obtain a decision that holders of the bonds were entitled to be paid in priority to other creditors, and also to obtain a ruling as to the rate of exchange as between roubles and lits.

    The Lithuanian Agent stated that the Jeglinas case was not a genuine case. Whatever may be the case on this point, it is sufficient for the Court to make the following observations.

    20
    After the case had been dealt with in the Court of the juge de paix and the Tribunal d’arrondissement, Jeglinas entered an appeal to the Supreme Court in Lithuania. The judges in that court ignored the contentions and admissions of the parties, annulled the judgment of the Tribunal d’arrondissement and quashed all the proceedings upon the ground that there was no properly qualified defendant before the court. The following are the important paragraphs of the judgment according to the French translation supplied to the Court :

    "The defendant cited in this case as liable for the bond is not the First Company of Secondary Railways in Russia, with its Board of Directors in Petrograd, but the First Company of Secondary Railways in Russia, with its Board of Directors at Tallinn in Estonia and whose managing director, Paul Klompus, at present resides in Kaunas, at the Lithuania Hotel, No. 9, Daukant Street. Consequently, in order to bring this case within the jurisdiction of the Lithuanian courts, a domicile has been artificially created in breach of Article 220 of the Code of Civil Procedure which indicates where a company is to be sued.

    More especially since, as may be seen from the evidence produced by the defendant, no company exists in Estonia in whose name the bond was issued and whose statutes were in force in 1892, but there is a company newly founded under the name of Esimene Juurdeveo Raudteede Selts Venemaal (which, translated, may mean : ‘First Company of Secondary Railways in Russia’).

    Evidence has not been produced in this case that the said Estonian company can be recognized by our laws or by international treaties as successor to the old Russian company, and the Court knows of no such laws or treaties. Only companies whose statutes are registered in accordance with our laws and duly published (law concerning joint-stock companies, ‘Government Gazette’, No. 179) may operate in Lithuania. And only such joint-stock companies are entitled to have their enterprises there, especially enterprises of such great importance as railways. Moreover the Tribunal d’arrondissement, with the participation of the representative of the Estonian company and on the basis of § 14 of the bond, gave the claimant a preferential right of execution upon the movable and immovable property of the Sventziany-Ponévège railway, although, as has been stated, part of this line is in the possession of the Lithuanian Ministry of Communications.

    In view of the foregoing, there is no ground for regarding Paul Klompus, the director of the Esimene Juurdeveo Raudteede Selts Venemaal Company, as a defendant entitled to answer for bond No. 0742, issued by the ‘First Company of Secondary Railways in Russia’, i.e., as qualified to be the defendant in accordance with Article 4 of the Code of Civil Procedure, and consequently the whole of the proceedings in this case which have taken place without the real defendant

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    having been summoned or heard must be annulled and the appeal in cassation cannot be considered1."

    The passage quoted above in which it is said that the proofs had not been submitted in the case to show that the Estonian company could be recognized as the successor of the former Russian company has been thought to mean that the Supreme Tribunal examined the evidence and gave a decision as to its effect. An examination of the judgment shows however that the passage in the judgment means no more than that no evidence had been submitted to the Lithuanian courts to show the identity of the two companies.

    It must also be pointed out that if the Esimene Company instituted proceedings in the Lithuanian court as to their right to be regarded as the owners and concessionaires of the Panevezys-Saldutiskis railway, the parties to the suit would not be the same as those in the Jeglinas case—so that no question of res judicata could arise ; nor is there anything to show that the Esimene Company would find itself confronted by a course of decisions (jurisprudence constante) of the Lithuanian courts which would render the Company’s suit hopeless, despite the difference of the parties.

    The Estonian Agent has also drawn the attention of the Court to an opinion rendered by the Lithuanian Council of State on January 25th, 1933, as to the juridical basis of the Esimene Company’s claim to the Panevezys-Saldutiskis railway. The conclusion reached by the Council of State was that the Esimene Company was neither the same as nor the successor to the Russian company and therefore had no claim to the railway.

    The function of the Council of State in Lithuania is among others to notify to the Council of Ministers or to the particular Minister concerned any case in which the orders, regulations or instructions of the executive authorities are inconsistent with the laws in force. It is not a judicial authority the opinions of which would be binding on the Lithuanian courts. For this reason the fact that in 1933 it rendered an opinion to the Lithuanian Government adverse to the validity of the Esimene Company’s claim cannot be regarded as excusing that Company from seeking redress in the Lithuanian courts.

    Neither of the reasons put forward by the Estonian Agent for the non-application of the rule as to the exhaustion of the local means of redress can therefore be regarded as holding good in the present case.

    22
    In consequence, on the one hand, the second Lithuanian preliminary objection having been submitted for the purpose of excluding an examination by the Court of the merits of the case, and being one upon which the Court can give a decision without in any way adjudicating upon the merits, must be accepted as a preliminary objection within the meaning of Article 62 of the Rules. On the other hand, as regards the merits of the objection, it is common ground between the Parties that the Estonian company has not instituted any legal proceedings before the Lithuanian courts in order to establish its title to the Panevezys-Saldutiskis railway.

    The objection must therefore be regarded as one that can be entertained as an objection of a preliminary character and as well-founded as regards its substance.

    For these reasons,

    The Court,

    by ten votes to four,

    Declares that the objection regarding the non-exhaustion of the remedies afforded by municipal law is well founded, and declares that the claim presented by the Estonian Government cannot be entertained.

    The present judgment has been drawn up in French and English, the French text being authoritative.

    Done at the Peace Palace, The Hague, this twenty-eighth day of February, 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 Estonian Government and to the Lithuanian Government respectively.

    23

    Count Rostworowski and M. De Visscher, Judges, declare that they are unable to concur in that part of the judgment given by the Court concerning the first objection raised by the Lithuanian Government and, availing themselves of the right conferred upon them by Article 57 of the Statute, have appended to the judgment the separate opinion which follows.

    Jonkheer van Eysinga, Mr. Hudson and M. Erich, Judges, 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 respective separate opinions which follow.

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