The Coup in the Kremlin
How Putin and the Security Services Captured the Russian State
IN THE present world conflict the warring governments have appropriated private property widely on the ground that it is enemy-owned. The United States, Great Britain and the countries of Latin America, as well as Germany, Italy and Japan, have taken possession, under various statutes and administrative decrees, of large amounts of property -- bank deposits, factories, shares of stock, corporate bonds and patents -- belonging to private citizens or corporations of the nations with which they are at war. Germany in particular has by various devices caused the transfer of untold wealth from the unfriendly hands of loyal citizens in Poland, Holland, France, Belgium and other subjugated territories to German concerns or to collaborationist elements. These transfers, often made under the guise of sales, mergers and other voluntary transactions, have resulted in the concentration in Nazi hands of a great part of the productive wealth of the European Continent.
The ultimate disposition of the property thus seized or transferred will constitute one of the problems of the peace settlement. In the midst of the larger and more spectacular political issues then being discussed it is not likely to attract much public interest or attention, especially since it necessarily is enveloped in technical details which tend to obscure the basic issues involved. The purpose of this paper is to present the problem in simple terms and to point out the desirability of early agreement upon the principles to be applied.
There can be little doubt that in the event of an Allied victory an effort will be made to undo the seizures and transfers effected by the Axis Powers. An intention to this effect was announced by the Governments of the United Nations in a declaration issued in the early part of January 1943, in which they state that, they intend to do their utmost to defeat the methods of dispossession practiced by the governments with which they are at war against the countries and peoples who have been so wantonly assaulted and despoiled.
Accordingly the governments making this declaration and the French National Committee reserve all their rights to declare invalid any transfers of, or dealings with property rights and interests of any description whatever which are or have been situated in the territories which have come under the occupation or control, direct or indirect, of the governments with which they are at war, or which belong or have belonged to persons (including juridical persons) resident in such territory. This warning applies whether such transfers or dealings have taken the form of open looting or plunder, or of transactions apparently legal in form, even when they purport to be voluntarily effected.[i]
There also can be little doubt that the victorious Allies will insist that the Axis Governments disgorge or pay adequate compensation for the property within their own territories belonging to Allied nationals and sequestrated or expropriated during the war. There remains the question of what policy the Allied Governments will pursue with respect to property of Axis nationals which they have themselves seized on the same grounds. What, for example, will the United States do with the credits, shares of stock, patents and corporate obligations belonging to German nationals which it has seized and vested under the Trading with the Enemy Act and its 1941 Amendment? What will Brazil and Mexico do with the German property seized in those countries?
In the latter connection attention may be called to three decree-laws already promulgated by the Brazilian Government, one applying to certain shipping companies and the others to certain banks and insurance companies, which purport to "incorporate in the national patrimony" the interests of Germans and Italians in such concerns. To all intents and purposes this confiscates those interests.[ii] In the same connection it is of interest to note one of the recommendations adopted by the Conference of the Twenty-one American Republics, held in Washington, June 30-July 10, 1942. This recommendation is to the effect that each of those Republics adopt, as soon as possible,
All necessary measures to eliminate from the commercial, agricultural, industrial and financial life of the American Republics all influence of governments, nations, and persons within such nations which, through natural or juridical persons or by any other means, is, in the opinion of the respective government, acting against the political and economic independence or security of such Republic.[iii]
It may be that the Brazilian decree-laws do not envisage outright confiscation, but look ultimately to some form of compensation for the expropriated owners. Likewise the recommendation just quoted may be limited in its reference to the duration of present hostilities; it may not contemplate, as it appears to do, the permanent exclusion of persons or concerns of Axis nationality from the holding of property in those countries. However, the language and tendency of both the laws and the recommendation, as well as of other documents issued by the Allied Governments, are sufficiently ambiguous to raise the question whether the United Nations expect to hold themselves to the same rule which they will doubtless apply to their defeated adversaries. If they do not, what principle will they follow? Some light may be shed on this question by the experience of the last war.
Most of the statutes and ordinances under which enemy property has been seized during the present conflict are amplifications and elaborations of those introduced during the war of 1914-1918.[iv] That legislation was initially presented under the guise of a two-fold purpose: first, to protect the sequestrating state against the possible use of the property for hostile ends; and, second, to protect and preserve the property for its owners at the termination of hostilities. This was explained by the Alien Property Custodian, A. Mitchell Palmer, in a statement issued November 14, 1917.[v] As the war progressed, the purpose underwent a decided modification. By a clause in the Urgent Deficiency Act, approved March 28, 1918, the Alien Property Custodian was given a general power to sell any property in his custody. It was not clear from the provisions of the Act, nor from the debates, what was intended to be the eventual disposition of the proceeds from the sale of such property. Speaking of this power of sale, Mr. Palmer, in his report of February 15, 1919, used quite different language from that of his announcement of November 1917. He presented the expropriation of enemy property as a measure of so-called "economic warfare," a term then just coming into vogue. "Instead of permitting myself to become a mere conservator of enemy property," he said, "I have tried to make the Trading With the Enemy Act a fighting force in the war." [vi] That is to say, the seizure of the property of private concerns of enemy character was avowedly conceived as a measure of hostility against their governments. Implicit in this view is the conception that the property of enemy nationals should stand responsible for the acts of their government, and that private individuals should to that extent be identified with the hostile state to which they belong. In justification of this view, it has been pointed out that new conditions of economic life and new methods of warfare have invested practically the entire citizen-body of a state with military character and value. Today the economic organization of a modern nation is so close-knit and integrated, and the functioning of that organization is so completely at the disposal of the state's military power, that it is said that the old distinction between civilian and military character can no longer be accepted without question. In words of former Secretary of State Lansing:
In the past . . . the noncombatants of the populations have formed a class which was without military value and which was on that account free from hostile attack. But today each able-bodied individual in a state, though not serving in the armed forces of a belligerent, is a distinct asset in the prosecution of a war . . . . This Great War has been a war of peoples, and not a war of armies and navies alone. Whole nations have been mobilized in the supreme effort to vanquish their enemies. How this manifest fact will affect the rules for the immunity and protection of noncombatants is a question which will require very careful consideration.[vii]
This identification of the alien enemy with his government, resulting in the imposition on his property of responsibility for the acts of his government, is the view which dictated the provisions of the Versailles Treaty relating to the disposition of the property of German nationals sequestrated by the Allies. The subject is covered in Sections 297 and 298 of the Treaty. These sections provided that Allied nationals whose property had been sequestrated or expropriated by Germany should be entitled to its restitution or to compensation. However, the property of German nationals which had been seized by the Allied Governments was to be retained by the latter and constitute a fund out of which their own nationals were to be paid the damages owed to them by the German state.[viii]
These provisions of the Treaty did not pass without criticism. One commentator referred to them as turning the clock back several hundred years, reviving an ancient barbaric practice, and making private property depend for its security upon preponderance of force.[ix] Judge Moore wrote: "I venture to think it directly contrary to the interests of the United States to resuscitate the doctrine that enemy private property found in a country on the outbreak of a war may be confiscated."[x] Opinions such as these had a definite influence in preventing the United States from taking full advantage of the treaty provisions.
The Knox-Porter Resolution of July 2, 1921, provided that the property of German nationals sequestrated by the United States should be retained only until other "suitable provisions" had been made for the satisfaction of claims of Americans against Germany. In 1923 the so-called Winslow Act effected the return of all sequestrated funds of less than $10,000 to their German owners, as well as the payment of $10,000 on each of the larger trusts. In 1926 the Treasury Department proposed an arrangement for discharging American claims against Germany out of annual sums to be received from the latter country under the Dawes Plan and meanwhile returning the sequestrated property outright to its German owners. This proposal failed of adoption by Congress, and the result was a compromise embodied in the War Claims Act of 1928. Under this Act the German owners were to receive immediately 80 percent of their property in kind or cash, and 20 percent in interest-bearing "participating certificates" to be amortized over a period of 25 years out of annual receipts under the Dawes Plan. The amounts not returned, together with other sums appropriated by Congress, were to constitute a fund for the payment of awards for damages entered in favor of American nationals against Germany. After the cessation of annual payments by Germany to the United States in 1933, the Harrison Resolution of the following year stopped all further payments to German owners under the War Claims Act.
A somewhat similar course of action was followed in England. Certain specified categories of liquidated German property were released to the former owners in accordance with the recommendations of the Blanesburgh report of 1924. In 1929 the British and German Governments concluded an agreement providing for the release of German property not finally disposed of at that time.
Thus in the end there was neither a complete restitution of enemy property to its private German owners, nor a full application of the Treaty provision devoting such property to the satisfaction of the claims of Allied nationals against Germany. The policy and principles were left very much at large, so that no clear guide as to future practice is offered by the experience of the last war. If that experience can be generalized at all, it amounts simply to the fact that during the later stages of the war and immediately after its conclusion the Allies were strongly inclined not to restore or compensate for seized German property, but to apply it for the benefit of their own citizens; but this inclination definitely receded during the years following the peace, so that in the end a large measure of restitution was effected.
Nor can it be said that opinion crystallized during the period of these developments. The divergent views of both statesmen and commentators have left a heritage of confusion and disagreement. The policy of the Versailles Treaty in making sequestrated property liable for claims against the government of the owner found defenders on the practical ground that unless the private property of enemy individuals is thus used, domestic claimants will be unable to obtain compensation, and that it is better for enemy citizens to lose than for our own nationals to go uncompensated.[xi] Again, it has been urged that the confiscation of privately-owned German investments in the United States is a justifiable measure of reprisal for Germany's unlawful destruction of the lives and property of American citizens.[xii] Professor C. C. Hyde has criticized these contentions.[xiii]
At present not much attention is being paid to the problem, nor, for that matter, to the general question of how the seized and sequestered property of Axis nationals shall be treated at the termination of hostilities. Instead, active effort is being exerted to deal with enemy property in the manner thought to be most effective for winning the war, and in this country as elsewhere a succession of immediate measures are being taken to liquidate Axis-owned concerns, sell their property and assets, and make use of their patent-rights for the purpose of our own war effort. These measures admittedly constitute "economic warfare" on a scale never before practiced. In the words of a publication of the Treasury Department, "It is the policy of the United States Government to eliminate all financial and commercial activity engaged in by individuals and concerns within the United States whose influence or activity is deemed inimical to the defense of the Western Hemisphere." [xiv] In accordance with this policy, the Alien Property Custodian on a single day (May 12, 1943) advertised for sale at public auction 285 companies owned by German, Japanese and Italian nationals.
There is sound authority for the view that there can be no criticism of such sales of going concerns owned by enemy nationals for a fair and reasonable price. "The law of nations does not forbid a state to suspend or cut off the privilege of transacting business within its territory for the ultimate benefit of alien enemies, or to convert properties belonging to them into cash assets to be held in trust for the owners." [xv] While this is true, it should not be ignored that much of what is now being done in the way of immediate or temporary measures of wartime control will have a pronounced and perhaps determining effect upon what will be done or can be done after the war. A good many long-term decisions may be implicit in the current acts of economic warfare. Those acts may produce situations which cannot later be undone, or can be undone only with great difficulty. For this reason a well-considered long-time policy might be of substantial practical value if ultimate mistakes are to be avoided. There is a very real necessity for coming to grips with principles at the present time rather than again following the purely opportunist course. The issue is one of policy rather than of international law in the legal sense; but because law always embodies or at least illustrates a sense of long-run policy, the available legal materials on the question of the treatment of enemy-owned property are not without value.
In primitive warfare whatever belongs to the enemy is legitimate booty, whether seized on the enemy's own territory or on that of the captor. The enemy's towns may be pillaged, his home looted, his personal property seized, his women and children sold into slavery. These harsh practices were sanctioned by the usage of the Romans and were accepted in a spirit of realism as the customary law of warfare by the earliest writers on international law. However, since modern international law began to take form in the sixteenth and seventeenth centuries a constant effort has been made to mitigate the savagery of primitive belligerent practices by the establishment of customs more in conformity with the ideas of civilization.
The major efforts have been in the direction of regulating and mitigating the treatment of conquered territories. These efforts culminated in the "Regulations Respecting the Laws and Customs of War on Land" adopted at the Hague Conference of 1907, and to which nearly all the states of the world subsequently became signatories. Article XLVII formally prohibits pillage. Article XLVI provides that "private property cannot be confiscated." Article LII prohibits requisitions in kind or services, except for the necessities of the army of occupation, and requires that "what is furnished shall as far as possible be paid for in ready money; if not, the fact of furnishing shall be recorded by receipts and the sums due paid as soon as possible." It thus has become the conventional law of nations that the private property of enemies in occupied or conquered territory is protected against confiscation and only the public property of the enemy government may legitimately be seized.
There has been no such conventional codification of international law respecting the treatment of enemy property within the territory of the other combatant. In this case the original practice has, however, been progressively mitigated by usages and treaty provisions extending through centuries. Significantly, there is an important provision on the subject in Magna Carta to the effect that "if in time of war merchants of the country at war with us shall be found in our country at the outbreak of the war, they shall be attached without damage to their bodies or goods, until it be known to us or to our chief justice how merchants of our country who are then found in the country at war with us are treated; and if ours are safe there, the others shall be safe in our country." When Louis IX arrested the English merchants and their goods in France at the outbreak of war with England in 1242, his conduct was protested as an outrage giving rise to the right of retaliation. Throughout the later Middle Ages a series of statutes and treaties provided that enemy merchants or individuals should be permitted to withdraw with their goods on the outbreak of a war, or to dispose of them, and should have a reasonable time within which to do so. By the early part of the eighteenth century a usage was practically established under which enemy subjects were ensured an opportunity of leaving with their property in safety. Where this privilege was guaranteed by treaty, such treaties were considered by some publicists as only an affirmance of common right. Bynkershoek, who regarded the primitive savage practice as still the rule of international law, admitted that in this respect "the law of war has yielded to the advantages of commercial intercourse." [xvi]
By the middle of the eighteenth century a still more liberal usage began to find its place in treaty provisions. This was to the effect that enemy aliens within a country at the outbreak of a war were to be permitted to remain and continue to enjoy their property during good behavior. Such permission was granted by the English government to French persons in England at the opening of the war with France in 1756, and like permission was given to Spanish subjects in England in 1762. Similar provisions were included in the Jay Treaty between England and the United States in 1795 and in numerous treaties concluded between the United States and Latin American countries during the first half of the nineteenth century.
With the progress of these developments publicists began to maintain by the middle of the eighteenth century that as a matter of law a sovereign who declares war cannot confiscate the property of subjects of the enemy who happen to be in his state at the time of the declaration.[xvii] Especially was the illegality of such confiscation of property said to be the case with respect to debts owing to enemies at the declaration of war. This view was favored in the United States by authoritative writers like Wheaton and Chancellor Kent.
The courts have not been willing to go so far. In the leading case on the subject, Chief Justice Marshall held that while a declaration of war does not in itself work a confiscation of enemy property within the jurisdiction of the United States, Congress is free in its discretion to confiscate such property by legislative. enactment if it decides to do so as a matter of public policy.[xviii] He left no doubt, however, that the "modern usage" against confiscation was one which "like other precepts of morality . . . cannot be disregarded without obloquy;" and another Chief Justice has said that "confiscations have fallen into disuse . . . from commercial policy, which European nations have a common, and indeed a strong, interest in supporting." [xix]
Law thus remits the question to policy; but the growth of law, at least up to the time of the last war, indicated and recognized a strong policy against confiscation. As late as 1918 Lord Finlay in the British House of Lords said that "it is not the law of this country that the property of enemy subjects is confiscated. Until the restoration of peace the enemy can of course make no claim to have it delivered up to him, but when peace is restored he is considered as entitled to his property with any fruits it may have borne in the meantime." [xx]
The public policy which lay behind the legal developments of the eighteenth and nineteenth centuries was effectively presented by Alexander Hamilton in his defense of the clause of the Jay Treaty already referred to. Hamilton's argument was that a nation in throwing open its ports and territories to foreign commerce in effect invites alien merchants and businessmen to bring their property within its borders. This invitation carries with it by implication an assurance that the property will be protected. "An extraordinary discretion to resume or take away the thing [property] without any personal fault of the proprietor, is inconsistent with the notion of property." The implied assurance of protection, coupled with the invitation to trade, is a prerequisite of international commerce, and international commerce is a source of national wealth. "Will justice sanction, upon the breaking out of a war, the confiscation of property which, during peace, serves to augment the resources and nourish the prosperity of a state?" Furthermore, he contended that the exercise of the power to confiscate is neither an effective deterrent to war nor a valuable aid in conducting it, while the confiscation of the property of enemies is likely to be but a first step in a general war upon credit and eventually upon all property.[xxi]
Hamilton's arguments have been elaborated and reënforced by Judge Moore's warning, already quoted. It may well have significance in the light of the recommendation of the Conference of the Twenty-one American Republics, referred to above, that those Republics adopt any measure that they desire in order to eliminate from their economic life the influence of any nation which they regard as acting against their independence or security. Such a recommendation may well have ominous repercussions for the future of American trade and investment in Latin America.
Current thinking in every field is dominated by the impression that the vast changes in technology -- industrial, commercial and military -- which have occurred in our time, have rendered most past thinking outmoded and necessitate an entirely new approach to old problems. It is pointed out that today international trade is carried on under conditions wholly different from those which prevailed a century or even a half-century ago. The old-fashioned merchant with his warehouse and his counting-house has given place to great international enterprises controlling mines, factories and selling organizations, employing thousands of workers and knit together into a network which sometimes spans half the globe. The question is naturally asked whether it can really be safe to harbor within our borders a segment of such an organization which is under foreign ownership and control. Certainly during a war such instrumentalities are potential sources of great danger. And it is accordingly suggested that war affords an excellent opportunity to rid our economy of these dangerous alien intruders. The question thus raises the whole problem of international commerce and economic relations in the postwar world.
There can be little doubt that from a military standpoint it is more important today than it once was to exert an effective control over a good deal of the enemy-owned private property within the territory of a nation and its allies in time of war. This is of course not true with respect to the small personal savings of individuals invested in real-estate, bank-accounts or the securities of American corporations, which by no stretch of the imagination can constitute a threat to our war effort. It is true with respect to important plants in key industries belonging to concerns which are owned or controlled by alien enemies, and to large organizations of any kind which might become focal centers of enemy influence. Plants in key industries must be utilized for our own war effort without danger of sabotage or ineffective operation. Obviously this means that they must be operated by Americans. And we cannot run the risk of permitting enemy-owned organizations in banking, selling, advertising and other service fields to be used for hostile purposes.
All these considerations necessitate a policy of sequestrating certain kinds of enemy property -- not necessarily all -- during the period of hostilities and turning it over to Americans for use and management. The considerations in question do not, however, in themselves require either that the enemy concerns should be sold or liquidated, or that they should now or later be confiscated for the benefit of the United States or any of its citizens. Arguments for sale, liquidation or confiscation must rest on an essentially different basis and must find their justification, if they can, in conceptions of postwar policy.
If the object of these actions is simply to injure the enemy as much as possible during the war, mere sequestration achieves it fully. Sale, liquidation or confiscation embody a conscious or unconscious purpose to achieve some different end. If this purpose is to find its justification in the new conditions of world industry and world economy about which so much is said, it must relate to the operation of these conditions in the postwar world. It cannot, for example, be simply a purpose to help pay the costs of the present war at the expense of enemy-individuals; that is a very old purpose, having nothing to do with the new conditions, and one which is as vulnerable today to the strictures of Hamilton and Judge Moore as it ever was. Again, it cannot be merely the purpose to compensate our own citizens for their losses at the expense of such property of enemy-persons as we can most readily lay our hands on; this is likewise an old purpose to which modern changes in technology are irrelevant. If the new nature of international business and international enterprise is therefore to supply justification for liquidation and confiscation of private enemy property, it must be as an appropriate and legitimate method of meeting certain postwar problems which the new conditions are expected to bring about. This is in fact substantially the justification which in none too explicit form is from time to time being tentatively put forward.
Foreign trade, it is said, is today essentially an arm or weapon of political expansion. This is especially true in the totalitarian states which we are fighting. In totalitarian states, foreign trade "is no longer the private concern of businessmen. They work for their own profit, but, more important, they also serve the cause of the State. . . . They . . . have the financial assistance of the State in order to beat foreign competition. State control of exports has forced upon them a 'national discipline' -- a united front against foreign competition . . . . The exporter of a totalitarian country is compelled to act as the agent of one big State trust, coördinating his policy with the sales policies of all other exporters and getting full support financially and otherwise from his Government. His foreign competitor, on the other hand, represents only his own private firm." [xxii]
When this close connection of foreign trade with political aggression is considered, together with the vast scale of foreign enterprise today and its penetration into some of the most important key industries of our own national economy, a strong argument is presented for using the war to eliminate this dangerous alien menace from our midst once and for all. If we do not do so, it is said that we shall have largely fought the war in vain. At its conclusion, even though victorious, we shall still find large segments of our industry being controlled and manipulated from Berlin and we shall still be harboring within our borders a Nazi army ready to resume the task of boring from within in the hope of ultimately taking revenge for its previous defeat. It is urged that the only way to meet this threat is to destroy it utterly by liquidating the German property in America and confiscating the proceeds, so that they may not be used after the war to finance a new German attack upon our economy.
This argument envisages a more or less continuous state of economic war between this country and the nations which are now our enemies. It is based on the assumption that during the present armed conflict we should be preparing for this future economic war against Germany and Italy. But it also involves obviously larger assumptions. It assumes that today foreign trade in general must inevitably be conceived as a kind of warfare. While we have already had an experience of such warfare with Germany, there is no reason to suppose that some other country or countries might not at any time adopt the methods which Germany has used. Against this danger there is likewise need for preparedness. It is not sufficient to prepare for economic war with Germany and Italy alone; we must be prepared for the same kind of war with other countries as well. It should be our purpose in the peace settlement and afterward to organize our international economic relations so as to wage economic war most effectively and successfully. All this is presupposed in the argument that under modern conditions it has become necessary to depart from previous international practice by liquidating enemy-owned concerns in time of war and confiscating the proceeds.
The question of whether or not the postwar period shall be a period of economic warfare is one of the most important, if not the most important issue, to be determined by the peace settlement. It lies at the basis of the political settlement as inevitably as economic questions always lie at the basis of political questions. One kind of economic settlement will bring about corresponding consequences from the political settlement as surely as another economic settlement will produce different political results. If a general policy of international economic warfare is accepted as the pattern of the postwar world, much of what is now so earnestly and confidently hoped from the political settlement will inevitably prove abortive from the outset, and even more modest and substantial expectations will also be defeated.
Under the new conditions of trade and industry, national prosperity and the maintenance of internal peace and order depend more than ever upon an adequate flow of international trade. When this flow is impeded beyond a certain point by trade restrictions, the result is a curtailment of both production and consumption in the internal economy of nations, with depressing effects on human welfare. The aggressor in this international economic warfare shuts off some of the normal parts of its foreign trade in order to force other parts artificially. The nation or nations under attack retaliate by erecting barriers.
We saw during the thirties that economic warfare was one of the most important factors in the rapid deterioration of political relationships. It was only a prelude to military warfare -- as certain nations undoubtedly intended it to be.
On principle and in the light of experience two attributes of economic warfare should be clear. In the first place, it progressively and drastically diminishes the advantages of international commerce, which requires a large measure of freedom, coöperation and confidence. In the second place, it promotes and intensifies political friction, and is an active agency in bringing on armed hostilities. The whole issue has been summed up by Leo Pasvolsky, Special Assistant to the Secretary of State, in the following impressive language: "If we want to make sure, this time, that postwar reconstruction policies will really be directed toward winning the peace, we must make sure that the cessation of armed hostilities will not be followed by a continuation of economic warfare."[xxiii]
We are all in agreement with this desire to bring an end to economic warfare. What then should be our policy toward the disposition of privately-owned German property in the United States and other Allied countries after the war? If Germany is no longer to be allowed to use her "commercial army" on our soil to wage economic war against us, and if the functions of her businessmen are to be limited to the normal processes of commercial competition, then the legitimate defensive reason for liquidating and confiscating their property disappears. If confiscation should nonetheless be persisted in, it could have only the character of a punitive and retributory measure against industrial concerns and their owners. Such a measure of retribution and punishment would undoubtedly have a strong disturbing and deterrent effect on the establishment of the normal and healthy trade relations which it will be the purpose of the settlement to bring about in the postwar world.
Doubtless it may be urged that in spite of the possible repercussion of punitive measures on trade policy, such measures would be amply justified both legally and morally in the case of many, if not all, German concerns. It is of course a well-known fact that the Nazi Government has for years controlled the acts of German concerns in foreign countries and has in many instances actually intruded itself into their management by undisclosed methods and even acquired some direct or indirect participation in their ownership. There is a tendency therefore to say that German concerns generally should be treated as in fact instrumentalities of the Nazi Government, and, as such, properly subject to expropriation and confiscation. Even, however, if the matter of trade policy is dismissed, the question cannot be dealt with in quite so summary a fashion.
To some extent it has always been true, since the days of Jacques Coeur and the Merchant Adventurers of Elizabethan England, that foreign traders have been implicated in the policies and affairs of their governments. In spite of this the policy embodied in treaties and legislation has favored protecting them as a class with immunity from confiscation. Other measures have been thought sufficient and more appropriate to prevent their allegiance to their own state from becoming a detriment to the country where they traded. So long as they were invited to trade or permitted to trade, their commercial activity was regarded as sufficiently beneficial to justify protecting their property. Their connection with their government was, in other words, not deemed an adequate basis for making their property responsible for the debts or acts of that government.
Undoubtedly in recent years the control of totalitarian governments over the acts of their citizens has been closer still. This has not always been with the consent of the citizen himself; often it has been a matter about which he could do nothing. The question for our own determination now is whether in dealing with individuals who are Nazi subjects we are to adopt a Nazi philosophy. Of course if the facts should disclose that any particular business concern was owned, directly or indirectly, by an enemy government, then the existing law should be sufficient to dispose of the case, since the public property of enemy states may always be confiscated. There is obviously no reason for relaxing this rule in favor of the Axis Governments. It may be urged that in many cases the proof will be difficult. Doubtless it will be, but it is hard to see that this makes a difference. The Nazi Government will certainly be gone, and with it will disappear its secret interest in the property. The result would at most be that German private individuals will succeed to this share, and this need cause no concern except on the theory that these individuals ought to be punished for collaborating with their own government.
Nothing that has been said is of course intended to imply that the German state should not be held to pay as ample damages as can be exacted, consistent with sound policy, for its unlawful and uncivilized acts and depredations. On the contrary, what has been said has been meant to emphasize that that is essentially a different question from the one discussed here. If Germany is called on to pay reparations through her Government, the burden of such reparations can and will be spread through taxation over the entire German population. Civic responsibility in this corporate sense for the acts of government is an altogether different thing from attaching such responsibility to particular individuals merely because they happen to have property within easy reach of an enemy state.
The substance of the argument advanced here is accordingly that, at the end of the war, if the United Nations intend to build a durable peace, there should be no confiscation of the privately-owned enemy property which has been seized and sequestrated. It should be held and administered for the benefit of its owners and duly restored to them at the conclusion of hostilities. It is important that a decision to this effect should be promptly reached. Knowledge of the nature of the decision, one way or the other, is needed to guide interim policy with respect to the sequestered property. In the absence of such a decision, things may be done -- indeed, are apparently already being done -- which will make it exceedingly difficult to arrive at a sound policy when the time for decision can no longer be postponed.
For example, the rapid sale or liquidation of many small enemy-owned concerns not important to our war effort would seem to have no other explanation than an intention to eliminate Germans and Italians from participation in our economic life after the war. It points definitely toward a continuation of economic warfare in the postwar period. And the wholesale character of such sales raises a question as to whether adequate effort is being made to preserve the value of the property for the benefit of its owners. In the seizure of enemy-owned patents and the issuance of licenses thereunder to American industry, no provision is apparently being made for the reservation of any royalty to the owner or of any right of subsequent recovery or control of the patent. In the words of a report by a special committee of the American Bar Association dated February 26, 1943, "this policy stated by the Alien Property Custodian [with respect to patents] is considered by your Committee to be outright confiscation or commercial destruction, which is an undistinguishable equivalent."
All these developments, which are proceeding apace, are charting a policy from which it may prove very difficult to recede at some future time when the importance of a different policy becomes evident. The public is little interested in them. But their tendency is to commit us imperceptibly and irretrievably to a continuance of economic warfare in the postwar era. They offer a serious warning of the necessity of making war in a way which will not deprive us of the ability to make the kind of durable peace upon which our hopes are centered.
[i] Department of State Bulletin, January 9, 1943.
[ii] Brazil Decree Law No. 4.611, August 24, 1942; Decree Law No. 4.612, August 24, 1942; Decree Law No. 4.636, August 31, 1942.
[iii] Pan American Union, Congress and Conference Series No. 39, 1942, Recommendation No. VII, par. 1.
[iv] For a summary of the laws and decrees adopted by the principal countries with respect to enemy-owned property during the First World War, see J. W. Garner, "International Law and the World War." New York: Longmans, 1920, v. I, p. 86-116.
[v] U. S. Committee on Public Information, Official Bulletin, November 14, 1917, p. 1.
[vi] "Alien Property Custodian, Report of All Proceedings Had By Him During the Calendar Year 1918 and to the Close of Business on February 15, 1919." Washington: Government Printing Office, 1919, p. 15.
[vii] Robert Lansing, "Some Legal Questions of the Peace Conference," Reports of the American Bar Association, 1919, 238, 245.
[viii] Cf., B. M. Baruch, "The Making of the Reparation and Economic Sections of the Treaty." New York: Harper, 1920, p. 103-105.
[ix] E. M. Borchard, American Journal of International Law, 1924, v. 18, p. 523-526.
[x] J. B. Moore, "International Law and Some Current Illusions," New York: Macmillan, 1924, p. 24.
[xi] Cf., Proceedings of the Grotius Society, v. VIII, p. 89.
[xii] Cf., Garner, op. cit., I, 105-106.
[xiii] C. C. Hyde, "International Law." Boston: Little, 1922, v. II, p. 240.
[xiv] Administration of the War-Time Financial and Property Controls of the United States Government. Washington: Treasury Department, December 1942, p. 26.
[xv] Hyde, op. cit., II, 241.
[xvi] "Quaestiones Juris Publici," b. I, c. 3.
[xvii] Vattel, "The Law of Nations," b. III, c. iv. (Washington: Carnegie Institution, 1916, v. 3, p. 256.)
[xviii] Brown v. United States (Supreme Court of the United States, 1814), 8 Cranch 110. (J. B. Scott, "Cases on International Law." St. Paul: West, 1906, 486.)
[xix] Chief Justice Ellsworth, Hamilton v. Eaton, in Scott, op. cit., p. 481.
[xx] Stevenson v. Aktiengesellschaft für Cartonnagenindustrie, 1918, A. C., 239, 244.
[xxi] Alexander Hamilton, "Works," edited by Henry Cabot Lodge. New York: Putnam, 1904, v. 5, p. 405-421.
[xxii] Guenter Reimann, "The Vampire Economy." New York: Vanguard, 1939, p. 229-230.
[xxiii] Leo Pasvolsky, "The Problem of Economic Peace After the War." Washington: Government Printing Office, 1942, p. 18.