Before Viscount Simon (Lord Chancellor), Lord Atkin, Lord Thankerton, Lord

Wright and Lord Porter.

Held, that the test to be applied was an objective one, depending upon the relation of the enemy power to the territory where the respondents had their commercial domicile and not upon nationality or patriotic sentiment; that residence in enemy - occupied territory disqualified from claiming persona standi in judicio; that in determining whether territory was "enemy occupied " it was necessary to enquire into the nature of the occupation; that territory was "enemy-occupied" if it was shown that the enemy was provisionally in effective control of the area and exercised some kind of Government or administration over it (mere military occupation not resulting in effective control was not enough); that it was clear that Germany was fully in both civil and military control of Holland; and that therefore the respondent shipowners were disqualified (apart from royal licence) from bringing or pursuing a suit in the King's Courts--Appeal by charterers allowed.

This was an appeal by V/O Sovfracht from an order of the Court of Appeal (71 Ll.L.Rep. 61) upholding an order of Mr. Justice Asquith, who affirmed an order of Master Ball whereby it was ordered that Mr. C. T. Miller be appointed to act as umpire under a submission to arbitration contained in a charter-party dated Aug. 11, 1939, made between the appellants as charterers and N.V. Gebr. Van Uden's Scheepvaart en Agentuur Maatschappij as owners of the steamship Waalhaven. Appellants were a Russian company and respondents were, a company incorporated under the law of the Kingdom of the Netherlands, with their principal place of business at Rotterdam. Under the charter-party it was provided that any dispute should be referred to arbitration in London. The question at issue was whether the respondents were alien enemies and so were disentitled to take any proceedings before the English Courts; and accordingly whether a summons taken out by respondents for the appointment of an umpire ought to be dismissed as incompetent.

JUDGMENT.

Viscount SIMON (Lord Chancellor):

My Lords, the respondents are a shipowning company incorporated before the war under the laws of the Kingdom of the Netherlands, with their principal place of business at Rotterdam. By a charter-party dated Aug. 11, 1939, the respondents chartered one of their vessels to the appellants, who are a Russian company; disputes arose between the parties and the respondents sought arbitration under a clause in the charter-party which provided for arbitration in London. During the month of April, 1940, each party appointed an arbitrator. Before the matter could proceed further the German invasion of the Netherlands took place, and by the second week of May, 1940, that country, including Rotterdam, was completely occupied by the enemy, and has ever since been entirely under enemy control. In these circumstances, the appellants and their arbitrator refused to proceed with the arbitration on the ground that the respondents had become enemies, and ultimately, on June 24, 1941, the respondents took out a summons asking for the appointment of an umpire. Master Ball, after hearing argument from both sides, made the order, and this order was confirmed by the Judge in Chambers, Mr. Justice Asquith, who gave to the present appellants leave to appeal to the Court of Appeal. The Court of Appeal (Lord Greene, M.R., Goddard and du Parcq, L.JJ.) dismissed the appeal and affirmed the view that the respondents were not in the position of alien enemies at common law and thus still enjoyed the right to resort to the King's Courts. This is the principal question to be decided in the present appeal. A subsidiary question as to the validity of the retainer of the solicitors for the respondents becomes irrelevant if the appeal on the main point were to succeed.

On the main question, it is, of course, common ground that an "alien enemy " cannot sue in the King's Courts or otherwise take up the position of an actor in British litigation, save under royal licence. An alien enemy, in this connection, does not mean a subject of a State at war with this country but a person of whatever nationality who is carrying on business in, or is voluntarily resident in, the enemy's country. Porter v. Freudenberg, [1915] 1 K.B. 857, at p. 869. That case was the decision of a specially constituted Court of Appeal at the beginning of the last war. It confirmed the view which was taken by our Courts during the Napoleonic wars, e.g., in the King's Bench in O'Mealey v. Wilson, (1808) 1 Camp. 482, where Lord Ellenborough, C.J., said, at p. 483:

If a British subject resides in an enemy's country without being detained as a prisoner of war, he is precluded from suing here. And by the Court of Common Pleas in M'Connell v. Hector, (1802) 3 Bos. & P. 113, at p. 114, where the Court declined to support a commission of bankruptcy granted at the suit of three partners, all British subjects, on the ground that two of them resided and traded at an enemy port. The port was the Dutch port of Flushing, described as "a port belonging to the enemies of this country"--the relevant date is not given, but, as Professor McNair points out in a learned article on the "Procedural Capacity of Alien Enemies" in the Law Quarterly Review of April last, the time was probably during the period when Holland, under a Francophil puppet government, was at war with Great Britain. In that case Lord Alvanley, C.J., said: I do not wish to hear it argued that a person who lives and carries on trade under the protection and for the benefit of an hostile State, and who is so far a merchant settled in that State that his goods would be liable to confiscation in a Court of Prize, is yet to be considered as entitled to sue as an English subject in an English Court of justice.

This decision was approved by this House in Rodriguez v. Speyer Brothers, [1919] A.C. 59, when Lord Finlay, L.C., said of it (at p. 73): All that was decided by the Court was that enemy character results from residence in the enemy country, and there is no doubt as to the correctness of this proposition.

There can be no doubt that the respondent company must be treated as "resident" in Rotterdam. Their commercial domicile was there, and there is no indication that it has changed. The case must be dealt with as though they were an individual subject of the Queen of Holland living there. I share to the full the feeling of distaste, expressed by the Master of the Rolls, at the idea that loyal Dutch subjects, who have suffered so cruelly at the hands of a brutal enemy and whose fellow countrymen are none the less maintaining from this country all the resistance they can to the invaders of their native land, should be regarded by English law, for any purpose, as alien enemies. But for the purposes of the statute law prohibiting trading with the enemy, they would plainly be so regarded, for "enemy territory" is defined, by Sect. 15 (1) of the Act, so as to include "any area which is . . . in the occupation of a Power with whom His Majesty is at war." Here, however, we are concerned with the common law. Even a British subject, if voluntarily resident in enemy territory, would be treated at common law as unable to sue (see, for example, Lord Parker's speech in Daimler Company, Ltd. v. Continental Tyre & Rubber Company (Great Britain), Ltd., [1916] 2 A.C. 307, at p. 339), for the denial of persona standi in judicio does not turn on allegiance, but on locality. The question is, therefore, simply whether residence in territory which has been invaded and is forcibly occupied by the enemy disqualifies (apart from royal licence) from bringing or pursuing a suit in the King's Courts.

I have had the advantage of perusing the opinions prepared by my noble and learned friends Lord Wright and Lord Porter, in which most of the relevant earlier decisions, both in this country and in the United States, are collected and analytically examined, and this relieves me from lengthening my own opinion by attempting any elaborate citation of authorities. To the cases cited by my noble and learned friends, I will add a reference to a Scottish decision given during the last war--Gebruder Van Uden v. Burrell, [1916] Sess. Cas. 391. There the Court of Session (Lord President Strathclyde, Lord Skerrington and Lord Anderson) held that a Dutch firm (I do not know whether the firm was the precursor of the respondent company, but the name is the same, and it was a firm of steamship owners in Rotterdam), which was an enemy within the meaning of the Trading with the Enemy Act, 1914, because the partners also carried on business in Germany, could be defeated as pursuers by the plea of alien enemy.

My own conclusions, deduced from the authorities, are in general accord with those of Lord Wright and Lord Porter, and may be summarised as follows:--

1. The test of "enemy character" is fundamentally the same, so far as areas occupied by an enemy Power are concerned, whether the question arises over a claim to sue in our Courts, or over issues raised in a Court of Prize, or over a charge of trading with the enemy at common law.

2. The test is an objective test, turning on the relation of the enemy Power to the territory where the individual voluntarily resides or the company is commercially domiciled or controlled; it is not a question of nationality or of patriotic sentiment.

3. If the enemy Power invades and forcibly occupies territory outside his own boundaries, residence in that territory may disqualify from bringing or maintaining suit in the King's Courts in the like manner as residence in the enemy Power's own territory would. The same applies to a company commercially domiciled or controlled in occupied territory.

4. But this is not always or absolutely so. It depends on the nature of the occupation and on the facts of each case. If as a result of the occupation the enemy is provisionally in effective control of an area at the material time, and is exercising some kind of Government or administration over it, the area acquires "enemy character"; local residents cannot sue in our Courts and goods shipped from such an area have enemy origin--see Marshall, C.J., in the Thirty Hogsheads of Sugar, Bentzon v. Boyle, (1815) 9 Cranch 191, at p. 195. If, on the other hand, the occupation is of a slighter character, for instance, if it is incidental to military occupation and does not result in effective control, the case is different, as in the Gerasimo, (1857) 11 Moo. P.C. 88. I would adopt the observations of my noble and learned friend Lord Wright on this decision, for I agree that, while Dr. Lushington's statement of the law went too far in one direction, Lord Kingsdown, in delivering the judgment of the Privy Council, reversing the decision of the Prize Court, in one passage went unnecessarily far in the other. In the present case, the occupation of Holland by Germany is plainly, as things stand, of the more absolute kind.

5. It is not irrelevant to bear in mind the reason why a resident in enemy- occupied territory is in certain circumstances subject to the same disability as a resident in enemy territory. "This law," said Lord Reading, C.J., in Porter v. Freudenberg, sup., at p. 867, referring to the denial to alien enemies of a right to sue, was founded in earlier days upon the conception that all subjects owing allegiance to the Crown were at war with subjects of the State at war with the Crown, and later it was grounded upon public policy, which forbids the doing of acts that will be or may be to the advantage of the enemy State by increasing its capacity for prolonging hostilities in adding to the credit, money or goods, or other resources available to individuals in the enemy State. This consideration equally applies to a claim sought to be established in our Courts by a resident in enemy-occupied territory, for if the claimant succeeds, an asset in the form of an award or a judgment is created which the occupying power can appropriate and which is calculated to increase the enemy's resources.

6. The common law disability to sue in such cases cannot be regarded as got rid of because emergency regulations would prevent the transmission abroad of the sum recovered. The asset would be created, even though it necessarily remained here till the end of the war. Such an asset might well operate as security for an advance to the enemy from a neutral lender.

7. The operation of the rule refusing persona standi in judicio is always subject to permission being given by royal licence. In the present case, no application for a royal licence has been made.

For these reasons, I find myself obliged to differ from the Court of Appeal and to move that the appeal be allowed with costs here and below. As I have said, this conclusion makes it unnecessary to deal with the other ground of appeal touching the retainer of the respondents' solicitor. On this point also I agree with the view expressed by my noble and learned friend Lord Porter.