Laane & Baltser v Estonian SS Line,

• Judge: Kellock J.,Kerwin J,Re,Rand J.
• Court: Supreme Court (Canada)
• Date: 28 February 1949
• Docket Number: Case No. 50

Canada, Exchequer Court, New Brunswick, Admiralty District.

Supreme Court of Canada.

(Anglin, D.J.A.)

(Rinfret, C.J.C., Kerwin, Rand, Kellock, and Estey, JJ.)

Case No. 50

Estonian State Cargo and Passenger S.S. Line

and

Laane and Baltser (The Elise).

Conclusiveness of Statements of Executive — Recognition of de facto Government — Estonian S.S.R. — Recognition of Incorporation of Estonian S.S.R. in U.S.S.R. — Retroactive Effect of Recognition — Law of Canada.

Recognition — of Governments — Recognition de facto — Nature and Effect of — Retroactivity of Recognition — Decree of Recognized Foreign Government — Validity of — Whether Cognizable in Local Courts — Enforceability on Local Territory — Estonian S.S.R. — Law of Canada.

Recognition — Of Annexation — Incorporation of Estonia in U.S.S.R. as Estonian S.S.R. — Law of Canada.

Jurisdiction — Territorial — Operation of Foreign Laws in Local Territorial Waters — Nationalization Decree of Estonian S.S.R. — Law of Canada.

Belligerent Occupation — Effects of — Prior Decrees of Unrecognized Government of Occupied Territory — Whether Abrogated by Occupation — German Occupation of Estonia — Decrees of Estonian S.S.R. — Validity after End of Occupation — Law of Canada.

Jurisdiction — Personal — Property of Nationals Abroad — Nationalization Decree — Effect of — Enforceability in Territorial Waters of Foreign State — Ships in transitu — Recognition — Of Governments — Of Incorporation of State in Territory of Foreign State — Estonian Soviet Socialist Republic — Recognition de facto — Retroactive Effect of — Nature of — Relationship of Recognition of Governments de facto with Recognition de jure — Decree of Recognized Foreign Government — Validity — Whether Cognizable in Local Courts — Confiscatory Decrees — Enforceability — Belligerent Occupation — Effects of — Prior Unexecuted Nationalization Decrees of Local Sovereign — Whether Enforceable After End of Occupation — German Occupation of Estonia — Conclusiveness of Statements of Executive — Recognition of Estonian Government — Law of Canada.

The Facts.—This action in rem was instituted by the plaintiff, the Estonian State Cargo and Passenger S.S. Line, to determine the ownership of the sum of $44,177 constituting the proceeds realized on the sale of the s.s. Elise, a ship registered at Parnü, Estonia, formerly owned and operated by the interveners, Laane and Baltser. During the year 1940 the Elise was engaged in trading between the United Kingdom and Canada. About June 17, 1940, a new Government was established in Estonia, known as the Estonian Soviet Socialist Republic and forming a constituent republic of the Union of Soviet Socialist Republics.

In 1947 the Government of Canada recognized the Government of the Estonian S.S.R. as the de facto Government of Estonia, but not as the de jure Government. The Canadian Government also recognized de facto but not de jure the incorporation of the Estonian S.S.R. in the U.S.S.R. The certificate signed by the Secretary of State for External Affairs in Canada setting out these facts reads as follows:

“Department of External Affairs

Canada

Ottawa

January 2nd, 1947.

“Dear Sir,

• “Re: Estonian State Cargo and Passenger Steamship Line vs. Proceeds of the Steamship Elise.

“Your letter of December 23 encloses four questions put jointly by you and Mr. C. F. Inches, representing all the parties to this action. You desire my answers to these questions for production to the Court in this case.

“Q. 1. Does the Government of Canada recognize the right of the Council of Peoples' Commissars of U.S.S.R., or any other authority of the U.S.S.R., to make decrees purporting to be effectual in Estonia? A. The Government of Canada recognizes sthat Estonia has de facto entered the Union of Soviet Socialist Republics, but does not recognize this de jure. The question of the effect of a Soviet decree is for the Court to decide.

“Q. 2. Does the Government of Canada recognize the existence of the Republic of Estonia as constituted prior to June, 1940, and if not when did such recognition cease? A. The Government of Canada does not recognize de facto the Republic of Estonia as constituted prior to June, 1940. The Republic of Estonia as constituted prior to June, 1940, has ceased de facto to have any effective existence.

“Q. 3. Does the Government of Canada recognize that the Republic of Estonia has entered the Union of Soviet Socialist Republics, and if so, as from what date, and is such entry recognized as being ‘de facto’ or ‘de jure’? A. The Government of Canada recognizes that Estonia has de facto entered the Union of Soviet Socialist Republics but has not recognized this de jure. It is not possible for the Government of Canada to attach a date to this recognition.

“Q. 4. Does the Government of Canada recognize the Government of the Estonian Soviet Socialist Republic, and if so, from what date? A. The Government of Canada recognizes the Government of the Estonian Soviet Socialist Republic to be the de facto government of Estonia but does not recognize it as the de jure government of Estonia. It is not possible for the Government of Canada to attach a date to this recognition.

“Sincerely yours,

[sgd.] Louis S. St. Laurent

Secretary of State for External Affairs.”

A number of decrees were promulgated by the new Estonian Government between July and October 1940 which purported to nationalize, subject to the payment of compensation amounting to 25 per cent. of their value, all ships and shipping concerns in Estonia. In 1941 the s.s. Elise, being in St. John in New Brunswick, was arrested by virtue of several processes issued out of the Court and sold in order to satisfy various claims which had been brought against her. After these claims had been met the sum of $44,177 remained for disposal. This amount was claimed in the present action by the Estonian State Cargo and Passenger S.S. Line, a state instrumentality which had been established by the Estonian nationalization decrees to succeed to the rights and interests of nationalized shipping companies. In support of this claim the plaintiff contended that the decrees were the legitimate exercise of legislative power by the de facto government, and were applicable to all ships of Estonian registry wherever they may have been at the date of the decrees and that therefore the plaintiff was entitled to the proceeds of the sale of the s.s. Elise. It was admitted by the plaintiff that the interveners, as former owners of the s.s. Elise, should be entitled to the payment out to them of 25 per cent. of the amount in dispute. Laane and Baltser claimed the whole sum on several grounds: that the Court was bound to inquire into the constitutional validity of the decrees in question, such an inquiry, according to their submission, revealing that the requirements of Estonian law had not been complied with; that because the new Estonian Government had only been recognized as the de facto Government it suffered from a disability to enact exterritorial legislation; that since the recognition of the Estonian S.S.R., even as a de facto Government, took place in 1947, it did not apply retrospectively to place the seal of recognition on every prior legislative act since the establishment of the new State; that the supersession of the local government by a belligerent occupant during the years 1941–1944 had the effect of annulling previous decrees promulgated by what was at that time an unrecognized Government; that, if the decrees were validly enacted they could have no effect within the territorial waters of a foreign state, since there was no principle of international law exempting foreign merchant vessels from the exclusive territorial jurisdiction of the local State and thus no principle supporting the contention that such ships were subject to no other jurisdiction than that of the State whose flag they were flying; and that, as a final argument for invalidity, the confiscatory character of the decree was such as to preclude the Court from giving effect to it on local territory.

Held: that the plaintiff was entitled to the balance of the money subject to the payment of one quarter to the interveners in accordance with the nationalization decrees. There is no distinction between the legislative power of a de facto government and that of a de jure government, and where the executive assigns no date from which it certifies its recognition of a foreign government the Court is entitled to presume that the recognition is retroactive to the date of the establishment of the government. There is nothing to preclude the Court from making an inquiry into the validity of the decrees of a de facto government, but in the absence of any evidence to the contrary the Court will assume that the decrees are valid and comply with the constitutional requirements of the foreign law. The temporary supersession of the foreign government by a belligerent power has no effect on the validity of decrees of the foreign government when it subsequently re-establishes its authority. The Court is bound to give effect to the decrees of a de facto government purporting to have an exterritorial effect in relation to ships owned by nationals of the state under the control of the de facto government if at the time of the decrees the ship is in transitu. Where there is provision in a nationalization decree for the payment of compensation which, though small, is not nominal, the Court would be reluctant to describe the decree as confiscatory. The recognition by the executive that the Estonian Government as constituted before June 17, 1940, had ceased to exist prevented the Court from even considering an objection to the nationalization decree of the new government based on its alleged repugnance to the Constitution in force before June 17, 1940. The Court said:

“It is appropriate at this stage to consider next the ultimate contention of the defendants that the decrees and statute of the de facto...