William O. Douglas

“ One needs to be no expert in Russian law to know that the expropriation decrees intended to sweep the assets of Russian companies taken over by that government into Russia's control no matter where those assets were credited. Equally clear is it that the assignment by Russia meant to give the United States as part of the comprehensive settlement everything that Russia claimed under its laws against Russians. ”

“ State questions do not become federal questions because they are difficult or because we may think that the state courts have given wrong answers to them. The only questions before us are whether New York has constitutional authority to adopt its own rules of law defining rights in property located in the state, and if so whether that authority has been curtailed by the exercise of a superior federal power by recognition of the Soviet Government and acceptance of its assignment to the United States of claims against American nationals, including the New York property. ”

“ For more than fifteen years formal relations between the United States and Russia were broken because of serious differences between the two countries regarding the consequences to us of two major Russian policies. This complicated process of friction, abstention from friendly relations, efforts at accommodation, and negotiations for removing the causes of friction are summarized by the delusively simple concept of 'non-recognition'. The history of Russo-American relations leaves no room for doubt that the two underlying sources of difficulty were Russian propaganda and expropriation. ”

“ No more can recognition be said to imply a deprivation of the constitutional rights of states of the Union, and of individuals arising out of their laws and policy, which are binding on the Federal Government except as the act of recognition is accompanied by some affirmative exercise of federal power which purports to set them aside. ”

“ In our dealings with the outside world the United States speaks with one voice and acts as one, unembarrassed by the complications as to domestic issues which are inherent in the distribution of political power between the national government and the individual states. ”

“ Under our dual system of government there are many circumstances in which the legislative and executive branches of the national government may, by affirmative action expressing its policy, enlarge the exercise of federal authority and thus diminish the power which otherwise might be exercised by the states. ”

“ Power to remove such obstacles to full recognition as settlement of claims of our nationals (Levitan, Executive Agreements, 35 Ill.L.Rev. 365, 382-385) certainly is a modest implied power of the President who is the 'sole organ of the federal government in the field of international relations.' United States v. Curtiss-Wright Corp., supra, 299 U.S. page 320, 57 S.Ct. page 221, 81 L.Ed. 225. Effectiveness in handling the delicate problems of foreign relations requires no less. Unless such a power exists, the power of recognition might be thwarted or seriously diluted. ”

“ For statutory priorities of New York policyholders or New York lienholders, and the common law priorities and system of distribution which the judgment below endeavored to effectuate and preserve intact, must alike yield to the superior force said to have been imparted to the Soviet decrees by the recognition and assignment. Nothing in the Litvinov assignment or in the negotiations for recognition suggests an intention to impose upon the states discriminations between New York and other creditors which would sustain the former's liens while obliterating those of the latter. ”

“ There is no reason why it may not through such devices as the Litvinov Assignment make itself and its nationals whole from assets here before it permits such assets to go abroad in satisfaction of claims of aliens made elsewhere and not incurred in connection with business conducted in this country. The fact that New York has marshaled the claims of the foreign creditors here involved and authorized their payment does not give them immunity from that general rule.
If the priority had been accorded American claims by treaty with Russia, there would be no doubt as to its validity. ”

“ There we were dealing with the question as to whether a state statute regulating aliens survived a similar federal statute. We held that it did not. Here we are dealing with an exclusive federal function. If state laws and policies did not yield before the exercise of the external powers of the United States, then our foreign policy might be thwarted. These are delicate matters. If state action could defeat or alter our foreign policy, serious consequences might ensue. The nation as a whole would be held to answer if a State created difficulties with a foreign power. ”

“ The expropriation decrees of the U.S.S.R. gave rise to extensive litigation among various classes of claimants to funds belonging to Russian companies doing business or keeping accounts abroad. England and New York were the most active centers of this litigation. The opinions in the many cases before their courts constitute a sizeable library. They all derive from a single theme-the effect of the Russian expropriation decrees upon particular claims, in some cases before and in some cases after recognition of the U.S.S.R., either de jure or de facto. ”

“ By the same token, the Federal Government is not barred by the Fifth Amendment from securing for itself and our nationals priority against such creditors. And it matters not that the procedure adopted by the Federal Government is globular and involves a regrouping of assets. There is no Constitutional reason why this Government need act as the collection agent for nationals of other countries when it takes steps to protect itself or its own nationals on external debts. ”

“ Recognition and the Litvinov Assignment were interdependent. We would usurp the executive function if we held that that decision was not final and conclusive in the courts.
'All constitutional acts of power, whether in the executive or in the judicial department, have as much legal validity and obligation as if they proceeded from the legislature; * * *.' The Federalist, No. 64. A treaty is a 'Law of the Land' under the supremacy clause, Art. VI, Cl. 2, of the Constitution. Such international compacts and agreements as the Litvinov Assignment have a similar dignity. ”

“ That the power to establish such normal relations with a foreign country belongs to the President is equally indisputable. Recognition of a foreign country is not a theoretical problem or an exercise in abstract symbolism. It is the assertion of national power directed towards safeguarding and promoting our interests and those of civilization. Recognition of a revoluntionary government normally involves the removal of areas of friction. As often as not, areas of friction are removed by the adjustment of claims pressed by this country on behalf of its nationals against a new re gime. ”

“ If the President had the power to determine the policy which was to govern the question of recognition, then the Fifth Amendment does not stand in the way of giving full force and effect to the Litvinov Assignment. To be sure, aliens as well as citizens are entitled to the protection of the Fifth Amendment. Russian Volunteer Fleet v. United States, 282 U.S. 481, 51 S.Ct. 229, 75 L.Ed. 473. A State is not precluded, however, by the Fourteenth Amendment from according priority to local creditors as against creditors who are nationals of foreign countries and whose claims arose abroad. ”

“ Legal ideas like other organisms cannot survive severance from their congenial environment. Concepts like 'situs' and 'jurisdiction' and 'comity' summarize views evolved by the judicial process, in the absence of controlling legislation, for the settlement of domestic issues. To utilize such concepts for the solution of controversies international in nature, even though they are presented to the courts in the form of a private litigation, is to invoke a narrow and inadmissible frame of reference. ”

“ Courts could hardly escape perplexities when citizens asserted claims to Russian funds within the control of the forum. But a totally different situation was presented when all claims of local creditors were satisfied and only the conflicting claims of Russia and of former Russian creditors were involved. In the particular circumstances of Russian insurance companies doing business in New York, the State Superintendent of Insurance took possession of the assets of the Russian branches in New York to conserve them for the benefit of those entitled to them. ”

“ The opinion show both the English and the New York courts struggling to deal with these business consequences of major international complications through the application of traditional judicial concepts. 'Situs', 'jurisdiction', 'comity', 'domestication' and 'dissolution' of corporations, and other legal ideas that often enough in litigation of a purely domestic nature prove their limitations as instruments for solution or even as means for analysis, were pressed into service for adjudicating claims whose international implications could not be sterilized. ”

“ Union State Bank, 281 U.S. 449, 50 S.Ct. 363, 74 L.Ed. 956, this Court took pains in its construction of a treaty, relating to the power of an alien to dispose of property in this country, not to invalidate the provisions of state law governing such dispositions. Frequently the obligation of a treaty will be dependent on state law. Prevost v. Greneaux, 19 How. 1, 15 L.Ed. 572. But state law must yield when it is inconsistent with or impairs the policy or provisions of a treaty or of an international compact or agreement. ”

“ Even when courts deal with the language of diplomacy, some foundation must be laid for inferring an obligation where previously there was none, and some expression must be found in the conduct of foreign relations which fairly indicates an intention to assume it. ”

“ Such nationals must look to their own government for any redress to which they may be entitled.'
But it is urged that different considerations apply in case of the foreign creditors [8] to whom the New York Court of Appeals (People, by Beha, v. First Russian Ins. Co., 255 N.Y. 415, 175 N.E. 114) ordered distribution of these funds. The argument is that their rights in these funds have vested by virtue of the New York decree; that to deprive them of the property would violate the Fifth Amendment which extends its protection to aliens as well as to citizens ”

“ Thereafter the present suit was instituted in the Supreme Court of New York. The defendants, other than respondent, were certain designated policy holders and other creditors who had presented in the liquidation proceedings claims against the corporation. The complaint prayed, inter alia, that the United States be adjudged to be the sole and exclusive owner entitled to immediate possession of the entire surplus fund in the hands of the respondent. ”

“ The Belmont case forecloses any relief to the Russian corporation. For this Court held in that case (301 U.S. at page 332, 57 S.Ct. at page 761, 81 L.Ed. 1134) : '* * * our Constitution, laws, and policies have no extraterritorial operation, unless in respect of our own citizens. * * * What another country has done in the way of taking over property of its nationals, and especially of its corporations, is not a matter for judicial consideration here. ”

“ Oxholm, 6 M. & S. 92, both of which may have carried the doctrine of non-recognition of foreign confiscatory decrees even further. See Holdsworth, The History of Acts of State in English Law, 41 Columbia L.Rev. 1313, 1325-26. The English courts have applied this rule in litigation arising out of the Russian decrees, holding that they are not effectual to transfer title to property situated in Great Britain. Sedgwick Collins & Co. v. Rossia Insurance Co., (1926) 1 K.B. 1, 15, affirmed, (1927) A.C. 95; The Jupiter (No. 3) , (1927) P. 122, 144-46, affirmed, (1927) P. 250, 253-55 ”

“ As such, when they affect property which was located in Russia at the time of their promulgation, they are subject to inquiry if at all only through our State Department and not in our courts. Underhill v. ”