PUBLICATIONS DE LA COUR PERMANENTE DE JUSTICE
INTERNATIONALE

SÉRIE A — N® 20/21

RECUEIL DES ARRETS

AFFAIRE CONCERNANT LE PAIEMENT DE
DIVERS EMPRUNTS SERBES EMIS EN FRANCE

AFFAIRE RELATIVE AU PAIEMENT, EN OR,
DES EMPRUNTS FEDERAUX BRESILIENS
EMIS EN FRANCE

PUBLICATIONS OF THE PERMANENT COURT
OF INTERNATIONAL JUSTICE,

SERIES A.— Nos. 20/21
COLLECTION OF JUDGMENTS

CASE CONCERNING THE PAYMENT OF VARIOUS
SERBIAN LOANS ISSUED IN FRANCE

CASE CONCERNING THE PAYMENT IN GOLD
OF THE BRAZILIAN FEDERAL LOANS
ISSUED IN FRANCE

LEYDEN
A.W. SIJTHOFF’S
PUBLISHING COMPANY
1929

- LEYDE
SOCIÉTÉ D’EDITIONS.
A. W. SIJTHOFF
1929

PERMANENT COURT OF INTERNATIONAL JUSTICE.

SIXTEENTH (EXTRAORDINARY) SESSION.

Before :

MM. ANZILOTTI, President,
HUBER, Vice-President,
LODER,

DE BUSTAMANTE,
ALTAMIRA,

ODA,
PEssôa,
HUGHES,

BEICHMANN,
NEGULESCO,

FROMAGEOT, |
\

Judges,

Deputy- Judges,

NOVACOVITCE, Judges ad hoc.

JUDGMENT No. 14.

CASE CONCERNING THE PAYMENT OF VARIOUS SERBIAN
LOANS ISSUED IN FRANCE.

The Government of the French Republic, represented by
M. Basdevant, Assistant Legal Adviser of the French Ministry
for Foreign Affairs,

VEYSUS

The Government of the Kingdom of the Serbs, Croats and
Slovenes, represented by M. Spassoïévitch, Professor at the
University of Belgrade.

THE Court,
composed as above,

1929.
July rath.
File E. ce. XV]
Docket XVI.
JUDGMENT No, I4.—CASE OF SERBIAN LOANS 6

having heard the observations and conclusions of the Parties,

delivers the following judgment :

The Governments of the French Republic and of the King-
dom of the Serbs, Croats and Slovenes have submitted to
the Permanent Court of International Justice, by means of
a Special Agreement concluded at Paris on April 19th, 1928,
between the aforesaid Governments, duly ratified by both
Parties on May 16th, 1928, and filed with the Registry
of the Court, in accordance with Article 40 of the Statute
and Article 35 of the Rules of Court, by letters dated
May 24th, 1928, signed by the French Minister at The
Hague and by the Minister of the Serb-Croat-Slovene State in
London (also accredited to The Hague) respectively, the dis-
pute which has arisen between the Serb-Croat-Slovene Govern-
ment and the French holders of the Serbian 4% 1895, 5%
1902, 44% 1906, 44% 1909 and 5 % 1913 loans and also of
the 44% land bonds (obligations foncières) of 1g10 and of
the 44% communal bonds of 1911 (Ouprava Fondova) and of
the shares of the Serbian Red Cross Society, with regard to
the question upon what monetary bases payment of the
principal and interest of these loans should be effected.

The letter of the Minister of the Serb-Croat-Slovene State
reached the Registry only on June 4th, 1928; but, in view of
the fact that Article III of the Special Agreement provides that
the latter may, as soon as ratifications have been exchanged, be
submitted ‘to the Court by means of a notification addressed to the
Registry by either Party, the Court was duly made cognizant
of the case on May 24th, the date on which the letter of the
French Minister at The Hague was received.

According to the terms of the Special Agreement, the Court
is asked to decide the following questions:

“(a) Whether, as held by the Government of the
Kingdom of the Serbs, Croats and Slovenes, the latter
is entitled to effect in paper francs the service of its 4%
1895, 5 % 1902, 4% % 1906, 45 % 1909 and 5 % 1913
loans, as it has hitherto done; |

(b) or whether, on the contrary, the Government of
the Kingdom of the Serbs, Croats and Slovenes, as held
JUDGMENT No. I4,—-CASE OF SERBIAN LOANS . 7 |

by the French bondholders, is under an obligation to pay
in gold or in foreign currencies and at the places indicated
hereinafter, the amount of the bonds drawn for redemp-
tion but not refunded and of those subsequently drawn,
-as also of coupons due for payment but not paid, and of
those subsequently falling due for payment of the Serbian
loans enumerated above, and in particular :

1° With regard to the Serbian 4% loan of 1805,
whether holders of bonds of this loan are entitled, whatever
their nationality may be, to obtain, at their free choice,
payment of the nominal amount of their coupons due for
payment but not paid and of those subsequently falling
due for payment, as also of their bonds drawn for redemp-
tion but not refunded and of those subsequently drawn, at
Paris, London, Berlin, Vienna, Geneva and Belgrade, in
the currency in circulation at one of these places;

2° With regard to the 5 % 1902, 44 % 1906, 44 % 1909
and 5 % 1913 loans and, subsidiarily with regard to the.
above-mentioned 4 % loan of 1895, whether holders of
these bonds are entitled to obtain payment of the nominal
amount of their coupons due for payment but not paid
and of those subsequently falling due, as also of their
bonds drawn for redemption but not refunded and of
those subsequently drawn, in gold francs at Belgrade,
Paris, Brussels and Geneva, or at the equivalent value
of the said amount at the exchange rate of the day in
the local currency at Berlin, Vienna and Amsterdam, in
so far as concerns the 1902, 1906 and 1909 loans ;

3° Lastly, how the value of the gold franc is to be
determined as between the Parties for the above-men-
tioned payments.”’ |

It is to be noted that no question is put to the Court
respecting the 44 % land bonds of 1910, the 44 % communal
bonds of IgrI, or the “shares of the Serbian Red Cross
Society’. |

Conforming to the proposals jointly made in Article IV of
the Special Agreement, in accordance with Article 32 of the
Rules of Court, the President, having regard to that article,
as also to Article 48 of the Statute and Articles 33 and 39
JUDGMENT No. I4.—CASE OF SERBIAN LOANS ~ 8

of the Rules, made an order on May 26th, 1928, fixing July
25th and September 25th, 1928, as the dates for the expira-
tion of the times allowed to each of the Parties for the filing
of their Cases, formulating their submissions, and of their
Counter-Cases in reply, setting out also, if necessary, any
additional submissions; in the same order, the President,
whilst recording that the Parties were to be held to have
agreed, in accordance with Article 30, paragraph 1, of the
Rules, to waive the right to submit Replies, reserved the
right of the Court to call upon them, should it see fit, to
submit Replies within a time subsequently to be fixed. The
Court has not made use of this right. |

The Cases and Counter-Cases were duly filed with the
Registry by the dates fixed and were communicated to those
concerned as provided in Article 43 of the Statute.

In the course of public sittings held on May 15th, 16th,
i7th, 18th, 22nd, 23rd and 24th, 1929, the Court has heard the
oral pleadings, reply and‘ rejoinder, presented by the above-
mentioned Agents for the Parties, as also by M® Albert
Montel, Counsel before the Court of Appeal of Paris, on
behalf of the French Government, and by M° Albert Devèze,
Counsel before the Court of Appeal of Brussels, on behalf
of the Serb-Croat-Slovene Government.

In support of their respective statements, the Parties have
submitted to the Court, either as annexes to the documents
of the written proceedings or during the hearing, the docu-
ments a list of which is given in the annex to this judgment}.

Under Article IV of the Special Agreement, the Parties’
Cases were to contain their submissions, whilst the Counter-
Cases were, if necessary, to set out any additional submissions.

The submissions of the French Government as formulated
in its Case are as follows:

It is submitted that:

“(r) With regard to the Serbian 4 % 1895 loan, the holders
of the bonds of this loan, whatever their nationality may be,
are entitled to obtain, at their free choice, payment of the
nominal amount of their coupons, due for payment but not

1 See p. 85.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 9

paid, and of those subsequently falling due, as also of their
bonds drawn for redemption but not refunded and of those
subsequently drawn at Paris, London, Berlin, Vienna, Geneva
and Belgrade in the currency in circulation at one of these
places ;

(2) With regard to the 4 % 1805, 5 % 1902, 44 % 1906,
44 % 1909 and 5 % 1913 loans, the holders of bonds of these
loans are entitled to obtain payment of the nominal amount
of their coupons, due for payment but not paid, and of those
subsequently falling due, as also of their bonds drawn for
redemption but not refunded and of those subsequently drawn,
in gold francs, at Belgrade, Paris, Brussels and Geneva, or
at the equivalent value of the said amount at the exchange
rate of the day in the local currency at Berlin, Vienna and
Amsterdam, in so far as concerns the 1902, 1906 and 1909
loans ;

(3) For the purpose of the above payments which are to be
made in gold francs at gold parity, the value of the gold
franc is that of a weight of gold corresponding to one twentieth
part of a piece of gold weighing 6 gr. 45161 900/1000 fine.”

For. its part, the Serb-Croat-Slovene Government, in its
Case, submits :

. that the French Government’s claims are unfounded and
that the Serb-Croat- Slovene State, in paying the principal and |
interest of the loans in dispute in French. francs, is carrying
out its obligations to the full;

And consequently that the claim of the French State should
be dismissed.”

This submission is preceded by an enumeration of grounds
on which it is based and summarizing the Serbian stand-
' point in regard to the various points forming the subject
of argument; these grounds are headed by a preamble, the
terms of which should be set out:

“Whereas the purpose ot the action brought by the French
State on behalf of the holders of bonds of the Serbian 1895,
1902, 1906, 1909 and 1913 loans, is to obtain judgment to the
effect that the service of these loans should be effected in gold; :

And whereas the Serbian State in its submissions “expressly
reserves all rights which may belong to it either by reason of
the forfeiture of certain rights by the bondholders, or under
the provisions of the Peace Treaty regarding the property of

ex-enemy subjects...”

The French Government has not availed itself of the right
accorded by the Special Agreement to formulate additional
JUDGMENT No. I4.—CASE OF SERBIAN LOANS IO

submissions in its Counter-Case; it has simply contented itself
with reproducing in that document word for word the sub-
missions made in the Case, but, like the Serb-Croat-Slovene
Case, it has preceded them by an enumeration of grounds
summarizing its standpoint in regard to the various points
in dispute. |
Similarly, the Serb-Croat-Slovene Government has not
made use of its right to formulate additional submissions in
its Counter-Case, and has confined itself to stating that it
“maintains the submissions set out” in its ‘‘first Case”.

With regard to Article I (b), No. 2, of the Special Agree-
ment, a passage which is reproduced almost word for word
in the submissions of the French Government, the Court has
been informed by that Government’s Agent, in reply to a
question put by the Court to the two Parties, that the words
“and Amsterdam in so far as concerns the 1902, 1906 and
1909 loans’, which in a preliminary draft of the Special
Agreement were enclosed in brackets, should be read to
mean: whereas, in the case of the holders of bonds of the
four loans of 1902, 1906, 1909 and 1913, the question is
one of the existence of a right to obtain at Berlin and at
Vienna only payment of the corresponding value at the .
exchange rate of the day in the local currency of the nominal
amount in gold francs of their coupons and bonds, in the
case of holders of bonds of the 1902, 1906 and 1909 loans,
there is also the question of the existence of a similar right
at Amsterdam.

The Agent for the Serb-Croat-Slovene Government has not
disputed the explanation thus given, which is, moreover,
confirmed by the wording of the various bonds.

.THE FACTS.
According to the documents and information submitted to

the Court by the Parties, the origin of the controversy now
before the Court is as follows:
JUDGMENT No. 14.—-CASE OF SERBIAN LOANS II

I.

I.—At a conference held on June 2oth, 1895, at Carlsbad,
between the Serbian Minister of Finance, representatives of
the Serbian National Bank and representatives of three other
banks, the Minister explained that the Serbian Government
had decided ‘‘to convert the existing 5% loans into a conso-'
lidated 4% loan to be redeemed in 72 years, to maintain
for the benefit of this new conversion loan the securities
appropriated to the existing loans; further, to create by law,
for the control of these securities, an Administration of Mono-
polies entirely independent of political occurrences, in order
that the securities appropriated to the conversion loan should
be administered independently, and to utilize independently
the revenues which it receives for the payment of interest and
for the redemption of the conversion loan’. Thereupon the
representatives of the banks expressed the ‘opinion that the
proposals of H.E. the Minister of Finance were calculated
considerably to increase confidence in Serbia's credit and
to compensate Serbia’s creditors for the reduction of the
rate of interest resulting from the exchange of the existing
5% stock for 4% bonds’. It was accordingly agreed that
the Serbian Government should submit to the Skupshtina a
bill containing certain provisions agreed upon by the Con-
, ference.

The Jaw in question was in effect promulgated on July
8th/2oth, 1895. It authorized a “new consolidated loan’
of a nominal capital of 355,292,000 dinars (francs); it was
divided into 710,584 bonds, the certificates of which—which -
are analysed hereinafter—were signed’ at Belgrade on August
Ist/13th, 1805. The loan was- issued in the same year at
various places other than London, with the exception of an
amount of 73,460,000 francs which remained in the hands of
the Serbian Government.

According to a circular of the Comptoir national d’ Es-
compte of Paris dated August 28th, 1895, it was more a
question of an exchange of certificates—this moreover was
in accordance with the character of the 1895 loan as a
conversion loan—, and this exchange could be demanded until

2
JUDGMENT No. 14.—-CASE OF SERBIAN LOANS 12

September 24th, 1895. The Court has before it no prospectus
properly so called, but merely a “first notice distributed in
France in May 1896”, as also a “notice concerning the Ser-
bian 4% consolidated 1895 funds”, which mentions no date
but is. said to have been published in October 1902, the
authenticity of which however is disputed by the Serbian
Government.

Under a contract concluded at Paris on April 3rd/15th,
1896, the Serbian Government made over to a group of
banks ‘‘the nominal sum of 70,460,000 francs” of the 4%
redeemable loan of 1895; a portion of the amount thus made
over was made the subject of an agreement concluded at
Paris on June 27th/July oth, 1897, with regard to the issue
in London of £1.000.000 sterling (25 million dinars). The
prospectus relating to this section, dated July 23rd, 1897,
states that subscription would take place in London on

July 27th, 1897.

II—On July 26th/August 8th, 1902, a Serbian law was
promulgated authorizing the Government to issue a loan
of a nominal amount of ‘60 million francs in gold”, and
designed to liquidate a part of the floating debt. With a
view to the issue of this loan, the Serbian Government con-
cluded at Paris on August 23rd/September 5th, 1902, with
a group of banks, a contract under which the Government
was to hold at the disposal of the banks, on certain specified
conditions, the bonds to be issued to the number of 120,000.
The bonds were signed at Belgrade on the same day; they
will be analysed hereinafter. The prospectus, which is dated
February 12th, 1903, indicates that the subscription list will
be open at Paris during the day of February 26th, 1903.

TlI.—A Serbian law promulgated on December r4th/27th,
1906, authorized the Serbian Government to contract a loan
“of a nominal amount of 95 million francs in gold’’, des-
tined for the construction of railways and the acquisition of
war material. As early as November 12th, 1906, however, a
‘contract had been concluded at Geneva between the Serbian
Government and a group of banks, the object of which
was the issue of the loan contemplated by the law of
December 14th/27th, to which it expressly refers. Under
JUDGMENT No. I14.—CASE OF SERBIAN LOANS 13

the contract, the Serbian Government was to hold at the
disposal of the banks the bonds to be created to the number
of 190,000 “as from the signature of the contract”. The
bonds, which will be analysed hereinafter, were signed at
Belgrade on December 14th/27th, 1906, that is to say, on the
day on which the law authorizing the loan was promulgated.
According to the prospectus, which is dated January 23rd,
1907, the subscription list was to be open at Paris on Febru-
ary gth, 1907.

IV.—On October gth, Ig09, a contract was concluded at
Paris between the Serbian Government and a group of banks
concerning the issue of a “‘loan of 150 millions of gold francs
which the Government intended to ask the Skupshtina for
authority to contract”; the Government undertook to hand
over to the banks the bonds to be issued ‘as from the
date of the passing and promulgation of the law’’; bonds
* to the number of 300,000 were to be issued 75% in France
and 25% in Germany; the contents of these bonds will be
analysed hereinafter. On December 15th/28th, 1909, a Ser-
bian law was in effect promulgated approving ‘the contract
of October 27th/November oth, 1900,’ concerning the loan
“‘of 150,000,000 francs intended for the construction of rail-
ways and the completion of the stock of war material”. The
bond certificates were signed the same day at Belgrade, and,
according to the prospectus of February 5th, 1910, concern-
ing the issue in France of 225,000 bonds, applications for
allotments were to be received at Paris, on and after Febru-
ary 19th, 1910; on the other hand, the prospectus concern-
ing the German issue (75,000 bonds), dated ‘‘February 1910”,
states that subscription would take place ‘at Berlin, Frank-
fort-on-the-Main and Hamburg, on February 26th, 1910.

V.—Lastly, a contract signed at Belgrade on August 26th/
September 8th, 1913, between the Serbian Government and
the group of banks fixed the conditions for the issue by the
latter of a loan which the Government “intended to ask the
Skupshtina for authority to contract’. The loan was to be
of 250,000,000 francs and divided into two equal parts, one
‘ devoted to payment of the expenditure resulting from the
wars of I9I2 and 1913, and the other to expenditure ih.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS I4

connection with the requirements of the public services and
the economic development of the Kingdom, and especially of
the new territories. The bonds, to the total number of 500,000,
were to be held at the disposal of the banks as from the
date of the passing and promulgation of the law authorizing
the loan. This law, which was actually promulgated on
October 18th/31st, 1913, approved the contract of August
26th/September 8th, 1913, concerning the loan ‘‘of 250,000,000
gold francs for the payment of the urgent expenditure incurred
during the war and for urgent needs of the State”. The
bonds, which will be analysed hereinafter, were signed at
Belgrade the same day. According to the prospectus, dated
December roth, 1913, the subscription list, which was opened
at Paris, Geneva and Belgrade, was to be closed on Janu-
ary I4th, 1914, at jatest.

2.

It has not been denied—and this moreover appears from
the actual terms of the Special Agreement—that the service

of the five loans has hitherto been effected in respect of the |

French holders in French francs at their current value. This
also appears to be the case, since July 1920, as regards
coupons of the 4 % 1895 loan belonging to French holders
who had previously been paid in London in «English money.
The service of the loan was conducted in this manner, in
particular, during the period, in the course of the war of
1914-1018, when it was met, either by the French Govern-
ment—as contended by the Serb-Croat-Slovene Government—
or out of funds advanced by the French and British Govern-
ments. It was from 1924 or 1925 onwards that the holders

began to refuse to accept payment of their coupons on this.
basis and to make protests, contending that the loan-service |

should be on a gold basis.

It is also common ground that the yield of the various
loans was credited to the Serbian Government in French
francs at the current value and that, when that Government,
in 1913, asked for remittances in gold specie, it was obliged
to accept responsibility for certain expenses in respect thereof,
the character of which is differently construed by the Parties.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS I5
3.

When their. attention had been directed to the question.
whether the service of the Serbian loans should be effected
in francs at gold value or in francs at the current value,
the French bondholders requested their Government to inter-
vene. According to the statements of the Parties’ Agents
before the Court, diplomatic negotiations followed and the
Court has had before it certain documents relating to these
negotiations, in the course of which “the Government of the
French Republic held that the French holders of the loans in
question were justified in the claim they were making to
obtain payment in gold currency of arrears and of bonds of
those loans drawn for redemption’, whilst “the Serb-Croat-
Slovene Government, on the other hand, held that it was
right in maintaining that payment was due only in French
paper money’.

This is “‘the dispute” which, being unable to settle it by
diplomacy, the two Governments have, according to the
preamble of the Special Agreement of April xoth, 1928,
decided to “submit to the Court’’; it is true, however, that,
in the preamble, as also in Article I above quoted, the
Special Agreement defines the dispute by stating, not the
respective contentions of the two Governments, but, on the
one hand, that of the Serb-Croat-Slovene Government and, on
the other, that of the French bondholders; the Court will’
revert to this point.

According to the Special Agreement, the Court’s judgment,
though deciding the questions formulated in Article I, is not
however destined finally to settle the manner in which the
service of the loans is to be effected. For Article IT of the
Special Agreement provides that, within one month from the
delivery of the judgment, the Serb-Croat-Slovene Govern-
ment and the representatives of the bondholders will begin
negotiations with a view to concluding an arrangement which :

“1° In the event of the Court’s award being in accord-
ance with the views of the Government of the Kingdom |
of the Serbs, Croats and Slovenes, will determine whether
considerations of equity do not require that the Govern-
JUDGMENT No. 14.—CASE OF SERBIAN LOANS 16

ment of the Kingdom of the Serbs, Croats and Slovenes
should make the bondholders certain concessions over and
above that which—in the event of an award by the
Court in favour of its contentions—it would be strictly
obliged to do.

2° In the event of the Court’ s award recognizing the
justice of the claims of the bondholders, will make to
the Government of the Kingdom of the Serbs, Croats and
Slovenes, having regard to its economic and financial
situation and capacity for payment, certain concessions
over and above that which it would be strictly entitled
to claim.”

The same article also provides that, failing the conclusion

within a specified time of such an arrangement, “‘the question
of the concessions referred to’ in the paragraph quoted above
“and of the method of giving effect to them’ shall, in all
circumstances, be decided by a special arbitral tribunal, to
which the question may be referred by “either of the two
contracting Parties’’.
' Binally, it should be observed that, according to Article V
of the Special Agreement, ‘‘as regards any matter not provided
for by the present Special Agreement, the provisions of the
Statute of the Permanent Court of International Justice shall
be appplied”’.

The Courts jurisdiction.

Before approaching the questions submitted to it, the
Court feels that it should define, with reference to the
provisions governing its jurisdiction and functions, the task
entrusted to it by the Special Agreement.

This is made necessary because of the fact that the juris-
diction which the Court is called upon to exercise under the
Agreement between France and the Serb-Croat-Slovene State,
seems at first sight to constitute a departure from the prin-
ciples which the Court, in previous judgments, has laid down
with regard to the conditions under which a State may bring
before it cases relating to the private rights of its nationals.

According to Article 14 of the Covenant, ‘the Court is
competent to hear and determine “any dispute of an inter-
national character which the Parties thereto submit to it”;
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 17

and, according to Article 36 of its Statute, ‘‘the jurisdiction
of the Court comprises all cases which the Parties refer to
it”. Having been brought before the Court by a Special
Agreement between the Government of the French Republic
and the Government of the Serb-Croat-Slovene Kingdom, the
present case appears on this ground to be admissible as far
as considerations of form are concerned.

Nevertheless, according to the strict terms of the Special
Agreement, the controversy submitted to the Court does not
appear as a dispute between the two Governments, but
as one between the Government of the Serb-Croat-Slovene
Kingdom and the French bondholders of certain Serbian
loans: it is this dispute, concerning the question on what
monetary bases the service of these loans should be effected,
which the said Government and the Government of the French
Republic would appear to have submitted to the Court by
agreement. Now, Article 34 of the Statute expressly provides
that ‘only States or Members of the League of Nations can
be parties in cases before the Court” (in the French text
“ont qualité pour se présenter devant la Cour”); this principle
has its origin in Article 14 of the Covenant, the terms of
which, especially if regard be had at the same time to both
the official versions, hardly admit of a doubt that the dis-
putes of an international character contemplated therein are
disputes between the actual Parties who submit them to the
Court.

It follows that if the dispute referred to the Court by the
Special Agreement between France and the Serb-Croat-Slovene
State were to be regarded as a dispute between the Govern-
ment of the Serb-Croat-Slovene Kingdom and certain bond-
holders of the loans, one of the essential conditions of procedure
before the Court, namely, the legal capacity of the Parties,
would be unfulfilled.

In this connection, reference should be made to what the
Court has said on several occasions, and in particular in
Judgments Nos. 2 and 13, namely, that by taking up a case
on behalf of its nationals before an international tribunal, a
State is asserting its own right—that is to say, its right to
ensure in the person of its subjects, respect for the rules. of
international law. Accordingly, in all cases with which the
Court has so far had to deal and in which private interests
JUDGMENT No. I4.—CASE OF SERBIAN LOANS I8

have been involved, the State’s claim has been based upon an
alleged breach of an international agreement. The éontroversy
submitted to the Court in the present case, on the contrary,
solely relates to the existence and extent of certain obligations
which the Serbian State is alleged to have assumed in respect
of the holders of certain loans. It therefore is exclusively
concerned with relations between the borrowing State and
private persons, that is to say, relations which are, in them- -
selves, within the domain of municipal law. |

It is however to be noted that the question whether the
manner in which the Serb-Croat-Slovene Government is
conducting the service of its loans is in accordance with the
obligations accepted by it, is no longer merely the subject of
a controversy between that Government and its creditors.
When the holders of the Serbian loans, considering that their
rights were being disregarded, appealed to the French Govern-
ment, the latter intervened ‘on their behalf with the Serb-Croat-
Slovene: Government. Diplomatic negotiations followed: but
whatever took place during these negotiations, it is common ground
that the Serb-Croat-Slovene Government did not reject the inter-
vention of the French Government, but contended that the
service of the loans was being effected by it in full conformity
with the obligations resulting from the contracts. This view
however was not shared by the Government of the French
Republic. As from this point, therefore, there exists between
the two Governments a difference of opinion which, though
fundamentally identical with the controversy already existing
between the Serb-Croat-Slovene Government and its. creditors,
is distinct therefrom; for it is between the Governments of
the Serb-Croat-Slovene Kingdom and that of the French
Republic, the latter acting in the exercise of its right to pro-
tect its nationals.. It is this difference of opinion between the
two Governments and not the dispute between the : Serb-
Croat-Slovene-Government and. the French holders of the loans,
which is submitted by the Special Agreement ‘to the Court. :
The case therefore is admissible not merely from the point of
view of form: it also relates to a dispute between Parties of
the category contemplated by Article 14 of the Covenant and
Article 34 of the Statute. It thus only remains to consider
whether the actual subject of the dispute referred to the

#
JUDGMENT No. 14.—CASE OF SERBIAN LOANS Ig

Court which relates only to questions of fact and of municipal
law, prevents the Court from dealing with it.

From a general point of view, it must be admitted that
the true function of the Court is to decide disputes between
States or Members of the League of Nations on the basis of
international law: Article 38 of the Statute contains a clear
indication to this effect.

But it would be scarcely accurate to say that only ques-
tions of international law may form the subject of a decision
of the Court. It should be recalled in this respect that para-
graph 2 of Article 36 of the Statute provides that States may
recognize as compulsory the jurisdiction of the Court in legal
disputes concerning ‘‘the existence of any fact which, if
established, would constitute a breach of an international
obligation”. And Article 13 of the Covenant includes disputes
of the sort above mentioned=“among those which are generally
suitable fog submission to arbitration or judicial settlement”.
Clearly, amongst others, disputes concerning pure matters of
fact are. éontemplated, for the States concerned may agree
that the fact to be established would constitute a breach of
an international obligation; it is unnecessary to add that
the facts the existence of which the Court has to establish
may be/of any kind.

Is the case altered if the point at issue between two States
is a question which must be decided by application of the
municipal law of a particular country? There are cases—as
the Court has already had occasion to observe in Judgment
No. 8—in which an action cannot be brought before af —
international tribunal when there are legal remedies still
open to the individuals concerned. But, apart from cases of
this kind, and) when the two States have agreed to have
recourse to the Court, the latter’s duty to exercise its juris-
diction cannot be affected, in the absence of a clause in the
Statute on the subject, by the circumstance that the dispute
relates to a question of municipal law rather than to a pure
matter of fact.] The very wide wording of the first paragraph
of Article 36, which refers especially to cases which—like the
present proceedings—are brought before the Court by Special
Agreement, supports this conclusion.

“-

LA
Le
JUDGMENT No. I4.—-CASE OF SERBIAN LOANS 20

Article 38 of the Statute cannot be regarded as excluding
the possibility of the Court’s dealing with disputes which
do not require the application of internatioral law, seeing
‘that the Statute itself expressly provides for this possibility. :
All that can be said is that cases in which the Court must
apply international law will, no doubt, be the more frequent,
for it is international law which governs relations between
those who may be subject to the Court’s jurisdiction.

On the one hand, the dispute submitted to the Court
is, as has. been explained, a controversy between France and
the Serb-Croat-Slovene State, while on the other hand, it
relates exclusively to a nexus of municipal law between the
Serb-Croat-Slovene State as borrower and the holders of
certain Serbian loans. In these circumstances, the question
arises whether facts of a character which would determine the
relations under international law between the two States may
also have an effect upon the relations under the municipal
law upon which the Court, at the request of these States,
has to give judgment in this case. Thus the Government
of the Serb-Croat-Slovene State has sought to rely upon
certains acts of the French Government with regard to the
service of the Serbian loans. The Court cannot base its deci-
sion on facts which are outside the scope of the relations .
existing between the borrowing State and the bondholders, |
for the question submitted to it is definitely restricted to
these relations; it is even expressly submitted in the form
of a statement contrasting the contention of the Serb-Croat-
Slovene Government on the one hand and that of the bond-
holders on the other. The Court therefore can and must
deal only with the particular aspect of the problem raised
by the intervention of the French Government on _ behalf
of the bondholders. This would be no less true even if the,
Special Agreement did not in its second article provide for :
a second possible phase of the proceedings, in which consi- ;
derations of equity’ and necessity may come into account,
considerations which have nothing to do with the relations
at municipal law existing between borrower and lender.
JUDGMENT No. 14.—CASE OF SERBIAN LOANS 2I

THE LAW.

The bonds.—The terms of the bonds of the various issues, in
so far as they are pertinent to the questions before the Court,
are as follows:

1895 Loan.
(Translation. 1
“4 % redeemable Loan
created by the law of 8th/2oth July, 31895, represented by
710,584 bonds constituting a nominal capital of frs. 355,292,000
= RM. 287,786,520 = Austrian gold florins 142,116,800,
repayable in gold at par in 72 years,
secured by the revenues appropriated by the law to the
Autonomous Administration of Monopolies.

BOND
to bearer ;
OF FIVE HUNDRED FRANCS
nominal value
= R.M. 405 = Austrian gold florins 200.”

“The bonds of this loan yield 4.% per annum upon their
nominal value and the interest thereon will be paid half-yearly
on the Ist/13th July of each year on presentation of the
coupons.

Repayment of this loan will be effected in accordance with
the smking fund plan annexed to. the bonds within 72 years
by means of half-yearly drawings held on ast/13th April and
1st/13th October of each year.

Drawn bonds will be repaid at their nominal value in gold
when the first coupon subsequent to the drawing reaches
maturity.

Bonds and coupons of this loan are free of all existing
or future taxes, duties or deductions in Serbia.

Payment of matured coupons and bonds drawn will be
effected, at the choice of holders:
| the rate of ro francs in gold for each cou-

at Belgrade pon and 500 francs in gold for each bond of 500

Paris f :
” rancs nominal,
at the rate of R.M. 8.10 in gold for each coupon
» Berlin and R.M. 405 for each bond of R.M. 405 nom-
inal,

| at the rate of 4 Austrian gold florins for each cou-
» Vienna , pon, and 200 Austrian gold florins for each bond of
À 200 florins nominal,
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 22

at any of the establishments and banking houses to be appointed
by the Minister of Finance to the Kingdom of Serbia.”

The French text of the bonds shall be authoritative.

Coupons not presented for payment shall be barred by
prescription after five years and bonds drawn for redemption
thirty years after maturity.

Belgrade, August 1st/13th, 1805.”
[Signed by the Serbian Minister of Finance.]

The following is the form of coupon :
[ Translation. |

ce

4 % redeemable Loan.
COUPON
payable in gold on ....
at Belgrade and Paris at the rate of frs. 10
, Berlin at the rate of R.M. 8.10 and
Vienna at the rate of 4 Austrian gold florins.”

>»?

1902 Loan.
[ Translation. |
“5 % Bonds of the Monopolies
created by the law of July 26th/August 8th, 1Igoz,
reproduced in extract on the back,
’ for a total of 60 million gold francs
represented by .
120,000 Bonds of 500 gold francs
redeemable by purchase below par, if the case arise, or otherwise
by six-monthly drawings at par,
by means of a special provision of 4% of the
nominal total of the loan.

- Maximum period for repayment : 50 years.

Annual sum allocated for interest and redemption
of the loan: 3,300,000 gold francs.

This loan is guaranteed both by the Royal Serbian Government
and by the Autonomous Administration of Monopolies
and is payable out of the surplus of net revenue available
after providing for the service

of the loans referred to in the law of July 8th/zoth, 1895.

An annual sum of 3,300,000. gold francs shall be allocated

for the purpose and shall be paid in monthly instalments by
the Autonomous Administration of Monopolies.
JUDGMENT No, 14.—-CASE OF SERBIAN LOANS 23

The loan is further guaranteed by the revenue from the rail-
ways with a first charge upon the lines at present in working,
the whole always subject to the provisions of the Law of
July 26th/August 8th, rgo2 (Art. IV), and of the General
Bond delivered to the contracting Parties
(whereof extracts are reproduced on the back).

5 % BOND TO BEARER
OF 500. FRANCS
No.....
The present loan is issued exclusively
for uniform denominations.

INTEREST.

The Bonds of this loan carry an annual interest of 5 % on
their nominal capital. Interest is payable each three months,
on February 2nd/r5th, May 2nd/r5th, August 2nd/r5th, and
November 2nd/15th of each year on presentation of the corre-
sponding coupons.

REDEMPTION.

Should redemption not be possible by repurchase below par,
drawings shall take place at Belgrade on March 2nd/rsth and
September 2nd/15th of each year, and the bonds drawn will be
repaid in gold at par two months after, namely, on May 2nd/r5th
and November 2nd/15th respectively. The Government reserve
the right to redeem the whole loan at par, together with
interest due, after the year 1908.

Bonds and coupons of the present loan are free of all
Serbian taxes, duties or deductions, present or future.

Payment of coupons due shall be made in gold at the
choice of holders and by the firms that shall be thereto
appointed.

For each Bond of 500 francs.

at Belgrade : Frs. 6.25 on Frebr. 2nd/x5th
Paris at the \ » 0.25 May ‘2nd/r5th ( of each
Brussels ( rate of 6.25 ,, Aug. 2nd/r5th ( year.

6.25 ,, Nov. ondirsth |

Geneva
Frs. 25.— per annum on presentation of
=== coupons bearing the dates
in question.

2?

>

JUDGMENT No. I4.—CASE OF SERBIAN LOANS 24

At Berlin = On the same dates
Vienna in the currency of these towns respectively
Amsterdam at the rate of exchange at sight on Paris.

The French text of the Bonds shall be authoritative.
Belgrade, August 23rd/September 5th, 1902.

’ The Minister of Finance
of the Kingdom of Serbia.”

The coupon is as follows:
[ Translation. ] | |
a % Bonds of the Monopolies
Coupon payable in gold on...
at Belgrade, Paris, Brussels and Geneva at the rate of Frs. 6. 25;
at Berlin, Vienna and Amsterdam at the rate of exchange at
sight on Paris.”

1906 Loan.
[ Translation. |
‘44 % Gold Loan 1906

Issued under the Law of December r4th/27th, 1906, whereof an

extract is reproduced on the back

For a total of 95 million gold francs

| represented by

190,000 Bonds of 500 gold francs.

Redeemable by repurchase below par, if the case arise, or
otherwise by six-monthly drawings. at par, by means of a
special provision referred to below.

Maximum period for repayment: 50 years.

Annual sum allocated for interest and redemption of the
present loan:
4,800,000 francs.

This loan is guaranteed both by the Royal Serbian Govern-
ment and by the Autonomous Administration of Monopolies
and is payable out of the surplus of net revenue available
after providing for the service of the loans referred to in the
Law of July 8th/2oth, 1895, and July 26th/August 8th, 1902, in
accordance with the Law of December 14th/27th, 1906.

BOND OF 500 FRANCS 43 %
TO BEARER.

INTEREST.

The Bonds of this loan carry an annual interest of 43 %
on their nominal capital. Interest is paid half-yearly on
JUDGMENT No. 14.--CASE OF SERBIAN LOANS 25

April 2nd /15th and October 2nd/15th of each year on presentation
of the corresponding coupons.

REDEMPTION.

Should redemption not be possible by repurchase below par,
drawings shall take place at Belgrade on February 2nd/15th
and August 2nd/15th of each year, and the bonds drawn will
be repaid at par after two months, namely, on April 2nd/r5th
and October 2nd/15th respectively.

The bonds and coupons of the present loan are for all time
exempt from all present or future taxes and duties in Serbia.

The payment of matured coupons and bonds drawn shall be
effected at the choice of holders by the firms that shall be
thereto appointed :

at Belgrade For each Bond of 500 francs.
at Paris at the } Frs. 11.25 on April 2nd/15th } of each
» 11.25 on Oct. 2nd/15th ( year.

at Brussels rate of
at Geneva

Total 22.50 per annum on presentation
——== of coupons bearing the date
in question ;

at Berlin on the same dates in the currency of these towns
at Vienna respectively at the rate of exchange at sight
at Amsterdam on Paris.

The French text of the bonds shall be authoritative.
Belgrade, December r4th/27th, 1906.

The Minister of Finance
of the Kingdom of Serbia.”

The coupon is as follows :
[ Translation. ]
“4k % Gold Loan 1906
Bond No.....
Coupon payable on....
at Belgrade, Paris, Brussels and Geneva, at the rate of frs. 11.25
at Berlin, Vienna, Amsterdam, at the rate of exchange at
sight on Paris.
JUDGMENT No, I4.--CASE OF SERBIAN LOANS 26

| 1909 Loan.
(Translation. |
“44 % Gold Loan 1909:
Issued under the law of December 15th/28th, 1000,
whereof an extract is given on the back,
For a total of
150 million gold francs :
Consisting of
300,000 Bonds of 500 gold francs

Redeemable by repurchase below par
or by six-monthly drawings if the price is at or above par
by means of a special provision referred to below.
Maximum period for repayment : 50 years.

Annual sum allocated for interest and redemption of the
present loan :
7,500,000 francs.

This loan has as a special guarantee the net receipts of the
Autonomous Administration of the Monopolies as available
after the service of the loans referred to by the laws of
July 8th/zoth, 1895, July 26th/August 8th, 1902, and Decem-
ber r4th/27th, 1906, in accordance with the law of Decem-
ber 15th/28th, 1909. If these receipts should be insufficient to
cover annual payments under the present loan, the service as
a whole will be effected by the general revenue from the

State budget.

44 % BOND OF 500 FRANCS
TO BEARER

INTEREST.
The Bonds of this loan carry 44 % interest per annum
on their. nominal capital. Interest is payable half-yearly on
May zroth/June rst and November 18th/December Ist of each
year, on presentation of the corresponding coupons.

The half-yearly coupons are payable:
At Belgrade
At Paris |
At Brussels
At Geneva
At. Berlin, Frankfort-on-Main, Hamburg, St. Petersburg, Vienna
and Amsterdam in the currency of those towns respectively

at frs. II.25;
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 27

at the rate of exchange at sight on Paris, by the firms which
shall be appointed to effect .the service of the loan.

REDEMPTION.

Should redemption not be possible by repurchase below par,
drawings shall take place at Belgrade on March rgth/April 1st
and September 18th/October 1st of each year, and the bonds
drawn will be repaid at par two months afterwards, namely,
on May 1oth/June 1st and November 18th/December Ist.

Bonds and coupons of the present loan are free of all
Serbian taxes and duties present or future. |

The French text of the bonds shall be authoritative.
Belgrade, December 15th/28th, 1900.

The Minister of Finance
of the Kingdom of Serbia.”

The coupon runs as follows :
{Translation. |
“44 % Gold Loan 1909
Bond No.....
Coupon payable
on....

at Belgrade, Paris, Brussels and Geneva,
at the rate of frs. 11.25 ; at Berlin, Frankfort-on-Main,
Hamburg, St. Petersburg, Vienna and Amsterdam
at the rate of exchange at sight on Paris.”

1913 Loan.
{Tvanslation.]
“5 % Gold Loan 1973:
of a nominal total of
Two hundred and fifty million francs
Issued under the law of October 18th/31st, 1913,
whereof an extract is reproduced on the back.
This loan is represented by 500,000 bonds of
500 gold francs
Carrying an annual interest of 25 francs
Repayable at par by half-yearly drawings or by purchase
on the Exchange below par.
Maximum period for repayment: Fifty years.
JUDGMENT No. I4.--CASE OF SERBIAN LOANS 28

Annual sum allocated for interest and redemption of the loan:
13,550,000 francs.

Apart from the direct obligation of the Royal Serbian
Government, this loan is specially’ guaranteed by the net
receipts of the Autonomous Administration of Monopolies so
far as available after the service of the loans referred to in the
laws of July 8th/2zoth, 1895, July 26th/August .8th, 1002,
December r4th/27th, 1906, and December 15th/28th, 1900, in
conformity with the law of October 18th/31st, 1913. The loan
is further specially guaranteed by a first charge on the net
profits of the Monopoly. on Alcohol established under the law
of August 3rd/15th, 1893, and administered by the Autonomous
Administration of Monopolies.

Bonds and coupons of the present. loan are exempt from
all Serbian taxes, duties or deductions present or future.

5 % BONDS OF 500 FRANCS
TO BEARER.

INTEREST.

The bonds of this loan carry an annual interest of 5% on
their nominal capital. Interest is payable half-yearly on
February 16th/March ist and August xgth/September ist of
each year on production of the corresponding coupons.

REDEMPTION.

Should redemption not be possible by purchase below par,
drawings shall take place at Belgrade on December 1gth/
January Ist and June 18th/July 1st of each year, and bonds
drawn shall be redeemed at par two months afterwards, that
is to say, on February 16th/March rst and August r9th/Sep-
tember ist respectively.

Payment of coupons due shall be made at the choice of
holders by the firms that shall be appointed for the purpose:

At Belgrade { Frs. 12.50 on Febr. 16th/March ist.
At Paris at the | ,, 12.50 on Aug. rgth/Sept. Ist.
At Brussels rate of » 25.— per annum, on presentation
At Geneva ——= of coupons bearing the date

in question.

At Berli On the same dates in the currency of those towns
oan respectively, at the rate of exchange at sight on
At Viennas pris
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 29
The French text of the bonds shall be authoritative.

* Belgrade, October 18th/31st, 1913.

The Minister of Finance
of the Kingdom of Serbia.”

The coupon runs as follows:
(Translation. ]

“5% Gold Loan 1913
Bond No. ....
Coupon payable on....
At Belgrade, Paris, Brussels and Geneva, at the rate of
12 frs. 50.
At Berlin and Vienna, at the rate of exchange at sight on
Paris.”

Interpretation of the provisions relating to payment.—The first
question presented is with respect to the interpretation of
the loan contracts, that is, whether gold francs or merely
French francs were promised, and, if the former, the signi-
ficance of the expression “gold franc”’.

The bonds are payable to bearer and they set forth the
terms of the payment to which each holder is entitled. An
examination of the bonds shows that in each case there was
a promise of payment in gold or gold francs. Thus the bonds
of the issue of 1895 explicitly provide:

“vepayable in gold at par in 72 years’.
Also :

“Payment of matured coupons and bonds drawn will be effected
at the option of the holders:

at the rate of 10 francs in gold for each cou-
a Belgrade | pon and 500 francs in gold for each bond of
l 500 francs nominal; |
at the rate of R.M. 8.10 in gold for each cou-
at Berlin pon and R.M. 405 for each bond of 405 nom-
inal ;
( at the rate of 4 Austrian gold florins for each
at Vienna coupon and 200 Austrian gold florins for each
| bond of 200 florins nominal.”

The coupon contains the statement ‘payable in gold’’.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS ~ 30

In the bonds of the issue of 1902, the obligations are
described as being for ‘‘a total of 60 million gold francs repre-
sented by 120,000 bonds of 500 gold francs”. The bonds drawn
for payment are to be paid “am gold”, and the payment of
coupons is to be made “im gold’. The bonds of 1906 are
entitled ‘44% gold loan’’ for ‘‘a total of 98 million gold francs
represented by 190,000 bonds of 500 gold francs’’. Similarly, the
bonds of 1909 are set forth as a “41% gold loan’’ for ‘a
total of 150 million gold francs represented by 300,000 bonds
of 5300 gold francs”. The description in the bonds of 1913
is that of a “5 % gold loan’ with the addition: “This loan
ts represented by 500,000 bonds of 500 gold francs.”

The coupons in each of these issues either provide for pay-
ment in gold, as in those of the loan of r902, or carry the
words ‘“‘....% Gold loan’, as in those of the loans of 1906,
1909 and 1913.

It is argued that there is “ambiguity because in other parts
of the bonds, respectively, and in the documents preceding
the several issues, mention is made of francs without specifi-
cation of gold. As to this, it is-sufficient to say that the
mention of francs generally cannot be considered as detract-
ing from the force of the specific provision for gold francs.
The special words, according to elementary principles of inter-
pretation, control the general expressions. The bond must be
taken as a whole, and it cannot be so taken if the stipula-
tion as to gold francs is disregarded.

As the bonds themselves are not ambiguous, there is no
occasion for reference to the preliminary documents. But if
these are examined, it will appear that they tend to confirm
the agreement for gold payments.

The loan of 1895 was the subject of an agreement at
Carlsbad, between representatives of the Serbian Government
and the banks, which contained the following provisions:
“The payment of matured coupons and bonds drawn shall be
in gold’; and the Serbian law of July 8th/zoth, 1895, which
authorized the issue, provided:

“The payment of matured coupons and bonds drawn
for redemption shall be in gold at the places appointed
therefor, at the holder’s option and in the gold currency
of the respective countries.”
JUDGMENT No. I4.—-CASE OF SERBIAN LOANS 31

In view of the clear terms of the bonds of this issue, it is
not necessary to resort to inferences from the fact that this
was a conversion loan to take the place of outstanding
obligations, or to base any conclusions on the terms of the two
notices which the Court has had before it and the authenticity -
of one of which has been drawn in question.. There is nothing,
moreover, in any of the attending circumstances or preliminary
documents, which can be regarded as contradicting or impairing
the gold clauses of the bonds. Nor is it necessary to follow
the argument that the issue of bonds in London, in pounds
sterling, was a part of the authorized issue of 1895. The
issue in London—an issue which was made in a currency
par .excellence, a gold standard currency, and which would
rather denote an intention to contract a “gold loan’’—certainly
affords no opposing inferences, but it may be considered as a
separate issue in fact, and the French holders. of bonds of
1895 may be held to the terms of their own bonds, without
in any manner invalidating the conclusion that these terms
constituted a definite promise of gold francs. :

In the case of the loan of 1902, the Serbian law of author-
ization (July 26th/August 8th, 1902) provides for an issue
“of sixty million gold francs”. The contract between the
Serbian Government and the bankers also stipulates an issue
amounting to 60 millions of gold francs and that the payments
of interest will be made in gold francs at Belgrade, Paris,
Brussels and Geneva. The prospectus offering the bonds
states that there will be “120,000 bonds of 500 gold francs”.

The Serbian law authorizing the issue of 1906 (December
r4th/27th, 1906) describes it as one of ‘‘95,000,000 francs in
gold”. The contract with the bankers states that the Serbian
Government is to issue bonds to the amount of 95 millions
of gold francs, and that interest will be paid in gold francs
at Belgrade, Paris, Brussels and Geneva. The prospectus also
speaks of the issue as “190,000 bonds of .500 gold francs’’.

The documents preceding the loans of 1909 and 1913
contain similar provisions.. Thus, while the language of the
JUDGMENT No. I4.—CASE OF SERBIAN LOANS * 32

several issues varies somewhat, it must be concluded that the
promise in each case is for the payment of gold francs.

Significance of the term “‘gold francs’’.—It is urged that the
promise to pay gold francs or what is called the “gold clause”
is without legal significance. It is said that there was no
international gold franc; that the reference was to money and
not to gold as merchandise ; that the reference must be taken
to be to French money; and that the French monetary unit
was silver and that there was no “gold franc” as a monetary
unit. Hence ‘it is insisted that, despite the terms of the
engagement, the promise must be construed as one to pay in
French currency.

As it is fundamental that the terms of a contract qualifying
the promise are not to be rejected as superfluous, and as the
definitive use of the word “gold’’.cannot be ignored, the
question is: What must be deemed to be the significance of
that expression? It is conceded that it was the intention
of the Parties to guard against the fluctuations of the Serbian
dinar, and that, in order to procure the loans, it was necessary to
contract for repayment in foreign money. But, in so contract-
ing, the Parties were not content to use simply the word
“franc”, or to contract for payment in French francs, but
stipulated for “gold francs’. It is quite unreasonable to |
suppose that they were intent on providing for the giving |
in payment of mere gold specie, or gold coins, without
reference to a standard of value. The treatment of the
gold clause as indicating a mere modality of payment,
without reference to a gold standard of value, would be, not
to construe but to destroy it.

Moreover, the ‘terms of the bonds make such an appre-
ciation impossible. Thus, the bonds of 1895 call for the
payment of principal and interest, at the option of the
bondholders, not only at Paris in gold francs, but in Berlin
at the rate of R.M. 8.10 in gold for each coupon and of
R.M. 405 for each bond. There were no gold coins of the
denomination required for such payments. The bonds of
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 33

1902 provide for payment of the quarterly interest of francs
6.25; the bonds of 1906 and 1909 for semi-annual interest. of
frs. 11.25; and those of 1913 for semi-annual interest of
frs. 12.50. These were to be gold payments, but there were no
gold coins for such amounts. It is manifest that the Parties,
in providing for gold payments, were referring, not to payment
in gold coins, but to gold as standard of value. It would be
in this way, naturally, that they would seek to avoid, as was
admittedly their intention, the consequences of a fluctuation
in the Serbian dinar.

The question, then, is whether there was a standard of
value which was properly denoted by the term ‘gold franc”.
The payments in gold francs were to be made, in the case
of the bonds of 1895, at Belgrade and Paris; and in those
of 1902, 1906, 1909 and 1913, at Belgrade, Paris, Brussels
and Geneva. Both at Brussels and Geneva, as well as at
Paris, the monetary unit was the franc. While there was no inter-
national gold franc, as the franc in each case was established
by the respective countries, the conception of the franc, and
of the gold franc, had nevertheless achieved an international
character as three countries had established a similar monetary
unit, with the same definition of the gold piece of 20 francs
in weight and fineness, and this unit had been made the subject
of the Convention of the Latin Union. The ‘gold franc” thus
constituted a well-known standard of value to which reference
could appropriately be made in loan contracts when it was
desired to establish a sound and stable basis for repayment.

But, while the “gold franc” was thus an internationally
accepted standard of value, its definition was to be found
in national laws. The French, and the initial definition of

e “gold franc”, which was later adopted by Belgium and
Switzerland, and by the Convention of the Latin Union, was
found in the law of the 17th Germinal, Year Eleven. This
law provided as follows:

(Translation. ]

“Five grams of silver, nine-tenths fine, shall constitute
the monetary unit, which retains the name of franc.
JUDGMENT No. 14.-—CASE OF SERBIAN LOANS 34

Head I.—The minting of money.

Article 6.—Gold pieces of twenty and forty francs
shall be minted.

Article 7.—The standard of these pieces is fixed at
nine-tenths fine with one tenth of alloy.

Article 8.—The standard weight of the pieces of
20 francs shall be one hundred and forty-five.to the kilo-
gram and that of the 40 francs pieces 773 to the kilogram.”

According to this definition, adopted and recognized by
other countries as above stated, the gold franc, at the time
of the bond issues in question, was the twentieth part of a
piece of gold weighing 6.45161 grammes with a fineness of
nine-tenths. It is this gold franc, with the weight and fine
ness thus enacted by law, which is stipulated particularly
in Article 262 of the Treaty of Versailles, in Article 214
of the Treaty of St. Germain, and in Article 197 of the
Treaty of Trianon.

It is concluded .that this was the gold standard of value
to which the loan contracts referred.

As this standard of value was adopted by the Parties,
it is not admissible to assert that the standard should not
. govern the payments because the depreciation in French
currency was not foreseen, or, as it is insisted, could not be
foreseen at the time the contracts were made. The question
is not what the Parties actually foresaw, or could foresee,
but what means they selected for their protection. To safe- —
guard the repayment of the loans, they provided for payment
in gold value having reference to a recognized standard, as
above stated.

The provisions for payment in certain places at the rate of
the sight exchange on Paris.—The bonds of the issues of |
1902, 1906, 1909 and 1913, not only provide for the payment
of interest in gold francs at Belgrade, Paris, Brussels and
Geneva, but also for payment in other designated places,
in the money of such places respectively, ‘‘at the sight rate
of exchange on Paris’. In the bonds of 1902 and 1906, the
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 35:

provision relates to Berlin, Vienna and Amsterdam; in
those of 1909, to Berlin, Frankfort-on-the-Main, Hamburg,
St. Petersburg, Vienna and Amsterdam; and in those of 1913,
to Berlin and Vienna. It is argued that these provisions
indicate that the engagement was for the payment of the
number .of francs stated at the rate of sight exchange on
Paris on the date the payment fell due, and hence that the
payment was to be made on the basis of French francs, or
French paper francs, of whatever value they might be at
that time. But the provision is for the payment in gold,
which, as has been said, must be taken to be gold value,
with reference to the gold standard of value at the time of
the loans. The mere provision for payment in the places
named at the rate of exchange on Paris cannot affect the
amount due: it must in fact be construed in the light of
the principal stipulation which is for payment at gold value.
That provision is plainly, not for the purpose of altering the
amount agreed to be paid, but for the placing of the equi-
valent of that amount according to banking practice at the
command of the bondholder in the foreign money in the
designated cities. When it is ascertained what was the amount
agreed to be paid, it is then simply a matter of calculation
to determine the equivalent amount in the foreign ‘currency
of these places. The question, then, comes back to the terms
of the agreement. This agreement was not simply for the payment
of the stipulated amount in French francs, or in paper francs,
but in gold francs, and as this referred to a well-known
gold standard of value, it is according to that standard that
the francs to be paid are to be computed.

It was evidently contemplated that the bondholder would
receive the same amount whether he was paid in Belgrade,
Paris, Brussels or Geneva. This was the intended result of
providing for gold francs, which referred to the same standard
of gold. value as then existing at these places. It was this
amount, and not a different amount, that the bondholder was
to receive in the other cities, which did not have the franc,
and the provision for the calculation at the rate of exchange
on Paris was a matter of convenience but was clearly’ not
intended to give the bondholder more or less than he would
be entitled to receive at. Brussels or Geneva. As the -gold

5
JUDGMENT No. 14.—CASE OF SERBIAN LOANS 36

franc referred to a uniform standard, the calculation at the
rate of exchange on Paris would give the desired amount, with
very slight, if any, differences as compared with Brussels
and Geneva. ‘

The conclusion at which the Court has thus arrived is
not affected by the fact that, for more or less extended
periods gold specie in francs or a franc at gold parity was
not quoted on the money market, as was the case at the time
when the loans were issued; for the value can always be
fixed either by comparison with the exchange rates of cur-
rency of a country in which gold coin is actually in circu-
lation, or, should this not be possible, by comparison with
the price of gold builion. Once the gold value is fixed, it,
is its equivalent in money in circulation which constitutes
the amount which is payable at Belgrade, Paris, Brussels
and Geneva and at the other places enumerated in the.
bonds, in the local currency at the sight rate of exchange on
Paris.

Payments at Geneva.—It is also to be observed with respect
to provisions for payment in the bonds of the issues of 1902,
1906, 1909 and 1913, that the French bondholders, as well
as others, are entitled to receive payment of the interest on
these bonds at Geneva. on the basis of the value of the gold
franc. No distinction is made by reason of the nationality
of the bondholder. At Geneva, the value of the gold franc
has been maintained and no question has arisen between the
Parties by reason of any Swiss legislation subsequent to the
Serbian loan contracts.

The bondholders’ option under the bonds of the issue of 1805.
—In the light of the interpretation of the provisions for gold
payment, no question of difficulty is presented in relation to
the special stipulations of the bonds of 1895 giving to the
holders an option of payment in Belgrade, Paris, Berlin and
Vienna. The bondholders, whatever their nationality, are
entitled to be paid their coupons as they fall due, and the
bonds drawn for redemption, according to the terms of the
contract which is free from ambiguity. In each place named,
the amount to which the bondholder is entitled is distinctly
specified. In Belgrade and Paris, the amount is ten francs in
JUDGMENT No. 14.—CASE OF SERBIAN LOANS 37

gold for each coupon as it becomes due, and 500 gold francs
for each bond of 500 francs drawn for redemption ; in Berlin,
at the rate of 8.10 Reichmarks in gold for each coupon, and
405 Reichsmarks for each bond of 405 Reichsmarks; and in
Vienna, four Austrian gold florins for each coupon and
200 Austrian gold florins for each bond of 200 florins. As the
Parties have not discussed whether the changes which have
been made in the currency legislation of Germany and Austria
have had any effect, and if so, what effect, upon the payments
to be made in gold marks and gold florins, the Court need
not concern itself with this point. |

No part of the bonds of the 1805 loan provides for payment
at Geneva. Moreover, the bonds of the issue which formed
the subject of the contract of 1897 and which were issued in
London, bear a special clause to the effect that they are also
payable in London and in pounds sterling. Only holders of
bonds of this issue, which must be regarded for the present
purpose as a special issue, are entitled to benefit by the
clause in question, which does not appear in the bonds not
belonging to this issue.

The execution of the loan conitracis.—It appears that before
the war, payment in Paris of the coupons of all these bonds,
and of the principal of the bonds drawn for redemption, was
made in the ordinary manner, that is, in bank-notes against
deposits by the Serbian Government in the designated banks.
During this period, the parity of French currency with gold
was maintained and the manner of payment was not incon-
sistent with the right of the bondholders to receive payment
on the basis of gold francs. During the war, the same practice
continued as to payments made in Paris, but this fact has
‘little significance, as during that period and until about 1979,
there appears to have been only a slight difference in the
value of French currency as compared with a gold basis,
taking the gold dollar as a criterion; but in the subsequent
period there was a great depreciation in French currency, in
relation to the former gold value, until finally by the law
of June 25th, 1928, the French franc was stabilized on a gold
basis at approximately one-fifth of the value of the gold franc
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 38

as it stood prior to the war. During this period of deprecia-
tion, payments on the Serbian loans in question continued to
be made in French paper francs.

This conduct of the Parties, that is, the acceptance by the |
bondholders of depreciated paper francs, is invoked upon two
distinct grounds. The first is that this method of executing
the contract should be deemed to be controlling in determining
the intention of the Parties, in accordance with the familiar
principle applicable to ambiguous agreements. On this prin-
ciple it is argued that the Parties did not intend by the
loan contracts to provide for payment in gold francs. But the
loan. contracts are not ambiguous on this. point. They are
clear and definite. The fact that gold francs were not paid can-
not be admitted to show that gold francs were not promised.
If the subsequent conduct of the Parties is to be considered,
it must be not to ascertain the terms of the loans, but
whether the Parties by their conduct have altered or impaired —
their rights.

In the latter view, the principle known in Anglo-Saxon law
as estoppel is sought to be applied. The argument developed
by the Serb-Croat-Slovene Government in this connection leads
the Court to consider the circumstances. The Special Agree-
ment for the submission to the Court was signed in April
1928, but it seems that for a considerable time previously
the question had been the subject of diplomatic negotiations
between the two Governments, and the period which may
have significance with respect to the conduct of the French
bondholders’ is during the years from about 1919 to about
1925. On behalf of the bondholders, it is urged that there
were large numbers of them; that it required time for them
to arrangé for concerted action; that it was necessary for
them to interest the French Government in their case; that
the French Government had to consider the matter and:
determine whether it would proceed to diplomatic negotiations
on behalf of the bondholders; and that the delay, considering
the incidents of governmental activity, is not extraordinary
JUDGMENT No. I4,—-CASE OF SERBIAN LOANS 39

and should not Jead to a denial of rights otherwise established.
‘This position is not an unreasonable one, and when the require-
. ments of the principle of estoppel to establish a loss of right
are considered, it is quite clear that no sufficient basis has
been shown for applying the principle in this case. There
has been no clear and unequivocal representation by the
bondholders upon which the debtor State was entitled to
rely and has relied. There has been no change in position ~
on the part of the debtor State. The Serbian debt remains
as it was originally incurred; the only action taken by the
debtor State has been to pay less than the amount owing
under the terms of the loan contracts. It does not even
appear that the bondholders could have effectively asserted
their rights earlier than they did, much less that there is
any ground for concluding that they deliberately surrendered
them. It may also be observed that the contract between
borrower and lender finds its expression in bearer bonds,
which entitle the bearer to claim, simply because he is a
bearer, all the rights accruing under the bond.

It is also argued that, during the period of depreciated
currency, the French and British Governments advanced to
the debtor State amounts needed to meet the accruing pay-
ments on the bonds and that these amounts payable in Paris
were calculated in depreciated paper francs. But it is manifest
that this action could not be regarded as affecting the rights
of the bondholders. It is also stated, apparently as a moral
consideration, that there has been speculation in these bonds,
and that the original subscribers have already taken their
losses. How far this is true is not shown, but it is a matter
with which the Court cannot concern itself in dealing, as
provided in the Special Agreement, with the question of legal
right. The French Government, as it was entitled to do, has
taken up the cause of its nationals, and the legal questions
submitted by the Special Agreement of the two States for
determination by the Court do not turn on such market
transactions.

Force majeuve.—It cannot be maintained that the war itself,
despite its grave economic consequences, affected the legal
JUDGMENT No. I4.--CASE OF SERBIAN LOANS 40

obligations of the contracts between the Serbian Government
and the French bondholders. The economic dislocations
caused by the war did not release the debtor State, although
they may present equities which doubtless will receive appro-
priate consideration in the negotiations and—if resorted to—
the arbitral determination for which Article II of the Special
Agreement provides.

It is contended that under the operation of the forced
currency régime of France, pursuant to the law of August 5th,
1914, payment in gold francs, that is, in specie, became
impossible: But if the loan contracts be deemed to refer to
the gold franc as a standard of value, payments of the
equivalent amount of francs, calculated on that basis, could
still be made. Thus, when the Treaty of Versailles became
effective, it might be said that ‘‘gold francs”, as stipulated in
Article 262, of the weight and fineneness as defined by law
on January Ist, 1914, were no longer obtainable, and have not
since been obtainable as gold coins im specie. But it could
hardly be said that for this reason the obligation of the
Treaty was discharged in this respect on the ground of
impossibility of performance. That is the case of a treaty
between States, and this is a case of loan contracts between
a State and private persons or lenders. But, viewing the ques-
tion, not as one of the source or basis of the original obliga-
tion, but as one of impossibility of performance, it appears to
be quite as impossible to obtain ‘gold francs” of the sort
stipulated in Article 262 of the Treaty of Versailles as it is to
obtain gold francs of the sort deemed to be required by the
Serbian loan contracts.

The law applicable—Having thus established the meaning
which, on a reasonable construction, is to be attached to the
terms of the bonds, the Court will now proceed to consider
the subsidiary contentions of the Serb-Croat-Slovene Govern-
ment to the effect that the obligations entered into are sub-
ject to French law which—it is alleged—renders a clause for
payment in gold or at gold value null and void, at all events
in so far as payment is to be effected in French money and
in France.
JUDGMENT No. 14.—-CASE OF SERBIAN LOANS AT

As regards the question whether it is French law which
governs the contractual obligations in this case, the Court
makes the following observations :

Any contract which is not a contract between States in
their capacity as subjects of international law is based on
the municipal law of some country. The question as to which
this law is forms the subject of that branch of law which
is at the present day usually described as private: interna- —
tional law or the ‘doctrine of the conflict of laws. The rules
thereof may be common to several States and may even be
established by international conventions or customs, and in
the latter case may possess the character of true international
law governing the relations between States. But apart from
this, it has to be considered that these rules form part of
municipal law.

The Court, which has before it a dispute involving the
question as to the law which governs the contractual obliga-
tions at issue, can determine what this law is only by
reference to the actual nature of these obligations and to
the circumstances attendant upon their creation, though it
may also take into account the expressed or presumed inten-
tion of the Parties.. Moreover, this would seem to be in
accord with the practice of municipal courts in the absence of
rules of municipal law concerning the settlement of conflicts
of law. .

Before proceeding to determine which this law is, it should
however be observed that it may happen that the law which
may be held by the Court to be applicable to the obliga-
tions in the case, may in a particular territory be rendered
inoperative by a municipal law of this territory—that is to
say, by legislation enacting a public policy the application
of which is unavoidable even though the contract has been
concluded under the auspices of some foreign law.

Again it should be observed that even apart from rules
of public policy, it is quite possible that the same law may
not govern all aspects of the obligation. The distinction which
seems indicated for the purposes of this case is more partic-
ularly that between the substance of the debt and certain
methods for the payment thereof.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 42

In the first place, the law governing the obligations at
the time at which they were entered into must be determined.
In the Court’s opinion, this law is Serbian law and not French
law, at all events in so far as concerns the substance of the
debt and the validity of the clause defining it.

The loans in question are loans contracted by the State
of Serbia under special laws which lay down the conditions
relating to them. These laws are cited. in the bonds; and
it appears that the validity of the obligations set out in
the said bonds is indisputable in Serbian law. The bonds
are bearer bonds signed at Belgrade by representatives of
_the Serbian Government. It follows from the very nature of
bearer bonds that, in respect of all holders, the substance.
of the debt is necessarily the same, and that the identity
of thé holder and the place where he obtained it are without
relevancy. Only the individuality of the borrower is fixed:
in this case it is a sovereign State which cannot be presumed
to have made the substance of its debt and the validity
of the obligations accepted by it in respect thereof, subject
to any law other than its own.

Nevertheless, Serbia might have desired to make its loans
subject to some other law, either generally, or in certain
respects: if that were proved, there would seem to be nothing
to prevent it. In this case, however, there is no express.
provision to this effect. The question therefore is whether,
from the contents of the bond or other circumstances which
‘are binding on the bondholders, the conclusion can be drawn
that the State of Serbia intended that the loans in question
- should be, either generally speaking, or in certain respects,
subject to French law—which is, according to the arguments,
the only law in question.

The Serbian Government has in this connection cited
various’: circumstances which, however, upon examination, do
not support the conclusion which it deduces from them and in.
any case appear not to be binding on the bondholders. This
is the case with regard to the. various provisions contained.
in the contracts with the banks, for instance, that concerning
the quotation of bonds on the Paris Exchange as a possible
ground for the rescission of the contract, the explanation of
this provision being the importance attached to quotation
JUDGMENT No. I4.—-CASE OF SERBIAN LOANS 43

at Paris with a view to placing the bonds; moreover, provi-
sion is also made for the quotation of bonds on the Exchanges —
of other countries. The same also applies with respect to
the provisions as to the deposit with a bank at Paris of the
sums necessary for the payment of interest and redemption,
and these provisions moreover only relate to the 1902, 1906
and 1913 loans, while in the case of the 1895 loan, funds
for the service of this loan were also to be transmitted to
Berlin and Vienna and, in the case of the 1909 loan, also
to a bank at Berlin. Lastly, the same applies in regard to
the provision contained in one of the contracts to the effect
that Serbia, for the purpose of the notices to be issued res-
pecting the contract, gives as its official address the Serbian
Legation at Paris. It is clear that all these stipulations
contain nothing with respect to the applicability of. French
law to the loans to which they refer. In so far as concerns
the places where the contracts with the banks were concluded
—a circumstance on which however it does not seem to be
the intention of the Serb-Croat-Slovene Government to rely—,
these are, for the 1895 loan, Carlsbad and Paris; for the
1902 and 1909 loans, Paris; for the 1906 loan, Geneva, and
for the 1913 loan, Belgrade. And the: banks were not all
French banks. In the Carlsbad agreement in June 1895, in
addition to some French banks, Berlin and Vienna banks
took part; in the Paris contract in April 1896, a Vienna
bank; in the Paris contract in: June 1897, English banks
took part; in the Paris contract in September 1902, banks
of Berlin and Vienna; in the Geneva contract in November
1906, a Franco-Swiss bank, and in the Paris contract in
November 1909, banks of Berlin and Frankfurt.

Nor were the loans issued exclusively in France, judging from
the prospectuses which have been produced. The prospectus of
the 1906 loan indicates that subscription would also take place
in Switzerland; as regards the 1909 loan, two prospectuses
have been produced, one of which states that subscriptions
would also be received at Geneva, and the ether, written in
German, that subscriptions would take place in various towns
in Germany; the prospectus of the 1913 loan also indicates
Geneva and Belgrade as places where subscriptions would be
received, in addition to Paris and French provincial towns.

6
JUDGMENT No. 14.—-CASE OF SERBIAN LOANS 44

As regards the 1902 loan, the prospectus produced does not
indicate the places where subscription was to take place;
in regard to the 1895 loan, the Court has only the one (in
English) relating to the special issue made in London, and
“notices” of 1896 and 1902 which do not mention the places
for subscription. But this loan being a loan for the conver-
sion of previous loans, it may be presumed that the issue
took place in the countries where these previous loans had
been issued and also at Berlin and Vienna, amongst other places.

All things considered, the Court finds that, in regard to the
Serbian loans in question, there are no circumstances which
make it possible to establish that, either generally speaking
or as regards the substance of the debt and the validity of
the provisions relating thereto, the obligations ‘entered into
were, in the intention of the borrowing State, or in a manner
binding upon the bondholders, made subject to French law.

But the establishment of the fact that the obligations’
entered into do not provide for voluntary subjection to
French law as regards the substance of the debt, does not
prevent the currency in which payment must or may be made
in France from being governed by French law. It is indeed a
generally accepted principle that a State is entitled to regulate
‘its own currency. The application of the laws of such
State involves no difficulty so long as it does not affect the
substance of the debt to be paid and does not conflict with
the law governing such debt. In the present case this situa-
tion need not be envisaged, for the contention of the Serbian
Government to the effect that French law prevents the
carrying out of the gold stipulation, as construed above, does
not appear to be made out.

In support of its contention, the Serb-Croat-Slovene Govern-
ment cites amongst others the following French laws:

The law of Germinal of the Year XI, already mentioned
above. |

Article 1895 of the Civil Code, which is as follows:

| [Translation.]

“The obligation resulting from a loan in money is always
simply for the amount in figures indicated in the contract.
If there has been an increase or diminution of specie
before the time of payment, the debtor must return the
JUDGMENT No. I4.—-CASE OF SERBIAN LOANS 45

amount in figures lent and must return this amount only
in the specie in currency at the time of payment.”

Article 475, paragraph 1x, of the Penal Code, which is as
follows :
[Translation.]

“The following shall be punished by a fine of from
6 to 10 francs...

11. Those who have refused to receive the national coin.
and currency, being neither counterfeit nor debased.... at
the value for which they are in circulation....”

The law of August r2th, 1870:
[Translation] °
“Article 1.—As from the date of promulgation of this
law, the notes of the Bank of France shall be accepted
as legal tender by public offices and private persons.”

The law of August 5th, 1014:
[Translation.]
“Article 3.—Until otherwise provided by law, the Bank
of France and the Bank of Algeria are released from the
obligation to give specie in exchange for their notes.”

The law of February rath, 1016:
[Translation.]

“Single Article.—In war time, any person convicted of
having bought, sold or parted with, of having attempted
or proposed to buy, sell or part with national specie or
currency, at a price exceeding their legal value, or for any
consideration whatsoever, shall be sentenced to a penalty of
from six days to six months imprisonment and to a fine
of from one hundred to five thousand francs or to one of
these two penalties only.

Sentence of confiscation of such national currency and
specie shall ipso facto be passed against the delinquents
and the currency or specie shall be devoted to.the fund
for relief of the poor. |

Article 463 of the Penal Code shall apply as regards
the offence dealt with by the present law; the law of
suspension of execution of the sentence is only applicable
in so far as concerns imprisonment.”

In addition to these legislative provisions, the Serb-Croat-
Slovene Government has cited a large number of opinions
expressed by French writers and also certain judicial decisions
which, in its contention, show that, upon a correct judicial
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 46

construction, the legal currency of bank-notes taken in con-
junction with the release from the obligation to exchange
notes for specie (forced currency) compels every creditor to
accept as due payment of a debt in French francs, inconvertible
bank-notes, at their face value, and renders inoperative or
null and void, at all events in France, any provision involving
a distinction between these notes and metal currency.

For its part, the French Government has sought to show
that this construction is not sound and that it is contrary |
to the law as stated by the Court of Cassation and other |
French courts since 1920. This Government also has cited a
number of publicists and judicial decisions and has submitted
that it is now definitely established by these decisions that
although a gold stipulation is null and void when it relates
to a domestic transaction, this does not hold good in the case
of international contracts, even when payment is to be effected
in France. And it has represented that if the law which must
be applied is French law, it must be applied as construed
by the courts. ao

The Court, having in these circumstances to decide as to the
meaning and scope of a municipal law, makes the following
observations: For the Court itself to undertake its own
construction of municipal law, leaving on one side existing
judicial decisions, with the ensuing danger of contradicting the
construction which has been placed on such law by the
highest national tribunal and which, in its results, seems to
the Court reasonable, would not be in conformity with the
task for which the Court has been established and would not
be compatible with the principles governing the selection of
its members. It would be a most delicate matter to do so,
especially in cases concerning public policy—a conception the
definition of which in any particular country is largely dependent
on the opinion prevailing at any given time in such country
itsel{—and in cases where no relevant provisions directly
relate to the question at issue. It is French legislation, as
applied in France, which really constitutes French law, and if
that law does not prevent the fulfilment of the obligations
in France in accordance with the stipulations made in the
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 47

contract, the fact that the terms of legislative provisions are
capable of a different construction is irrelevant.

In these circumstances, the Court will confine itself to
observing that, according to the information furnished by the
Parties, the doctrine of French courts, after some oscillation,
has now been established in the manner indicated by the
French Government, and that consequently there is nothing to
prevent the creditor from claiming in France, in the present
case, the gold value stipulated for. ~ |

It should, however, be added that, since the conclusion of
the Special Agreement in March 1928, a new currency law
has been promulgated in France, on June 25th, 1928, which,
by its first article, abrogates Article 3 of the law of
August 5th, 1014, regarding forced currency, and which
contains the following provision in its second article:

“The French monetary unit, the franc, is constituted
by 65.5 milligrams of gold, nine hundred thousandths fine.

This definition shall not apply to international payments
which, prior to the promulgation of the present law, may
have been validly stipulated in gold francs.”

For the future, this law replaces previous legislation; the
forced currency régime having been abrogated, no obstacle
resulting from this régime will any longer exist, and the
reduction of the metallic value of the franc, as newly defined,
to about one-fifth of its original value, will not affect the
payments involved by the Serbian loans at issue which are
undoubtedly international payments.

* * *

In formulating, in the operative part of the judgment, the
result arrived at by it in regard to the question referred to
it, the Court has held that it must keep as closely as possible
to the terms used by the Parties themselves in the Special Agree-
ment. The reason why the Court has omitted the formula which,
in Article I, paragraph (0), of the Special Agreement sets out
in general terms the contention of the French bondholders, is
that the submissions of the French Case and Counter-Case do
not repeat this formula; moreover, it does not appear to contain
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 48

anything which is not subsequently expressed with greater
clearness in paragraphs. x and 2 of the same article and which
is not reproduced in the French Government’s submissions.

Again, the Court considers that it should be clearly stated
that, if payment is to be made in gold francs, this is to be
understood in accordance with the interpretation given above,
that is to say that if the franc which is legal tender at the
place fixed for payment does not possess the value of the
gold franc as defined by this judgment, payment must be
effected by the remittance of a number of francs, the value
of which corresponds to the value of the gold francs due.

FOR THESE REASONS,

The Court,

having heard both Parties,
by nine votes to three,
gives judgment to the following effect :

(1) That, in regard to the Serbian 4 % loan of 1805, the
holders of bonds. of this loan are entitled, whatever their
nationality may be, to obtain, at their free choice, payment
of the nominal amount of their coupons due for payment but
not paid and of those subsequently falling due, as also of
their bonds. drawn for redemption. but not refunded and of
those subsequently drawn, at Paris, Berlin, Vienna and Bel-
grade, in the currency in circulation at one of these places;

(2) That, in regard to the 4% 1895, 5 % 1902, 44 % 1906,
44 % 1909 and 5 % 1913 Serbian loans, the holders of these
bonds are entitled to obtain payment of the nominal amount
of their coupons due for payment but not paid and of those
subsequently falling due, as also of their bonds drawn for
redemption but not refunded and those subsequently drawn, in
gold francs, in the case of the 1895 loan, at Belgrade and
Paris, and, in the case of the 1902, 1906, 1909 and 1913
loans, at Belgrade, Paris, Brussels and Geneva, or at the
equivalent value of the said amount at the exchange rate of
the day in the local currency at Berlin and Vienna, in the
case of the 1913 loan, and at Berlin, Vienna and Amsterdam,
in the case of the 1902, 1906 and 1909 loans.
JUDGMENT No. I4.—CASE OF SERBIAN LOANS 49

(3) That the value of the gold franc shall be fixed between
the Parties, for the above-mentioned payments, as equivalent
to that of a weight of gold corresponding to the twentieth

part of a piece of gold weighing 6 grammes 45161, 0900/1000
fine. |

Done in French and English, the French text being author-
itative, at the Peace Palace, The Hague, this twelfth day of
July, nineteen hundred and twenty-nine, in three copies, one
of which is to be placed in the archives of the Court andthe
others to be forwarded to the Agents of the Government af
the French Republic and the Government of the Kingdom of
the Serbs, Croats and Slovenes respectively.

(Signed) D. ANZILOTTI,
President.

(Signed) À. HAMMARSKJÔLD,
Registrar.

MM. de Bustamante and Pessôa, Judges, and M. Novacovitch,
Judge ad hoc, declaring that they are unable to concur in the
judgment given by the Court and availing themselves of the
right conferred on them by Article 57 of the Statute, have
delivered the separate opinions which follow hereafter.

(Inttialled) D. A.

(Initialled) À. H.