DISSENTING OPINION BY M. NOVACOVITCH.
[Translation. |
Being unable to concur in the foregoing judgment, I believe
it to be my duty, both towards the Court and my conscience,
to set out the reasons which prevent me from so doing.

I.

The case of the Serbian loans is submitted to the Court by
a Special Agreement concluded between the Government of
the French Republic and the Government of the Kingdom of
the Serbs, Croats and Slovenes. What is the dispute thus
referred by the two Governments to the Court? A dispute
between the Serb-Croat-Slovene Government and the French
holders of the Serbian loans, that is, a dispute between a
State and private individuals of another nationality. This is
clearly stated in the preamble of the Special Agreement: “In
view of the fact that a dispute has arisen between the Govern-
ment of the Kingdom of the Serbs, Croats and Slovenes

and French —holders....”, and again: “The Government of
the Kingdom of the Serbs, Croats and Slovenes, paying and
considering .... and the French holders considering....’’, and this

is repeated in Article I: ‘‘The.... Court .... will be asked for
judgment on the following questions: (a) whether, as held by
the Government of the Kingdom of the Serbs, Croats and Slo-
venes.... (6) or whether, on the contrary.... as held by the
French bondholders...’ And in No. 3 of Article I we read:
“how the value of the gold franc is to be determined as
between the Parties for the above-mentioned payments’. The
value of the gold franc is to be fixed as between the Yougoslav
Government and the bondholders. By using the expression
“the Parties” to cover them both, the Special Agreement
reaffirms that they are the Parties to the dispute.

The same idea is found in Article II: “In the event of
the Court’s award recognizing the justice of the claims of
the bondholders....’’ (and not of the French Government). Can
the Court deal with a dispute between a State and private
individuals ?
JUDGMENT No. I4.—-DISSENTING OPINION BY M. NOVACOVITCH 77

According to the Court’s Statute, the Court can only deal
with disputes between States; Article 34 expressly says:
“Only States or Members of the League of Nations can be
parties in cases before the Court” (and the French text: “Seuls
les Etats .... ont qualité pour se présenter devant la Cour’).
Though Article 36 says that the jurisdiction of the Court
' comprises all cases which the Parties refer to it, this in no
way affects Article 34: all cases, certainly, but between States.

No doubt a dispute between States may originate in a
controversy between a State and individuals—the injury by a
State of the private interests of the nationals of another
State. This was the case, for instance, in the case of the
S.S. Wimbledon (the Court’s Judgment No. 1), in that of the
Mavrommatis Palestine Concessions (Judgments Nos. 2, 5, and
11), in that of the German interests in Upper Silesia (Judg-
ments Nos. 6,7, 9, 13). But in the Wimbledon case the question
at issue was the interpretation and application of Article 380
of the Treaty of Versailles; in the Mavrommatis case it
was a question of the application of Protocol No. XII annexed
to the Peace Treaty of Lausanne of 1923 and of the Mandate
for Palestine entrusted to His Britannic Majesty on July 24th,
1922; the case of the German interests in Upper Silesia con-
cerned the application of the Treaty of Versailles, the German
Government maintaining that Poland had contravened it by
her legislation. In all these cases, therefore, the dispute related
to the application of treaties between States, and what had
to be considered was whether there had been a breach of
public international law. In relation to this controversy of
public law, the original dispute became of secondary import-
ance, and the protection of the interests of individuals only
came in question as a consequence of the application of a
treaty. The State took up the cause of the individual but
only because it contended that there had been a breach of
public international law, a breach which affected not only the
rights of individuals but also those of the State. And it is
this injury to the rights of a State, and not to the rights of an
individual, which brought the dispute within the domain of
public international law and gave the Court jurisdiction.
JUDGMENT No. 14.—DISSENTING OPINION BY M. NOVACOVITCH #8

The Court has clearly stated in its previous judgments
that “by taking up the case of one of its subjects and by
resorting to diplomatic action or international judicial proceed-
ings on his behalf, a State is in reality asserting its own right
—its right to ensure, in the person of its subjects, respect for
the rules of international law’. (Judgment No. 2, p. 12.)
And again: ‘‘.... the Court declared itself competent to pass upon
the claim for reparation because it regarded reparation as the
corollary of the violation of the obligations resulting from an
engagement between States. This view of the matter, which is
in conformity with the general character of an international
tribunal which, in principle, has cognizance only of inter-state
relations, is indicated with peculiar force in this case...”
(Judgment No. 13, p. 27.)

In the case of the Serbian loans, we have on one side the
Serb-Croat-Slovene Government and on the other the French
bondholders, who have caused the French Government to repre-
sent them, but to represent them only and nothing more.
Neither in the Special Agreement, nor in the Cases and Coun-
ter-Cases, nor in the oral proceedings, has it ever been contended
that the Serb-Croat-Slovene Government has violated an inter-
national treaty, or that it has disregarded or violated a rule
accepted as forming part of the law of nations. The bond-
holders have not had recourse to any municipal court, so that
there is no question of a denial of justice on the part of the
Serb-Croat-Slovene State or of a refusal to comply with the
decision of a municipal court, circumstances which would
engage the international responsibility of the Serb-Croat-
Slovene State. Further, the fact that, as in the present case,
there is a difference of opinion as to the interpretation of a
private contract between a State and foreign nationals does not
suffice to engage the international responsibility of that State
(difference of opinion as to interpretation only and not even a
question of failure to execute the loan contracts, since the Serb-
Croat-Slovene State has continued and still continues to exe-
cute them, but according to an interpretation differing from
that of the bondholders). This difference of interpretation may
injure the private interests of individuals, and these individuals
may contend that there has been a breach of the contract and
have recourse to the national courts in order to establish the.
JUDGMENT No. I14.—DISSENTING OPINION BY M. NOVACOVITCH 79

justice of their claims. But the State whose nationals these
individuals are, cannot at this stage be a Party to the case,
and since its own rights have not been violated, it cannot
assert its own rights. No engagement between France and the
Serb-Croat-Slovene State, an engagement the obligations of
which are alleged to have been violated, has been cited before
the Court. The Serb-Croat-Slovene State therefore has incurred
no international responsibility, and it is precisely the absence
of such responsibility which makes it impossible to regard the
present controversy as a dispute between States.

It has, however, been argued that negotiations have taken
place between the French Government and the Serb-Croat-
Slovene Government, that these negotiations have failed and
that it is this disagreement between the two Governments which
is submitted to the Court. But how far is it possible to have
regard to these negotiations? No precise statement has been
made either as to the extent or substance of these nego-
tiations, and the Special Agreement does not even allude to
them. On the contrary, the Special Agreement refers only to
the controversy between the Serb-Croat-Slovene State and the
bondholders. In these circumstances, it is difficult to take
these negotiations into account.

Another difficulty arises from the fact that this is not a
dispute between States but a controversy between a State
and private individuals. This is the question what rules are
to be applied. The Parties have only invoked contracts and
laws. But a loan contract or a bearer bond is subject to
municipal law, so that only municipal legislation must be
applied to them. And yet the Court, whose mission it is to
enforce international law and which has been created to
apply such law, must apply this law (Article 38 of the Sta-
tute). Hitherto it has done so, and though sometimes it
may have applied municipal law, this has only been in a
subsidiary manner. In the present case it is however obliged
to apply municipal law and nothing but municipal law. In
regard to national systems of law, the Court has already had
occasion to state in previous cases that it could not under-
take to pass upon questions of municipal law but must simply
take such law and the relevant doctrine as it found it.
JUDGMENT No. I14.—DISSENTING OPINION BY M. NOVACOVITCH 80

It must however. be considered that the Court has been
made cognizant of this case not by unilateral application but
by a Special Agreement. The two Sates signing the Special
Agreement approach the Court as they would an arbitrator
and they ask it to decide—as they might ask legal experts—
upon a question of the interpretation of contracts in regard
to which they disagree. They ask the Court for an opinion—
not an advisory opinion—, since such an opinion, under the
terms of the Covenant and Article 72 of the Rules of Court,
can only be given upon a written request signed by the
President of the Assembly or Council or by the Secretary-
General of the League of Nations—but an opinion which
is to constitute the basis for direct negotiations between the
Serb-Croat-Slovene State and the bondholders, or failing agree-
ment, for a second arbitration. |

In asking the Court for this opinion, the two States signing
the Special Agreement have certainly been actuated by the
best intentions, but involuntarily they have placed the Court
in a difficult position, because it is bound by the Statute
and because according to that instrument it is not, in my
opinion, competent to decide the question. The Court may
assume the mission of arbitrator, and in so doing it may
even depart from a strict application of the rules which it
is otherwise bound to apply, since the last paragraph of
Article 38 of the Statute authorizes it to give judgment ex
æquo et bono if the Parties are agreed, but the Parties must
have agreed thereto, and this must have been stated in the
Special Agreement. Otherwise it is impossible to apply the
last paragraph of Article 38. An incompatibility exists be-
tween the Statute. and the Special Agreement as drafted, and
the only way of remedying this incompatibility would have
been for the two States signing the Special Agreement to
‘agree to extend the powers of the arbitrator by authorizing
him to consider the question in all its aspects and pass
judgment upon the whole of it ex æquo et bono. Since
there has been no such extension of powers, the last para-
graph of Article 38 is inapplicable, and the Court cannot
undertake the arbitration, its powers being too limited by
the Special Agreement.
JUDGMENT No. I4.—DISSENTING OPINION BY M. NOVACOVITCH 81.

If we arrive at the conclusion that the Court is not com-
petent, this renders it unnecessary to consider the case on
its merits. But being also in disagreement on the merits, I
feel called upon to make certain observations which only
tend to confirm that it is impossible for the Court to pass
upon this case. .

Several pages of the judgment are devoted to the question
whether the gold clause can be regarded as rendered inoper-
ative by the public policy legislation existing in countries
where payments are to be made. And after setting out the
opposite views submitted by the Parties in their exposition
of the case, the Court states that the doctrine of the French
courts is established in this sense, that a distinction is to
be made between domestic and international payments, and
that in the case of the latter the gold clause is not rendered
inoperative by the public policy legislation. The Court cannot
pass upon the question whether this doctrine is sound or
the reverse, more especially seeing that the reasons on which
this doctrine is based are not of a juridical nature, but rea-
sons of national concern, which the Court, being an interna-
tional body, cannot consider. As stated in the judgment, for
the Court itself to undertake its own construction of municipal
law would not be in conformity with the task for which
it has been established, and would not be compatible with
the principles governing the selection of its members. This
is certainly out of the question, and the Court should have
confined itself to this statement without even entering upon
the question as to the position in regard to the doctrine
of the French courts, especially seeing that the Special Agree-
ment does not mention the point. But if it left this ques-
tion aside, the Court would only be able to give an incom-
plete decision, so that it was confronted with a dilemna:
it must either only give an incomplete decision or else enter
upon a domain which does not belong to it but to municipal
courts. The only way out of this difficult position was to say
that it had no jurisdiction.
JUDGMENT No. 14,.—-DISSENTING OPINION BY M. NOVACOVITCH 82

The questions submitted to the Court should have been
dealt with and decided from a concrete standpoint, from the
standpoint adopted by the Parties in their Cases, Counter-
Cases and oral statements. If this point of view had been
adopted, the Serb-Croat-Slovene State on the one side would
have been confronted with the French. Government and. the
group of French bondholders on the other. But if this stand-
point had been taken, it would have been necessary to have
regard to all the objections taken against the French Govern-
ment and to the group of French bondholders. The Serb-
Croat-Slovene Government put forward these objections in its
oral exposition of the case, it cited documents with a view to
proving that the execution of the contracts for a number of
years in succession had been accepted without reservation by
the bondholders, notwithstanding that the loan-service was
effected in French francs which had already depreciated. The
‘two. Parties argued at length in regard to the execution of
the contracts, and the Serb-Croat-Slovene Government sought
to show, relying more especially on this execution of the con-
tracts, that the intention of the Parties had not been that the
contracts should be executed in gold francs but in the French
legal currency. It is to be noted that certain arguments invoked
by the Serb-Croat-Slovene Government have not been refuted
by the other side. The Serb-Croat-Slovene Government has.
argued, relying on the text of the prospectuses, that the sub-
scriptions to the loans were paid in French francs in France
and at the sight rate of exchange on Paris at other places;
that Serbia did not receive gold from her creditors, but that
the yield of the loans was credited to the Serbian Government
in the books of the banks in French francs; that when, as an
exception, Serbia asked for actual gold, she had to pay an
additional premium to obtain this gold and the operation was
entered in the bank books as a sale of gold; that the balance
of the 1913 loan was paid by the banks to the Serb-Croat-
Slovene State after the war in French: francs, although these
francs were already well below gold parity; that the French.
bondholders, until 1925, accepted payment in French francs
without any protest or reservation, and that they thus agreed
with the Serb-Croat-Slovene Government that there was no
question of payment in gold value; that all these facts show
JUDGMENT No. 14.—DISSENTING OPINION BY M. NOVACOVITCH 83

that notwithstanding the gold clause, the Parties had in mind
the French franc. And though the other side has argued. that
this was not the intention of the Parties, it has submitted no
proofs refuting all the facts advanced by the Serb-Croat-Slovene
Government. Further, adopting this same concrete standpoint,
the conclusion should have been reached that the intention of
the Parties was to make the execution of the contracts subject
to French law and not to Serbian law, since it was at Paris
that Serbia made its annual payment, wherever the bond-
holders might be, and since Paris is the place where payment
is to be made and the contract executed. If French law is
applied it must be so in its entirety. Lastly, the question
should have been considered whether the French Government
could take up the case on behalf of the bondholders and claim
for them payment at gold value; whether it was established,
as contended in the course of the proceedings, that that
Government considered itself as validly released from a debt
by payment in French francs; and that its courts held French
citizens as released from their obligations towards foreign
creditors under the same conditions. To clear up all these points
further oral proceedings and report by experts ought to have
been arranged.

The Court had rejected the concrete side of the question
and has only regarded the abstract side, holding that the
question concerned bearer bonds, that is to say bonds the
holders of which are not personaliy known. In regard to the
obligation based on a bearer bond, the identity of only one
person is determined, namely, the debtor.. The creditor is
anonymous and variable; he may change from one moment
to another. This is quite true, but all the consequences follow-
ing from the conception should be taken into account, and the
conclusion should be that the question cannot concern French
bondholders, but simply bondholders, of whatever nationality.
Jf the abstract aspect of the question be alone considered,
all the objections based on the execution of the contracts fall
to the ground, since the bondholder for the time being is not
bound by the acts of preceding holders. But, from another
point of view, the result of keeping to the abstract aspect is
that, as opposed to the debtor, the Serb-Croat-Slovene State,
there is merely an anonymous, impersonal creditor, and in that

If
JUDGMENT No. 14.—DISSENTING OPINION BY M. NOVACOVITCH 84

. case the French bondholders disappear and consequently there
is no one for the French State to protect. In these conditions,
can the Court deal with the case?

Such are the reasons which have led me to conclude that
the Court cannot be competent and which prevent me from
concurring in the judgment.

(Signed) M. Novacovitcu.