PUBLICATIONS DE LA COUR PERMANENTE DE JUSTICE
INTERNATIONALE

SÉRIE A — N°5
Le 26 mars 1925

RECUEIL DES ARRETS

AFFAIRE DES CONCESSIONS
MAVROMMATIS A JERUSALEM

PUBLICATIONS OF THE PERMANENT COURT
OF INTERNATIONAL JUSTICE.

SERIES A — No. 5
March 26th, 1925

COLLECTION OF JUDGMENTS

THE MAVROMMATIS
JERUSALEM CONCESSIONS

Société d’Editions
A. W. Sijthoff
Leyde

A. W. Sijthoft’s
Fublishing Company
Leyden

TABLE DES MATIERES

Pages
Arrêt de la Cour relatif à l'affaire des concessions
Mavrommatis à Jérusalem . . . . . . . . . . . 6
CONTENTS.

Judgment of the Court in the case of the Mavrommatis
Jerusalem Concessions . . . . . . . . ,. , . . 6
PERMANENT COURT OF INTERNATIONAL JUSTICE.

SIXTH (EXTRAORDINARY) SESSION 1925.
March 26th

On March 26th, 1925. DE Vie.

Before:

MM. Huser, President,
LODER, Former President,
WEISS, Vice-President,
Lord FINiay,
MM. NyHOoLM,
ALTAMIRA, » Judges,
ODA,
ANZILOTTI, |
YOVANOVITCH,
BEICHMANN, > Deputy-Judges,
NEGULESCO,

M. CALOYANNI, National Judge.

THE MAVROMMATIS JERUSALEM CONCESSIONS.

The Government of the Greek Republic, represented by HE.
M. Kapsambelis, Greek Minister at The Hague,

Applicant,
Versus

His Britannic Majesty’s Government, represented by R. V. Vernon
Esq., C.B.. of the Colonial Office,

Respondent,
JUDGMENT No. 5 7

The Court, composed as above,
having heard the observations and conclusions of the Parties,

delivers the following judgment :

The Government of the Greek Republic, by an application
filed with the Registry of the Court on May 13th, 1924, in
accordance with Article 40 of the Statute and Article 35 of the Rules
of Court, has submitted to the Permanent Court of International
Justice a suit arising out of the alleged refusal on the part of the
Government of Palestine and consequently alsc on the part of His
Britannic Majesty’s Government, in its capacity as Mandatory
Power for Palestine, since the year 1921, to recognize to their full
extent the rights acquired by M. Mavrommatis, a Greek subject,
under contracts and agreements concluded by him with the Otto-
man authorities, in regard to concessions for certain public works
to be constructed in Palestine.

This application concludes with a request that the Court may be
pleased to give judgment to the effect that the Government of
Palestine and consequently also the Government of His Britannic
Majesty have, since 1921, wrongfully refused to recognize to their
full extent the rights acquired by M. Mavrommatis under the
contracts and agreements concluded by him with the Ottoman
authorities in regard to the works specified above, and that
the Government of His Britannic Majesty shall make reparation
for the consequent loss incurred by the said Greek subject, a loss
which is estimated at £234.339 together with interest at six per cent.
as from July 20th, 1923, the date on which this estimate was made.

The considerations leading up to these conclusions have been
developed in the Case filed with the Court by the claimant on
May 23rd, 1924. Itis therein specified that the Greek Government,
abandoning a portion of its original claim relating to the irrigation
works in the Jordan Valley, asks for judgment only in respect of
two groups of concessions, namely : those relating to the construc-
tion and working of an electric tramway system, the supply of
electric light and power and of drinking water in the city of Jeru-
salem, and :hose relating to the construction and working of an
electric tramway system, the supply of electric light and power
and of drinking water in the city of Jaffa and the irrigation of its
gardens from the waters of El-Hodja.

JUDGMENT No. 5 8

The application instituting proceedings was, in accordance with
Article 40 of the Statute, communicated to the Government of His
Britannic Majesty on May 15th, 1924, and the Greek Case was
transmitted to that Government on May 315. On June 3rd, His
Britannic Majesty's Government informed the Court that it thought
it necessary to take a preliminary objection as to the competence
of the Court to entertain the proceedings in question.

On August 30th following, the Court gave judgment on the pre-
liminary objection.

The conclusions of this judgment were as follows :

“The Court, having heard both Parties,

“Upholds the preliminary objection submitted by His
Britannic Majesty’s Government in so far as it relates to the
claim in respect of the works at Jaffa and dismisses it in so far as
it relates to the claim in respect of the works at Jerusalem ;

“Reserves this part of the suit for judgment on the merits ;

‘And instructs the President to fix, in accordance with
Article 33 of the Rules of Court, the times for the deposit of
further documents of the written proceedings.”

Accordingly, the concessions for the construction and working
of electric tramways, the supply of electric light and power and of
drinking water in the city of Jaffa and the irrigation of its gardens
from the waters of El-Hodja were likewise eliminated from the
proceedings on the merits.

The Greek Government in the Case asks the Court, in regard
to the Jerusalem Concessions which are reserved by the Court for
judgment on the merits, to give judgment as follows :

‘“‘t) That, these concessions having begun to be put into oper-
ation, the British Government, in its capacity as Mandatory for
Palestine, is bound to maintain them and to agree to their adapt-
ation to the new economic conditions of the country, or to redeem
them by paying to the claimant reasonable compensation ;

‘“‘2) that, having in fact already made its choice, by rendering
impossible, directly or indirectly, the carrying out of the works for
which the claimant holds a concession, it must pay him
compensation ;

‘3) that, taking into account all the various elements of the loss
occasioned to the claimant, he will receive just and equitable
JUDGMENT No. 5 9

compensation by a judgment in his favour for the sum of
£121.045, together with interest at six per cent. from July 2oth,
1923, until the date on which judgment is given.”

On the occasion of the delivery of the judgment of August 3oth,
the representative of His Britannic Majesty’s Government requested
the Court to fix January Ist, 1925, as the time for the filing of the
British Counter-Case on the merits of the suit ia regard to the Jeru-
salem concessions. Having heard the views of the Agent of the
Greek Government, the President, by virtue of the powers con-
ferred upon him, under the terms of the judgment of August 3oth
and under Article 33 of the Rules of Court, fixed the time for the
filing of the Counter-Case in accordance with the wish expressed
by the British Government. At the expiration of this time, he
fixed January roth and 26th, 1925, as the dates for the filing of
the Greck Reply and British Rejoinder respectively.

The documents of the written proceedings were duly submitted
to the Court at the prescribed times and were communicated as
laid down in Article 43 of the Statute.

His Britannic Majesty’s Government, in the Counter-Case, asked
the Court to decide as follows :

1) “That M. Mavrommatis’ Electricity Concession and Water
Concession are respectively invalid and not entitled to recognition
under Protocol XII annexed to the Treaty of Lausanne ;”

and, in the event of the Court deciding against His Britannic
Majesty’s Government on this point, to decide as follows :

“(2) That the British Government have not in regard either to
M. Mavrommatis’ Electricity Concession or his Water Concession
committed any breach of the international obligations referred to in
Article rz of the Mandate for Palestine.

‘‘(3) That neither of the concessionary contracts in question has
begun to be put into operation within the meaning of Article 6 of
Protocol XII annexed to the Treaty of Lausanne.

“(4) That, therefore, the provisions of Articles 4 and 5 of the
Protocol relating to readaptation are inapplicable to either of
M. Mavrommatis’ concessions.

(5) That both the concessions must be maintained without
JUDGMENT No. 5 IO

readaptation unless, within six months from the date of the Court’s
decision, M. Mavrommatis requests that the concessionary con-
tracts should be dissolved, in which case he will be entitled, if there
is ground for it, to such indemnity in respect of survey and
investigation work as in default of agreement between him and
His Majesty’s Government shall be considered equitable by the
experts provided for in the Protocol.

(6) That in any event the compensation claimed is unreasonable
and excessive.”

The Greek Government in the Reply submitted :

(x) that the validity of the Mavrommatis concessions is
established ;

“‘(2) that they are entitled, under the terms of Article 4 of the
Protocol, to readaptation ;

“*(3) that, nevertheless, even under these conditions, their
execution is too difficult to be regarded as adequate compensation
for the breach of Article 11 of the Mandate ;

“(4) that, having regard to the situation brought about in
Palestine in this respect, it is more practical and more just finally
to cancel them and to pay the beneficiary a Jump sum by way of
compensation” ;

and asked the Court to decide :

“(1) That, having begun to be put into operation, the concessions
obtained by M. Mavrommatis at Jerusalem must be readapted
to the new conditions of the country and that the British Govern-
ment is under an obligation to allow their readaptation or to buy
them out by paying the beneficiary reasonable compensation ;

“(2) that, having in fact exercised its choice, by directly or indi-
rectly rendering impossible the carrying out of the works conceded
to the claimant, it must pay him reasonable compensation ;

“(3) that, having regard to all the elements of loss occasioned
to the claimant, fair and reasonable compensation, estimated at
the sum of £121.045, together with interest at 6% from July 2oth,
1923, until the date of judgment, shall be awarded him ;

(4) that, furthermore, after due enquiry—if necessary—with
respect to the utilization by the British military authorities of his
JUDGMENT No. 5 II

designs and plans for the supply of water to the city of Jerusalem,
he shall be granted special compensation, the amount of which
shall be fixed in accordance with the provisions of Article 3 of the
Protocol of Lausanne.”

The British Government in its Rejoinder confined itself to asking
the Court to decide in accordance with the submissions made in the
Counter-Case.

By a decision dated January 27th, 1925, which was duly commu-
nicated to the Agents of the Parties, the Court included the case
of the Mavrommatis Jerusalem Concessions on the list for the
Extraordinary Session which had been convoked for January 12th,
1925, and fixed February roth, 1925, as the date for the commen-
cement of the hearing of this suit.

In the course of the hearing which lasted from February toth
to 14th inclusive, the Court heard the statements and replies of
Counsel for the respective Parties, namely : H.E. M. Politis, Greek
Minister at Paris, and Mr. Purchase, barrister-at-law for the Greek
Government, and Sir Douglas Hogg, the Attorney-General, for His
Britannic Majesty’s Government.

In support of their conclusions the Parties handed in various
documents either as annexes to the Case, Counter-Case, Reply and
Rejoinder, or during the oral proceedings.

FACTS.

On January 27th, 1914, two agreements relating respectively to
a ‘‘concession for the public distribution of electric power and for
electric tramways” and to the “concession for the construction and
exploitation of the works necessary for the supply of drinking
water”, were signed between the City of Jerusalem and M. Euripide
Mavrommatis. In these agreements, of which copies certified
correct by the President of the Municipality of Jerusalem have
been submitted to the Court, M. Mavrommatis is described as an
‘Ottoman subject residing at Constantinople”. The first of these
concessions hereinafter referred to as the ‘electric concession”
covers, according to the first article of the Agreement :

“(D the public distribution of electric power for all purposes
other than telegraphy, telephony and the motive power
JUDGMENT No. 5 12

required for public conveyance undertakings (save as stated
in Article ID}, the tramways in the City of Jerusalem and its
suburbs within a radius of twenty kilometres around the City ;”

(IT) a certain system of electric tramways including ‘obli-
gatory’, ‘contingent’ and ‘optional’ lines.

The second concession, hereinafter called the ‘‘ water concession’,
covers, according to Article I of the Agreement, “the construction
and exploitation of the works required for leading the water to
Jerusalem and supplying it throughout the city and its suburbs”.

By ietters dated March 3rd of the same year, the banking firm
Périer and Company of Paris, hereinafter called the “Banque
Périer’’, informed the President of the Municipality of Jerusalem
(1) that it held at the disposal of the Municipality, on behalf of
M. Mavrommatis, the sum of seven thousand Turkish pounds, being
the final deposit for the obligations accepted by him under the
Agreement relating to the electric concession ;

(2) that similarly it also held at the disposal of the Municipality
the sum of one hundred thousand francs, being the final deposit
provided for in the Agreement regarding the water concession ;

(3) that it had promised M. Mavrommatis its financial support
for the carrying out of his schemes.

This promise of support is contained in a letter sent by the Banque
Périer to M. Mavrommatis on November 13th, 1913. According
to this letter, M. Mavrommatis was to endeavour to obtain the two
Jerusalem concessions and the two Jaffa concessions in his own
name. Should he be successful, the Bank would place the sum
of five million francs at his disposal ; all expenses incurred in
obtaining the concessions to be met by the concessionnaire.

On July 30th (old style), 1914, M. Mavrommatis wrote to the Mayor
of Jerusalem: (1) to inform him of the despatch of a copy of the
definitive plans provided for in the Agreement concerning the elec-
tric concession ; (2) to inform him that, as a precaution, having
regard to the state of war and the consequent insecurity of postal
communications, he had kept by him, but at the disposal of the City,
the three other copies ; (3) to request, alleging the war as a case of
circumstances beyond his control, that the times for the fulfilment
of his obligations under the Agreement should cease to run “for a

2
JUDGMENT No. 5 13

period equivalent to the time elapsing between the day of the declar-
ation of war and the final conclusion of peace’.

M. Mavrommatis appears to have made a similar request as
regards the water concession. The reply of the Municipality deals,
in fact, with the two concessions.

The Municipal Council decided :

‘to postpone execution for the whole of the period commencing
on July 21st (old style), the date of the declaration of the war in
question, and ending with the conclusion of peace.”

The Treaty of Versailles, signed on June 28th, 1919, came into
force on January roth, 1920. Under Article 22 of the Covenant
of the League of Nations, which forms the first part of that Treaty,
the Mandatory régime was established for ‘certain communities
formerly belonging to the Turkish Empire”, of which Palestine
is one. The Treaty of Sévres, the purpose of which was to settle
the conditions of peace with Turkey, was signed on August roth,
1920. This Treaty contained the following clauses regarding
concessions granted by the Ottoman authorities, including those
granted in the territories detached from Turkey and placed under
Mandate :

Article 311.

“In territories detached from Turkey to be placed under the
authority or tutelage of one of the Principal Allied Powers,
Allied nationals and companies controlled by Allied groups or
nationals holding concessions granted before October 29th,
1914, by the Turkish Government or by any Turkish local
authority shall continue in complete enjoyment of their duly
acquired rights, and the Power concerned shall maintain the
guarantees granted or shall assign equivalent ones.

“Nevertheless, any such Power, if it considers that the
maintenance of any of these concessions would be contrary
to the public interest, shall be entitled, within a period of six
months from the date on which the territory is placed under
its authority or tutelage, to buy out such concession or to
JUDGMENT No. 5 14

propose modifications therein ; in that event it shall be bound
to pay to the concessionnaire equitable compensation in accord-
ance with the following provisions.

“Tf the Parties cannot agree on the amount of such compensa-
tion, it will be determined by Arbitral Tribunals composed
of three members, one designated by the State of which the
concessionnaire or the holders of the majority of the capital
in the case of a company is or are nationals, one by the Govern-
ment exercising authority in the territory in question, and the
third designated, failing agreement between the Parties, by the
Council of the League of Nations.

“The Tribunal shall take into account, from both the legal
and equitable standpoints, all relevant matters, on the basis
of the maintenance of the contract adapted as indicated in the
following paragraph.

“The holder of a concession which is maintained in force
shall have the right, within a period of six months after the
expiration of the period specified in the second paragraph of
this article, to demand the adaptation of his contract to the
new economic conditions, and in the absence of agreement
direct with the Government concerned the decision shall be
referred to the Arbitral Commission provided for above.”’

Article 312.

“Tn all territories detached from Turkey, either as a result
of the Balkan Wars in 1913, or under the present Treaty, other
than those referred to in Article 311, the State which definitely
acquires the territory shall #pso facto succeed to the duties and
charges of Turkey towards concessionnaires and holders of
contracts, referred to in the first paragraph of Article 311, and
shall maintain the guarantees granted or assign equivalent
ones.

‘This succession shall take effect, in the case of each acquiring
State, as from the coming into force of the Treaty under which
the cession was effected. Such State shall take all necessary
steps to ensure that the concessions may be worked and the car-
rying out of the contracts proceeded with without interruption.

JUDGMENT No. 5 I5

‘Nevertheless, as from the coming into force of the present
Treaty, negotiations may be entered into between the acquiring
States and the holders of contracts or concessions, with a view
to a mutual agreement for bringing such concessions and
contracts into conformity with the legislation of such States
and the new economic conditions. Should agreement not
have been reached within six months, the State or the holders
of the concessions or contracts may submit the dispute to an
Arbitral Tribunal constituted as provided in Article 311.”

On May 20th, 1920, the Mandate for Palestine had been given to
Great Britain and on July rst the British Government replaced its
military occupation of Palestine by a civil administration.

On April 16th, 1921, M. Mavrommatis wrote to the new Govern-
ment of Palestine, in order, firstly, to accept the Treaty of Sévres
as applicable to the water and electric concessions ; secondl:, to
offer to submit the plans provided for in the agreements concerning
these concessions, and, thirdly, to suggest the modifications, to be
agreed upon with the City of Jerusalem, required to bring the con-
cessions into conformity with the new conditions of the country.

According to a letter sent to M. Mavrommatis by the Banque
Périer on February 14th, 1921, that Bank was at that time prepared
to reopen negotiations concerning the Jerusalem and Jaffa
concessions on the bases of the agreement of November 1013 but
on condition that the new Palestine authorities recognized and
ratitied the rights of the concessionnaire.

It would seem that M. Mavrommatis’ above-mentioned letter of
April 16th, 1921, led to certain negotiations between the Palestine
authorities and M. Mavrommatis or his agents. From a letter signed
on May oth, 1921, by the Legal Secretary of the Palestine Government,
it appears (1) that these negotiations concerned M. Mavrommatis’
nationality, and (2) that this question was referred to the author-
ities in London. It related more particularly to the establishment
of his Greek nationality, because, in the agreements, he was des-
cribed as an Ottoman subject. To this end, M. Mavrommatis’
London agent, on September Ist, 1921, presented to the Colonial
Office certain documents intended to prove M. Mavrommatis’
Greek nationality.
JUDGMENT No. 5 ih

It has been alleged by the claimant — and the respondent has not
disputed the contention—that during the negotiations which took
place at Jerusalem, M. Mavrommatis was recommended, on behalf
of the Palestine Government, to come to an understanding with
a certain M. Rutenberg, with a view to collaborating in the carrying
out of the works contemplated in the agreements under which
M. Mavrommatis was the beneficiary. M. Rutenberg, for his part,
however, seems to have thought that any understanding would be
premature, pending recognition by the local authorities of the valid-
ity of the concessions.

While this was going on an agreement was concluded on Sep-
tember 21st, 1921, between the Crown Agents for the Colonies and
M. Rutenberg regarding the grant to the latter of a concession for the
utilization of the waters of the rivers Jordan and Yarmouk and their
affluents for generating and supplying electrical energy. It is laid
down in the agreement that if M. Rutenberg, within two years, fulfils
certain conditions, the High Commissioner of Palestine for the time
being shall, on application, grant him the concession in question.
In the meantime he may not grant any concession or licence con-
flicting with this concession. The draft concessionary contract
which is annexed to the agreement, and to which the latter refers,
contains amongst others a clause numbered 2g which runs as
follows :

“In the event of there being any valid pre-existing concession
covering the whole or any part of the present concession the
High Commissioner if requested in writing by the Company
so to do shall take the necessary measures for annulling such
concession on payment of fair compensation agreed by the
Company or failing agreement determined by arbitration
between the owner of such concession and the High Com-
missioner and the Company shall indemnify the High Com-
missioner against any compensation that may be due or become
payable in respect of any such annulled concession to the
extent to which it affects this present concession and shall be
entitled to increase the capital of the Company and the rates
of charge to be made to consumers of electrical energy corres-
pondingly and the amount of any compensation to become
payable and to be paid in respect of any such annulled con-
cession shall be paid in agreement with the Company and in
JUDGMENT No. 5 17

default of agreement be determined by arbitration between the
owner or owners of such pre-existing concession and the High
Commissioner or other appropriate procedure.”

It is a fact that the application provided for in the agreement
of September 21st, was made in due time. The two Parties, however,
wished to make certain modifications in the concessionary contract
above-mentioned and consequently the concession has not vet
actually been granted. Nevertheless the Palestine Government
recognized that it was bound to grant it as soon as the terms of
the contract should have been fixed. Meanwhile M. Rutenberg
formed the Company required to work the concession, the Palestine
Electric Corporation, Ltd.

The nature of the relations existing between M. Rutenberg and
the Zionist Organization mentioned in Article 4 of the Palestine
Mandate has been discussed at length before the Court, who, how-
ever, sees no occasion to express any view on this question of fact.
Moreover, at the time in question, the document entitled the
“Mandate for Palestine’ was not yet in force. {n point of fact the
terms of that document were not definitely fixed until July 24th,
1922, and it only came into force on September 2gth, 1923.

It has been asserted that the result of the granting of the Ruten-
berg concessions was the withdrawal by the Banque Périer of its
promise of February 14th, 1021. On December 2nd, 1921, that
Bank wrote to M. Mavrommatis to say that in consequence of the
grant of those concessions, it could not undertake to finance
M. Mavrommatis’ concessions.

From October 1921 onwards it began to become clear that the
Treaty of Sèvres would never come into force. On October 20th,
1921, the separate agreement between France and the Government
of the Grand National Assembly at Angora was concluded. In
February and March, 1922, diplomatic conferences took place
between the delegates of the Allied Powers, in the course of which
modifications to be made in the Treaty were discussed. In the
following April, Italy concluded a separate agreement with the
Kemalist Government. The military operations in Asia Minor
in September 1922, resulted in the agreement of Moudania on
October rith, 1922, which led to the opening—in November—of
JUDGMENT No. 5 18

the Conference of Lausanne, the object of which was the revision
of the Treaty of Sévres and the settlement of the conditions of
peace in the Near East.

In the meantime the negotiations between M. Mavrommatis or his
agents and the British or Palestine Authorities continued, as is
demonstrated by the correspondence contained in the dosster of
the case. The claimant contends, and the respondent does not
deny, that at the request of the Colonial Office, conversations also
took place with M. Rutenberg and with the president and other
representatives of the Zionist Organization. The Colonial Office
was kept informed as to these conversations. There was, however,
no tangible result, and the matter was just as it stood in September
1921, when on March 27th and May 3rd, 1922. M. Mavrommatis’
solicitors submitted to the Colonial Office fresh proofs of their
chent’s Greek nationality. On May 25th the Colonial Office asked
for copies of the documents on which M. Mavrommatis based his
claims to concessionary rights at Jerusalem ; on the 29th of that
month this request was complied with. His Greek nationality has
not been disputed since that time and is now admitted by the
respondent.

In August 1922, M. Mavrommatis was indirectly informed that,
in the opinion of the Colonial Office, (1) his concessions endowed
him with certain rights; (2) these rights must be respected,
and (3) he should come to an understanding with M. Ruten-
berg or (4) lay before the Palestine Government proposals
transforming his concessions into a practical scheme for supplying
Jerusalem with tramways and water. M. Mavrommatis followed
out this suggestion and, on August 15th, 1922, submitted amongst
others the same designs and plans as he had sent to the Mayor of
Jerusalem on July 30th (old style), 1914, with the addition of new
calculations based on the conditions prevailing at the time. He
also desired (1) to be informed within a limited time whether
M. Rutenberg. after due consideration of the Mavrommatis conces-
sions, intended to make use of the right of expropriation conferred
upon him under Article 29 of the annex to the Agreement of Sep-
tember 21st, 1921, and (2), if this was not the case, to hear that his
plans and proposals were approved, subject to possible alterations.

The reply to this step was the Colonial Office’s letter of October
21st, 1922, which, while refusing to recognize the Jaffa concessions,
confirmed the fact that M. Mavrommatis enjoyed certain rights
JUDGMENT No. 5 1g

under his Jerusalem concessions, and that these rights in so far
as they existed would be respected. The Colonial Office added,
however, that, as regards the water concession, the establishment
during the war of an efficient water supply for the town of Jerusalem
appeared to have divested M. Mavrommatis’ concession of any
value.

It has been contended on behalf of the applicant that this letter
had the effect of breaking off direct negotiations between M. Mavrom-
matis and the Zionist Organization which were on the point of
reaching a satisfactory conclusion.

M. Mavrommatis replied by drawing attention to the following
points: (1) the expenses which he had already incurred in con-
nection with the water concession ; (2) the fact that he should not be
deprived of his rights under the water concession because the Mili-
tary Administration had been obliged to carry out during the war
a part of the works included in that concession ; (3) the provi-
sions of Article 31: of the Treaty of Sèvres concerning the cancel-
lation of concessions already in existence. The Colonial Office,
however, stated on November 14th, 1922, that these observations
did not modify the views in regard to the water concession, as
expressed in its letter of October 21st. It alsc became clear that
the Colonial Office was still taking its stand on the Treaty of Sévres.

On November 16th, M. Mavrommatis replied as follows: (x) that
he was prepared to agree to the expropriation of his water concession
in consideration of the payment of fair compensation to be assessed
by experts; (2) that he desired to obtain the approval, with or
without modification, of his plans for the electric concession which
he had submitted on August 15th, 1922, sothat he could begin the
projected works; (3) that he was, however, prepared to agree
to the expropriation of this concession also, on payment of
fair compensation.

However, in a letter dated December 30th, 1922, the Colonial
Office informed the solicitors, (1) that as regards the water
concession, M. Mavrommatis had not put forward any proposals
applicable to the changed conditions of the country; (2) that
as regards M. Mavrommatis’ claim to rights in respect of his
electric concession, these rights would remain undetermined until
a treaty of peace with Turkey had come into operation. At the
same time, however, the Colonial Office, referring to its letters of
October 21st and November 14th, 1922, still in certain respects
JUDGMENT No. 5 20

took its stand on the Treaty of Sévres. Moreover, though it declared
that M. Mavrommatis’ plans for the electric concession were
financially impossible to carry out, the Colonial Office nevertheless
asked tor a further set of documents concerning it. M. Mavrom-
matis’ solicitors complied with this request on January 23rd, 1923,
and sent the Colonial Office a series of additional documents regard-
ing both the water and electric concessions. They also pointed
out that in their opinion, (1) under Articles 311 and 312 of the Treaty
of Sévres, the Mandatory had no power to annul previously existing
concessions, but that this had been done in the case of the Mavrom-
matis concessions by the grant of the Rutenberg concessions and
that consequently the matter could not be settled by the sub-.
mission by M. Mavrommatis of fresh plans but only by arbitration ;
and (2) that the plans submitted by M. Mavrommatis to the City
of Jerusalem with his letter of July 30th (old style), 1914, which
the City had duly acknowledged on September 30th following,
should be regarded as approved, since the City had not within the
prescribed time, namely three months from the date of submission,
suggested any modification (Article 6 of the Electricity and Water
Agreements).

Meanwhile M. Mavrommatis had put the matter before the Greek
Legation in London, requesting it to take the necessary steps with
a view to submitting the case to arbitration in accordance with
Articles 311 and 312 of the Treaty of Sèvres. The Legation trans-
mitted the letter to the Foreign Office, together with the correspond-
ence passed between the Colonial Office and M. Mavrommatis or his
representatives between December 18th, 1922, and January 27th,
1923. The Foreign Office however considered—as appears particu-
larlv from the letter of February 2nd, 1923—that M. Mavrommatis
should continue to deal direct with the Colonial Office. It should be
added that, by a letter dated January gth, 1923. M. Mavrommatis’
solicitors informed the Colonial Office that the matter had been put
before the Legation.

Private negotiations however were continued. It would appear
that in March 1923, it was in principle agreed that M. Mavrommatis’
claims should be referred to a Judge of the English High Court for
arbitration, and draft terms of reference were submitted to the
Colonial Office on May 2nd, 1923. This proposal was however set
aside, as appears from a letter of the Colonial Office dated July 14th,
1923. The reason given in this letter was the uncertainty as to the

3
JUDGMENT No. 5 21

conditions of peace with Turkey, which made it impossible to fix the
extent to which M. Mavrommatis could be held to possess any
claims which the Palestine Government would be bound to recognize,
At the same time, the Office suggested, without prejudice and
without making any admission, that M. Mavrommatis should
state what sum of money he would be prepared to accept in full
and final settlement of any claims against that Government. In
reply, M. Mavrommatis’ solicitors, in a letter dated July 2oth, 1923,
(1) accepted on his behalf the suggestion of the payment of a lump
sum in full settlement and (2) fixed this sum at £234,339. It should
be noted that this sum is the same as that which subsequently
appears in the application instituting proceedings filed with the
Registry of the Court on May 13th, 1924, and already quoted in this
Judgment. On August 2nd, however, the Colonial Office stated
that the figure named could not be entertained even as a basis for
discussion and advised M. Mavrommatis to examine the terms of the
Protocol concerning Concessions, signed at Lausanne at the same
time as the Treaty of Peace. It should be observed in this connec-
tion that in a letter dated July 2oth, 1923, M. Mavrommatis’
solicitors had stated that their client was prepared to abide by the
conditions of the future Treaty although unaware of its terms.

The Treaty and the supplementary instruments were actually
signed on July 23rd, 1923. Amongst the latter is to be found—
No. XII—a “Protocol relating to certain concessions granted in the
Ottoman Empire”, hereinafter called Protocol XII. The Court has
already observed, in Judgment No. 2 (August 30th, 1924), that
Protocol XII was intended to replace those clauses of the Treaty
of Sévres relating to concessions and has indicated its general
structure. In the present Judgment, therefore, the Court confines
itself to quoting the relevant clauses :

Article 1.

“Concessionary contracts and subsequent agreements
relating thereto, duly entered into before the 29th October,
1924, between the Ottoman Government or any local authority,
on the one hand, and nationals (including Companies) of the
Contracting Powers, other than Turkey, on the other hand, are
maintained.” ©

JUDGMENT No. § 22
Article 3.

“The amount due, after settlement of accounts, to the State
or to beneficiaries under contracts and agreements referred to
in Articles 1 and 2, in respect of the use by the State, on the
territory which it now possesses, of the property or the services
of the said beneficiaries shall be paid in accordance with
existing contracts or agreements or, in detault of contracts or
agreements, in accordance with the procedure of settlement by
experts provided for by the present Protoccl.”

Article 4.

“Subject to the provisions of Article 6, the provisions of the
contracts and subsequent agreements referred to in Article 1
shall, by agreement, and as regards both Parties, be put into
conformity with the new economic conditions.”

Article 5.

“Inthe absence of agreement within one year from the coming
into force of the Treaty of Peace signed this day, the Parties
will adopt the provisions regarding both the settlement of
accounts and the readaptation of concessions, which are con-
sidered suitable and equitable by two experts, to be nominated
by the Parties within two months from the expiration of the
period of one year mentioned above. In case of disagreement,
these experts will refer the question to a third expert selected
within two months by the Turkish Government from a list of
three persons, nationals of countries not having participated
in the war of 1914-1918, prepared by the head of the Swiss
Federal Department of Public Works.”

Article 6.

“Beneficiaries under concessionary contracts referred to in
Article 1, which have not, on the date of this Protocol, begun
to be put into operation, cannot avail themselves of the pro-
JUDGMENT No. 5 23

visions of this Protocol relating to readaptation. These
contracts may be dissolved on the request of the concessionnaire
made within six months from the coming into force of the Treaty
of Peace signed this day. In such case the concessionnaire
will be entitled, if there is ground for it, to such indemnity in
respect of the survey and investigation work as, in default of
agreement between the Parties, shall be considered equitable
by the experts provided for in this Protocol.”

Article 9.

“In the territories detached from Turkey under the Treaty
of Peace signed this day, the State which acquires the territory
is fully subrogated as regards the rights and obligations of
Turkey towards the nationals of the other Contracting Powers,
and companies in which the capital of the nationals of the said
Powers is preponderant, who are beneficiaries under con-
cessionary contracts entered into before the 29th October, 1914,
with the Ottoman Government or any local Ottoman authority.
The same provision will apply in territories detached from Tur-
key after the Balkan Wars so far as regards concessionary
contracts entered into with the Ottoman Government or any
Ottoman local authority before the coming into force of the
Treaty providing for the transfer of the territory. This
subrogation will have effect as from the coming into force of the
Treaty by which the transfer of territory was effected except
as regards territories detached by the Treaty of Peace signed
this day, in respect of which the subrogation will have effect
as from the 30th October, 1918.”

Article 10.

“The provisions of Section I of this Protocol, except Articles 7
and 8, will be applied to the contracts referred to in Article 9.
Article 3 will only have effect in detached territories where the
property or the services of the concessionnaires were utilized
by the State exercising authority in such territory.”
JUDGMENT No. 5 24

Protocol XII came into force, as regards the Parties to the dis-
pute, on August 6th, 1924, together with the Treaty of Lausanne.

The period August to October, 1923, appears to have been taken
up by a resumption of verbal negotiations. In fact, on October
23rd, the Colonial Office, referring to conversations which had taken
place with a representative of M. Mavrommatis, stated that they
would not suggest any figure for the full settlement previously
contemplated and recommended M. Mavrommatis to present a
claim under Protocol XII ; until he had done so the Colonial Office
were not prepared to make any further move.

A detailed claim was therefore submitted on November 2nd, 1923,
to the Colonial Office on behalf of M. Mavrommatis. It appears
from the covering letter that the claim was submitted mainly in
order to serve as a basis for a friendly settlement. Since, as regards
the water and electric concessions, it is undoubtedly on this claim
that the conclusions of the Greek Case (quoted above) are based,
it will be well to cite the relevant passage :

“(x) It is desired that these concessions be recognized and/or
maintained and that M. Mavrommatis be permitted to work the
undertakings in accordance with the concessions granted him. In
the alternative he should receive :

“{a) Compensation for the expropriation of his concessionary
rights to reimburse him for the costs incurred in the acquisition of
his rights and for their necessary development including survey and
general expenses, commissions to agents, expenses in drawing up
plans, together with the loss of interest and exchange on his deposit,
and

‘*(b) Loss of profit.”

The amount claimed is as follows:

Under (a) £53,256
Under (8) £67,789

‘‘(2) In so far as the water services and/or property have been
JUDGMENT No. 5 25

utilized by His Majesty’s Government for the period of five years
he claims indemnity for such use.”

The Colonial Office’s reply is dated December 15th, 1923. In this
reply, (1) note is taken of M. Mavrommatis’ alleged admission that
his claims fell to be dealt with under the Protocol ; (2) it is stated
that, subject to the production of the original copies of the conces-
sions and their being found in order, the British Government was
disposed to recognize the water and electric concessions ; (3) it is
stated that, not having begun to be put into operation, the con-
cessions fell under Article 6 of Protocol XII ; (4) it is asked whether,
in this connection, M. Mavrommatis desired to put them into
execution or apply for their dissolution ; (5) it is stated that in the
former event, they would not be readapted to the new economic
conditions, in particular as regards the scale of charges fixed in
paper money and that in the latter event, a claim for an indemnity
for the survey and investigation work would be considered ; and (6)
it is observed that the works connected with the water concession
had not been carried out and that therefore the British Authorities
had not been able te utilize them, and that, consequently, there was
no valid claim for an indemnity on this account.

The reply made to this communication on behalf of M. Mavrom-
matis is dated January r1th, 1924, and was to the following effect :
(1) that it was not admitted that the claims fell to be dealt with
only under the provisions of Protocol XII ; (2) that M. Mavrommatis
had the right to choose whether his concessions should be recognized
and put into execution or expropriated ; (3) that M. Mavrommatis
was prepared to form the company or companies required for
carrying out the contracts ; and (4) that he had the right, if he put
them into execution, to claim their readaptation but that he would
be content, in conformity with the agreements, to have the cost
of the works estimated at the actual amount on the day of their
execution, it being understood that the tariffs were fixed in gold
piastres. The letter went on to observe that an issue was clearly
raised which could best be solved by arbitration, failing friendly
agreement. Finally, attention was drawn to the loss occasioned
to M. Mavrommatis by reason of the delay in the settlement of the
matter.

Meanwhile M. Mavrommatis once more referred the question
to the Greek Legation in London. His solicitors informed the

JUDGMENT No. 5 26

Colonial Office of this, adding that the object was to have the
Mavrommatis claims brought before the Permanent Court of Inter-
national Justice. The Colonial Office therefore on February roth,
1924, terminated the correspondence with the solicitors. For the
history of the case from the time when it was definitely handed over
to be dealt with through diplomatic channels, the Court refers
to Judgment No. 2 (August 30th, 1924). It should merely be
observed at this point that the argument of the Greek Government
was the same as that developed on behalf of M. Mavrommatis in the
2bove-mentioned letters of November 2nd, 1923, and January rit,
1924, whilst the British Government adopted the attitude defined
in the Colonial Office’s letter of December 15th, 1923.

LAW.

The Respondent submits that in the present suit three questions
tall to be answered by the Court, namely :

{1) Are the Mavrommatis concessions legally valid ?

{2) Has the British Government, by granting the Rutenberg
concession, violated the obligations devolving upon it under the
Protocol ; and

(3) Which Articles of the Protocol—No. 6 or Nos. 4 and 5—are
applicable to the Mavrommatis concessions ?

The Claimant, whilst not entirely disputing this way of formulat-
ing the above questions and whilst agreeing to discuss them in the
order proposed, contends that the order of numbers (2) and (3)
should be reversed. In his opinion, when the question of the
validity of the concessions and that of the relevant clauses of
Protocol XII have been dealt with, it remains to be ascertained
whether the system established by the Protocol has not been ren-
dered inapplicable as a result of the situation brought about in
Palestine by the grant of the Rutenberg concession.

The Court, before dealing with the contentions put forward by
the Parties and before deciding upon their conclusions, feels it
necessary to state precisely the questions put before it for examina-
tion and the basis on which rests its competence to deal with them.

The Greek Government, in the application instituting proceedings
dated May 13th, 1924, resting itself on Articles 26 and 11 of the
Mandate for Palestine, has asked the Court for a decision. His

JUDGMENT No. 5 27

Britannic Majesty’s Government raised an objection to the Court’s
jurisdiction ; the Court therefore had, in the first place, to give
judgment on this prelim‘nary question and, in the judgment of
August 30th, 1924, it reserved the suit in so far as the Jerusalem
concessions were concerned for judgment on the merits.

The Court based that judgment on the terms of Article 11 of the
Mandate and principally upon the first paragraph of that article.

It laid down that the Rutenberg Concession was granted in the
exercise of the full power bestowed upon the Palestine Adminis-
tration ‘to provide for public ownership or control of any of the
natural recources of the country or of the public works, services
and utilities established or to be established therein.”’ It is there-
fore in the exercise of this full power that the Palestine Administra-
tion must, under Article 11, respect the international obligations
accepted by the Mandatory in regard to which that article makes
an express reservation. In the opinion of the Court these internatio-
nal obligations there referred to are constituted solely by the
Protocol of Lausanne. For no other instrument creating inter-
national obligations contracted by the Mandatory has been brought
to the Court’s knowledge, and it does not appear that any such
exist. It is true that the Claimant has maintained that the pro-
visions of the Protocol should be supplemented by certain principles
taken from general international law ; the Court, however, considers
that Protocol XII is complete in itself, for a principle taken from
general international law cannot be regarded as constituting an
obligation contracted by the Mandatory except in so far as it has
been expressly or implicitly incorporated in the Protocol.

Since the Court’s jurisdiction extends only to cases where
M. Mavrommatis’ concessions have been affected by the acts con-
templated by Article 11 of the Mandate, in sc far as such are con-
trary to the obligations contracted under Protocol NII, it follows
that this jurisdiction does not extend to the works constructed by
the British Troops in the summer of 1918, nor to the alleged use
made by them of M. Mavrommatis’ plans regarding the Water
Concession. Those are circumstances entirely unconnected with
the concession promised to M. Rutenberg.

It is not by reason of the jurisdiction conferred on the Court
under Article 26 of the Mandate, but in consequence of an agree-
ment between the Parties resulting from the written proceedings,
that the Court has jurisdiction (Article 36, first paragraph, of the
JUDGMENT No 5 28

Statute) to decide whether M. Mavrommatis’ Jerusalem Concessions
fall to be dealt with under Articles 4 and 5, of Article 6 of the Proto-
col. The Court’s jurisdiction, however, does not extend beyond
giving a reply to this question. Only by virtue of a further agree-
ment could other disputes, relating to the application of the articles
in question, be dealt with by the Court, unless, of course, such
disputes resulted out of the grant of the Rutenberg Concession and
to this extent fell within the scope of the jurisdiction obtained,
as indicated above, from Articles 26 and 11 of the Mandate.

Finally, it appears from the oral statements of the Parties that
they are agreed in asking the Court, should the case arise, to decide
whether the tariffs laid down in the Jerusalem concessions are
fixed on a gold basis or in paper money. This agreement, however,
is applicable only in the event of the Court deciding that these
concessions are valid and that Article 6 is applicable to them and
not Article 4.

According to the above considerations, the Court will now proceed
to consider the following points :

Validity of the Mavrommatis Concessions (1) ;

Relation between these Concessions and the Rutenberg Con-
cessions; violation of international obligations accepted by the
Mandatory and damage to M. Mavrommatis’ interests resulting
therefrom (IJ) ;

Question whether the Mavrommatis Concessions fall under
Articles 4 and 5 or Article 6 of Protocol XII (ITN).

Before the Court takes up the principal question, namely, whether
M. Mavrommatis is entitled to compensation in consequence of
the concession promised to M. Rutenberg, a preliminary point
raised by the Respondent must be decided.

The British Government submits in the Counter-Case that
M. Mavrommatis’ Jerusalem concessions are invalid. It bases this
contention on the fact that M. Mavrommatis is referred to in both
concessions as an Ottoman subject, whereas his real and only
nationality is Greek and has been recognized to be so by both
Parties. In the contention of the British Government, it follows
that the concessions were granted in error and consequently that

4

JUDGMENT No. 5 29

they are not valid. In these circumstances-—it is contented—
Palestine cannot be subrogated as regards the rights and obliga-
tions which Turkey would have had in respect of these concessions,
had they been valid. Furthermore, the protection accorded by
the Protocol to the nationals of Contracting Powers other than
Turkey cannot be invoked in respect of Ottoman concessions
granted to a beneficiary described as an Ottoman subject.

*
* *

It should in the first place be observed that the Court has to con-
sider the validity of the concessions only as a preliminary question,
and not as a point of law falling by its intrinsic nature properly
within its jurisdiction as an International Court. For these
reasons the Court confines itself to considering whether there are
adequate reasons for regarding these concessions as having been
entered into according to the terms of Article 9 of the Protocol or
as ‘“‘duly entered into” according to the terms of Article 1.

It is not contended by the Respondent that the Ottoman author-
ities ever treated the Jerusalem concessions as null, or that they
took any steps to annul them ; on the contrary, the validity of the
contracts was taken for granted in all that passed between the
authorities and M. Mavrommatis after the grant of the concessions.

In these circumstances, the Court considers that it is for the
Respondent to prove that the concessions are not valid, though
it is indisputable that the reference to the Ottoman natio-
nality of the beneficiary in the concessions is incorrect. The British
Government does not contend that, in Turkish law, the Ottoman
nationality of the beneficiary was a condition essential to the valid-
ity of concessions ; moreover, no law nor any document in this
sense regarding the practice of the courts or competent author-
ities in Turkey has been produced. Nor has the Respondent
tried to show that, if the authorities had imposed such a
condition, a failure to observe it would, in Turkish law, have
rendered the concessions null or liable to annulment. For this
reason the question does not, in the present case, arise as to whether
the Court should, if necessary, ascertain what rule would actually
have been applied by Turkish law to the situation under consider-
ation. The Respondent has confined himself to putting forward

JUDGMENT No. 5 30

arguments in favour of the contention that the Ottoman author-
ities might have considered M. Mavrommatis’ Ottoman nationality
as a condition upon which the grant of the concession was depend-
ent, but no proof that such was actually the standpoint of these
authorities has been produced. The contention of the Respondent
in regard to this point therefore fails through lack of evidence to
support it.

Even arguing—as does the British Government—from those
principles which seem to be generally accepted in regard to con-
tracts, and from the probable intentions of the Parties, the Court
equally arrives at the conclusion that the Mavrommatis concessions
must be regarded as valid. Since the identitv of the person has
never been in any doubt, the error can only relate to one of the
attributes of the concessionnaire. The absolute nullity therefore
of the concessions would appear to be excluded ; their hability to
annulment depends on the question whether Ottoman nationality
was considered as a condition of the grant of the concessions. The
Respondent has contended that certain circumstances militate in
favour of this view-—inter alia the express mention of the Ottoman
nationality of the concessionnaire, the existence of clauses ensuring
that the Company to be formed shall be Ottoman. The following
circumstances should however be noted :

The fact that the concessionnaire is under an obligation to form
within a short period an Ottoman Company to work the concession
renders his nationality of practically no importance, his technical
abilities and financial connections being the essential points.
Indeed, in the agreements relating to the Jaffa concessions, which
were granted even after Turkey’s entry into the war, M. Mavrom-
matis’ nationality is not mentioned. Furthermore, one important
consequence of Ottoman nationality, namely the jurisdiction of
the Ottoman authorities and courts in the event of any possible
dispute, is expressly stipulated in all the concessions, in those
which mention M. Mavrommatis’ nationality as well as in those
that do not ; this jurisdiction does not therefore depend upon the
description of the concessionnaire as an Ottoman subject.

For these reasons the Court has come to the conclusion that the
reference to M. Mavrommatis as an Ottoman subject in the agree-
ments concerning the Jerusalem concessions, is not intended to
represent a condition on which the grant of the concession is

JUDGMENT No. 5 31

dependent and that, therefore, the fact that M. Mavrommatis is
not an Ottoman subject cannot involve the invalidity of the con-
cession. The concessions must therefore be regarded as valid
and definitively acquired.

The Respondent also reserved to himself the right to raise the
question whether the water concession had not lapsed because the
obligations with regard to the deposit to be made had not been
fulfilled in accordance with the provisions of the concession. As
however this point appears to have been subsequently abondoned,
the Court need not deal with it. At all events the Jerusalem
authorities do not appear to have raised any objection to the
deposit made by the Banque Périer being regarded as fulfilling the
requirements of Article 18 of the agreements concerning the con-
cession.

*
* *

The Mavrommatis concessions, having been recognized as valid,
must, if they are to hold good as against the successor State in accord-
ance with Article 9 of Protocol XII, be held by a subject of a con-
tracting Power other than Turkey. Now it is common ground that
M. Mavrommatis is a Greek subject and that Greece is one of the
Contracting Powers in question. Nevertheless, it remains to be
considered whether the fact that M. Mavrommatis is described in the
concession as an Ottoman subject, though not invalidating the con-
cession itself, might deprive him of the right to benefit by the terms
of Article g of the Protocol. The Court declines to admit the possi-
bility of such a conclusion. It is of opinion—-and no proof to the
contrary has been furnished—that Article 9 of Protocol XII con-
templates the real nationality of beneficiaries, and that it would
be contrary to the spirit and intention of this instrument to with-
hold its benefits because another nationality was in error set down
in the concessionary contrats. There is an indication to this
effect in Article 9 ; that article stipulates that Ottoman Companies
in which the capital of nationals of Contracting Powers other than
Turkey is preponderant, holding concessionary contracts, may
benefit by the terms of this article. It is therefore on the natio-
nality of the real beneficiaries and not on the mere legal national
status of the concessionnaire that the question of subrogation
depends. Now the real nationality of this concessionnaire,
M. Mavrommatis, is Greek.

JUDGMENT No. 5 32

The provision, therefore, contained in Article g of Protocol XII,
to the effect that Palestine is subrogated as regards the rights and
obligations of Turkey towards the nationals of contracting Powers
other than Turkey, who are beneficiaries under the concessionary
contracts entered into with the Ottoman authorities before October
29th, 1914, is applicable to M. Mavrommatis’ concessions.

IT.

The Court now passes to the question of the relation existing
between M. Mavrommatis’ Jerusalem concessions and the agreement
concluded on September 21st, 1921, between M. Rutenberg and
the Crown Agents for the Colonies on behalf of the High Commis-
sioner for Palestine.

This is the only agreement which need be considered for it is
common ground that the concession granted on September rath,
1921, to M. Rutenberg for the supply of electrical energy and the
irrigation of the District of Jaffa does not affect the rights derived
by M. Mavrommatis from his above-mentioned concessions.

The British Government recognizes that the rights which the
High Commissioner undertook, by the agreement of September
21st, 1921, to grant in certain circumstances to M. Rutenberg partly
overlap the rights derived by M. Mavrommatis from his conces-
sions for the supply of electricity at Jerusalem. That Government,
however, contends that under Article 29 of the conditions attached
to that agreement, M. Rutenberg is under an obligation to respect
M. Mavrommatis’ rights in so far as M. Rutenberg does not make
use of the option accorded him under that article to request the
High Commissioner to annul, on payment of compensation, any
rights which may conflict with those embodied in the concession
promised to M. Rutenberg.

Article 29 runs as follows :

“In the event of there being any valid pre-existing conces-
sion covering the whole or any part of the present concession,
the High Commissioner, if requested in writing by the Com-
pany so to do, shall take the necessary measures for annulling
such concession on payment of fair compensation agreed by the
Company or, failing agreement, determined by arbitration

JUDGMENT No. 5 33

between the owner of such concession and the High Commis-
sioner and the Company shall indemnify the High Commissio-
ner against any compensation that may be due or become
payable in respect of any such annulled concession to the
extent to which it affects this present concession and shall be
entitled to increase the capital of the Company and the rates of
charge to be made to consumers of electrical energy corres-
pondingly and the amount of any compensation to become
payable and to be paid in respect of any such annulled conces-
sion shall be paid in agreement with the Company and in
default of agreement be determined by arbitration between
the owner or owners of such pre-existing concession and the
High Commissioner or other appropriate procedure.”

Although the article does not expressly say that if M. Rutenberg
does not ask for the annulment of valid pre-existing concessions
covering the whole or any part of the concession granted him, he
must respect them, it is indeed hardly possible to construe the
article in any other sense. Clearly, by giving M. Rutenberg the
right to ask for annulment, the article implies that, should he not
make a request to that effect, he will not have the right to treat
such concessions as null, and that, until annulled, in the manner
provided for, they must be maintained.

The question whether, by giving M. Rutenberg the right to claim
the annulment of previous concessions covering the whole or any
part of the concession promised to him, the Palestine Administra-
tion failed to observe the international obligations accepted by the
Mandatory, will be considered later. But the Court notes that,
apart from this right, there is nothing in the agreement of Septem-
ber 21st, 1921, which—on a reasonable interpretation of Article 29
—can be regarded as contrary to the rights held by M. Mavrommatis.

As regards M. Mavrommatis water concession for the supply of
water, the British Government denies that this is affected either
directly or indirectly by the concession promised to M. Rutenberg
on September 21st, 1921.

For this purpose, that Government relies on Article 4 of the
water concession, which contains the following:

“Translation. |
“For the exclusive purposes of his concession, the conces-
sionnaire shall have the right either himself to install a hydro-

JUDGMENT No. 5 34

electric power-station generating not more than 1000 (one
thousand) kilowatts, or to procure power from a central power-
station not included in the present concession or to install
a steam power-station of force sufficient for the working of
his concession” ;

and again on Article 34 of the conditions drawn up for the Ruten-
berg concession, which is as follows :

“Nothing herein contained shall prevent.... any person
or persons or any firm or company generating electrical energy
and using the same for his or their own purposes within
the concession area but so that no such electrical energy shall
be sold or otherwise disposed of within such area.”

On the other hand, the Greek Government considers that the
latter concession conflicts with the rights possessed by M. Mavrom-
matis under his water concession. No weight, however, can be
attached to this argument having regard to Article 34 (above-quoted)
of the Rutenberg concession.

The right of any person to produce and employ electric power
for his own use is therefore expressly reserved and M. Mavrommatis
can, according to the actual terms of the concession promised to
M. Rutenberg, himself install a hydro-electric power-station for
the working of his water concession.

The Greck Government also contends that M. Mavrommatis
only accepted the water concession having regard to the special
advantages which he would derive from also possessing the electric
concession, since the works projected for the one could be used for
the purposes of the other as well.

The Court docs not think it necessary to consider the weight of
this argument. It will suffice to observe that even if it had been
proved that M. Mavrommatis accepted the water concession exclu-
sively on this understanding, it would only be in the event of his
being deprived of his electric concession, or prevented from pro-
ceeding with it, that there would appear to be any connection
between his water concession and the Rutenberg concession which
might lead to M. Mavrommatis also being prevented from proceed-
ing with the water concession or to his suffering loss in respect of it.

JUDGMENT No. 5 35

The British Government has pointed out that, though
M. Rutenberg has, within the time fixed in the agreement of
September 21st, 19271, claimed the grant of the concession contem-
plated therein, the concession has not yet been granted because
the Palestine Administration and M. Rutenberg have not yet
agreed upon certain modifications to be introduced in the conditions
laid down.

Furthermore, in the course of the proceedings--as an annex to the
Counter-Case, dated December 28th, 1924,—the British Govern-
ment produced the following letter, dated London, May Ist, 1924,
and addressed to the Colonial Office :

“The Palestine Electric
Corporation, Limited.

“Our Ref. 3977. London, May Ist, 1924.
“Sir,
«ve Jerusalem Installation. — Mavrommatis Concession.

“The Board of Directors of our Company have carefully considered
the position with regard to the supply of electricity to Jerusalem
in connection with the alleged rights of M. Mavrommatis under
his pre-war Turkish concession for Jerusalem and compensation
of £125,000 demanded by him for such rights.

“Whilst not admitting the validity of the above-mentioned
concession previously annulled by H.M. Government, our Board
were prepared, in order to satisfy the urgent requirements for
electric energy of the Jerusalem population, to pay reasonable
compensation to M. Mavrommatis.

“In view, however, of the fact that the compensation of £125,000
demanded by M. Mavrommatis is unreasonable and would prove an
extremely heavy and unproductive burden on the comparatively
poor Jerusalem population in the form of excessively high rates
for electrical energy, our Company will not expropriate M. Mavrom-
matis’ concession and will raise no objection to M. Mavrommatis
being pernritted to carry out the Jerusalem installation in accordance
with the terms of lis concession.

“Provided, however, that should M. Mavrommatis fail to com-
JUDGMENT No. 5 36

mence and carry out the installation in the respective terms
specified in his concession, no obstacles will be placed in the way of
the Palestine Electric Corporation, Limited, to proceed with the
works in Jerusalem and district in accordance with the Jordan
concession,

“We shall be glad if you will kindly let us know what steps
H.M. Government is taking in this regard.

“T am, etc.

“For the Palestine Electric Corp., Ltd.

(Signed) PINHAS RUTENBERG,

Director.”

The Greek Government questioned the value of this statement as
evidence that “The Palestine Electric Corporation, Limited”,
the Company formed by M. Rutenberg to work his electric conces-
sion, has definitely and unconditionally renounced the right to ask
for the expropriation of M. Mavrommatis and would not oppose
his being allowed to proceed with his concession. Whereupon
the British Government, in the course of the hearing, produced a
further letter from M. Rutenberg dated Jerusalem, January 28th,
1925, in which M. Rutenberg, in reply to a telegraphic enquiry from
the Colonial Office, renewed his declaration as follows :

“T refer to my letter to the Colonial Office of 1st May, 1924.
For the reasons therein set out, neither the Palestine Electric
Corporation Limited nor myself will raise any objection to the
carrying out by M. Mavrommatis of his tramway and electricity
concession for Jerusalem, and neither the Palestine Electric Corpor-
ation Limited nor myself propose to exercise any right under our
concession to call for the annulment of M. Mavrommatis’ said
concession.”

As regards M. Mavrommatis’ water concession, M. Rutenberg
adds :

“I say that neither I nor the Palestine Electric Corporation
Limited object or have ever objected to M. Mavrommatis carrying

5

JUDGMENT No. 5 37

”

out the concession for the supply of water to Jerusalem....

It is clear from these declarations of M. Rutenberg that his renun-
ciation is binding not only on himself as a contracting Party to the
agreement of September 21st, 19271, but also onthe Company which
he had undertaken to form under the terms of that agreement and
to which the rights and obligations under -the concession would
accrue. The Court considers that, similarly, the renunciation also
holds good for any successors to M. Rutenberg's rights other than
the Company taking over the concession.

The British Government, through its Representative, made the
following declaration :

“We have received from M. Rutenberg what we regard as an
unequivocal disclaimer of any intention to ask us to expropriate
M. Mavrommatis. We have accepted that unequivocal statement,
and we have declared—it is to be found on page 6 of the British
Counter-Case—that His Majesty’s Government are ready and
willing to carry out in regard to both M. Mavrommatis’ Jerusalem
concessions, if, contrary to the British contention, they are held
to be valid, whatever obligations under the Lausanne Protocol
the Court may decide to be applicable now. That explicit declara-
tion I, as such authorized representative of H.M. Government,
and a member of it, here repeat that we intend to carry out whatever
obligations, if any, the Court says are imposed upon us by the
terms of the Lausanne Protocol. That being so, there can be no
question of our acting on any request to expropriate M. Mavrom-
matis. If M. Rutenberg was so—I do not like to use the term—
dishonest, so unreasonable, now as to ask to expropriate him after
declaring that he has no such intention, we should not act upon
that request.”

After this statement, the binding character of which is beyond
question, the Court considers that henceforward it is quite impossible
that the British or Palestine Governments should consent to comply
with a request for the expropriation of M. Mavrommatis’ Jerusalem
concession. The clause in Article 29 of the Rutenberg concession
JUDGMENT No. 5 38

which gave him the right to demand such expropriation must there-
fore be regarded as deleted and all that remains of that article is
an obligation on the part of M. Rutenberg and his successors to
respect M. Mavrommiatis’ concessions.

*
* *

Nevertheless the fact remains that, prior to that statement, the
article did exist and was to the effect indicated above, and the ques-
tion is whether this fact alone constituted a violation of the inter-
national obligations contemplated in Article 11 of the Mandate.

In this respect, it should be remembered that at the time when
the agreement with M. Rutenberg was concluded, that is on
September 21st, 1921, the Treaty of Sèvres had been signed.
According to Article 311 of that Treaty, Mandatory States were
entitled within a period of six months from the date on which the
territory affected had been placed under their authority or tutelage,
to buy out pre-existing concessions. The fact that this right of
expropriation was limited to a period of six months appears to
indicate that, apart from possible provision for a right of repur-
chase in the actual conditions of a concession, contracting States,
under the Treaty of Sévres, renounced the right to expropriate con-
cessions in their entirety. According to this Treaty, the Palestine
Administration would not—it would seem—have been entitled
to grant to a concessionnaire the right at any time to require the
annulment of a concession maintained by the Treaty.

Subsequently, when the course of events made it clear that the
Treaty of Sévres would never come into force, the negotiations
which resulted in the adoption of Protocol XII were commenced.
This Protocol, as is well known, contains no right to expropriate
pre-existing concessions, which, according to its terms, are to be
maintained. The Parties, however, are not agreed as to the
meaning to be attached to the provisions of this Protocol.
Whereas the British Government is of opinion that the fact that
the successor States are placed under an obligation to maintain
the concessions referred to in Article g of the Protocol, whilst no
mention is made of a right to expropriate them, is indicative of an
intention to exclude such a right, the Greek Government, on the
other hand, considers that the existence of such a right of expropri-
ation is to be assumed.

The Court does not feel it to be necessary to resolve this question.

JUDGMENT No. 5 39

It considers that, for the purposes of the present case, it will suffice
to observe that the British Government has stated that it does not
regard itselt as authorized to expropriate concessions the mainten-
ance of which is assured under Protocol XII. It has produced in
support of its views notes exchanged on July 24th, 1924, between
Sir Horace Rumbold and Gencral Pellé, from which correspondence
it appears that it was at all events considered desirable, in view of
the provisions of the Protocol, te agrec in terms that France and
Great Britain respectively did not intend to avail themselves, as
regards concessions for putlic works, of the provisions of Section IT
of the Protocol, and that therefore it would be open to the
Governments of these countries to proceed to buy out the con-
cessions.

The Treaty of Sèvres has never been ratified and Protocol XII
only came into force on August Oth, 1024. The Court will not
examine the question whether these international instruments
might, before their ratification, have produced certain legal effects
as regards the contracting Parties. Nor willit examine the bearing
from a juridical point of view of the negotiations which took place
on the basis of these instruments between the interested person
and the authorities—-negotiations the sole object of which was, in
any case, to arrive at a friendly agreement. In the present case,
the applicability of those clauses of Protocol XII which ensure the
maintenance of concessions, results from an express provision of
the Protocol itself, namely Article 9, which antedates the subrog-
ation as regards the rights and duties of Turkey to October 30th,
1918, in the case of States succeeding to territory detached from
Turkey as a result of the Great War. The obligation accepted by
the Mandatory to maintain concessions covered by the Protocol is
therefore to be regarded, by virtue of this clause, as having existed
at the time when the Rutenberg concession was granted and it has
never ceased to exist since that time.

The insertion in clause 29 of the Annex to the Agreement of
September 21st, 1921, of a right on the part of M. Rutenberg to
require at any time the expropriation of pre-existing concessions,
until it was withdrawn, interfered with the right of holders of
pre-existing concessions to utilize their concessions as such without
being threatened with annulment before the time at which, under
their concessions, a right of repurchase would become operative.

The annulment which might have resulted from the application

JUDGMENT No. 5 40

of clause 29 of the Rutenberg concession, might moreover have
taken place at any moment during the existence of the concession
and at the initiative of a private individual, so that the safeguard
against ill-considered expropriation which exists when the initiative
is in the hands of a State, which can only expropriate for reasons of
public utility, was seriously impaired.

The Court therefore holds that so long as M. Rutenberg possessed
the right to require the expropriation of the Mavrommatis con-
cessions, the clause in question was contrary to the obligations
contracted by the Mandatory when signing the Protocol. The
question then arises whether, by the Mandatory’s failure to fulfil
the obligations which he had contracted, M. Mavrommatis has
suffered loss entitling him to compensation.

»

*
* *

The Greek Government’s main contention is that expropriation
has already taken place and that the compensation due therefor
has not been paid to M. Mavrommatis. It is this compensation
which constitutes its principal claim.

It is however clear that the clause contained 1n Article 20 does not
in itself amount to expropriation. It merely gives M. Rutenberg
the right to require it, should he desire to do so, and there is nothing
to show that he had made any request to that effect. On the
contrary, as has been seen, he has now renounced his right.

The Greek Government itself recognizes that the clause in itself
does not amount to expropriation. It contends however that
subsequently the British Government made its choice and decided
not to allow M. Mavrommatis to proceed with his concessions, or
that, at least, it made the execution of the concessions impossible
or difficult in actual fact. The statements made during the
proceedings to the effect that neither the British Government nor
M. Rutenberg or the Palestine Electric Corporation Limited will
oppose the putting into execution of the Mavrommatis concessions,
have in the opinion of the Greek Government been made too late
and cannot restore the situation for M. Mavrommatis.

The Court points out in the first place that, if the British Govern-
ment had in fact decided not to allow M. Mavrommatis to proceed
with his concessicns, this decision not being the consequence of a
request on the part of M. Rutenberg, there might be some doubt

JUDGMENT No. 5 41
as to whether this would be an act falling within the jurisdiction
of the Court. For, according to the judgment of August 30th,
1924, the Court’s juvisdiction is confined to acts against which the
terms of Article 11 of the Mandate are directed. The Court does
not however think it necessary to labour this question of jurisdic-
tion, since the correspondence during the negotiations between
M. Mavrommatis and the Colonial Office shows that there is no
foundation for such an assertion.

In this respect, it will suffice to observe that, after M. Mavromma-
tis had proved his Greek nationality, the Colonial Office stated on
several occasions that it recognized that M. Mavrommatis held
certain rights under his concessions at Jerusalem and that these
rights, in so far as they existed, would be respected. Again, in a
letter to M. Mavrommatis’ solicitors dated December 15th, 1922,
the Colonial Office asked whether M. Mavrommatis wishes to pro-
ceed with his concessions, a fact which seems to preclude the idea
that it had at that time already decided to expropriate them.

As regards M. Mavrommatis, his solicitors did indeed, in a letter
dated January 23rd, 1923, express the opinien that the Palestine
Administration and the British Government had abrogated most
of the rights conceded to M. Mavrommatis anc made them over to
M. Rutenberg. But this point of view was not maintained in the
ensuing negotiations. In the statement of his claims submitted
on behalf of M. Mavrommiatis on November 2nd, 1923, it is requested
either that the Jerusalem concessions should be recognized and
maintained or that he should receive compensation for the expro-
priation of his rights. And in a letter sent by M. Mavrommatis’
solicitors to the Colonial Office on Ja: uary 11th, 1924, in reply
to the Colonial Office’s letter of December 15th, 1923, it was stated
that M. Mavrommatis was prepared to form the company or com-
panies required for the working of his concessions, even if no right
on his part to have the concessions readapted to the new economic
conditions were recognized.

In short, the Court is of opinion that though, in the course of the
long negotiations, the possibility of expropriating M. Mavrommiatis’
concessions or of ceding them to M. Rutenberg was considered, this
was only one suggestion amongst several made with a view to a
friendly settlement of the question. No decision appears to have
been taken during the negotiations. Furthermore, as already
JUDGMENT No. 5 42

stated, the British Government has now definitively decided not to
expropriate M. Mavrommatis’ concessions.

It is true that in its letter of May Ist, 1924, the Palestine Electric
Corporation Limited said that M. Mavrommatis’ concessions had
already been annulled. The British Government however denied
the accuracy of this statement and, as has already been said, there
is nothing to show that such annulment had really taken place.

There remains the question whether, as alleged by the Greek
Government, the execution of the concessions had already been
rendered impossible for M. Mavrommatis and whether this was
by reason of the concession promised to M. Rutenberg. The argu-
ments relied on by the Greek Government in regard to this point
seem to be, on the one hand, the withdrawal by the Banque Périer
of its promise to undertake the financing of the concessions and
a statement to the same effect by a British banker—Mr. C. B. Crisp
—and, on the other hand, the influence of the Zionist Organiza-
tion which, in the contention of the Greek Government, is opposed
to allowing M. Mavrommatis to proceed with his concessions.

The Court will first consider the former of these arguments. The
Banque Périer had, it appears, in November 1913 concluded an
agreement with M. Mavrommatis to pay him under certain condi-
tions five million francs for the two concessions at Jerusalem and
the concessions for tramways, electric ight and power, and for water
supply at Jaffa, together with the right to use the waters of the River
El-Hodija for irrigation. And the same Bank had, in letters addres-
sed respectively to the Presidents of the Municipalities of Jeru-
salem and Jaffa, stated that it had accorded M. Mavrommatis its
financial assistance for the carrying out of his schemes. In a letter
to M. Mavrommatis, dated February 14th, 1921, MM. Bauer, Mar-
chal & Co., on behalf of the Banque Périer, stated that they were
prepared to reopen negotiations regarding the Jerusalem and Jaffa
concessions on the basis of the agreement of November 1913, but
only on condition that the new authorities of Palestine recognized
and ratified M. Mavrommatis’ rights. On December 2nd, 1921,
however, they wrote to M. Mavrommatis saying that, having
learned that the Colonial Office in London had just granted to
M. Rutenberg an exclusive monopoly for electric energy throughout
Palestine, which would conflict with M. Mavrommatis’ concessions,
they were compelled to inform him that, as a result, financial
JUDGMENT No. 3 43

circles had lost faith in the commercial value of the undertakings,
and the writers could not therefore undertake the financing of them.

As regards Mr. Crisp, a letter to M. Mavrommatis’ Agent, dated
May 3rd, 1923, has been produced in which Mr. Crisp noted that
the validity of the concessions was beyond all doubt, but stated
that as the validity had been questioned at a time when the conces-
sions might have been financed and the opportunity had been
missed, he was no longer able to deal with them.

It appears, however, clear that this does not prove that the financ-
ing of M. Mavrommatis’ concessions has become impossible, espe-
cially if it be remembered that in the letter of January 11th, 1924,
already referred to—much later in date than the letters of
MM. Bauer, Marchal & Co. and of Mr. Crisp—M. Mavrommatis’ soli-
citors stated that he was prepared to form the company required for
the execution of the concessions. Even if there were no justifica-
tion for saying that, having regard to this statement, it would have
been incumbent on the Greek Government to prove that, since
that time, circumstances have changed and that that which would
have been possible for M. Mavrommatis at the beginning of 1924
subsequently became impossible, and, moreover, did so in conse-
quence of the concession promised to M. Rutenberg, the statement
in question proves that at that time M. Mavrommatis did not con-
sider the execution of his concessions as impossible.

As regards the influence of the Zionist Organization in the affairs
of Palestine, this influence, for which provision is made in the Man-
date itself, existed already from the moment when the Mandate
came into force, and it seems hardly permissible to doubt that
the British Government, which has declared that it will allow
M. Mavrommatis full lberty to put into execution his Jerusalem
concessions, will loyally take steps to ensure that its promise is
respected and, if necessary, protect M. Mavrommatis against any
attempt to prevent the execution of his concessions.

But—it may be said—even if the execution of M. Mavrommatis’
concessions has not been rendered impossible, the Agreement of
September 21st, 1021, with M. Rutenberg and the fact that the
latter had hitherto had the right to require the expropriation of
those concessions, have nevertheless inflicted loss upon M. Mavrom-
matis, because this agreement and this right have prevented him
JUDGMENT No. 5 44

from forming, at a period more favourable than the present, the
companies provided for in the concessions.

The Court is however equally unable to admit that any loss of
this kind has been proved. The letter from MM. Bauer, Marchal
& Co., dated February 14th, 1021, proves that even if there had
previously been a definite contract between the Banque Périer
and M. Mavrommatis, this contract was at that time considered as no
longer existing. According to this letter, it was a question only of
resuming negotiations and this on condition that the new Palestine
authorities recognized the validity of the concessions. And when,
by its letter of December 2nd of the same year, the Banque Périer
stated that it could no longer entertain the idea of financing the
concessions, such recognition had not yet been accorded and it
could not be definitively accorded until the principles which were
to govern the situation of successor States as regards concessions
granted by the Ottoman authorities had been finally fixed and
came into force. There is moreover nothing to prove that the
Banque Périer had at that time complete knowledge of the agreement
with M. Rutenberg. As the negotiations contemplated regarded
also the Jaffa concessions, which undoubtedly conflicted with the
Rutenberg concessions and which could not claim to be recognized
under the Treaty of Sèvres, which had then been signed, the state-
ment of the Banque Périer to the effect that they did not wish to
undertake the financing, is fully explained, even without assuming
that the Bank would have been prepared to undertake the financing
of the Jerusalem concessions alone, had it not been for the existence
of the agreement of September 21st, 1921, with M. Rutenberg. The
Court therefore cannot consider either the letters of MM. Bauer,
Marchal & Co. or of Mr. Crisp as sufficient proof that circumstances
were more favourable for the financing of the concessions at some
period or other after the beginning of 1921 than they are at the
present time. In the first place, M. Mavrommatis, who in the conces-
sions was described as an Ottoman subject, would have had to prove
his Greek nationality ; and in the second place, the conditions on
which the maintenance of concessions granted by the Ottoman
Government or by local authorities was dependent would have had
to be definitively settled ; but this did not take place until the
coming into force of Protocol XII on August 6th, 1924. Moreover,
the question whether M. Mavrommatis was or was not entitled to
have his concessions readapted to the new economic conditions,

6
JUDGMENT No. 5 45

would also have had to have been settled, and this question would
have arisen just as much if the Agreement of September 21st,
1921, with M. Rutenberg had never existed. Nor must it be for-
gotten that M. Mavrommatis had himself asked for and obtained
a suspension of the execution of his concessions until the conclu-
sion of peace.

In these circumstances, it appears to the Court most improbable
that so long as these questions were still unsettled, the fmancing
of M. Mavrommatis’ concessions could have been arranged more
easily and under more favourable conditions than would be the
case now.

The Court therefore considers that even if the clause in Article 29
of the conditions of M. Rutenberg’s concession is to be regarded
as contrary to the Mandatory’s international obligations, in so far
as it gave M. Rutenberg the right to require the expropriation of
concessions conflicting with his own, this clause has not in fact
either led to the expropriation or annulment of M. Mavrommatis’
concessions, or caused him any loss which might justify a claim on
his behalf for compensation in the present proceedings.

III.

By agreement the Parties have put to the Court the question
whether M. Mavrommatis’ concessions should be readapted in
accordance with the economic conditions created by recent events.

Are these concessions, the validity of which has been already
demonstrated and for which Great Britain, as Mandatory of the
League of Nations in Palestine, is bound to ensure respect under
Article Ir of the Mandate and Protocol XII, entitled to
readaptation, or has the beneficiary merely the right, should he
be unable or unwilling to proceed with them as they stand, to
request that they may be dissolved ?

The root of the difficulty is to be found in Articles 4 and 6 of
Protocol XII, which decide in favour of one or other of these solu-
tions as the case may be. ;

Article 4, which provides for readaptation, runs as follows :
JUDGMENT No. 5 46
“Subject to the provisions of Article 6, the provisions of the
contracts and subsequent agreements referred to in Article 1

shall, by agreernent, and as regards both Parties, be put into
conformity with the new economic conditions.”

As for Article 6, in respect of which Article 4 makes an express
reservation, it indicates the concessions to which readaptation
does not apply :

“Beneficiaries under concessionary contracts referred to
in Article 1, which have not, on the date of this Protocol},
begun to be put into operation, cannot avail themselves of the
provisions of this Protocol relating to readaptation. These
contracts may be dissolved on the request of the concession-
naire made within six months from the coming into force of the
Treaty of Peace signed this day. In such case the concession-
naire will be entitled, if there is ground for it, to such indemnity
in respect of the survey and investigation works, as, in default
of agreement between the Parties, shall be considered equitable
by the experts provided for in this Protocol.”

A comparison between these two articles shows therefore that
concessions granted at an earlier period and for regions which have
been detached from Turkey as a result of the Great War, are to
receive different treatment according as they have or have not begun
to be put into operation before July 24th, 1923. In the former
alternative, the successor State must readapt the concessions to
the new economic conditions ; in the latter, the concessionnaire is
not entitled to readaptation, but may request that his concession
be dissolved and, if there is ground for it, may claim an indemnity
in respect of survey and investigation work which he had under-
taken.

In order to determine M. Mavrommatis’ position in relation to
the Palestine Administration, which is subrogated as regards the
rights and obligations of Turkey in respect of concessions granted by
that country in Palestine, one matter of fact must be verified : had
the contracts concluded between M. Mavrommatis and the Ottoman
authorities begun to be put into operation at the date of signature
of Protocol XII? [f the answer to this question is in the affirniative,

' July 24th, 1923.
JUDGMENT No. 5 47

it is clear that they fall under the terms of Article 4, that is to
say, are entitled to readaptation; otherwise, Article 6, according
to which they may be dissolved on payment of an indemnity for
survey and investigation work, must be applied.

The Representative of the Respondent, arguing in favour of the
latter alternative, pointed out that, on July 24th, 1923, M. Mavrom-
matis had certainly not begun to execute the works which he had
undertaken, Now—-he argued-—it is only the commencement
of actual work which endows an enterprise with value and which
gives the person responsible for the works a claim to continue and
complete them in consideration of payment. If he has not started
work, the concessionnaire has not developed any real activity,
and the right to obtain, should he so desire, dissolution of the con-
tract and an indemnity, will sufficiently compensate him for any
loss which he may have suffered. There has been no beginning
of operation of the contract ; the circumstances are those provided
for in Article 6 of the Protocol.

The Court does not feel able to accept this interpretation. The
distinction on which it is based between undertakings where there
has already been a commencement of the works of the concession
and undertakings the existence of which is not yet shown by any
actual execution of the work, reserving to the former alone the
privilege of readaptation, may have been contemplated at first
by the negotiators of the Peace of Lausanne ; but, by substituting
for the words commencement d’exécution used in the original
draft! the expression commencement d'application in the text
finally approved, they have adopted a different train of thought.
The authors of the Protocol have made a commencement @ appli-
cation des contrats de concession the condition on which the
readaptation of such contracts is dependent. By speaking of
contracts and not of works or even of concessions, they have
shown that in their view it was immaterial from this standpoint
whether the works covered by the concessions had already begun
to be carried out ; they have held strictly to the domain of the
application of the contracts. No doubt the execution of the works
provided for in a concessionary contract is peculiarly conclusive
evidence that the contract is a real thing ; it is a form of application.

! Conference of Lausanne, Recueil des Actes de la Conférence. Première
série, tome 1, p. 378 (Art. 74 of the Projet de traité de paix).

JUDGMENT Ne. 5 48

But this torm is not the only one possible, and it may be said that
a contract is applied every time that any act-—even unconnected
with the carrying out of the works—is accomplished under the
terms of the contract. “Application” therefore is a wider, more
elastic and less rigid term than “execution” ; and this may be the
reason which led to its insertion in the Protocol of Lausanne, in
order to distinguish between concessions which are entitled to
readaptation and those that are not.

It is, however, beyond dispute that M. Mavrommatis has not
simply kept by him, without making any use of them, the conces-
sions which he had obtained at Jerusalem. Several of the obliga-
tions which he had undertaken have been fulfilled within the times
granted. Thus, in conformity with Article 6 of the water con-
cession and Article 6 of the electric concession, he had submitted
to the City of Jerusalem on August 12th, 1914—that is to say
more than one month before the expiration of the time fixed—
the plans and designs of the works to be carried out ; again, in
accordance with Article 18 of the first concession and Article 4 of
the second, M. Mavrommatis had arranged with the Banque Périer
on March 3rd, 1914—very considerably before the expiration
of the time laid down—for credits constituting the final deposits
which he had undertaken to make. Moreover, though, in conse-
quence of the war, he found himself compelled to make use of the
clause concerning circumstances beyond his control contained ia
Article 7 of the water concession and Article 6, paragraph 2, of the
electric concession, in order to obtain an extension of the time
assigned to him for the commencement of the works, he did not fail
to inform the Ottoman authorities in due time, as it was his duty
to do. Furthermore, by a decision dated September 30th, 1914,
the Municipality of Jerusalem granted his request and recognized
the soundness of the reasons on which it was based.

The conclusion at which the Court arrives on the basis of the
actual wording of Article 6 is also supported by considerations of
another kind.

Article 4 of Protocol XI, which is closely connected with Article 1
which lays down the fundamental principles of the maintenance
of contracts and agreements duly entered into, is, as compared with
Article 6, in the nature of a rule, whereas the latter article is merely
an exception.

This is easy to understand if it be remembered that in practice

JUDGMENT No. 5 49

the only effective way of maintaining concessions granted before
the war is to readapt them to the new economic conditions. The
right given under Article 6 to the beneficiary to proceed with
his concessions on the conditions under which it was granted
before October 29th, 1914, would almost always be useless; in
effect, the real advantage derived by beneficiaries from Article 6
is the right to claim the dissolution of their contract and an
indemnity for survey and investigation work. It follows that
a strict interpretation of Article 6 is the only one which is in
harmony with the system of the Protocol. Were this article
to be applied in every case where there had been no beginning
af actual work on the ground, the consequence would be that,
as the indemnity provided for would not be sufficient com-
pensation for the trouble taken and the expense incurred by the
concessionnaire—for instance in order to ensure the financing
of his future undertaking—rights validly acquired would be
sacrificed.

These remarks are enough to reduce to its true value the objec-
tion made by the British Government to this interpretation, to
the effect that if it were correct it would deprive Article 6 of all
practical value, as it would hardly ever be applicable.

The Court realizes that, if the making of deposits and the filing
of designs and plans is regarded as a beginning of operation giving
a right to readaptation, Article 6 will only cover exceptional cases ;
but it is of opinion, for the reasons given above, that Article 6 can
only contemplate cases of this kind.

Again it has been said that it is not correct in law to regard the
payment of a deposit, or the deposit of plans or designs in the hands
of some particular authority, as acts constituting, within the meaning
of Article 6 of Protocol XII, a beginning to put into operation of the
contracts to which such acts relate. Before à contract can have a
beginning of operation, it must, in the first place, exist, it must be
valid and the conditions necessary to endow it with validity must
all be present. All that M. Mavrommatis has done—in arranging
for security and in filing the plans of the works—he has done in
order to render his concessions unassailable, to make quite certain
of them and to save them from nullity or forfeiture, which would
have resulted from default or neglect on the part of their holder.
JUDGMENT No. 5 50

He has fulfilled the conditions constituting the contract, but he has
not applied the contract.

The Court cannot accept this view. No doubt M. Mavrommatis
was bound to perform the acts which he actually did perform in
arder to preserve his contracts from lapsing as they would otherwise
have done. But that which gives birth to a contract is the agree-
ment between the parties to it, the exchange of signatures denoting
that agreement, and it is at that moment that the conditions on
which the agreement is based must exist. Everything that happens
subsequently, everything that is done outside the contract itself,

‘all the conditions with which the Parties must comply at a period
more or less remote from the conclusion of the contract, with a view
to preventing it from lapsing, may be regarded as a part of the
fulfilment of the contract. The fact, therefore, that Articles 4 and
13 of M. Mavrommatis’ electric concession and Article 18 of the
water concession and Article 20 of the Cahier des charges attached
thereto, stipulate that in the event either of the final deposit to
be made by the concessionnaire not having taken place, or of the
plans and designs of the works to be carried cut not having been
deposited within the times specified, the concessions will lapse, is no
argument in support of the view that these acts, though subsequent
to the contracts, may not be acts performed in fulfilment of them.

The Court therefore is of opinion that the concessions granted to
M. Mavrommatis at Jerusalem come within the scope of Article 4
nf Protocol XII and that the beneficiary is entitled to claim that
thev should be brought into conformity with the new economic
conditions by means of readaptation.

Nevertheless, the fact that the Court has been enabled to affirm
the concessionnaire’s right to have his contracts readapted, cannot
give it power itself to determine the method of such readaptation ;
only the Parties themselves, and subsidiarily the experts appointed
in accordance with Article 5 of the Protocol, can proceed to under-
take the various operations of the process of readaptation.

As has already been stated, the Parties have asked for the Court’s
decision on the question whether the tariffs laid down in the conces-
sions are fixed on a gold basis or in paper money, only in the event
oi the Court declaring Article 6 of the Protocol, and not Article 4,
to be the applicable provision. The Court, having decided in
favour of the readaptation of the Mavrommatis concessions, need
not therefore consider this question.
JUDGMENT No. 5 SI
FOR THESE REASONS,

The Court, having heard both Parties,

gives judgment as follows :

1. That the concessions granted to M. Mavrommatis under the
Agreements signed on January 27th, 1914, between him and the
City of Jerusalem, regarding certain works to be carried out at
Jerusalem, are valid ;

That the existence, for a certain space of time, of a right on the
part of M. Rutenberg to require the annulment of the aforesaid
concessions of M. Mavrommatis was not in conformity with the
international obligations accepted by the Mandatory for Palestine ;

That no loss to M. Mavrommatis, resulting from this circumstance,
has been proved ;

That therefore the Greek Government’s claim for an indemnity
must be dismissed ;
© 2. That Article 4 of the Protocol signed at Lausanne on July 2ard,
1923, concerning certain concessions granted in the Ottoman
Empire, is applicable to the above-mentioned concessions granted
to M. Mavrommatis.

Done in French and English, the French text being authoritative,
at the Peace Palace, The Hague, this twenty-sixth day of March
nineteen hundred and twenty-five, in three copies, one of which is
to be placed in the archives of the Court, and the others to be
forwarded to the Agents of the Applicant and Respondent
Parties respectively.

(Signed) Max HUBER,
President.

(Signed) À. HAMMARSKJOLD,
Registrar.

M. Altamira declares that he is unable to concur in the judgment
delivered by the Court, as regards paragraphs 3 and 4 of the
operative part.

(Initialled) M H.

(Initialled) À. H.