458.11 Dexter and Carpenter, Inc./60

The Secretary of State to the Minister in Sweden ( Morehead )

No. 54

Sir: The Department has under consideration the application of Dexter and Carpenter, Incorporated, an American corporation, for the support of a claim against the Government of Sweden for losses and damages sustained because of the failure of that Government to pay a court judgment rendered against the Kunglig Jarnvagsstyrelsen, known as the Royal Administration of the Swedish State Railways, and in favor of the claimant corporation.

Kunglig Jarnvagsstyrelsen, hereinafter referred to as the Railways, filed a complaint in the United States District Court for the Southern District of New York in 1922, describing itself as a corporation under the laws of Sweden, and sought the recovery of over $125,000, claiming breach of contract by Dexter and Carpenter, Incorporated, hereinafter referred to as the claimant, for the sale of 150,000 tons of coal. An answer to this complaint was filed denying any breach of contract and setting up a counterclaim on the ground that the Railways had repudiated the contract sued upon by them to the damage of the claimant in the amount of about $1,000,000. A replication was filed by the Railways in reply to the counterclaim and also a motion requesting the court to dismiss the counterclaim on the ground that the Railways was an agency of the Government of Sweden and therefore the counterclaim was not maintainable against it without the consent of the Swedish Government. This motion was overruled and the replication was stricken out. The Court held that, in filing its claim, the Railways had consented to the jurisdiction of the Court for all purposes including that of affirmative relief by way of counterclaim and that the mere allegation of agency, unsupported by any claim of immunity proceeding directly from the sovereign and unvouched for by the Government of the United States, was insufficient.

The trial of the action resulted in a judgment dismissing the complaint of the Railways and a verdict by the jury for the Railways on [Page 1010] the counterclaim. Neither the Railways nor the claimant was satisfied with this result and each sought a review by the United States Circuit Court of Appeals for the Second Circuit. That court reversed the judgment in favor of the Railways on the counterclaim and affirmed the judgment against the Railways on its original complaint. The Supreme Court of the United States refused the request of the Railways to review the decision of the Circuit Court.

The case then went back to the United States District Court for the Southern District of New York for the second trial in accordance with the decision of the United States Circuit Court of Appeals. That trial resulted in a verdict and judgment against the Railways in the amount of $411,203.72. The judgment was entered on April 25, 1928.

This judgment, on appeal by the Railways, was affirmed by the United States Circuit Court of Appeals for the Second Circuit in its decision of April 8, 1929. The facts and proceedings so far described are substantiated and set forth in greater detail in the opinion of the Court last referred to. A duly authenticated copy of the opinion is enclosed and marked Exhibit A.1

Thereafter an application for re-argument was made by the Railways and a certificate, executed by the Minister of Sweden at this Capital, stating that the Railways was not a corporation but an organic part of the Government of Sweden, and advancing the claim of immunity, was filed. Re-argument was denied.

The Railways again sought, by a petition for a writ of certiorari, a review by the Supreme Court of the United States.

In accordance with the request of the Minister of Sweden, contained in his notes of July 2, 1929, and September 17, 1929,2 the Department asked the Attorney General of the United States formally to advise the Supreme Court of the status of the Railways and of its claim to immunity from suit in the Courts of the United States. A suggestion to this effect was filed with the Court at the direction of the Attorney General in October, 1929.3 The petition for a writ of certiorari was denied.4

Upon the refusal of the Supreme Court of the United States to review, by certiorari, the judgment recovered by the claimant, the claimant, through its counsel, applied to the Minister of Sweden for payment of the judgment. The Minister, pursuant to instructions from [Page 1011] his Government, referred the claimant to the Royal Administration of the Swedish State Railways. The claimant, through its counsel, thereupon requested payment of the judgment from the Railways. Payment was refused.

Payment of the judgment having been refused, the claimant procured the issuance of execution on the judgment, and also instituted proceedings supplementary to execution. In these proceedings, an order was made, on December 16, 1929, attaching funds belonging to the Kingdom of Sweden, on deposit with the National City Bank of the City of New York, as well as money owing to the Kingdom of Sweden by the Swedish American Line, a Swedish corporation doing business in New York, to the amount necessary to satisfy the judgment.

Under the date of December 18, 1929, the Minister of Sweden lodged a protest5 with the Department against the attachment. This protest was duly communicated to the Court, by the United States Attorney for the District, by a suggestion filed, under the date of December 31, 1929,6 in the proceedings supplementary to execution.

On the preceding day the Court was presented with a petition of the Minister of Sweden, in which he asked leave to intervene for the sole purpose of asserting the right of the Kingdom of Sweden to sovereign immunity. Upon this application by the Minister, the Court vacated and set aside the order of attachment and writ of execution and directed that no further execution issue against any property belonging to the Kingdom of Sweden or the Railways.

In the course of its opinion, rendered March 12, 1930,7 the Court made the following observations concerning the merits of the case:

“The outstanding feature of the case which now presents itself is the fact that the Swedish Government has been in this suit from the beginning. While suggestion has been made from time to time that the plaintiff, as an agency of the Swedish Government, was immune from such liability as was asserted by Dexter and Carpenter, Inc., it never saw fit to claim immunity in the method prescribed by the laws of the United States. The failure so to do cannot be ascribed to inadvertence or oversight. On the contrary, and in the light of all that has transpired, such failure must be regarded as having been deliberate. As pointed out by counsel for the judgment-creditor the only inference properly to be drawn from the procedure heretofore followed is that the Swedish Government, or its attorney, believed it more expedient to contest the issues on their merits than to seek to escape liability from suit upon the ground of immunity, properly advanced. This acquiescence, in the ordinary and usual processes of the court, which preceded and included final judgment, ought to carry [Page 1012] with it, as a matter of simple justice, an implied agreement by the Government of Sweden that all writs and remedies commonly available for the collection of the judgment that was here recovered, should now, and without objection, be placed at the disposal of the defendant until they shall have been successful in recovering the full sum of money to which the defendant is rightfully entitled. To state the matter differently, the attitude that has been assumed by the Swedish Government should be held to be a complete waiver of its sovereign immunity, both as to suit and as to execution. Otherwise, the court will find itself to have labored heavily and to have produced nothing more than a moral claim which, at some future time, may, or may not be recognized by the Kingdom of Sweden. Indeed, the intervenor does not hesitate to say that such is the exact situation. The Court is told that although its judgment was rendered in accordance with approved legal formalities, and while, in that respect, it is to be highly regarded, it cannot be permitted, over the protest now made, to support an execution against the funds and property of the Government of Sweden within this jurisdiction. Argument is advanced that the immunity of a foreign sovereign may be waived at one stage of a particular suit, and claimed at a later one, if it then appears wise and expedient so to do, and that such sovereign is the sole judge as to whether and when such claim shall, or shall not be asserted.”

In concluding, the Court said:

“If this conclusion be sound, as my study of the question convinces me it is, the attachment, heretofore issued, for obvious reasons, must be vacated. At first blush, an order to that effect will seem to carry with it an admission of impotence on the Court to effectuate its judgment. Strictly speaking, that is not the fact. So far as power is concerned, the Court can compel the garnishees to deliver up the funds of the Swedish Government for the payment of defendant’s judgment. But such power, if exercised, and notwithstanding a course of procedure by plaintiff that is far from meeting my approbation, may conceivably precipitate international complications of a burdensome nature to the executive branch of our own Government. To the end that no possibility of this character can arise, and in conformity with what seems to be domestic precedents, the Court will not, for long, exercise further dominion over the property and credits of a friendly foreign sovereign, but will vacate its attachment directed to the garnishees.”

This judgment was appealed to the United States Circuit Court of Appeals for the Second Circuit, which, on July 14, 1930, affirmed the judgment. The opinion of the Court contains a lucid discussion of the facts and the law and is enclosed herewith as Exhibit B.8

It will be observed that the opinion concludes with the following paragraph:

“It is regrettable that Sweden may thus escape payment of a valid judgment against it. Appellant has been misled in the belief that this plaintiff was a separate entity—apart from the government—and now, [Page 1013] when a sufficient number of years has passed making possible a plea of limitation or laches against suing in Sweden (see letter to the League of Nations), appellee appears and pleads its sovereign immunity. Whatever may be appellant’s remedy to collect its valid judgment, it should not be necessary to resort to further litigation. It is hoped that the judgment of our courts will be respected and payments made by the Swedish government. But we are required to affirm the order appealed from.”

A review of the decision, by the Supreme Court of the United States, was sought by means of a petition to that Court for a writ of certiorari. On January 12, 1931, the Court denied the petition.9 Claimant therefore has no further judicial recourse in the United States.

From the above it appears that in 1922, the Railways invoked the jurisdiction of the courts of the United States by bringing suit, as a Swedish corporation, against the claimant. (It may be observed that this was not the only case in which the Railways has sued in the courts of the United States as a Swedish corporation). When affirmative relief by way of counterclaim was sought by the defendant, the Railways for the first time suggested its claim to immunity by reason of its identity with the Swedish Government.

However, it did not see fit to claim immunity in the method prescribed by the laws of the United States. The course of expediency was followed. Thereafter, when it appeared that the Railways would be subjected to the liability of having the judgment against it affirmed by the Court of last resort, it sought the assistance of the executive branch of this Government in presenting its claim to immunity. The Supreme Court, however, declined at that time to review the decision which had been reached by the Lower Courts. When the rights and duties of the parties had been determined, the Railways refused to discharge its obligation by paying the amount of the judgment. And when proceedings supplementary to execution were begun, the Railways, for the first time, properly plead its immunity.

The merits of the case have been thoroughly litigated, in the forum chosen by the Railways and determined in accordance with the law of the country wherein the contract was made and was to be performed. The amount of the damages has been fixed. The sum of $411,203.72 with interest at 6% from April 25, 1928, is due and unpaid.

You are requested to communicate the above to the Foreign Office and to state that this Government confidently expects that the matter, now brought to the attention of the Swedish Government through the appropriate diplomatic channels, will be adjusted by the payment to this Government, on behalf of the claimant corporation, of the amount of the judgment with interest.

[Page 1014]

The Department desires you to give this claim your careful attention and to keep the Department informed by cable of the result of your representations.

Very truly yours,

For the Secretary of State:
W. R. Castle, Jr.
  1. Not printed.
  2. For text of these notes, see Suggestion of the Solicitor General as to Petitioner’s Legal Status and Claim of Immunity, Kunglig Järnvägsstyrelsen, also known as the Royal Administration of the Swedish State Railways (A Corporation), Petitioner v. Dexter & Carpenter, Inc., United States Supreme Court, October Term, 1929; No. 273 (Washington, Government Printing Office, 1929), pp. 4 and 10.
  3. Ibid., p. 1.
  4. 282 U. S. 896.
  5. See Brief on Behalf of Dexter & Carpenter, Inc., Judgment-Creditor, Appellant, United States Circuit Court of Appeals for the Second Circuit, p. 10.
  6. Ibid., p. 8.
  7. Full opinion not printed.
  8. 43 F. (2d) 705.
  9. 282 U. S. 896.