The Kronprins Gustaf Adolf (Claims of the Nordstjernan Company) (Sweden/U.S.A.)

Facts

During the years 1917/1918, in the course of the First World War, the U.S. Government ceased granting export licenses for goods bound for the Northern Neutrals: Holland, Denmark, Norway and Sweden. Two ships owned by the Swedish company Nordstjernan (also known as the Johnson Line), the M.S. Kronprins Gustaf Adolf and the M.S. Pacific, remained in U.S. ports for over one year. The Kronprins Gustaf Adolf, which had been bound for the United States to load a shipment of sugar, had run aground, and required repairs, which were carried out in drydock in New York between 26 June and 25 September 1917.

The Pacific arrived at Newport News, Virginia on 1 July 1971, bound for Sweden with a cargo of nitrate from Chile. Despite assertions made at that time by an agent of the Johnson Line, that the ship had called at Newport News for bunkering purposes, it was subsequently established that she had anchored to await instructions from her owners as to her next port of call. Both vessels were subsequently refused export licenses with respect to outbound cargo and ships' stores.

Questions Submitted to Arbitration

1. Did the Government of the United States of America detain the Swedish motorship Kronprins Gustaf Adolf between 23 June 1917 and 12 July 1918, and the Swedish motorship Pacific between 1 July 1917 and 18 July 1918, in contravention of the Swedish-American Treaties of 3 April 1783 and 4 July 1827?

2. If the first question is decided in the affirmative, is the Government of the United States of America liable to the Government of Sweden on behalf of the owners of the motorships for damages resulting from such unlawful detention?

3. Should this answer be affirmative, what amount of reparation is due to the Government of Sweden on behalf of the owners of the motorships mentioned above?

The Award of the Arbitral Tribunal

Applicable Law

The United States of America took the position that the Arbitrator should not base his award on principles of international law as such, since his jurisdiction was limited to the question of the contravention of the two Treaties involved. The Arbitrator admitted that the position of the United States was correct, but in order to avoid any misapprehension, he felt obliged to observe that while the award had to be based on the Treaties, the Treaties themselves were a part of international law as accepted by both Parties. Accordingly it could be safely assumed that when the Treaties were concluded both Parties considered them as being agreed upon as special provisions to be enforced between them in what may be called the atmosphere and spirit of international law as recognized by both of them.

Treaty Interpretation

The United States invoked the preamble of the Treaty of 1783 as clarifying the meaning of Article 7 of that Treaty. Counsel for the United States argued that: the statements in the preamble were put in for the particular purpose of showing the intent the treaty-makers had in mind and for laying down principles by which what they declare in the treaty shall be construed. The arbitrator responded that ... it has been inferred therefrom that the chief object of the treaty was expressly to maintain and safeguard the sovereignty of each State. This certainly goes too far, if such had been the aim contemplated by the Parties, no treaty was needed in order to reach it.

Article 7 of the 1783 Treaty reads as follows:

All and every subject & inhabitant of the Kingdom of Sweden, as well as those of the United States, shall be permitted to navigate with their vessels in all safety and freedom and without any regard to those to whom the merchandizes and cargoes may belong, from any port whatever. And the subjects and inhabitants of the two States shall likewise be permitted to sail and trade with their vessels and, with the same liberty and safety, to frequent the places, ports and havens of Powers enemies to both or either of the contracting parties, without being in any wise molested or troubled, and to carry on a commerce not only directly from the ports of an enemy to a neutral port, but even from one port of an Enemy to another port of an Enemy, whether it be under the jurisdiction of the same or of different Princes. And as it is acknowledged by this treaty, with respect to ships and merchandises, that free ships shall make the merchandizes free, and that everything which shall be on board of ships belonging to subjects of the one or the other of the contracting parties shall be considered as free, even though the cargo or a part of it should belong to the enemies of one or both, it is nevertheless provided that Contraband goods shall always be excepted ; which, being intercepted, shall be proceeded against according to the spirit of the following articles. It is likewise agreed that the same liberty be extended to persons, who may be on board a free ship, with this effect, that although they be enemies to both or either of the parties, they shall not be taken out of the free ship, unless they are soldiers in the actual service of the said enemies.

Sweden contended that Article 7 granted to Swedish ships in American ports, as well as to American ships in Swedish ports, the freedom of navigation stipulated therein, from any port whatsoever. The United States, however, contended that Article 7 applied to freedom of navigation on the high seas, but could not be considered as controlling the legal status of ships of one party in the ports of the other. The arbitrator held the true interpretation of Article 7 to lie between both contentions:

...The true meaning of Article 7 will be found if one considers the difference between the high sea, on which belligerent States claim a right of control of commercial intercourse with their enemies, and the ports of either contracting Party subject to the territorial sovereignty of the state[s]. ... 

Article 7 gives effect to the rule that free ships shall make the merchandise free, except contraband goods, in the port of either signatory or on the high seas, but it is more than doubtful whether, when applied to the ports of either contracting party, it was meant to go further and to prescribe in general terms the liberty of navigation. Such a scope given to Article 7 would have made entirely superfluous the second part of Article 17, which is particularly to be considered here as the lex specialis applying to the circumstances of the present case. Moreover, to prescribe an unlimited freedom of navigation could not have been the intention of the framers of the Treaty. ... 

It follows therefrom that the provisions of the Treaty applying to the present case are to be found rather in those articles which deal particularly with the situation of the ships of one Party in the ports of the other Power and which have thus, as already mentioned, the character of a lex specialis as compared with the general principle laid down in Article 7.

The abovementioned Article 17 contemplates one of the Contracting Parties being at war while the other remains neutral. The second part of this Article reads:

Merchants, masters and owners of ships, seamen, people of all sorts, ships and vessels, and in general all merchandises and effects of one of the allies or their subjects, shall not be subject to any embargo nor detained in any of the countries, ... ports ... of the other ally, on account of any military expedition or any public or private purpose whatever, by seizure, by force, or by any such manner. ...

In response to the United States' argument that even assuming arguendo that the ships were detained, they were not detained by seizure or by force, the Arbitrator held that in employing the words by any such manner in Article 17, the framers of the Treaty sought to prohibit not only a detention by sheer physical force, but also detention by other means leading to the same results.

As to the detention which could be considered as justifying a claim for damages under the Treaty, the Arbitrator Borel observed:

As far as Article 17 secures to the ships of one Party the liberty to depart from the ports of the other State, it imposes on that other State no duty whatever with regard to the supplying of those ship's stores and other necessaries which the ships may need to continue their voyages. ... Without the necessary supplies it may in fact be impossible for them to leave ..., but against such an occurrence the Treaty itself gives no relief, and it contains no general provision forbidding either signatory to restrict or prohibit the exportation from its territory of any goods, including such as are necessary to ships at sea. This is indirectly confirmed by Article 21 of the Treaty of 1783 [which obligates either party to allow ships] to supply themselves with refreshments, provisions and every thing necessary for their sustenance, for the repair of their vessels and for continuing their voyage: but since this provision deals with the exceptional case of distress, it may be safely inferred therefrom that the same obligation was not intended to be stipulated as a general rule. ...

... [T]he word detained, obviously implies that, at the time the act of detention took place, the person or the thing subjected thereto was about to move and would have moved, but for the said measure. With regard to ships this raises the question as to whether, at the time the measure or measures complained of were put in effect, the person who had the control of the said ships had decided to leave and was ready to do so. 

Lastly it must be observed that a ship cannot be considered as detained as long as the decisions on which depend the sailings under regulations in force not contrary to the Treaties have not been properly called forth in compliance with the said regulations.

The Arbitrator then cited the Zeelandia case as analogous because, like the Pacific, that ship had arrived in the United States with an intransit cargo. Zeelandia involved the detention of a Dutch vessel in New York Harbor in 1917, pursuant to the Espionage Act and Trading with the Enemy Act. In that case, the Court of Claims had concluded that the legislative prohibitions did not apply to such goods and commodities as a neutral ship had on board when entering a port of the United States and which remained on board...

The Arbitrator held that in view of both the Treaty (Article 5) and the abovementioned case, the cargo of nitrate abord the Pacific loaded in Chile, touching at an American port, but in fact bound for Sweden, did not come under the Espionage Act, and was not subjected to the license requirement and refused. He did, however, point out that he also had to consider whether the delay in granting the license in fact kept the Pacific at Newport News, or whether there was some other reason why the representative of the Johnson Line did not order the ship to proceed on its voyage.

As evidence of the owners' attitude towards leaving the United States, he pointed to the absence of an application for clearance and to the obstacles placed in the way of navigation by the British authorities. A then-prevailing British Order in Council had provided that all ships not calling at British Ports for examination would be presumed to carry goods of enemy origin. As a consequence, all Swedish ships, including those of the Johnson Line, were required to call at Halifax. As part of this policy, the British had established the navicert system. Navicerts were indispensable letters of assurance for the shippers to get their goods passed. They were issued by the British Embassy in Washington and had no connection with an American export license. Prior to February 1918, a shipper of the Northern Neutrals was required to have both. Despite strenuous effort by the Johnson Line to secure a navicert, evidence was put forward that the requests had been refused. The arbitrator concluded that it had been this circumstance that had prevented the sailing of the Pacific:

As has been seen above, the contention that the Pacific was ''detained contrary to the Treaties by the delay and, later on, the refusal to grant a license, implies that this vessel was ready to sail; that it would have sailed but for the said delay and refusal; that ... the attitude of the American authorities was the cause why [it did not sail]. This point has already been dealt with and it has been found that [the impediment caused by the British Government has caused the delay]. It will, therefore, be seen that, while the decision of the War Trade Board [to require and refuse a license fir the said cargo was unjustified, it does not follow that the vessel was] detained in violation of the Treaties.

In light of the damage sustained by the Kronprins Gustaf Adolf, Sweden had contended that Article 21 of the Treaty of 1783 was applicable, as the vessel was said to have been forced by urgent necessity to enter port, and that therefore under this Article, the vessel was at liberty to supply itself with refreshments, provisions and everything necessary for its sustenance ... for continuing its voyage. The arbitrator, however, found that the damage to the vessel was insufficient to establish a case of distress, and held Article 21 inapplicable.

The full diplomatic exchanges between the two governments were placed in evidence. The arbitrator observed:

... [T]he United States laid great stress on the fact that no application for clearance for either vessel was made to the Collector of Customs, the proper official under the law. This objection is of undeniable weight. A claim for damages asserted by a government on behalf of a national cannot rest on mere declarations of intentions or of policy on the part of the authorities. The proper foundation for such a claim is an act, a decision taken with regard to such national and of a nature incompatible with his treaty rights. ...

... [I]t is more than doubtful that a claim for damages such as the present may be properly built up on a mere oral ruling. This would mean that an oral intimation by an official as to how he will act in a case has the effect of dispensing with the procedure validly prescribed ... [Communications] as to the policy and the intentions of a Board may properly call for a protest [by the Swedish Government]. But they cannot do away with the procedure prescribed by the regulations in force.  ...

The same considerations dispose of any inference which may be drawn from the attitude of the War Trade Board towards the Dutch ship Zeelandia as showing that an application, even if properly made, would have been rejected. A claim for damages presented by a government on behalf of one of its citizens cannot be based on what has been done in other cases in connection with subjects of a third State. It must rest on actual decisions and measures taken with regard to its own national.

The Arbitrator therefore held that the government of the United States did not detain the Swedish motorship Kronprins Gustaf Adolf between 23 June 1917 and 12 July 1918, and the Swedish motorship Pacific between 1 July 1917 and 19 July 1918, in contravention of the Swedish-American treaties of 3 April 1783 and 4 July 1827. ... As a consequence, the second and third question need not be answered. 

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