5

Recognition of foreign commercial companies belonging to a Contracting State does not imply that these companies shall be entitled to establish themselves and transact business in the territory of the other Contracting Parties or, in general, to carry on permanently the activities contemplated by their statutes.

OBSERVATIONS BY M. SCHÜCKING WITH REGARD TO M. RUNDSTEIN'S REPORT [Translation]

I have no general observations to offer with regard to the report on question 9: "Is it possible to establish by way of a Convention international rules concerning the recognition of the legal personality of foreign commercial corporations?" I agree with the opinion set out in this excellent report.

I would venture, however, to refer to what is more or less a question of form in connection with Articles 4 and 5 of the draft.

Article 4 defines the rights which are implied in the "recognition" of a foreign company by a State signatory to the Convention, whereas Article 5 specifies the domain in which a foreign Company should not be granted recognition by the foreign State which has signed the Convention, without special authorisation based on an administrative act or a bilateral or plurilateral treaty. The Convention thus defines the maximum and minimum rights of foreign legal entities engaged in commerce and defines them with perfect clearness. The only objections I have to raise are in connection. with the phrase: "exercer . . . les droits civils et ester en justice" which M. Rundstein employs in Article 4 of the draft. The expression "droits civils" is certainly clear in French legal parlance, where it is not open to any misinterpretation. (See PILLET: "Des personnes morales en droit international privé," pages 217 et seq.)

..

This is not the case, unfortunately, in German legal phraseology, which gives to "bürgerliche Rechte" a meaning quite different from that which the rapporteur has in view. "Bürgerliche Rechte" are, in German doctrine, opposed to "politische Rechte," and they include all the non-political objective rights which, as law, come within the domain of public law. They therefore include rights which touch upon social questions, as, for instance, the right of industrial freedom, which according to this conception is a "bürgerliches Recht."

This is contrary to the standpoint adopted in the report, and particularly to Article 5 of the draft.

The rapporteur is quite justified in holding that the recognition of a foreign company should have no further effect than to allow it to exercise certain rights and accomplish certain acts in relation to its capacity to enjoy such rights (Rechtsfähigkeit) and its capacity to be a party to an action at law. These, then, are, in their essence, rights which, as law, come within the

domain of private law, that is to say, above all, the capacity of enjoying a right (Rechtsfähigkeit), and consequently all the powers which follow as a result of such capacity for instance, the capacity to conclude a contract (Vertragsfähigkeit!). To express the meaning of the second phrase (capacity of being parties to an action at law), German legal parlance employs two terms which have originated in the German Code of Civil Procedure and Doctrine regarding actions at law (“Parteifähigkeit" and "Prozessfähigkeit”). "Parteifähigkeit" is the capacity to be, either directly or indirectly, party to an action at law (GAUPP-STEIN: "Zivilprozessordnung," 5th edition, Vol. 1, page 132). "Prozessfähigkeit" is the capacity to appear in Court, the capacity to declare one's intention on one's own behalf or on behalf of others (GAUPP-STEIN, op. cit., page 139). A minor, for instance, is "parteifähig," for he may, either directly or indirectly, be party to an action at law; but he is not "prozessfähig," because he cannot express his intention.

"Prozessfähigkeit" is largely a doctrinal consideration when applied to juridical personality. Those who hold that legal entities are a fiction do not admit that such entities can be "prozessfähig," but those who support the theory of their real existence (organic theory) admit such "prozessfähigkeit." In entire agreement with this German doctrine, WALKER ("Internationales Privatrecht," 4th edition, pages 133 et seq.) says: "Den ausländischen juristischen Personen muss grundsätzlich die Parteifähigkeit zugestanden werden, die Fähigkeit vor Gericht als Kläger oder Beklagter aufzutreten Die Frage, ob juristischen Personen Handlungsfähigkeit und damit Prozessfähigkeit zuzuerkennen sei, hat fast nur für die Rechtslehre Bedeutung." The same opinion is expressed by MAMELOK in a very judicious manner ("Die juristische Person im internationalen Recht," page 97): "Geschäfte einer juristischen Person, die sie im Ausland geschlossen hat, behalten, wenn sie sich nicht auf den eigentlichen Gegenstand ihrer Operationen beziehen, ihre Gültigkeit und Klagbarkeit. . . .'

...

To express, therefore, in German legal phraseology the thought which the rapporteur had in mind when he wrote "droits civils" and "ester en justice," we should say that the question is one of the capacity to enjoy rights (Rechtsfähigkeit), which implies "Parteifähigkeit" in actions at law.

If, on the other hand, we admit the organic theory regarding legal entities, we should refer to "Prozessfähigkeit," though I would not venture to suggest that the terms of German legal phraseology, which are clear and which satisfactorily define the scope and essence of the "droits civils" and the "capacité d'ester en justice," should be translated and included in the text of a convention which could hardly be couched in such technical terms; I have ventured to point out that the conceptions "droits civils" and "ester en justice" are open to contradictory interpretations as soon as they cease to be employed in the strict sense of French legal phraseology.

(Signed) SCHÜCKING.

COMMENTS ON M. SCHÜCKING'S REMARKS

[Translation.]

Professor Schücking raises perfectly legitimate doubts as to the meaning of the expression: "exercer . . . les droits civils et ester en justice 1. . . ." in Article 4 of the draft. The equivalent of this expression in German, "bürgerliche Rechte," might cause confusion and might be interpreted in a manner which would be contrary to the real signification of the clause. I venture to offer the following comments:

My intention was to emphasise the fact that recognised corporations would be capable of enjoying rights; they were to be considered therefore from the point of view of their civil personality, as distinct from the question of their capacity to transact business (see PILLET, Traité II, page 818). M. Pillet has thoughtfully drawn attention to the difficulties caused to legal terminology by the peculiar use of "capacité" in French legal parlance (cf. PILLET, "Des personnes morales en droit international privé," 1914, No. 62, note 3: "The use of the word 'capacité' in this connection might easily cause misunderstanding. On this point German terminology is better and more adequate than our own, for the Germans distinguish two sorts of 'capacité': 'Rechtsfähigkeit' and the 'Handlungsfähigkeit"" (see also FRANKENSTEIN, "Internationales Privatrecht," 1926, I, page 399, note 52: "Wenn Pillet zwischen 'capacité de jouissance' und 'capacité d'exercice' unterscheidet, so ist das nur eine freie Uebersetzung der deutschen Begriffe, keine dem französischen Recht geläufige Terminologie").

It is the outstanding difference which Anglo-American terminology endeavours to convey by contrasting "civil capacity" with "functional capacity."

From a terminological point of view, it is very interesting to compare the German and French texts of Article 54 of the Swiss Civil Code:

German text.

Die juristischen Personen sind handlungsfähig sobald die nach Gesetz und Statuten hiefür unentbehrlichen Organe bestellt sind.

French text.

Les personnes morales ont l'exercice des droits civils dès qu'elles possèdent les organes que la loi et les statuts exigent à cet effet.

I note that, in the treaties of commerce recently concluded by the German Reich, this conception has been expressed as follows:

"Aktiengesellschaften und andere kommerzielle, industrielle oder finanzielle Gesellschaften, einschliesslich der Versicherungsgesellschaften, welche in dem Gebiete des einen vertragsschliessenden Teiles ihren Sitz haben und nach dessen Gesetzen zu Recht bestehen, sollen auch in den Gebieten des anderen vertragsschliessenden Teiles als zu Recht bestehend anerkannt werden und gegen Beobachtung der daselbst geltenden einschlägigen Gesetze und Verordnungen befugt sein, alle

ihre Rechte geltend zu machen und namentlich vor Gericht als Kläger oder Beklagter Prozesse zu führen" (see MARBURG, "Staatsangehörigkeit und feindlicher Charakter juristischer Personen," 1927, page 35).

It will be sufficient, then, to mention "rights" ("ihre Rechte geltend zu machen") without the qualifying adjective "civil."

Similarly, a draft statute on legal entities drawn up by the International Chamber of Commerce is worded as follows:

"Shareholders' companies (joint-stock companies) and other associations, commercial, industrial and financial, or transport or insurance associations, domiciled in the territories of one of the contracting parties provided they have been validly incorporated therein in accordance with the municipal law-shall be recognised in the territories of the other Contracting Parties as possessing a juridical personality and as being entitled, provided they conform to the law of the countries in question, to exercise all their rights, including the right of being parties to actions at law either as plaintiffs or defendants."

(See the Report of the Trade Barriers Committee, submitted to the Preparatory Committee of the Economic Conference of the League of Nations.)

Therefore, in view of Professor Schücking's observation, Article 4 of the Draft might be worded as follows:

"Foreign companies thus recognised shall, in the territories of the signatory States, be entitled to enjoy the rights deriving from such recognition and be parties to actions at law either as plaintiffs or defendants, provided they comply with the laws of the country in question."

Geneva, March 21st, 1927.

(Signed) S. RUNDSTEIN.

Committee of Experts for the Progressive Codification of International Law REPORT TO THE COUNCIL OF THE LEAGUE OF NATIONS Adopted by the Committee at its Third Session, held in March-April, 1927 NATIONALITY OF COMMERCIAL CORPORATIONS AND THEIR DIPLOMATIC PROTECTION*

The Committee of Experts for the Progressive Codification of International Law was required under its terms of reference:

1. To prepare a provisional list of the subjects of international law the regulation of which by international agreement would seem to be most desirable and realisable at the present moment;

2. After communication of the list by the Secretariat to the Governments of States, whether Members of the League or not, for their opinion, to examine the replies received; and

3. To report to the Council on the questions which are sufficiently ripe and on the procedure which might be followed with a view to preparing eventually for conferences for their solution.

In Execution of these terms of reference, the Committee requested a Sub-Committee:

"To examine, with a view to regulation by international agreement, the questions of the nationality of commercial corporations and of the determination of the State to which the right of affording them diplomatic protection belongs."

The Sub-Committee, which was composed of M. RUNDSTEIN, Rapporteur, and MM. GUERRERO and SCHÜCKING, submitted to the Committee a report setting out the reasons in support of its conclusion that the subject is one the regulation of which by international agreement is at the present moment desirable and realisable.

M. Schücking has submitted observations on the subject of this report, to which M. Rundstein has replied.

The report, with the observations and the reply, has been examined by the Committee of Experts.

The nature of the general question and of the particular questions involved therein appears from the report. The latter contains a statement of principles to be applied and of the solutions of particular questions which follow from these principles. The Committee regards this statement as indicating the questions to be resolved in order to deal with the matter by way of an

*Publications of the League of Nations. V. Legal. 1927. V. 12.