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Indonesian Nationalization Measures Before Foreign Courts

Published online by Cambridge University Press:  28 March 2017

Martin Domke
Martin Domke*
Affiliation:
New York University School of Law
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Extract

In the wake of nationalist movements directed against the determination of The Netherlands not to give up their rights to West New Guinea, the Indonesian central government in 1958 nationalized Dutch properties, among them tobacco plantations.

Type
Research Article
Information
American Journal of International Law , Volume 54 , Issue 2 , April 1960 , pp. 305 - 323
Copyright
Copyright © American Society of International Law 1960

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References

1 Ali Sastroamidjojo and Robert Delson, “ The Status of the Republic of Indonesia,” 49 Col. Law Bev. 344 (1949); and Charles Cheney Hyde, ibid. 955.

2 Government Decree No. 23, of April 16, 1958, Lembaran Negara 1958, No. 39, trans. in “The Measures Taken by the Indonesian Government against Netherlands Enterprises,” 5 Netherlands Int. Law Rev. 227, 231 (1958).

3 Lord McNair, “The Seizure of Property and Enterprises in Indonesia,” 6 Netherlands Int. Law Rev. 218 (1959), refers on p. 220 to a statement by the Minister of Economic Stabilization, on Nov. 21, 1958, whereby an Ordinance of the Central Military Authority “was intended to exercise supervision over the transfer of Dutch property.”

4 Statutes 1958, No. 162; trans, in U.N. Doc. A/AC.97/5, of Dee. 15, 1959, cited note 60 below, p. 139; and in 6 Netherlands Int. Law Rev. 291 (1959).

5 Statutes 1959, No. 5, trans, ibid. 296.

6 statutes 1959, No. 6, trans. Hid. 301.

7 Statutes 1959, No. 7, trans, ibid. 304.

8 Statutes 1959, No. 16, trans, ibid. 307.

9 N.V. Verenigde Deli-Maatschapijen and N.V. Senembah-Maatchappij v. Deutscli- Indonesische Tabak-Handelsgesellschaft m.b.H.

10 Cited note 3 above.

1l 1 U 159/1959 and 1 U 201/1959.

12 7 Q 12 and 13/1959, of April 21, 1959, concerning the tobacco shipped with the vessels Aeneas and Eumaeus; 7 Q 26/1959, of June 16, 1959, re vessel Ulysseus.

13 Pursuant to Art. 545(2) of the German Code of Civil Procedure, there is no appeal (Revision) available from a judgment of a Court of Appeals in injunctive procedures; cf. Kaplan-Von Mehren-Schaefer, “Phases of German Civil Procedure,” 71 Harvard Law Rev. 1193, 1260 (1958).

14 Cf.Ignaz Seidl-Hohenveldern, “ Ausländische Nationalisierungsmassnahmen und ihre Beurteilung durch deutsche Gerichte,” 5 Aussenwirtschaftsdienst des Betriebs- Beraters 272 (1959).

15 Senembah Maatschappij N.V. v. Republiek Indonesie Bank Indonesia and De Twentsche Bank N.V.

16 Nederlandse Jurisprudence 1959, No. 73, p. 218.

17 Ibid., No. 350, p. 855.

18 R. D. Kollewijn, “ ‘Nationalization’ without Compensation and the Transfer of Property,” 6 Netherlands Int. Law Rev. 140, 156 (1959).

19 WedderburnK. W., ‘’ Sovereign Immunity of Foreign Public Corporations,'’ 6 Int. and Comp. Law Q. 290 (1957); Bank Indonesia Act, Law No. 11, 1953, as amended by Law No. 84/1958, Report of the Governor, Bank Indonesia, for the Financial Year 1958- 1959, p. 292.

20 For quotations from the Dutch court decisions, see pp. 315, 316, 318, 319, below.

21 The court refers to Martin Wolff, Das Internationale Privatrecht Deutschlands 175 (3rd ed., 1954).

22 Though the German judge, pursuant to Art. 293 of the Code of Civil Procedure, has to ascertain foreign law from his own investigation; cf. Martin Domke, American- German Private Law Relations 92 (1956).

23 Cf., generally, KissamLeo T. and K. LeachEdmond, ‘ ‘ Sovereign Expropriation of Property and Abrogation of Concession Contracts,” 28 Fordham Law Rev. 177 (1959); and Stephen M. Schwebel, “International Protection of Contractual Arrangements,” 1959 Proceedings, American Society of International Law 266.

24 Pursuant to Royal Ordinance of May 6, 1915, on the establishment of real property rights under the Netherlands-Indian Civil Code, Indonesian Government Gazette, No. 474.

25 Cf. LeyserJ., “Legal Developments in Indonesia,” 3 A. J. Comp. Law 399 (1954).

26 KleintjesPh., “Over een wettelijk fragment van intergentiel recht” [On the draft of a statute of intergentile law], 38 Rechtsgeleerd Magazijn 51 (1919).

27 Appellate Court of Netherlands India, May 4, 1916, 106 Indisch Tijdschrift van het Recht 420; April 28, 1927, 126 ibid. 1.

28 Cited notes 4 to 8 above.

29 A withdrawal (so-called rachat légal, RückTcauf) ‘’ conclusively declared by the occupation of the plantations.

30 Note 2 above.

31 10 Code of Federal Regulations, 1947 Supp., sec. 3.15.

32 In an action by the owner of blocked property to determine the liability of a custodian under Military Law No. 52, the German Federal Supreme Court, however, declared on June 24, 1957 (24 Entscheidungen des Bundesgerichtshofs in Zivilsachen 393, digested in 53 A.J.I.L. 457 (1959)), it was “a duty toward the owner to manage the property carefully,'’ and reversed the decision of the Court of Appeals of Düsseldorf which “erred in holding that the custodian under Law No. 52 had to safeguard the interest of the occupying Power exclusively and that therefore he had to administer the property not for the owner but rather against him.” For a discussion of the German case law on the status of the custodian, see Court of Appeals of Celle, June 30, 1959, Eechtsprechung zum Wiedergutmachungsrecht, Beiheft 1959, No. 7, p. 6 (1959).

33 See Paul Guggenheim, Traité de Droit International Public, “Vol. 1, p. 109 (1953).

34 It should be noted that the P.P.N. Baru, ‘’ as representative of the Indonesian State , “ and the German company agreed on Feb. 13, 1959, that for the case of any attachment by a third party of the tobacco shipped to Bremen, special insurance should be taken by the company to cover this risk, which insurance was in fact arranged for.

35 P. 319 below. In this respect, reference may be made to the question of acquisition of rights to oil in Sumatra by the Japanese occupation authorities, dealt with in N.V. De Bataafsche Petroleum Maatschappij v. The War Damage Commission, April 13, 1956, [1956] Singapore Law Rep. 65, 22 Malayan Law Journal 155 (1956), 51 A.J.I.L. 802 (1957); “The Case of the Singapore Oil Stocks,” 5 Int. and Comp. Law Q. 84 (1956).

36 Act No. 7, of 1950; Gazette, No. 37, of 1950; trans, in Amos J. Peaslee, Constitutions of Nations 383 (2d ed., 1956).

37 On this so-called Normenkontrolle by the German Constitutional Court, see Gottfried Dietze, “Constitutional Courts in Europe,” 60 Dickinson Law Rev. 313, 321 (1956) ; Taylor Cole, “ The West German Federal Constitutional Court. An Evaluation after Six Years,” 20 Journal of Politics 278 (1958), and “Three Constitutional Courts,” 53 Am. Pol. Sci. Rev. 963, 969 (1959) ; and Charles Szladits, Guide to Foreign Legal Materials, French-German-Swiss 147, note 91 (1959).

38 Department of State Pub. 3526, European and British Commonwealth Series 8.

39 Cf. the decision of the Federal Constitutional Court of July 1, 1953 (Decisions, Vol. 2, p. 380), dealing with illegal confiscation of property: “The Constitution includes general principles which were not enacted in written clauses because the general principles supplied the pre-constitutional framework for the makers of the Constitution. The rule of law-principles is among these general principles, and is therefore binding on both national and state legislatures.” Cf. also “The Rule of Law in the Federal Republic of Germany,” A Statement by the German National Section of the International Commission of Jurists 22 (The Hague, 1958).

40 The court referring to Leo Rosenberg, Lehrbuch des Zivilprozesses 614, § 130 I 2b (7th ed., 1956).

41 Stein-Jonas-Schoenke, Kommentar zur Zivilprozessordnung, § 925, Note 112 (18th ed., 1956).

42 HydeJames N., “ The Act of State Doctrine and the Rule of Law,” 53 A.J.I.L. 635 (1959); Michael Zander, “The Act of State Doctrine,” Ibid. 826; Wm. Harvey Reeves, “ Act of State Doctrine and the Rule of Law—A Reply,” 54 ibid. 141 (1960); LipperJerome, “Acts of State and the Conflict of Laws,” 35 N.Y.U. Law Rev. 234 (1960); PetersJohn C., “International Conflict of Laws—Title to Chattels—'Act of State’ Doctrine,” 58 Mich. Law Rev. 100 (1959).

43 Cited note 38 above.

44 Even assuming that the application of Art. 25 is not confined to violations by the Federal Republic of Germany itself; cf. Hermann Mosler, Das Völkerrecht in der Praxis der Deutschen Gerichte 42 (1957). On the international law aspect of the Bonn Constitution, see Arthur Lenhoff, “The German (Bonn) Constitution with Comparative Glances at the French and Italian Constitutions,” 24 Tulane Law Rev. 1, 31 (1949) ; and on the priority of international law, Paul Guggenheim, Völkerrechtliche Schranken im Landesrecht 20 (1955), and B. A. Wortley, Expropriations in Public International Law 18 (1959).

45 The Court of Appeals, in confirming this viewpoint, referred to Hans Baade, ‘’ Die Anerkennung im Ausland vollzogener Enteignungen,” 3 Jahrbuch für Internationales Recht 133, 134 (1954).

46 Esp. ‘'Völkerreehtswidrige Eigentumseingriffe und deren Folgen,'’ 53 Friedens- Warte 1 (1955), and comment on the Bremen District Court decisions, note 11 above, in 5 Aussenwirtschaftsdienst des Betriebs-Beraters 106 (1959).

47 Referring to 1 Georg Dahm, Völkerrecht 268 (1958), who notes this opinion as “fully prevailing” (ganz überwiegend). Cf. Frede Castberg, “ Del'effet extraterritorial des décrets d'expropriation et de réquisition,” in Studi in Onore di Tomaso Perassi, Vol. 1, p. 339 (Milan, 1957).

48 Reading as follows (trans.): “The application of a foreign law is excluded if the application would be contra bonos mores, or contrary to the object (Zweck) of a German law.“

49 The court refers to proposals ‘ ‘ to fight international torts by developing a system of legal protection (Rechtsschutzsystem) by international organizations and by conclusion of conventions between particular states.'’ Cf. MillerArthur S., ‘’ Protection of Private Foreign Investment by Multilateral Convention,” 53 A.J.I.L. 371 (1959).

50 Braunschweig, 1 Neue Juristische Wochenschrift 487 (1948); Nürnberg, 5 N.J.W. 109 (1952); Hamburg, 6 Monatsschrift für Deutsches Recht 560 (1951); Munich, 7 ibid. 425 (1952); Oldenburg, 1954 Betriebs-Berater 326. These decisions supersede somewhat the earlier decisions mentioned by Zander, cited in note 42 above, at p. 841, note 76. See also Fontes Juris Gentium, Ser. A, Sec. II , Tomus 3 (Decisions of German Superior Courts relating to International Law), p. 106 (1956), Sammlung der deutschen Entscheidungen zum interzonalen Privatrecht 1945-1953, Vol. II, Nos. 353-427c (ed. Ulrich Drobnig, 1957); and Die Enteignungen in der sowjetischen Besatzungszone und die Verwaltung des Vermogens von nicht in der Sowjetzone Ansassigen 27 (ed. by Bundesministerium für gesamtdeutsche Fragen, Bonn, 2nd ed., 1958).

51 The Bremen Court of Appeals, however, makes no reference to the decision of the Federal Supreme Court of Jan. 29, 1953 (6 Neue Juristische Wochenschrift 545 (1953); 1953 Int. Law Rep. 31), which approved the viewpoint of the Court of Appeals of Munich that the reservation clause (Art. 30 of the Introductory Law to the German Civil Code) precluded the application of the Czechoslovakian confiscatory legislation. Cf. also the Zeiss judgment of the Federal Supreme Court of July 25, 1957 (53 A.J.I.L 687 (1959)), and the more recent decision of the German Federal Supreme Court, Nov. 12, 1959 (13 Neue Juristische Wochenschrift 189 (I960)), whereby a confiscation measure in the ‘ ‘ Soviet Zone of Germany'’ has to be denied any effect as to assets located outside the territory (guarantor in West Germany), with comment by Günther Beitzke in 14 Juristen Zeitung 90 (1960).

52 Among them the Swiss-owned Tjinta Radja tobacco concession.

53 Cf. Gerhard Leibholz, ‘’ Equality as a Principle in German and Swiss Constitutional Law , “ 3 Journal of Public Law 156 (1954); Dietrich Schindler, Gleichberechtigung von Individuen als Problem des Völkerrechts 77 (Zurich, 1957), and, generally, A. J. Thomas, Jr., “Protection of Property Abroad,” in Proceedings of the 1959 Institute on Private Investments Abroad 417, 423 (Southwestern Legal Foundation, 1959).

54 On the impact of Western sugar estate enterprises on the Indonesian population, see Clifford Geertz, “Capital Intensive Agriculture in Peasant Society: A Case Study,” 23 Social Research 433 (1956), referred to by Justus M. van der Kroef, “Indonesia: Centrifugal Economies,” in Foreign Aid Reexamined. A Critical Appraisal 197, 203 (James W. Wiggins and Helmut Schoeck, eds., Washington, D. C, Public Affairs Press, 1958)

55 Alfred Verdross, ‘ ‘ Die Nationalisierung niederländischer Unternehmungen in Indonesien im Lichte des Völkerrechts,” 6 Netherlands Int. Law Rev. 278, 285 (1959), considers the discrimination such an additional and aggravating fact that the Indonesian nationalization has to be dealt with as “invalid (unwirksam) under international law.“

56 Cited note 5 above, p. 300.

57 Cited note 4 above, p. 293. On Aug. 17> 1959, the President of the Republic of Indonesia issued a Political Manifesto, referred to in the note of Dec. 18, 1959 (below, p. 486), from the Netherlands Government to Indonesia; “The taking over of Dutch enterprises in the context of the struggle for the liberation of West Irian was a very important step indeed. However, not all Dutch capital has been taken over, not all Dutch enterprises have been nationalized. While the Dutch attitude in the case of West Irian is still stubborn, I sound warning that if, in the question of West Irian, the Dutch remain stubborn, if, in the question of our national claim, they remain headstrong, then all Dutch capital, including that in mixed enterprises, will bring its story to a close on Indonesian soil.” Cf. also Bank Indonesia, Report, note 19 above, at p. 15: “ I t is necessary to continue with the measures against the Dutch enterprises until Indonesia will have freed itself entirely from Dutch domination in the economic field.''

58 Cited note 12 above.

59 The court referred to Rodolfo de Nova, “ Völkerrechtliehe Betraehtungen fiber Konfiskation und Enteignung,” 52 Friedens-Warte 116 (1954).

60 Cf. The Status of Permanent Sovereignty over Natural Wealth and Eesouroes, Preliminary Study by the Secretariat of the United Nations, U.N. Doc. A/AC.97/5, of Dec. 15, 1959, referring to the Indonesian nationalization measures on pp. 139, 145 and 292.

61 For a similar viewpoint, cf. Alan W. Ford, The Anglo-Iranian Oil Dispute of 1951- 1952, pp. 184 and 314, note 22 (1954).

62 On the concept of ‘’ exhaustion of local remedies'’ when an effective relief appears unavailable under the circumstances, see Art. 19 of the Convention on the International Responsibility of States for Injuries to Aliens (Preliminary Draft with Explanatory Notes), Harvard Law School, May 1, 1959, p. 98.

63 Art. 3(1) of Act No. 86 made the provisions of the Expropriation Ordinance (Statute Book 1920, No. 574) not applicable to the 1958 nationalization.

64 Meanwhile, Government Ordinance No. 9/1959, of April 2, 1959 (Statutes 1959, No. 16), provided in Art. 3 that “ t h e Committee for the Fixation of Compensations may propose to the Board for the Nationalization of Netherlands-owned Enterprises that part of the revenues obtained from enterprises which are nationalized will be reserved for the payment of the compensation at the appropriate time.” The Netherlands note, mentioned in note 57 above, refers to Indonesian instructions that “only one per cent of the gross revenue of the Dutch-owned enterprises after deduction of the corporation income tax shall be reserved for the payment of compensation at a future date .” After the Bremen judgment of Aug. 29, 1959, Art. 1(1) of the Indonesian Prime Minister's Decree No. 485/M.P./1959, of Sept. 17, 1959, set forth that in case of nationalization of vital enterprises partly owned by aliens of non-Netherlands nationality, compensation will be paid for the portion of the capital originally owned by non- Netherlands aliens.

65 Note 48 above.

66 1 Schnitzer, Handbuch des Internationalen Privatrechts 233 (4th ed., 1958).

67 Martin Wolff, cited note 21 above, p. 62. Cf. also Gerhard Kegel in Soergel's Kommentar zum Bürgerlichen Gesetzbuch, p. 299, Note II3a to Art. 30 (8th ed., 1955); and Alex Vannod, Fragen des Internationalen Enteignungs- und Konfiskationsreehts 45 (Zürich, 1959).

68 Reiehsgericht, 110 Entscheidungen in Zivilsachen (EGZ) 175.

69 RGZ 119, 263.

70 EGZ 169, 245.

71 Bundesgerichtshof, 22 Entscheidungen in Zivilsachen 167, and 28 ibid. 385.

72 Internationales Konfiskations- und Enteignungsrecht 58 (1952). Seidl-Hohenveldern (ibid. 48) derives his wording from Cammel v. Sewell, (1860) 5 Hurlstone & Norman's Excheq. Rep. 728, 157 Eng. Rep. 1371, dealing with the right under Norwegian law of a captain of an averaged vessel to sell part of the cargo to cover repairs of the vessel.

73 The Bremen Court of Appeals notes that Communist countries reject “with particular sharpness” court decisions of Western countries which apply the public policy of the forum to violation of international law by foreign laws. Cf. Ehrenfried Schuette, “Die sowjetische Beurteilung der Rechtsprechung des Westens fiber die sowjetischen Nationalisierungsmassnahmen,” in Der Schutz des privaten Eigentums im Ausland 159, 173 (Festschrift für Herman Janssen, 1958).

74 This viewpoint, maintained in a diplomatic note of March 3, 1959, was again asserted in a note of Dec. 18, 1959, in which The Netherlands suggested submission to the International Court of Justice of the questions arising out of the nationalization measures. For text of note, see below, p. 484.

75 69 U.N. Treaty Series 200 (I, No. 894, trans., 1950). Cf. also Laws and Practices concerning the Conclusion of Treaties (U.N. Legislative Series, 1952.V. 4), p. 64 (1953).

76 Cf. AngeloHomer G., ‘’ Transfer of Sovereignty over Indonesia,'’ 44 A.J.I.L. 569 (1950); Naamloze Vennootschap Suikerfabriek “Wono-Aseh” v. Chase National Bank of the City of New York, 111 F. Supp. 833, 842 (1953) ; 47 A.J.I.L. 717 (1953) ; D. P. O'Connell, The Law of State Succession 131 (1956); and, generally, U.N. Doc. A/AC. 97/5, of Dec. 15, 1959, note 60 above, p. 242.

77 Art. 11 (note 75 above, p. 236), reads as follows: “Netherlands nationals, corporate bodies, products, vessels and other objects enjoy no less favorable treatment in Indonesia than that accorded to any third country. ‘’ Foreigners of all nations will have equal rights in the participation of trade with Indonesia and in the economic activity and industrial development of the country. The Republic of the United States of Indonesia however recognizes that the special interests of Netherlands nationals and corporate bodies within Indonesia will be fully taken into account and further that no discrimination will take place with regard to the interests referred to. However, the right of the Republic of the United States of Indonesia to make such regulations as are necessary for the protection of national interests or economically weak groups will not be prejudiced. The provisions made in this article on behalf of the Netherlands apply mutually between the Netherlands and Indonesia.''

78 Statute No. 13, of 1956, Lembaran Negara 1956, No. 27.

79 Staatsblad van het Koninkrijk der Nederlanden 1956, No. 438, amending Art. 1 of the Constitution to the effect that the Kingdom of The Netherlands encompasses (omvat) also “Nederlands Nieuw Guinea.” Previously, before the transfer of sovereignty, Indonesia (including New West Guinea) was a part (not a colony) of the Kingdom of The Netherlands. After the transfer of sovereignty, New West Guinea remained a part (not a colony) of that Kingdom. The statement of the Bremen Court of Appeals on the change of the ‘ ‘ colonial'’ status obviously overlooked an erratum to page 1 of the standard reference book, “De Nederlandsche Wetboeken,” ed. by J. A. Fruin (1952), that “Indonesie” was included in the former text of Art. 1 of the Constitution.

80 KGZ 114, p. 40.

81 Art. 28(11) of the Hamburg Executory Law to the (German) Civil Code of July 14, 1899.

82 Cited note 80 above, p. 45.

83 European Treaty Series, No. 19; for a summary, see 3 European Yearbook 301 (1955).

84 Art. 4 reads as follows: “Nationals of any Contracting Party shall enjoy in the territory of any other Party treatment equal to that enjoyed by nationals of the latter Party with regard to the possession and exercise of private rights, whether personal or property rights.“

85 Sept. 30, 1959, BGB1. 1959, II, 997.

86 Art. 30(1) reads as follows: “ For the purpose of this Convention ‘nationals’ means physical persons possessing the nationality of one of the Contracting Parties.” See Ignaz Seidl-Hohenveldern, “European Companies,” 1959 Journal of Business Law 113, 125, and “ Eigentumsschutz dureh internationale Organizationen,” Festschrift, note 73 above, at 193, 200 (1958).

87 ‘’ Measures taken by the government within the framework of the struggle for the liberation of Irian Barat , “ note 4 above.

88 Henri Rolin, ‘’ Avis sur la validité des mesures de nationalisation decretées par le gouvernement indonésien,” 6 Netherlands Int. Law Rev. 260, 274 (1959), considers reprisals possible in principle, but in this case overstepping the limits imposed by international law (“même si le gouvernement indonésien avait été en droit d'exercer des représailles, la confiscation dépassait par sa nature les limites que le droit des gens fixe aux représailles“).

89 As to a German reprisal (Vergeltung) against a New York judgment in a paternity suit of a resident of Germany (Feyler v. Mortimer, (1949) 299 N.Y. 309), a German court held that reprisal under German law can only be directed by the government and not by the courts. Cf. Martin Domke, American-German Private Law Relations 86 (1956)..

90 See Loftus E. Becker, ‘ ‘ Just Compensation in Expropriation Cases: Decline and Partial Recovery,” 1959 Proceedings, American Society of International Law 336. Cf. also the U. S. Government's protests against Cuban nationalization measures, especially under the Agrarian Reform Law (Boletín, Ministerio de Estado, Departamento de Prensa, Num. 49 of July 20, 1959), 40 Dept. of State Bulletin 958, 41 ibid. 715 (1959); 42 ibid. 158, 238 (1960).

91 It may be noted that an influential German newspaper, the Hamburg “ Zeit , “ No. 32, of Aug. 7, 1959, p. 4, wrote (trans.): “ If the court obviates the declared intention of the Indonesian Government to transfer the centre of tobacco [dealing] to Bremen, it will go to other countries without doubt, under circumstances even to a territory beyond the Iron Curtain.'’ Cf. also Kenneth S. Carlston, “Nationalization: An Analytical Approach,” 54 Northwestern U. Law Rev. 405, 412 (1959): “The inconsistencies in the application of the rules of private international law to essentially similar fact situations will perhaps be lessened when the practices of courts in dealing with foreign acts of nationalization are classified not according to the formal rules which they proclaim, but instead on the basis of the interests and policies which they seek to safeguard and which in fact motivate their decisions.“