315 U.S. 203, 62 S. Ct. 552 (1942)
In 1907 the First Russian Insurance Co., organized under the laws of the former Russian Empire, opened a New York branch and deposited assets with the New York Superintendent of Insurance to secure claims arising from its New York business.1 In 1918 and 1919 the Soviet Government promulgated decrees that nationalized the insurance business, declared all property of Russian insurance companies to be state property wherever situated, and cancelled the companies' debts.2 The New York branch continued operations until 1925, when respondent, the New York Superintendent of Insurance acting as liquidator, took possession of its assets.3 All domestic creditors were paid in full, leaving a surplus exceeding one million dollars.4
In 1931 the New York Court of Appeals directed the liquidator to pay allowed claims of foreign creditors who had filed attachments and then to distribute any remaining balance to a quorum of the company's directors.5 On November 16, 1933, the United States recognized the Union of Soviet Socialist Republics and, as part of that recognition, received the Litvinov Assignment.6 The Soviet Government released and assigned to the United States all amounts due or that might become due from American nationals, including amounts due to the Soviet Government as successor to prior Russian governments or to the nationalized insurance companies.7
The United States first sued in federal district court to recover the surplus; that court action was stayed and the United States was remitted to the New York courts.8 Its motion to intervene in the ongoing state liquidation proceeding was denied.9 The United States then commenced the present action in the New York Supreme Court against the liquidator and certain policyholders and creditors, seeking a judgment that it was the sole owner of the surplus fund.10
In 1937 the Soviet Commissariat for Justice issued an official declaration stating that, by virtue of the November 28, 1918 decree, the funds and property of former insurance companies constitute the property of the State irrespective of whether the property was situated within the territorial limits of the R.S.F.S.R. or abroad.11 The New York courts dismissed the complaint on the authority of their earlier decision in the Moscow Fire Insurance case; the Appellate Division affirmed without opinion and the New York Court of Appeals affirmed per curiam.12
Whether the New York Court of Appeals decision that the Soviet decrees had no extraterritorial effect presents a question of federal law reviewable by this Court?13
A state court decision on a question of federal law is reviewable by the Supreme Court of the United States.14
Yes. The New York Court of Appeals followed federal precedents including United States v. Belmont when it ruled that the Soviet decrees nationalizing insurance companies had no extraterritorial effect.15 Because the United States asserted title under the Assignment, the interpretation of the decrees' reach is necessarily a federal question that this Court may review independently.16
The New York Court of Appeals did not purport to decide an independent question of state law when it addressed extraterritoriality.17 Instead, it relied on federal authority to conclude that the decrees left the New York assets unaffected, which in turn determined whether the Soviet Government had any rights to assign.18 This federal character of the question permits review here even though the state court framed its ultimate disposition in terms of New York corporate and liquidation rules.19
The judgment of the New York Court of Appeals is reviewable by this Court because it rests on a determination of federal law concerning the extraterritorial effect of the Soviet decrees.20
Whether the Litvinov Assignment transferred to the United States the right to the New York assets of the First Russian Insurance Co.?21
An executive agreement such as the Litvinov Assignment transfers to the United States all rights that the Soviet Government possessed as successor to nationalized Russian corporations, including claims to assets located abroad when the decrees are construed under Russian law to have extraterritorial effect.22
Yes. The Soviet decrees of 1918 and 1919 nationalized all property of Russian insurance companies wherever situated.23 The Soviet Government succeeded to the assets of the First Russian Insurance Co.24 The 1933 Litvinov Assignment expressly assigned to the United States all amounts due or that might become due from American nationals, including amounts due to the Soviet Government as successor to the nationalized insurance companies.25 The New York branch assets belonged to the Moscow company, not to a separate New York entity.26 The Soviet Government therefore held title that passed under the Assignment.27
The 1937 official declaration of the Soviet Commissariat for Justice confirms that the nationalization decrees operated on funds and property abroad.28 Once that intended extraterritorial reach is accepted, the Assignment transferred the right to the New York surplus to the United States.29 The United States is therefore entitled to recover the assets against both the corporation and the foreign creditors whose claims arose outside New York branch transactions.30
The Litvinov Assignment transferred to the United States the right to the New York assets of the First Russian Insurance Co., and the United States is entitled to recover them.31
Related opinions on this issue
Justice Frankfurter agreed with the result reached by the Court but did not subscribe to all views expressed in the opinion.32 The power of the President to conduct foreign relations is very broad but does not embrace the power to disregard the rights of private parties as determined by the settled law of the states.33 The President cannot by an executive agreement transfer to the United States property which under the law of New York belongs to a New York corporation.34
In this case the property did not belong to a New York corporation. It belonged to the Moscow company.35 The Soviet decrees transferred it to the Soviet Government.36
The Litvinov Assignment transferred it to the United States.37
Whether the President possessed constitutional authority to accept the Litvinov Assignment without Senate consent?38
The powers of the President in the conduct of foreign relations include the authority, without the consent of the Senate, to determine the public policy of the United States with respect to the rights of nationals of foreign countries within the United States and to effectuate that policy by a comprehensive settlement of claims through an executive agreement.39
Yes. The Litvinov Assignment was executed as an incident to the recognition of the Soviet Government on November 16, 1933.40 It formed part of a single transaction that settled outstanding claims between the two nations.41 The President acted as the sole organ of the federal government in the field of international relations when he accepted the Assignment without submitting it to the Senate.42 Recognition and the Assignment were interdependent.43
The Assignment did not require the advice and consent of the Senate because it was an international compact rather than a treaty within the meaning of the Constitution's treaty clause.44 Such compacts have the same dignity as treaties for purposes of the supremacy clause when they address matters within the exclusive federal domain of foreign affairs.45 The President's determination that full recognition required settlement of all outstanding claims, including those arising from nationalization, is conclusive and not subject to judicial second-guessing.46
The President possessed constitutional authority to accept the Litvinov Assignment without Senate consent, and the Assignment was a valid exercise of that authority.47
Whether New York may apply its own rules of law to deny effect to the Litvinov Assignment with respect to property located in New York?48
State law and policy must yield when they are inconsistent with or impair the policy or provisions of an international compact or agreement entered into by the United States in the conduct of foreign relations.49
No. The New York Court of Appeals refused to give effect to the Litvinov Assignment on the ground that New York law treated the New York branch as a distinct juristic personality whose assets had acquired a character of their own under state liquidation rules.50 That refusal collides with the federal policy embodied in the Assignment, which was designed to eliminate sources of friction between the United States and the Soviet Union by settling claims arising from nationalization.51 Enforcement of New York's policy would amount to official disapproval of the Soviet nationalization program and would help keep alive one source of friction that the policy of recognition intended to remove.52
The Fifth Amendment does not bar the federal government from securing priority for itself and its nationals against foreign creditors whose claims did not arise from New York branch transactions.53 The United States is not required to act as collection agent for nationals of other countries when it takes steps to protect its own interests.54 Because the Litvinov Assignment was part and parcel of the recognition policy, New York lacks power to stand in the way of its enforcement.55
New York may not apply its own rules of law to deny effect to the Litvinov Assignment with respect to property located in New York.56
Related opinions on this issue
Joined by Justice Roberts
Chief Justice Stone, joined by Justice Roberts, dissented on the ground that the Soviet decrees had no extraterritorial effect and therefore transferred no title to property situated in the United States.57 The Litvinov Assignment transferred to the United States only such rights as the Soviet Government had. It transferred nothing here.58
The property in question belongs to the respondent. The judgment should be affirmed. The New York courts possessed constitutional authority to apply their own rules of law to property located within the state.59
Recognition of the Soviet Government did not compel the states to surrender those rules or substitute Russian law.60 The pronouncements in United States v. Belmont were dicta and neither recognition nor the bare assignment altered substantive state law or prescribed uniform rules for the states.61
Whether the 1937 official declaration of the Soviet Commissariat for Justice conclusively establishes the intended extraterritorial reach of the nationalization decrees under Russian law?62
An official declaration by the competent authority of a foreign government, when properly before the court, conclusively establishes the intended extraterritorial effect of that government's decrees as a matter of foreign law.63
Yes. The United States, through diplomatic channels, obtained from the Soviet Commissariat for Justice an official declaration dated November 28, 1937.64 The declaration stated that by virtue of the November 28, 1918 decree the funds and property of former insurance companies constitute the property of the State irrespective of whether situated within the territorial limits of the R.S.F.S.R. or abroad.65 The referee in the related Moscow case found that the Commissariat for Justice has power to interpret existing Russian law.66 That declaration was properly before the New York courts under New York Civil Practice Act § 391 and is conclusive on the question of intended extraterritorial reach.67
Because the declaration establishes that the Soviet Government intended the decrees to operate on assets abroad, the Soviet Government possessed rights in the New York surplus that it could and did assign to the United States.68 The New York courts were required to accept that authoritative statement of Russian law rather than independently determine the decrees' intended scope.69
The 1937 official declaration of the Soviet Commissariat for Justice conclusively establishes the intended extraterritorial reach of the nationalization decrees under Russian law.70