For the Rule of Law

December 10, 1956

At least one aspect of the Middle East crisis, particularly as it affects the Suez Canal and the oil supplied to the West, falls within the province of a business column. This is the importance not only to the interests of the United States, but to world trade, world investment, and world peace, of maintaining respect for international law, particularly as it affects the security of private property.

The situation in this respect has become richly ironic. It was Nasser himself who on Nov. 21 pledged himself “to the strict observance of all the international law which now exists,” and even called for “the expansion of international law to meet the needs of the complex modern world.” Yet the clearest possible case of breach of international law is one nation’s unilateral violation of a treaty to which that nation has itself been a signatory.

The Egyptian Government was not only a party to the Convention of 1888, it renewed its determination to uphold that convention as recently as October 1954. And that convention provided “for the benefit of all the world that the international character of the canal would be perpetuated for all time, irrespective of the expiration [in 1968] of the concession of the Universal Suez Canal Co.” Nasser couldn’t even wait for 1968. He seized the canal on July 26, only six weeks after the last British troops (partly because of American pressure) left Egyptian soil.

CONDONING SEIZURES

What was even more remarkable in all this, however, was the failure of the United States and even England clearly to denounce the arbitrary seizure of an international agency and the private property of foreigners as a violation of international law.

As pointed out in this column of Aug. 27, the American Government in the last twenty years has piled up an amazing record of condoning other governments’ expropriations of foreign-owned private property (including that held by Americans). We in effect acquiesced in the seizure of the British and American oil properties by Mexico, and of the Anglo-Iranian oil properties by Iran. But the British were also prevented from taking any firm stand against the so-called “principle of nationalization” because of their government’s own home record in nationalizing coal mines, railroads, and communications.

It has remained for a few German writers to take the clearest stand on this issue. I have already (Newsweek, Aug. 20) referred to Wilhelm Röpke’s pamphlet on Economic Order and International Law. One German writer who has been particularly active in this field has been Hermann J. Abs, at Frankfurt-am-Main, financial adviser to Chancellor Adenauer, and head of a new organization called the Society to Promote the Protection of Foreign Investment. Abs recognizes how vitally important it is for world peace and world recovery to restore the protection that international law, until the last quarter century, afforded to private property. He declared in Cologne on March 27:

TO PROTECT INVESTMENT

“Without the guaranty that invested capital will remain the investor’s property, bear interest, and be repaid in due time, it will be impossible to mobilize sufficient private capital for foreign projects. It must not be forgotten that private capital both in Europe and the United States has sufficient opportunities to work profitably at home without having to assume the additional risks regularly connected with foreign investment. . . . What is the use of international rules of law, of property-protecting clauses in Western constitutions, national laws and numerous commercial treaties . . . if they are not unreservedly observed in practice?”

Abs went on to recommend “the conclusion of an international Magna Charta, by which if possible all countries in the free world engage to respect and protect rightfully acquired foreign property and other foreigners’ rights. By this Charta, the contracting parties should submit to sanctions determined by an international arbitration court in the case of proven violations of this fundamental government. Perhaps it might be suitable for the Magna Charta to embody general basic rules concerning the fair treatment of foreign investments.”