By: Stephen
C. Neff, Reader in Law – Public International Law, University of Edinburgh Law
School
It might be
wondered – even if only in very idle moments – when states began to make
legal claims against one another in something like the modern sense, through
either diplomatic channels or third-party adjudication. There may be any number
of candidates for this honor. But certainly high in the list of contenders
would be the so-called “Silesian loan” dispute that erupted between Prussia and
Great Britain in the middle of the 18th century. It had many elements
that would be instantly recognisable to a lawyer today – so much so, that one
might be led to wonder if the day-to-day practice of international law has
undergone any important changes in the last two and a half centuries or so.
It all began in
1735, when Holy Roman Emperor Charles VI, beset by the heavy military expenses
of the War of the Polish Succession, borrowed £250,000 from a group of private
lenders in Britain, at 7 percent interest. The loan was secured on tax
revenues flowing from the province of Silesia (located in what is now the
western portion of Poland). Payments of interest were to commence six months
after the loan was made, with payments of principal to begin in 1741, and the
whole of the repayments to end in 1746.
Things began to
go wrong from the beginning. For one thing, Charles failed to make the
required interest payments. Moreover, before the time came for the payments of
principal to begin, the province of Silesia underwent an abrupt change of
political status. King Frederick II of Prussia, in one of the century’s more
audacious acts of blitzkrieg, conquered and annexed the
province. The Emperor acquiesced in this act in the Treaty of Berlin in July
1742 – though with the crucial proviso that, along with its new possession,
Prussia was to assume the obligation of repaying the “Silesian loan” (i.e., the
1735 loan whose repayment had been secured on the revenues from Silesia).
Things now
seemed to back on keel. Frederick duly paid £84,700 (interest and principal) in
1743 – the first repayment actually made. His assumption of the loan
obligation was renewed in the Peace of Dresden of December 1745, and yet again
the following year – this time, alongside a guarantee by the British government
of the cession of Silesia to Prussia. The repayment obligation was, however,
an onerous one; and Frederick appears to have been constantly vigilant for some
kind of legal justification for halting the payments.
His opportunity
arose when a dispute erupted with Britain over some niceties of the law of
neutrality. This arose out of a war which broke out in 1744 between Britain
and France, in which Prussia was neutral. British naval vessels and privateers
captured a number of Prussian merchant ships and, pursuant to proceedings in
British prize courts, made a number of confiscations on two key grounds:
first, that some of the goods were contraband of war (i.e., war-related goods)
being carried to France; and second, that some of the goods were enemy-owned.
Prussia contested both of these grounds. Regarding contraband, the objection
was that British prize courts treated naval stores as contraband, contrary to
international law. Regarding enemy-owned goods, Prussia asserted the existence
of a general principle that “free ships make free goods” – meaning that
enemy-owned cargoes were not subject to capture if they were being carried on
neutral (e.g., Prussian) vessels.
The last of the
ships were released by the British by the end of 1748, but the Prussian
government insisted on a payment of damages for the goods confiscated, as well
as for the delays suffered by the Prussian carriers. A commission established
by the Prussian government quantified these losses at 189,000 reichsthalers.
When the British government obstinately refused to pay, Frederick decided to
resort to self-help, in the form of set-off. Specifically, he ordered that the
Silesian loan repayments be redirected from the British creditors to the
injured Prussian carriers. At this point (it was 1752 by now), about £45,000
remained outstanding on the loan.ably
do good service with surprisingly little alteration.
It is
interesting to note that Frederick’s own legal advisers – who included the
renowned natural-law scholar Samuel Cocceji – counselled against taking this
action. Not surprisingly, the British government also took a dim view of
Frederick’s acts. More to the point, it put the case before a panel of eminent
legal advisers, one of whom was William Murray, a Scottish lawyer who would
later attain a high degree of legal renown