Contracts between Citizens of the United States and Foreign States

Abstract

During the past few years public attention has been increasingly focused upon the economic relations of American citizens, banks, and corporations with foreign governments. It is beyond dispute that America's entry into the World War in I9I7 was deeply influenced by great loans and prvate credits to the Allied Powers. The basic contractual relations which our immense investment abroad presupposes may well, as forcibly illustrated in the recent Ethiopian-Standard Oil concession, present involvements of a political character, place a heavy burden upon diplomatic relations, or present a serious obstacle to the unhampered carrying out of a sound foreign policy. It becomes then of definite importance to weigh thoroughly some of the legal considerations which must govern the contractual relations of citizens of this country and foreign states, and to investigate from the standpoints of both national policy and national law the soundness of popular assumptions as to the validity and propriety of these relationships. The Constitution is silent upon the subject of the contract of a citizen of the United States with a foreign state. Under its provisions, the whole intercourse of the United States with foreign states is entrusted exclusively to the Federal The treaty-making power embraces the regulation of all matters affecting the political and commercial relations of this country and foreign powers. It is axiomatic that one nation treats with the citizens of another, only through their Government. 1 The President of the United States alone can conduct that intercourse on behalf of the government or people of this nation. Within the limits of its delegated powers to regulate commerce and navigation with foreign nations, Congress has an admitted authority to enter into legislative compacts with them. It has, moreover, Constitutional authority to interpose between a state of the Union and a foreign state and prohibit, or consent to, any compact or agreement contemplated between them.2 From these powers important conclusions are to be deduced as to the supposed right of a citizen to enter into contract with a foreign sovereign or governmental power.