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peaceable nations." In the same way Ferraz ^
pointed out that the harassing of neutral countries
was one of the greatest injustices of every war.

1 Prot. III., p. 805.

2 Prot. III., p. 578 ; also the Austrian Envoy Diimba in
London in 1909. " Actes," p. 228.



CHAPTER XI.

DIRECT EFFECTS OF THE LAW UPON

NEUTRALS.

Here, no doubt the advocates of the right
will rejoin that the harassing of neutral countries
cannot be avoided, but is inherent in the
nature of war. But one must not leave out of
account the consideration that the loss of numerous
ships means a serious injury to an enemy. In
reply to this contention, what follows will show who
it is that has to fear the damage occasioned by
the right of prize, z>., the seizure of an enemy's
ships and merchandise.

At this point we must emphasise the complete-
ness of the change wrought in the conditions
now under consideration by the impulse recently
given to shipping companies and maritime
insurance.

To begin with, one of the most prominent
features of this development is that separate
enterprises and private lines have more and more
given place to monster companies, and especially
to joint-stock ownership.^ This has been mainly

* Wustendorfer, p. 34 et seq.



i6o CAPTURE IN WAR.

accomplished through the necessity to-day for
building iron and steel vessels of constantly
growing dimensions. How far the capitalistic
organisation of the shipping industry has already
advanced is shown by the example of Hamburg,
eighty-one per cent, of whose total steam tonnage
at the beginning of 1903 was in the hands of
joint-stock companies. In the Hanse ports there
existed in 1900 only two ocean-going regular lines
of steamers which were in private hands, that of
R. M. Sloman, junr., and the Woerman Line, of
which the former was transformed into a joint-
stock company as early as 1903.

It is to be gathered from this — if one assumes
the absence of insurance or, what amounts to the
same, self-insurance — that the loss of a ship ^ is
borne by a great number of shareholders. These
can naturally make good the loss much more
easily than could a few companies. Moreover,
in the case of the largest German firms par-
ticularly, the share capital is held in exception-
ally sound and financially well established circles.
Add to this that the Bremen and Hamburg
merchants^ are interested in the great lines and
their management, not only as to money but, as
Thiess^ says, as to their reputation and trade "in

^ From this Renault tried in 1907 to deduce that the law
of prize was no longer directed against private persons. Yet
it must be pointed out that even in land warfare such com-
panies are treated as private individuals.

2 Those of Bremen rather than of Hamburg. Cf. Jolles'
article " Heinrich Wiegand,'' in the " Tag" of April ist, 1909.

^ Ibid., p. 12.



DIRECT EFFECT UPON NEUTRALS. i6i

the patriarchal sense." There can thus hardly be
any question of ruining the lines by the law of
prize. For only a portion of the ships being on
the high seas, their loss could always be replaced.
In the same way such a company will also be
in a position to make good easily the damage
resulting from ships being harbour-fast.

The share capital of the shipping companies,
however, is not exclusively in the hands of
home shareholders, but to some extent in foreign
hands. For instance. Clause 2 of section i of
the German Law concerning the nationality of
merchant ships expressly grants to certain legalised
persons having their domicile within the Empire,
the right to hoist the flag of the Confederation
without requiring the shareholders to be subjects
of that Empire. As Murken mentions, American
financiers have completely denationalised certain
great English lines. Consequently, even neutral
shareholders have often to bear the loss caused by
the law of prize. It is another matter, of course,
when the flag is changed at the purchase of a
whole line, as happened in 1898, when the North
German Lloyd bought up the Scottish Oriental
Steamship Company and the East India Steamship
Company.

The companies are, as a matter of fact,
almost all insured against loss, and the larger
firms, which hitherto had been partly self-insured,^
have lately taken to insurance proper, such as has

' P. 99-
C.W. M



1 62 CAPTURE IN WAR.

long been generally in vogue in England. In the
German Empire, the Hamburg-America Line, for
instance, which, until the beginning of i9o8,had been
self-insured, had recourse at that date to ordinary-
insurance.-^ Hence the loss falls upon the insurance
companies, and not upon the shareholders of
the shipping companies. How greatly German
insurance companies, for instance, were injured in
1 870- 1 87 1 by the capture of a few ships, may be
judged from the fact that of twenty-two marine
insurance offices in Bremen in that year, only three
were still doing business in 1872.^

In all countries but Norway insurance companies
have for the most part had the form of joint-stock
corporations for a far longer period than shipping
companies, and hence here, too, the loss is divided
among a great number of shareholders. Here and
there, it is true, the shares of the insurance offices
are in foreign hands. Thus, in 1890, the Royal
Exchange Assurance Corporation took over half
the shares of the Hamburg " Insurance Company
of 1873." Moreover, it is of prime importance to
establish the fact that many lines insure their vessels
with foreign firms. Thus the English " Lloyd's "
takes risks from all countries in the world.

In 1901, not less than seventy foreign marine
insurance offices were represented in Hamburg by

^ As to the North German Lloyd it is to be noticed that it
was founded as a shipping and river and sea insurance
company, so that formerly it even undertook to insure foreign
companies. Cf. Plass, p. 520.

2 Cf. Manes in the "Tag," February 26th, 1908.



DIRECT EFFECT UPON NEUTRALS. 163

agencies, whereas that city itself had at the time
only nine such offices of its own. In a report of
the Hamburg Chamber of Commerce in the 'nineties
of last century complaint is made that most marine
insurances are taken out in England. It is just
during a war that the subjects of the belligerent
Powers are most apt to insure their ships with
neutral companies.

These facts were adequately taken into considera-
tion as early as the " Compact touching the
instituting of an International Prize Court."
By Art. 5, namely, the lodging of an appeal is
open to neutral or hostile parties who have a
legal interest in the success of the private individual
entitled to appeal and have already espoused his
cause in the proceedings before the national Courts.
Renault says emphaticall}-,^ " The comment has
been made that the owners of a ship or a cargo
were not the only people that might suffer from a
capture." On the motion of Asser and Beernaert ^
it was expressly laid down that these minor
sufferers could appeal each on his own account in
proportion to their several interests. It was
primarily taken into consideration that ships are
often insured with several companies, and those,
moreover, of various nationalities, and a particular
company might he debarred from appealing by
reason of its native State. In that case the other
companies are nevertheless to be allowed to make

1 Prot. I., p. 189.
' Prot. I., p. 23.

M 2



i64 CAPTURE IN WAR.

good their right in proportion to their interest.
Even Art. 64 of the London Convention speaks quite
generally of " those interested." ^

All these great insurance offices are habitually
insured in their turn and that mostly with foreign
companies. The development of German super-
insurance in the last decades is particularly typical,
just because to an increasing extent it is foreign
business. The Hamburg assurance office in which
the Hamburg-America Line insured itself recently,
is, in its turn, insured with twenty other companies,
mostly English, Different conditions of insurance,
however, prevail to some extent in the various
countries, and therefore it may easily happen that
the original insurer has to replace losses which the
super-insurer has not to bear. But this is an
exception. Generally speaking, we may say, in
almost all cases as many of the neutral as of the
enemy's private companies suffer by the law of
prize. Hence Barbosa observed quite rightly, in
1907,^ " The fact is that in seeking to wound the
enemy with arms of this kind one most often
wounds oneself. The matter becomes clear in re-
flecting on the modern role of assurance companies."

It is true that, as regards the latter argu-
ments, two qualifications must be made. Firstly,
war risk, the idea of which is by no means
uniform, and which is nowadays not so willingly
accepted by private insurers as it was.

' " Actes," p. 374.
2 Prot. III., p. 783.



DIRECT EFFECT UPON NEUTRALS. 165

Especially is this the case since the Spanish-
American War, and the troubles between Chile
and Peru. At that time, particularly, English, and —
thanks to the international quality of underwriting —
other insurers also were taken by surprise by events
and suffered great losses, as they had taken over
the war-risk, even for open policies, without extra
premiums. Since then they have been more
cautious in England, and followed the example of
continental countries, by which war insurance is
only held to be excluded by a special proviso.
In Holland only are war insurances still included
without mention. It is worth noticing that in
open, i.e., not graduated, insurances, the war risk
can at any time be discontinued at very short
notice. For, as Girtanner rightly says,^ " you
cannot reckon the extra rate for it beforehand, and
must therefore leave the insurer his freedom
both as to the taking over and the rate of the
premiums." Thus, owing to the South African
War, the " Vereeniging von Assuradenren " in
November, 1899, repudiated the stoppage risk on
all current insurances, and so caused merchants to
insure their goods against the war risk in a
separate policy, and that at a premium of one-
eighth per cent. In Hamburg there were in the
'seventies three insurance companies, by whose
trade description it was plain that they took war
risk,- for instance, the " Insurance Company of 1868

' " Assekuranz-Jahrbuch," 1901, p. 89.
•^ Cp. Plass, pp. 641, 749, 754.



i66 CAPTURE IN WAR.

for sea, war, river, and land transit risks." Now-
adays, when insurance companies consent to insure
against war risk, it is only at comparatively high
premiums. Even though at the outbreak of war
carrying companies are put in a position, owing to
the rise in price of freightage, to pay big premiums,
these often reach such a height that owners do not
insure their ships or goods at all against war risks.
Renault very rightly declares,^ " the insurer, if he
disregards the seriousness of the risks, is forced to
exact war premiums that are often exorbitant or
else insufficient." The owners then, of course,
have to bear the loss brought about by the law of
prize.

The height of the premiums will, however, have
a continuously decreasing tendency during this
century. The more the course of codifying the
law is adopted, the more will the conditions
become known under which ship and cargo are
seized, and the more will it be possible to estimate
the risk.^ Thus, if only by reason of the decisions
of the London Convention, the insurance rate will
be lower in the next war at sea, as v. Flockher has
already insisted.^

Premiums will undergo further modification from
the fact that contracts by which the merchant

^ "Actes," p. 369.

■^ Cf. " Decisions of the Supreme Commercial Court,"
Vol. VII., p. 171.

» "Morgen," 1909, p. 588; cf. also the chapter, "The
Merchantship and her Cargo in Naval Warfare," in
" Nauticus," 1909.



DIRECT EFFECT UPON NEUTRALS. 167

ships of the one belh'gerent are insured with the
assurance companies of the other are, as a rule
regarded as void. Of course, this rule holds only
where the capture has been legally made. In the
case of illegal capture, as Girtanner says,^ the
underwriter is bound, even towards an alien
underwriter. That principle, first advocated in the
consolato del mare and the guidon de la iner,
obtains in England. In 1748 and 1792 England
made laws against the insurance of such vessels
as were the property of Frenchmen. Quite
recently in England the maxim was affirmed, both
expressly by several decisions during the Boer
War, and tacitly by the new English law of marine
insurance of December 21st, 1906.^ In France
also this prohibition is recognised. Thus French
commentators have expressed the view that "war
risks are excepted from marine super-insurance."
Forit might come aboutthatthecountry of thesuper-
insurer were at war with the country under the flag
of which the uninsured ships sailed, and then, even
though indirectly, support would be given to the
hostile Power. At the outbreak of the Russo-
Japanese War, French shipowners, who had secured
their war risk with English underwriters, owing to
the possibility of France's being drawn into the
war, sought covering insurance for their vessels

^ " Insurance Year-Book," igor, p. 96.

"^ Cf. Goldschmidt, " Law as to Private Relations between
an Englishman and a hostile Foreigner in case of War," in
" Zeitschrift fiir Volkerrccht und P)undesstaatsrecht," Vol. I.,
pp. 353 ei seq.



i68 CAPTURE IN WAR.

on the Continent, i.e., concluded insurance com-
pacts to the effect that a continental company
should cover the loss, in case the English under-
writers did not pay.^ In Germany, as Voigt
declares,^ this maxim also holds good, and likewise
in many other countries. No doubt this prohibition
is fully logical, while the law of prize is retained.
The object of the capture of the enemy's private
property at sea is supposed to be the destruction of
the enemy's commerce, and this aim would be
thwarted if, for instance, in a war between England
and Germany, a German vessel seized by England
should be replaced by English insurance companies.
Accordingly, as long as the right of prize is recog-
nised, no abrogation of this prohibition can be
compassed.^ Hence it was quite without significance
when, in 1905, nineteen English insurance companies
issued the declaration (i) "that they alike, in
peace and in war, would, under all circumstances,
strictly fulfil the obligations incumbent upon them
owing to agreements of insurance entered into
by them within the German Empire, and (2) that
no laws obtaining in England would hinder the
carrying out of the immediate obligations assumed
within that Empire."* For this declaration cannot
claim a legal significance, seeing that private

1 " BL fur Vers. Wissenschaft," XlXth year, p. 299.

2 P. 8.

^ The Paris Declaration, as has been shown above, is also
not quite logical.

* Manes holds a different view: " Bl. fiir Vers. Wissens-
chaft," p. 298.



DIRECT EFFECT UPON NEUTRALS. 169

announcements of intention cannot abrogate any
clause of public law. A breach of that prohibition
would, doubtless, come under the heading of high
treason. In accordance with the aim of the
prohibition, the time at which the agreement of
insurance is concluded is quite immaterial. On the
other hand, the view is correct that it must be
distinguished whether the claim for insurance arises
before or after the outbreak of war. Naturally the
prohibition does not include such losses as have
arisen before the outbreak of war. An interesting
and apposite case was decided by the English
House of Lords in 1902. The Government of the
Transvaal before the outbreak of war impounded
gold in course of transit. It had to be decided
whether the insurance was invalid because the
approach of war was suspected. The Lords rightly
answered in the negative. Only from the beginning
of war does the law of prize obtain, and from that
same date the prohibitions attaching to it.^ This
decision, by-the-by, is interesting, because, by the
law of insurance, the danger of war is already there
when two parties stand facing each other in a
hostile mood without war being as yet declared.

It stands to reason that what has hitherto been
said holds good only when the policy of insurance
has been effected in the country to which the
insurance company belongs. It is quite another
matter when, for instance, an English company has

Cf. the contrary English view in another case, Liepmann,
p. 340.



170 CAPTURE IN WAR.

effected a policy with German shipowners. Then
the German Hne can sue in Germany, and the
judge there wiU not trouble himself about the
English veto. Yet a German judgment for execu-
tion will be worth nothing even then unless the
English company has real property or capital in
Germany, and the judgment can be enforced within
that country.

In certain cases nothing prevents the country
to which the insurance company belongs from
setting aside the prohibition in question.^ Thus
the English Government during the course of
a war has, in certain circumstances, repeatedly
granted concessions, by which all commercial
relations were permitted with the enemy's country,
particularly when a colony.

The following ruling, which also holds good in
England, is worthy of note. " If property be lost
which was insured with an English company by
the subject of a foreign Power while that Power
was still at peace with England, but at war with
another Power, the insurer still retains a claim for
compensation if war breaks out with England.
But this claim remains dormant during the war,
and can be revived again only after its termination."

It is to be expected that together with the
abolition of the law of prize a regulation for naval
war will be introduced similar to that which we
already possess for land warfare in Art. 23, // of
the Code : " The abrogation or temporary setting
^ Cp. "Insurance Year-Book," for 1901, p. 131.



DIRECT EFFECT UPON NEUTRALS. 171

aside of the rights and claims of subjects of the
adversary, or the prohibition of their bringing suit
is forbidden." In a proposal relating to the laws
of naval warfare Van Karnebeek, in 1907,^ declared
this ruling to be equally applicable to war at sea.

In spite of these limitations it may be maintained
that the seiz.ure of an enemy's ship injures not only
that enemy's shipping companies, but also those of
neutrals. Even if to-day the injury inflicted on
the former is the greater, it will year by year be
more distributed among other nations as commerce
becomes more international. This wdll cause the
nations to realise more and more clearly that
the right of prize is injurious to the whole economy
of the world, and their realisation that the law is
at variance with the essence of the comity of
nations will become the more vivid. What the old
Code of international law did not bring about, the
new Code — being based on the international solid-
arity of national interests, as Niemeyer and Nippold
aver — will accomplish, and we can therefore assume
with certainty that the abrogation of the law of
prize is only a question of time.

^ Prot. III., p. 1060.



CHAPTER XII.

ENGLAND AND THE LAW OF PRIZE AT
SEA, PARTICULARLY IN COMPARISON
WITH GERMANY.

The fact particularly needs emphasising that
England, herself one of the greatest opponents
of the abrogation, would have to suffer in an
especial degree by the application of the law
in a naval war. Lord George Hamilton in 1894
announced, on the strength of his experience as
First Lord of the Admiralty, that all English
sailing-ships and steamers of less than twelve
knots speed would be laid up on the outbreak of
war. This applies alike to ships of the United
Kingdom and those of the colonies. Remember
that in that year England owned 2,869 sailing-
vessels with a nett tonnage of 1,894,442, and 8,352
steamships of 13,652,455 tons in all, of which only
1,033 of the latter made twelve knots and upwards.
Thus a prominent English expert testifies that
10,000 English vessels would be laid up in the
event of war breaking out. Although this state-
ment is to be received with reservations, yet one
may conclude from it that England's position
with regard to the law of prize is by no means
particularly favourable.

Let us now discuss the particular disadvantages of



LAW OF PRIZE AT SEA. 173

England in a naval war. To begin with, the English
nnercantile marine is much more vulnerable than
the German, seeing that its seagoing vessels have
five times the tonnage. While, then, the trade of
other belligerent Powers can mostly be taken over
by other and neutral marines, this is not possible
to the same degree for England. That country
will thus be forced to carry on its trade partly with
its own vessels, and that means a special prospect
of capture for the English ships.

The German mercantile marine is, moreover,
in respect of its organisation, considerably stronger
than the English. Such powerful lines as the
Hamburg-America and the North German Lloyd
existing nowhere else in the world. Even the
Morgan Trust is not as strong as these two taken
together. Of the German total jQ-^ per cent,
belongs to the largest lines with over 39,000 tons,
in England only 52-5 per cent.^ How much more
would the small companies, which in England are
so much more numerous than in Germany, have to
suffer from a naval war than the great firms ?
These can easily recover, where the smaller ones are
often exposed to destruction. It has also to be
borne in mind that what is called haphazard sailing
is much commoner in England than with us. The
German lines almost always build their ships for a
settled run on settled routes, whereas in England
tramps are very common. Out of upwards of
eighteen and a half millions of British tonnage

' Thiess, p. 4.



174 CAPTURE IN WAR.

to-day only four millions belong to fixed lines,
so that the remainder falls to the companies
having a more or less haphazard destination. This
results in a splitting up of the entire merchant
service.

The German ships have fully determined connec-
tions which are systematically maintained. The
great houses always send their goods by the same
vessels and are not in the habit of changing. For
they have a confidence, built up in course of time,
in certain lines. If, therefore, a regular service in
Germany, for instance, is interrupted by war, on the
conclusion of peace the commercial relation revives
again, whereas with the numerous tramps in England
this is much less the case. With irregular companies,
moreover, combines, which lighten the struggle for
existence, seldom arise. To form one, it is above all
necessary that the spheres of interest should be
sharply defined. With irregular steamers, on the
contrary, as v. Halle remarks,^ outsiders can easily
intervene, if the chances of a fixed destination
appear at all favourable.

The fact is also worth recalling that in England
most shipping companies are the outcome of indi-
vidual enterprise, whereas most of the great con-
tinental firms came into existence at once as joint-
stock companies. Hence, in the English companies
the purely personal element preponderates more
than elsewhere, and, as Wiedenfeld ^ insists, in such

1 " Marine Rundschau," 1909, p. 412.

'^ " The World-ports of N.-W. Europe," pp. 211, 212.



LAW OF PRIZE AT SEA. 175

cases there is often a jealous clinging to complete
independence which is detrimental to the corpora-
tions. This reason frequently prevents fusions
with rival enterprises, and many undertakings fritter
themselves away in fruitless competition.

Moreover, in England narrow bounds are set to
the aggregation of capital, because there only
the capitalised strength of a single industrial firm
is limited. The latter procures a sufficient share
to ensure itself the control of affairs, whereas on the
Continent many private adventurers and banks
share that task, and thus the expansion of the
capital proceeds much more easily. In face of the
current endeavours to aggregate capital, there can
be no doubt that this state of things means a great
disadvantage to England.

This defect of the great English companies has
made itself visible above all in their not being able to
maintain their independence against the American
trust, whereas the Hamburg-America Line and
the North German Lloyd sustained the encounter
unscathed.

In addition to this, it is a matter of notoriety that
in England the proportion of the fighting navy to
the mercantile marine is far less advantageous than
in Germany. To every ten tons of the former in


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