Luther v Sagor (Recognition of new governments)

1917 was a year of turmoil in Russia. In February and March 1917, heavy losses in the war against Germany and domestic economic difficulties led to unrest and to the abdication of Tsar Nicholas II. This period of turmoil resulted ultimately in the October Revolution, which brought the communist Bolsheviks under Vladimir Lenin to power and plunged Russia into 70 years of harsh communist dictatorship from which it still has not recovered today. One of the first things that the Bolshevik government did was to nationalise, which is a polite way of saying steal, virtually all of the industrial assets which existed in the country at that time without compensation. The plaintiffs in this case, whose full name I won't even try to pronounce, operated a lumber mill in Reval, now known as Tallinn, the capital of Estonia. Estonia was part of the Russian Empire and also came under the domination of the Bolshevik government. As a result, the Bolshevik government stole a great quantity of timber boards from the company, Luthor, and sold them to the Defendant, a company in England. The Russian company sought to have the sale contract set aside because they claimed to be the true owner of the boards. At the time of the sale and at the time of the first instance trial, the British government had not recognised the Bolshevik government. However, by the time the matter reached the Court of Appeal, the British government had recognised the communist regime, with effect from March 1917. The question for the Court was whether that recognition could be made retroactive. Lord Warrington said, Recognition is the act through which it becomes apparent that an old state is ready to deal with a new state as an international person and a member of the family of nations. If this is so, then provided the act in question was an act of the state so recognised, it must, in my opinion, be entitled to the same respect as an act of a sovereign state, whether done before or after recognition. As a result, the United Kingdom accepted the theft of the boards as being the legitimate conduct of a lawful government and essentially became party to that theft. From this case, we learn that the recognition of a foreign government can be made retrospective, but that courts will not enforce the acts of an unrecognised government.