34 
RESPONSIBILITY OF STATES 
the Schedule of Points of the Preparatory Committee. Of course, there is 
no doubt but that, from the legal point of view, all contracts made by the 
State are equally binding. Their fulfilment is usually guaranteed by the 
local statutes. The States agree on these principles. They all admit that 
unless proper courts and legal actions are established to enforce the rights 
of persons who have made contracts with the State, there would be an utter 
denial of justice; likewise, if the decisions of the courts constitute an evi- 
dent and intolerable disregard of the law, it would amount to an exceptional 
injustice. The cases of national debt are precisely the ones wherein there 
are no means whatsoever for local redress, because they are covered by 
statutes which the local courts are compelled to enforce. They are typical 
cases that should be subject to international jurisdiction. There might be 
others covering rescission of franchises, or their unilateral amendment by 
virtue of local laws or administrative measures prompted by considerations 
of public policy, or matters of paramount national interest. These are pri- 
marily cases which come within the jurisdiction of the national courts, but 
which might eventually assume international import if no adequate redress 
has been obtained in the local means. 
And what is the significance of submitting these cases to the jurisdiction 
of the Law of Nations? Its meaning is that in instances wherein the State, 
in the exercise of its governmental functions, has committed acts impairing 
the obligation of contracts with private individuals, and has thereby inflicted 
loss or damage, it is of the exclusive incumbency of the international com- 
munity to determine whether such functions have been properly exercised, 
or whether there has been any error or impropriety in connection therewith. 
State sovereignty is not an inviolable majesty. Sovereignty is the com- 
petency of the State to govern the interests of the community. Its exercise 
should be guided by the duty to avoid damage to property, unless called for 
by moral grounds or by the best interests of the nation. In view of the 
equality of the States, it is only the community of States that can properly 
pass upon their individual conduct. The following conclusions may be 
drawn from these considerations: first, that contracts made by the States 
are subject to their local laws; secondly, that when such laws do not afford 
adequate remedy, or when, due to the nature of the contractual relation, there 
is no legal remedy available, the international community is competent to 
adjudicate upon the situation thereby created; thirdly, that in view of the 
present régime of the international community throughout the world, as 
evidenced by the organization of the League of Nations and of the Perma- 
nent Court of International Justice, as well as by the vast number of 
treaties on arbitration and conciliation that bind practically all the nations 
of the world, there is no legal possibility of reprisals on the part of States 
for violations against them, except in the case of very exceptional situations