meet the actual war needs, there has been more or less abandonment or modification of these social insurance systems. There are, however, promised some positive effects of the war on social insurance. In no other field of human endeavor is there greater opportunity to use to the improvement of society the principle of insurance than in these various kinds of social insurance. An aroused democracy, which is promised as one effect of the war, may insist that the insurance principle be extensively used to meet these social problems, and what was granted by the ruling classes as a concession may be demanded by the masses; that is, the use by the governments of the insurance principle to meet the problems of invalidity, disability, death, old age, unemployment. In this connection the use of the insurance principle to meet the problems which in the past have been sought to be met by a pension system is important. As is well known, most of the leading nations have had what is known as a pension problem. In the early period of developing nationality, when the soldier fought for his share of the booty or for a wage, and when a social conscience was in its germ stage of development, no problem was to be found. But at a later date, when nationality had become fully developed and recognized, and when appeals were made to the patriotism of the citizen to defend his country, an obligation on the part of the nation was recognized to those who thus defended the nation and to the dependents of the soldier. There thus arose the question of a service pension, a disability pension, and a pension for dependents, and the practices with respect to granting these different pensions varied greatly in different countries. In those nations with representative forms of government, there was a tendency to be liberal in the granting of pensions, due in part to the pressure which could be brought to bear by the beneficiaries on their representatives. In the United States, in particular, the pension system has been one which has brought little credit to representative government. It has often become a political party question, and, what is worse, in its actual operation it has entailed the appropriation of enormous sums of money without securing the ends to be achieved. It has

been unjust often to the soldier and his dependents.

The patriotism and gratitude of a people have often been played upon and prostituted to serve the ends of politicians. In view of the history of the pension system, especially in the United States, it is not surprising that, upon the entrance of this country into the war, there was a widespread wish that the country might be spared a repetition of this pension history.

The insurance principle offered a superior substitute, and provision was early made to meet the situation by the use of this principle. There is no reason to doubt that the plans which have been devised and which are discussed in detail at a later place in this study will meet the problem in a much more adequate

manner.

INSURANCE CONTRACTS AND THE WAR

The effect of the war on insurance in its scientific aspects and in its practical conduct has been indicated in the preceding discussion. But there have been more direct effects of the war on insurance in all its branches. Insurance has shared in the great development of international trade during the past century, and at the outbreak of the war many individuals found themselves in possession of insurance policies on their lives or property which had been issued by the foreign companies of nations with which their own nation was at war. Immediately questions arose as to the validity of these contracts: Could premiums be paid to the agents of these foreign companies who were in residence in the country of the insured? Could such agents continue to transact an insurance business for the foreign company, if, as is usually the case in the United States, such foreign company was required to keep a deposit in the country where the insurance was written? Were such agents in truth the real agents of the principal now that the country of the insurer and insured were at war? These and a number of other questions arose. In other words, it was a question of the status of commercial contracts during the time of war between enemies, as well as the status of alien representatives of such companies with respect to their power to bind their principals.

International law has dealt only in an incidental way with the effect of war on commercial contracts. Such contracts are primarily a subject of national law, since an inherent character of the sovereignty of a nation is its power to determine the terms of contracts, not only among its own citizens, but also to lay down on what terms and on what conditions an alien may be, permitted to contract and transact business with its citizens.'

All the leading countries engaged in the war have taken such action against alien subjects, residing in the country, as seemed to be necessary to protect the nation. In many cases such aliens have been compelled to register. Their movements in the country and their places of residence have been restricted. In some cases they have been segregated and in many cases they have been under close surveillance. The English courts reaffirmed the old rule that alien enemies have no locus standi in the courts, but if such aliens are registered, they have a right to sue in the courts. The Court of Appeal in England has held that a claim can not be made by an agent for an enemy's business by reason of having received from his principal power of attorney; nor can such an agent be appointed a receiver of the business of his principal for the purpose of satisfying the creditors of his principal.

In most cases, shares of stock owned by alien enemies have not been disturbed, but dividends have been held, pending the close of the war. The general principle of the English law is that the war discontinues all commercial intercourse of British subjects and those of an enemy. All treaties, civil contracts and rights in and to property are either suspended or terminated. Since the origin of much of United States law and legal procedure is of English derivation, the same rules are largely observed in the United States with respect to contracts in time of war. The insurance of property of the enemy is therefore presumptively an illegal contract, since it is a species of trade and intercourse with the enemy. Likewise, the sending of money or funds

1 For a discussion of this subject, see Journal of the Society of Comparative Legislation, vol. xv; G. G. Phillimore, Trading with the Enemy.

as insurance premiums to an enemy country is illegal. All commercial partnerships with the enemy terminate with the declaration of war. In the early period of the war the following general proclamation with respect to insurance was issued by England.

Not to make or enter into any new marine, life, fire or other policy or contract of insurance (including reinsurance) with or for the benefit of an enemy; nor to accept or give effect to any insurance of any risk arising under any policy or contract of insurance (including reinsurance) made or entered into, with or for the benefit of an enemy before the outbreak of war; and in particular as regards treaties or contracts of reinsurance current at the outbreak of the war to which an enemy is a party or in which an enemy is interested, not to cede to the enemy or to accept from the enemy under any such treaty or contract any risk arising under any policy or contract of insurance (including reinsurance) made or entered into after the outbreak of war or any share in any such risk.

Provided always that where an enemy has a branch locally situated in British, Allied, or neutral territory not being neutral territory in Europe, transactions by or with such branch shall not be treated as transactions by or with an enemy. But where an enemy has a branch locally situated in British, Allied, or neutral territory which carries on the business of insurance or reinsurance of whatever nature, transactions by or with such branch in respect to the business of insurance or reinsurance shall be considered as transactions by or with an enemy.1

PUBLIC CUSTODIANS OF INSURANCE PROPERTY

Since the property value, represented by debts to enemy aliens which were continually maturing, was considerable, and since there were many other kinds of property values owned by alien enemies, it was necessary, if confiscation was not to be practiced, that some arrangements be made by the government to take care of this property of alien enemies. The usual practice has been to appoint a public custodian who has charge under the trading with enemy acts of all property of such aliens. These public custodians have, among other duties, the receiving of all payments arising out of transactions entered into before the outbreak of the war, or of such other business or contracts as are permitted. An amendment to the original trading with enemy 1 Manual of Emergency Legislation (England), 19.

act in England made the Board of Trade such custodian during the war, and left the matter of the general disposition of such property to be dealt with by Orders in Council after the close of the war. The public custodian of the Board of Trade receives all dividends, interest, shares of profits and other credits of enemies. These funds are to be dealt with as the Treasury directs. Particular information as to enemy property is to be supplied by trustees of enemies and enemy property can be vested in such trustee by an order of a High Court judge.

If any funds had been paid to a bank or other financial agent or concern, such funds were required to be turned over to this public custodian, appointed by the Board of Trade. Fines and imprisonment penalties were established for a violation of this provision of the law. Such property could not be attached, but the custodian could upon order of the court pay debts out of it. The legal status of the marine insurance business of enemy nations has occasioned the greatest difficulties. This is due in part to the fact that the marine insurance companies, especially of some of the European nations, such as England and Germany, had either original or reinsurance contracts in large numbers on the property of enemies. Then, too, ocean transportation has assumed a position of commanding importance in this war on account of the necessity of shipping food supplies and munitions of war, as well as the extensive use of the submarine and other agencies of destruction against the shipping of the enemy.

RIGHTS OF FOREIGN COMPANIES

In the United States the problem was especially difficult because of the fact that the largest part of the marine insurance business is held by foreign insurance companies and a considerable amount of it, either as direct insurance or as reinsurance, by German companies.

In the early period of the war there was an attempt to control the problem through a proclamation issued by the President.