Watts, Watts & Co. v. Unione Austriaca Di Navigazione

Background

A British coal company sold bunker coal to an Austro-Hungarian shipping company at Algiers. When payment drafts were protested, the seller sued in a U.S. admiralty court in New York in August 1914 and attached one of the buyer’s steamers. The attachment was later discharged on a bond, and the buyer appeared and admitted the admiralty nature of the case. The trial court dismissed the suit in May 1915 because both countries were at war and their laws forbade payments between enemies; that dismissal was affirmed by the court of appeals in December 1915. While the case was on review, the United States declared war on Austria-Hungary in December 1917.

Reasoning

The Court asked whether a U.S. court should continue a case between foreign enemies after the country itself entered the war. It explained that the situation had changed: what began as a neutral-court dispute became a suit by a co-belligerent against a common enemy. The Court noted a 1917 law limiting contact with enemy subjects and that physical and legal barriers might prevent the defendant from preparing its defense. Because those changed facts could make dismissal unjust, the Court set aside the dismissal and sent the case back to the trial court. It directed that only steps needed to preserve the parties’ security and rights be taken, and that no further action occur until peace is restored or the defendant can adequately defend.

Real world impact

The ruling lets foreign merchants seek relief in U.S. courts despite earlier neutrality rules, but it protects defendants who cannot meet their defense needs during war. The decision is procedural, not a final ruling on who owes what, and preserves existing security while the case waits to proceed.