Marks v. Marx -- capitalists sue USSR in test of debt default

There is a certain ring of poetic justice to this story. A brokerage house, an espouser of capitalism, has brought a class-action suit against the Soviet Union for its repudiation of $75 million of debts incurred by the czarist leaders before the Bolshevik Revolution.

The brokerage house is Carl Marks & Co. It is suing a sovereign government that takes a good portion of its ideology from Karl Marx - famous for writing ''Das Kapital,'' the treatise which among other things predicted the demise of the capitalistic system.

Beneath the obvious irony lies a story about a lawsuit that has some bearing on today's debt-ridden world. Edward M. Sills, the lawyer pressing the case for Carl Marks, declares, ''We are intent on proving that every successor government is responsible for the obligations of its predecessor.''

Mr. Sills notes that with debt problems accumulating in Latin America as well as the communist-bloc countries, this lawsuit is not without some meaning to other countries with private debt outstanding which might be considering similar repudiation of debt. Within the next 45 days Sills expects to be in Federal District Court here taking on the Soviet Union.

This story begins in 1914 with the outbreak of World War I. Kaiser Wilhelm II of Germany opened hostilities against Czar Nicholas II, his second cousin and ruler of Imperial Russia. Nicholas, eventually in need of funds, found New York bankers willing to lend him some of the money he needed.

The bankers, led by J. P. Morgan & Co. and National City Bank, the forerunner to Citibank, provided the money in the form of two syndicated loans. The first loan was for $25 million, due in 1921, with interest payable at 51/2 percent. The second was for $50 million, payable at 61/2 percent. In both cases, the interest and principal were payable in US gold coins, since the United States was still on the gold standard. (Marks & Co. figures the whole thing is worth $ 618,750,000 today, based on past interest due, interest due on interest, and the current value of the gold coins.)

Within a year of the underwriting, the winds of revolution had whipped through Russia and the czar was out. The new government repudiated the debt.

Despite the action, bond traders such as Marks continued to buy and sell the securities. Daniel M. Collier Jr., a vice-president of Marks, recalls that the bonds would rise when detente was in the air and fall when the cold war got colder.

Marks & Co., along with other bondholders, has steadfastly asked the US State Department to help it get its money. Edwin S. Marks, the president, says that ''while the State Department took the position that repudiation of these obligations did give rise to claims under international law, it persistently declined to prosecute them for American citizens.'' The Soviets, for their part, in what is known as the Litvinov agreement, agreed to settle all claims against the US in 1933 when the US recognized the Soviet government.

Then, in 1976, the US Congress passed the Foreign Sovereign Immunities Act, which permitted US citizens to sue foreign governments in US courts when it concerned certain commercial transactions.

So this year the Marks & Co. brought the class-action suit on behalf of the 3 ,000 current bondholders. The Soviets themselves, replying through the State Department, have told the holders ''nyet.'' Rejecting the court documents, they assert that the Soviet Union, as a sovereign nation, is immune, and that the claims had been settled under the Litvinov agreement. Mr. Sills, however, disagrees.

One Soviet expert in New York says the Soviets would be philosophically opposed to paying the interest part of the debt, since they have considered interest to be a tool to ''exploit'' the workers.

Most likely, Carl Marks will find itself in court alone. The Soviets are not expected to be represented.

If the judge finds the suit is a valid class action, notice will be posted so any and all bondholders can participate. Then, the judge will hear the case and bondholders will ask him to enter a judgment. If the bondholders present a convincing enough case, the judge may grant them such a judgment.

There is the problem of enforcing any ruling, however. Most Soviet property in the US is owned by the Soviet embassy, which is immune from actions such as seizure of property. ''I don't know how we will enforce these judgments,'' Mr. Sills says, adding, ''It's open to resolution. Maybe the diplomatic arm will step back in.''

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