author: LARAMORE, Senior Judge:

text:
    COMPAGNIE FINANCIERE de SUEZ et de L’UNION PARISIENNE v. The UNITED STATES.
    No. 411-67.
    United States Court of Claims.
    Feb. 20, 1974.
    D. Nelson Adams, New York City, attorney of record, for plaintiff, Davis Polk & Wardwell, and George A. Bermann, New York City, of counsel.
    Joseph Kovner, Washington, D. C., with whom was Asst. Atty. Gen., Scott P. Crampton, for defendant.
    Before LARAMORE and DURFEE, Senior Judges, and NICHOLS, Judge.
   OPINION

LARAMORE, Senior Judge:

Plaintiff brought this suit for $420,-491, plus interest, on two claims for refund which the government denied. The tax in question covers the period 1952 through 1956. Compagnie Financiere de Suez et de L’Union Farisienne (hereinafter referred to as “Suez” or “the Company”), built and operated the Suez Canal until it was nationalized on July 26,1956.

Suez entered into a trust agreement with J. P. Morgan & Co., Inc., of New York, on January 17, 1949, creating a revocable trust pursuant to which Suez designated J. P. Morgan & Co., Inc. as the trustee of a trust fund for the purpose of enabling Suez to fund or otherwise secure its pension obligations. Current trust income, exclusive of capital gains, was to be paid over to Suez as of December 1 each year. The trustee was also designated as the withholding agent for withholding at the source on interest and dividends in accordance with sections 1441 and 1442 of Title 26, U.S. Code. Suez, at the time the trust was created, and on all the tax returns filed on its behalf, identified itself as an Egyptian corporation. Suez also directly received dividend and interest income upon which withholding at the source tax was also paid at the rate of 30 percent. Plaintiff at no time during the years 1952 through 1956 had a permanent establishment in the United States.

The Company filed refund claims on January 14,1959 for both the amounts withheld in the trust and investments withheld directly. The basis of the claim was that Suez was a French corporation for the purposes of Article 6A of the Income Tax Convention between the United States and France, signed on July 25, 1939 and October 18, 1946, as modified and supplemented by the Supplementary Convention signed June 22,1956. Article 6A was a product of the 1956 Convention made retroactive to January 1, 1952, and it reads as follows:

Dividends and interest derived, on or after January 1, 1952, from sources within one of the contracting states by a resident or corporation or other entity of the other state, not having a permanent establishment in the former state, shall be subject to tax by such former state at a rate not in excess of 15 percent of the gross amount of such dividends or interest. Such reduced rate of tax shall not apply tp dividends or interest paid prior to the calendar year in which are exchanged the instruments of ratification of the present Convention if, for the taxable year in which such dividends or interest is received, penalty for fraud with respect to the taxes which are the subject of the present Convention has been imposed against the recipient of such dividends or interest.

The government disallowed the claims because it considered the Company to be Egyptian for the period 1952 through 1956 and, therefore, not eligible for the preferential 15 percent withholding rate under Article 6A of the Income Tax Convention between the United States and France.

The necessary facts are stated in the court’s opinion based on the stipulation of facts agreed upon by the parties. There is no issue of fact in this case.

One must delve into the Company’s history to appreciate the litigants’ arguments. The Company’s promoter and founder, a Frenchman named Ferdinand de Lesseps, was granted the First Concession by the Turkish Viceroy of Egypt on November 30, 1854. This first order recognized de Lesseps’ revolutionary idea of cutting a canal through the Isthmus of Suez. It granted de Lesseps the authority to establish a company to construct and operate the canal. The Act provided in general terms that the manager of the company was to be appointed by the Egyptian Government and that its articles of incorporation and any amendments thereto were to be approved by the Viceroy. On January 5, 1856, the Second Concessionary Act was issued to provide more detailed information and documentation. It enumerated the details of construction and operation of the canal under a 99-year concession and had the articles of incorporation appended to it. Significant provisions of the act bearing on the Company’s origin included the Viceroy’s appointment of de Lesseps as the chief executive officer of the Company for a period of 10 years, approval of the appended articles of incorporation and other indications of bestowing sovereign grace upon the corporation to be, such as limiting the length of its existence.

Subject to the foregoing, the articles of incorporation established every feature of the Company as a corporate entity. Article 1 declared the corporation to be formed and named it the Universal Company of the Suez Maritime Canal. Article 2 announced the corporate purpose to be the construction and operation of the Suez Canal. Article 3 declared that the Company’s head office would be at Alexandria and its administrative domicile in Paris. Article 4 set the commencement as of the date a notarial sworn affidavit is signed, showing that all shares have been subscribed to. Other provisions dealt with the capital structure, issuance, registration, record ownership, stock transfers, directors and officers, their number, election, duties and powers, an executive committee, stockholders’ meetings and dissolution. Two provisions refer directly to the sovereign authority of the Egyptian Government in creating this corporation and in granting special administrative and jurisdictional privileges based on its international character. They are:

Article 71
If practical experience points to the usefulness of making amendments for additions to these articles of incorporation, the general meeting shall provide such amendments, in the form determined in article fifty-seven.
The resolution of the meeting in this respect however can be executed only after the approval of the Egyptian Government.
All powers are given in advance to the board of directors, when deliberating on the basis of a two-thirds majority of the votes of members present, during a special meeting held for this purpose, so as to make possible the changes which the Egyptian Government may consider necessary in the amendments voted by the general meeting,

and

Article 73
Since the company is established, with the approval of the Egyptian Government, as a corporation, similar to the corporations authorized by the French Government, it is governed by the principles applicable to these latter companies.
Although the company head office is at Alexandria, the company picks as its legal domicile and for purposes of jurisdiction, its administrative domicile in Paris, where ail writs must be' served upon it.

Article 76 then provided for a special commissioner of the Egyptian Government to remain in permanent residence at the administrative domicile of the Company in Paris. The articles of incorporation closed with the following:

We, Mohammed Said Pasha, ViceRoy of Egypt.
After having taken cognizance of the draft of the articles of incorporation of the Universal Company of the Suez Maritime Canal and connected facilities, which was submitted to us by Mr. Ferdinand de Lesseps, whose original, containing seventy-eight articles, remains filed in our archives.
Hereby declare that we give these articles of incorporation our approval, so that they may be annexed to our firman concerning the concession and the articles and conditions, as of this day.
Done at Alexandria, on five January eighteen hundred and fifty-six.
O Seal of His Highness the Vice-Roy.

The capital stock was subsequently subscribed to on an international basis with French investors and the Egyptian Government absorbing the majority.

In accordance with Article 4 of the Articles of Incorporation, on December 2,1858, de Lesseps, as founding president of the Company, filed with a notary public, Maitre Mocquard, a sworn affidavit, appending certified translations of the Turkish originals of the First and Second Concessionary Acts, the Articles of Incorporation, a decree relative to the employment of Egyptian workers, all duly stamped and “legalized in Paris by the Counsellor of the Consulate-General of Turkey and by the office chiefs of the Chancellery of the Ministry of Foreign Affairs.” This was followed by a second affidavit of December 15, 1858, filing with Maitre Mocquard a list of the subscribers to all of the capital stock of the company and de Lesseps’ designation of the board of directors and of the executive committee of the company.

Following these measures the corporation’s executive committee was uncertain regarding its legal status in France as is evidenced by the following records:

M. St. Elme advised that the secretary-general of the bank has asked before opening an account for the Company, that the documents relating to its constitution and especially the Articles of Incorporation be submitted to him.
A member stated that before submitting the Articles of Incorporation for examination, it would be good to determine certain questions, especially the situation of the Company in France, from a legal point of view. The Suez Canal Company is a foreign corporation which is not in any way subject to the formalities to which French corporations are subjected since its seat is in Alexandria. But the provision of the Articles of Incorporation which establish in Paris the legal domicile and attributes of jurisdiction, are they not of a nature which alters this situation and do they not expose the Company to the necessity of obtaining the authorization of the French Government and of complying with certain formalities such as, for example, the publication of the corporate deed. That is a question to be examined. This committee shares this opinion. It was decided that the legal advisory committee would be convoked the next December 24 and that its advice would be sought and that its advice be acted upon.

The legal advisory committee of the Company reported that the French Emperor, Napoleon III, had issued a decree on May 7, 1857, which permitted foreign corporations that had submitted to the authorization of the Belgian Government, to exercise their rights in France. Article 2 thereof also provided that “[a]n imperial decree, rendered in council of state, may apply the benefits of article 1 to all other countries.” The Company lawyers recommended that a similar decree should be sought for the benefit of the Company authorizing Egyptian corporations to do business in France.

The corporation then solicited an imperial decree from Napoleon III to enable it to exercise its rights in France. In the course of the solicitation the Company enumerated the previously stated facts concerning its creation and held itself out as an Egyptian corporation seeking to do business in France. The decree authorizing Egyptian corporations to do business in France was issued on May 7, 1859. It closed with the following provisions :

Have hereby decreed and do decree the following:
Article 1. Corporations and other commercial, industrial, or financial associations which, in Turkey and Egypt, are subject to the authorization of the government and which have obtained it, may exercise all of their rights and may sue in civil actions in France, complying with the laws of the Empire.
Article 2. Our minister-secretary of state in the department of agriculture, commerce, and public works is charged with the execution of this decree which shall be published in the Bulletin des Lois and shall be printed in the Moni-teur.
Done in the Palace of the Tuileries, on 7 May 1859.
Napoleon.
By the Emperor:
The minister-secretary of state in the department of agriculture, commerce and public works.
Signed: E. Rouher.

The Executive Committee, still uneasy about its nationality and overall legal status, decided ■ to address a series of questions regarding the problem to its own Legal Advisory Board and independent members of the French Bar. On the major question in issue both groups came to a similar result which is stated best in the Company’s Legal Advisory Board conclusion as follows:

IN THE FORM, this is an Egyptian commercial corporation thereby subjected to the conditions of natural law only and to the high supervision of the Viceroy. In this dual connection, it is beyond any reproach, and as to the situation it has in France, it is very clearly defined by the Imperial Decree of May 7, 1859, mentioned in the advisory memorandum, and which is all the more applicable to it since it has obviously been issued for it.

The Sultan’s final approval of the canal concession was embodied in a decree of March 19, 1866. The decree’s two provisions, one establishing nationality and jurisdiction for various judicial purposes and the other reaffirming all preceding agreements, relevant to the matter in dispute are as follows:

Article 16
Since the Universal Company of the Suez Maritime Canal is Egyptian, it is governed by the laws and customs of the country; however, as regards its constitution as a company and the relationships of the associates among each other, it is, by special convention, governed by the laws which apply in France with respect to corporations. It is agreed that all disputes arising under this heading shall be judged in France by arbitrators with appeal, with arbitrator at the Imperial Court of Paris.
Differences, in Egypt, between the company and private individuals of whatever nationality, shall be judged by the local courts according to the manner spelled out by the laws and customs of the country and the treaties.
Disputes which might arise between the Egyptian Government and the company shall likewise be subjected to the local courts and shall be resolved according to the laws of the country.
The supervisors, workers, and other persons belonging to the company administration shall be judged by the local courts according to local laws and treaties for all crimes and disputes in which one of the parties is indigenous.
If all parties are foreign, they shall proceed among themselves in accordance with the established rules.
Any serving of writs upon the company, by any interested party in Egypt, shall be validly done at the administrative headquarters in Alexandria.
Article 17
All prior acts, concessions, conventions, or articles of incorporation are maintained in all of their provisions that do not conflict with this convention.

Preliminary construction work had begun prior to the Sultan’s final approval. After March 19, 1866, the work proceeded rapidly to completion and the Suez Canal was opened to navigation on November 17, 1869. See Hallberg, The Suez Canal (1931), c. XIII, pp. 212-214. The Suez Canal was operated by the Suez Canal Company from that date until July 26, 1956, when the Egyptian Government nationalized the Canal.

During the corporation’s operating history, all major administrative functions (i. e., executive, administrative, treasury, accounting offices and all meetings of the shareholders, directors, and executive committee) were performed through its general administrative. office in Paris. All the Company’s officers and all the Company’s resident agents in Egypt, with one exception, have been French citizens. The Company’s securities were registered on the French Stock Exchange among those issued by French companies. For purposes of handling its securities the Company was subject to French jurisdiction while for tax purposes the securities were treated as foreign. The Company entered into agreements with the French Bureau of Income Taxation to provide for withholding at the source of the tax on its securities registered on the French Stock Exchange.

The Company held itself out to investors as an Egyptian corporation. The 1932 brochure of the Company describing its securities to investors, which remained in circulation until 1953, stated the following:

The Suez Canal Company is an Egyptian stock corporation authorized by Acts of the Egyptian Government of November 30, 1854 and January 5, 1856, confirmed by the firman of the Sultan of March 19, 1866. Under the terms of Article 73 of its Statutes, “the Company, having been formed with the approval of the Egyptian Government as a limited liability Company, by analogy with limited liability companies (Societes anonymes) authorized by the French Government, is governed by the principles that apply to the latter companies” (Commercial Code, Articles 29 et seq.).
Its head office is in Egypt and its administrative domicile is at 1 Rue d’Astorg, Paris VIII.

The Company’s relations with the Egyptian Government were often regulated by special agreements (or conventions) between the Egyptian Government and the Suez Canal Company rather than by the laws of general application to Egyptian corporations. In the course of negotiating one such special agreement of March 7, 1949, the Company’s president, M. Charles Roux, made the following representation to the Egyptian Government:

The Company has never disputed being an Egyptian company. And it is most certainly not doing so now, any more than it ever has. The only inference it has drawn from being “universal" has been that it is deserving of special agreements with the Government, which the Egyptian Government, for its part, has never refused to enter into with it.
* * * * * *
The Universal Company of the Suez Maritime Canal is an Egyptian company, but quite an exceptional one, warranting special agreements.

The above statement in substance was repeated in the 1949 Annual Report of the president of the Company.

On April 12, 1955, the Company filed a French tax return for the year 1955 with the Department of the Seine, Paris, in which it described itself as an Egyptian civil corporation. In this return, referring to a- statement made in 1951, the Company claimed exemption from any French income or turnover tax because it did not conduct any business in France.

On July 26, 1956, the Egyptian Government promulgated a law for the na-tionlization of the Company and all its properties. This action created an international crisis.

In November, 1956, French, in concert with England, sent a military force into Egypt to occupy the Canal Zone. Anglo-French troops were landed at Port Said under cover of a naval and aerial bombardment and the Egyptian garrison surrendered. Port Fuad was also seized by the Anglo-French forces. In response to international pressures, a cease-fire was called and the Anglo-French forces were withdrawn from Egypt in December, 1956.

The Egyptian Government brought a test suit in the Swiss Court at Basel, Switzerland, to recover the Company assets in that country. The French National Assembly, in support of French stockholders and management of the Company, enacted a law declaring that the Company survived the nationalization of its Egyptian properties, as a corporation governed by French law.

At the stockholders’ meeting of June 25, 1957, the directors, faced with the impending dissolution of the Company upon the loss of the Canal concession, proposed (in accordance with Article 72) the reconstitution of a new company, not subject to the authority of the Egyptian Government, and, unlike its predecessor, with registration as a French corporation, with its head office in France. This was subsequently accomplished.

In its French tax return for 1956, filed March 25, 1957, the Company described itself as a civil corporation operating a canal in Egypt.

On November 15, 1957, the Tax Department of the Seine advised the Company that it was constituted in the form of a French corporation, and because its business had been carried on outside France, it was not subject to tax on the income from investments in other countries, closely related to its Egyptian activity. The Company has paid no French income tax for 1956 and prior years.

The convention and protocol of which Article 6A is a part does not provide the guidance necessary for settling this issue. It neither provides counsel for determining a corporation’s domicile or origin for the purpose of applying the treaty, nor does it provide a guide for determining where the corporation was created or organized. Article III of the Protocol, signed July 25, 1939, does not define a French corporation. Article 111(e) states:

The term “French enterprise” is defined in the same manner, mutatis mutandis, as the term “United States enterprise.”
Article 111(d) states:
The term “United States enterprise” means an enterprise carried on in the United States of America by a resident of the United States of America or by a United States corporation or other entity.

Treasury Regulation, section 514.104 (3) states:

The term “French enterprise” means an enterprise carried on in France by a nonresident alien individual resident of France or by a French corporation or other French entity. The term “corporation or other entity” means a partnership, corporation, or other entity created or organized in France or under the laws of France. For example, an enterprise carried on wholly outside France by a French corporation is not a French enterprise within the meaning of the convention. Whether a French entity is a corporation * * * is to be determined in accordance with principles of existing law relating to the taxation of nonresident aliens and foreign corporations.

The corporate characteristics are set forth in Treasury Regulations on Procedure and Administration (1954 Code) (26 C.F.R.), section 301.7701-2(a)(1) as:

(i) Associates, (ii) an objective to carry on business and divide the gains therefrom, (iii) continuity of life, (iv) centralization of management, (v) liability for corporate debts limited to corporate property, and (vi) free transferability of interests.

The Suez Canal Company was undoubtedly such a corporation.

The remaining question is whether the Company was a “French” corporation for the purpose of Article 6A. The plaintiff contends that based on the facts the corporation, from its inception, was created and organized in France to qualify it for the treaty benefits of Article 6A. In addition, the plaintiff asserts it is a French corporation according to the French rule for determining domicile based on the location of its administrative head office in Paris.

As per the stipulation, both parties acknowledged that steps were never taken to either qualify the Company as an Egyptian corporation under Articles 28, 32 and 34 of the Code of Commerce of the Ottoman Empire or to comply with the requirements of the French Code of Commerce for the organization of commercial corporations. The Company considered these provisions inapplicable to it. The record indicates that at all times the Company was accorded a unique status.

A distinction must be made between being deemed to be a French corporation for a particular purpose primarily of interest to France and being a French corporation in fact from the Company’s inception or due to the nature of its creation. The latter question, which sovereign power clearly exercised its authority to recognize the Company as a corporation, from its inception, is a question only of interest to the United States, and it is answerable on a factual determination.

“Unlike an individual, a corporation has a state of incorporation.” In the important aspect that sovereign power is indicative of granting the authority for the corporation’s existence, that recognition was Egyptian. The First Concessionary Act evidenced Egypt’s sovereign permission to form a company for the designated purpose of building and operating a canal. The Second Concessionary Act demonstrated Egypt’s grant of sovereign authority for the Company’s creation by providing for its duration and termination. Egypt again demonstrated its sovereign power over the Company by taking the liberty to appoint its first Chief Executive Officer, Mr. Ferdinand de Lesseps, for a period of 10 years. The Viceroy representing the Egyptian Government was the only sovereign to approve the articles of incorporation. The approval of the articles of incorporation gave the Company the legal right to constitute itself and conduct business in the form of a corporation upon the date to which its stock was entirely subscribed.

The officially sanctioned articles contained the essentials for establishing a corporation. It also contained further indicia of Egypt's sovereign power to affect the Company’s legal relations. Article 71 clearly indicates Egyptian nationality of the Company by reserving to Egypt the final power for making amendments or additions to the corporate articles operative. Nowhere in the well-documented history of this Company is there a broad sovereign power of this kind reserved to the French government. Article 73 demonstrates Egypt’s dominant sovereign power over the Company, because while it unequivocally establishes the corporation’s nationality as Egyptian it permits the Company the privilege of following French law regarding shareholders’ interests inter se. This concession to French law cannot be construed as tantamount to making the Company French for every legal purpose when, in fact, French sovereignty was not responsible for granting the initial authority for the corporation’s existence.

Article 73 also established the Company’s head office in Alexandria, Egypt, but recognized Paris as the administrative and legal domicile for the purpose of jurisdiction. There is much dispute whether either site is clearly indicative of the Company’s domicile for the purpose of determining nationality.

One of the plaintiff’s major points, supported by a recitation of facts concerning the administrative functions, was that the Company’s real domicile (siége social reél) was its administrative office in Paris, and under French law that is sufficient to give it French nationality for all purposes. The countervailing fact is that the Company had its designated head office (siége social) in Egypt, its primary place of business and its basic source of income.

The literature does not support the plaintiff’s unequivocal contention. The French interpretation of domicile for purpose of determining nationality depends upon the interests involved. The ultimate policy determination appears to rest on whether the French Court is being called upon to protect the interests of creditors and shareholders who are predominantly French. In pursuing this policy, the head-office test is a useful general rule but is not rigorously applied, particularly where it would lead to an undesirable result for French interests. There are no general French statutory provisions defining “nationality” in the case of corporations.

The plaintiff attempts to write the Egyptian designated head office (siége social) into a fictitious and nominal position incongruent with the facts. The acknowledging sovereignty of Egypt obviously required the head office designation as a condition for recognition and existence. The Egyptian head office was far from nominal in character because at a minimum it was responsible for the daily operation of the Canal. The designated head office (siége social) was located in the territory where the enterprise carried on its primary profit-making functions. Egypt required the Company’s management to keep a minimum of one representative at this “designated” head office at all times. It should also be repeated here that the French case law does not put unequivocal weight on the location of an administrative head office when it may be adverse to the French interest at stake. Based on these considerations we do not find the plaintiff’s argument persuasive.

The plaintiff also misinterprets the Notarial Acts of December 12, 1858 and December 15, 1858 as incorporating the Company in France. Neither of the two French Notarial Acts bestowed a major right or privilege on the Company that would be indicative of the sovereign power to approve or ratify the corporation’s existence. In the chronology of events these acts involved nothing more than de Lesseps’ execution of Article 4 of the Articles of Incorporation, which provided :

The existence of the Company shall date from the day of the execution of the corporation deed showing the subscription of all of the shares. Its duration shall be equal to the duration of the concession.

The plaintiff, with its expert, claims French law of the period required only that contractual expression of intention by the incorporators and subscription to all of the Company’s shares was needed to form a corporation. These elements were encompassed by the Notarial Acts. The weakness of this contention is that it runs contrary to the record. Plaintiff’s expert failed to consider the Imperial Decree of May 7, 1859, which recognized the Company for the purpose of exercising its rights in France, but it certainly did not recognize or approve the corporation’s creation. The plaintiff’s contention also ignores the opinion of its own Legal Advisory Board and that of the independent members of the French Bar. The defendant’s expert also points out that the plaintiff’s expert based a portion of his interpretation on an erroneous statement of law. The court also notes that the plaintiff’s legal expert equates the Company’s having its administrative organization in Paris with being created or organized in France. Having one’s corporate administrative offices in a given place is very different from being created or organized in that place. The latter involves the sovereign’s scrutiny and eventual approval of the rules by which the corporation will function. A plain reading of the facts say this was not done by France.

On occasions when the Company had doubts about its nationality, subsequent to the Notarial Acts, it was resolved both by the Company, and by outsiders, to be an Egyptian corporation. From the time the Company began soliciting the Imperial Decree of May 7, 1859 through the tax years in question, it held itself out as an Egyptian corporation and derived benefits in the nature of special conventions by so doing.

The Sultan’s final approval reaffirms the fact that the Company was incorporated in Egypt with jurisdictional rules for settling disputes compatible with what the parties considered their special international situation. It is also interesting to note that concerning at least one issue involving an internal dispute regarding the form in which dividends would be paid, the Company submitted itself to the jurisdiction of the Egyptian Mixed Courts.

The Articles of Incorporation is the contract between the State and the Company, between the Company and the shareholders and between the shareholders among themselves. The facts show that France did not grant or exercise the sovereign powers by which the Suez Canal Company functioned under this contract. The Company recognized the sovereign grace that gave it life by consistently holding itself out as an Egyptian corporation. France, at the most, acquiesced in the Company’s granted powers by allowing the Company to administer its business from within French territory. The facts do not show that France, through its sovereign authority, plainly granted the Company the powers under which it functioned. Without further belaboring the point the Company was, in fact, created or organized in Egypt and is, therefore, an Egyptian corporation for the purpose in issue.

Complementing the above finding based on the facts, Treasury Regulation, section 514.104(3), supra, also precludes the Company from availing itself of Article 6A of the Convention. The Regulation stated in part, as an illustration:

* * * an enterprise carried on wholly outside France by a French corporation is not a French enterprise within the meaning of the convention.

The basic nature and purpose of the enterprise in question was to operate an international waterway through Egyptian territory for profit. Egypt was the primary source of the corporation’s income. The administrative functions conducted in Paris were merely an adjunct to the basic profit-making enterprise carried on in Egypt, wholly outside France. The purpose of the Regulation example is interpreted as identifying and closing a potential “loophole”. It was intended to prevent corporations that were incorporated in France and conducted all their profit-making business outside of France, so as to be free of French taxation, from claiming tax benefits of treaties to which France was a signatory. The point is that during the years 1952 through 1956 France continued to assess tax on the jurisdictional basis of the income source. Only income from what was considered domestic sources was taxed. The result of this “source-jurisdiction” rule was that the country of residence did not assert jurisdiction to tax income from foreign sources. This freed the plaintiff’s income from French taxation and would also free it from United States taxation if the Convention could be invoked. Treasury Regulations, section 514.104 (3), supra, was an effort to prevent this result. Therefore, even if the corporation was created or organized in France or under the laws of France, which the facts show it was not, the Company would not qualify as a corporation for purposes of the Convention.

Ultimately this case also turns on the intent and purpose of the Convention as agreed upon by the signatories. The purpose and intention of the Tax Convention between the United States and France was to avoid double taxation and to alleviate the problems arising from it. The parties to a bilateral agreement are primarily concerned with removing an obstacle to the flow of trade and investment between their two countries.

Double taxation arises when the jurisdiction of the tax authority where income arises overlaps the jurisdiction of the tax authority where the taxpayer resides. The agreement attempts to avoid double taxation between the signatories through adjusting their respective tax jurisdictions either by one party reducing the tax on certain types of income or completely surrendering the right to tax it. The country of residence will mitigate its claim based on the tax paid to the source country where the first method is not practicable.

The fact is that during the years in question plaintiff did not have a “fiscal domicile” or “residence” in France for French income tax purposes. Prior to 1957 the Company had always been free of French taxation. When it was subjected to French taxation, as when its securities were taxed, the Company was treated as a foreign corporation with respect to France. It is also interesting to note that subsequent to the French Legislative Act of June 1, 1957, the corporation was held not to be taxable in France on income connected with operation of the Canal. The United States sourced taxable income in issue arose from an activity closely connected with operation of the Canal, funding its pension obligations. The Company was not at any time during the years in question actually subject to, or subjected to, tax in France.

The fact that the Company is motivated in its actions by the desire to minimize its tax burden can in no way be taken to deprive it of a benefit to which it is clearly entitled by an applicable treaty. Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935); Johansson v. United States, 336 F.2d 809 (5 Cir., 1964). In determining the applicability of the treaty, we recognize the necessity for liberal construction. Jordan v. Tashiro, 278 U.S. 123, 49 S.Ct. 47, 73 L.Ed. 214 (1928). However, at the core of this issue we are not dealing with a problem of construction but with the intent and purpose of the treaty. A treaty, being a pact between two sovereigns, must be construed broadly to accomplish the intent of the contracting parties. American Trust Co. v. Smyth, 247 F.2d 149 (9 Cir., 1957). “To say that we should give a broad and efficacious scope to a treaty does not mean that we must sweep within the Convention what are legally and traditionally recognized to be * * * taxpayers not clearly within its protections; * * Maximov v. United States, 373 U.S. 49, 56, 83 S.Ct. 1054, 1058, 10 L.Ed.2d 184 (1963).

As stated in Maximov, supra, “[i]t appears from the relevant materials instructive as to the intent of the parties to the Convention that the general purpose of the treaty was * * * to facilitate commercial exchange through elimination of double taxation resulting from both countries levying on the same transaction or profit; an additional purpose was the prevention of fiscal evasion.” Maximov, supra, at 54, 83 S.Ct. at 1057.

The fact is that the plaintiff is not confronted with a problem of double or burdensome taxation that the treaty was designed to alleviate or eliminate. There is no double tax on the income of the plaintiff since it is not taxed in France. There is no obstacle to trade or commercial intercourse in the context of this ease, and considerations of fiscal evasion are not involved. “We cannot * * * read the treaty to accord unintended benefits inconsistent with its words and not compellingly indicated by its implications.” Maximov, supra at 55, 83 S.Ct. at 1057. “Our interpretation affords every benefit negotiated for by the parties to the Convention on behalf of their respective residents and prevents an unintended tax windfall to a private party.” Maximov, supra at 56, 83 S.Ct. at 1058.

The plaintiff claims, based on the treaty, that an adverse decision would violate the rule of comity. This is not so because the only tax authority involved is that of the United States. If the United States surrendered its authority in accordance with the plaintiff’s claim, it would gain nothing for which it negotiated under the treaty. Also, France has no interest in this matter because its authority to tax is not involved. France disclaimed its right to .tax the income in dispute. United States’ interests and benefits are the only ones involved relative to the Convention, therefore a result unacceptable to the plaintiff, either based on the Convention or indirectly structured through an unfavorable choice of law, in no way violates the principles of comity. The decision merely protects the principle of the Convention, avoidance of double taxation.

In consideration of the above-stated reasons we hold' the plaintiff is not entitled to recover, and the petition is dismissed.

CONCLUSION OF LAW

Upon the foregoing opinion, which contains the essential findings of fact as stipulated by the parties, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is dismissed.

      . The name stated is that of the successor to the original company, “Compagnie Universelle du Canal Maritime de Suez.”

      . “Article 20

      “Regardless of the time necessary for the execution of the work, our friend and authorized agent, Mr. Ferdinand de Lesseps shall preside over and direct the company as the first founder for a period of ten years starting on the day of commencement of the period of utilization of the concession, which is ninety-nine years, under the provisions of article sixteen, above.”

      . "Article 21

      “The attached articles of incorporation of the company, created under the name of: Universal Company of the Suez Maritime Canal, are hereby approved, and this approval serves as authorization for constitution, in the form of corporations, as of the date the Company shall be entirely subscribed to.”

      . “Article 16

      “The duration of the company is fixed at ninety-nine years, as of the completion of the work and of the opening of the maritime canal for ocean-going navigation.
      “At the expiration of this period of time, the Egyptian Government shall regain possession of the maritime canal built by the company, under its responsibility, [and shall] in this case take over all of the equipment and supplies used for the maritime operation of the enterprise and shall pay to the company the value as it may be fixed either upon friendly agreement or upon the statement of experts.”

      . Whiteman, Digest of International Law, vol. 3, p. 1097 (1964).

      . The French National Assembly enacted Law No. 57-658 of June 1, 1957, J.O. 5571 [1957], relating to the legal status of the Suez Canal Company and providing:
      “The Compagnie Universelle du Canal Maritime de Suez, governed, as regards its establishment as a corporation and the relations of its shareholders with each other, by the provisions of French law, remains subject to said provisions and to its Articles and By-Laws, in particular in all matters which concern its corporate existence, its corporate bodies and its corporate assets, without being able to be affected by the provisions of any foreign law.
      “Provisions of the Company’s Articles and By-Laws which subject to the approval of the Egyptian government the implementation of resolutions of the General Shareholders’ Meeting passed with the purpose of effecting amendments of or additions to said Articles and By-Laws are hereby declared null and void and shall be considered as invalid and cancelled.”

      . “Article 72. In case of dissolution of the company, the general meeting shall upon proposal of the board of directors, determine the manner to be adopted either for liquidation or for the reconstitution of a new company.”

      . Treas.Reg. § 514.104 (1954) was formerly numbered section 7.413. The Regulation was renumbered on January 1, 1961, at 25 Fed. Reg. 14021.

      . Restatement (Second) of Conflicts of Laws, section 11(1), (as adopted and promulgated by the American Law Institute, May 23, 1969.)

      . Id. Conflicts of Laws 2d., § 299(1) “Whether the existence of a corporation has been terminated or suspended is determined by the local law of the state of incorporation.”

      . Supra, n. 2.

      . The Viceroy of Egypt was ultimately subject to the political control and sovereignty of the Ottoman Sultan.

      . Supra, n. 3.

      . The designated head office was eventually moved, with the approval of the Egyptian Government, to Cairo.

      . “The criterion which has been unanimously accepted by the French Courts for the determination of the nationality of corporations, and which is considered at present, with the exception of the decisions based on wartime legislation, as the decisive one, is that of the domicile of the corporation. It is important here to define what is meant by ‘domicile’ of a corporation. The domicile of a corporation, under Article 1002 of the Civil Code, is considered to be located at its principal place of business. The principal place of business is not necessarily located where it is designated by the Act of Incorporation. This designation may be fictitious. A corporation is held to have the nationality of the place where its Head Office or principal place of business is really situated. Where this principal place of business actually is, becomes a question of fact to be gathered from the circumstances of the case, and in which are to be taken into consideration, as elements of proof, the designation in the Act of Incorporation and Bylaws of the corporation, of such place where the general management of the corporation is situated, where the General Meetings of Stockholders are held, where the books are kept, the inventories made, where the main organism of the corporation is operated, or, in other words, the place from which the operations of the corporation are directed.” G. Loeb, Legal Status of American Corporations in France, Lecram Press (1921), Paris, pp. 30-31.
      * * * * *
      “A company has the nationality of the country where it has its legal domicile (siége social), whether or not its principal jplace of business is located there. The domicile, of course, cannot be a mere front; thus a company cannot have its offices and accounting departments in France and hold its directors’ and stockholders’ meetings there, while escaping the requirements of French law by claiming to have its domicile in a foreign country. The courts may freely judge whether or not the declared domicile can, in fact, qualify as the legal domicile.” E. Church, Business Associations under French Law, Fallon Law Book Co. (1960), § 439.

      . Note, 74 Harv.L.Rev. 1429 (1961), The “Nationality” of International Corporations Under Civil Law and Treaty.

      . The two following cases are illustrative of this point: Bouvet v. Societe Anonyme Francaise des Mines de fer, cour d’appel e’Angers, June 23, 1913, 2 Gazette du Palais 113. The corporate charter specified London, England as the head office where the directors met. Industrial operations were at the place of incorporation entirely within France; the majority of shareholders and directors were French. Based on significant contacts the court said the corporation was French, declared it a nullity because it failed to incorporate in France, thus allowing the French investors and creditors to pursue the personal liability of the directors and promoters. So-ciete W. Canadian Collieries v. Vanberts, Tribunal civil de Lille, May 21, 1908, [1910] D. II 41. Company incorporated in London, England, where it held its shareholders’ meetings, operated mines in Canada, maintained central administrative offices in France where its directors (French majority) met and from which the corporate business activities were conducted. The court held London was a reasonable place for a designated head office, giving judicial recognition to the claimed English “nationality” and thus thwarted a shareholder action to have the corporation nullified.

      . Cousin-Devos v. Societe Auxiliaire de Transports, Tribunal de Commerce de Perpig-nan, December 23, 1913, 64 J.Trib.Comm. 672 (1915), 44 Olunet 1066 (1917). The court acknowledged and thpn ignored the corporation’s foreign nationality in order to protect creditors.

      . Supra, n. 16.

      . Supra, n. 16.

      . “A large number of governmental decrees and bilateral international treaties have granted to companies legally formed in their own country authorisation to do business in France. Such companies remain subject to the legislation of their own country in matters of their formation, their conduct and their dissolution. Their by-laws are valid, so long as they do not violate any rule of public policy (regie d’ordre public).
      * * * * *
      “Although, in general, foreign companies are subject to foreign legislation, certain matters are regulated by French law; this is usually the case where the interests of third parties require protection.” E. Church, Business Associations Under French Law, Fallon Law Book Co. (1960), § 439.

      . Plaintiff’s expert stated that the Suez Canal Company was a civil company organized under the provisions of Article 1832. The reference refers to a partnership, supra n. 21, at section 97, which states as follows:
      “§ 97. Civil companies in general

      “There are three forms of companies which are governed entirely by the civil law, two of which, the universal property partnership (societe universelle de tous biens presents) and the universal profit partnership (societe universelle de gains), are of antiquarian interest only, and need not be examined here. The third, and still extant, form of civil company is the civil partnership (societe par-ticuliere), which will be discussed in this part. A civil partnership is loosely defined by the Civil Code as a company concerned only with the ownership, use or exploitation of a specific property; but it may also be a company formed for the conduct of a particular enterprise, or for the exei-cise of a particular trade or profession. Either of these definitions could perfectly well apply to certain commercial companies; it is more precise to define a civil partnership as a partnership conducting activities which are civil rather than commercial in nature.”
      As a contrast, a company is defined, in section 45, as
      “ * * * a relationship by contract whereby two or more persons agree to pool assets for the purpose of sharing the resulting profits.”

      . In soliciting the Imperial Decree, de Lesseps letter of December 26, 1858, stated the Company was already established in Egypt with its head office in Alexandria. See also, Delson, The Nationalization of the Suez Canal Company, 57 Colum.L.Rev. 755, 782 (1957).

      . The Company’s Legal Advisory Board and the independent members of the Bar found the Company to be Egyptian. See quote on page 802, supra. A number of authorities and articles have also found the Company to be created or organized as an Egyptian corporation. See, Huang, Some International and Legal Aspects of the Suez Canal (51 Amer. Journal of International Law (1957), pp. 277, 286-289), Notes: Nationalization of the Suez Canal Co., 70 Harv.L.Rev. 480, at 487, n. 54. N.Y. Times, October 6, 1956, p. 3, col. 1, statement by British Foreign Secretary Lloyd did not consider the Company to be French. N.Y. Times, October 6. 1956. p. 3, col. 5, statement by French Foreign Minister Pineau also did not consider the Company as French. During the years in issue, French tax authorities considered the Company to be Egyptian.

      . The Company’s stock was taxed as a foreign security. Additional evidence that the Company considered itself foreign was that it entered into agreements with the French Bureau of Income Taxation to provide for withholding at the source of the tax on its securities registered on the French Stock Exchange. Also refer to quotes on page 803, supra, concerning the 1932 Company brochure describing its securities, and page 803, supra, regarding comments made in 1949 to both the Egyptian Government and to the general public through the corporation’s annual report. Also the 1955 Corporate Tax Return stated that it was an Egyptian corporation not engaged in any business in France and, therefore, considered itself not subject to French income tax. The Company also consistently stated to J. P. Morgan & Co., Inc. and the U. S. Treasury that it was an Egyptian corporation.

      . The leading case is J. Shallam & Sons v. Compagnie Universelle de Canal Maritime Suez, 23 Gazette des Tribunaux Mixtes (1932-33), p. 304; Annual Digest and Reports of Public International Law Cases (1931-32) case #137, p. 268 (June 8, 1931). The issue involved whether Egyptian statutes regulating payment in gold on securities of Egyptian corporations were applicable to dividends on the capital stock and debenture interest of the Company. The case held “that although the administrative headquarters of the Company was in Paris, its siége social was in Egypt. Accordingly, the Company had a double status, and was governed, in regard to its corporate activity, by the laws of Egypt, but, in regard to the relations of its members inter se, by the laws of France. The dividends must be paid in gold francs as stabilized by Egyptian law.”

      . From its inception, various proposals were made at international meetings concerning the international character of the Canal. These culminated in the Convention signed at Constantinople in 1888 which declared free passage for all nations. See Whiteman, Digest of International Law, vol. 3, ch. VIII, Inter-Oceanic Canals, Suez Canal, at p. 1076 (1964). The issues of public international law are not relevant to this case.


source: Caselaw Access Project

author: DAVIS, Judge:

license: Public Domain

text:
    The SEMINOLE NATION OF OKLAHOMA v. The UNITED STATES.
    Appeal No. 3-73.
    United States Court of Claims.
    Feb. 20, 1974.

      Paul M. Niebell, Washington, D. C., attorney of record, for appellant.
    M. Edward Bander, Washington, D.C., with whom was Asst. Atty. Gen. Wallace H. Johnson, for appellee. A. Donald Mi-leur, Washington, D.C., of counsel.
    Before DURFEE, Senior Judge, DAVIS and SKELTON, Judges.
   DAVIS, Judge:

After its removal from the east during the first part of the 19th century, the Seminole Nation became the owner in fee of a large area which is now Seminole County, Oklahoma, but was then within Indian Territory. Cf. Choctaw Nation v. Oklahoma, 397 U.S. 620, 622-626, 90 S.Ct. 1328, 25 L.Ed.2d 615 (1970). By Article V of the Treaty of March 21, 1866, 14 Stat. 755, 757-58, the Nation granted a railroad right-of-way over this land, plus the right to buy strips up to three miles on each side of the tracks, “to any company which shall be duly authorized by Congress.” In 1888 Congress gave such authorization to the Choctaw Coal and Railway Company (now part of the Rock Island system); construction took place during 1889 and 1890. In 1896 a second authorization went to the St. Louis, Oklahoma and Southern Railway Company (later part of the Frisco), and the line was built in 1900 and 1901. Another permission was given in 1902 to the Enid and Anadarko Railway Company (which became a segment of the Santa Fe) for track laid in 1905 and 1906.

Under the authorizing statutes as supplemented, the three railroads obtained, among other things, a relatively narrow right-of-way and also the right to certain lands outside of the right-of-way for station purposes (called “station reservations”). In partial return, -the company was to pay for the Indians’ benefit a stated sum per mile of rail constructed (a payment not now involved), together with fifteen dollars per mile per year for so long as the territory was owned and occupied by the Nation.

In the 1920’s the Seminóles brought suit in this court against the United States, under a special jurisdictional act, asserting that the railroads had failed to comply with the treaty and statutes in that they had taken and held for their own unlawful benefit “station reservations” unnecessary for railroad purposes and had received rents and profits from these lands, and also that they failed to pay the annual mileage charge after Oklahoma entered the Union in 1907. The Government was charged with breaching its obligations by allowing the roads to commit these acts; the relief sought was that the United States idem-nify the claimant for the value of the lands allegedly wrongfully taken, for rents and profits accruing from the companies’ use of such land, and for the unpaid mileage charge. This court decided for the Government, 97 Ct.Cl. 591, 723 (1942), and in 1943 the Supreme Court affirmed. Creek Nation v. United States, together with Seminole Nation v. United States, 318 U.S. 629, 63 S.Ct. 784, 87 L.Ed. 1046.

After the passage of the Indian Claims Commission Act in 1946, the Seminole Nation presented the very same sets of facts to the Commission under the “fair and honorable dealings” clause (§ 2, clause 5, 25 U.S.C. § 70a). That tribunal, with two members dissenting, rejected the claim after trial. 27 Ind.Cl.Comm. 141 (1972), rehearing denied, 29 Ind.Cl.Comm. 422 (1973). The Seminóles have appealed, asking us to reverse the Commission and hold in their favor. The appeal is expressly limited to the $15 per mile annual charge and to the “station reservations.”

A. The $15 per mile annual charge: With respect to the Government’s refusal to collect the $15 per mile charge after Oklahoma became a state in 1907, the Commission correctly held that appellant was foreclosed by the Supreme Court’s 1943 decision.

In that litigation, the Court rejected the Seminóles’ then argument that the Secretary of the Interior had breached the 1866 treaty and the various railroad statutes in taking the position that the $15 charge was no longer payable once the state was created, and in refusing to sue the railroads for those sums. Mr. Justice Black’s opinion for the majority said, first, that “[t]he $15.00 charge was considered a tax, approximately equal to the taxes charged by neighboring states,” and, second, that there was nothing to indicate “that the United States, acting as a voluntary tax collector for- the tribes, meant to guarantee to the tribes that the taxpayers would make their payments when due.” 318 U.S. at 637, 63 S.Ct. at 788.

Accepting as we must the Supreme Court’s opinion and decision, we cannot see how the Nation can now prevail on its claim that the Government treated it less than fairly and honorably on this very same matter. The high court’s ruling tells us authoritatively that the Government did not go counter to any relevant treaty or legislation. Cf. Suquamish Tribe v. United States, 197 Ct.Cl. 775, 779 (1972). The contention is advanced, however, that, even if there was no breach of agreement or statute, the United States nevertheless failed to live up to its common law fiduciary obligation as guardian of its Indian wards. One difficulty with this position is that the 1943 opinion seems infused with the view that the Government was free from any such legal, equitable or moral obligation to go against the railroads if it decided not to; the Court said, for instance, that there was “no mandatory duty on the Secretary to do the work of collecting” (318 U.S. at 637, 63 S.Ct. at 788), that the Secretary had very wide discretion in determining when to institute legal proceedings (318 U.S. at 639, 63 S.Ct. 1046), that “the government did not mean to assume an insurer’s responsibility” (318 U.S. at 640, 63 S.Ct. at 789), that the Indians had power to sue for themselves (318 U.S. at 640, 63 S.Ct. 784), and while “ [a] ppreciating the desire of Congress to recognize the ‘full obligation of this nation to protect the interests of a dependent people’ [citing case], we are unable to find in the words of the treaties or statutes upon which this action rests any such prodigal assumption by the government of other people’s liabilities as that for which the petitioners [the Indians] contend here.” 318 U.S. at 640, 63 S.Ct. at 790 (emphasis added). The basic postulates underlying and coloring these words are very hard to reconcile with the possibility that the Government may have breached some non-statutory (or non-treaty) fiduciary duty.

More dispositive is the square substantive holding that the $15 charge was “a tax, approximately equal to the taxes charged by neighboring states.” 318 U.S. at 637, 63 S.Ct. at 788. In this connection the Court cited (318 U.S. at 632, n. 5, and 637, n. 15, 63 S.Ct. 784), seemingly with approval, an opinion of the Secretary of the Interior holding that the railroads’ obligation to make this payment terminated upon the admission of Oklahoma as a state in 1907. This administrative ruling (38 Pub.Land Dec. 414 (1910)) explained that (a) the mileage charge was not part of the compensation payable to the Indians for use of their land, nor was it a property tax upon the land, but was instead “in the nature of a franchise tax or charge upon the business of the corporation constructing the road”; (b) at the time the tax was imposed “there was no State or Territorial government except that of the Indian tribes or nations, and the payment of the annual charge of fifteen dollars per mile was exacted by Congress for the benefit of the tribal governments” ; (c) although the tribes continued to exist for certain purposes after Oklahoma became a state, “they no longer exercise the functions of a political government, as the tribal government has been superseded by that of the State”; and (d) “after the admission of the State of Oklahoma the Indians ceased to own and occupy the lands in the sense in which that expression is used in the acts of Congress” imposing the mileage charge. 38 Pub.Land Dec. at 417.

We think that the Supreme Court accepted this chain of reasoning when it characterized the $15 payment as a “tax, approximately equal to the taxes charged by neighboring states,” and cited the Secretary’s decision “for an analysis of the nature of this tax.” It necessarily follows that the railroads were not liable for the charge after Oklahoma’s admission, and the Federal Government did not act less than fairly or honorably in failing to sue them for monies they did not owe. Even if we were to read the 1943 opinion more narrowly, as stopping with its designation of the charge as a tax without exploring the consequences of that description, we would have to agree that the Secretary’s conclusion is the logical implication once the payment is seen as the tax the Court and the Secretary deemed it to be. Only if the charge were part of the compensation for allowing the railroad to use the Indians’ land could it continue after Oklahoma joined the Union — and the Secretary and Court have flatly held that it was not such compensation.

Appellant ripostes with the thread-bare generality that a demand under the “fair and honorable dealings” clause of the Claims Commission Act of 1946 presents a new claim which was not, and could not be, before the Supreme Court in 1943 under the special jurisdictional act. We have made it clear that this is not enough, by itself, to do away with the defense of collateral estoppel or issue preclusion. Each case must be examined to see what was actually decided in the prior litigation and to appraise the bearing of that decision on the current claim. See Creek Nation v. United States, 168 Ct.Cl. 483, 494-498 (1964); Creek Nation v. United States, 168 Ct.Cl. 512, 519-521 (1964); United States v. Creek Nation, 196 Ct.Cl. 639 (1971), cert. denied, 406 U.S. 929, 92 S.Ct. 1771, 32 L.Ed.2d 132 (1972); United States v. Creek Nation, 476 F.2d 1290, 201 Ct.Cl. 386 (1973). If the factual or legal issues determined in the earlier case are sufficient to dispose of the new cause of action for less than fair and honorable treatment, the prior ruling is conclusive, not as a matter of res judicata but under the normal application of the principles of collateral estoppel. See, e.g. United States v. Creek Nation, supra, 476 F.2d at 1299-1300, 1302-1303, 201 Ct.Cl. at 401-402, 406-407.

That is the situation in this instance. The Supreme Court’s decision in 318 U. S. leaves nothing substantial for appellant to urge (with respect to the mileage charge) on its present claim of other than fair and honorable dealings. That happens, of course, to be a new type of demand, but this novel claim is wholly disposed of and foreclosed by the points made by the Court and the issues decided in 1943. It is impossible, in other words, for us to find less than fair and honorable dealings without going contrary to some significant aspect of what the Court there determined.

The Indians contend that, even if this be so, they are free to reopen the issues already resolved because they have new arguments to make. But these arguments are not new issues, never presented to the Supreme Court, but simply new subsidiary reasoning in further support of appellant’s position on the questions actually decided. See ALI, Restatement of the Law Second, Judgments (Tentative Draft No. 1, 1973), § 68, comment c, pp. 148, 149. In any event, we consider the allegedly “new” points to be so minor and cumulative that they could not have affected the Court’s ruling.

In the same vein, the Seminóles invoke the doctrine that collateral estop-pel crumbles when there has been a sufficient change in the legal climate. See Commissioner v. Sunnen, 333 U.S. 591, 599-600, 68 S.Ct. 715, 92 L.Ed. 898 (1948). There has, no doubt, been a marked shift since 1943 in several aspects of Indian law but we cannot say that there has been any such change with respect to the narrow considerations and circumstances on which the nature of this mileage charge turns. Nothing suggests that what the Supreme Court (in 1943) and the Secretary (in 1910) thought to be a governmental tax would now be viewed as compensation to the Seminole Nation. That is the crucial question, and as to it we can discern (and appellant suggests) no hint of movement in the legal wind or weather.

B. Station reservations: In section 14 of the Act of February 28, 1902, 32 Stat. 43, 47, Congress provided that railroads in then Indian Territory could take and condemn lands, additional and adjacent to the right of way, for “station grounds” (and other specified purposes) ; section 15 required full compensation for such takings “to the individual owner, occupant, or allottee of such lands, and to the tribe or nation through or in which the same is situated.” Four years later, section 14 of the Act of April 26, 1906, 34 Stat. 137, prescribed that with Respect to land reserved to a railroad for “station grounds” (among other uses) the company could acquire full title under regulations of the Secretary of the Interior at a valuation to be determined by him “but if any such company shall fail to make payment within the time prescribed by the regulations or shall cease to use such land for the purpose for which it was reserved, title thereto shall thereupon vest in the owner of the legal subdivision of which the land so abandoned is a part, except lands within a municipality the title to which, upon abandonment, shall vest in such municipality.” 34 Stat. at 142.

As part of their prior suit under the special jurisdictional act, the Seminóles (as we have mentioned) alleged that the railroads took and held station reservations which were unnecessary for railroading, and reaped rents and profits from those tracts. The Supreme Court refused any federal liability for such conduct, under the treaties and statutes, on the related grounds that the Government had no mandatory duty under the then law to sue the companies but rather a very broad discretion — and also that the Indians could have sued on their own behalf. 318 U.S. at 638-640, 63 S.Ct. 1154.

This decision does not preclude the present claim. The Court dealt only with the liability of the United States under existing treaties and legislation— this was the only type of suit permitted by the special jurisdictional act — and it necessarily accepted the various statutes, including the 1902 and 1906 Acts, as its datum. Appellant is now attacking a portion of the 1906 Act itself, and perhaps also some of the 1902 statute — as an Indian claimant can do under the “fair and honorable dealings” clause. The fairness and honor of the provisions of the 1902 and the 1906 Acts concerning station reservations was not subjected to examination or decision in the earlier litigation. It was, however, properly before the Commission below, and is now before us.

There is agreement on the background of this facet of the claim: In 1906 the Rock Island designated, under section 14 of the 1902 Act, supra, some 13.76 acres in the Town of Seminole, then Indian Territory, as station grounds. The railroad did not acquire title as it could have under the 1906 Act, supra, nor was compensation ever paid to the appellant. The company has, however, continued to hold this land and currently leases 22 tracts thereon to private companies and individuals. No station was erected on the acreage and it is not now and has never been used for railroad purposes.

Appellant’s basic point is that this continued holding by the company of property not used for railroading, and to which title was not timely obtained under the 1906 Act, supra, is admittedly unlawful under the 1906 Act, but the Tenth Circuit has made it clear that the Seminole Nation cannot recover the land since Congress, in the same 1906 law, provided that in those circumstances title was to vest in the abutting landowners for land outside a municipality, or in the municipality for lands within its boundaries. This congressional transfer of title to the adjoining owners and the municipalities is challenged as inequitable.

The reference in the 1906 legislation to “the owner of the legal subdivision of which the land so abandoned is a part” recalls the Congressional policy, begun in the 1890’s, to allot the Seminole tribal lands to individual members of the Nation. Cf. Choctaw Nation v. Oklahoma, 397 U.S. 620, 627, 90 S.Ct. 1328, 25 L.Ed.2d 615 (1970). Under the Seminole Agreement of December 16, 1897 (ratified July 1, 1898), 30 Stat. 567, all tribal lands were to be allotted as equally as possible (with minor exceptions). This process of allotment began in 1901 and was completed in 1908, but the titles were not actually delivered until 1912-1914. Thus, the original owners of the subdivisions in which the station reservations were located would be Seminole allottees (though as time went on much of this land was transferred out of Indian ownership).

1. The principal contention is that the Federal Government acted unfairly toward the Nation when it adopted the provision of the 1906 Act giving title to abandoned station reservations to abutting owners and municipalities. This is said to have been an uncompensated transfer of the Nation’s property to others. Cf. United States v. Creek Nation, 295 U.S. 103, 109-110, 55 S.Ct. 681, 79 L.Ed. 1331 (1935); Lipan Apache Tribe v. United States, 180 Ct.Cl. 487, 500 (1967).

Insofar as appellant bottoms this claim on the Act’s vesting of title to the station land in the subdivision owners, we hold like the Commission that the case has not been made. It was not unfair or less than honorable for Congress to decide, after the adoption and implementation of the policy of allotting almost all of the Seminole tribal lands, that areas abandoned by the railroads should go to the nearby individual allot-tees, rather than to the tribe as a whole. The orginal allottees were Indians, members of the Seminole Nation, and accordingly that particular benefit of the 1906 Act would be retained, at least in theory, for Seminóles. Since the purpose of the 1897 Seminole Agreement was to divide “all” Seminole tribal lands (with few exclusions) “among the members of the tribe so that each shall have an equal share thereof in value, so far as may be” (30 Stat. 567), it was not unjust to place ownership of the abandoned station lands in the adjoining allottees’ hands. In this connection, one must remember that it is a familiar common law principle that railroad easements, when abandoned, revert to the abutting landowners. Congress could reasonably call upon that old proposition, especially since the adjoining owners were Semi-nóles themselves (or their successors in interest).

These being the circumstances, it would be wooden and unjustified to apply here, as the Nation would have us do, the general principle that Congress should not turn over to “others”, without compensation, an Indian tribe’s land. This land did not truly go to “others” but to the individual Seminóles, members of the Seminole Nation, who were the ones most concerned because they were nearest to the property.

2. Appellant’s minor argument to support its position on the station tracts which Congress vested in the adjoining allottees is that, in any event, it was a violation of fair and honorable dealings to allow the railroads to carve out any station reservations in the first place. On this, the salient point urged is that the 1866 Seminole Treaty envisaged only one railroad (not three) through Seminole territory, and only a right of way (not additional “station grounds” outside or adjacent to the right of way); Congress is said to have unilaterally gone beyond this limited agreement its Oklahoma railroad legislation. in

Perhaps the understanding in 1866 (when the treaty was negotiated) was that only one road would be constructed through Seminole territory (cf. Creek Nation v. United States, supra, 318 U.S. at 631-632 n. 3, 63 S.Ct. 784), but the actual language of the instrument grants a right of way “to any company which shall be duly authorized by Congress,” 14 Stat. at 757-758 — words which can readily cover a number of roads. In either case, the treaty is not dispositive. Congress could exercise its right of eminent domain to take Indian lands for public purposes (with compensation), and an interstate railroad plainly falls within that class. Cherokee Nation v. Southern Kansas Ry., 135 U.S. 641, 655 ff, 10 S.Ct. 965, 34 L.Ed. 295 (1890). It was not less than fair and honorable to subject Indian groups to the condemnation power in the same way as non-Indians and the states whose consent did not have to be obtained. Ibid. Appellant can claim no higher or special status, nor if otherwise treated fairly could it demand that its consent had to be secured.

This eminent domain authority also suffices for the station reservations, even if one accepts the appellant’s doubtful proposition that the grant of a right of way, and the right to purchase adjacent lands mentioned in the 1866 treaty, 14 Stat. at 758, do not implicitly cover such additional “station grounds.” We can see, moreover, no inequity in the pattern or working out of the station reservation legislation of 1902 and 1906 — aside from the vesting of ownership to abandoned tracts in the municipalities (which we consider infra). The 1902 Act recognized (§ 15, see supra) that proper compensation should be paid, and, as the Commission pointed out, the statute “provided ample protection of the rights of the tribes and allottees as against the railroads in the event of controversy over the taking and use of any lands by the railroads under the statutes.” 27 Ind.Cl.Comm. 141, 150 (1972).

As we have stressed, the Supreme Court’s 1943 ruling (318 U.S. 629, 63 S.Ct. 784, 87 L.Ed. 1046) determined that there was no breach by the Federal Government in its railroad policy of any relevant treaty or statute. The “common law” obligation of the United States as fiduciary toward the Indians was not justiciable under the special jurisdiction act, but, as we observe in Part A, supra, it is very difficult, if not impossible, to harmonize the statements in the Court’s opinion with the view that the Government failed in any extra-statutory (or extra-treaty) fiduciary duties. It is obvious that the Court thought that the United States had no responsibility, equitable or legal, for suing the railroads (assuming that the latter were acting wropgfully). As for the substantive content of the railroad legislation, the Court stated that the Government “undertook through its administrative and legislative policy to aid the tribes to hold possession of their lands” and “[i]n view of the pressures of the time, it appears to have treated its obligation with real care” — citing various provisions of the railroad legislation relating to these Oklahoma Indians. See 318 U.S. at 634-636, 63 S.Ct. at 787. The Court which promulgated these and the other views expressed in the opinion (see Part A, supra) could not, if the question had been squarely presented, have deemed the Government’s general course of dealings with these Indians (in relation to railroads) to be less than fair or honorable.

The Supreme Court’s opinion would not, of course, be an obstacle under clause 5 if we believed that there has been a significant change — a development relevant to this particular case —in the standard of equity and fairness toward the Indians. With the exception of the criteria for evaluating the part of the 1906 Act giving title to abandoned station reservations to the municipalities (see infra), we can see (as we have already indicated) no such modification pertinent to the Seminóles’- current claim. It follows that, this exception aside, we do not fault the Commission for concluding that the substantive contents of Congress’s station reservation legislation, whether taken as a whole or in separate pieces, did not contravene the standard of fair and honorable dealings.

3. The vesting of abandoned station reservations in municipalities is another story. Neither the Commission nor the defendant has set forth any adequate reason why the municipality, which is wholly unrelated to the Seminole Nation, should receive free, without any compensation to the Nation (or to the individual allottees), land which is potentially useful and valuable. The general rule, as we have pointed out above, is that tribes should normally be paid when their recognized or fee property is transferred by Congress to «others outside of the tribe. Unless there is some good ground for departing from this principle, an uncompensated transfer, unilaterally imposed by Congress, could not be deemed fair.

The only reasons given us for not applying this rule to this case are dry and technical, and even as such do not stand up. It is suggested, as one argument, that by March 1, 1909 (the earliest date railroads could be officially considered under the 1906 Act as having abandoned station reservations) all the Seminole land had been allotted, and, therefore, if anyone was injured by Congress’ vesting of title in municipalities, it would be the allottees, not the Nation itself. But so far as we can determine the individual allotments uniformly excepted rights to land forming the station reservations, and accordingly neither any individual allottee nor all of them together (as allottees) were given any right to these tracts. The residual fee title remained in the Seminole Nation, and when the 1906 Act provided that title to abandoned station reservations lying within a municipality should vest in the municipality it was the Nation’s property which was being transferred without compensation.

It is also intimated that there would be no purpose in having the station reservations (described as long, narrow strips of land) retained by a tribal organization which was winding up its affairs and would no longer have significant land holdings of its own. Even if this were proved (which it has not been), the fact would not excuse the Congress’ failure to insist on due compensation. There is no reason to believe that any or all of the station grounds were wholly valueless, and the Nation was entitled to adequate payment if it was thought necessary or proper to hand over these strips into non-tribal ownership.

Finally, it is said that there is no proof that any station reservations went to municipalities under the 1906 statute (rather than to abutting landowners). The parties agreed (see note 2, supra) that the only proof which had to be offered at the trial below (re station reservations) was as to the Rock Island’s reservation at Seminole, Oklahoma, and that the claimant reserved its rights as to other station reservations of the three railroads. It is clear, therefore, that appellant was under no duty to prove, at the proceedings below, that other reservations went to a municipality; and it is now free to make such proof in the remand proceedings before the Commission. In any event, it appears that the reservation at Seminole lies within a municipality. Defendant’s brief to this court (p. 21) states unqualifiedly that the Commission correctly determined that “the title to the lands within the town of Seminole became vested in the town of Seminole,” citing Chickasha Cotton Oil Co. v. Town of Maysville, Okl., 249 F.2d 542, 544, 546 (C.A. 10, 1957). Seminole is a town which was settled about 1890. Hammond’s Ambassador World Atlas 359 (1956).

We conclude that the Commission erred with respect to the station reservations located in municipalities. It was not fair and honorable for the 1906 Act to vest those tracts in the municipalities without providing fair compensation to the Seminole Nation. The United States is properly liable, under the fair and honorable dealings clause, for the monetary damage suffered by appellant through this statute. We leave to the Commission on remand to determine the appropriate compensation — whether it should be fair value as of the date of vesting in the towns and cities, the rents and profits derived from the lands, a combination of both standards, or some other measure.

The end result is that we affirm the Commission except with respect to any station reservations located within municipalities. On that aspect we hold the defendant liable and remand for the determination of the amount of recovery.

Affirmed in part, reversed in part, and remanded,

      . The Creek Nation had pursued a comparable claim.

      . By agreement, the parties limited their proofs to facts relating to the right-of-way and one station reservation (at Seminole, Oklahoma) of the Rock Island, with the right reserved to appellant to present the facts relating to the other railroad companies and the remaining Rock Island station reservations if the decision on liability should go in the Nation’s favor.

      . With respect to the station reservations, the Commission did not rest on preclusion or collateral estoppel but reached the merits.

      . By agreement, this is the only station reservation as to which proof was or had to be offered. See note 2, supra.

      . Under the Secretary’s regulations the road had until March 1, 1909 to purchase the tract.

      . See United States v. Magnolia Petroleum Co., 110 F.2d 212 (C.A. 10, 1939); United States v. Drumb, 152 F.2d 821 (C.A. 10, 1946); Seminole Nation v. White, 224 F.2d 173 (C.A. 10), cert. denied, 350 U.S. 895, 76 S.Ct. 153, 100 L.Ed. 787 (1955); Chickasha Cotton Oil Co. v. Town of Maysville, Okla., 249 F.2d 542 (C.A. 10, 1957); St. Louis-San Francisco Ry. v. Town of Francis, 249 F.2d 546 (C.A. 10, 1957); St. Louis-San Francisco Ry. v. Walter, 305 F.2d 90 (C.A. 10, 1962); Choctaw and Chickasaw Nations v. Atchison, Topeka and Santa Fe Ry., 396 F.2d 578 (C.A. 10, 1968), cert. denied, 393 U.S. 1048, 89 S.Ct. 677, 21 L.Ed.2d 690 (1969); Choctaw and Chickasaw Nations v. St. Louis-San Francisco Ry., 396 F.2d 582 (C.A. 10, 1968), cert. denied, 393 U.S. 1048, 89 S.Ct. 677, 21 L.Ed.2d 690 (1969).

      . See United States v. Magnolia Petroleum Co., 110 F.2d 212, 217-218 (C.A. 10, 1939); Seminole Nation v. White, 224 F.2d 173, 175 (C.A. 10, 1955); St. Louis-San Francisco Ry. v. Town of Francis, 249 F.2d 546, 548 (C.A. 10, 1957).

      . Any suggestion of inequality between the Seminóles who would benefit from this provision of the 1906 statute and those who would not (because their lands did not abut a station reservation) would relate to individual claims of the latter, and would not at all be cognizable under the Indian Claims Commission Act — certainly not at the instance of the appellant.

      . Cf. Chickasha Cotton Oil Co. v. Town of Maysville, Okla., 249 F.2d 542, 543, 544-546 (C.A. 10, 1957); St. Louis-San Francisco Ry. v. Town of Francis, 249 F.2d 546 (C.A. 10, 1957).

      . Section 27 of the 1906 Act provided that lands belonging to the Seminole tribe “shall be held in trust by the United States for the use and benefit” of the Indians comx>rising the tribes and their heirs. 34 Stat. 137, 148. See Choctaw Nation v. Oklahoma, 397 U.S. 620, 627, 90 S.Ct. 1328, 25 L.Ed.2d 615 (1970). The Nation continued in existence, even after the implementation of the allotment policy, for the purpose of the ownership of lands continuing as tribal property. Cherokee Nation v. State of Oklahoma, 461 F.2d 674, 678 (C.A. 10) cert. denied, 409 U.S. 1039, 93 S.Ct. 521, 34 L.Ed.2d 489 (1972).

      . The defendant is very wide of the mark when it urges that appellant has no standing under the fair and honorable dealings clause (clause 5) to point to railroad activities after March 1, 1909, because the abandoned station reservations became vested as a matter of law, under the 1906 Act, in the adjoining owners or the municipalities on that date. Clause 5 is not limited to legal rights, and the Nation can show that the destruction of its legal rights, as of March 1, 1909, even if constitutional, caused it injury which should now be redressed in fair measure under that provision of the Claims Commission Act. If the railroad’s gains after March 1909 are taken into account, it will not be because appellant is “legally” entitled to such sums but because those gains are considered an appropriate and equitable measure of redress under clause 5.