Carl Zeiss Stiftung v. VEB Carl Zeiss, Jena

DISCUSSION

A central and primary issue in this case is whether the plaintiff Foundation or that established in East Germany in 1951 is legally identical with, and the successor to, the original Abbe Foundation, which is without question entitled to exclusive use of the United States trademarks in dispute. The Soviet expropriation purported to encompass all Zeiss trademarks owned by the Zeiss firm, wherever located. In view of the well-settled United States policy against extraterritorial recognition of such decrees, the Foundation or its legal successor, if it has legally continued to exist (whether in East Germany, West Germany, or elsewhere 1 ), must be recognized as the owner of the United States marks. Furthermore, while a United States court may give effect to expropriation of property located within the territory of the expropriating state, Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964), United States trademarks, for the purpose of determining the applicability of our anti-expropriation policy, are deemed to be located within the United States, even though the trademarked goods may be manufactured elsewhere, Zwack v. Kraus Bros. & Co., 237 F.2d 255 (2d Cir. 1956); F. Palicio y Compania, S.A. v. Brush, 256 F.Supp. 481 (S.D.N.Y.1966); and see Baglin v. Cusenier Co., 221 U.S. 580, 596, 31 S.Ct. 669, 55 L.Ed. 863 (1911), and our anti-expropriation policy applies with full vig- or with respect to property outside the taking state. As Judge Friendly said *897 in a learned opinion in Republic of Iraq v. First Natl. City Bank, 353 F.2d 47, 51 (2d Cir. 1965):

“Extra-territorial enforcement of the Iraqi ordinance as to property within the United States at the date of its promulgation turns on whether the decree is consistent with our policy and laws. [Footnote omitted] We perceive no basis for thinking it to be. Confiscation of the assets of a corporation has been said to be ‘contrary to our public policy and shocking to our sense of justice.’ Vladikavkazsky Ry. Co. v. New York Trust Co., 263 N.Y. 369, 378, 189 N.E. 456, 460, 91 A.L.R. 1426 (1934).”

Since the objective of our policy is to prevent the unfair consequences of expropriation without compensation, we are required as a counterpart of that policy, insofar as it is possible to do so, to identify the owners surviving the confiscation, and to award the property to them. In this case, therefore, since the Soviet’s purported expropriation of the United States Zeiss trademarks violated our anti-expropriation policy, leaving the Foundation’s ownership unaffected, our task is to identify the surviving owner as between the various claimants.

If the issue of legal identity or successorship, which is central to the ease, could be resolved solely as a question of fact, the facts found by the - Court would dictate a decision in favor of the plaintiff as the true Zeiss Foundation. The evidence reveals that as between the rival Foundations, the plaintiff is in fact a good faith continuation of the original Abbe organization, in which the Zeiss officers employed for life who were the official representatives of the original Foundation have conscientiously done everything within their power to adhere to the Abbe Statute and carry on the tradition of the organization, to the extent that this has been permitted by circumstances beyond their control (i. e., their forced evacuation from Jena to Heidenheim, and their inability, after two years of efforts, to maintain the organization at Jena, even at the price of forebearing exercise of their own authority, after Soviet seizure of its assets there). The “Foundation” established in 1951 in East Germany, in contrast, is but a sham and subterfuge, erected solely for the purpose of litigation outside of East Germany, and neither a continuation of the original organization nor a good faith effort to resurrect it in substance or adhere to its basic tenets.

If fundamental fairness and equity were the criteria, therefore, the de fasto existence and operation of the plaintiff Foundation in the West as a good faith effort to continue what remained of the overall Abbe Foundation enterprise, after expropriation of its assets in the East and its inability to function in its original domicile, would call for its recognition. Such an approach based on the equities was adopted by the United States Supreme Court more than 50 years ago in a remarkably parallel situation in Baglin v. Cusenier Co., 221 U.S. 580, 31 S.Ct. 669, 55 L.Ed. 863 (1911), which involved the trademarks to the well known liqueur “Chartreuse.” For many years the liqueur had been manufactured by the order of Carthusian Monks in a monastery in France known as the “Grande Chartreuse” and sold throughout the world (including the United States) under the trademark “Chartreuse.” In 1903 the monastic order was dissolved by French law and its property confiscated. Thereupon the Monks moved to Spain where they resumed manufacture of the same liqueur there. In the meantime a French company, as liquidator, continued operation of the expropriated monastery and factory in France. The Supreme Court granted the refugee Monks an injunction against use of the trademark in the United States by the liquidator and his distributor, holding that the Monks were legally identical with the original monastic order and that to permit the defendants to use the marks in the United States would allow the French Government to seize United States trademarks *898 and detach them from the Monks’ product. In denying effect to an extraterritorial expropriation by a foreign power that would violate American policy, the court was prepared to overlook technical niceties in favor of doing substantial justice on the basis of the equities.

The fashioning of such a doctrine of equitable ownership as a counterpart of our anti-expropriation policy is frequently dictated by necessity, since expropriation usually changes the expropriated enterprise, sometimes so drastically that recognition of the survivors or their successors becomes difficult. Where the ownership of a natural person is involved (such as the expropriation of King Faisal’s United States assets by the Republic of Iraq), the inquiry is a relatively simple one, the property being awarded to his estate or heirs upon his death. Republic of Iraq v. First Natl. City Bank, 353 F.2d 47 (2d Cir. 1965). Where a creature of the law, such as a partnership or corporation, is concerned, however, the inquiry into its life, death and succession is more complex. As Judge Cardozo said in Petrogradsky M. K. Bank v. National City Bank, 253 N.Y. 23, 30, 170 N.E. 479, 481 (1930):

“There is a distinction not to be ignored between the life of a human being and the life of a persona ficta,, the creature of the state. When a human being dies, his death is equally a fact whether it is brought about legally or illegally, whether he has died of illness in his bed or has been murdered on the highway. The event is not conditioned by the juristic quality of the cause. But in respect of juristic beings, the quality of the cause may determine the event as well. The personality created by the law may continue unimpaired until law rather than might shall declare it at an end. Conceivably, the law will declare it at an end when marauders have brought frustration to the purpose for which personality was given. That is another question. What is not to be lost. sight of is that even so it is the law and not merely an assassin that must pronounce the words of doom.”

The legal existence, status, identity, and domicile of a foreign corporate entity or juristic personality, such as the Foundation here, must be determined by the laws- of the country where it has been created and continues to exist, see Bank of Augusta v. Earle, 13 Pet. 519, 10 L.Ed. 274 (U.S.Sup.Ct.1839); Russian Reinsurance Company v. Stoddard, 240 N.Y. 149, 147 N.E. 703 (1925). Procedural technicalities, lack of clarity in the foreign law involved, or doubt as to its applicability, however, should rarely be viewed as insurmountable obstacles, particularly where United States property is at stake, since failure to resolve the issue would reward the oppressor, give effect to fundamentally unfair acts, or result in the property becoming “ownerless”. Expropriation without compensation is an extraordinary and basically unfair measure, frequently resulting in unusual consequences not provided for in the laws of the country where the owner was established, which often assume continuation of governmental institutions according to an existing pattern rather than substitution of drastic new concepts. As a result our courts have developed a willingness to disregard technicalities in favor of equitable considerations. For instance in Zwack v. Kraus Bros. & Co., 237 F.2d 255 (2d Cir. 1956), the Court, faced with similar problems arising out of the expropriation of a Hungarian ownership, stated:

“Under applicable Hungarian law, which regards a partnership as an entity, the individual partners have no individual rights in the firm assets. * * * The defendant seeks to analogize the Hungarian entity concept of the partnership to the American concept of the corporation and argues that the partner’s interest in the firm assets consists wholly of a claim of ownership in the firm having its exclusive situs at the firm residence in Hungary. It urges that the transfer of plaintiffs’ shares of ownership was accomplished in Hungary by official *899 acts of the Hungarian government and therefore is not subject to collateral attack outside of Hungary even if confiscatory and therefore against the public policy of the forum.

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“We think that, where firm assets existing in the forum are concerned, technical considerations as to the manner in which the foreign state seeks to expropriate them are not controlling. Prior to confiscation the assets of the firm both here and in Hungary were equitably owned by the plaintiffs as the sole partners in the firm. It is clear that the Hungarian government could not directly seize the assets which have a situs in the stage of the forum. To allow it to do so indirectly through confiscation of firm ownership would be to give its decree extraterritorial effect and thereby emasculate the public policy of the forum against confiscation. This we decline to do.” 237 F.2d at 258-259.

Similarly, in a case involving an Estonian corporation, A/S Merilaid & Co. v. Chase Natl. Bank, 189 Misc. 285, 71 N.Y.S.2d 377 (Sup.Ct.N.Y.County 1947), a majority of whose stockholders met in Sweden following expropriation and purported to transfer the corporate seat to Sweden and re-elect former directors with authority to continue the business, such action, notwithstanding irregularities, was regarded as effective to continue the corporate existence and entitle the surviving entity to funds deposited in a New York bank. The irregularities in procedure were disregarded because “all that could be done to conform with the usual formalities was done”. 71 N.Y.S.2d at 379. Where a juristic entity or personality created by one state has been recognized by other states, which permit it to “do business” in their respective territories (owning property, making contracts, etc.) so that it assumes a status as an international business organization, no sound reason appears, in fairness or logic, why termination of its existence in the creating state, and purported seizure of its assets without compensation, should require those other states where its property is located to treat its existence as terminated everywhere rather than assume sponsorship or recognition of the entity as continuing to exist within their borders. Permission to “do business” would appear as a matter of international law, to carry the implied condition that the entity be treated as continuing for certain purposes within the state granting such permission.

With these principles in mind we turn to consideration of the law of the country in which the Zeiss Foundation was created. See page 898, supra, Bank of Augusta v. Earle, 13 Pet. 519, 10 L.Ed. 274 (U.S.Sup.Ct.1839); Russian Reinsurance Company v. Stoddard, 240 N.Y. 149, 147 N.E. 703 (1925). Both sides describe that law as “German law,” which accords with the view that at least until September 1949, when the Federal Republic of Germany (West Germany) was formed, Germany continued to exist legally as a sovereign state occupied by four hostile powers which, through the Allied Control Council; administered it. Clark v. Allen, 331 U.S. 503, 514, 67 S.Ct. 1431, 91 L.Ed. 1633 (1947); State of Netherlands v. Federal Reserve Bank, 201 F.2d 455 (2d Cir. 1953). The parties differ sharply, however, as to whether the German law is that promulgated and interpreted by West Germany, or by East Germany. Plaintiffs argue that the former must be recognized as the only law of Germany for the reason that the United States Government, through its Executive Branch, recognizes the Government of the Federal Republic of Germany (West Germany) as the only German Government freely and legitimately constituted and entitled to speak for Germany (Policy Statement of U.S., France and U.K., September 19, 1950, 23 Dept. of State Bull. 530 (1950)), and does not recognize the existence of the German Democratic Republic (East Germany) or any other separate state or sovereign in the Soviet Zone. See Moscow Fire Insurance Co. v. Bank of New York, 280 N.Y. 286, 20 N.E.2d 758 *900 (1939); Petrogradsky M.K. Bank v. National City Bank, 253 N.Y. 23, 170 N.E. 479 (1930).

In the plaintiffs’ view the governing body of German law encompasses the law of the German Reich (including its Constitution and the German Civil Code in effect from the termination of hostilities until the formation of West Germany in 1949); the acts of the Control Council for Germany, of the Occupying Powers in the West, and of the governments of the various German laender or states in the West; the Constitution of West Germany and decisions of its courts; and the laws in effect in the Soviet Zone to the extent that they do not violate the public policy of West Germany.

Defendants, on the other hand, contend that our Government’s non-recognition of East Germany does not preclude application of East German law, at least where it is the de facto govennment of that territory, Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 226-227, 186 N.E. 679, 89 A.L.R. 345 (1933); Vladikavkazsky Ry. Co. v. New York Trust Co., 263 N.Y. 369, 189 N.E. 456, 91 A.L.R. 1426 (1934); Bank of China v. Wells Fargo Bank & Union Trust Co., 104 F.Supp. 59 (N.D.Calif.1952); Restatement 2nd, Foreign Relations Law, § 113. They argue that since Jena, where the Foundation was originally organized, is located in East Germany and since West Germany does not claim to have sovereignty or territorial jurisdiction over the Soviet Zone, Mann, “Germany’s Present Legal Status Revisited,” 16 Int’l & Comp.L.Q. 760, 779, 789 (1967), and the United States does not recognize West Germany as the de jure government of all Germany, Zschernig v. Miller, 389 U.S. 429, 88 S.Ct. 664, 19 L.Ed.2d 683 (1968); “Contemporary Practice of the United States Relating to International Law,” 57 Am. J.Int’l L. 403, 410 (1963), German law as promulgated in East Germany and interpreted by its courts should be applied.

While our Government’s diplomatic recognition policy is entitled to considerable weight in determining what law is to be applied, The Maret, 145 F.2d 431 (3d Cir. 1944); Latvian State Cargo & Pass. S. S. Line v. United States, 116 F.Supp. 717, 126 Ct.Cl. 802 (1953); see Bank of China v. Wells Fargo Bank & Union Trust Co., 104 F.Supp. 59, 64 (N.D.Calif.1952), the invocation of the policy is complicated in the present case by the fact -that the Court is dealing with a divided. country, West Germany being recognized as sovereign only over its own territory and not over that of East Germany, which remains unrecognized by the United States. Choice of law rules normally assume the existence of a territory having an appropriate relationship to the issue, over which the recognized foreign government claims sovereignty. See, e. g., Amstelbank, N. Y. v. Guaranty Trust Co., 177 Misc. 548, 31 N.Y.S.2d 194 (Sup.Ct.N.Y.Co.1941).

Whether or not German law as declared or construed by the courts of unrecognized East Germany or recognized West Germany should be applied depends to some extent on the nature of the question to be resolved. Normally the acts of an unrecognized regime which pertain to its purely local, private, and domestic affairs will be given effect, see Matter of Luberg’s Estate, 19 A.D.2d 370, 372, 293 N.Y.S.2d 747 (1st Dept. 1963); Restatement, 2nd, Foreign Relations Law, § 113; and such acts on the part of East Germany are even applied in West Germany, regardless of diplomatic non-recognition, to the extent that they are not inconsistent with West German policy. Here, however, we are not confronted with acts on the part of East Germany dealing solely with private, local, domestic matters, such as certificates of birth or death, powers of attorney, land transfers, or the like. We are dealing with decisions of East German courts with respect to matters extending beyond the borders of East Germany, such as the nature of a foundation under federal law and the effect to *901 be given to acts of Wuerttemberg. The questions of whether a private foundation is a federal or state entity, and, if a federal entity, whether its domicile may be altered or transferred by a member state (Wuerttemberg) other than that where its domicile existed for many years (Thuringia), present issues of public policy relating directly to persons and property located in countries other than East Germany. However, to resolve these questions solely according to German law as promulgated and declared by authorities and courts of West Germany ignores the fact that even though the Foundation had no significant contacts with the authorities of Thuringia or Successor political divisions in East Germany after it was destroyed in the East through Soviet expropriation, it did come into existence through action of the authorities of the Duchy of Saxe-Weimar, later merged into the State of Thuringia, which in turn became, successively, part of the territory controlled by the Soviet Military Administration and the unrecognized German Democratic Republic (East Germany). In view of the Foundation’s territorial contacts with the East before its capacity to function there was destroyed, this Court should not be precluded from considering decisions handed down by the courts of East Germany with respect to the Foundation’s legal identity, powers, and status, and giving them such weight as they appear to merit. Fortunately we are aided here by the continuation in effect of the provisions of the German Civil Code throughout both Germanies and by the more fluid and amorphous concept of nationality or domicile of corporations and foundations in Germany, compared with the concept in this country. Testimony of German law experts revealed that while German entities; including private corporations and foundations, depend for their existence upon the approval of their charter or “Statute” by a state, the “nationality” of the entity (which is but another way of referring to the state whose laws govern its existence and legal relationships as an entity) is influenced more by the place where it maintains its principal place of business and its administrative center than by its place of formation. See Note, “Corporations in Exile,” 43 Colum.L.Rev. 364, 366 (1943). The “nationality” of a German foundation depends, therefore, at least as much on the body of law by which it is in fact governed as it does on the law of the place where it came into being. Since a foundation’s principal establishment is usually located in the state where it is created, its domicile or nationality rarely comes into issue. Here, however, the Zeiss Foundation’s principal establishment, its management and its business assets were all involuntarily located in one German state (Wuerttemberg) as the result of the termination of its capacity to exist in the other (Thuringia). The answer to the question of whether, in view of such an unusual change in circumstances, it is to be considered a national of Germany or of Thuringia requires a brief review of the development of relevant law in Germany.

Prior to 1871 the territory which was to become the German Empire, or federal union, was divided between numerous kingdoms, duchies, principalities and free towns, most powerful of which were Prussia, Bavaria, Saxony, Baden and Wuerttemberg. Following popular movements toward nationalism in 1848 and power struggles between rival states, Prussia took the leadership and principally through the deft negotiations of Otto von Bismarck, the various states signed treaties leading to the formation of the empire as a permanent federal state, which in 1871 adopted a constitution substantially in a form passed by Prussia’s diet in 1867. One of the constituent states of the empire was the Grand Duchy of Saxe-Weimar-Eisenach, a limited hereditary monarchy governing several scattered districts (e. g., Neustadt, Weimar, Eisenach) and a score of scattered enclaves, many not even contiguous with any other lands of the Duchy. The Duchy itself had resulted from the union of smaller principalities. *902 Although the member states retained this autonomy as to matters not delegated to the imperial authorities, the latter ruled supreme over all states in the delegated area. The new Constitution established “a common citizenship for all Germany” and provided that “the whole domain of civil * * * and commercial laws” was to be “under the supervision and control of the Empire”, Wright, The Constitutions of the States at War, 1914-18, p. 217 (1919). Effective January 1, 1900 the German Empire adopted a federal Civil Code, applicable throughout the German federation, containing provisions relating to foundations which were expressly made applicable to existing foundations created under the laws of member states before the Civil Code was adopted. Thereafter, on January 14, 1905 the Zeiss Foundation Statute was amended by Dr. Abbe, the amendment being approved by the authorities of the Grand Duchy of Saxe-Weimar-Eisenach pursuant to the new German Civil Code.

To the extent that they occupied particular areas, the provisions of the German Civil Code represented the supreme law of the German Empire. The effect of the adoption of Code provisions governing foundations, therefore, was to constitute foundations, including those established under laws of the various German states, or laender, creatures of German federal law, or federal entities, as distinguished from entities of the states where each particular foundation was originally established. Article 55, Introductory Law. Exceptions were made in the case of specific types of foundations, such as the “Gotha” mining companies, which were expressly designated as local state entities because of their strictly local characteristics. See Wang, The German Civil Code, pp. 550-68; Arts. 164-166, The Introductory Law. Subject to such exceptions, however, Germany, having established a common citizenship for all subjects of its different member states, took a further step forward in this federalization process by constituting foundations federal, rather than state, entities. One goal was to assure that even though member states might continue to administer foundations, federal standards and federal authority would assure foundations of minimum guaranties and, if necessary, federal intervention for the purpose of enabling a foundation to continue in existence rather than be relegated to a state of limbo or dependency on the sketchy and inadequate laws of many of the member states. The need for such federally-created provisions for intervention was greater in the case of private foundations than private corporations for the reason that while the private foundation is a legal entity, capable of owning property and carrying on business under a trade name, or “firma,” it is not owned by anyone, nor is it an instrument of any governmental agency; and the necessity for establishment of foundations as federal, rather than state, entities was indicated by the changing character of the German states, giving rise to serious questions as to the existence, identity and adequacy of applicable state laws. For instance, in the present case, at the turn of the century the Grand Duchy represented but one of several mergers of different German duchies, kingdoms and principalities, each with its divergent laws, and within 20 years, it in turn would be merged into another state, Thuringia. As a federal law applicable in all such states, the German Civil Code provided some measure of stability and uniformity for private foundations.

Although the Zeiss Foundation became a German federal entity upon adoption of the German Civil Code in 1900, under the German Constitution (unlike that of the United States) administration of the federal law was delegated to the individual member states, each of which was authorized to execute the federal law with full force and effect throughout Germany, subject to resolution by German federal courts of any differences, or conflicts between the states in their administration of the federal law. In implementation of the federal Civil Code’s provisions govern *903 ing foundations, each member state, including Thuringia, adopted laws governing foundations domiciled in such state. Since a private foundation is in the nature of a trust, the state’s participation was essentially ministerial and supervisory in nature, designed to insure that the will of the founder, as expressed in the Statute or charter, would be respected as far as possible. For instance, a foundation came into existence as a juristic person upon the state’s acceptance of the Statute, a purely ministerial act.

The domicile of such a foundation would usually be in the state where its Statute was accepted or approved, for the reason that its principal place of business would normally be located there. With the adoption of the German Civil Code, of course, the concept of domicile as attaching to a particular state had less significance than theretofore, since the foundation, being a German federal entity, could do business in any other member state merely by registering its “firma” or its establishments in the other state, a ministerial matter. In other words, although it had a domicile in a particular state, it remained a creature of federal law. Essentially, therefore, the principal significance of the concept of domicile for foundations under German federal law was that it determined the state authority normally expected to supervise the foundation in accordance with federal law, at least to the extent that such supervision was required, without, however, excluding supervision also by another member state, where the foundation was actually engaged in doing business.

Although no authoritative German precedents or teachings prescribe the procedure to be followed to transfer a foundation’s domicile from one German state to another, German law experts agree that the normal procedure would be for the foundation’s management to obtain approval of the state where it is presently domiciled, and that a prohibition against transfer of domicile (such as that found in Section 121 of the Zeiss Foundation’s Statute) would ordinarily bar such a transfer. In the present case, however, the Soviet Military Administration, which controlled the domiciliary state, by expropriating the Zeiss Foundation’s assets and preventing it from continuing to function in Thuringia, destroyed its capacity to function there and made it impossible for it to carry out its founder’s purposes in that state. Since it owned and operated substantial commercial enterprises elsewhere, however, dissolution was not called for under its Statute. (Section 116). In the opinion of highly respected experts in German law, these unusual circumstances would call for exercise by another member state of the power granted by § 87 of the German Civil Code, which provides that where a foundation’s purposes can no longer be fulfilled, its statutory purpose may be amended by “the appropriate authority” to enable it to function in accordance with the founder’s intention as far as possible. Although this broad authority, in the nature of a codification of a cy pres doctrine for foundations, would ordinarily be administered by the state where the foundation is domiciled, and would involve an amendment of some provision of the Statute other than that relating to domicile, nothing in § 87 precludes amendment of a Statute’s provision as to domicile where its stated purpose of maintaining its domicile in a particular state can no longer be fulfilled, and nothing in it requires that such an amendment be made by one member state of the German federation rather than another. This Court, therefore, accepts the view of German law experts that under the circumstances presented here (Soviet expropriation which made it impossible to fulfill Dr. Abbe’s stated purpose of maintaining the Zeiss Foundation’s commercial enterprises and domicile in Jena, and left its operational center and principal remaining commercial works in Wuerttemberg), the State of Wuerttemberg, as a member of the German federation, was empowered by § 87 as “the appropriate *904 authority” to establish the Foundation’s domicile where its administrative center and principal operations were now located.

Having in mind Dr. Abbe’s intent to establish an organization that had as its primary purpose the profitable operation of its commercial enterprises in a free enterprise system as the source of funds to cultivate and maintain its operations in the precision technical industry, and that confiscation of its commercial facilities and assets in the East made it impossible to fulfill this primary purpose of the Statute, the establishment of the Foundation’s domicile in Heidenheim, where its Boards of Management were located, constituted the only available course that would enable the Foundation to continue “as far as possible” in accordance with “the intention of the founder”. (§ 87, German Civil Code) The authorities of Soviet-occupied Thuringia which, by expropriation, made “fulfillment of the purpose of the Foundation * * * impossible,” were hardly “the appropriate authority” to amend the Foundation’s Statute. It defies common sense to say that a foundation’s domicile must continue in a state which seizes its basic assets and denies it the right to carry out its purposes. As an arm of the German federation, the State of Wuerttemberg was, under these extraordinary circumstances, “the appropriate authority,” and since § 87 provides that “The authority can amend the Statute of the Foundation as far as the modification of purpose requires,” such broad delegation of power included the power to amend the Statute’s provision as to domicile (notwithstanding the Statute’s provision that it could not be amended), so that the basic purpose of the founder might be continued in another part of Germany rather than be destroyed altogether. Dr. Abbe, as founder, in providing in the Statute that the Foundation’s domicile should be Jena, and that this provision as to domicile could not be amended, assumed that the Foundation would be permitted to carry on its commercial enterprises (which were the source of all of its other activities) in Jena, which was the birthplace of the Zeiss and Schott works. He did not anticipate that governmental action might not only confiscate but prevent the continuation of these enterprises and operations by the Foundation in Jena, leaving others capable of continuing the Foundation’s work in another part of Germany. The entire Statute, however, makes it clear that if he had contemplated such a possibility, he would have preferred that the Foundation continue elsewhere in Germany, provided its basic purposes might be achieved there, rather than dissolved. This is evidenced by the Statute’s provision (Section 116) that the Foundation was to be dissolved only if it became impossible to continue any of its business undertakings with the result that it could “see no longer any grounds for continuing its activity in the sphere of the higher technical industry profitably and be also in possession of no other organizations of a permanent nature and of sufficient importance * * *.”

After loss of its assets and ability to function in Jena, the Zeiss Foundation still owned substantial “business undertakings” and “organizations of a permament nature” in the West, which constituted “grounds for continuing its activity in the sphere of the higher technical industry profitably” there. If the founder’s intention was to be respected, the proper course of action was to continue its activities in the West. This it was enabled to do by changing its domicile from Jena to Heidenheim. Section 87 of the German Civil Code permitted intervention by the state authority of Wuerttemberg for the purpose of achieving such a change, so that the validity of the state’s action in exercising the supervisory power over foundations delegated to it by § 87 does not depend on the Board’s authority.

Defendants’ contention that a foundation is strictly a creature of the state which approved the founder’s statute or charter, and the supporting testimony of German law experts offered by the de *905 fendants, Messrs. Nathan and Honig, must he rejected. Their view to the effect that a member state creating a foundation has always had the powers set forth in Articles 80-88 of the German Givil Code, including the power to dissolve such a foundation or change its purpose, would render these Civil Code provisions superfluous, whereas the interpretation furnished by plaintiffs' German law experts and authorities not only accords with the Code’s pattern but gives them meaning and effect, especially in view of the generally accepted doctrine of federalism to the effect that following adoption of the German Civil Code each of the member states, or laender, had only limited autonomy which could be changed from time to time by the central government as the sovereign power. Emerson, State and Sovereignty in Modern Germany, pp. 238-241 (Yale Univ. Press 1928). The view accepted by the Court, which would give effect to the German Civil Code, is that its provisions superseded the private law systems of the states to the extent that the field was occupied by the federal government. In accepting this view the Court has carefully considered not only the authorities and arguments offered by the parties but the credibility to be extended to the experts who testified on the issue. The Court found the testimony of Professor Steindorff, offered by plaintiffs, to be particularly impressive and reliable as a thorough, fair, and carefully reasoned analysis. In contrast, that of Professor Nathan appeared for the most part to be unacceptable, not only because of its weaker support in logic but because of a strong preexisting bias evidenced in intemperate articles written by him with respect to Zeiss in which he stated that the United States was “in league with German Fascists” in April and May, 1945, when its forces entered Jena, that the history is one of a “pseudo-Zeiss scandal” in which “for monopoly capitalism no means are notorious enough illegally to enrich itself”, that “all the dark powers of the German and American imperialism will appear behind the scene and pull their strings, in order to achieve judicial approval as a cope-stone of their dirty machinations”, etc. Mr. Honig, a British barrister offered as another witness by defendants, suffered from the disability of never having practiced law in Germany, taught German law, or written any works or articles on the subject of German law. His testimony was unconvincing on the principal issue. After testifying that § 87 of the German Civil Code authorized a change of domicile of a foundation at least within a land or state, he withdrew this view on the following day. Furthermore, the authorities offered by Nathan and Honig are unpersuasive and clearly distinguishable. An 1843 decision by the Court of Appeal of Celle to the effect that only the state where a foundation legally has its domicile may exercise supervisory power over it, is irrelevent for the reason that it antedated the 1871 unification of Germany and the 1900 adoption of the German Civil Code, with its provisions federalizing foundations, which govern here. As both Professor Nathan and Mr. Hpnig conceded, the “nationality” of a foundation is essentially a term used to describe the body of law by which it is governed. Since 1900, as Professor Steindorff demonstrated, that body has been the German Civil Code.

The weakness of the position advocated by defendants with respect to § 87 lies partly in their failure to distinguish between a “private” foundation, such as the Zeiss Foundation 2 which is governed by §§ 80-88 of the German Civil Code, and a public one, such as a state insurance or charitable ins