United States v. Belmont

When the Soviet Union nationalized the Petrograd Metal Works in 1918, not all of the business's assets were within easy reach of the new Soviet government. Earlier that same year, the metal works had deposited $24,438 with a New York City private banking firm, August Belmont & Company. The money remained in New York for nearly 20 years before a U.S. Supreme Court decision made its release possible.

During the first tumultuous years of the Soviet regime, hundreds of millions of dollars in claims were filed by Americans whose business with Russian firms was disrupted by the Soviet takeover of private enterprise. Likewise, huge sums aimed by Soviet claimants against American interests remained uncollected because no formal diplomatic relations existed between the United States and the Soviet governments.

This legal standoff lasted until 1933, when President Franklin D. Roosevelt recognized the Soviet Union by executive order. In some quarters, Roosevelt's decision to recognize the Soviet government was controversial. Because the president established diplomatic relations by issuing an executive order, debate or approval by Congress was not required.

Financial claims were among the issues discussed by the Roosevelt administration and Soviet People's Commissar of Foreign Relations Maxime Maximovitch Litvinoff. In a reciprocal agreement signed on 16 November 1933, each side agreed to release and transfer the job of weighing and collecting claims to the government on whose soil the claim was being made. In the Petrograd Metal Works case, this meant that the United States agreed to pursue the claim of the Soviet government on the money withheld by the Belmont firm, in return for Soviet action on claims by Americans against Russian nationals.

The August Belmont Company, however, refused to release the disputed money. The U.S. government responded with a lawsuit. After August Belmont died in 1924, the federal suit named the executors of his estate, Belmont's widow Eleanor and Morgan Belmont. At first, the federal government's claim was dismissed by the U.S. District Court for the Southern District of New York. The court agreed that the Belmont case was within the scope of the Roosevelt-Litvinoff accord. Since the deposit was made in New York and not on Soviet territory, however, the court decided that appropriating the money would amount to confiscation, an act which was against the public policy of both the state of New York and the United States. Dismissal of the case amounted to a decision that the U.S. government was not entitled to sue the Belmont company.