claim to be put on the same footing as the native creditor of the state." 1 Rivier, one of the foremost authorities, .has in this respect asserted a far-reaching right of intervention under circumstances far more unreasonable than those admitted by other publicists. Unless it may be assumed that the words italicized below presuppose fraud and bad faith, his doctrine will hardly find general support, though it must be admitted that the weaker states have at times found themselves intervened against under circumstances no harsher than those mentioned by Rivier:

"The fortune of individuals, subjects of the state, forms an element of the riches and prosperity of the state itself. It has an interest in the maintenance and increase of that fortune. If it is compromised by the act of a foreign state which administers its finances badly, which betrays the confidence individuals placed in it when they subscribed to loans on conditions that are not observed, and which violates its engagements in regard to them, the state to which the injured individuals belong is evidently authorized to take their interests in hand in any manner which it shall deem suitable; it may proceed either by diplomacy or by reprisals. Individuals have not, as a general rule, the right to require of the state that it shall thus take their cause in hand. The state may refuse to act in their favor for reasons of which it is the sole judge; but if it acts, it only exercises its right. It may see to it, perchance, according to the circumstances, that its subjects are better treated than those of other states, or than those of the insolvent state. This is, from the legal point of view, a matter of absolute indifference." 2

G. F. de Martens sanctions intervention in case of "violent financial operations" of the debtor state depriving creditors of their loans, but he adds that foreign creditors cannot demand better treatment than nationals. Although cited by Phillimore as an advocate of in1 Phillimore, op. cit., II, 14.

2 Rivier, Alphonse, Principes du droit des gens, Paris, 1896, I, 272.

3 This was in effect the decision of the Hague Tribunal in the claim of Canevaro (Italy) v. Peru, April 25, 1910, 6 A. J. I. L. (1912), 746, based on the fact that certain bonds of the internal debt of Peru, subsequently reduced in value by the refunding of that debt into consolidated bonds, had by assignment passed into the hands of Italian subjects, who had sustained injury by the reduction of the debt. Although Italy cited numerous authorities in support of its argument that as to aliens a state incurs international responsibility by the reduction of its debt, the Tribunal declined to view the refunding as the reduction of a foreign debt, but considered the transfer of the bonds of an internal debt from nationals to aliens as not conferring greater rights upon aliens than nationals possessed. See an illuminating article by Ch. de Boeck, discussing the Peruvian and Italian contentions, with citations of authorities, in 20 R. G. D. I. P. (1913), 355 et seq., 365, 369.

tervention, opponents may also find support in his ambiguous doctrines.1

The majority of writers consider armed intervention for the mere non-payment of public debts an unjustifiable procedure, upon reasons similar to those advanced by Dr. Drago, namely: that hazardous loans should be discouraged; that those making them have full notice of the risks; that foreigners cannot expect to be preferred to native creditors; that force is never resorted to except against weak states and is often a pretext for aggression or conquest; and, finally, that the loss of credit and standing incurred by the state is an ample and effective penalty for the failure to fulfill its obligations.2 The objections of writers, however, are directed not to diplomatic interposition, but rather to an excess of interposition in the use of armed force to collect unpaid public loans.

The preponderance of authority, however, favors the view that under certain circumstances intervention to secure the payment of public loans is legitimate. Authorities differ merely as to the nature of the circumstances. In general, it may be said that intervention is not warranted in the case of an honest inability of a state to pay its debts, but only when, the means being at hand, the debtor state willfully refuses to pay; or further, when foreign creditors are illegally treated, especially if they are discriminated against in favor of national creditors, or if certain categories of creditors are preferred to others; or when special funds assigned as security to the payment of certain debts are diverted or suppressed;-in short, when bad faith may be considered the moving cause

'G. F. de Martens, Précis du droit des gens, Paris, 1864, I, 298, § 110. See also Phillimore, op. cit., 14, and Pradier-Fodéré, Traité, I, § 405, p. 623, note.

2 These authorities are enumerated and citations to their works given in the second part of footnote 34 of Hershey's article in 1 A. J. I. L. (1907), 37; in the work of Wuarin, op. cit., 155–159, and in the address of Gen. Horace Porter before the Second Hague Conference on July 16, 1907, presenting the American proposition for the limitation of force in the collection of contractual debts. La deuxième Conference internationale de la Paix, II, 229–233. Also printed in English (Hague, 1907). The principal publicists who oppose what may be called financial intervention are F. de Martens, Westlake, Holland, Bonfils, Calvo, Pradier-Fodéré, Rolin-Jacquemyns, Despagnet, von Bar, Liszt, Geffcken, Kebedgy, Nys, Merignhac, Féraud-Giraud, Weiss, Olivecrona and Floecker. Gen. Porter also cited Rivier, but this must have been an oversight. See also Collas, Der Staatsbankerott und seine Abwicklung, Stuttgart, 1904, 51, and Freund, Rechtsverhältnisse, etc., 271.

of the non-payment. In the present condition of international law, in which states, large and small, have no common superior to control or check them, each state has the legal right of deciding for itself whether the conditions warranting intervention exist. In the use of this right, the power of enforcing its demands has often been a factor more controlling than the mere legitimacy or fairness of its action.1

There is, in fact, no definite rule as to diplomatic intervention in the matter of unpaid public loans, except in so far as the convention of the Second Hague Conference for the limitation of the use of force in the collection of contractual debts will operate as a check by requiring under certain conditions a preliminary resort to arbitratior.

§121. Practice of Nations.

The European powers have on several occasions intervened to secure the payment of public loans due their subjects. Their action has taken various forms. Sometimes it has been merely the use of good offices and an approval of arrangements for financial control made by national bankers or associations of bondholders with the debtor state, as in the case of Turkey (1881) and Servia (1904); an assumption of limited governmental control, as in the case of the United States in the Dominican Republic (1907); or joint intervention of several powers assuming financial control as in the case of Tunis (1868), of Greece 2 (1897), and

The decision of the Hague Permanent Court of Arbitration in the Preferential Claims case of Germany, Great Britain and Italy against Venezuela has been considered an approval of the use of force in the collection of claims based on contract or public debt. While it is true that the use of force appears to have been sanctioned by the tribunal by the allowance of preferential treatment to the three blockading powers, it is certain that only a small part of the claims pressed arose out of contractual debts. The primary reason of the blockade was the stubborn reiteration by Venezuela of the exclusive jurisdiction of its national courts and the absolute refusal to arbitrate. Castro's arrogance exhausted the patience and temper of the powers. See article by Basdevant, Jules, L'action coercitive Anglo-Germano-Italienne contre le Venezuela (1902-1903), 11 R. G. D. I. P. (1904), 363-458; Hershey, Amos S., The Venezuelan affair in the light of international law, 51 American Law Register, 249– 267. The Hague decision is criticised by André Mallarmé in an article L'arbitrage vénézuélien in 13 R. G. D. I. P. (1906), 423–500. For the correspondence see Asuntos Internacionales, two volumes of the Yellow Book of Venezuela published in 1903 and extracts printed in the Appendix to Ralston's Report of the Venezuelan Arbitrations. * Kebedgy, Michel S., Les difficultés financières de la Grèce et l'intervention des

of Egypt (1880). This is intervention in the true sense, in that it involves an administrative control over a certain portion of national resources and revenues. It seems to be more proper on the part of a state or states guaranteeing the debt of some weak state placed under their guardianship. Both this form of action and the collection of loans by force of arms without complete intervention, as, e. g., the joint operations against Mexico in 1861 and against Venezuela in 1902, have invariably been carried out against weak states. When Spain, Italy, Austria, Hungary and various states of the United States at different times suspended or reduced their public obligations there was no intervention on the part of the powers whose subjects had shares in the unpaid or underpaid loans. This is at least cumulative evidence in establishing that intervention or the use of arms to collect public loans is a question of power and politics rather than a rule of law.

Notwithstanding Great Britain's participation in the operations against Mexico in 1861, against Egypt in 1880, and against Venezuela in 1902, her statesmen have always asserted it to be England's policy not to interpose diplomatically in behalf of British holders of bonds. of foreign governments, though reserving their liberty of action. The British view was expressed in its now accepted form in the celebrated circular sent by Lord Palmerston in 1848 to the British representatives in foreign states. He then declared:

"It is therefore simply a question of discretion with the British government whether this matter [the non-payment of public loans] should or should not be taken up by diplomatic negotiation, and the decision of that question of discretion turns entirely upon British and domestic considerations."

états étrangers, 1 R. G. D. I. P. (1894), 261–271; Imbert, Henri Marc, Les emprunts d'états étrangers, Paris, 1905, gives an account of the various cases of intervention in Turkey, Egypt, Portugal, Greece, Tunis (pp. 60–99); Kebedgy, M. S., De la protection des créanciers d'un Etat étranger, 21 Clunet (1894), 59–72, 504–519. See also Wuarin, Freund and Politis, op. cit., and Meili, Fr. Der Staatsbankerott und die moderne Rechtswissenschaft, Berlin, 1895; Waurin, article in 29 Clunet (1902), 25 et seq., 420-431.

1 Kaufmann, Wilhelm, Das internationale Recht der egyptischen Staatschuld, Berlin, 1891. See also article by same author in 22 R. D. I. (1890), 556–586; vol. 23, 48-75, 144-175, 266-316. A bibliography on the Egyptian debt will be found in 30 Clunet (1903), 681-683.

Referring to the economic disapproval of British investments in foreign loans as against British enterprises, he added that the British government has

"hitherto thought it the best policy to abstain from taking up as international questions the complaints made by British subjects against foreign governments which have failed to make good their engagements in regard to such pecuniary transactions. .

"But, nevertheless, it might happen that the loss occasioned to British subjects by the non-payment of interests upon loans made by them to foreign governments might become so great that it would be too high a price for the nation to pay for such a warning as to the future, and in such a state of things it might become the duty of the British government to make these matters the subject of diplomatic negotiations." "

1

Palmerston's instruction has occasionally been misinterpreted by writers who use his note in support of an argument for non-intervention. When he stated that interference was "for the British government entirely a question of discretion, and by no means a question of international right," he did not intend to cast any doubt on the right of Great Britain to interfere (as some writers have quoted him), but he meant that there was no question about the right to interfere. This is clearly shown by the succeeding sentence of the note.2

Subsequent secretaries for foreign affairs, emphasizing the speculative character of the transaction of subscription to a foreign loan, have declined to do more than exercise their good offices in behalf of unpaid bondholders. Great Britain's practice of non-interference is entirely a matter of policy and is not to be construed as the recognition of an international legal principle.3

1 Palmerston's circular is quoted in full by Phillimore, op. cit., II, 9-11, and by Hall, 276-277. Other secretaries for foreign affairs of Great Britain have expressed, in language even more unreserved than that of Palmerston, the policy of noninterference. See, for example, Canning and Aberdeen (28 St. Pap. 961, 967, 969). Russell (52 St. Pap. 237-239), Derby, Granville (quoted by Phillimore, op. cit., 1213), and Salisbury (cited by Hall, note, p. 277). Balfour, when Prime Minister in 1902, supported this view; see Scott's Hague Peace Conferences, I, 402.

2

See, for example, Gen. Porter's address of July 16, 1907, printed separately and quoted in Scott's Hague Peace Conferences, I, 402.

The recent (1913) threat of Great Britain to dispatch a warship to Guatemala to collect the unpaid interest and capital on bonds held by British subjects may be charged to the action of Guatemala in diverting the security of the loan, an export tax on coffee, to other purposes.