of Egypt (1880).1 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.

The practice of non-interference of the United States on the other hand has been not only a matter of policy, but the carrying out of a fundamental principle that the diplomatic interposition of the United States cannot be invoked (within the recognized limitations) in behalf of contractual claims.1 If certain revenue or security has been set aside for the repayment of a loan, it seems probable that the United States would, following the practice of other nations, interpose diplomatically to prevent any diversion of the security or the pledged revenue.2 Attorney-General Cushing in the course of an elaborate opinion on the Texas bonds question declared that

"A public creditor, like a private creditor, has a general right to receive payment out of the property, income, or means of his debtor. A special pledge of this or that source of revenue, of this or that direct tax, when made by a government, renders such source of revenue, like a mortgage or deed of trust given by a private individual to his creditor, a specific lien, a fixed incumbrance, which the government ought not, in justice to the creditor, to abolish, lessen, or alienate until the debt has been satisfied." 3

4

In the case of certain bonds issued by Haiti to American citizens for work and materials furnished, Secretary of State Sherman protested against a proposed law of Haiti having in view the conversion of the bonds at a rate greatly depreciatory of their value. There would indeed seem to be some difference between bonds purchased in the open market as an investment and bonds received in payment for services and goods, in the hands of the original parties.

Where the loan has been liquidated and a new agreement for payment made, the origin of the debt seems to have constituted no deterrent against its enforcement. So in Mexico, in 1861, Lord John Russell withheld recognition of the Mexican government until Mexico had agreed to carry out an arrangement made with British bondholders.5

1 Citations noted in Moore and Wharton, supra, p. 288.

2 Cases cited, supra. See also opinion of Little, commissioner, in Aspinwall (U. S.) v. Venezuela, Dec. 5, 1885, Moore's Arb. 3641-3642.

3 Opinion of Sept. 26, 1853, 6 Opin. Atty. Gen. 130, 143.

4 Mr. Sherman, Sec'y of State, to Mr. Powell, Oct. 26, 1897, Moore's Dig. VI, 729. In Canevaro (Italy) v. Peru, April 25, 1910, 6 A. J. I. L. 746, the internal debt of Peru was converted at a reduced rate.

5 Lord J. Russell to Sir C. Wyke, Mar. 30, 1861, 52 St. Pap. 237, 239. Some of

Both the United States and Great Britain have authorized their representatives abroad to receive payment for their citizen bondholders, as a matter of convenience both to the debtor government and to the citizen, and where the bonds of one foreign government have been wholly or largely held by the citizens of another, the United States has,. on one occasion at least, sanctioned the endeavor of the government of the creditors to effect by diplomatic negotiation an adjustment of their claim.2

Dr. Drago, in advancing his doctrine as a corollary to the Monroe Doctrine, had some reason to expect the approval of the United States, not only because of its interest in the maintenance of the Monroe Doctrine, but because of its traditional attitude in the matter of contract claims. Dr. Drago quoted from Monroe's message that the United States

"could not view any interposition for the purpose of oppressing [the countries of the American continent], or controlling in any other manner their destiny, by any European power, in any other light than as the manifestation of an unfriendly spirit toward the United States." 3

In Secretary of State Hay's reply to the Drago note (one of "cordial evasion," as Dr. Drago himself has expressed it), Mr. Hay quoted from President Roosevelt's message of 1901 to the effect that

“we do not guarantee any state against punishment if it misconducts

the money was seized by Mexican authorities after it was in the hands of the bondholders' agent. This raised a different question, and of course justified interposition. 51 St. Pap. 548.

1 Mr. Frelinghuysen, Sec'y of State, to Mr. Wright, Jan. 17, 1884, Moore's Dig. VI, 713; Phillimore, op. cit., II, 13. See also settlement of claim of McMaster (Gt. Brit.) v. Colombia, Jan. 27, 1882, 73 St. Pap. 1349. McMaster had to prove that he purchased the 16 bonds in question before the issuance of a certain order for the suspension of payment on all bonds of this issue. Claimant governments will usually examine closely into the bona fides of the transaction by which their citizens became the holders of the bonds of foreign governments, to establish the absence of speculative ventures, and the existence of an actual loss. The face value of the bonds is not always a good test of the sum parted with or the legitimate loss sustained.

* Mr. Frelinghuysen, Sec'y of State, to Mr. Wright, Jan. 17, 1884, Moore's Dig. VI, 713. He stated, however, that the occasions on which this had been done were not common enough to form a rule of action.

'President Monroe's Annual Message, Dec. 2, 1823, Amer. St. Pap., For. Rel. V, 246, 250, quoted in Moore's Dig. VI, 401, 402; Richardson's Messages, II, 209 et seq.

itself, provided that punishment does not take the form of the acquisition of territory by any non-American power,'

but added an unequivocal approval of arbitration of claims growing out of alleged wrongs to individuals.

§ 122. The Porter Proposition at The Hague.

Both Mr. Root, as Secretary of State, and President Roosevelt, having in mind the difficulties of Venezuela in 1903 and those of the Dominican Republic in 1894 and 1904 in endeavoring to ward off foreign intervention, were anxious to have the question of the use of force in the collection of contractual claims settled by the agreement of states. Mr. Root therefore on June 18, 1906, instructed the delegates of the United States to the Third American Conference of American States at Rio Janeiro as follows:

"It has long been the established policy of the United States not to use its armed forces for the collection of ordinary contract debts due to its citizens by other governments."

After deprecating its injurious effect upon the welfare of weak and disordered states, whose development ought to be encouraged in the interests of civilization, he added:

"It is doubtless true that the non-payment of public debts may be accompanied by such circumstances of fraud and wrong-doing or violation of treaties as to justify the use of force. This government would be glad to see an international consideration of the subject which shall discriminate between such cases and the simple non-performance of a contract with a private person, and a resolution in favor of reliance upon peaceful means in cases of the latter class." 2

He recommended, however, that as most of the American states were still debtors and would, by such a resolution, resolve how their creditors should act, it would be more fitting that they should request the Hague Conference, where both creditors and debtors would be assembled, to consider the subject.

The Rio Conference made such a request, and the United States delegation at The Hague, on instructions from Mr. Root, as Secretary 1 Mr. Hay, Sec'y of State, to Señor Garcia Mérou, Feb. 17, 1903, For. Rel., 1903,

2 Senate Doc. 365, 59th Cong., 2nd sess., 41-42.