2

Before the Venezuelan commissions, sitting at Caracas, four bond claims were presented, with various decisions. In the case of the Comp. Générale des Eaux de Caracas (Belgium), Venezuelan bonds payable to bearer had been issued to the corporation for certain public works. From the decision it would seem that the general rule of nonenforcement of bond claims may be held not applicable where the bonds are issued in payment of property rights transferred to the government. Although many of the stockholders were not Belgians, an award was made with the peculiar provision that the money should be deposited in a Belgian bank and the bonds paid on being turned in. The production of the bonds naturally was made a necessary condition for the making of an award, so where, in the case of Ballistini (France), the original bonds were not produced, the claim was dismissed, Paul, Commissioner, in a dictum giving expression to the usual rule of the non-enforcement of bond claims before international commissions. In the case of Boccardo (Italy),3 where national bonds were delivered to claimant in payment for articles furnished and were never transferred by him, judgment was rendered on the authority of the Aspinwall case before the Venezuelan Commission of 1885. The fourth case, Jarvis (U. S.), was dismissed because the service and the supplies for which the bonds were issued (by a temporary dictator of Venezuela) were furnished to an unsuccessful revolution, which had not been recognized by the government of the United States, and hence presumably they were not valid obligations of Venezuela.

5

In the recent case of Canevaro (Italy) against Peru, Italy based its claim upon the fact that Peru had refunded its internal debt by issuing consolidated bonds at a greatly reduced rate, and that bonds of this internal debt held by Italian subjects by assignment were

case, Moore's Arb. 3463), although the failure to pay for supplies furnished under contract had been so construed.

1 Comp. Générale des Eaux de Caracas (Belgium) v. Venezuela, March 7, 1903, Ralston, 271-290.

2 Ballistini (France) v. Venezuela, Feb. 27, 1903, Ralston, 503–506.

3 Boccardo (Italy) v. Venezuela, Feb. 13, 1903, cited in note to Ralston, 505 (not reported). See, however, the brief statement given by Mr. Ralston in his address before the International Law Association, 24th Rep. 193-194.

4 Jarvis (U. S.) v. Venezuela, Feb. 17, 1903, Ralston, 145–151.

Canevaro (Italy) v. Peru, April 25, 1910, 6 A. J. I. L. (1912), 746, 752.

thereby unlawfully reduced in value. The Hague Tribunal supported the contention of Peru that the internal debt did not become external by its assignment to aliens, and that alien transferee-holders were in no better position than national holders of the bonds. Various claims of French and other citizens and corporations against Chile, based upon bonded indebtedness guaranteed upon guano deposits ceded by Peru, were submitted to the tribunal sitting at Lausanne, the awards upon which were rendered July 5, 1901.1 By the protocol of Feb. 2, 1914 between France and Peru, it was agreed to submit to arbitration the claim of the widow Philon-Bernal and other bondholders of the loan of 1870.2

§ 125. The United States and Central-American Loans.

The United States, in its endeavor to be consistent with the maintenance of the Monroe Doctrine and with the declaration of President Roosevelt that that doctrine could not be used by any nation of this continent to shield it from the consequences of its own misdeeds, has at times been placed in the most delicate position when foreign nations have attempted to seek redress for the alleged violation of international rights. So, in the settlement of numerous difficulties between European nations and Latin-American states arising out of pecuniary claims the United States has had an active interest. Especially where the occupation of American territory seemed imminent, the United States, by virtue of its responsibilities under the Monroe Doctrine, has felt called upon to undertake what may be called friendly intervention to prevent such occupation and yet satisfy the creditor nations.

President Roosevelt, in his message to Congress of Dec. 5, 1905, stated these embarrassing conditions, pointing out at the same time. the method by which relief from this critical situation could be most equitably and practically secured. In his message he said:

"Our own government has always refused to enforce such contractual obligations on behalf of its citizens by an appeal to arms. It is much to be wished that all foreign governments would take the same view. But they do not, and in consequence we are liable at any time to be brought face to face with disagreeable alternatives. On the one hand,

1 Descamps and Renault, Rec. int. des traités du xx siècle, 1901, p. 188 et seq. 241 Clunet (1914), 1440–1442.

this country would certainly decline to go to war to prevent a foreign government from collecting a just debt; on the other hand, it is very inadvisable to permit any foreign power to take possession, even temporarily, of the custom-houses of an American Republic in order to enforce the payment of its obligations, for such temporary occupation might turn into a permanent occupation. The only escape from these alternatives may at any time be that we must ourselves undertake to bring about some arrangement by which so much as possible of a just obligation shall be paid. It is far better that this country should put through such an arrangement rather than allow any foreign country to undertake it. To do so insures the defaulting republic from having to pay debts of an improper character under duress, while it also insures honest creditors of the republic from being passed by in the interest of dishonest or grasping creditors." 1

2

This method of administering the finances of bankrupt and unstable governments has in fact been applied in the Dominican Republic. In 1905 it was effective in restraining the forcible attempt of Germany, Spain and Italy to secure payment of arrears of interest and pledged revenues to their subject creditors. International practice seems to have given a sanction to this form of intervention. It might be called benevolent intervention in the interests of the debtor state and of its creditors, and however the paternal control of the temporary guardian may hurt the pride of the citizens of the bankrupt nation, the advantages resulting to world peace exceed by far such minor disadvantages as the disapproval of a few patriotic nationals. Nevertheless, in the absence of an international forum, it is not apparent how grossly exaggerated claims against these states can be avoided, for presumably the financial administration looks only to the payment of the current expenses and of the national debts and makes no provision for the judicial examination of the legitimacy of the latter. The existence of the Platt Amendment in the treaty with Cuba and in the proposed treaty with Nicaragua is an effective check upon the undue increase of public debts by these countries. The unratified treaties of 1911 between the United States and Honduras and the United States and 1 For. Rel., 1905, H. Doc. 1, 59th Cong., 1st sess., 34-35.

2 This Latin-American disapproval of the policy of the United States as evidenced in the unratified treaties of 1911 with Honduras and Nicaragua is expressed in a series of pamphlets: United States and Latin-America, Dollar Diplomacy, by Juan Leets, New Orleans, 1912; Nicaraguan Affairs, San José, 1912; the Morgan-Honduras Loan, 3 parts, New Orleans, 1911-12.

Nicaragua and the recently proposed "protectorate" treaty with Nicaragua, all of which were invited by these small republics, indicate a necessary policy of this government, whether by temporary receivership or supplementary administrative control, to secure the financial rehabilitation of the weaker states of Latin-America, and thus reassure foreign creditors and maintain domestic peace and prosperity on terms most favorable to Latin-America.1

§ 126. Conclusion.

1

The Porter proposition is by no means a complete remedy for ex

European countries have adopted practices of various kinds to assure the successful operation of a loan contract concluded between a foreign nation and their subjects. Thus Great Britain has provided in such cases for the selection of a British supervisor of the loan and the government "takes cognizance" of the contract. The Corporation of Foreign Bondholders, an association for the protection of British holders of the bonds of foreign countries, usually seems to receive material support from the British government in its demands. Similar associations exist in Germany, France, and Belgium (41 Clunet, 1914, 137-140).

In the Dominican and the unratified Honduras and Nicaraguan treaties with the United States, diplomatic protection is extended to the receiver or supervisor in the performance of his duties. See the treaties between the United States and Dominican Republic, Feb. 7, 1907, Honduras, Jan. 26, 1911, and Nicaragua, June 8, 1911. See also editorial comment on the treaties in 5 A. J. I. L. (1911), 1046-1051. A discussion of the treaties by Sec'y of State Knox is contained in his speech before the New York State Bar Association (1912), 311-318. An elaborate explanation and justification of the policy of the United States in negotiating the treaties is to be found in President Roosevelt's message in connection with the customs revenues of the Dominican Republic, Confidential Executive, V, 58th Cong., 3rd sess. See also speeches incident to the visit of Philander C. Knox to the countries of the Caribbean, Feb. 23 to April 17, 1912 (Washington, 1913, ch. III and IV). France has apparently no objection to using its subjects' foreign loans to foster its commercial interests. Speech of M. Pichon, Minister of Foreign Affairs, in the Chamber of Deputies, Jan. 13, 1911, Journal Officiel, Jan. 14, 1911. Notwithstanding the disapproval by the present Administration of "dollar diplomacy"—an ill-defined and much-abused term-as evidenced in the withdrawal from the Chinese loan, the Administration has clearly indicated by the proposed so-called "protectorate" treaty with Nicaragua its necessary interest in the financial stability of the small Latin-American states. The recent threat of Great Britain to dispatch a warship to Guatemala to secure the payment of debts and the resulting appeal of Guatemala to the United States presents a familiar situation in our Latin-American relations. By reason of the Monroe Doctrine, we cannot avoid an active concern in the adjustment of these difficulties, and had better sanction a method of peaceful administrative supervision most conformable to the interests of all parties concerned.

isting evils, except in so far as it protects a debtor state from the immediate use of force. It still permits of much injustice to the debtor nation, inasmuch as claims are still presented on ex parte evidence without a judicial examination of the merits of the case. Experience has shown that claims are generally greatly exaggerated. Again, the creditor's national government is not required to arbitrate. The failure to make or accept the offer of arbitration simply precludes the use of force in first instance, but not the use of other methods of oppression. Experience has shown that it is only against weak states that governments will interpose to secure the payment of contract debts. Moreover, there is a question whether the debtor government can demand arbitration. This should certainly be made possible.

On the other hand, the unpaid creditor has no individual right to bring about the adjustment of his claim. The action of his government in his behalf depends upon political considerations and is entirely a matter of expediency and policy. If his government for any reason declines to become interested in his case or to espouse his claim against the foreign government, the creditor is without a remedy. A legal right of the individual may therefore be sacrificed to the political exigencies of his government. With the constant growth of international contractual relations between individuals and foreign governments, the fulfillment and enforcement of legal obligations toward individuals should be divorced from political considerations. The difference in the practice of governments in the support of contract claims gives an unequal advantage to the nationals of some states and correspondingly embarrasses the governments whose policy or practice it is to decline diplomatic pressure in such cases.

These various defects of the system as it still exists, with its possibilities of injustice either to the debtor state or the unpaid creditor, or both, lend much weight to the proposal, advanced with greatest emphasis in Germany, that an international court be created by international agreement for the adjustment of these essentially legal claims. The individual should be given the right to bring suit against the debtor nation before this international tribunal, as has been done in the convention for the establishment of an international prize court and in

10. Nippold in 18 Ztschr. für internationales privat. u. öffentliches Recht, 260.