¹ The term “international loan” would be more accurately applied to loans made by one nation to another nation. The term is not generally applied to the purchase of an internal bond of a foreign country by a national bondholder or to investments abroad in the form of stock purchase or purchase of foreign property, real or personal. Nor will it here be used to describe loans by nationals to foreign private enterprises, corporate or individual. The loan is usually evidenced by a bond or other certificate constituting a promise to pay, with interest.

² Manes, Staatsbankrotte, 2d ed., 14.

³ The principal non-American cases of state insolvency have been: Austria―1802,1805, 1811, 1816, 1868, 1919; Holland― 1814; Germany (Prussia)―1807, 1813, 1919; Westphalia ―1812; Schleswig-Holstein―1850; Spain―1820, 1831, 1834, 1851, 1867, 1872, 1882; Greece ―1826, 1893; Portugal―1837, 1852, 1892; Russia―1839, 1919; Turkey―1875, 1876, 1881; Egypt―1876. In the United States, nine states of the Union—Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, and West Virginia—repudiated their debts about the middle of the century; and in SouthAmerica and Central America, almost every country at one time or another has been unable or unwilling to pay as promised its bonded indebtedness. The defaults of 1930, 1931, and 1932 open a new chapter.

⁴ Europe, The World’s Banker, 1870–1914. An account of European foreign investment and the connection of world finance with diplomacy before the war. (New Haven, 1930, Part 2.)

⁵ John Foster Dulles, “Our foreign loan policy” (1926), 5 Foreign Affairs, 33; Dr. Leo Gross, “Bundesstaatliche Kapitalkontrolle in den Vereinigten Staaten von Amerika,” Mitteilungen des Verbandes österreichischer Banken and Bankiers, XIV, pp. 17–25, 89–103 (1932).

⁶ See speech of Senator Johnson of California, 75 Cong. Rec. 6219 (1932).

⁷ Wuarin, Essai sur les emprunts d’ etats (Paris, 1907), 60; Meili, Staatsbankerott, 11 et seq.; Manes, Staatsbankrotte (Berlin, 1919), 2d ed., 17–23.

⁸ Lehr, for example, in Handworterbuch der Staatswissenschaften, Vol. 5, p. 832, 1st ed., says: “When a government, with or without express declaration, openly or tacitly fails to fulfill its obligations toward its creditors, we speak of a state bankruptcy.” Pflug, in his work Staatsbankrott and internationales Recht (Munchen, 1898), 1, says: “State bankruptcy is the refusal of a state to pay its legally undoubted money, obligations toward private persons, whether this be caused by inability or unwillingness, or both.” Wuarin, op. cit., p. 62, says:“The bankruptcy of a state, from a legal point of view, consists in the official declaration, by law or decree, of the non-performance by the state of its obligations of its public debt, whether the violation of the rights of its creditors proceed from the insolvency of the state or from its unwillingness to pay.” Von Heckel, in his Lehrbuch der Finanzwissenschaft (Leipzig, 1911), 450, says: “State bankruptcy is present whenever a state violates the rights of its creditors, with or without express declaration, by failing in whole or in part to perform its obligations as a debtor.”

⁹ This occurred in the case of Greece after 1873, which for many years paid only 30% of its coupon interest; and Portugal, which after 1841 reduced its interest payments from 4% to 2½%for a number of years.

The South American countries are prolific in instances of this type. Under this heading might be included the failure to pay interest in cash, but in paper money or other promises to pay―a typical example of which is the Turkish default of 1875, after whichTurkey for five years resolved to pay one-half its interest in cash and to give 5% notes for the other half. Even this undertaking was not carried out, for in 1876 a complete insolvency took place and coupons were no longer paid.

¹⁰ This has not been an uncommon practice, for war and revolution have placed many states in temporary default, requiring postponement in payments.

¹¹ An example of this form of default will be found in the Spanish insolvencies of 1820, 1834, 1851, and 1867. These defaults were made good only in part, when refunding or reorganization or consolidation of loans, helped by a new loan, was undertaken. In 1834, for example, Spain declared that one-third of its foreign debt would be considered as not subject to payment of interest, whereas the other two-thirds were to be subjected to compulsory conversion into new 5% bonds. Even on these, interest was defaulted. Greece, after 1827, completely defaulted on interest for nearly 50 years. Argentina paid interest on its first loan from 1825 to 1829, but then remained in default of interest from 1829 to 1857. In 1890 an agreement with the Bank of England provided for a partial payment of the defaulted interest. Mexico, which effected its first loan in 1825 in Europe, suspended payment of interest in 1827, resumed in 1836, suspended in 1846, resumed in 1850, suspended from 1859 to 1863, and in 1886 entered into an agreement with its creditors to pay, after 1889,3 % interest. San Salvador suspended interest from 1828 to 1859; Guatemala from 1828 to 1855; Ecuador from 1834 to 1854 and from 1868 to 1899. The suspension of interest might best perhaps be called a form of moratorium, rather than insolvency, if the state subsequently makes good its default. Such resumption is somewhat rare.

¹² Obviously, not every tax on coupons can be regarded as the result of insolvency. Where the coupon, however, is tax exempt by contract, such tax constitutes a violation of the obligation to pay interest. Examples of this type of unlawful reduction of coupon interest are to be found in Austria in 1868, in the Spanish 4% loan of 1882, in Russia in 1885, in Italy in 1894, and other instances.

¹³ Such a default may occur in the failure to redeem at the time promised, the failure to draw a lottery loan at the time promised, or the failure to pay annuities. In this category, one often cites the case in 1770 of Louis XV, whose Finance Minister Terray diverted to other uses for eight years funds set aside for the payment of debts. South American countries, and states in federal governments like Argentina and Brazil, have frequently suspended the payment of capital sums or failed to carry out the amortization covenants of loan contracts.

¹⁴ The compulsory character of the obligation is sometimes difficult to prove, though it may well be assumed that no creditor willingly submits to a diminution of his claim. Older forms of loan contracts frequently contained a clause that a conversion was not to take place for a given number of years. Nevertheless, the practice was so common that certain writers on finance seem to have regarded a conversion as something inevitable. If creditors are given an option to take the new converted debt or payment of their old debt, there is nothing objectionable in the transaction.

One form of conversion has been the compulsory exchange of a short-term or floating debt for a permanent consol uncallable. Philip II of Spain, in 1557, converted a debt of 7,000,000 ducats into permanent consols, cancelling the security on the debt and reducing the interest at the same time.

A more modern example was the conversion in 1880 of the 7% and 9% Egyptian debt into a 4% to 5% debt, at the time of the institution of financial control. In Serbia a 5% consol was converted into one of 4%. It has been argued that the subsequent acquiescence of the creditors makes these conversions contractual and hence unobjectionable. This seems an evasion, because the creditors, doubtless, in the absence of any other remedy, must perforce accept their lot.

Some authorities justify compulsory conversions, when not too seriously violative of the terms of the original contract, on the ground that new conditions, such as political, financial or social upheavals, make it necessary to effect some new arrangement with creditors for the benefit of the taxpayers. These equitable considerations, they maintain, require creditors to forego a portion of their claims in the general interest. This, however, seems a dangerous argument and would seek to introduce into the debtor-creditor relationship something like the clause rebus sic stantibus in international treaties, which assumes that treaty promises are entered upon on the assumption of the continuance of a certain condition of affairs.

¹⁵ A well-known illustration is the reduction of the French debt in 1797 by the National Assembly. After the payment of interest had been reduced to three-fourths, for which the creditors received assignments on national assets, the principal of the debt was in 1797 reduced by the Directorate to one-third of its amount. For the other two-thirds, the creditors received coupons which would be accepted for payment, if they purchased state property. These coupons sank in value to one-sixth. Holland and the Kingdom of Westphalia followed the French example. Foreign writers occasionally cite the case of Minnesota, which, in 1858, reduced $100,000,000 of railroad bonds to $50,000,000.

¹⁶ This type of bankruptcy was known even in ancient Rome. Since the war, the payment in an inflated paper currency of an obligation contracted in a metal and sound currency has been common throughout many of the ex-belligerent countries. It is a form of confiscation and admission of insolvency. Similar transactions happened in Portugal in 1899 and in Greece in 1893. The Portuguese creditors lost two-thirds, and those of Greece, 70%, of their interest. Russia entered on such a transaction in 1839, though in Russia it affected practically only Russian creditors. This Russian affair has been characterized by writers as an intentionally fraudulent transaction, for they took silver away from the people and gave them worthless paper in its place.

¹⁷ Both types of reduction have been known in connection with a single debt. This was done in Austria in 1811, where the interest was cut in half and the capital converted into a different currency. It was also done in Egypt Turkey, Greece, and Santo Domingo. South America offers other illustrations.

¹⁸ These repudiations have often followed revolutions, when the new government repudiates obligations contracted by a previous de jure or de facto government, on the allegation that the prior government had no authority to bind the nation. Philip II of Spain is cited as having openly repudiated in 1566, 1576, and 1595. Portugal declined to be bound by the debt contracted by Dom Miguel, 1832. Mexico declined to be bound by the debts contracted by Maximilian. Mississippi, Florida, Alabama, North Carolina, South Carolina, Georgia, Louisiana, Arkansas, and Tennessee repudiated their debts around the middle of the 19th century, but in some of these cases the allegation was made that the loan was not contracted according to law, including lack of legal authority of the officials purporting to represent the state. Where in fact the loan contract is defective in law, either because there was no constitutional or legislative authority to contract the debt or because in other respects the rules of law governing a binding obligation were not observed, the repudiation may have a legal justification, and the creditor may not be deprived of any legal right, for in such cases his obligation from the beginning was not legally binding. We cannot here enter into the power of de facto governments to bind the state, although, in principle, it may be said that general de facto governments having actual control of a country are in international law its legal representatives and have authority to bind the nation.

¹⁹ Borchard, “The Relation Between State and Law” (1927), 36 Yale Law Journal, 780.

²⁰ The jurist Hugo, often called the father of the historical school of jurists (Lehrbuch des Naturrechts, Berlin, 1819, 2d ed.), says: “A national bankruptcy is by no means illegal, and whether it is immoral or unwise depends altogether upon circumstances. One can hardly ask of the present generation that it alone shall suffer for the folly and waste of its predecessors, for otherwise in the end a country could hardly be inhabited because of the mass of its public debts.”

Zachariae (“ Uber das Schuldenwesen der Staaten,” in Jahrbitchern der Geschichte, Leipzig, 1830, p. 291) says: “The State is entitled to reduce its debts, indeed to repudiate them entirely, in so far as it is no longer in a condition to raise the funds, aside from current expenses, to pay the interest and principal of the public debt.” Zachariae admits that, if the rights of the creditor rested upon a contract, rather than on the duty of the state to compensate those who have borne a burden in place of the state, the rights of the creditors would then be unconditional and the nation would have to pay, so far as humanly possible, down to the last cent. He takes, however, the other view. He admits that no nation may arbitrarily break its word and simply decline to pay, when it can. But he maintains that a government has a higher duty than the payment of its debts, which is to keep its citizens alive, and that creditors must be disregarded when there is no alternative. He does make a distinction between those who have voluntarily lent their money and who have concluded an aleatory contract, and those who were the victims of a forced loan. Only under force majeure would he consider the state entitled to disregard these involuntary creditors. (The analogy to involuntary tort creditors is significant.) Zachariae attributes no importance to the form of the contract, which, indeed, is sometimes but not always not unlike the usual corporate loan contract. Occasionally it reads like a decree or law.

Savigny (Obligationenrecht, Vol. 2, p. 110), doubtless influenced by a Prussian law of 1823 which provided that the state could not be sued on its public debts, concluded that public debts are “not under the private-law protection of a judge.”

Rolin-Jaequemyns, a Belgian jurist, in the Revue de Droit International, 1869, p. 146, took the position that the making of a loan was an act of sovereignty, as was the payment. He added that any interference of another state was out of the question.

Numerous French jurists take the same view. We may cite Berr (Etude sur les obligations, Paris, 1880, p. 236), who says: “The Frenchman who concludes a contract with a foreign government subjects himself in advance to the laws of that government concerning the jurisdiction and the law of its courts; he renounces voluntarily the protection of his own national laws. In consequence, questions concerning the performance and liquidation of obligations directed against a foreign state can only be brought before its own courts in accordance with the rules of public law there in force.”

Phillimore (Commentaries on International Law, London, 1882, 3d ed., Vol. 2, p. 18) says: “The English courts have decided that bonds payable to bearer issued by the government of a state only create a debt in the nature of a debt of honor, which cannot be enforced by any foreign tribunal nor by the tribunal of the borrowing state itself, unless with the consent of its government,” citing Crouch v. Credit Foncier of England, L. R. 8 Q. B. 374 (1873); Twycross v. Dreyfus, 5 Ch. D. 605 (1877).

Von Bar, a well-known authority (Internationales Privatrecht, Vol. 2, p. 663), says: “If all the creditors could actually levy execution upon the state property, they could bring the state machinery to a standstill. Public debts, therefore, issued under a special law, contracted with an uncertain number of creditors, rest upon the condition that the State is in a position—of which the State by legislation is the judge—to perform its obligations. The State has, so to speak, a beneficium competentiae in the widest sense; it must first preserve itself, and the payment of its debts is a secondary consideration.”

Politis (Les emprunts d’etat en droit international, Paris, 1894, p. 16) states that the pub

lie loan is neither controlled by civil law nor is it a natural debt, but that a state which does not perform its contracted obligations merely loses credit and its honor. To some extent, Politis differs from von Bar, because he does regard the loan as creating rights and duties, notwithstanding the fact that the state cannot be sued or levied against. Politis declines to admit the distinction between internal and external creditors. He adds: “The assumption of a debt by a state cannot be regarded as a purely private act of a government, as would be the act of a private debtor, but constitutes a political act which the state concludes, in its sovereign capacity as a public power, in the interest and in the name of the whole people.”

Another Greek writer, Kebedgy, in an article in Clunet’s Journal, 1894, Vol. 21, pp. 59 and 504, maintains that the loan of money to a foreign state is a speculative transaction or a more or less aleatory operation.

Appleton, a French writer (Des effets des annexions de territoire sur les dettes d’dat, Paris, 1885, pp. 17 and 18), remarks: “Creditors who are affected by a state bankruptcy entered into a speculative contract which did not give them the hoped for result; that is for them a misfortune. But their government cannot intervene in so far as the debtor acts in good faith and gives its creditors everything which it is in a position to give.”

Wuarin (op. cit., p. 24) also regards the contract as of an aleatory character, giving the creditor no legally enforceable right.

Zorn (Bankarchiv, Berlin, Vol. 6, p. 106) points out that “the payment of interest on a public debt is not a matter of private law, but is the result of the exercise of sovereign powers, and on this point there is no fluctuation in theory.” He adds that “for extreme cases legal rules are unavailing.” In this connection, he is thinking of losses occasioned by war or revolution, and he considers these in the field of force majeure.

²¹ This second group of jurists characterizes the legal relationship between creditor and debt6r somewhat differently. Not all the writers are as clear or categorical as might be desired for purposes of classification, but it may be worth while to quote a few whose views differ materially from those of the first group. This second group regards the relationship as governed, in whole or in part, by private-law concepts, and considers the creditor as having a legal claim upon his debtor, the state. This group considers him, in the event of bankruptcy, not the helpless victim of a sovereign act, but a creditor entitled to such rights as practice and arbitration may be deemed to have given him as a matter of law.

Von Gonner (Von Staatsschulden, Munchen, 1826, pp. 196, 197, 173, 174) says, though not altogether unequivocally, that “public bonds fall in the category of a contract to pay money, both in the relation between debtor and creditor as in the matter of the circulation of the bonds among private holders, notwithstanding the fact that the character of the debtor, who regards the debt as a matter of State, may introduce modifications which cannot always be measured by the rules of private law.”

Ttiol (Handelsrecht, Leipzig, 1879, 6th ed., Vol. 1, sec. 215, p. 644) explains that the circumstance that the debtor is a state involves no particular legal peculiarity apart from exceptions raised by positive law. He defends the position, as do many others, that we are dealing here

with duties or obligatons of a private-law character, regardless of whether the state uses the money loaned for fiscal or administrative or other purposes.

Cosack (Lehrbuch der Handelsrechts, 5th ed., 1900, sec. 66) says: “The emission of a loan constitutes the sale by the borrower of his loan obligation and the attached promise to pay, to the holder of the bond. The bond is the subject of purchase and sale. The creditors are the purchasers. The purchase price is the sum which they pay to the debtor. Practically speaking, the partial creditor is in the legal position of the possessor of a bearer bond: the defenses which the debtor has are limited.”

Meili (Der Staatsbankerott and die modem Rechtswissenschaft, Berlin, 1895, p. 18) says that the contract of loan is a legal obligation, legally binding upon the debtor. He thinks the contract is governed by the objective law of the debtor at the time of the making of the loan, and admits that the obligation has been characterized differently by various jurists,

French literature is also represented by this school. Lewandowski (De la protection des capitaux empruntes en France, Paris, 1896, pp. 27, 32, 33) regards a public loan as a purely private contract. He believes that, when a state takes up a loan, it renounces all its sovereign rights and steps into the arena of private interests, subjecting itself thereby to the common law of contracts. He nevertheless concedes, in the light of the present positions a international legislation and of the facts involved in state bankruptcy, that, if the state a of debtor is in bad faith, the creditor can legally do but very little, so that he concludes that perhaps after all it is only a moral obligation of the debtor.

Jozon (Revue de Droit International, 1869, p. 279) believes that every time a bond is transferred, a new contract between state and creditor is entered into.

Kaufmann (Internationales Recht der aegyptischen Staatsschuld, Berlin, 1891, pp. 14, 15) seeks to justify a distinction between internal and external creditors as follows: As to the internal creditor, he says the private person has only to do with a single sovereign state. By the contract, the private creditor acquires certain contractual rights against the debtor, but at the same time he is subject to the legislative power of the state and hence is subject to the possibility that the state may take from him those rights which by contract it has given him and must give him.

The legal position is different, however, when the state faces foreign creditors. Then, he thinks, the state is, so to speak, a subject of international law. Here he thinks only a contractual relation is involved. Kaufmann regards it as a fiction to consider the foreigner, with respect to the contractual relation, as subjected to the law and courts of the contracting state, and an even greater fiction to assume that this subjection relates not only to the time of the contract, but to all future time and subsequent changes the state might by legislation effect. Such changes in the contractual relations made by a state through legislation are regarded by Kaufmann as a breach of legal rights, whereas he seems to regard the native creditor in a different position.

Freund (Rechtsverhaltnisse der Offentlichen Anleihen, Berlin, 1907, p. 257) takes somewhat the same position. He thinks the internal creditor is subject to the legislation of the state, whereas the external creditor has the protection of international law. He has equal rights with his debtor, the state, and the state cannot change its obligations unilaterally.

Pflug (Der Staatsbankrott, Munchen, 1898, pp. 12, 13) follows somewhat the same view.

Gerlach, in the 5th edition of Roscher’s Finanzwissenschaft, Stuttgart, 1901, p. 277, regards the loan contract as subject to the general principles of the civil law. Every invasion by the debtor state of the rights of the creditors is regarded as an arbitrary and wrongful act. He makes no such distinction as do Kaufmann and Freund between native and i oreign creditors.

It must be added that those who make the distinCtion between the internal and the

external creditor do not apparently follow through the result of their differentiation. Possibly the diplomatic protection of the foreigner is in their minds, in that the foreigner’s remedy may often be more effective than that of the native. They seek, however, to justify the distinction on a legal theory for which they furnish little evidence or argument. If the view were sound, the foreign creditor has a better legal position than the domestic creditor. In the event of an imminent state bankruptcy, domestic bondholders might best transfer their bonds to foreigners. In truth, in the case of Egypt, it was a great advantage to be a foreign bondholder, because special courts were set up to determine the rights of foreigners, namely, the Mixed Courts of Egypt. In diplomatic settlement and arbitration, it has also proved to be a factual advantage to be a foreign bondholder against a weak state.

In 1894, on the protest of the Council of Foreign Bondholders to the Greek Government against any reduction in the interest of the external debt or against any alteration in the system of collecting the hypothecated revenues without full accord with the bondholders, the Greek Government, through the Chargé d’Affaires at London, replied, January 22, 1894 [21st Rep., Corp. of Foreign Bondholders (1893), p. 86]: “I am instructed to acknowledge the receipt of your letter to my Government, and to assure your Committee and the Bondholders, that while the Government thoroughly recognize the obligations undertaken by Greece, they have acted under imperious and immediate necessity, and are convinced they can satisfy the Bondholders that it is impossible for them to carry on the Government of the country and meet their engagements in full; but whatever may be the provisional measures imposed on the Government by the imperious necessities of the situation, the Government consider that no Obligations or Securities can undergo any modification of a permanent character except by agreement with the Bondholders” [italics supplied].

²² Laband, one of Germany’s most celebrated jurists, in an article in the Archiv für öffentliches Becht, 1908, Vol. 23, p. 200, takes the position that in all public loans, even when the state is the debtor, the legal transaction is one of private law, the state appearing not as a sovereign, as in the collection of taxes, but as any private person who might conclude contracts. The legal relation is governed by the law of the time and place of emission of the loan. Laband, however, opposes the view that there is a distinction between internal and external creditors, so far as concerns their legal position. He maintains that the state as a corporation cannot be under the law and then as a legislator, above the law. He admits that it may become incapable of paying its debts, like any private debtor. It may be unable to perform its legal obligations, in whole or in part, but these are facts, and not consequences of legal principles. This legal position is not altered by the fact that the creditors, internal and external, may be unable to enforce their rights against a state acting even in bad faith.

Laband may be characterized as the representative of a third school, which regards state insolvency and bankruptcy as a mere fact, from which no conclusions can be drawn as to the legal relations existing between the parties.

Rotteck, in the 2d edition of his Staatslexikon, had already taken this position. It is also adopted by Escher and by Manes (p. 152).

²³ Wuarin, op. cit., 35.

²⁴ Cited by Manes, op. cit., 153.

²⁵ Watrin, G. Essai de construction d’un contentieux international des dettes publiques. Paris, 1929.

²⁶ We shall here refer only to Wuarin and Sir John Fischer Williams. Wuarin (op. cit., 128–129) suggests the following procedure:

(1) The arbitrators must first examine the bonds. This examination will comprise the authenticity of the bonds, their denomination, and the price at which they were issued on the market. The existence of discounts and premiums must be established, with an indication of the redemption value and the cost of emission.

(2) The arbitrators should designate a certain number of experts who will meet in committee and draft a report after investigation on the following points:

a. A consideration of the economic condition of the state; of its resources; the future development to be anticipated; the revenues collected in the past; critical examination of the system of collecting taxes; ameliorations which might be introduced in the kind and method of collecting taxes; consideration of the new burdens which might be imposed, without injuring the economic development of the country or its people.

b. A critical examination of the budgetary situation over a period to be fixed by the arbitrators, but which might be fixed, in principle, at ten years; an indication of the budgetary deficits and an investigation of their causes; the elaboration of a draft of a normal budget.

c. Conclusions of the experts on the economic situation, in particular a proposal concerning increases of taxes and budgetary economy which might be introduced, and an indication of the benefit to accrue to the debt service.

(3) After taking cognizance of the report of the experts, the arbitrators will give their judgment, taking account of the importance of the claim as established by the experts. They may also decree a reduction of the capital or interest of a debt, or its consolidation, or any other solution; and, if within their jurisdiction, they may designate the comptrollers of the revenue.

Sir John Fischer Williams goes somewhat further in suggesting the considerations to be taken into account, and lays emphasis upon the priority of internal needs of the state, in order that it may continue its functions. He says, in his lectures on “Some legal aspects of international financial problems” (reprinted in his volume, Chapters on Current International Law, 1929), 327–329:

“A Court that had to formulate the principles of decision in the matter of enforcing State debts might perhaps direct its attention to some such considerations as the following:

“First: The debtor State must continue its activities. The enforcement of payments which cannot be made without destroying the existence or the proper discharge of the duties of the State to its nationals is always immoral and usually impossible.

“Second: The question what are the internal duties of a given State at any given time is a question of fact to be decided by the standard of the judgment of an ordinary and reasonable man: a backward State which had never developed a regular system of State education could not claim suddenly to do so at the expense of its creditors; a State threatened by no external aggression could not claim the luxury of large military forces. On the other hand, the nationals of an advanced State could not be deprived of their educational privileges, nor could a weak and threatened State be made to forgo all means of military defence.

“Third: The main element in estimating the financial capacity of a State is the taxable wealth of its citizens, rather than the material assets of which as between itself and its citizens the State may happen to be the owner. To hold otherwise is to make the measure of the foreign liabilities of a State vary with its own internal arrangements. Although the private property of citizens cannot be directly seized by aforeign creditor in payment of a State debt, the foreign creditor is justified in expecting that private citizens will not be allowed to retain

wealth which can fairly be regarded as going beyond the proper needs of their several lives and occupations while the State debts remain unpaid.

“Fourth: Regard must be had to the circumstances in, and the purposes for, which the loan was contracted and the representative or non-representative character of the government which contracted it. A creditor who claims for money lent to satisfy the personal whims of a despot or dictator has not so good a claim as one who advanced his money for the economic development of the country on the faith of the legislative act of a representative assembly.

“A creditor who advances money to a belligerent during a war to some extent adventures his money on the faith of the borrower’s success. A system of international treaties is conceivable by which the contracting Powers would bind themselves that if any State resorted to war against the decision of an international court, contracts of loan made by that State during the course of the war should not be recognized after its termination.

“Fifth: For the payment of a foreign creditor involving ex vi termini, the transfer out of the paying country of goods, or the performance outside that country by its nationals of services, possessing an economic value (except in rare cases when the creditor is willing to leave his property in the debtor country), regard must be had in fixing the liability of the debtor country to the facilities which it possesses for foreign trade and to the economic policy of those countries which might reasonably be expected to trade with it.”

²⁷ Instances in which the diversion of security has induced diplomatic protest are found in the proposal of Great Britain in 1913 to dispatch a warship to Guatemala for the collection of unpaid interest and capital on bonds held by British subjects, after Guatemala had diverted an export tax―security for the loan―to other Purposes.

Lord Salisbury in 1879 protested against the diversion to a new loan of the security pledged by Turkey to the loan of 1862, and in 1881 the security diverted was duly restored.

Secretary Lansing, in an instruction to the American Minister to Ecuador, Dec. 22, 1915, stated, on the diversion by Ecuador of the customs revenues pledged to the discharge of the bonds of the Guayaquil and Quito Railroad, to the expenses of the Ecuadorian Government: “This Government will not countenance any injustice to legitimate American interests and will insist that the Government of Ecuador comply with contractual obligations.” (For. Rel. 1915, p. 373.) See also the protest of the British Ambassador to the financing of public works by Ecuador out of funds pledged to the holders of these railroad bonds, ibid., 351.

The Haitian Government, in 1914, diverted from the National Bank of Haiti customs duties constituting the security for foreign bond issues. (For. Rel. 1915, p. 511.) As a result of American intervention, the rights of the bank were reinstated. After the American occupation, the security of the foreign bonds was diverted to internal needs, but later the foreign bonds, issued in French francs, were bought up in depreciated francs.

²⁸ Politis, op. cit., 92. See, on security, the article by Feilchenfeld, Elrick and Judd, “Priority problems in public debt settlements” (1930), 30 Col. Law Rev. 1115.

²⁹ That it has but little value in municipal courts is evident from a decision of the Court of Paris, June 25, 1877 (Sirey, 1878, I, 345), holding that, in spite of the pledge by Peru of the proceeds of guano and the repeated use of such expressions as “engagement,” “affectation,” “assignment,” “general” and “special mortgage,” the guano had not been pledged or mortgaged, for it had not been placed in the possession or control of the creditors, but was entirely under the control of the Peruvian Government. (Politis, op. cit., 93, note.) Frederick the Great is stated to have said that “all guaranties are like filigree work, more useful to satisfy the taste than of practical utility.” (Martens, Introduction, p. 68, n. 1; Vattel, II, c. xiv, sec. 239, n. 1; Pradier-Fodere, Trait& II, sec. 1014.)

³⁰ In the Portuguese reorganization of 1892, while other loans had to bear a reduction of interest, there was no such reduction in the case of the 1891 loan, which was secured by the revenues of the tobacco monopoly. In the case of the reorganization of the Egyptian debt in 1880, bondholders having security were preferred among themselves according to the nature of their security. By such assignment of revenues, the state tacitly agrees not to contract any new loan secured by an assignment of the same revenues. It also tacitly agrees not to divert the assigned revenues to any other purpose—an agreement which has the sanction of international law, in that diplomatic interposition has taken place where diversion was threatened. Messrs. Madden and Nadler, in their book on Foreign Securities (New York, Ronald Press, 1929, p. 180), point out that assigned revenues materially limit the borrowing capacity of a country and, therefore, have great economic importance.

³¹ The security of the Egyptian loans assured the holders, of three different types, preference in new security granted and in interest rates. The Turkish guaranteed loan of 1855 was not impaired. By the decree of Mouharrem of 1881, the Turkish bonds were scaled down according to issue price, and priority in amortization granted according to the security held. Four classes were made. In the Greek case of 1897, security determined priority of amortization, as well as the time of restoration of the original interest rate. The Russian indemnity exacted from Turkey after the war of 1877 was not permitted to disturb loans, or the security on loans, to foreigners. Phillimore, II, 14, and citation of Parliamentary Papers, Turkey No. 39 (1878), and Turkey No. 20 (1880). So Turkey, after its successful war with Greece in 1897, was obliged not to disturb by its war indemnity the security previously granted by Greece to bondholders. The 5.2% of the customs revenue of Venezuela which constituted security for the diplomatic debt was not disturbed. The security given to the Ethelburga Loan Syndicate of 1909 in Nicaragua was not disturbed by the subsequent settlement, but was expressly recognized in the agreement of 1917 for the distribution of the Canal Fund payment from the United States.

The United States insisted in 1915, in the case of China, that “the service of the loans contracted prior to 1900 which has priority over the Boxer indemnities as a charge on the maritime customs revenue” was not to be disturbed in order to meet deficits of the government. (For. Rel. 1915, pp. 209, 210.)

³² Doc. Dipi., Egypte, 1880, p. 225.

³³ The Egyptian Commission of 1879 recommended that the special pledges of this class of creditors “should be respected so far as possible under the actual condition of affairs,” on the ground that it was “the natural consequence of the application of the principle that special pledges ought to be respected so far as possible.” (Doc. Dipl., Egypte, 1880, p. 225.)

Security was modified or changed in Egypt in 1880, when the security of the Moukabala loan was substituted by the revenues of two provinces, and a broad revision of security was undertaken.

In 1893 a crisis in Greek finances made necessary the borrowing of more money or the curtailment of the state’s liabilities. Failing to get a new loan, Greece paid the interest coupons of the 1881, 1884, 1889 and 1890 loans in bonds (1893) bearing 5% interest. The Monopoly loan, on account of its special guarantees, was at that time excluded from this operation. (21st Rep. Corp. For. Bondh. (1893), p. 83.) Later the issue of funding bonds was suspended and instead 30% of the coupons of all issues, including the Monopoly loan, was paid. The bondholders protested and the French and German Government representatives in Athens remonstrated officially. After some correspondence between representatives of the bondholders and the Greek Government, the explanation was offered by the government as quoted in the last paragraph of footnote 21, supra.

The loan of the Turkish bankers of 1877 was secured in 1879 by the Turkish Government on certain revenues already pledged to the loan of 1862. The bondholders protested and obtained the support of their governments. The British Government protested officially against the diversion of pledged revenues. (Blaisdell, European Financial Control in the Ottoman Empire, p. 88.) The Turkish Government in 1881 denounced its agreement with the Turkish bankers and returned the diverted revenues to the service of the foreign debt. (Blaisdell, op. cit., p. 92.)

In Santo Domingo, in 1901, the customs revenues were taken from the San Domingo Improvement Co. After protest by the United States, an agreement was made by Santo Domingo with the company and an arbitration held as to the method, including new security, by which the agreed debt was to be discharged. In Haiti, after 1914, the security for external and internal loans was diverted, a reorganization waiting until 1919. Some of the secured loans were reduced from 5 to 25%, probably depending on the nature of the loan and the security.

³⁴ The Egyptian loan of 1876 appears to have been guaranteed by the Khedive by a mortgage on the railroads of Egypt and on the port of Alexandria, though commentators state that, in fact, only the revenues were given as security. The Egyptian Daira Loans of 1866 and 1870 were secured by a mortgage on the private domain of the Khedive. States governed by the civil law also make a distinction between their public property, and their private domain which, though owned by the state, is not used for general public purposes. Such property is controlled by the rules of civil law governing the alienation of property, and such “private” state property can be mortgaged. Honduras in 1869 gave a mortgage on its private domain and its forests, though the loan went into default in 1873, and the mortgage does not seem to have been foreclosed. Such property in theory could be foreclosed by the creditors, and they have a security from which, legally, they cannot be dislodged. Whereas, in the times when kings borrowed personally, the public domain was not inalienable and hence a mortgage thereof was not unusual, today in practically all states the public property of the state used for public purposes is practically inalienable and unattachable. For that reason mortgages of such property are extremely rare, and unless the property were alienable would be of but little value.

³⁵ In the Egyptian reorganizations, as already observed, such pledges were given priority. The Serbian creditors of the Railroad Loan were given a guaranty of the net proceeds of the line, of the customs revenues, and of the civil taxes. The Bulgarian loans secured on the tobacco tax, which was under the control of representatives of the bondholders, were given priority in the post-war settlement. The Peruvian Salt Loan of 1909 was administered by a stock company, to whom was to be paid over the proceeds of the salt monopoly, though in the period between August, 1914, and August, 1916, the difficulty of remitting to Paris and the moratorium declared in France caused a delay in the transmission of the interest.

The revenues of Greece were pledged and controlled by an international financial commission representing six great Powers, reduced after 1918 to the representatives of France, Great Britain, and Italy, to collect and distribute the state revenues assigned to the service of foreign loans.

A consideration of various aspects of pledges and assignment of revenue will be found in Jeze, La garantie des emprunts publics d’état, Paris, 1924, p. 120 et seq.

³⁶ The Polish Stabilization Loan of 1927, while not issued under the auspices of the League of Nations, has many features similar to the loans just mentioned. (Madden and Nadler,

op. cit., 178.) Some loan contracts provide that a receiver representing the bondholders may be appointed in the event of default in the payment of interest. (See Polish 6% Railroad Loan, due 1940, ibid., 179.)

In recent years loan contracts have contained clauses by which the debtor agrees that, if in the future he should issue any loan secured by a pledge of specific revenue, the present loan shall have priority over it or shall be equally secured. (Ibid., 162, 164.)

The provision of the Dutch and former Spanish Constitutions to the effect that “the obligation of the state to its creditors is guaranteed,” is probably of no special legal value. (See Meili, op. cit., 84.)

³⁷ This question arose in connection with the pledge of personalty by the Turkish Government to certain French creditors. Turkey handed to these creditors certain bonds, with the privilege of realization in the event of default. When Turkey defaulted, the bonds were sold by the creditors on the French stock exchange. Turkey brought an action, contending that a judicial decision should have been obtained prior to foreclosure on the pledge in accordance with Article 2078 of the French Civil Code. The Tribunal of the Seine, March 3, 1875 (Sirey, 1877, II, 25), held that the contract of pledge was governed by Turkish law, which required no court decision as a condition of foreclosure.

³⁸ Westlake, International Law (2d ed., 1910), I, 332.

³⁹ Grotius, De jure belli, 3, 2, 5; cf. 1, 5, 2 and 2, 25, 1; Vattel, Law of Nations, Bk. II, c. 18, §§343, 347, 354, c. 14, §§214–216.

⁴⁰ Phillimore, Int. Law (3d ed.), II, c. III, 8 et seq.; Hall, Int. Law (6th ed.), 275–76.

⁴¹ Phillimore, op. cit., II, 14.

⁴² Rivier, Alphonse, Principes du droit des gens (Paris, 1896), I, 272.

⁴³ G. F. de Martens, Precis du droit des gens (Paris, 1864), I, 298, §110. See also Phillimore, op. cit., 14, and Pradier-Fodere, Traite, I, §405, p. 623, note.

⁴⁴ These authorities are enumerated and citations to their works given in the second part of footnote 34 of Hershey’s article in 1 Am. Jour. Int. Law (1907), 37j 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, in presenting the American proposition for the limitation of force in the collection of contractual debts. La deuxieme conference inbernationale de la paix, Vol. 2, 229-233 (1907). Also printed in English (1920). The principal publicists who oppose what we may call financial intervention are F. de Martens, Westlake, Holland, Bonfils, Calvo, Pradier-Fodere, Rolin-Jaequemyns, Despagnet, von Bar, Liszt, Geffcken, Kebedgy, Nys, Merignhac, Feraud-Giraud, Weiss, Olivecrona, and Floecker. Gen. Porter also cited Rivier, but this must have been an oversight. See also Collas, Der Staatsbankerott and seine Abwicklung (Stuttgart, 1904), 51; Freund, Rechtsverheiltnisse, etc., 271; Strupp, Intervention in Finanzfragen (1928).

⁴⁵ 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 of 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 of 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), Revue generale de droit int. pub., Vol. 2, 363-458. Hershey, Amos S., “The Venezuelan Affair in the Light of International Law,” American Law Register, Vol. 51, 249-267. The Hague decision is criticized by Andre Mallarme in an article, “L’arbitrage venezuelien,” in Revue generale, Vol. 13, 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.

⁴⁶ 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 non-interference. 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., 12-13), and Salisbury (cited by Hall, note p. 277). Balfour, when Prime Minister in 1902, supported this view. See Scott’s Hague Peace Conferences, Vol. 1, 402.

⁴⁷ See, for example, Gen. Porter’s address of July 16, 1907, printed separately, and quoted in Scott’s Hague Peace Conferences, Vol. 1, 402.

⁴⁸ Blaisdell, op. cit., 82, 83.

⁴⁹ Parliamentary Papers, Turkey No. C. 1424 (1876), Dispatch 47. Mr. Hyde Clarke, of the Corporation of Foreign Bondholders, had been advised similarly four years earlier. Ibid., No. C. 1077 (1874), Dispatch 61. Prior to 1879, instructions of the British Foreign Office to its representatives in Constantinople, and replies to inquiries and protests from British subjects, were in all cases to the effect that unofficial support only would be given. Ibid., No. C. 1424 (1876), Dispatches 64, 65, 68, 69, 73, 90, 91, 97, 123.

⁵⁰ The proposed action of Great Britain in 1913 to dispatch a warship to Guatemala to collect the unpaid interest and capital on bonds held by British subjects, may be charged to the bad faith of Guatemala in diverting the security of the loan, an export tax on coffee, to other purposes.

⁵¹ Citations in Moore’s Digest, VI, 705-707, and Wharton’s Digest, II, 655, to the effect that as a rule the United States will use only good offices in support of a contract claim.

⁵² See illustrations infra. See also opinion of Little, Commissioner, in Aspinwall (U. S.) v. Venezuela (Dec. 5, 1885), Moore’s Arb., 3641–3642.

⁵³ Opinion of Sept. 26, 1853, 6 Op. Atty. Gen., 130, 143.

⁵⁴ Mr. Sherman, Sec’y of State, to Mr. Powell (Oct. 26, 1897), Moore’s Dig., VI, 729.

⁵⁵ Mr. Frelinghuysen, Sec’y of State, to Mr. Wright (Jan. 17, 1884), Moore’s Dig., VI, 713; Phillimore, op. cit., II, 13.

⁵⁶ 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.

⁵⁷ Lord J. Russell to Sir C. Wyke (Mar. 30, 1861), 52 St. Pap. 237, 239.

⁵⁸ The British Council of the Corporation of Foreign Bondholders, Stäindige Kommission zur Wahrung der Interessen deutscher Besitzer ausläindischer Wertpapiere, Association Belge pour la Défense des Détenteurs de Fonds Publics, Association Suisse des Banquiers, and Association Nationale des Porteurs Francais de Valeurs Mobiliéres.

⁵⁹ Cf. Allen W. Dulles, “The Protection of American Foreign Bondholders” (April, 1932), 10 Foreign Affairs, 474.

⁶⁰ Wigmore, “Responsibility for Tortious Acts” (1894), 7 Harv. Law Rev. 315, 383, 441; Pound, Philosophy of Law (1922), c. IV. That is probably a legal reason for the United States to deny any liability for the defaulted debts of American States. The lender looked exclusively to the credit of the state and never had any expectation or basis for expectation that the federal government would assume the debt.

⁶¹ Overdue Mexican coupons, Du Pont de Nemours (U. S.) v. Mexico (July 4, 1868), Moore’s Arb., 3616. Opinion by Wadsworth, Zamacona concurred. See dictum of Thornton, Umpire, in Widman (U. S.) v. Mexico (July 4, 1868), Moore’s Arb., 3467.

⁶² Colombian Bond Cases, Riggs, Oliver, Fisher (U. S.) v. Colombia (Feb. 10, 1864), Moore’s Arb., 3612–3616.

⁶³ Venezuelan Bond Cases, Aspinwall, Executor of G. G. Howland et al. (U. S.) v. Venezuela (Dec. 5, 1885), Moore’s Arb., 3616–3641. This claim was dismissed by the mixed commission under the convention of April 25, 1866. The findings of this commission were reopened because of the alleged fraud of the arbitrators. Under a strict construction of the protocol, Bates, Umpire, dismissed the Texas Bond cases before the British-U. S. Commission of Feb. 8, 1853, Moore’s Arb., 3594. One reason was that they had not been treated by Great Britain as a subject for diplomatic interposition. The decision is criticized by Westlake, vol. 1, 77-78, citing Dana in Dana’s Wheaton, §30, n. 18. Jurisdiction was exercised by the Mexican Commission in 1868 over a stolen bond, Keller (U. S.) v. Mexico (July 4, 1868), Moore’s Arb., 3065, on the ground of fraudulent destruction of specific property having a definite value, and certain assurances by the government. See also Eldredge (U. S.) v. Peru (Jan. 12, 1863), Moore’s Arb., 3462. The failure to fulfill the obligations of a bond issued for supplies was held not an “injury to property” by the U. S.-Mexican Commission of 1868 (Manasse case, Moore’s Arb., 3463), although the failure to pay for supplies furnished under contract had been so construed.

⁶⁴ Comp. Générale des Eaux de Caracas(Belgium) v. Venezuela (March 7, 1903), Ralston, I, 271–290.

⁶⁵ Ballistini (France) v. Venezuela (Feb. 27, 1903), Ralston, I, 503–506.

⁶⁶ Boccardo (Italy) v. Venezuela (Feb. 13, 1903), cited in note to Ralston, I, 505 (not reported). See, however, the brief statement given by Mr. Ralston in his address before the International Law Association, 24th Report, 193–194.

⁶⁷ Jarvis (U. S.) v. Venezuela (Feb. 17, 1903), Ralston, I, 145–151.

⁶⁸ In the settlement of defaults and the advance of claims against defaulting states, preferences have occasionally been given to the owners of tort claims. The Venezuelan Preferential Claims of 1903 were divided into three classes. The first-rank claims of Great Britain, Germany, and Italy were all tort claims. These, owing to Venezuelan recalcitrance, were not submitted to arbitration. The second-rank claims, which were submitted to arbitration, were also tort claims. Bond claims were relegated to the third class; and there is some evidence that they were included at all only because the creditor Powers wished to effect a final settlement of all claims.

In the case of Venezuela, ’the tort claims were, in fact, paid off by 1912, whereas the bonds were merely converted into a new issue.

In the case of the Santo Domingan settlements of 1907 and 1917, the position of tort claimants is somewhat more doubtful. The San Domingo Improvement Co. claim, which was part bonds and part tort, had been reduced in a compromise agreement and an arbitral award, and was again reduced 10% in 1907, whereas bond claims generally were reduced 50% and then settled 20% in cash and 80% in new bonds. Internal claims, largely bondholders, were even more seriously reduced. The awards of the 1917 Claims Commission were, however, paid in full by an issue of 5% bonds secured by an additional charge on the customs revenues; but claims less than $50―over 80% of the whole―were paid in cash.

In the Haitian Protocol of 1919 the awards of the Claims Commission, primarily tort claims, were to be paid first out of the new loan provided for by the protocol.

In the Nicaraguan settlement of 1917, the Emery claim, also protocolized by agreement between the United States and Nicaragua, was maintained in full, whereas claimants before the 1911 commission were deferred in payment. Although priority out of the Canal Fund payment of $3,000,000 was accorded to secured bondholders and the New York bankers, British tort claimants were not able to secure equality with the Emery claim. The Nicaraguan Public Credit Commission stated that they did not expect to revise Mixed Claims Commissions’ judgments on claims in the hands of the original claimants, except by mutual agreement. Claims in the hands of speculators or third parties were to be heavily scaled from 50% to 70%, and all claims less than $1,000 were, if possible, to be paid in cash. (For. Rel. 1917, p. 1144.)

In the case of Egypt, judgment creditors (to some extent tort claimants) before 1880 were paid without scaling, but received only 30% in cash and 70% in bonds of the privileged debt, and this notwithstanding a suggestion of the Debt Commission of 1879 that judgments obtained between April 6, 1876―when bankruptcy was alleged to have begun—and 1879 were void. Judgments after 1880 were probably paid in full. The Alexandria Riot claims of 1882 were paid out of the proceeds of the loan of 1885.

In the post-war settlement priority appears to have been given to the tort claimants. The first charge against Germany under Article 297 of the Treaty of Versailles was to pay Allied claimants who had suffered from exceptional war measures in Germany. It may be added, however, that Allied creditors of German debtors under the Clearing Office settlements were also given priority over general reparations. It could be argued that these payments to Allied creditors were effected out of the proceeds of confiscated private property belonging to German nationals in the Allied countries. Whatever objection there may be, however, to this method of paying governmental debts, it remains true that persons suffering tort injuries were included in the first class of those to be reimbursed. It could also be said, however, that many of these persons suffering physical or financial injury sustained no legal wrong at all, but were victims of war, without valid claims recognized by international law. But the treaties accorded them a right of reimbursement not otherwise admissible.

In the case of the United States, the awards of the Mixed Claims Commission, United States and Germany, and of the Tripartite Claims Commission, United States and Hungary, are, under the Settlement of War Claims Act, to be paid in full, with interest at 5%. Preference is, however, given to death and personal injury claims, including the victims of the Lusitania disaster, who are to be paid at once in full, as are also the American owners of claims under $100,000. The owners of claims above this amount are to receive $100,000 at once and are then to be paid up to 80% out of payments to come from Germany, the balance of 20% to be liquidated gradually pari passe with the German owners of the 20% withheld by the Alien Property Custodian and of the 50% withheld from the German ship and patent claimants against the United States.

Claimants against Austria have already been paid in full out of the Special Deposit Account set up under the Settlement of War Claims Act. This account was supplied with the necessary $350,000 or so by the Austrian Government from funds possessed in this country. The owners of bonds of the Austrian Government are not to be paid in full.

⁶⁹ As examples, there may be cited the Don Pacifico claim of Great Britain against Greece, 1849, during the period of Greek default, and the Cannon and Groce claims against Nicaragua in 1911, where the United States collected $60,000 on behalf of the widows of these American citizens shot by Zelaya. In 1915 the Brazilian Ambassador, on behalf of the United States, exacted a payment from Mexico of 160,000 pesos for the murder by Zapatistas of John B. McManus. (For. Rd. 1915, p. 866.) In 1917, under an award of the King of Spain, Dec. 7, 1916, Honduras paid to Great Britain £1450 for an assault on three British subjects. (121 Brit. & For. St. Pap. 794.) In 1928 the Nanking Government paid to American and foreign citizens a considerable sum for the damages caused by the bombardment of Nanking. Italy secured a payment from Greece, under an award of the Council of Ambassadors, in 1921, for the killing of General Tellini in fixing the Albanian boundary. Even the Soviet Government is reported to have agreed to pay the claim of a Japanese woman killed and of a Japanese railway official injured in the bombardment of Manchuli, Manchuria, if Soviet forces were shown to have been responsible. (New York Times, Dec. 22, 1929.)

⁷⁰ Sack, La succession aux dettes publiques d’etats (Paris, 1929); see also Sack, Les effets des transformations des etats sur leers dettes publiques (Paris, 1927), 2 vols., and book review by Sack of Feilchenfeld (1932), 80 U. of Pa. Law Rev. 608. Feilchenfeld, Ernest H., Public Debts and State Succession, New York, Macmillan Co., 1931.