ARBITRATION TREATIES

Hokitika Guardian, 24 March 1928, Page 2

ARBITRATION TREATIES

REVIVE BRITISH DEBT CLAIMS. (By DREW PEARSON in the Auckland “Star.”) The vast and complicated question of international debt repudiation, going back as far as the British loans to the southern Confederate States dining the American Civil War, is expected to be revived by the new scries of arbitration treaties which the 1 nited I States lias concluded with Franco and ! is negotiating with Great Britain. ( The sum of £12.000.000 plus £3fi.000.000 in interest is still owing to i British bond holders from loans which they granted to the Confederate States , before and during the Civil War. and every effort made to collect this, or to deduct it front the war debt owed by , Great Britain to the United States has so far failed because the problem could I not be arbitrated under the arbitration treaty existing between the United , States and Great Britain. , This treaty the Root-Brycc aggre- . meat of 1908. excluded from arbitratI ion questions of “vital interest and national honour.” And since the amendment to the American Constitution declared that all debts “incurred in aid of insurrection or rebellion against the United States—shall lie held illegal and void,” the United States could claim and did maintain that the arbitration of debts incurred in aid of the Civil War was an aif- , rout to her national honour. 1 NATIONAL HONOUR. However ihe new treaty just signed I with Franco and to ho concluded with Great Britain before June 23 when the old treaty expires, does not exempt ( questions of national honour. Its exemptions include domestic questions, those affecting a third party, or affecting the Afonrno Doctrine or obligations l under tlie League of Nations. None of these appear to include, by any stretch of the imagination, the important subject of debts between the nations of two different countries. The descendants of Hie British interests which invested in bonds of the southern States, have organised the British Corporation of Foreign Bondholders. and have made known their intention of renewing their claims for payment. A circular letter sotting forth the claims ol this organisation has been sent to every member of i Vingress. In addition to the debts incurred by the southern States during the Civil AYar, there are four other instances in which American States repudiated loans held chiefly by British investors. These occurred before the Civil War. The State of Mississippi, for in- ’ stance, issued 5.000.000 dollars’ worth of State bonds for the Union Bank of Mississippi in 1838. In less that two years, the bank was haplessly insclj vent and in 1811 the Governor recommended that Die hands lie ropudv.it ;d. The Legislature followed his ivsc'ue--1 thins and the State was-declared to ho under no normal or legal obligation to 1 redeems its bonds. The same fate befell ’ an issue of 2.000.000 dollars’ worth of State bonds issued for tlie Planters’ Bank. PROSPERITY AND A CRASH. These repudiations occurred just after a period of apparent great prosperity, when the bonds of American States sold readily in Europe. Alost of those State bonds were absorbed by British investors,- and the European capital added to the already inflated bubble of prosperity, eventually caused n crash. Florida. Alieliigan and Alinnesota also got caught in this financial crisis of 1837. Florida repudiated 1.999.000 dollars’ worth of railroad bonds and 3.900,000 dollars’ worth of 1 Kinds issued by the State for the hanks. Alieliigan repudiated one half of a 5.000.000 dollars debt, while the State of Minnesota repudiated one-half of a 2.275.000 dollars railroad bond issue and interest amounting to 1,751,750 dollars, Europeans who made these investments were not familiar with the dual system of government existing in the United States, whereby the individual States have independent .sovereign powers, one of which is the right to contract financial obligations. The Federal Government is in no wise responsible for State obligations and has no power to enforce payment by the States. Aloreover, no individual, either American or foreigner, has the power to proceed against a State in order to collect repudiated debts. The. eleventh amendment to the constitution prevents this. It reads: “The juridical power of the United States shall not be construed to extend to any suit in law or equity commenced or prosecuted against one of the United States by citizens of another State or by citizens or by subjects of any foreign countries.” In other words, the only recourse which British bondholders ever had in order to collect their debts was international arbitration. If the l nited States could have Lot'll manoeuvred into the arbitration of these •debts, it would have been obliged to have accepted the verdict of the Arbitration Court, even though the carrying out ol tlie decision would have been in conflict with its own organic law. A rbitra t ion. of course, was ml [ X >Nsible under the old Root-Brycc Treaty. but muler the new treaty the only move which can block arbitration of these debts is the opposition of the Senate, which. being the most powerlul factor in {he conduct of Amciican foreign relations, may fail to ratify the new treaties altogether. mar*. 11