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II.: The Recovery of Contract Debts. - A. Pearce Higgins, The Hague Peace Conferences and Other International Conferences concerning the Laws and Usages of War 
The Hague Peace Conferences and Other International Conferences concerning the Laws and Usages of War. Texts of Conventions with Commentaries, by A. Pearce Higgins, LL.D. (Cambridge University Press, 1909).
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The Recovery of Contract Debts.
Convention concernant la Limitation de l’Emploi de la Force pour le Recouvrement de Dettes Contractuelles.
Sa Majesté l’Empereur d’Allemagne, Roi de Prusse &c.1
Désireux d’éviter entre les nations des conflits armés d’une origine pécuniaire, provenant de dettes contractuelles, réclamées au Gouvernement d’un pays par le Gouvernement d’un autre pays comme dues à ses nationaux,
Ont résolu de conclure une Convention à cet effet, et ont nommé pour Leurs Plénipotentiaires, savoir:
[Dénomination des Plénipotentiaires.]
Lesquels, après avoir déposé leurs pleins pouvoirs, trouvés en bonne et due forme, sont convenus des dispositions suivantes:—
Convention respecting the Limitation of the Employment of Force for the Recovery of Contract Debts.
His Majesty the German Emperor, King of Prussia &c.1
Being desirous of avoiding between nations armed conflicts originating in a pecuniary dispute respecting contract debts claimed from the Government of one country by the Government of another country as due to its nationals,
Have resolved to conclude a Convention to this effect, and have appointed as their Plenipotentiaries, that is to say:
[Names of Plenipotentiaries.]
Who, after having deposited their full powers, found to be in good and due form, have agreed upon the following provisions:—
Les Puissances contractantes sont convenues de ne pas avoir recours à la force armée pour le recouvrement de dettes contractuelles réclamées au Gouvernement d’un pays par le Gouvernement d’un autre pays comme dues à ses nationaux.
Toutefois, cette stipulation ne pourra être appliquée quand l’État débiteur refuse ou laisse sans réponse une offre d’arbitrage, ou, en cas d’acceptation, rend impossible l’établissement du compromis, ou, après l’arbitrage, manque de se conformer à la sentence rendue.
The Contracting Powers agree not to have recourse to armed force for the recovery of contract debts claimed from the Government of one country by the Government of another country as being due to its nationals.
This undertaking is, however, not applicable when the debtor State refuses or neglects to reply to an offer of arbitration, or, after accepting the offer, renders the settlement of the Compromis impossible, or, after the arbitration, fails to submit to the award.
Il est de plus convenu que l’arbitrage, mentionné dans l’alinéa 2 de l’article précédent, sera soumis à la procédure prévue par le titre IV, chapitre 3, de la Convention de La Haye pour le règlement pacifique des conflits internationaux. Le jugement arbitral détermine, sauf les arrangements particuliers des Parties, le bienfondé de la réclamation, le montant de la dette, le temps, et le mode de paiement.
It is further agreed that the arbitration mentioned in the second paragraph of the preceding Article shall be subject to the procedure laid down in Part IV, Chapter 3, of the Hague Convention for the Pacific Settlement of International Disputes. The award shall determine, except where otherwise agreed between the parties, the validity of the claim, the amount of the debt, and the time and mode of payment.
La présente Convention sera ratifiée aussitôt que possible.
Les ratifications seront déposées à La Haye.
Le premier dépôt de ratifications sera constaté par un procès-verbal signé par les représentants des Puissances qui y prennent part et par le Ministre des Affaires Étrangères des Pays-Bas.
Les dépôts ultérieurs de ratifications se feront au moyen d’une notification écrite, adressée au Gouvernement des Pays-Bas et accompagnée de l’instrument de ratification.
Copie certifiée conforme du procès-verbal relatif au premier dépôt de ratifications, des notifications mentionnées à l’alinéa précédent, ainsi que des instruments de ratification, sera immédiatement remise, par les soins du Gouvernement des Pays-Bas et par la voie diplomatique, aux Puissances conviées à la Deuxième Conférence de la Paix, ainsi qu’aux autres Puissances qui auront adhéré à la Convention. Dans les cas visés par l’alinéa précédent, le dit Gouvernement leur fera connaître en même temps la date à laquelle il a reçu la notification.
The present Convention shall be ratified as soon as possible.
The ratifications shall be deposited at The Hague.
The first deposit of ratifications shall be recorded in a procès-verbal signed by the Representatives of the Powers which take part therein and by the Netherland Minister for Foreign Affairs.
The subsequent deposits of ratifications shall be made by means of a written notification addressed to the Netherland Government and accompanied by the instrument of ratification.
A duly certified copy of the procès-verbal relating to the first deposit of ratifications, of the notifications mentioned in the preceding paragraph, as well as of the instruments of ratification, shall be immediately sent by the Netherland Government through the diplomatic channel to the Powers invited to the Second Peace Conference, as well as to the other Powers which have acceded to the Convention. In the cases contemplated in the preceding paragraph, the said Government shall inform them at the same time of the date on which it received the notification.
Les Puissances non-signataires sont admises à adhérer à la présente Convention.
La Puissance qui désire adhérer notifie par écrit son intention au Gouvernement des Pays-Bas en lui transmettant l’acte d’adhésion qui sera déposé dans les archives du dit Gouvernement.
Ce Gouvernement transmettra immédiatement à toutes les autres Puissances conviées à la Deuxième Conférence de la Paix copie certifiée conforme de la notification ainsi que de l’acte d’adhésion, en indiquant la date à laquelle il a reçu la notification.
Non-Signatory Powers may accede to the present Convention.
A Power which desires to accede notifies its intention in writing to the Netherland Government, forwarding to it the act of accession, which shall be deposited in the archives of the said Government.
The said Government shall immediately forward to all the other Powers invited to the Second Peace Conference a duly certified copy of the notification as well as of the act of accession, mentioning the date on which it received the notification.
La présente Convention produira effet pour les Puissances qui auront participé au premier dépôt de ratifications, soixante jours après la date du procès-verbal de ce dépôt, pour les Puissances qui ratifieront ultérieurement ou qui adhéreront, soixante jours après que la notification de leur ratification ou de leur adhésion aura été reçue par le Gouvernement des Pays-Bas.
The present Convention shall take effect, in the case of the Powers which were parties to the first deposit of ratifications, sixty days after the date of the procès-verbal recording such deposit, in the case of the Powers which shall ratify subsequently or which shall accede, sixty days after the notification of their ratification or of their accession has been received by the Netherland Government.
S’il arrivait qu’une des Puissances contractantes voulût dénoncer la présente Convention, la dénonciation sera notifiée par écrit au Gouvernement des Pays-Bas, qui communiquera immédiatement copie certifiée conforme de la notification à toutes les autres Puissances en leur faisant savoir la date à laquelle il l’a reçue.
La dénonciation ne produira ses effets qu’à l’égard de la Puissance qui l’aura notifiée, et un an après que la notification en sera parvenue au Gouvernement des Pays-Bas.
In the event of one of the Contracting Powers wishing to denounce the present Convention, the denunciation shall be notified in writing to the Netherland Government, which shall immediately communicate a duly certified copy of the notification to all the other Powers, informing them of the date on which it was received.
The denunciation shall only affect the notifying Power, and only on the expiry of one year after the notification has reached the Netherland Government.
Un registre tenu par le Ministère des Affaires Étrangères des Pays-Bas indiquera la date du dépôt de ratifications effectué en vertu de l’Article 3, alinéas 3 et 4, ainsi que la date à laquelle auront été reçues les notifications d’adhésion (Article 4, alinéa 2) ou de dénonciation (Article 6, alinéa 1).
Chaque Puissance contractante est admise à prendre connaissance de ce registre, et à en demander des extraits certifiés conformes.
En foi de quoi, les Plénipotentiaires ont revêtu la présente Convention de leurs signatures.
Fait à La Haye, le 18 Octobre, 1907, en un seul exemplaire, qui restera déposé dans les archives du Gouvernement des Pays-Bas, et dont des copies certifiées conformes seront remises par la voie diplomatique aux Puissances contractantes.
A register kept by the Netherland Ministry for Foreign Affairs shall record the date of the deposit of ratifications effected in virtue of Article 3, paragraphs 3 and 4, as well as the date on which the notifications of accession (Article 4, paragraph 2) or of denunciation (Article 6, paragraph 1) were received.
Each Contracting Power is entitled to have access to this register and to be supplied with duly certified extracts from it.
In faith whereof the Plenipotentiaries have appended their signatures to the present Convention.
Done at The Hague, the 18th October, 1907, in a single original, which shall remain deposited in the archives of the Netherland Government, and of which duly certified copies shall be sent through the diplomatic channel to the Contracting Powers.
Convention No. 2. The limitation of the employment of force for the recovery of contract debts1 .
Connection of this Convention with the “Drago doctrine.”In the course of the correspondence which followed on the Circular of Count Benckendorff of the 3rd April, 1906, the United States expressed their intention of raising the question of restricting the employment of force for the recovery of ordinary public debts resulting from contracts. The genesis of this proposal is to be found in the combined blockade by Great Britain, Germany and Italy of the coasts of Venezuela in 1902, the Note of Dr Luis Drago of the 29th Dec. of the same year, the message to Congress of President Roosevelt of the 5th Dec. 1905, and the resolution passed at the Third Pan-American Congress at Rio de Janeiro in 1906. The cause of the blockade was the inability of the three Powers to obtain satisfaction for claims which they made on behalf of their subjects. Previous to the blockade Germany invited Venezuela to submit the claims of her subjects to arbitration; Great Britain in calling the attention of Venezuela to the claims of British subjects, including therein “an arrangement for the foreign debt,” asked for the admission in principle and payment of some of them, and the acceptance by Venezuela of the “decisions of a mixed Commission with respect to the amount and guarantee for payment,” and Italy requested Venezuela to “be good enough to declare itself disposed to give to the claims of her subjects the attention which may put an end to further discussion, accepting the opinion of a mixed Commission2 .” To all of these requests Venezuela returned answer that her own laws were conclusive on these matters, and the offer of arbitration was ignored. The claims for which the governments were pressing were based on various grounds; injuries sustained during revolutionary proceedings, deferred interest on public debt outstanding on bonds issued by the Venezuelan government for construction of railways and other public works, and special contracts. The three Powers being unable to obtain redress blockaded the ports of La Guaira, Carevero, Guanta, Campano and the mouths of the Orinoco in December, 1902, seized the Venezuelan fleet, and in the course of the operations bombarded La Guaira, Puerto Cabello and Maracaibo1 . On the 29th Dec. 1902, Dr Luis M. Drago, the Foreign Minister of the Argentine Republic, addressed a Note to Señor Mérou, the Argentine Minister in Washington, with reference to these proceedings. In his note he confined himself to considerations with reference to the forcible collection of public debts suggested by the events then in progress. He argued that creditors in advancing a loan take into account the security offered, the resources of the country, etc., and make their terms accordingly. While admitting that the payment of its public debt is absolutely binding on a state, he maintained that the debtor state has a right to choose the manner and time of payment, in which it has as much interest as the creditor himself, or more, since its credit and national honour are involved. It may be highly inconvenient and detrimental to the best interests of a state to be compelled to pay at a given time, but this is not a defence for bad faith, disorder and deliberate and voluntary insolvency. The Argentine people, he continued, “has felt alarmed on learning that the failure to meet the service of the public debt of Venezuela has been assigned as one of the causes which have led to the seizure of her fleet and the bombardment of one of her ports, and a war blockade rigorously established along her coasts2 .” They were alarmed lest the action of the Powers should establish a precedent dangerous to the security and peace of the nations of South America, for “the collection of loans by military means implies territorial occupation to make it effective, and territorial occupation signifies the suppression over the sphere of such occupation of the government of the country wherein it extended,” a situation obviously at variance with the Monroe Doctrine. He then quoted from the famous message of President Monroe of the 22 Dec. 1823 the declarations on non-colonisation and non-intervention on the American continent and pointed out the tendency of European nations to single out the South American countries as an ample field for future territorial expansion, and the danger lest European nations should make use of “financial intervention” as a pretext for conquest. “The only thing that the Argentine Republic maintains, and which she would see with great satisfaction consecrated...by a nation, such as the United States...is the principle that there cannot be European territorial expansion in America or oppression of the peoples of this continent, because their unfortunate financial condition might oblige one or more of them to put off the fulfilment of its obligations: that is to say...that a public debt cannot give rise to the right of intervention, and much less to the occupation of the soil of any American nation by any European Power.” It is this last sentence which contains the principle which has become known as the “Drago Doctrine,” a principle which its author considers to be supplementary to or explanatory of the Monroe Doctrine.Drago and Calvo doctrines distinguished. Though sometimes confused with a doctrine associated with the name of the late distinguished South American jurist, Dr Calvo1 , it is, as is pointed out by Mr Amos S. Hershey, much narrower in scope. “Calvo absolutely denies that a government is responsible by way of indemnity for any losses or injuries sustained by foreigners in time of internal troubles, civil war, or for injuries resulting from such violence (provided the government is not at fault) on the grounds that the admission of such a principle of responsibility would ‘establish an unjustifiable inequality between nationals and foreigners,’ and would undermine the independence of weaker states2 .”
The note of Dr Drago was not immediately successful in procuring a pronouncement of the United States such as was desired, but in his message of 5th Dec. 1905 President Roosevelt dealt with the Drago doctrine. After stating that the United States would not enforce contractual obligations on behalf of its citizens by an appeal to arms, and expressing the wish that other states would take the same view, he pointed out that there were two alternatives: “On the one hand, 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 Customs 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 debt 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.”
Dr Drago’s doctrine was not new, it had been enunciated by “the illustrious Hamilton,” and American Secretaries of State from Alexander Hamilton to Colonel Hay have made declarations of varying import in regard to it.
The question of the use of force for the collection of public debts came before the Third Pan-American Conference which met at Rio de Janeiro in July—August, 1906, when a resolution was passed recommending “to the governments represented therein that they consider the point of inviting the Second Peace Conference at the Hague to consider the question of the compulsory collection of public debts: and in general, means tending to diminish between nations conflicts having an exclusively pecuniary origin.”
On the eve of the Hague Conference Dr Drago published both in Europe and America an elaborate exposition of the doctrine that had become associated with his name1 . In it he drew a distinction between ordinary contracts and public loans, and contended that as regards the former, a state acts as a legal person acquiring rights and accepting definite obligations in respect of certain specified individuals, and in case of denial of justice by the national courts the common and accepted principles of international law obtain, a state “avoiding by means of payment the action which, though unjust, a foreign state might take to compel it.” In the case of debts arising from domestic or foreign loans through the emission of bonds at a fixed interest, which constitute public debts, the suspension of payment brings with it a profound disturbance of the finances and economic resources of the debtor country, thus giving occasion for intervention and the subordination of the local government to the creditor nation, as has been instanced in the cases of Turkey and Egypt. “This is what the Argentine Republic sought to avoid. Its doctrine is in consequence before all and above all a statement of policy2 .”
The subject was one peculiarly well suited for discussion by an international assembly. Divergent views had been expressed by leading publicists, and international practice was equally divergent1 . If there had been a generally accepted practice and doctrine as to the cases when intervention was recognised as legal, the question might have been dealt with by applying these principles, but here, again, international practice and doctrine are in an unsettled condition. There had undoubtedly been cases in which a strong creditor state had bullied a weak one into payment, while the cases which had come before arbitration courts had not infrequently shown that the amount ultimately awarded fell very far short of that claimed2 .
Had Venezuela consented to go to arbitration, instead of flouting the great Powers who were courteously endeavouring to obtain redress for their subjects, she would, as subsequent events showed, have had nothing to fear. Cases which came before the Venezuelan Mixed Commission in 1903 showed that of four claims advanced two only were successful, and in one of these a claim for $8,100,000 resulted in an award of only $668,000, less than one-twelfth of the claim3 .
What was wanted was some mode of procedure which while it prevented poor but honest debtor states from being oppressed by powerful grasping creditors, at the same time ensured that no state should be able to shelter itself behind the aegis of a stronger, and allege possible territorial occupation or political complication as a means of evading the just demands of its creditors.
The United States proposition.The subject was introduced at the Hague Conference by General Porter, one of the Plenipotentiaries of the United States, on the 2nd July, but, in accordance with the instructions of the United States Government4 , his proposal made no distinction between public loans and other contractual debts, a distinction which is the essence of the Drago doctrine and for which there is no authority in respect of the means which governments have taken in case of non-fulfilment of obligations. “No such distinction has indeed been drawn by any government,” says Professor Westlake1 . The wording of the United States proposal was as follows:
“With the object of avoiding between nations armed conflicts of a purely pecuniary origin, arising from contract debts claimed from the government of one country by the government of another as due to its subjects or citizens, and in order to guarantee that all contractual debts of this nature which have not been found capable of settlement in a friendly manner by diplomatic means shall be submitted to arbitration, it is agreed that no recourse to a coercive measure implicating the employment of military or naval forces for the recovering of such contractual debts shall be had until an offer of arbitration has been made by the creditor and refused or left unanswered by the debtor state, or until arbitration has taken place and the debtor state has failed to comply with the decision given.
“It is further agreed that this arbitration shall be in conformity with the procedure in Chapter iii. of the Convention for the pacific settlement of international disputes adopted at the Hague, and that it shall determine the justice and the amount of the debt, the time and mode of its settlement, and the guarantee, if necessary, to be given during any delay in the payment2 .”
This proposition, called throughout the discussion the “Porter proposition,” was made to the Committee entrusted with the subject of obligatory arbitration. It was accorded a special examination, as while it was evident that the possibility of reaching any definite conclusion on this subject generally was felt to be doubtful, there was good reason to believe that the American proposal would have a favourable reception. Such proved to be the case.
In introducing his proposal, General Porter pointed out the danger to the peace of the world occasioned by the employment of pacific blockade or the use of force for the purpose of collecting unadjusted contractual debts. The object of the American proposal was to stop the resources of states from being exploited by speculators and adventurers. The forcible collection of debts was detrimental to all states, for if pacific blockade was ineffectual states had recourse to a war blockade as was the case in Venezuela, the trade of the world was for the time being dislocated, and the government of the creditor state often found itself put to great expense for the collection of a comparatively small sum. He instanced a case where the United States had once used 19 warships and spent £760,000 to recover £18,0001 . If recourse to force were recognised as lawful only when the resources of arbitration had failed, advantages would accrue to all the states of the world.
Dr Drago (Argentine) in the discussion spoke at considerable length, reproducing largely his published views, and making the reservations set out below. M. Ruy Barbosa (Brazil) strongly supported the proposal, though he desired to add words providing that no acquisition of territory should be recognised except after failure to accept arbitration by the state claiming an alteration of boundaries—a matter clearly alien to the subject.
The discussion which followed on General Porter’s speech made it evident that a change in the wording would be required. The Italian delegate pointed out that too great emphasis was laid on the forcible remedy, while recourse to arbitration was not made obligatory on the creditor state. The Swedish delegate said that an indirect sanction to the employment of force was given in all cases which were not expressly provided for. The Venezuelan delegate refused to be content with anything less than the absolute prohibition of the use of force in all cases. The Committee finally adopted the proposition in much the same form as that in which it now appears in the Convention, slight changes having been made by the Drafting Committee.
In its final form the Convention came before the 9th Plenary Meeting of the Conference on the 16th Oct. when all the 44 states represented voted for it, except Belgium, Roumania, Sweden, Switzerland and Venezuela: these five states abstained from taking part in the vote.
The signatory States.Up to the present time the Convention has been signed by all the states enumerated in the Final Act except Belgium, Brazil, China, Luxemburg, Nicaragua, Roumania, Siam, Sweden, Switzerland and Venezuela.
The following states have signed with reservations: The Argentine Republic, Bolivia, Colombia, Dominica, Ecuador, Greece, Guatemala, Peru, Salvador and Uruguay.
The reservations are as follow:
The reservations.The Argentine Republic adopts the reservations made by Dr Drago in Committee, viz. (1) “In regard to debts arising from ordinary contracts between the national of a state and a foreign government, recourse shall not be had to arbitration except in the specific case of denial of justice by the tribunals of the country which made the contract; the legal remedies must first be exhausted. (2) Public loans, with issue of bonds, constituting the national debt, cannot in any circumstances give rise to military aggression or to the effective occupation of the territory of any American state.”
Guatemala and Salvador make similar reservations.
Bolivia signs under reservation, as the Convention implies the legalisation by the Conference of a certain class of wars or at least interventions, based on disputes which relate neither to the honour or vital interest of the creditor states.
Colombia “does not accept in any case the employment of force for the recovery of debts of any kind. She only accepts arbitration after the final decision of the courts of the debtor countries.”
Dominica makes a reservation in the case of the sentence “or after accepting the offer, renders the settlement of the Compromis impossible” (rend impossible le compromis) as the interpretation may lead to excessive consequences which would be the more regrettable as they are provided for and avoided in Art. 53 of the new Convention for the pacific settlement of international disputes1 .
Ecuador signs under reservation of a declaration against any use of force for the settlement of debts.
Greece signs under the reservation that the provisions contained in paragraph 2 of Art. 1 and Art. 2 shall in no way affect existing stipulations, nor the laws in force in Greece.
Peru signs under the reserve that the principles laid down in this Convention cannot apply to claims or differences arising from contracts entered into by a state with the subjects of a foreign state when it is expressly stipulated in such contracts that the claims or differences must be submitted to the judges and tribunals of the country.
Uruguay signs under reserve of the second paragraph of Article 1, because the Delegation considers that refusal to submit to arbitration can always be made rightfully if the fundamental law of the debtor state, previous to the contract which occasioned the misunderstandings or disputes, or the said contract itself has fixed that such misunderstandings or disputes shall be settled by the tribunals of the said country.
The abstention from signature of 10 states, and the reservations in the case of 10 others, considerably weaken the force of this Convention, especially as the states abstaining or making reservations are mainly those against whom it has been found necessary to exercise force in the past.
The signatory Powers have in effect accepted the principle of obligatory arbitration in one important class of cases, no reservations being made in the Convention regarding “honour and vital interests”—a point emphasised by the Roumanian delegate. The Permanent Court at the Hague will therefore in cases of this kind which come before it have a wide field for its labours which will involve an examination of the whole circumstances of the claim and the validity of the excuses of the debtor. It will thus be enabled to administer justice transcending the mere letter of the law1 . It is to be regretted that so many states in whose interests the proposal of the United States was chiefly made have thought fit either to abstain altogether, or to sign with such far-reaching reservations as to deprive themselves of the benefit which would accrue to an honest debtor state from an examination of all its circumstances by an independent tribunal.
The Argentine reservation.The Convention provides that recourse shall not be had to armed force for the recovery of contract debts claimed from the government of one country by the government of another country as being due to its nationals except
(1) when the debtor state refuses
or (2) neglects to reply to an offer of arbitration,
or (3) after accepting an offer of arbitration prevents any Compromis from being agreed upon,
or (4) after arbitration fails to comply with the award.
The first paragraph of the reservation made by the Argentine delegate2 , and adopted by the delegates of Guatemala, Colombia, Salvador, and Uruguay requires consideration. It was urged strongly in Committee by Venezuela and most of the Latin American states that the Convention would gain in precision, while possible misunderstanding and abuse of its provisions would be prevented, if it was made quite clear that in all cases of contract debts, where the laws of the debtor state allow proceedings to be taken against it in its own courts, such proceedings must first be taken, and an evident denial of justice proved to exist before the state is compelled to appear before an international tribunal, or run the risk of the creditor state having recourse to the employment of armed force to support its national’s demands.
During the discussion in the Sub-Committee, General Porter in reply to M. de Martens said that the intention of the authors of the proposal was to limit the application of force to the cases where the subjects of one state who were creditors of another addressed themselves to their government with the object of recovering the amount which was due to them; and that it was understood that it was entirely in the discretion of the government interested to intervene in this dispute between its nationals and a foreign state1 .
It is for every government to appreciate the justice of the claims which any of its nationals may have against another state, before determining whether those claims shall be pressed by diplomatic methods. The fact that such claims have or have not been judicially considered by the tribunals of the debtor state is doubtless of great importance in assisting a government in arriving at a conclusion. But the mere fact of their having been dealt with judicially will not preclude a government from pressing for a settlement. All state judiciaries are not above suspicion; but where no doubts exist as to the impartiality of the tribunal or the competence of the judges the creditor ought to exhaust all the legal resources of the debtor state before appealing to his own state for aid, and this is the course invariably followed.
The temptation to a powerful state with territorial ambitions and an increasing population to seize upon the occasion of a dispute between one of its nationals and the government of a state with a small population but large natural wealth, as a means of obtaining an outlet for its surplus population, was emphasised in the now historic despatch of Dr Drago. The Monroe Doctrine will, in the case of American states, probably prevent actual territorial acquisition, while states outside the Western Hemisphere can rely on the sense of justice, or the self-interest of the other Powers to protect their territory from seizure on such a plea.
The meaning of “dettes contractuelles.”In the course of the discussions in Committee2 the delegates of the Argentine Republic and Servia raised the question of the meaning of the term “dettes contractuelles” which they considered as too vague. The use of these words, they contended, would give rise to misunderstanding, for they would include debts arising from conventions entered into between one state and the subjects of another as well as those arising from contracts between states and states. General Porter replied that the distinction between the two kinds of debts had little importance here, as in the case of public debts, as well as the emission of obligations of rentes, the creditors would be sufficiently protected by the general principles of international law; on the other hand in the case of contractual debts, the protection of the rights of creditors would be assured by the American proposition1 . Nor could he consent to delete all mention of armed force as demanded by his last interlocutors. He desired it however to be understood that this extreme measure was reserved solely for the case of refusal to execute an arbitral award. This reply was not of a nature to satisfy Dr Drago, who thought it dangerous to retain the contested expression. The delegate of Guatemala considered that the American proposition did not refer in any way to state loans, or public debts properly so called. The words of the Convention make no distinction between debts of all kinds arising from contracts.
Obligations are recognised as springing from two main sources, contract and delict. States which borrow money, buy ships and armaments, grant leases or concessions, and generally enter into transactions of the nature which in private law fall under the head of contracts, by so doing purport to create legal relations between themselves and those with whom they deal. When, as is generally the case, a state allows legal proceedings to be taken against it in its own courts, whether technically as an act of grace, as in English law by Petition of Right2 , or under statutory provisions which may provide special formalities, in all such cases as the foregoing contractual obligations may be said to exist.
Under the head of delictual obligations would come claims for injury to person or property of aliens arising from the neglect of a state to protect those who are sojourning within its borders. The Convention excludes such cases, for as the exposé des motifs presented by General Porter in support of his proposition stated: “This proposal is concerned solely with claims based on contracts entered into between a state and the individuals of another country and has no reference to claims for injuries done to resident aliens3 .”
The attempt on the part of Dr Drago to distinguish between contractual debts and public debts, such as bonds to bearer in the hands of foreign subjects, appears, as has been already stated, to be ill-founded. The initiative taken by the United States in introducing the subject was the direct result of the intervention in Venezuela when a “public debt” was forcibly collected, and the object of the Porter Proposition was to put an end to the disputes which this intervention had occasioned. The terms of the Convention lend no support to those who would contend that the term “dettes contractuelles” is used only in the sense of contractual obligations other than public debts, and the reservations made by the various Latin American states make it clear that it was understood by them as applying to contractual debts in the widest sense1 . The indefiniteness of the answer which General Porter gave to the Argentine and Servian delegates, and the variations made in the terminology of the drafts during the course of the examination of the question suggest that the American delegate was not always quite clear in his own mind as to the extent to which the Committee was prepared to go. In the first draft he speaks of debts of a “purely pecuniary origin arising from contractual debts2 .” Subsequently the phrase used is “ordinary public debts having their origin in contracts.” In the Examining Committee he spoke of “wars having a purely pecuniary origin being avoided” and subsequently at the same sitting he stated that the United States desired that in cases “of debts or claims of any nature whatever” recourse should always be had to arbitration3 . But looking at the Convention as finally adopted and having regard to the fact that Dr Drago formulated reservations clearly indicating that the Convention did not adopt his distinction, and that this has been endorsed by several Latin American states while several others have withheld their signatures altogether, there appears no doubt that the term “dettes contractuelles” is used in the widest sense, including both public debts and ordinary contracts.
The Conference, as has been noticed above, refused to accept the Argentine amendment which required that recourse must first be had to the courts of the debtor state and only permitted a demand for arbitration in case of an evident denial of justice. The rejection of this amendment was due to the existence of states whose judiciaries are imperfectly organised and in which it was common knowledge that even in cases where a creditor could in theory sue in the courts of the debtor state, he had no prospects of success, whatever the intrinsic merit of his claim. The decision of a court against a creditor or the suspension of payment by an executive or legislative act deprives a creditor of his right of suit, his debt ceases to be contractual from the municipal standpoint; but such an act of sovereignty may be appreciated by an international tribunal, the debt still remains contractual from the point of view of international law—whenever a wrong has been done to the subject of one state by the organs of another, the state has the right to obtain redress for its national1 ; the method of redress for a wrong ensuing from a breach of a contractual obligation is under this Convention by arbitration. “The intent of the Convention,” says Professor G. W. Scott, “is to refer to international tribunals the very delicate and difficult task of determining the liability of one state to another where the public governmental acts of the one have annulled or modified the contracts which it had with the subjects of another2 .” It is however not a case of compulsory arbitration on both sides, the creditor must propose, the debtor may reject. But the Convention does not contemplate an immediate and peremptory summons to the debtor to appear on a writ specially endorsed by the creditor as for a claim of a purely pecuniary nature arising from a contract debt. If the debtor state is willing to go to arbitration the Compromis is then settled by the two states, and the opinion of the court is taken on a “case stated” by the parties in conflict who may also agree upon the law to be applied. The debtor state may decline to arbitrate. It may be that such a state adopting the view of Dr Drago that “it is particularly difficult to determine the financial position and solvency of a debtor state without the most minute enquiry into its administration, a matter closely bound up with the political and social organisation of the nation,” will refuse to allow such an examination to be made with a view of its international liability being determined. The alternative is that the creditor state may have recourse to armed force to recover the contract debt. This as in the past may or may not be treated by the debtor as a casus belli, but the creditor having recourse to war, after and not before attempting a peaceful solution of the dispute, will henceforth occupy a far stronger moral as well as legal position than formerly.
It is to be noticed that the United States in signing this Convention did not think it necessary, as in the case of the first Convention, to make any reservation embodying the Monroe Doctrine1 . Dr Drago both in his despatch and his speech at the Hague Conference laid great stress on the intimate connection between the declaration of policy which he was enunciating and that which President Monroe laid down in his famous message.
[1 ]List of States as in the Final Act, 1907.
[1 ]List of States as in the Final Act, 1907.
[1 ]Parl. Papers, Misc. No. 4 (1908), p. 423; The Second International Peace Conference (Report to U.S. Congress, Document 444, 1908), pp. 10, 34, 88; Livre Jaune, p. 55; Weissbuch, p. 5; La Deux. Confér. T. i. p. 336; E. Lémonon, La seconde Conférence de la Paix, p. 97; C. Calvo, La doctrine de Monroe, Rev. de Droit inter. Vol. v. (2nd series), p. 597; Luis M. Drago, State loans and their relation to international policy, Am. Journ. of Int. Law, Vol. i. p. 692; see also Rev. gén. de Dr. int. Vol. xiv. p. 251; Amos S. Hershey, The Calvo and Drago Doctrine, Am. Journ. of Int. Law, Vol. i. p. 26; G. W. Scott, Hague Convention restricting the use of force to recover on contract claims, id. Vol. ii. p. 78; Idem, International law and the Drago doctrine, North American Review, 15 Oct. 1906; J. Westlake, The Hague Conference, Quarterly Review, Jan. 1908, p. 236; Sir T. Barclay, Problems, etc. pp. 115-122; H. A. Moulin, La doctrine de Drago, Rev. gén. de Droit inter. Vol. xiv. p. 417; Idem, La doctrine de Drago, questions de droit des gens et de politique internationale (with bibliography); A. B. Fried, Die zweite Haager Konferenz, p. 119; Dachne van Varick, Le Droit Financier devant la Conférence de la Haye.[ ]
[2 ]G. W. Scott, Am. Journ. of Int. Law, Vol. ii. p. 82.
[1 ]T. E. Holland, War sub modo, Law Quarterly Review, Vol. xix. p. 133; Parl. Papers, Venezuela, No. 1 (1904); A. E. Hogan, Pacific blockade, pp. 149-157; A. Gaché, Le conflit Vénézuelin et l’Arbitrage de la Haye; Bonfils-Fauchille, Manuel de Droit international public, § 990.
[2 ]Dr Drago omits to mention the offers of arbitration which the Powers had made previous to the blockade, and which had been ignored by Venezuela.
[1 ]Droit international, T. i. liv. iii. §§ 185-206.
[2 ]Am. Journ. of Int. Law, Vol. i. p. 31.
[1 ]Am. Journ. of Int. Law, Vol. i. p. 692; Rev. gén. de Droit inter. Vol. xiv. p. 251.
[2 ]Am. Journ. of Int. Law, Vol. i. at p. 725.
[1 ]The use of force for the collection of pecuniary claims has in the past generally been subordinated by creditor states to questions of expediency. Some states, more long-suffering than others, rarely, if ever, resorted to extreme measures, but, as was recognised in President Roosevelt’s message of 5 December, 1905, such action is undoubtedly within the competence of a state in its sovereign capacity. The divergence of views among publicists was chiefly due to the different views taken of the lawful occasions for intervention. On the 17th April, 1903, M. Calvo, Argentine Minister in Paris, addressed a letter to 12 international jurists, enclosing a copy of Dr Drago’s despatch; this letter and the replies which he received are set out in Rev. de Droit inter. (2nd series), Vol. v. pp. 597-623.
[2 ]Compare for example the case of Don Pacifico, whose claim was for the sum of £21,295. 1s. 4d. and who was awarded the sum of £150 by commissioners to whom the matter was referred.
[3 ]Other instances are given by D. J. Hill, The Second Peace Conference at the Hague, Am. Journ. of Int. Law, Vol. i. p. 689: see also Darby, Modern Pacific Settlements.
[4 ]See The Second International Peace Conference (Report to U.S. Congress), p. 10. The United States Delegation was instructed to urge the following “if no better solution seems practicable”:—“The use of force for the collection of a contract debt alleged to be due by the Government of any country to the citizen of any other country is not permissible until after: 1. The justice and amount of the debt shall have been determined by arbitration if demanded by the alleged debtor. 2. The time and manner of payment, and the security, if any, to be given pending payment, shall have been fixed by arbitration, if demanded by the alleged debtor.”
[1 ]The Quarterly Review, Jan. 1908, p. 238. See also A. Moulin, La doctrine de Drago, Rev. gén. de Droit inter. Vol. xiv. at p. 424.
[2 ]Parl. Papers, Misc. No. 4 (1908), p. 423; La Deux. Confér. T. i. p. 553.
[1 ]Report of Gen. Porter’s speech in The Times of 17 July, 1908.
[1 ]There appear to be good grounds for this reservation as under the Article referred to “the Permanent Court is competent to settle the Compromis,...even if the request is only made by one of the parties, when all attempts to reach an understanding through the diplomatic channel have failed in the case of...(2) a dispute arising from contract debts,” etc.
[1 ]J. Westlake, Quarterly Rev. January, 1908, p. 239.
[2 ]See p. 191, supra.
[1 ]Parl. Papers, Misc. No. 4 (1908), p. 428; La Deux. Confér. T. i. p. 559.
[2 ]Parl. Papers, Misc. No. 4 (1908), pp. 427-9; La Deux. Confér. T. i. pp. 558-9.
[1 ]“He might have answered that the language of the Convention was not susceptible of the former construction,” that is, it does not apply to disputes arising from contracts to which two states were the direct parties (G. W. Scott, Am. Journ. of Inter. Law, Vol. ii. p. 90). See also E. Lémonon, La seconde Conférence, p. 119.
[2 ]See The Bankers’ Case, State Trials, Vol. xiv. p. 1; Thomas v. The Queen, L.R. 10 Q.B. 31; 23 and 24 Vic. c. 34.
[3 ]See H. A. Moulin, La doctrine de Drago, p. 309.
[1 ]See the 2nd reservation of the Argentine Republic cited above.
[2 ]Parl. Papers, Misc. No. 4, 1908, p. 485 (also p. 423).
[3 ]Parl. Papers, Misc. No. 4, 1908, p. 427. See H. A. Moulin, La doctrine de Drago, pp. 316-8. M. Moulin considers that there is considerable doubt whether the expression “dettes contractuelles” is used in the wider sense of including public debts, but he inclines to that opinion and regrets that the Conference did not define the term (p. 320).
[1 ]See L. Oppenheim, Int. Law, Vol. i. § 162. In the case of a manifest denial of justice the Institut de droit international at its meeting at Neuchatel in Sept. 1900 recommended resort to arbitration before possible action be taken (Annuaire, Vol. xviii. p. 256).
[2 ]Am. Journ. of Int. Law, Vol. ii. pp. 92-3.
[1 ]See ante, p. 173.
[P. 184, note 1,]add La Deux. Confér. T. ii. pp. 130-144, 548-553, 916-925.