No. 37.
Mr. Kasson to Mr. Evarts.

No. 195.]

Sir: In my Nos. 174, 175, written in response to the instructions given me in your No. 87, I referred to certain expected documents from the ministry of commerce, which would enable me to transmit further valuable information touching the railroad system of Austria, and the provisions of law relating thereto. These have since been received at this legation; and I now give an analysis of the principal provisions of the organic regulations.

The executive act of concession referring to the fundamental law of concessions first declares the name of the company which is to undertake the work, and gives the termini and the chief points of the route. It also prescribes the dates within which the enterprise must be begun and terminated, and the amount of caution money to be paid to the government in pledge for the execution of the company’s engagements.

The government reserves its right to approve the modes of raising money to build the road, and the rates at which money is to be obtained on their securities. It reserves the right of free transmission of the public mails, and to use any or all trains for postal carriage, except that the fast trains shall not be used for the package-post.

The company must give free transportation to postal employés, and must provide and keep in order the usual post and ambulance cars according to the requirement of the postal department; and the particulars of such requirements are expressed. Proper postal rooms must also be provided without charge at each station-house on the road.

In the absence of the post-officers, the railroad employés must do certain of the duties for a reasonable compensation from the post direction.

The company undertakes to construct and maintain a telegraph line (or arrange for it with the State, Telegraph Company), to be used by themselves in the conduct of their railroad, the government reserving the right to have this telegraph line employed for public or private business. It also reserves the right to put its own wires on the company’s poles, or erect its own poles and wires along the company’s land; and regulates the terms on which telegraph materials are to be transported and cared for.

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In all these affairs the company must come to agreement with the proper organ of the government.

The concession fixes a maximum tariff for passengers and for freight, according to class and train (a, § 7).

It also fixes the rules governing the cost of all military transport for government (a, § 8), with some detailed provisions relating thereto.

On the other hand, the state guarantees annual net earnings (including sinking fund) to the amount of —— per mile for the whole term of the concession, which is. 90 years. Whatever is wanting in the proper earnings of the road to this sum is to be made good by the governments This guarantee begins to have effect from the day of the opening of the whole guaranteed line, (a, § 9.) Its object is to fix a sufficient sum to be annually applied, which shall pay to shareholders 5 per cent. per annum, and shall in 90 years extinguish, by further annual payments, both capital and bonded debt.

Provisions for carrying out this obligation are made, including the refunding to the state of previous disbursements on the guarantee from any subsequent excessive earnings of the road, (a, § 10.)

If necessary, exemption from all taxes is conceded for a limited time. What items shall be counted for necessary expenses are stated. Proper limitations are imposed on the issue of shares and bonds, and the right of the state to anticipate the time of its acquisition of the road on prescribed terms, at any time after thirty years, is reserved.

In brief, the theory of Austrian railroad legislation is this: The need of a railroad being recognized, its general route is established by the government. The concession to build it is given to a company upon maximum conditions of cost, to be repaid, and of time of construction.

A fine for non-execution of contract may be imposed. The government reserves its rights for its free use for postal purposes and certain telegraphic privileges and the right of military use at established rates.

The concession also controls a maximum rate for freight and travel. The road becomes the absolute property of the government in 90 years.

In return the state assures the company against loss, by guaranteeing an amount of annual earnings per mile (or receipts in some form), which shall within the period of 90 years be sufficient to realize beyond current expenses an annual interest of 5 per cent. on share and bonded capital, and shall, upon a prearranged system of annual amortization, extinguish the principal invested in the construction and equipment.

The excess of net earnings beyond the amount necessary to indemnify the government against its guaranty goes to the shareholders.

Thus the interests of the company and of the government are in many respects identical, and where there is a conflict justice is assured to the company by protection against actual loss.

In time all the private interests pass over to the public interest.

I have, &c,