Message from the President of the United States, transmitting a protocol of an agreement between the United States and the Dominican Republic, providing for the collection and disbursement by the United States of the customs revenues of the Dominican Republic, signed on February 7, 1905.

February 15, 1905.—Read; protocol of agreement read the first time and referred to the Committee on Foreign Relations, and, together with the accompanying papers, ordered to be printed in confidence for the use of the Senate.

February 16, 1905.—Injunction of secrecy removed.

To the Senate:

I submit herewith a protocol concluded between the Dominican Republic and the United States.

The conditions in the Republic of Santo Domingo have been growing steadily worse for many years. There have been many disturbances and revolutions, and debts have been contracted beyond the power of the Republic to pay. Some of these debts were properly contracted and are held by those who have a legitimate right to their money. Others are without question improper or exorbitant, constituting claims which should never be paid in full and perhaps only to the extent of a very small portion of their nominal value.

Certain foreign countries have long felt themselves aggrieved because of the nonpayment of debts due their citizens. The only way by which foreign creditors could ever obtain from the Republic itself any guaranty of payment would be either by the acquisition of territory outright or temporarily, or else by taking possession of the custom-houses, which would of course in itself, in effect, be taking possession of a certain amount of territory.

It has for some time been obvious that those who profit by the Monroe doctrine must accept certain responsibilities along with the rights which it confers; and that the same statement applies to those who uphold the doctrine. It can not be too often and too emphatically asserted that the United States has not the slightest desire for territorial aggrandizement at the expense of any of its southern neighbors, and will not treat the Monroe doctrine as an excuse for such aggrandizement on its part. We do not propose to take any part of Santo Domingo, or exercise any other control over the island save what is necessary to its financial rehabilitation in connection with the collection of revenue, part of which will be turned over to the government to meet the necessary expense of running it, and part of which will be distributed pro rata among the creditors of the Republic upon a basis of absolute equity. The justification for the United States taking this burden and incurring this responsibility is to be found in the fact that it is incompatible with international equity for the United States to refuse to allow other powers to take the only means at their disposal of satisfying the claims of their creditors and yet to refuse, itself, to take any such steps.

An aggrieved nation can without interfering with the Monroe doctrine take what action it sees fit in the adjustment of its disputes with American States, provided that action does not take the shape of interference with their form of government or of the despoilment of their territory under any disguise. But, short of this, when the question is one of a money claim, the only way which remains, finally, to collect it is a blockade, or bombardment, or the seizure of the custom-houses, [Page 335]and this means, as has been said above, what is in effect a possession, even though only a temporary possession, of territory. The United States then becomes a party in interest, because under the Monroe doctrine it can not see any European power seize and permanently occupy the territory of one of these republics; and yet such seizure of territory, disguised or undisguised, may eventually offer the only way in which the power in question can collect any debts, unless there is interference on the part of the United States.

One of the difficult and increasingly complicated problems, which often arise in Santo Domingo, grows out of the violations of contracts and concessions, sometimes improvidently granted, with valuable privileges and exemptions stipulated for upon grossly inadequate considerations which were burdensome to the State, and which are not infrequently disregarded and violated by the governing authorities. Citizens of the United States and of other governments holding these concessions and contracts appeal to their respective governments for active protection and intervention. Except for arbitrary wrong, done or sanctioned by superior authority, to persons or to vested property rights, the United States Government, following its traditional usage in such cases, aims to go no further than the mere use of its good offices, a measure which frequently proves ineffective. On the other hand, there are governments which do sometimes take energetic action for the protection of their subjects in the enforcement of merely contractual claims, and thereupon American concessionaries, supported by powerful influences, make loud appeal to the United States Government in similar cases for similar action. They complain that in the actual posture of affairs their valuable properties are practically, confiscated, that American enterprise is paralyzed, and that unless they are fully protected, even by the enforcement of their merely contractual rights, it means the abandonment to the subjects of other governments of the interests of American trade and commerce through the sacrifice of their investments by excessive taxes imposed in violation of contract, and by other devices, and the sacrifice of the output of their mines and other industries, and even of their railway and shipping interests, which they have established in connection with the exploitation of their concessions. Thus the attempted solution of the complex problem by the ordinary methods of diplomacy reacts injuriously upon the United States Government itself, and in a measure paralyzes the action of the Executive in the direction of a sound and consistent policy. The United States Government is embarrassed in its efforts to foster American enterprise and the growth of our commerce through the cultivation of friendly relations with Santo Domingo, by the irritating effects on those relations, and the consequent injurious influence upon that commerce, of frequent interventions. As a method of solution of the complicated problem arbitration has become nugatory, inasmuch as, in the condition of its finances, an award against the Republic is worthless unless its payment is secured by the pledge of at least some portion of the customs revenues. This pledge is ineffectual without actual delivery over of the custom-houses to secure the appropriation of the pledged revenues to the payment of the award. This situation again reacts injuriously upon the relations of the United States with other nations. For when an award and such security are thus obtained, as in the case of the Santo Domingo Improvement Company, some foreign government complains that the [Page 336]award conflicts with its rights, as a creditor, to some portion of these revenues under an alleged prior pledge; and still other governments complain that an award in any considerable sum, secured by pledges of the customs revenues, is prejudicial to the payment of their equally meritorious claims out of the ordinary revenues; and thus controversies are begotten between the United States and other creditor nations, because of the apparent sacrifice of some of their claims, which may be just or may be grossly exaggerated, but which the United States Government can not inquire into without giving grounds of offense to other friendly creditor nations. Still further illustrations might easily be furnished of the hopelessness of the present situation growing out of the social disorders and the bankrupt finances of the Dominican Republic, where for considerable periods during recent years the bonds of civil society have been practically dissolved.

Under the accepted law of nations foreign governments are within their right, if they choose to exercise it, when they actively intervene in support of the contractual claims of their subjects. They sometimes exercise this power, and on account of commercial rivalries there is a growing tendency on the part of other governments more and more to aid diplomatically in the enforcement of the claims of their subjects. In view of the dilemma in which the Government of the United States is thus placed, it must either adhere to its usual attitude of nonintervention in such cases—an attitude proper under normal conditions, but one which in this particular kind of case results to the disadvantage of its citizens in comparison with those of other States—or else it must, in order to be consistent in its policy, actively intervene to protect the contracts and concessions of its citizens engaged in agriculture, commerce, and transportation in competition with, the subjects and citizens of other States. This course would render the United States the insurer of all the speculative risks of its citizens in the public securities and franchises of Santo Domingo.

Under the plan in the protocol herewith submitted to the Senate, insuring a faithful collection and application of the revenues to the specified objects, we are well assured that this difficult task can be accomplished with the friendly cooperation and good will of all the parties concerned, and to the great relief of the Dominican Republic.

The conditions in the Dominican Republic not only constitute a menace to our relations with other foreign nations, but they also concern the prosperity of the people of the island, as well as the security of American interests, and they are intimately associated with the interests of the South Atlantic and Gulf States, the normal expansion of whose commerce lies in that direction. At one time, and that only a year ago, three revolutions were in progress in the island at the same time.

It is impossible to state with anything like approximate accuracy the present population of the Dominican Republic. In the report of the commission appointed by President Grant in 1871, the population was estimated at not over 150,000 souls, but according to the Statesman’s Yearbook for 1904 the estimated population in 1888 is given as 610,000. The Bureau of the American Republics considers this the best estimate of the present population of the Republic. As shown by the unanimous report of the Grant commission the public debt of the Dominican Republic, including claims, was $1,565,831,59¼. The total revenues were $772,684.75¼. The public indebtedness of the Dominican [Page 337]Republic, not including all claims, was on September 12 last, as the Department of State is advised, $32,280,000; the estimated revenues under Dominican management of custom-houses were $1,850,000; the proposed budget for current administration was $1,300,000, leaving only $550,000 to pay foreign and liquidated obligations, and payments on these latter will amount during the ensuing year to $1,700,000, besides $900,000 of arrearages of payments overdue, amounting in all to $2,600,000. It is therefore impossible under existing conditions, which are chronic, and with the estimated yearly revenues of the Republic, which during the last decade have averaged approximately $1,600,000, to defray the ordinary expenses of the government and to meet its obligations.

The Dominican debt owed to European creditors is about $22,000,000, and of this sum over $18,000,000 is more or less formally recognized. The representatives of European governments have several times approached the Secretary of State, setting forth the wrongs and intolerable delays to which they have been subjected at the hands of the successive governments of Santo Domingo in the collection of their just claims, and intimating that unless the Dominican Government should receive some assistance from the United States in the way of regulating its finances, the creditor governments in Europe would be forced to resort to more effective measures of compulsion to secure the satisfaction of their claims.

If the United States Government declines to take action and other foreign governments resort to action to secure payment of their claims, the latter would be entitled, according to the decision of the Hague tribunal in the Venezuelan cases, to the preferential payment of their claims; and this would absorb all the Dominican revenues and would be a virtual sacrifice of American claims and interests in the island. If, moreover, any such action should be taken by them, the only method to enable them to secure the payment of their claims would be to take possession of the custom-houses, and considering the state of the Dominican finances this would mean a definite and very possibly permanent occupation of Dominican territory, for no period could be set to the time which would be necessarily required for the payment of their obligations and unliquidated claims. The United States Government could not interfere to prevent such seizure and occupation of Dominican territory without either itself proposing some feasible alternative in the way of action, or else virtually saying to European governments that they would not be allowed to collect their claims. This would be an unfortunate attitude for the Government of the United States to be forced to maintain at present. It can not with propriety say that it will protect its own citizens and interests, on the one hand, and yet on the other hand refuse to allow other governments to protect their citizens and interests.

The actual situation in the Dominican Republic can not, perhaps, be more forcibly stated than by giving a brief account of the case of the San Domingo Improvement Company.

From 1869 to 1897 the Dominican Government issued successive series of bonds, the majority of which were in the hands of European holders. Successive issues bore interest at rates ranging from 2¾ to 6 per cent, and what with commissions and other deductions and the heavy discount in the market the government probably did not receive [Page 338]over 50 to 75 per cent of their nominal value. Other portions of the debt were created by loans, for which the government received only one-half of the amount it was nominally to repay, and these obligations bore interest at the rate of 1 to 2 per cent a month on their face, some of them compounded monthly.

The improvidence of the government in its financial management was due to its weakness, to its impaired credit, and to its pecuniary needs, occasioned by frequent insurrections and revolutionary changes and by its inability to collect its revenues.

In 1888 the government, in order to secure the payment of an issue of bonds, placed the custom-houses and the collection of its customs duties, which are substantially the only revenues of the Republic, in the hands of the Westendorps, bankers of Amsterdam, Holland. But the national debt continued to grow and the government finally intrusted the collection of its revenues to an American corporation, the San Domingo Improvement Company, which was to take over the bonds of the Westendorps. The Dominican Government finally became dissatisfied with this arrangement, and, in 1901, ousted the Improvement Company from its custom-houses and took into its own hands the collection of its revenues. The company thereupon appealed to the United States Government to maintain them in their position, but their request was refused. The Dominican Government then sent its minister of foreign affairs to Washington to negotiate a settlement. He admitted that the improvement company had equities which ought not to be disregarded, and the Department of State suggested that the Dominican Government and the improvement company should effect by private negotiation a satisfactory settlement between them. They accordingly entered into an arrangement for a settlement, which was mutually satisfactory to the parties. A similar arrangement was likewise made between the Dominican Government and the European bondholders. The latter arrangement was carried into execution by the Dominican Government and payments made toward the liquidation of the bonds held by the European holders. The Dominican Congress refused to ratify the similar arrangement made with the improvement company, and the government refused to provide for the payment of the American claimants. In this state of the case it was evident that a continuance of this treatment of the American creditors, and its repetition in other cases, would, if allowed to run its course, result in handing over the island to European creditors, and in time would ripen into serious controversies between the United States and other governments, unless the United States should deliberately and finally abandon its interests in the island.

The improvement company and its allied companies held, besides bonds, certain banking and railway interests in the island. The Dominican Government, desirous to own and possess these properties, agreed with the companies that the value of their bonds and properties was $4,500,000, and they submitted to arbitration the question as to the installments in which this sum should be paid and the security that should be given. The Hon. George Gray, judge of the United States circuit court of appeals, and the Hon. Manuel de J. Galvan, both named by the Dominican Republic, and the Hon. John G. Carlisle, named by the United States, were the arbitrators and rendered their award on July 14, 1904. By its terms the Dominican Government was to pay the above-mentioned sum of $4,500,000, with 4 per cent [Page 339]interest per annum, in monthly installments of $37,500 each during two years, and of $41,666.66 each month thereafter, beginning with the month of September, 1904, said award to be secured by the customs revenues and port dues of all the ports on the northern coast of Santo Domingo. The award further provides for the appointment of a financial agent of the United States, who was authorized in case of failure during any month to receive the sum then due to enter into possession of the custom-house at Puerto Plata in the first instance and assume charge of the collection of customs duties and port dues and to fix and determine these duties and dues and secure their payment; in case the sums collected at Puerto Plata should at any time be insufficient for the payment of the amounts due under the award, or in case of any other manifest necessity, or in case the Dominican Government should so request, the financial agent of the United States was authorized to have and exercise at any and all of the other ports above described all the rights and powers vested in him by the award in respect of Puerto Plata. Under the award the financial agent could only apply the revenues collected toward its payment after he had first paid the expenses of collection and certain other obligations styled “apardos,” which constituted prior charges on the revenues assigned. These prior charges are specified in the award. The Dominican Government defaulted in their payments; and in virtue of the award and the authority conferred by the Dominican Government, and at its request, possession was delivered of the custom-house of Puerto Plata to the fiscal agent appointed by the United States to collect the revenues assigned by the arbitrators for the payment of the award; and in virtue of the same authority possession of the custom-house of Monte Christi has also been handed over. I submit herewith a report of Mr. John B. Moore, agent of the United States in this case, and a copy of the award of the arbitrators.

During the past two years the European claimants, except the English, whose interests were embraced in those of the American companies, have, with the support of their respective governments, been growing more and more importunate in pressing their unsatisfied demands. The French and the Belgians in 1901 had entered into a contract with the Dominican Government, but after a few payments were made on account it fell into neglect. Other governments also obliged the Dominican Government to enter into arrangements of various kinds by which the revenues of the Republic were in large part sequestrated, and under one of the agreements, which was concluded with Italy in 1903, the minister of that government was empowered directly to collect from the importers and exporters that portion of the customs revenues assigned to him as security. As the result of chronic disorders, attendant with a constant increase of debt, the state of things in Santo Domingo has become hopeless, unless the United States or some other strong government shall interpose to bring order out of the chaos. The custom-houses, with the exception of the two in the possession of the financial agent appointed by the United States, have become unproductive for the discharge of indebtedness, except as to persons making emergency loans to the government or to its enemies for the purpose of carrying on political contests by force. They have, in fact, become the nuclei of the various revolutions. The first effort of revolutionists is to take possession [Page 340]of a custom-house so as to obtain funds, which are then disposed of at the absolute discretion of those who are collecting them. The chronic disorders prevailing in Santo Domingo have, moreover, become exceedingly dangerous to the interests of Americans holding property in that country. Constant complaints have been received of the injuries and inconveniences to which they have been subjected. As an evidence of the increasing aggravation of conditions the fact may be mentioned that about a year ago the American railway, which had previously been exempt from such attacks, was seized, its tracks torn up, and a station destroyed by revolutionary bands.

The ordinary resources of diplomacy and international arbitration are absolutely impotent to deal wisely and effectively with the situation in the Dominican Republic, which can only be met by organizing its finances on a sound basis and by placing the custom-houses beyond the temptation of insurgent chieftains. Either we must abandon our duty under our traditional policy toward the Dominican people, who aspire to a republican form of government while they are actually drifting into a condition of permanent anarchy, in which case we must permit some other government to adopt its own measures in order to safeguard its own interests, or else we must ourselves take seasonable and appropriate action.

Again and again has the Dominican Government invoked on its own behalf the aid of the United States. It has repeatedly done so of recent years. In 1899 it sought to enter into treaty relations by which it would be placed under the protection of the United States Government. The request was refused. Again, in January, 1904, its minister of foreign affairs visited Washington and besought the help of the United States Government to enable it to escape from its financial and social disorders. Compliance with this request was again declined, for this government has been most reluctant to interfere in anyway, and has finally concluded to take action only because it has become evident that failure to do so may result in a situation fraught with grave danger to the cause of international peace.

In 1903 a representative of a foreign government proposed to the United States the joint fiscal control of the Dominican Republic by certain creditor nations, and that the latter should take charge of the custom-houses and revenues and give to the Dominican Government a certain percentage and apply the residue to the payment ratably of claims of foreign creditors. The United States Government declined to approve or to enter into such an arrangement. But it has now become evident that decided action of some kind can not be much longer delayed. In view of our past experience and our knowledge of the actual situation of the Dominican Republic, a definite refusal of the United States Government to take any effective action looking to the relief of the Dominican Republic and to the discharge of its own duty under the Monroe doctrine can only be considered as an acquiescence in some such action by another government.

That most wise measure of international statesmanship, the Platt amendment, has provided a method for preventing such difficulties from arising in the new Republic of Cuba. In accordance with the terms of this amendment the Republic of Cuba can not issue any bonds which can be collected from Cuba, save as a matter of grace, unless with the consent of the United States, which is at liberty at all times to take measures to prevent the violation of the letter and spirit of the [Page 341]Platt amendment. If a similar plan could now be entered upon by the Dominican Republic, it would undoubtedly be of great advantage to them and to all other peoples, for under such an arrangement no larger debt would be incurred than could be honestly paid, and those who took debts not thus authorized would, by the mere fact of taking them, put themselves in the category of speculators or gamblers, who deserved no consideration and who would be permitted to receive none; so that the honest creditor would on the one hand be safe while on the other hand the Republic would be safeguarded against molestation in the interest of mere speculators.

But no such plan at present exists; and under existing circumstances, when the condition of affairs becomes such as it has become in Santo Domingo, either we must submit to the likelihood of infringement of the Monroe doctrine or we must ourselves agree to some such arrangement as that herewith submitted to the Senate. In this case, fortunately, the prudent and far-seeing statemanship of the Dominican Government has relieved us of all trouble. At their request we have entered into the agreement herewith submitted. Under it the customhouses will be administered peacefully, honestly, and economically, 45 per cent of the proceeds being turned over to the Dominican Government and the remainder being used by the United States to pay what proportion of the debts it is possible to pay on an equitable basis. The Republic will be secured against over-seas aggression. This in reality entails no new obligation upon us, for the Monroe doctrine means precisely such a guaranty on our part.

It is perhaps unnecessary to state that no step of any kind has been taken by the Administration under the terms of the protocol which is herewith submitted.

The Republic of Santo Domingo has by this protocol wisely and patriotically accepted the responsibilities as well as the privileges of liberty, and is showing with evident good faith its purpose to pay all that its resources will permit of its obligations. More than this it can not do, and when it has done this we should not permit it to be molested. We on our part are simply performing in peaceful manner, not only with the cordial acquiescence, but in accordance with the earnest request of the government concerned, part of that international duty which is necessarily involved in the assertion of the Monroe doctrine. We are bound to show that we perform this duty in good faith and without any intention of aggrandizing ourselves at the expense of our weaker neighbors or of conducting ourselves otherwise than so as to benefit both these weaker neighbors and those European powers which may be brought into contact with them. It is in the highest degree necessary that we should prove by our action that the world may trust in our good faith and may understand that this international duty will be performed by us within our own sphere, in the interest not merely of ourselves, but of all other nations, and with strict justice toward all. If this is done, a general acceptance of the Monroe doctrine will in the end surely follow; and this will mean an increase of the sphere in which peaceful measures for the settlement of international difficulties gradually displace those of a warlike character.

We can point with just pride to what we have done in Cuba as a guaranty of our good faith. We stayed in Cuba only so long as to start her aright on the road to self-government, which she has since [Page 342]trod with such marked and distinguished success; and upon leaving the island we exacted no conditions save such as would prevent her from ever becoming the prey of the stranger. Our purpose in Santo Domingo is as beneficent. The good that this country got from its action in Cuba was indirect rather than direct. So it is as regards Santo Domingo. The chief material advantage that will come from the action proposed to be taken will be to Santo Domingo itself and to Santo Domingo’s creditors. The advantages that will come to the United States will be indirect, but nevertheless great, for it is supremely to our interest that all the communities immediately south of us should be or become prosperous and stable, and therefore not merely in name, but in fact independent and self-governing.

I call attention to the urgent need of prompt action on this matter. We now have a great opportunity to secure peace and stability in the island, without friction or bloodshed, by acting in accordance with the cordial invitation of the governmental authorities themselves. It will be unfortunate from every standpoint if we fail to grasp this opportunity; for such failure will probably mean increasing revolutionary violence in Santo Domingo, and very possibly embarrassing foreign complications in addition. This protocol affords a practical test of the efficiency of the United States Government in maintaining the Monroe doctrine.

Theodore Roosevelt.

[Untitled]

The President:

The undersigned, Secretary of State, has the honor to lay before the President, with a view to its transmission to the Senate to receive the advice and consent of that body to its ratification, should his judgment approve thereof, a protocol of an agreement between the United States and the Dominican Republic, signed by their respective plenipotentiaries at Santo Domingo City on February 4, 1905, providing for the collection and disbursement by the United States of the customs revenues of the Dominican Republic.

Respectfully submitted.

John Hay.

[Untitled]

Whereas the Dominican Government in view of the debts which burden the Republic, the imminent peril and urgent menace of intervention on the part of nations whose citizens have claims already established or to be established, finding itself, as it does, unable peremptorily to fulfill its obligations on account of the condition to which political disturbances and other causes have brought the Treasury, the result being that these obligations are falling due without its having been possible to pay them, or even the interest thereon, desires to reach an arrangement with all its creditors and the government itself succeed in assuring the regular receipt of revenues sufficient for the payment of its internal administration and the maintenance of its administrative autonomy without any interruption by the exigencies of foreign creditors or by internal political disturbances, and,

Whereas the Government of the United States of America, viewing any attempt on the part of the governments outside of this hemisphere to oppress or control the destiny of the Dominican Republic as a manifestation of an unfriendly disposition toward the United States is, in compliance with the request of the Dominican Government, disposed to lend its assistance toward effecting a satisfactory arrangement with all the creditors of the [Page 343]Dominican Government, agreeing to respect the complete territorial integrity of the Dominican Republic.

The Dominican Government represented by the secretary of state of foreign relations, Citizen Juan Francisco Sanchez, and the secretary of state of finance and commerce, Citizen Federico Velasquez, and the United States Government represented by its minister resident, Thomas C. Dawson, have agreed and covenanted as follows:

Article First. The United States Government agrees to attempt the adjustment of all the obligations of the Dominican Government, foreign as well as domestic; the adjustment of the payment and of the conditions of amortization; the consideration of conflicting and unreasonable claims, and the determination of the validity and amount of all pending claims.

If, in order to reach such adjustment, it shall be considered necessary to name one or more commissions, the Dominican Government shall be represented on said commissions.

Article Second. In order to enable the United States Government to render the assistance above mentioned, it shall take charge of the existing custom-houses and those which may hereafter be created, shall name the employees necessary to their management, and shall collect and take charge of all custom-house receipts.

These employees shall be subject to the civil and criminal jurisdiction of the Dominican Republic.

The Dominican Government may appoint in each of the custom-houses an officer for the purpose of making an inspection on behalf of Dominican interests.

Article Third. Out of the revenues which shall be collected in all the custom-houses of the Republic, the Government of the United States shall deliver to the Dominican Government a sum, which shall not be less than 45 per cent of the total amount collected, for the purpose of meeting the needs of the public service, and which the Dominican Government shall receive in monthly payments from the date of the taking possession of the customhouses by the officials of the United States, divided into four installments in the following manner:

Forty-five per cent of the total sum collected monthly in periods ending on the 8th, 15th, 22d, and the last day of each month.

Article Fourth. The Government of the United States will apply the 55 per cent which it retains toward the payment of—

A.
The employees of all the custom-houses.
B.
The interest, amortization, and installments of the Dominican debt, foreign and domestic, in accordance with what is hereinbefore provided, according as it shall be fixed and liquidated.
C.
The whole surplus which may remain at the end of each fiscal year shall be delivered to the Government of the Dominican Republic, or shall be devoted to the payment of its debts, if it shall so determine.

Article Fifth. The collectors in the custom houses shall send monthly to the contaduria general and the Department of the Treasury statements of the corresponding income and outgo, and annually a general statement which shall embrace the total of what has been collected and paid out.

Article Sixth. Any reform of the system of duties and taxes shall be made in agreement with the President of the United States, and therefore the present tariff and port dues may not be reduced except with his consent, as long as the whole of the debt which the Government of the United States takes charge of shall not have been completely paid, with the exception of the export duties upon national products which the Dominican Government remains authorized to abolish or reduce immediately, but not to increase said export duties or its public debt without the consent of the President of the United States.

Article Seventh. The Government of the United States, at the request of the Dominican Republic, shall grant the latter such other assistance as the former may deem proper to restore the credit, preserve the order, increase the efficiency of the civil administration, and advance the material progress and welfare of the Dominican Republic.

Article Eighth. This agreement shall continue in force during the time required for the amortization of the debt of which the Government of the United States takes charge.

Article Ninth. This agreement shall take effect after its approval by the United States Senate and the Congress of the Dominican Republic.


  • Thomas C. Dawson.
  • Juan Fco. Sanchez.

Fedri. Velasquez.

[Page 344]

[Inclosure 1.]

The President:

In compliance with your request, I have the honor to submit a statement in relation to the award rendered on the 14th of July last in the case of the San Domingo Improvement Company of New York and its allied companies, the San Domingo Finance Company of New York, and the company of the Central Dominican Railway, all three being New Jersey corporations, and the National Bank of San Domingo, a company originally organized under a French charter, but owned and controlled by the San Domingo Finance Company.

In 1888 the firm of Westendorp & Co., bankers of Amsterdam, Holland, underwrote and issued, at 83½, for the Government of San Domingo 6 per cent gold bonds of that government to the amount of £770,000. The proceeds of these bonds were to be used for the payment of the interior debt of the Republic, which bore very high rates of interest, and also for the conversion of certain bonds issued in 1869 which were held in England.

As security for the new loan the Dominican Government created a first lien on all its customs revenues, and in order to make the lien effective the government authorized the Westendorps to collect and receive at the custom-houses all the customs revenues of the Republic, the Westendorps to retain for interest and sinking fund £55,645 annually, and to deliver the remainder to the government. As machinery for this purpose, the Westendorps were to create an establishment in Santo Domingo known as the Caisse Générale de la Regia (Caja de Recaudación), generally called the “Regie,” to which the collection of the revenues was to be intrusted till the loan was cleared off. Moreover, in case of default, the Westendorps were empowered to create for the purpose of collection a European commission, which it was understood was to be international in character.

The Westendorps duly established the “Regie,” sending out from Europe the necessary agents and employees, and they continued in the collection and disbursement of the revenues till the transfer of their rights to the San Domingo Improvement Company in May, 1892, which transfer was accepted and confirmed by the Dominican Congress in March, 1893.

Meanwhile the Westendorps had, in 1890, contracted to take a further amount of £615,000 6 per cent bonds, which were issued for the payment of additional interior debt and also for the partial construction of a railway from Puerto Plata, the principal seaport on the north coast, across and through the mountains to Santiago, the principal city of the interior. Security similar to that of 1888 was given for the new bonds, and the “Regie” was to pay the interest and the sinking fund out of the customs revenues. The Westendorps offered the new bonds at 77 to the public in Holland and Belgium in November, 1890, but, as the Baring failure took place within a week, the offer was unsuccessful, and they were obliged to take practically the entire issue themselves. The Westendorps began the construction of the railway and had finished about 11 miles up the mountain and had supplied some rolling stock when the improvement company, which had acquired the bonds belonging to the Westendorps (about $1,500,000) and all their rights and obligations under their contracts with the Dominican Government, took possession. At the same time the improvement company contracted to complete the railway, which was subsequently done, to guarantee the conversion of the outstanding 6 per cent bonds, including bonds to be issued for the completion of the railway, into new 4 per cent consolidated bonds, amounting to £1,610,000, and to pay off and discharge certain large interior debts, aggregating $659,000 silver or $440,000 gold.

The Dominican Government also created a new class of bonds, called debentures, at 4 per cent, amounting to $1,250,000. Both classes of new bonds were declared, in the law by which they were authorized, to “be guaranteed by the total amount of the customs receipts, which shall be collected by the San Domingo Improvement Company,” and all the stipulations of the Westendorp contracts for the guaranty and validity of the bonds were declared to continue in full force and effect; and it was further expressly provided that, in order to strengthen the credit of the budget, the improvement company should, in case of default of interest or sinking fund, or in case of other manifest necessity, request the Governments of Holland, Belgium, England, France, and the United States, in which the bonds were held, each to appoint a member of a financial commission, which was to possess all the “Regie’s” rights of collection. It was stipulated, however, that the power of appointment should not be exercised by a country in which less than £100,000 bonds were held.

The improvement company successfully carried out the conversion in Europe of 6 per cent bonds into 4 per cent bonds, but in 1894 the Dominican Government, having become further indebted locally, increased the debentures by $1,250,000 additional, for which the company paid $540,000 gold, besides disbursements, and incurred certain other oblations provided in the law.

Up to this time the fiscal operations of the Dominican Government, the purchase and sale of bonds, and the work upon the railway had all been conducted by the improvement company, but it was then thought best to separate these operations so that the sole office of the improvement company might be that of trustee in the collection and disbursement of the [Page 345]revenues. The San Domingo Finance Company of New York, was therefore created, under the laws of New Jersey, in 1894, by the same Americans who organized and controlled the improvement company (of which the Hon. Smith M. Weed, of New York, was, and still is, president), for the purpose of carrying on the financial operations requisite for the purchase of bonds, as well as the construction of the railway. For the construction and equipment of the latter the Dominican Government agreed to pay the company in consols (6 per cent reduced to 4 per cent), and the road was to be operated through the medium of a company to be created for that purpose for a period of fifty years upon a fixed basis of distribution of profits between the Dominican Government and the operating company. The construction and equipment of the road cost the American companies more than $650,000 gold in excess of the sums realized from the £425,000 Dominican bonds which were sold from time to time in the Brussels market. But the work was completed and the company of the Central Dominican Railway was organized under the laws of New Jersey as the operating company. This company took possession of the railway and still holds and operates it.

In 1895 the Dominican Government became embarrassed by the hostile action of a French fleet which appeared with peremptory demands. In 1889 a company called the Banque Nationale de Saint Domingue was created in France to exercise an exclusive franchise for a State bank in Santo Domingo. The bank was duly established and was in operation when, in 1892, a personal difference arose with President Heureaux, and upon his obtaining a judgment against the bank for a large sum execution was issued and a levy made upon its property. The French consul intervened, sealed the safe of the bank, and reported to his government. Diplomatic relations were severed, and a French fleet appeared before the Dominican capital. The dispute was submitted to the arbitration of Spain, but was not decided, and strained relations still continued when in January, 1895, a naturalized Frenchman was murdered near Samana Bay.

The French Government demanded redress in both matters and threatened to seize the custom-houses of the country and collect a large indemnity. President Heureaux appealed to the improvement company to help him, and upon the presentation of the matter to the President and Secretary of State of the United States, the American minister in Paris was directed to interpose, and in the end the French Government agreed to adjust the matter if the improvement company would guarantee the necessary payments. This the company eventually did, and the finance company agreed to purchase some additional debentures, which by law were called “French-American reclamation consols,” and to buy control of the bank. Such control was purchased in June–October, 1895, the finance company acquiring, at something over par, more than three-quarters of all the shares, costing, with some extraordinary expenses and commissions, about $750,000 in gold. The assets of the bank at that time, besides about 100,000 francs in cash, consisted chiefly of loans to the Dominican Government and the claim for damages resulting from the action of President Heureaux under his judgment. As the loans produced from 12 to 20 per cent, the bank, after it had passed into the control of the finance company, agreed to fund them and to accept payment in French-American reclamation consols (4 per cent), bringing the entire issue of that class of bonds up to $4,250,000, which received as further security certain separate revenues previously pledged to the bank.

In 1897 the improvement company, at the urgent solicitation of the Dominican Government, brought about a consolidation of all the debts of the Republic, including both the exterior debts, and particularly the consolidated gold 4 per cent bonds of 1893, and the French-American reclamation consols of 1895, as well as the interior floating debts, so as to reduce the annual interest charges. This consolidation was effected through the finance company, to which the Dominican Government, under an act of its Congress of August 8, 1897, delivered for the purpose of consolidation two classes of new bonds, respectively denominated “Dominican unified debt 4 per cent bonds” and “obligations or de Saint Domingue 2¾ per cent,” the former to amount to £1,500,000 (of which upward of £350,000 were afterwards canceled, leaving £1,148,600) and the latter to the amount of £2,736,750. By this operation the total bonded debt of the country became £3,885,350, or about $19,000,000. The “obligations or” or “gold obligations” are held chiefly in Holland and Belgium, though some of them are held in France and Germany, and a few in England [and] the United States. The unified bonds are held chiefly in the United States and the remainder in England and France; but those in England, and a large part of those held in France, belong to allies of the American companies.

The law of August 9, 1897, reaffirmed all previous guaranties, expressly declaring that the new 4 per cent and 2¾ per cent bonds should be “conjointly” guaranteed by a first mortgage on the total amount of the general customs receipts and of the “special revenues” and “apartados” which had been appropriated to the debts which were about to be funded; that the revenues should be “collected directly by the ‘Caisse de la Regie,’” and that “all the stipulations of the contracts of 1888 and 1890 with Messrs. Westendorp & Co. in force, and of the laws and contracts of 1893, 1894, and 1895, entered into with the ‘San Domingo Improvement Company of New York’ for the security and validity of the Republic’s bonds, [Page 346]shall remain in force, except such parts as may have been modified by the present law and by the contracts derived from it.”

In carrying out the conversion under the law of 1897 the finance company was embarrassed by finding that certain representations made by the Dominican Government as to the amount of its floating indebtedness were erroneous. This discovery led to the withdrawal of certain English capitalists, with the result that the finance company was obliged itself to raise additional sums of money in order to carry the operation to completion.

In April, 1899, in spite of the fact that under the administration of the improvement company the amount of the revenues collected had steadily increased, the payment of the coupons was suspended, chiefly because the revenues had, under a governmental decree, become payable partly in depreciated paper currency, the market value of which fell from $3 paper to $1 of gold in September, 1898, to $20 paper to $1 of gold in August, 1899. It was impossible with this money, even with the help of such duties as were payable in gold coin, to meet the government budget and buy sufficient gold to pay the coupons. The causes of this unfortunate depreciation of the currency are a matter of public notoriety. Revolutionary movements, which had for some time been repressed, had become flagrant. On July 26, 1899, President Heureaux was assassinated, and as the result of the prevailing disturbances the interior or floating debt of the Republic rose by the latter part of 1899 to more than $2,500,000, bearing interest in some cases at the ruinous rate of 2 per cent a month, compounded.

Efforts were made by the improvement company to relieve the government’s situation, and to that end a new contract, which was ratified by the Dominican Congress on April 18, 1900, and duly promulgated as a law, was entered into. By this contract all duties were payable in gold; the amount of the interior debt was ascertained, and the interest on it was reduced to 6 per cent or less; and provision was made for the payment of all the government’s floating debts. The contract was duly put into operation, but its performance was soon interrupted. After the assassination of Heureaux the government naturally fell into the hands of the men who had been his enemies and who were disposed to question and condemn all the acts of his long administration. Moreover, the great majority of those who came into temporary possession of public power were unfamiliar with administrative duties and were confessedly unacquainted with the contracts of the government and the rights, duties, and powers of the American companies thereunder, and the press began to urge the withdrawal of the American companies from the country. Some advocated a withdrawal as the result of friendly negotiation and some through forcible expulsion.

Late in 1899 Señor Juan Isidro Jimenez, who had become President on November 20 of that year, inquired of the American companies, through an agent in New York, whether they would be willing to sell all their interests to the government and withdraw from the country. The companies indicated their willingness to negotiate in that sense, and, upon further request, submitted a plan as a basis for negotiation. Subsequently the companies concluded with the government a contract of April 18, 1900, which was duly ratified by the Dominican Congress; but while it was before the Congress President Jimenez renewed the discussion as to the purchase of the companies’ interests. Subsequently the companies submitted detailed propositions, but President Jimenez meanwhile changed his mind, and after a preliminary discussion he declined to proceed further in the negotiations. He then adopted the view which had been advanced in the Dominican press, that the contract of 1900, if not absolutely void, could not be legally put into execution, except as to those parts which increased the government’s annual budget. In this position he derived encouragement from the attitude of certain Belgian and French interests, who were dissatisfied with the contract. The improvement company insisted on carrying out the contract as approved by the Congress, and, being in control of the “Regie,” continued to disburse the moneys accordingly, including payments to the government itself.

About this time the Dominican Government instituted a proceeding in the local courts against the bank, alleging its bankruptcy on the ground of nonpayment of a small amount of bank notes, for which the government itself was in writing pledged as primary debtor under a contract by which the bank was released. These proceedings were decided nineteen months later in favor of the bank, but they had made any hope of rehabilitation under existing conditions impossible, since during all that time the bank was closed and in the possession of official liquidators.

Proceeding in a similar spirit, President Jimenez on January 10, 1901, by a mere executive order, peremptorily excluded the improvement company from the discharge of its functions in the collection of the revenues under the laws. To appreciate the far-reaching effect of this decree it is necessary to recall the fact that every bond of the Republic was issued, bought, and sold on the strength of the laws which provided that the security for their payment should be the customs revenues of the Republic, collected and administered by the San Domingo Improvement Company, and this assurance was printed in the bonds themselves.

The Jimenez decree, in ejecting the improvement company from the custom-houses, destroyed practically the only substantial security for the payment of the bonds, £825,000 of which were owned by the finance company and its allies. By the same decree by which [Page 347]the company was ejected there was constituted a “commission of honorables,” consisting of three members, to whom it was declared that the sums due to the company’s creditors would be paid, to be kept on deposit pending the settlement. This professed security of course proved to be wholly specious. No moneys were kept on deposit with the commission. On the contrary, it became known late in 1901 that out of the large revenues of that year, amounting to more than $2,100,000, the percentages for the foreign and domestic debt had not been set aside, that no payments had been made on the interior floating debt, but that the Jimenez “revolutionary” claims had been paid without warrant of law, and that there was besides a deficit.

The American companies applied to their government for relief against the decree of January, 1901, and almost immediately thereafter the Dominican Government sent its minister of foreign affairs, Dr. Henriquez y Carvajal, to the United States and Europe on a special mission. Doctor Henriquez laid his case before the Department of State, where he was advised to seek a direct arrangement with the American companies. He immediately opened negotiations with them, and on March 25, 1901, concluded with them a contract which was considered by him, as well as by the American companies, to be advantageous to his government. This contract, which embraced the purchase by the Dominican Government of the interests of the American companies, provided for the deposit with a trust company in New York of a fixed monthly sum pending the amicable settlement of all questions, which, so far as they could not be adjusted directly, were to be determined by arbitration. Each of the parties was to appoint an arbitrator; and an umpire, in case they could not agree, was to be designated by the King of Sweden, at the request of the American and Dominican Governments. The gross sum to be paid and the method of its payment, together with the security therefor, were also to be determined by the arbitrators.

After completing this negotiation Doctor Henriquez went to Europe, where, as the result of the contract made with the improvement company, he was able to effect, on June 3, 1901, a contract with the Belgian and French bondholders. Both contracts were submitted to the Dominican Congress in September, 1901. The Belgian contract was promptly ratified, but the American contract was rejected. The principal ground of its rejection seems to have been the objection to leaving it to the arbitrators to fix the sum to be paid.

The American companies then invoked the intervention of their government and filed with the Department of State, on January 6, 1902, their printed case. The Department gave suitable instructions to the American chargé d’affaires to Santo Domingo, with whose assistance another effort was made by the companies to effect a direct settlement. Negotiations had, however, scarcely begun when the existing government was overthrown and a new one set up.

In May, 1902, negotiations were resumed, the American companies being represented by Mr. John T. Abbott and the Dominican Government by its minister of finance. Mr. Abbott presented a statement as to the properties and claims of the American companies, with a view to arbitration. The government, however, adhering to the principle on which the contract of 1901 was rejected, proposed a settlement by the purchase of all the rights, claims, properties, and interests of the company for a round sum of money, thus disposing at a stroke of all accounts, claims, and differences between the parties, and leaving only the annual or monthly payments and the security therefor, together with the mode of collection, as subjects for discussion. This proposal was accepted by Mr. Abbott, and the sum of $4,500,000 was agreed upon as the price to be paid by the government and received by the companies for the purposes stated. The aggregate of the claims originally presented by the companies amounted to over $11,000,000; but, as Mr. Abbott pointed out to the government, some of the claims were partly duplicated, and the £850,000 of bonds were set down at par, while loss of profits on contracts which the government had violated was also included.

The companies expressed to the government their belief that upon a strictly equitable settlement they were entitled to $6,000,000, but they eventually agreed upon the sum above named, throwing in their bonds at 50 cents on the dollar and compromising or relinquishing other claims. The amount allowed for their bonds (at 50 cents on the dollar) was $2,076,635; their interests in the railroad were included at $1,500,000, a sum to which the Dominican Government did not object, and their bank shares and various “accounts, claims, and differences” were embraced for $923,365. This compromise having been reached, only the question of the annual or monthly payments and the time of the delivery of the railroad remained to be determined. The government eventually insisted upon the delivery of the railroad within a few months after the contract should be signed and before any substantial part of its value had been paid. The companies, on the other hand, insisted that they should be permitted to hold and operate the railroad till it had been paid for, since it would constitute their only tangible security apart from the offer of the government to set aside a portion of the revenues of Puerto Plata for the monthly payments.

On the question of the railway a deadlock ensued, and negotiations were broken off. The companies subsequently offered to deliver the road after five annual payments of principal [Page 348]and interests had been made; but this proposal was curtly rejected, and all negotiations between the government and the companies ceased. The companies were again obliged to have recourse to the Government of the United States. The Department of State shared the view of the companies, that the demand of the Dominican cabinet for the immediate handing over of the railway was unjust. The American chargé d’affaires to San Domingo was therefore, in the autumn of 1902, instructed to ask for an arbitration by means of a mixed commission of all questions at issue, including the amount to be paid to the American companies, and a form of protocol appropriate to the case was presented to the Dominican Government. The draft protocol contained no suggestion of the amount to be paid to the American companies, but left the whole case to the arbitrators, including price, accounts, and claims.

A long discussion ensued, and in the end the Dominican Government, adhering to its previous position, proposed to liquidate in the protocol itself the accounts, claims, and purchase money for the round sum of $4,500,000, leaving it to the arbitrators to determine the conditions under which the companies’ property should be delivered, the terms and times of payment, including security, and the amount of the monthly installments and the manner of their collection, as well as the rate of interest to be paid on the award. This proposal was accepted, and a protocol in conformity with it was signed at San Domingo City on January 31, 1903. Under this agreement payments at the rate of $18,750 a month were to be made pending arbitration. The first payment was made in February, 1903, but none subsequently.

The arbitrators met in Washington in December, 1903, their appointment having been delayed by the various revolutions which had taken place in San Domingo during the year, some of which were still in progress when the arbitrators assembled. The arbitrator on the part of the United States was the Hon. John G. Carlisle; on the part of San Domingo Señor don Manuel de J. Galvan; the third arbitrator was Judge George Gray. The Dominican Government was represented before the board by Messrs. Curtis, Mallet-Prevost & Colt; the Government of the United States by the undersigned. Cases, countercases, and arguments were duly submitted, and on July 14, 1904, the arbitrators rendered their award. The award provided that the principal sum, bearing interest at the rate of 4 per cent per annum, shall be paid in monthly installments of $37,500 during the first two years, and $41,666.66 thereafter.

Provision is made for the appointment by the United States of a financial agent who is to receive the amount due on the 1st of each month, beginning with September 1, 1904; and the revenues of Puerto Plata, Samana, Sanchez, and Monte Christi, and of any other customhouses opened within a designated zone are assigned and designated security. In case of failure to receive during any month the sum then due the financial agent of the United States is empowered to enter into possession of the custom-house at Puerto Plata in the first instance and collect the revenues; and in case the sums there collected shall be at any time insufficient for the payment of the amounts due, or in case of any other manifest necessity, or if the Dominican Government shall so request, the financial agent is authorized to exercise at Sanchez, Samana, and Monte Christi any or all of the rights and powers vested in him in respect of the port of Puerto Plata. A copy of the award is hereto annexed.

The agent of the United States laid before the arbitrators all recorded liquidated debts of the Dominican Republic, which, as set forth in the case of the United States, then amounted approximately to $24,643,387. This sum embraced the bonded debt, but did not include, except to a slight extent, a mass of unliquidated claims which probably may exist and which may be brought forward at greatly exaggerated figures when opportunity is afforded for their adjustment.

It was shown before the arbitrators that the causes of the Dominican Government’s financial difficulties were revolutions, inefficient and corrupt administration of the revenues, and wasteful and illegal expenditures, including those for the payment of “revolutionary” claims and “asignaciones.” The first duty of a new president is conceived to be the payment of the expenses incurred by him and his leading supporters in securing the presidential office. These are commonly called “revolutionary” claims, and for their payment all moneys in sight are considered to be available. By “asignaciones” is meant unauthorized and unlawful gratuities paid by the existing government to its actual or potential enemies in order to induce them to refrain from raising revolutions.

It is upon such things that the public revenues, so far as they are actually collected by the government and not by its enemies, are dissipated, while ordinary expenses are paid by emergency loans or left unpaid, and the public creditor receives nothing. If the arbitrators had accepted this condition of things as normal and permanent their proceedings would necessarily have been a farce, and they could have rendered no award; but they deemed themselves precluded from acting on such a theory. Acting on the only principle on which they could discharge their functions, they entered fully into the consideration of the Dominican resources and revenues. They examined the country’s debts and the rights of the various creditors, as shown in public laws and contracts, and they framed their award [Page 349]upon the assumption that the revenues were properly to be devoted to the payment of legitimate expenses of government and the satisfaction of creditors instead of being worse than thrown away in harmful and illegal ways.

If the award, as the tribunal evidently desired and intended, should by reason of the mode of collection which it establishes enable the American creditors to obtain, even in revolutionary times, something in, discharge of what is due them, this result would be equally advantageous to them and to San Domingo; for except by such a mode of collection no creditor could obtain anything, while the revenues would be dissipated by the chiefs of contending factions in the prosecution of their destructive and ruinous contests.

In reality the provisions of the award, while they are admirably adjusted to the fundamental equities of the case, disclose an evident wish on the part of the arbitrators to be liberal toward the Dominican Republic.

The mode of collection established for certain ports was obviously a substitute for the right which the San Domingo Improvement Company possessed under Dominican laws that have never been repealed, though their execution has been violently prevented, to collect the revenues at all the ports of the Republic. In taking from the company this larger right the tribunal merely endeavored to give the lesser and substituted right in such form as to be as far as possible self-executing and effective. Moreover, the evidence before the tribunal demonstrated the expansion of which the revenues are capable under a proper mode of collection. Under the administration of the San Domingo Improvement Company they amounted in 1894 to $1,228,113.68; in 1895 to $1,364,238.16; in 1896 to $1,473,310.42; in 1897 to $1,600,294.39; in 1898 to $1,633,557.61; in 1899 (a year of revolution) to $1,458,173.44, and in 1900, the last year in which the improvement company collected them, to $2,424,684.05.

In fixing the amount of the annual payment at $450,000 for the first two years, instead of $500,000, as decreed for subsequent years, the tribunal considered in a liberal spirit the demands of other creditors, although the Dominican Republic was, at the time of the award, in arrears in its stipulated payments to the United States under the protocol of January 31, 1903, to the amount of $337,500.

Again, the protocol provided that interest should begin to run from the date of the award, but it also stipulated that the award should be rendered within a year from the signature of the protocol. It was therefore submitted to the tribunal that interest should begin to run, especially as the principal amount of the debt was fixed in the protocol, from the expiration of a year after the date of the signature of that instrument. The tribunal, however, gave the Dominican Government the benefit of the doubt and allowed interest only from the actual date of the award.

Finally, interest at the rate of 6 per cent was claimed on behalf of the United States, that being the legal rate in San Domingo, while the actual rate on loans lately made by that government is far higher. The claim as to interest was supported by precedents, but the tribunal, evidently desirous of acting toward the Dominican Government in a spirit of the utmost consideration, allowed only 4 per cent. The result is that the Dominican Republic is required to pay less than the legal, to say nothing of the actual, rate of interest in that country, and the proportion of the annual payments devoted to the discharge of the principal of the debt is correspondingly increased.

Respectfully submitted.

John B. Moore

[Inclosure 2.]

Inclosure 2 being award of the commission of arbitration under the provisions of the protocol of January 31, 1903, between the United States of America and the Domincan Republic, for the settlement of the claims of the San Domingo Improvement Company of New York, and its allied companies, printed Foreign Relations, 1904, p. 274.

[Inclosure 3.]

Inclosure 3 being protocol of an agreement between the United States of America and the Dominican Republic for the submission to arbitration of certain questions as to the payment of the sum hereinafter agreed to be paid by the Dominican Government to the Government of the United States on account of the claims of the San Domingo Improvement Company, of New York, a corporation under the laws of the State of New Jersey and a citizen of the United States, and its allied companies, printed in Foreign Relations, 1904, p. 270.