Papers Relating to the Foreign Relations of the United States, With the Annual Message of the President Transmitted to Congress December 3, 1907, (In two parts), Part II
File No. 7543/2.
The Acting Secretary of State to Minister Collier.
Washington, August 2, 1907.
Sir: I have to acknowledge the receipt of your No. 358 of June 19 last, inclosing a copy of the law authorizing the minister of finance to pay the principal and interest of the Spanish indemnity of 1834.
I inclose for your convenient information a copy of a memorandum made by the Second Assistant Secretary of State as to the manner, time, and place of payment of the inscriptions of 1834.
I am, etc.,
spanish inscriptions of 1834, memorandum as to manner, time, and place of payment.
By the treaty signed at Madrid on February 17, 1834, and proclaimed on November 1, of the same year, the Government of Spain engaged “to pay to the United States as the balance on account of the claims aforesaid” (preferred by each party against the other) “the sum of $12,000,000 of reals vellon, in one or several inscriptions, as preferred by the Government of the United States, of perpetual rents, on the great book of the consolidated debt of Spain, bearing an interest of 5 per cent per annum.”
On the 13th of December, Minister C. P. Van Ness received of the Spanish Government 900 “inscriptions “of “rents at 5 per cent payable to the bearer in Paris,” viz, 300 for $1,000 each, and 600 for $500 each. He received at the same time’ a draft for francs 81,000, or $15,000, payable in Paris on the 14th of February, 1835, and delivered the coupons appertaining to said payment.
The “inscriptions” and draft were sent by Van Ness to Paris in the custody of the secretary of the legation, Arthur Middleton (dispatch No. 92, of December 29, 1834) and deposited with Rothschild Brothers who were then the bankers of the United States. The receipt signed by them and now bound with Secretary Middleton’s letter of February 12, 1835, recites that the 900 certificates, in a package sealed with Middleton’s seal and their own, was held gratuitously and without responsibility on their part, at the disposal of the Government of the United States, and would be returned on demand.
The practice in subsequent payments which were made in Paris in accordance with the terms of the treaty on or about the 14th of August, 1835, and in February and in August, 1836, seems to have been that the package was opened in the presence of the diplomatic representative of the United States for the purpose of detaching and delivering the coupons, and resealed.
After the last date above mentioned and owing to civil strife and pecuniary embarrassments in Spain payments were suspended until Aaron Vail, who was sent to Madrid as chargé d’affaires, effected in April, 1841, an arrangement by which the treasury of Cuba was to pay annually and “punctually” to an agent of the United States the sum of $60,000, one-half of which was to be applied to the payment of arrears (dispatch of April 6, 1841). Vail’s instructions (July 15, 1840) were to offer one of two modes of settlement: First, payment of arrears and interest by drafts on the Cuban treasury; second, acceptance of “coupons” of the certificates in settlement of customs and other dues in ports of Cuba.
[Page 1010]The arrangement concluded by Aaron Vail was accepted by this Government, and in February, 1842, Tully R. Wise was sent to Habana as a secret agent (Special Missions Book No. 1, p. 181) and collected the sum of $60,000. At the special request of the Spanish Government absolute secrecy was enjoined upon Agent Wise.
“In consequence of the inconvenience and expense of sending to the island of Cuba an agent” (instruction of August 29, 1842, to Washington Irving, Madrid) “and of an assurance given to Mr. Wise that such a course would be perfectly acceptable,” the intendant of Habana was asked on June 3, 1842 (Special Missions Book No. 1, p. 187), to remit the amount agreed on without the intervention of an agent. The refusal of the intendant, based on the circumstance that a Spanish “claim (La Amistad) was awaiting adjustment, was made the subject of simultaneous and earnest representations through both the legations at Washington and at Madrid (August 16, 1842, to the Chevalier de Argaiz; August 29, 1842, to Washington Irving). On the 11th of January, 1843, Minister Irving was informed that on the 29th day of December the Chevalier de Argaiz had notified the department that he had received from the treasury of Cuba bills of exchange amounting to $60,000. “The communication and the delivery of the bills were attended by no explanation whatever, nor has it been thought necessary by the Government to seek one.” (Mr. Webster to Mr. Irving, January 17, 1843.) From that time, the practice seems to have obtained of receiving these remittances from the Spanish Legation at Washington. Payments were thus made or tendered in the sums of $60,000 on November 13, 1841; $60,000 on November 27, 1844, and, the arrears being then apparently covered, $30,000 on April 9, 1846.
On the 9th of March, 1847, Minister Calderon de la Barca submitted the following proposition:
- “First. That the Government of H. C. Majesty is disposed to locate permanently in Habana the payment of the interest to which the second article of the convention of 1834 refers.
- “Second. That the amount of the said interest shall be annually remitted by the treasury of Habana in bills of exchange guaranteed by it of the same nature as those hitherto sent.
- “Third. That to cover the expense of the acquisition of the said bills, that it may not fall upon Spain, 5 per cent, or $1,500, shall be deducted from the aforesaid amount.
- “Fourth. That on receiving the bills, the Government of the United States will give Her Majesty’s legation in Washington the receipts and the usual order for the delivery of the coupons in the same manner and in the same form as has been practiced until now.”
The proposition was accepted on the same day by Secretary Buchanan “in the understanding that the said annual remittance of interest, in bills of exchange, is to be made on the 14th day of August of each successive year, or, at latest, one month or forty days thereafter, from imperative or unforeseen circumstances, it should occasionally prove impossible to make it by the day named.”
The first payment, under the arrangement, was made by the Spanish legation on May 25, 1847, in two letters of exchange amounting together to $28,500 and covering the overdue installment of 1846.
Under date of October 28, 1847, Señor de la Barca again wrote to the department and asked that, by reason of the exhaustion of the coupons, the usual order to deliver the said coupons be dispensed with and that the receipt in quadruplicate be accepted in lieu of said order. This arrangement was also accepted by Secretary Buchanan on October 30, 1847; and from that date to the 21st of August, 1897, when the last payment was made by Minister Dupuy de Lome, all the remittances were made on the basis of the notes above referred to.
With more or less promptness the Spanish legation transmitted to the department one or more letters of exchange which, so far as the records indicate, were drawn by firms in Cuba on firms in the United States; upon receipt of these drafts the department sent to the Spanish legation a receipt accompanied by a memorandum setting forth the arrangement of October, 1847, in regard to the coupons (Appendix A), both these papers being in quadruplicate, and two copies attached to the memorandum; one of these was sent to the Treasury Department, by which, since 1884, the money thus received has been distributed to the person entitled to it, and the other forwarded through the diplomatic representative of the United States at Paris to Messrs. Rothschild Brothers.
[Page 1011]The question of paying all the principal of the debt is one that has been put from time to time. The letter of the treaty shows that Spain discharged all her liabilities, to the amount of 12,000,000 of reals ($600,000), by “one or several inscriptions of perpetual rents.” As said in Senate Report No. 1467, Fifty-fifth Congress, third session, “Spain executed the inscriptions as required by the treaty.” It might therefore be said that the treaty obligation, as such, was fully discharged and in its stead a new obligation assumed by Spain toward certain holders of certificates of perpetual interest-bearing indebtedness. This seems to be the view taken by the Spanish Government in deciding to waive negotiations for the revival of the treaty of 1834 and to proceed to pay the interest suspended during the past two years.
In the form of such certificates appended to the treaty, Spain reserves the application to this particular debt of a general statute applicable to the perpetual consolidated debt of Spain, which provides for a sinking fund to be fed by annual payments into that fund of sums equal to 1 per cent of the par value of such inscriptions, which fund may be used for the extinguishment of the inscriptions, by the bankers, through purchases to be made at the open market rates.
In 1878 (November 1) Mr. Evarts instructed Mr. Lowell to ask of Spain the payment of the principal, founding his demand on the sinking fund proviso of the certificate, and on the translation given by him of the proviso to the effect that the prescribed sinking fund should be employed for the periodical extinguishment of the debt “at the current rate of exchange.” The answer of the Spanish Government was to the effect that the sinking fund was a privilege reserved by the Spanish Government for its own advantage by buying in the certificates at the current market rate. Mr. Silvela said, March 18, 1879, “We continue to pay public obligations.” Mr. Evarts, April 10, 1879, rejoined, contesting the Spanish view, and the matter rested.
An earlier effort, or at least inquiries in the same direction, seem to have been made by Arthur Middleton, who, as mentioned above, was sent to Paris by Minister Van Ness with the 900 Spanish certificates. In his letter dated in Paris, February 12, 1835, he reports that Rothschild Brothers would be able and “probably willing to give more than anybody else “and that if the United States Government should offer a “guarantee” there would be no difficulty in obtaining “the highest price that can be got for any foreign stock, say from 85 to 90.”