Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 5, 1916

File No. 838.77/137

The National Railroad Company of Haiti to the Chief of Division of Latin American Affairs

New York, May 24, 1916.

Sir: Following my letter to you of May 8.² I enclose herewith duplicate copies of a memorandum dealing in a general way with the claims which the Compagnie Nationale des Chemins de Fer d’Haiti has against the Haitian Government, and also the differences existing between the two over certain matters.

So soon as your Department and the members of the Haitian Commission are ready to discuss the various matters covered by the enclosed memorandum I will attend at Washington upon notification from you.

Yours [etc.]

Compagnie Nationale des Chemins de Fer d’Haiti,

R. L. Farnham, President

[Inclosure—Memorandum]

[Untitled]

In accordance with the terms and conditions of its concession which, in final amended form, was duly ratified by the Congress of the Republic of Haiti and officially promulgated April 16, 1910, the Compagnie Nationale des Chemins de Fer d’Haiti began in April 1911 the construction of the National Railroad of Haiti. Between the date of the commencement of the construction work (April 1911) and the date of the intervention of the United States in Haitian affairs (July 1915) the railroad company has suffered great losses:—

1. Through destruction, damage and theft by revolutionary bodies and sometimes by the troops of the Government, of its property.

2. Through being compelled to make payments unlawfully exacted from it by the various Governments which have prevailed in Haiti during the above-named period and in direct contravention to the specific provisions of its concession.

3. Through considerable losses of property and of time caused by the repeated failure of the aforesaid Governments to extend upon requests made, the police assistance and protection to the workmen and property of the company, which, by the concession, the Government of Haiti pledged itself to do.

4. Through the failure of the Haitian Government to meet its obligations in respect of its guarantee of the bonds of the railroad.

5. Through default of its guarantee of interest upon the bonds of the railroad company.

Revolutionary troubles were first experienced by the railroad company in Haiti in July 1911, when a revolution headed by General Leconte made its way from the vicinity of Cape Haiti [Haitien] to Port au Prince, fighting the forces of President Simon, who was finally defeated and driven from the island in August 1911, and Leconte became president. In this revolution at Cape Haiti and vicinity; at Gonaives and between St. Marc and Port au Prince, a large amount of the construction equipment and property of the railroad company was destroyed, damaged and stolen, both by the revolutionary forces under General Leconte and the Government forces under General Simon. All construction work was brought to a standstill for some three months but the overhead charges and payroll of engineers continued. These conditions were experienced by the railroad company to greater or less extent each time there was a revolutionary movement in the country, and the records show that in the period from April 15, 1911 to July 1, 1915,—four years and three months,—there were only eighteen months during which peace and quietness prevailed in the country and construction work could be prosecuted without interference. Within this period of five years Haiti has had seven different Governments, all of which came into power through revolution.

At the beginning of his revolutionary movement General Leconte raised the cry of “Down with the Railroad “, “Down with the Americans”, and he succeeded in so arousing public feeling against the railroad enterprise that for nearly three years thereafter the property of the company and all of the white employees were popular subjects of attack by the people of the country and by political speakers.

During the several revolutions which occurred between 1910 and 1915 stations of the railroad company were burned; telegraph and telephone lines torn down and many kilometers of the wire destroyed; trains were derailed; bridges burned; large quantities of railroad ties destroyed; and more than one-half of the construction plant either destroyed or carried off. The actual cost to the railroad company of the buildings, equipment, plant and other property thus destroyed or stolen aggregated over two hundred thousand dollars ($200,000), for which no reimbursement or compensation has been made by the Government of Haiti.

The second item of loss suffered by the railroad company in Haiti during the last five years grows out of payments of tonnage taxes and customs duties enforced by various officials of the Haitian Government despite the fact that one of the conditions of the concession specifically provides that “Materials, engines, tools, all appliances and supplies necessary to the establishment, to the operation and maintenance of the railroad shall be exempted from all customs duties and taxes except those which have been appropriated to another concession.”

During the first few months of the construction of the railroad in Haiti under the administration of President Simon, no demand for the payment of tonnage dues or duties upon supplies, materials, etc., brought into Haiti for the account of the railroad was made upon the railroad company. The provisions of the concession in this respect were lived up to by the Haitian officials.

A short time after General Leconte succeeded to the Presidency of Haiti, his Secretary of State for Public Works instructed the collectors of customs to refuse delivery to the railroad company of supplies, equipment etc., brought into the country in connection with and for the purpose of constructing the railroad, until the company paid tonnage dues and customs duties upon the same in accordance with the existing Haitian tariff.

The company promptly filed a protest against the collection of these taxes, calling attention to the provisions of its concession, but the Secretary of State for Public Works refused to change his instructions stating to the resident officials of the company that, while the company’s contentions might be quite sound, the Government of Haiti was poor and needed the money and the railroad, being rich, could well afford to pay taxes imposed.

In order to avoid serious and expensive delays in the prosecution of the work of construction from nondelivery of the articles detained in the customhouses by the arbitrary ruling of the Secretary of State for Public Works, the railroad company paid each time, under written protest, the amounts demanded. This procedure of paying these taxes and duties under protest has been maintained by the company practically up to the present time, although it has made frequent representations, but without avail, to the different Governments of Haiti for relief in conformity with the terms of its concession. The payment made during this period on account of tonnage dues and customs duties now amounts to over fifty-nine thousand dollars ($59,000.00).

The third item of loss flows from the failure of the various Governments of Haiti to give the police or military protection to the property of the company as it promised in the concession to the railroad to do. Repeatedly at Cape Haiti and vicinity, and at Grand Rivière; at St. Marc and Port au Prince the representatives of the railroad company requested from the Haitian Government police protection for its property which was being destroyed in these instances by the population and not by revolutionists. The company was required by Haitian Government officials to fence its right of way, which it did with a wire fence at a cost of three hundred and fifty dollars ($350.00) per kilometer. Despite the fact that the company bought and paid expensive prices for every foot of its right of way and was compelled by the Haitian Government to build fences on both sides of such right of way (in many places where there was not the slightest need of a fence) the right of way was used by the country people as a regular thoroughfare. To gain access to this right of way they cut the wire fences whenever and wherever it suited them; also frequently they would tear down at one time several kilometers of wire fencing taking the wire away with them to use on their places in the country. No police or military protection was given to the company in response to its many appeals for such protection to prevent the destruction and theft of its fences.

Also, during periods of comparative peace between revolutionary movements, local military chiefs would come with a number of soldiers to points where construction work was proceeding and take the laborers from the work. These visitations usually occurred on pay day and the laborers would be locked up at the headquarters of the military General for twenty-four hours; their wages taken from them, and then they would be brought back to the work under military guard. This sort of thing resulted in frequent and costly interruptions of the work because when the approach of the General and soldiers was heralded, the majority of workmen would take to the woods and remain in hiding for two or three days or longer, while those who were unfortunate enough to be caught would, when returned from detention, immediately run away, leaving the company without laborers and with an extensive force of engineers and other subordinates remaining on the ground under pay in enforced idleness. Despite repeated overtures made to the Government of Haiti at Port au Prince to have this raiding of the employees stopped and sometimes receiving promises that this would be done, nothing actually was done by the officials of the Haitian Government to put to an end this trouble. This practice of raiding the laborers continued at irregular intervals from the beginning of the Leconte revolution in July 1910 until September 1, 1913.

The fourth item arises from the following:—In April 1913 the railroad company having completed the sections of railway between Port au Prince and St. Marc (103 kilometers in length) and known officially as Sections 1, 2, 3. presented the same to the Haitian Government for acceptance. The Haitian Government refused to accept these sections and refused to place the guarantee of the Government upon the definitive bonds issued thereon amounting to upwards of two million dollars ($2,000,000). The railroad company relying upon the prompt issuance of these bonds had entered into compromises with bankers in France for their delivery.

The refusal of the Government of Haiti to promptly place its guarantee upon these bonds caused the company to default in this compromise and placed it in such a situation that its credit was seriously impaired.

Finding it impossible to get fair treatment from the Haitian Government, appeal was made by the railroad company to the State Department of the United States, and due to the efforts of that Department the sections of railroad were accepted and the guarantee of the Haitian Government affixed to the bonds. These guaranteed bonds were not delivered to the railroad company until August 1913.

One of the conditions of this acceptance of road and delivery of bonds, as arranged by the representative of the State Department, was that the railroad company was to extend its principal track further into the city of Port au Prince, and also further into the city of St. Marc, and upon completion of such extensions, (2.23 kilometers) the Haitian Government promptly would affix its guarantee to the definitive bonds authorized upon the said extensions. The railroad completed these extensions in May, 1914, and the engineers of the Haitian Government signified their satisfaction and acceptance of the same, but the railroad company, up to the present moment has been unable to obtain from the Government the promised guarantee to the bonds covering these extensions of track which amount to forty-four thousand six hundred Dollars ($44,600.00). These bonds bearing the guarantee of the Haitian Government, together with accrued interest thereon from May, 1914, are still owing to the railroad company, which is under agreement to deliver them to bankers in return for funds already advanced against them.

On the first day of August 1913 a coupon on the bonds already issued and guaranteed by the Haitian Government became due and payable. The Haitian Government defaulted in this payment. This default, coupled with the failure to deliver the two million dollar ($2,000,000) of bonds already referred to, so seriously injured the company’s credit that it was unable to make the necessary financial arrangements to permit it to continue construction, and the work was therefore suspended on the first day of September 1913.

This enforced suspension of construction work at this time entailed upon the company among other losses, a particular financial loss of over fifty thousand Dollars ($50,000.00) in respect of the completion of Section 4 of the railroad line connecting St. Marc with Petit Rivière de l’Artibonite. At the time work was suspended the construction of this section had reached a point where it was practically ready to receive the rails. The price at which the company at that time could have purchased the rails, telegraph and telephone lines and other equipment for the twenty-seven kilometers of this section and the price which it now must pay for the same equipment represents a difference of over forty thousand Dollars ($40,000.00). To this loss must be added the erosion and damage which has occurred during the period of suspension to the road bed and embankments; the cost of getting together a new organization to do the work, and the increased cost of labor, which is now double the rate then prevailing.

The losses of the company due directly to the interruptions and final stoppage of its work through failure of the Haitian Government to comply with its obligations under the concession not only represent a considerable sum in dollars, but involve also a great loss of time in construction which in great measure has contributed to prevent the completion of the railroad within the time fixed in the concession. These delays, as well as delays and suspensions of work due directly to revolutionary movements, all constitute instances of Force Majeure and for these delays in their aggregate the company is entitled to a commensurate extention of time.

The fifth item concerns default in the payment of interest. By Article 3 of the concession to the railroad company, the Haitian Government gives its direct obligation to pay the principal and interest on the bonds which the Government authorizes the railroad company to issue upon its principal track. It was well understood by the officials of the Haitian Government when the work of building the railroad was begun that several years at least would elapse before the business of the railroad would be such as to enable it to pay the interest on its bonds and until such time as the railroad’s earnings would become sufficient, the interest and sinking fund charges on the bonds would have to be borne by the Haitian Government.

When, on August 1, 1913, the first coupon upon the bonds of the railroad company at that time issued, became due and payable the Haitian Government remitted to the Farmers’ Loan and Trust Company of New York, trustee for the bondholders, the requisite amount. When the next coupon became due and payable (Feb. 1, 1914) a revolution was on in Haiti and no attention was given by those who, at that moment, were in control of the affairs of Government, to the matter, but a few weeks later the Haitian Minister of Finances, M. Lespinasse, remitted on March 25, 1914, to the Farmers’ Loan and Trust Company, New York, not only the amount required to pay the coupons due February 1, but he also remitted an additional sum representing interest at the rate of six per cent (6%) per annum on the deferred payment from February 1 to March 25, thus evidencing recognition by the Haitian Government of its obligation as set forth in its guarantee inscribed on the bonds, to pay promptly when the same became due and payable, the interest charges.

When the next payment became due (Aug. 1, 1914) the Haitian Treasury was practically empty and the then officials of Government raised the question of meeting the obligation by deferred payments, which proposition neither the railroad company nor the trustee for the bondholders could admit. From this date on no interest has been paid, the officials of the succeeding Governments contenting themselves with the statement that they had no money and raising various questions as to the obligation of the Haitian State to pay the interest, and finally resorting to threats of foreclosure under various pretenses that the railroad had failed to live up to the terms of its contract. These threats of foreclosure on the part of the Haitian officials were promptly brought not only to the attention of the United States Government, but to the attention of the French Government as well, in the latter instance for the reason that two million five hundred thousand dollars ($2,500,000) of the bonds issued on the railroad are held in France by French citizens. Representations were made both by the State Department of the United States and by the Foreign Office of the French Government to the officials of Haiti warning the latter to desist in their so-called foreclosure proceedings. These diplomatic representations resulted in several postponements by the Haitian officials, of the foreclosure proceedings, and finally the entire matter was lost sight of in the acute revolutionary disturbances which were rapidly spreading throughout the country to the exclusion of everything else.

From time to time, as the interest payments have become due, the regular formal notification has been given by the railroad company, and also by the Farmers’ Loan and Trust Company, trustee for the bondholders, to the officials of the Haitian Government and duplicates of these notifications filed with the French and American Legations in Port au Prince and forwarded to the Foreign Office in France. Since the February 1, 1914 coupon was paid no payments have been made by the Government of Haiti in respect of the interest due upon the three million five hundred thousand dollars ($3,500,000) of bonds of the railroad issued and outstanding. The Haitian Government is now in arrears in respect of the following payments:—

	Amount
August 1, 1914	$104,999.54
February 1, 1915	104,999.54
August 1. 1915	104,999.54
February 1, 1916	104,999.54
Total	419,998.16

plus interest at the rate of six per cent (6%) per annum on these deferred payments as established by the precedent of Secretary of State for Finances Lespinasse in making the belated remittance on March 25 above referred to. This amount of four hundred and nineteen thousand nine hundred and ninety-eight dollars and sixteen cents ($419,998.16) with accrued interest thereon is the first obligation of the Government of Haiti.

The default of the Government of Haiti in meeting its guarantee on the bonds of he railroad company, as described above, received wide publicity both in the financial papers of the United States and of France and this has operated to prevent the railroad selling its bonds as this default in respect of the bonds of the railroad company most seriously affects the credit of Haiti and renders it impossible for the railroad company to secure funds with which to carry on further construction work.

The several matters of damages from revolutions; monetary losses; failure of police protection; default in interest, as herein above described, have heretofore been formally brought to the attention of the State Department of the United States and to the Foreign Office of the French Government, and on three occasions the Government of the United States has intervened diplomatically in Haiti on behalf of the railroad company.

When the matter of claims for damages resulting from revolutions; and from the unlawful exaction of tonnage dues and customs duties, as herein described, was formally presented to the State Department at Washington in February 1913, the Haitian Secretary of State, Mr. Leger, requested the railroad company not to press the matter at Washington, giving the company to understand that if the matter could be held in abeyance and taken up directly with the officials of the Haitian Government, a satisfactory adjustment would promptly be arranged. To this end the railroad company gave heed and requested the State Department at Washington to withhold the presentation of the claims through the usual diplomatic channels pending direct negotiations between the railroad company and the Haitian Government. While it is believed that Mr. Leger, the Secretary of State of Haiti, made his overtures to the railroad company in good faith (he resigned from the Cabinet shortly after) the several conferences between the officials of the railroad and the officials of the Haiti Government which followed his suggestion bore no results.

In discussions between officials of the railroad company and of the Haitian Government concerning Haiti’s default on the railroad bonds some of the Government officials stated in substance that there was no question that Haiti was directly obligated for this interest, but that payment was being withheld in order to force the railroad company to agree to a change of route and a shortening of the line of the railroad; that some Haitians were of the opinion that the line as laid out in the concession was too long; did not serve the best interests of the Haitian people, and imposed an unnecessarily large burden upon the Haitian Treasury through the guarantee of bonds on such a long line.

While these observations were taken by the representatives of the railroad company merely as an excuse for the nonpayment of overdue interest on the bonds, they were nevertheless a repetition of what previously had been suggested to some of the officials of the railroad company by President Auguste and by President Oreste. Both Presidents, during their tenure of office, discussed with officials of the railroad company the advisability of modifying the present concession with a view of materially changing and shortening the length of the route. They made suggestions as to where they thought the road should run to best serve the Haitian people and the officials of the railroad company not only gave responsive attention to these suggestions but caused the engineers of the company to make preliminary surveys of the alternate routes suggested by President Auguste and later by President Oreste.

The officials of the company since then have been ready to discuss with the Haitian Government this question of modification of the concession and change of route, but conditions in Haiti since the time of President Oreste have been such as to make impossible any such conference.

The railroad company is not unwilling now to take up this subject with the officials or authorized representatives of the Haitian Government so soon as an adjustment of the four or five other matters dealt with in this memorandum has been reached.

2. Not printed.