Paris Peace Conf. 180.03401/125

IC–176J

Notes of a Meeting Held at President Wilson’s House, at the Place des Etats-Unis, Paris, on Saturday, April 26, at 3.15 p.m.

  • Present
    • United States of America
      • President Wilson,
      • Mr. Norman Davis,
      • Captain Smith.
    • British Empire
      • The Rt. Hon. D. Lloyd George, M. P.
      • Mr. J. M. Keynes,
      • Mr. O. T. Falk,
      • Mr. H. A. Siepmann.
    • France
      • M. Clemenceau
      • M. Klotz
      • M. Luquet
      • M. de Lasteyrie
      • M. Jouasset
      • M. Cheysson
      • M. Lyon.
      • Sir Maurice Hankey—Secretary.
      • Professor Mantoux—Interpreter.

Financial Clauses

The Council had before them the French and English Texts of the Financial Clauses as revised by a special Committee appointed to consider the Report of the Financial Commission.1

1. Mark Payments Made by Germany in Occupied Territory President Wilson said that he had one alteration to propose at the end of Clause 2. of the English Text (Clause 1. (a) of the French Text). This Clause provides that certain payments to be made by Germany to the Allied & Associated Governments in the occupied territories themselves shall be paid by the German Government in Marks. These payments include sums due to the Allies for the up-keep of the Armies of Occupation, and the practice is for Marshal Foch to agree a rate from time to time at which these Mark payments shall be calculated. The text would consequently be clearer if it were made plain that Germany will pay at the current or agreed rate of exchange.

M. Klotz was at first doubtful as to the precise significance of this addition, but Mr. Davis explained that the words were only intended to mean that until there is an actual current rate for Marks [Page 303] the agreed rate as established from time to time under the present system will govern the payments made by Germany in the occupied territories.

It was agreed that Clause 2. (Clause 1. (a) in the French Text) should be amended by the insertion of the words “at the current or agreed rate of Exchange” at the end of the penultimate sentence.

2. Payments Essential To Enable Germany To Meet Her Obligations in Respect of Reparation President Wilson proposed that the definition of payments which the Allied & Associated Governments might judge to be essential to enable Germany to meet her obligations in respect of reparation, should be made somewhat less rigid. As defined in the text these payments must be either for supplies of food or for raw material, but there might be other payments which it would be of advantage to allow Germany to make in advance of reparation.

M. Klotz thought that all necessary payments were covered by the definition as it stood in the text, and enquired what other payments it might be desired to include in the priority.

Mr. Davis said that in certain circumstances it might be desirable to allow Germany to pay a debt due to a neutral country, and he thought that in any event it would be a mistake to close the door against any possible extension by limiting the Allied and Associated Governments to the strict terms of the proposed text.

It was agreed that the last sentence of Clause 4. (Clause 2. in the French Text) should read as follows:—

“The payment of such supplies of food and raw materials for Germany, and such other payments as may be judged by the Allied & Associated powers to be essential to enable Germany to meet her obligations in respect of reparation will have priority to the extent and upon the conditions which have been or may be determined by the Allied & Associated Governments.”

3. Crediting to Germany of the Armistice Material M. Klotz said that it was only just and reasonable that in cases where the Germans had stolen locomotives or rolling stock, for ex-crediting to ample, from France, they should be required to make good those losses to France, not only where the identical locomotive could be discovered, but also by the restitution of similar material.

Mr. Lloyd George said that he was quite prepared to accept this principle, but that if it were accepted it must be applied all round. If a German railway wagon is to be handed over to France in substitution for a stolen wagon, apart from the general reparation pool, then the same principle must apply to a ship, and the Germans must make good to the United Kingdom in a similar manner the losses suffered as a result of the Submarine warfare.

[Page 304]

M. Klotz maintained that there is no comparison between the two cases because ships have been sunk, whereas the identical locomotives could presumably be discovered in Germany in course of time.

Mr. Lloyd George replied that this was not at all necessarily the case, and that even if this were so the French Government would be entitled to obtain them under the Reparation clauses.

President Wilson agreed that the case is covered by the Reparation clauses of the Treaty, and that since it is not too late to identify the stolen material, there is no necessity for providing that similar material shall be restored without payment.

It was agreed that the Clause should be allowed to stand as drafted in the text.

4. Payment for Dept and Government Property in Territories No Longer Under German Control M. Klotz said that in Clause 9 (Clause 6 (a) in the French Text) there was a British and a French proposal as between which no agreement had been reached.

The French proposal is to apply a uniform system to all territory changing hands. In the first place the State that takes possession or assumes a Mandate over territory should also take the responsibility control for such portion of the debt of the German Empire as can properly be attached to that territory: at the same time the Mandatory State, or the State to whom the territory is ceded should take over all German State properties within the territory. It would be difficult, in the first place, to make Germany pay coupons on the joint debt of several German Colonies, or be responsible for the administration of the local debts attached to the territories not in her control; and, in the second place, it was necessary that if the Mandatory States took over a portion of the debt they should also take over the State property without payment, since otherwise they would be paying twice over, once for the property, and again for the debt to which the property was attached.

Mr. Lloyd George said that he would have the greatest difficulty in defending the principle that the Allies should assume liability for the debts attaching to the German Colonies; for example, General Smuts would naturally and rightly object to paying the debt of S. W. Africa which is largely a war debt for expenditure incurred by Germany for military purposes and directed against the Allies. At the same time he would be prepared to make a concession by admitting liability for the purely commercial portion of the debt. It was perhaps right that we should pay for railways that were not strategic railways, and for buildings and undertakings which were the result of German enterprise which would benefit the Mandatory Power. He proposed, therefore that a valuation of such property should be made [Page 305] and that liability should be acknowledged for the present value of this property. This was the only fair measure of the actual advantage acquired by the State under whose control the territory would be.

President Wilson thought that it might be extremely difficult to know whether the money borrowed by the Germans on the assets of a Colony had been spent within the Colony or for its advantage.

M. Klotz said that he was prepared to leave the whole question to the Reparation Commission.

President Wilson replied that the Reparation Commission might determine the items but that it was necessary now to lay down the general principle which should be applied in all these cases.

M. Klotz said that Alsace-Lorraine was altogether in a special position. The Germans had taken over everything in 1871 without payment except the Railways.

M. Clemenceau said that for the Railways he would be prepared to return the money which had been received from Germany, but that France had a right to have everything else restored to her which the Germans had forcibly taken in 1871.

Mr. Lloyd George said that since 1871 the Germans, by their enterprise, had greatly added to the value of Alsace-Lorraine, and that it was therefore not entirely a question of restoring what had been wrongfully taken. Similarly in Africa the Germans might have built a railway for opening up a new part of the country. In such a case he thought it right that some sort of compensation should be made, but that he would sharply distinguish between military value and commercial value.

Mr. Keynes proposed the following clause:—

“Cedee and Mandatory Powers shall pay the present economic, commercial and administrative value of Government property in territory taken over by them, except that in the case of Alsace-Lorraine property taken over by Germany in 1871 and not paid for shall be returned to France without payment of any kind.”

M. Clemenceau said that he could not accept this text.

The Representatives of the French Government withdrew to prepare an alternative proposal.

As eventually drafted this proposal made an exception in the case of Alsace-Lorraine on the ground that the principles applying elsewhere do not there hold good in view of the past history of the country.

Mr. Lloyd George said that the important thing was that there should be no exceptions, but that a principle should be found which covered all cases alike. In spite of the serious objections which could reasonably be made from the point of view of the British Dominions, he had proposed that, after valuation, some payment should be made [Page 306] to Germany for commercial improvements. If this concession could not be accepted and applied all round he would prefer that there should be no payment at all, and that what property there is should be taken as a contribution to the costs of the war. It was impossible to suppose that Mandatories should be required to pay when no payment at all was made for ceded territories.

President Wilson thought that the case of the Colonies was somewhat different from that of Alsace-Lorraine, seeing that the Colonies had not been wrongfully taken away. The whole world had felt for 48 years that Alsace-Lorraine had been wrongfully torn from France. German S. W. Africa, New Guinea, and even the ceded parts of Posen were not in the same position.

Mr. Lloyd George said that he did not press for payment in Alsace-Lorraine, but he did press for the acceptance of a general principle. The British interpretation of the Armistice terms was that a claim might rightfully be made for injury to civilians in respect of the injury done by the Submarine warfare to the business of civilians. In that case he had agreed not to press the British claim but to fall in with the general principles proposed. It was very harsh that in this case, where the general principle happened not to suit another country, an exception should be made in their favour, even though the British Goverment had agreed not to lodge the whole claim to which they were entitled.

President Wilson stated that he had been assuming that the case of Alsace-Lorraine was an accepted exception in the thought of the world. The difficulty on the other side was the inequity of taking over property without paying for it.

Mr. Lloyd George said that Alsace-Lorraine was an exception as regards territory, but not as regards expenditure. He could not defend such discrimination. He could not go to the Dominions and press upon them the acceptance of a German debt when their expenditure had been so gigantic in relation to their population. Australia had a population of 4½ million and three hundred million pounds of war debt. She had lost as many dead in the war as the United States, and was now to be required to pay for New Guinea, even although she could not obtain the whole of her just claims against Germany. The only thing that the British Colonies could hope to get was a pension on the French scale when they were paying twice as much from their own resources, and now it was proposed to discriminate against the British Dominions and in favour of Alsace-Lorraine.

Mr. Keynes suggested that in respect of Mandatories, the British text should be accepted, and that the new French text should be accepted for ceded territories.

[Page 307]

President Wilson said that the Mandatory States would be acting in the capacity of Trustees, and that he thought it was therefore reasonable that they should not pay for the territories taken over; at the same time Alsace-Lorraine was in a special position, and France should not be required to pay for what had been taken from her.

It was agreed that except in the case of Alsace-Lorraine, Government property in all ceded territories should be paid for, but that Mandatory States, being Trustees, should take over the property without payment.

5. Alienation of Property in Violation of the Armistice President Wilson stated that he thought it would be difficult to accept the principle of Clause 13. (Clause 11. in the French text) under which any alienation of property or securities in violation of the financial conditions of the Armistice becomes null and void. It would in any event be quite impracticable to track down the securities which had been alienated.

M. Klotz said that he was quite prepared to abandon the chase after securities in Turkey, for the sake of which the clause had been inserted.

It was agreed to delete Clause 13. (Clause 11. in the French Text).

6. Priority of Allied Nationals Holding German Public Loans President Wilson thought that this Clause also should be omitted.

M. Klotz said that it had certain importance for public Loans the protection of French interests in Austria-Hungary and Bulgaria and Turkey.

It was agreed that the Clause should be deleted but that this would not prejudice eventual consideration on their merits of the particular cases mentioned by M. Klotz.

Villa Majestic, Paris, 26 April, 1919.

  1. These draft texts do not accompany the minutes.