464.00 R 29/37

The Unofficial Representative on the Reparation Commission (Logan) to the Secretary of State

My Dear Mr. Secretary: Reference is made to your cable L–5 of August 30, 1923, and my cable L–4 of August 22nd, 1923, which related to the interests of the United States in certain Bulgarian Treasury Bills payable to Hungary, which were to be surrendered to the Allied and Associated Powers by Hungary pursuant to Article 196 of the Treaty of Trianon. A further question relative to any claim the United States may have in these securities, was raised by Sir John Bradbury in the Meeting of the Reparation Commission on November 6th, which question requires me to ask for supplemental instructions from the Department. I beg to summarize the situation as follows:

On June 9th, 1923, the Hungarian Government presented a “note verbale” to the Reparation Commission in which it referred to the Bulgarian Treasury Bills in the possession of the Hungarian Government, and stated that it was transmitting these Bills to the Reparation Commission pursuant to Article 196 which required transfer to the Allied and Associated Powers. The Hungarian Government pointed out that in view of the fact that the United States was not represented on the Reparation Commission, and in view of the fact that the Peace Treaty concluded with the United States on August 29th, 1921, reserved to the United States the rights conferred upon it by Article 196 of the Treaty of Trianon, the Hungarian Government felt obliged to ask the assurance of the Reparation Commission that its interests would not be prejudiced in the event of objection by the United States to the delivery to the Reparation Commission.

The subject was discussed in the Finance Service and that Service took the view that Hungary might be assured that the Reparation Commission would become accountable for the securities to the Governments concerned, and in particular to the United States Government. A draft letter to Hungary in this sense was prepared and [Page 452] submitted to this Delegation which led to my L–4 asking for instructions. You replied that when the matter came forward I should state that the United States raised no objection to requiring Hungary to surrender the Bills, but that it should be made clear that the United States is entitled to be consulted regarding their disposition and that it assumes that it will be consulted in due course before effective disposition is made.

This view of the United States was duly communicated to the Finance Service and the Finanee Service in its report to the Reparation Commission, which came on the Agenda for the Meeting of November 6th, repeated the language of the reservation made by me at your direction. The Finance Service recommended the sending of a letter to Hungary which, in principle, followed the terms of the original proposed letter to the effect that the Reparation Commission would be accountable to the United States for the Treasury Bills.

Sir John Bradbury asked for a postponement of the question, stating that he hesitated to settle parenthetically, in a letter from the Commission, what might involve a difficult legal problem, i.e. whether the securities in question were delivered to the Allied and Associated Powers which had signed the Treaty, or only to those which had ratified it. He suggested that the immediate matter of the Treasury Bills might be adjusted semi-officially, and upon his motion the question was adjourned.

I am just in receipt of a letter from Sir John Bradbury in which he again intimates that a complicated legal question may be involved, “i.e. Is the reserve of American rights, which may flow from Treaties which the United States has signed but not ratified, made in subsequent Treaties with the ex-enemy powers operative as against signatories of the unratified Treaties which are not themselves parties to the subsequent Treaties?” He goes on to suggest that there may be “a big fight” on this question sooner or later, but that it is certainly undesirable to bring up a matter of large principle with regard to these Treasury Bills which are virtually worthless. He suggests that the United States waive its claim against these particular Bills, making reserves as to its rights in this and similar cessions of the ex-enemy powers, and raise no objection to their being delivered to the Reparation Commission. He suggests that the Allied Powers, if they wish, could then make a counter reserve and thus the fundamental problem be left open.

In practice it is probably true, as Sir John Bradbury suggests, that the Bulgarian Treasury Bills have little or no commercial value.

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In practice too it would probably be exceedingly difficult to determine just what percentage of interest we have in the total of the securities, remembering that they were ceded not to the principal Allied and Associated. Powers but to all the Allied and Associated Powers. Finally, there is an additional point which neither Sir John nor any one else has so far called attention to. By Article 124 of the Treaty of Neuilly (which was signed by our diplomatic representatives), Bulgaria recognised the transfer to the Allied and Associated Powers of these Treasury Bills, but the Allied and Associated Powers expressly agreed not to require from Bulgaria any payment in respect of the claims so transferred, giving as a reason that these matters had been taken into account in fixing the global sum to be paid by Bulgaria as reparation.

In view of this express release of the Allied and Associated Powers, to which our diplomatic representatives at least assented, it would seem very difficult, from a moral and equitable point of view, for the United States to attempt to collect anything from Bulgaria on this paper ceded by Hungary. It might be that we have some sort of claim against the other Allied Powers on the theory that part of the reparation they get from Bulgaria contains some allowance for the value of these Bills.

I request your instructions on the compromise proposal of Sir John Bradbury. It would avoid discussion of the legal rights of the United States under all the Treaties, in connection with a particular and highly special case which is weakened by the complications outlined above, and which centers around a claim of dubious financial value and involves the difficult mathematical problem of determining what is the percentage of our share in that financial value, if any exists.

Upon the general proposition of law, this Delegation has consistently maintained—as in the case of the cables under Annex VII of Part VIII of the Treaty of Versailles, for example—that a cession to the Allied and Associated Powers created an interest of the United States in such cession, particularly in view of the separate Treaties confirming and reserving these interests. The matter has never been formally decided or formally discussed by the Commission and it is perhaps well to reserve any discussion to a clear cut case.

Faithfully yours,

James A. Logan, Jr.