The British Chargé (Chilton) to the Secretary of State

No. 129

Sir: I have the honour to inform you that His Majesty’s Government, in conjunction with the French Government, have lately had under consideration the advisability of setting up some centralizing organ to deal with questions arising out of the liquidation of the Relief Credits granted in 1920 and 1921 by certain Allied and Neutral Governments to other Governments in Central and Eastern Europe, and to transmit to you herewith, for facility of reference, a memorandum explaining the steps taken to furnish these credits to the countries concerned. The French Government, while favouring the utilisation of the Financial Committee of the League of Nations for the purpose of dealing with the questions referred to above, has declared that it would have no difficulty in agreeing to any other suggestion embodying the same principle.

His Majesty’s Government entirely share the view of the French Government that the interests of the creditor states will best be served, when the date for repayment of the advances approaches, by acting in unison and dealing with individual debtor states according [Page 130] to the circumstances of each. At the same time, they doubt whether the Financial Committee of the League of Nations would be a suitable body to deal with these credits, even if it were willing to undertake the work. The Committee is a purely advisory body, with no administrative functions; and it is neither intended nor suited for carrying out routine administration demanding constant attention.

A further disadvantage is that its members do not correspond in nationality with all the creditor countries concerned and include at least one member of a debtor nationality. Moreover, the members, do not represent the governments of their countries, and have always regarded themselves as entirely independent experts. It appears essential that where decisions with regard to government advances have to be taken, the deciding body must be strictly representative of the governments concerned.

His Majesty’s Government have therefore suggested that the best course would be for a Relief Credits Committee to be formed, which might meet in London, to whom all applications by debtor governments with regard to their liabilities under the Relief Credits should be referred. The committee would consist of the representatives of the credit-giving governments and would be furnished by those governments with full particulars of the present position of such credits. It would probably be sufficient for the committee to meet occasionally, and it might possibly be formed in the main from representatives already in London.

The Committee (after settling its procedure) would naturally be chiefly concerned with the arrangements to be made with the debtor countries in view of the maturity of a considerable portion of the original bonds on the 1st of January, 1925.

All proposals received by any creditor Government as regards the relief credits would, of course, be referred to the committee, who would be in a position to undertake oral discussions with representatives of each debtor country.

The Committee could also consider whether there would be any advantage in appointing a Trustee as suggested in 1921, though there would seem to be little need for this proposal at this stage.

While His Majesty’s Government suggest that the Committee should consist primarily of the European credit-giving countries, they would naturally welcome the presence of an American representative and, inasmuch as they are aware that, under the United States laws, only the Debt Funding Commission can deal with American Credits, I am instructed to express the hope that, in the event of the United States Government being willing to share in the work of the Committee, a representative of the Debt Funding Commission might be delegated to attend the meetings of the Committee in London. I should be glad to receive in due course an expression [Page 131] of the views of the United States Government in regard to this matter for communication to my Government.

I have the honour to add that His Majesty’s representatives at Christiania and the Hague have been instructed to bring these proposals to the notice of the Norwegian and Netherlands Governments.

I have [etc.]

H. G. Chilton

Memorandum on Relief Credits

The Relief Credits grew out of the Relief Missions organised in 1919 under the Supreme Economic Council, the successor to the short-lived Supreme Council of Supply and Relief. These two bodies had been the result of negotiations for the formation of some allied organization for the prevention of starvation and disorder in Central, Eastern and Southern Europe. The principal contributors to the Relief thus administered were the United States, Great Britain, (with Canada and Newfoundland) France and Italy. By the end of 1919 it had become evident that in order to cope with the economic needs of Eastern and Southern Europe it was urgently necessary to substitute for “Relief” some comprehensive form of credits in order to remedy the situation in those regions. “To continue to provide food without at the same time providing raw materials on which to re-establish industry would merely be to aggravate the problem of Europe”. It seemed improbable that any group of American, French, Italian or British bankers, would make a long-term contract with governments whose political existence and whose assets and liabilities were from day to day of doubtful duration. There was therefore little likelihood of credits being provided on a scale and on terms likely to be effective unless the allied and associated governments and also the neutral governments intervened with some scheme to minimise the political risk preventing the introduction of private foreign capital into such countries.

Negotiations with this in view accordingly took place with the result that the International Committee for Relief Credits was set up in Paris in April 1920. It consisted of representatives of Argentine, Belgium, Canada, (unofficial), Denmark, France, Italy, Netherlands, Norway, Sweden, Switzerland, United Kingdom and United States, (unofficial). The object of the committee was to administer, in consultation with the representatives of the debtor countries, the relief and reconstruction credits which had been granted by the governments of some of the above-mentioned creditor countries and to arrange for new credits.

Each lending country reserved complete liberty as to the country to which its credits should be extended but agreed to accept a common form of bond as security. In the case of Austria-Hungary [Page 132] these bonds were accorded priority over reparation payments, this having been a condition as to participation made by several neutral governments.

This committee sat until the winter of 1921, when it was dissolved. It had during that time arranged for credits for Poland, Czechoslovakia, Hungary, Servia, Roumania, Baltic States, Armenia and Austria. The United States of America advanced the largest sum—approximately £63,000,000, the United Kingdom coming next with £17,000,000, followed by Italy and France with £4¾ millions and £3½ millions respectively. After them the two most substantial creditors are Holland and Norway. These sums do not include the relief advances made prior to the beginning of 1920.