871.6363/210
The Secretary of State to the Minister in Rumania (Jay)
Sir: Under date of October 15, 1924, there was communicated to the American Chargé d’Affaires at Bucharest the text of a note to [Page 638] be submitted to the Rumanian Government with respect to outstanding questions between the Government of the United States and that of Rumania, and between the nationals of the two countries. While you are thoroughly familiar with this communication, which was drawn up after consultation with you, for convenient reference a copy is enclosed herewith.42
Considering that it might be helpful to you in connection with the representations which you will make upon your return to Bucharest in support of the position outlined in the above mentioned communication, the Department takes this occasion to amplify in certain particulars the views therein expressed and also to send you certain memoranda and documents which you may find useful in this connection.
With respect to the introductory paragraphs, i. e. one to three inclusive, of the note, it may be stated that the Department considers the questions at issue between the two Governments are susceptible of adjustment through negotiation, provided the requisite good will and patience are manifest on both sides, and if the Rumanian Government is sufficiently impressed with the importance which this Government attaches to a satisfactory adjustment.
In the concluding sentence of paragraph 2, you will note that reference is made to this Government’s [“] attitude in the event that a satisfactory settlement of the principal points at issue could not be reached.” While it would not be appropriate to attempt to indicate in any detail the action which might be considered appropriate in the event that the Rumanian Government failed to show the requisite good will in working for a settlement of pending questions, the following suggestions may be helpful to you:
- (a)
- The continued failure on the part of the Rumanian Government to accord the protection to American interests which they may properly and reasonably expect or to give due consideration to American claims would create a situation in which this Government would feel obliged to warn American citizens, about to embark in commercial ventures in Rumania, of conditions there existing and of the attitude of the Rumanian Government towards foreign commercial enterprises.
- (b)
- Under the present circumstances and until further steps have been taken toward the adjustment of pending questions, the Department would be disposed to offer objection to any attempt to float a Rumanian loan in this country.
- (c)
- Finally, if the Rumanian Government should not be disposed to give due consideration to the representations of the Legation, the Department might consider that no useful purpose would be served by maintaining a person of your rank and experience in Bucharest and that the Legation might therefore be left in charge of a Chargé d’Affaires for a period of time.
The information contained in the above paragraphs (a–c) is for your guidance, but there would be no objection to your orally indicating this Government’s views to the Rumanian Government should you consider it desirable to do so.
With respect to paragraph 4 of this Government’s note, which relates to the claims of American creditors against Rumanian nationals, you will find the Department’s viewpoint stated in its written instruction No. 215 of August 22, 1923,43 and in paragraph No. 7 of its telegram No. 34 of August [July] 30, 1924.44 While Instruction No. 215 related specifically to the Commercial Indebtedness Law, which the Department understands has not yet been made applicable to American creditors, the principles embodied therein are equally applicable to any other similar governmental interference with private debts. In this connection your attention is called to the so-called Term of Grace Law as extended from time to time, which the Department understands prevents American creditors from obtaining the payment of debts due them in American currency even where the debtor is solvent. As indicated in the above instructions, not only is this legislation discriminatory in that it does not apply to all debts due in Rumania but only to those due in a strong currency, but, since it prevents payment irrespective of the financial capacity of the debtor to pay, it is an improper and arbitrary governmental interference with the right of private contract for which the Rumanian Government might be held liable to American citizens suffering damage by reason of its action.
In evidence of the hardship that this legislation works upon American creditors may be cited the Benco case. In this case a superior Rumanian court has rendered a judgment in favor of the American creditor against the Rumanian debtor and two Rumanian banks which guaranteed the debt. Notwithstanding this, and although the banks guaranteeing the debts are two of the largest financial institutions in the country and the debtor, at the time the judgment was handed down, was solvent, the Department understands that the creditor, to his serious financial embarrassment, has been prevented from obtaining payment of the judgment by reason of the continued extensions of the Term of Grace Law. In fact, according to the information of the Department, the creditor is in danger of being forced into bankruptcy by reason of the interference of the Rumanian Government.
The Department has received telegram No. 68, dated October 10, 1924, from the American Legation at Bucharest,45 stating that it has [Page 640] received a visit from a member of the Bucharest Chamber of Commerce who had been appointed by the Rumanian Government as a delegate to negotiate the settlement of pre-war and post-war private debts due by Rumanians to Americans. This delegate of the Rumanian Government proposed that either representatives of the American creditors be appointed to negotiate directly with him, or that the Legation be empowered to negotiate with him an agreement on behalf of the American creditors. He suggested taking the British or Swiss agreement with Rumanian debtors as a basis of discussion. A copy of this telegram is attached, together with a copy of the Department’s reply.46
The Department, as already indicated, considers that private debts, whether pre-war or post-war, owed between Rumanian and American nationals should be adjusted by the interested parties directly and should not be subject to governmental interference. This Government would not be in a position to commit its nationals without their consent in each case and, therefore, the Legation could not properly undertake any negotiations of the nature indicated on behalf of American creditors generally. Of course, should an American creditor, in any particular case, desire to reach an agreement, either with the delegate appointed by the Rumanian Government or with the Rumanian debtor, you may, at the creditor’s request, render him such informal assistance as might be proper.
The Department understands that the Term of Grace Law has recently again been extended, notwithstanding the request of this Government that this be not done. You should, therefore, renew and supplement the views set forth in your note No. 104 of September 20, 1923,47 and subsequent communications, and insist that Rumanian laws or regulations should be such as to permit American creditors to obtain payment from solvent Rumanian debtors. You may also impress upon the Rumanian Government the views of this Government with respect to the consequences of improper governmental interference between debtor and creditor impairing the rights of the creditor.
The debts owed by the Rumanian Government to American nationals or companies are dealt with in paragraph 5 of this Government’s note. With respect to the notes of the Transoceanic Corporation held by the Chase National Bank and the Equitable Trust Company, (see Department’s telegram No. 32, July 24, 1924, 4 p.m.—copy enclosed48) the Department is gratified to inform you of the receipt of information indicating that a settlement satisfactory [Page 641] to the American holders of the bonds has been reached with the Rumanian Government. A copy of the agreement as communicated to the Department by Mr. Stuppel is enclosed for your information,49 as well as a copy of a letter from Mr. Stuppel, dated October 17, 1924.49 The Department further understands that negotiations may shortly be undertaken on behalf of the present American holders of certain of the notes of the Transoceanic Corporation formerly held by Knauth, Nachod and Kuhne.
In the matter of the claim of the Baldwin Locomotive Works against the Rumanian Government, which was fully discussed with you and with the representatives of that Company, there are enclosed copies of certain correspondence,49 including instructions which the Company has sent to their Bucharest representative, which relate to the negotiations with the Rumanian Government for a settlement, by a system of deferred payments, of the claim of the Baldwin Locomotive Works. Without, of course, intervening in the negotiations, the Department desires you appropriately to impress upon the Rumanian Government the importance of an early adjustment of this claim.
For your information in connection with paragraph 6 of the note, which relates to the Rumanian Government’s indebtedness to the United States, there is enclosed a statement49 relating to reported payments by the Rumanian Government to Great Britain and to Canada on relief and reconstruction loans. There are also enclosed copies of agreements which this Government has reached with the Governments of Great Britain, Hungary, Finland, and Lithuania.49 The agreement with Lithuania has not yet, however, been ratified by Congress. Negotiations are now pending with Poland and Czechoslovakia for the settlement of their indebtedness.
With respect to the Rumanian Mining Law, the Department desires you particularly to impress again upon the Rumanian Government the serious view which this Government would take of any action calculated to impair vested rights. From your conferences with the Department, you are already familiar with this Government’s view in the matter.
You are also familiar with the correspondence between the Department and the American interests concerned and with the Legation at Bucharest regarding the reported decision of the Rumanian Government which would have the effect of depriving the Romano-Americana Company of its right to drill on plots where the wells cannot be spaced at least thirty meters from the perimeter, whereas under the old law a distance of only fifteen meters was required.
[Page 642]It may further be impressed upon the Rumanian Government that the policy underlying the Mining Law is of a character to discourage American enterprise from undertakings in Rumania and that it is difficult for this Government to reconcile this attitude with the assurances previously given to American interests, to which you have alluded in your communications to the Rumanian Government.
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