839.51/2542
The Secretary of State to the Dominican Minister (Ariza)
Sir: I have received your note of March 31, 1925, in which you transmit to me on behalf of your Government, various inquiries relative to the carrying out of the Convention between the United States and the Dominican Republic signed in Washington December 27, 1924, approved by the Senate of the United States and now pending ratification by the Dominican Congress.
You advise me (a) that it has been claimed in the Dominican Republic that the wording of the first paragraph of Article VII of the Treaty referred to, namely, “this agreement shall take effect after its approval by the Contracting Parties” implies that the refunding of the Republic’s debt must be undertaken before the exchange of ratifications of this Convention, and you inquire whether I share your understanding that the exchange of ratifications should, on the contrary, take place prior to the refunding of the Republic’s debt as an indispensable prerequisite to the issuance of the bonds of the proposed [Page 48] loan of $25,000,000. In reply, I desire to state that this Government understands that the exchange of ratifications must of necessity take place prior to the proposed refunding of the Republic’s outstanding debt in view of the fact that the Convention cannot enter into effect until after ratifications have been exchanged and since the provisions of the Convention operating as guarantees for the proposed loan of $25,000,000 must become effective prior to the issuance of the bonds of the proposed loan.
You state (b) that Article III of the Convention of 1924, which follows the text of Par. 1 of the same article of the Convention of 1907, is as follows:
“Until the Dominican Republic has paid the whole amount of the bonds of the debt, its public debt shall not be increased except by previous agreement between the Dominican Government and the United States”.
You inquire whether “the whole amount of the bonds of the debt” refers in the Convention of 1924 to the proposed bond issue of $25,000,000 and you ask whether in this event the Department of State understands that the “previous agreement” between the two Governments for the negotiation of the loan of $25,000,000 becomes effective as the result of the signing and ratification of the Convention of 1924, or whether, on the contrary, a distinct and special agreement is required before the new bonds are issued. In reply, I desire to state that it is the understanding of this Government that a special agreement will be required on the part of the Governments of the United States and of the Dominican Republic prior to the issuance of the proposed bond issue of $25,000,000, or any portion thereof.
You inquire (c) whether in view of the fact that the Convention of 1924 does not stipulate any special form for the issuance of the bonds of the proposed loan of $25,000,000 it is the understanding of the Department of State, as you state it is yours, that the provisions of the Convention admit the possibility of one series of bonds for the total amount above mentioned as well as of various series totalling $25,000,000, as the best interest of the Dominican Republic may determine. In reply, I may inform you that this Government considers that the terms of the Convention under reference admit the possibility of the issuance of the bonds of the proposed loan up to the total of $25,000,000 either in one series or in several series as the best interest of the Dominican Republic may from time to time determine.
Finally, you state (d) that Article VII of the Convention of 1924 provides that upon the exchange of ratifications of this Convention, the Convention as signed on February 8, 1907, shall be deemed to be abrogated, and you inquire what will be the condition of the bonds issued during the life of and in accordance with the provisions of [Page 49] the Convention of 1907 which may still be outstanding after the exchange of ratifications of the Convention of 1924 prior to their conversion. You state that it appears evident that upon the abrogation of the Convention of 1907 such bonds would be guaranteed by the provisions of the Convention of 1924 and that the payment of interest upon such bonds and the manner of providing for their eventual amortization would be governed by the terms of the legislation passed authorizing the issuance of the series of which they form a part. You further state that the holders of such bonds could not invoke any legal right to insist upon the continuation of the Convention of 1907 in view of the fact that the new Convention, that of 1924, provides the same guarantees as the former Convention. In reply to this last inquiry, I desire to state that I share your understanding that upon the abrogation of the Convention of 1907 all bonds then outstanding will be guaranteed by the provisions of the Convention of 1924 and that the payment of interest upon such bonds and the manner of providing for their eventual amortization will be governed by the terms of the legislation passed authorizing the issuance of the series of which they form a part. In order that our common understanding upon this point may become a matter of record I wish to suggest an exchange of notes confirming this understanding. I shall be glad to have you advise me whether this suggestion meets with your approval.
Accept [etc.]