868.51 WarCredits/439

The British Embassy to the Department of State


His Britannic Majesty’s Minister has been instructed to invite the attention of the Secretary of State to correspondence ending with the Acting Secretary of State’s note No. 868.51/95710 of September 1st last relative to a proposal on the part of His Majesty’s Government that the representatives at Athens of the United States, France and Great Britain should address a joint protest to the Greek Government regarding the supplementary Contract concluded between the latter and the Foundation Company of New York. Inasmuch as Mr. Grew, in his above mentioned note, adverted to the Greco-Canadian Agreement of December 27th, 1923, and asked the reasons which had led His Majesty’s Government to base the proposed protest specifically on the case of the Foundation Company, His Majesty’s Government are desirous of offering the following detailed explanation of their attitude towards the various loans issued to the Greek Government:

His Majesty’s Government were not aware of the terms of the Canadian agreement of the 27th of December, 1923, to which the Acting Secretary of State has been good enough to call their attention. They have made enquiries into the matter and find that it is the case that the Greek Government under this agreement assigned a charge on the surplus of the controlled revenues in favour of the Canadian loan without requesting the assent of the Powers concerned in the 1918 Agreement. It should, however, be borne in mind that the Canadian advances were made in 1919 to finance the purchase of food supplies by Greece while the Greek Government were maintaining their army on a war footing, pending the conclusion of peace with Turkey, and their character was therefore substantially analogous to that of the Allied war advances. Further, the original contract of the 21st of March, 1919, provided that the Canadian advances should have the same security as any future loan issued by the Greek Government and thereby entitled the Canadian Government to claim a charge on the surplus revenues if such a charge were granted by the Greek Government to any future loan. The terms of [Page 376] this contract were brought to the notice of His Majesty’s Government at the time but they came to the conclusion that its terms could not be held to affect the rights of the Powers concerned in the Agreement of 1918. His Majesty’s Government were not consulted before the conclusion of the Funding Agreement of 1923 and if they had been consulted they would certainly have taken steps to reserve the rights of the Allied Governments concerned in the agreement of 1918. Unfortunately no such action was taken at the time, and, apart from the long period that has elapsed, it appears to His Majesty’s Government that the character of the Canadian loan and the terms of the original contract distinguish it from the cases now under consideration.

Moreover, the situation of the Greek Government vis-à-vis its war debts has been subsequently modified by the terms of the Geneva Protocol signed in September 1924.11 By Article VI of this Protocol the Greek Government with a view to obtaining the International Refugee Loan undertook “not to create any charges on its revenues by way of security for any loans not intended either for productive purposes or for carrying out its obligations under the Treaties of Peace”. This engagement would appear to debar the Greek Government thereafter from assigning special security for the repayment of its war debts, and, so far as His Majesty’s Government are concerned, would appear to preclude any claims for such security. Impressed, however, with the political and humanitarian importance of assisting the Greek Government to cope with the influx of refugees, His Majesty’s Government accepted the Protocol and gave their assent, under the agreement of 1918, to the assignment of special security to the Refugee Loan raised thereunder.

In April 1925, the Greek Government again sought the approval of His Majesty’s Government for the assignment of special security for the loan of ten million dollars raised under an agreement with the American firm of Messrs. Ulen and Company, for the improvement of the Athens water supply. His Majesty’s Government, after considering the matter, and having regard to the urgent need for the works in question, gave their assent to this loan.12

Similarly, in July last, the Greek Government duly asked for the consent of His Majesty’s Government to the assignment of security in respect of the Swedish Match Company’s loans to which attention has also been drawn by the Acting Secretary of State. In the case of this loan, a further difficulty arose in that it seemed doubtful [Page 377] whether it could be regarded as a loan for productive purposes within the meaning of the Protocol of the Greek Refugee Loan. This aspect of the matter was recently considered by the Financial Committee of the League of Nations and having regard to the financial difficulties of Greece, His Majesty’s Government have now replied to the Greek Government that they are willing to waive any objections to the Swedish Match Loan in this sense and also to consent under the 1918 Agreement to the assignment of security for the loan subject to the receipt of assurances that the Greek Government will in future strictly observe the terms of Protocol of the Refugee Loan.

If the Greek Government confined its borrowings to the above loans, His Majesty’s Government would not have wished to raise the general question of the execution of the Agreement of 1918. But they understand that there are a number of other proposals, e. g. for railway and harbour construction and for draining schemes not to mention credits for armaments and similar purposes which the Greek Government have had under consideration: and they are impressed with the danger both to Greek finances and to the creditors of Greece on account of war advances, if no check is placed on such indiscriminate borrowing. Having regard to the terms of the Geneva Protocol, the Allied war advances must presumably be regarded as unsecured debts. The Governments concerned have, however, in virtue of the Agreement of 1918 the right to prevent new charges being created, in favour of other loans, which would damnify the general security for the repayment of their war advances; this is the sole means by which they can maintain the effective character of their claims. His Majesty’s Government do not suggest that the powers given by the agreement of 1918 should be so exercised as to preclude all further borrowings by the Greek Government: but they do consider that it is to the interest of the United States and of Great Britain to insist on a stricter observance of the terms of the agreement of 1918, so that, should it be necessary, a check can be imposed on the creation of new charges ranking before the repayment of their war advances.

Of the additional loan proposals, to which reference has been made, the Foundation Company’s loan is the first case which, so far as His Majesty’s Government are aware, has taken concrete shape and gives rise to objection, on the ground that the Greek Government purport to assign security to this loan without the consents required under the 1918 agreement. It appears to His Majesty’s Government that unless that agreement is to be allowed to become a dead letter suitable representations should be made in this case.

His Majesty’s Government have of course no desire to single out an American concession upon which to base their protest, and the [Page 378] fact that they agreed without hesitation to the assignment of security for the Ulen Loan may be cited as evidence of their good faith in this matter. In this connection, it should be pointed out that the State Department in their note of the 12th of December, 1925, agreed that it would be disposed to bring to the attention of the Greek Government the violation of the 1918 Agreement if a loan were floated under the contract with the Foundation Company and security assigned without the required consent being obtained. As this eventuality has been brought about by the supplementary contract with the Foundation Company now in question, His Majesty’s Government assume that the United States Government would now be willing to join them in making the proposed representations on the subject.

  1. File number of note has been changed to “868.51 War Credits/437”.
  2. See additional act signed at Geneva, Sept. 19, 1924, amending the protocol of Sept. 20, 1923, League of Nations, The Settlement of Greek Refugees: Scheme for an International Loan (C. 524. M. 187. 1924. ii).
  3. See despatch No. 173, July 6, 1925, from the Ambassador in Great Britain, Foreign Relations, 1925, vol. ii, p. 292.