Papers Relating to the Foreign Relations of the United States, 1926, Volume II

882.6176 F 51/156

The Chief of the Division of Western European Affairs ( Castle ) to the Secretary of State

[ Washington ,] January 12, 1926 .

The Secretary: You will recall that during the visit of the Liberian Secretary of State to this country last summer conversations took place between him, the Firestone interests and the National City Bank of New York. The upshot of these conversations was the granting to Mr. Firestone of three concessions providing for:

(1) A 99 year lease on the existing experimental rubber plantation near Monrovia;

(2) A 99 year lease for a million acres to be devoted to rubber production;

(3) The right to improve the harbor facilities of Monrovia.

In addition, a Loan Agreement was negotiated with the National City Bank providing for a five million dollar credit for the Liberian Government to be expended under certain conditions. Copies of these agreements are subjoined.²

With regard to the rubber agreements the Department felt that 99 years might be too long and that it might be advisable to limit the concession to 50 years with the option of renewal upon such terms as might then be appropriate to existing conditions. However, the Liberian Government stated flatly that it preferred the hard and fast agreement for 99 years and in consequence the matter was dropped and the 99 year feature was retained.

The Loan Agreement and the rubber agreements were informally submitted to the Department as under them this Government is to assume certain functions more or less analogous to those assumed by it under the 1912 Loan Agreement.³ These functions may be summarized as follows:

(a) The rubber agreement provides that the Liberian Government shall arrange with the Department of State for the arbitration of any questions arising under the agreement. This is a new feature not found in the 1912 Loan Agreement.

(b) The loan contract provides that the President shall designate the individual to be appointed by the Liberian Government as Financial Adviser, the President having at all times the right to insist upon his removal. This is similar to the designation of the General Receiver of Customs by the President under the 1912 Agreement.

(c) The names of the staff of the Financial Adviser are to be reported to the Department of State. This feature does not appear in the 1912 Agreement.

(d) The President of the United States is to recommend four duly qualified officers to take charge of the Frontier Force. This was also provided for in the 1912 Agreement.

(e) The Secretary of State may be requested to appoint an arbitrator in case of dispute concerning the loan contract. A new feature.

(f) Liberia out of the loan proceeds will discharge its debt to the United States of $26,000 plus accrued interest. This requires no comment but its support has been informally communicated to the Treasury.

These agreements have received the careful scrutiny of the Department, particularly in connection with the note from the British Embassy of October 7, 1925,⁴ and they have been carefully examined with a view to determining whether they are in any particular open to criticism on the score of impairing the principle of the Open Door.

Two points of possible objection were raised by the Department, namely, article 12, paragraph 5 and article 15 of the Loan Agreement.

After consultation with Colonel Crews,⁵ representing the National City Bank, and Mr. Harvey Firestone, Jr., it was decided to modify article 12, paragraph 5, in the manner shown in the subjoined copy,⁶ as it was felt incongruous that the Liberian tariff be controlled by a New York bank providing that the total yield of the revenues was unaffected, and that the phrase “expenses of the administration of the Government” might prevent the application of the assigned revenues to the service of other loans which the Liberian Government might contract in the future.

It was felt by the Department that it might be preferable to revise article 15 so as to make the contracting of new loans dependent upon whether in the future revenues should have increased to a point at which the service of such loans would be possible. However, Colonel Crews and Mr. Firestone objected strongly to such change as they considered the clause an essential safeguard to their investment and, in consequence, the Department took the attitude that it would not insist, provided it could clear itself of any claim that might be raised by a foreign government to the effect that this clause constituted an infringement of the principle of the Open Door. This it believes it can do as the clause does not prohibit the making of new loans but merely requires that they be approved by the Financial Adviser, and as there is no reason for assuming that he will not pass on such loans in a proper manner.

Subject to your approval it is therefore proposed that the Department notify the bankers, informally, that the Department perceives no objection to the terms of the Loan as they now stand (with the modification agreed upon in article 12, paragraph 5) and that this Government is prepared to assume the functions assigned to it by the agreements upon the request of the Liberian Government.

A memorandum is attached⁷ suggesting certain further steps which may be taken by the Department to put our position in the matter beyond the possibility of any misunderstanding.

W. R. C[astle], Jr.

2. There are no agreements attached to the file copy of this memorandum. For texts of the agreements signed Sept. 16 and 17, 1925, see ibid., pp. 450 ff.
3. See ibid., 1912, pp. 667 ff.
4. Foreign Relations, 1925, vol. ii, p. 484.
5. Member of the law firm of Shearman & Sterling, attorneys for the Finance Corporation of America and the National City Bank of New York.
6. There is no copy of the article attached to the file copy of this memorandum.
7. There is no memorandum attached to the file copy of this memorandum.