462.00 R 296/2249

The Ambassador in France (Herrick) to the Secretary of State

Reparation

Sir: I have the honor to refer to my telegram Reparation No. 79 of February 18, 1928, and to the Department’s Reparation No. 45 of February 23, 1928, regarding 1) the disposal of the unused balances of the Rhineland High Commission, and 2) the question of interpretation of paragraph 5 of Article 2 of the Paris Agreement of January 13, 1927, as well as of the extended assurance covering the Rhineland Commission for claims payable under Articles 6 and 8–12 of the Rhineland Agreement.

With regard to the first point mentioned, all the Powers concerned have now stated that they are prepared to give the extended assurance desired by the Rhineland Commission before it makes its savings available for distribution as Reparation.

As regards the second point, the question of interpretation, the Managing Committee at a meeting on May 2nd, acting in this instance as an informal drafting committee on behalf of certain of the interested Powers, considered a Draft Protocol prepared by the Finance Section of the Commission. Following subsequent discussions between representatives of the principal Powers, agreement has now been reached on a text, copies of which I transmit herewith.30 This text of the Draft Protocol is satisfactory to the British, French, Italian and Belgian representatives and I regard it as satisfactory from our point of view. It is now proposed to submit the Draft Protocol to the representatives of all the Powers signatory to the Agreement of January 13, 1927, and then to convoke an early meeting of such representatives for the purpose of signing the Protocol.

The Department will note that according to Article 1 of the Draft Protocol, the additional amount that may be placed at the disposal of the Rhineland Commission, within the limits of its savings, in order to meet claims that may become payable, will rank with the annual charge fixed in Article 2 of the Agreement of 13th January, 1927, for the administrative expenses of the Rhineland Commission. In view of the wording of the Department’s instruction contained in its telegram Reparation No. 45 of February 23rd, I had suggested to the other representatives that the paragraph should be so drafted as to read specifically that the sums which may be placed at the disposal of the Rhineland Commission to meet claims payable should be taken out of the part of the Annuity then current which would otherwise [Page 886]be available for distribution among the Powers. There was objection to this, however, on the part of the other representatives, as they feared that this wording would have the effect of setting up a further distinct category of priority in addition to the prior charges created in the January 14, 1925, Agreement. They preferred not to establish this additional priority, but merely to provide that, in the contingency contemplated, a certain amount would be added to the maximum amount heretofore fixed for the existent priority in favor of the Rhineland Commission.

So far as we are concerned, it appeared to me that our main interest was to see that any additional amount, within the limits of the savings effected, which might be allocated to the Rhineland Commission to meet claims payable, should not be charged against the Annuity as a whole in such a manner as to reduce the amounts already allocated for existing priorities, and in particular for our Army Cost priority. I explained this view to the other representatives who expressed their entire agreement with me, and in order specifically to guard against any such occurrence, it was agreed that a phrase at the end of paragraph 1 of the Draft Protocol should be inserted, reading as follows: “The provisions of this paragraph do not modify any of the stipulations of the Agreement of 14th January, 1925.”

It seems to me that the Department’s interpretation of Article 2 of the January 13, 1927, Agreement, as set forth in the Department’s Reparation No. 45 of February 23rd, is now given practical effect by the wording of the Draft Protocol: if at any date claims become payable, sums up to the amount of the savings of the Rhineland Commission will in fact be taken, not from existent priorities, but from that part of the Annuity then current, i. e., the Reparation pool, which would otherwise be available for distribution among the Powers.

Further comment in explanation of the Draft Protocol may be submitted as follows:

It has been drafted to cover claims under Article 6 and Articles 8–12 for the second, third, fourth and fifth years of the Plan only. At one time it was suggested that the new assurances should cover the outstanding claims from the beginning of the Experts’ Plan.31 As claims under Article 6 for the first year of the Plan are covered by the provisions of paragraph 5 of Article 2 of the Agreement of 13th January 1927, and as there are no outstanding claims under Articles 8–12 in respect of that year, it was thought preferable for the new assurances to cover claims only from the beginning of the second year of the Plan.

[Page 887]

Further, as the unused balances of the Rhineland Commission are established only for each annuity year it was thought advisable for the new assurances to cover only the period up to the end of the fifth year (31st August 1929) leaving any outstanding balances and any claims in respect of the period 1st September 1929–10th January 1930 to be dealt with at the same time as any general provisions are made for the whole of the sixth annuity year.

It will further be seen that paragraph 2 provides that, in the event of an agreement being reached regarding the amounts payable for the claims for one or several of the years only, the amount which the Allied and Associated Powers will make available will not exceed the unused balances for the year or years in question. Strictly speaking, in order that the total expenses of the Rhineland Commission for any given annuity should not exceed the maximum annual charge fixed in Article 2 of the Agreement of 13th January 1927, it would have been necessary to limit the amounts which could be made available to meet outstanding claims in respect of each year to the unused balances of the same year. As, however, as a result of the provisions of the Riders to the Financial Regulations of 5th May 1925,32 the claims under Articles 8–12 of the Rhineland Agreement for the second and third years will have to be dealt with together, it was thought useless to include such a restriction in the present Protocol (see Article III of Rider No. II, Annex 3089 B, page 21).32

According to a revised statement from the Chief Accountant of the Reparation Commission, dated March 15, 1928, the amount of the savings of the Rhineland Commission which would now become available for distribution to the Powers is as follows:

G.M.
Savings for the 2nd Annuity Year 300,447.10
3rd 612,600.92
Amount blocked in 3rd Annuity Year under Article 2 of the Agreement of 13th January 1927 550,000.00
1,463,048.02

The savings for the first Annuity Year—548,581.58 gold marks—have already been distributed to the Powers.

The relative unimportance of the matter to the United States will be realized when it is seen that the total amount of savings which will thus fall to be distributed is only, in round figures, about two million gold marks, of which our share would be but some 45,000 gold marks. Conversely, the limit of our liability to recoup the Rhineland Commission on account of claims payable can never exceed the small amount thus received out of its savings.

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As mentioned in the foregoing, the Draft Protocol in its present form is satisfactory to the British, French, Italian and Belgian representatives. As a result of the meeting to be called of the representatives of all the Powers signatory to the January 13, 1927, Agreement, it may be found necessary to amend the Draft Protocol in some minor particular in order for it to meet with general approval. But I feel that, in substantially its present form, it will be found satisfactory to all the representatives in question.

I therefore respectfully suggest that the Department, if it perceives no objection, authorise me by cable as soon as possible after the receipt of this letter, to sign, on behalf of the Government of the United States, the Protocol in substantially the form in which it is at present drafted.

I have [etc.]

For the Ambassador,
Edwin C. Wilson
  1. Not printed.
  2. For the negotiations, see Foreign Relations, 1924, vol. ii, pp. 1 ff.
  3. Not printed.
  4. Not printed.