The Chargé in Rumania (Sussdorff) to the Secretary of State

No. 932

Sir: I have the honor to acknowledge the receipt of the Department’s strictly confidential instruction No. 246, of June 21, 1932,11 which reached the Legation on July 21, 1932, and which, therefore, crossed the Legation’s despatch No. 916, of July 13, 1932.

Upon receipt of the Department’s instruction under acknowledgment, I felt that a final effort ought to be made by the Legation to obtain the contract mentioned in the Legation’s despatch No. 867, of April 11, 1932,11 for the General Railway Signal Company. I, therefore, immediately sought an interview with Mr. Al. Vaida Voevod, Rumanian Prime Minister and Minister for Foreign Affairs. On July 28, 1932, accompanied by the Commercial Attaché of the Legation, Mr. Fouché, I called on Mr. Vaida Voevod and informed him that I desired to protest formally against the discrimination of the Rumanian Ministry of Communications and the Rumanian Railway Administration against an American company—the General Railway Signal Company, of Rochester, N. Y. I explained the case thoroughly [Page 511] to Mr. Vaida Voevod and handed him a carefully prepared note setting forth the principal facts, a copy of which is enclosed.

The Department will observe from the enclosed memorandum of my conversation with Mr. Vaida Voevod12 that the latter sought to go off into side issues in order to evade the main issue. When pinned down to facts, however, Mr. Vaida Voevod admitted that the American firm had made the best offer and that the position taken by the American Legation was a just one. He endeavored to excuse himself and his Government by explaining that the commitment vis-à-vis the French firm Thomson-Houston had been undertaken by the Iorga-Argetoianu Ministry, which, he said, was noted for its stupidities. I informed Mr. Vaida Voevod that my Government could not accept such a reason, since, in its acts vis-à-vis foreign interests, the Iorga-Argetoianu Ministry, like all other Rumanian ministries, was the Rumanian Government. At the request of Mr. Vaida Voevod, I agreed to withhold the note of protest for a few days in order to give him time to see whether he could bring about a satisfactory settlement of the case.

I saw Mr. Vaida Voevod again on August 2nd, but he said that he had not yet been able to obtain a report on the case from the Minister of Communications. On August 5th, Mr. Vaida Voevod telephoned me and asked me to call on him at the Foreign Office. Upon my arrival there, he informed me that he had taken up the case with the Minister of Communications, but that the contract had been signed and that his hands were tied.

I told Mr. Vaida Voevod that I was very sorry to receive this communication and to transmit it to my Government; that I was afraid that the continued refusal of the Rumanian Government would produce a very unfavorable impression in Washington which I was sure he would want to avoid, and that I still entertained the hope that the considered reply of the Rumanian Government to the formal note which I would now be obliged to file would be favorable.

Feeling that Mr. Vaida Voevod was too inexperienced in foreign affairs to be able to appreciate fully the importance of the principle involved in the case which I had discussed with him, I called on Mr. Gafencu, Under Secretary of State for Foreign Affairs, on August 8th, ostensibly to hand him the note of protest for Mr. Vaida Voevod, but really to explain the case to him, since I felt that Mr. Gafencu would understand far better than Mr. Vaida Voevod the international aspects of the case. Mr. Vaida Voevod, it will be recalled, is both Prime Minister and Minister for Foreign Affairs, and on account [Page 512] of his occupation with internal political questions Mr. Gafencu practically runs the Foreign Office.

Mr. Gafencu said that he would give the case very careful study. He did not deny that the offer of the General Railway Signal Company was the most advantageous one which the Railway Administration had received. Mr. Gafencu was even more sensitive than Mr. Vaida Voevod about the complaint of French pressure contained in the note. Although no reference was made to it in our conversation, he knew that he was one of the four high Rumanian officials referred to in the note. Consequently, he disliked intensely the paragraph about the statement of Rumanian officials concerning French pressure. I felt, however, that it was absolutely imperative to retain this paragraph, since it really constituted the basis of our complaint. Mr. Gafencu was so anxious to keep all reference to French pressure out of the correspondence that I agreed that if he could effect a satisfactory solution of the case I would at his request withdraw the note and substitute another omitting reference to French interference. I made it plain, however, that unless a fair solution could be reached the note in its original form must be treated as filed of that day’s date.

After several delays, occasioned by a reorganization of the Ministry and pressing internal affairs, Mr. Gafencu received me on August 16, 1932, to give me an oral preliminary reply. He informed me that he had received the dossier that morning from the Railway Administration; that he was not satisfied with the explanations given by the Railway Administration; and that Mr. Vaida Voevod, acting in his capacity of Prime Minister (not in his capacity of Minister for Foreign Affairs), was going to send the Legation’s note of August 6, 1932, together with the dossier of the Railway Administration and an explanation of the case, to Mr. Mirto, the new Minister of Communications, for careful study, with a view to seeing whether a solution could not be reached that would satisfy the American Government and the American company.

Mr. Gafencu added that the technical explanation furnished by the Railway Administration sought to prove that the American company did not have a very well-founded complaint. The Railway Administration explained that the first competition for signal installation was annulled because the offers were too expensive and did not comply with the specifications laid down by the Technical Committee; and that in the second competition the American company did not make the lowest offer (the order with regard to price was: (1) The English firm Westinghouse; (2) A German firm; (3) The General Railway Signal Company; (4) Thomson Houston).

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Mr. Gafencu then remarked again that he was not satisfied with the explanation of the Railway Administration and that the Prime Minister would send the case immediately to the new Minister of Communications. I said that I thought the explanation of the Railway Administration was very unconvincing; that it was practically common knowledge amongst persons who had followed the case that the first competition was annulled at the insistence of the French Legation. With regard to the statement of the Railway Administration that the American company did not make the lowest bid in the second competition, I pointed out that the offers of the firms which underbid the General Railway Signal Company were incomplete and were thrown out by the Technical Commission for that reason; that the contract was given to Thomson-Houston who made an offer which was 3,000,000 lei higher than the offer of the General Railway Signal Company. I added that Rumanian officials had admitted to the Legation on several occasions that the contract was awarded to Thomson-Houston because of pressure from the French Legation.

I then said that speaking quite frankly and between friends I thought there was something wrong at the Rumanian Railway Administration. I asked Mr. Gafencu to read the following item, which appeared in the Independance Rumaine and other Rumanian newspapers of July 20, 1932:

“The French Minister, Mr. Gabriel Puaux, in the name of the President of the French Republic, presented, on Saturday at the Legation, the insignia of Commander of the Legion of Honor to General Ionescu, Director General of Railways, that of Officer of the same order to Messrs. Cezar Merutza, Assistant Director General, and Codreanu, Director of Construction, and that of Chevalier to Mr. Stoica, Chief Engineer.

“The presentation solemnly took place in the presence of the higher personnel of the Legation.

“Mr. Puaux made a short speech indicating the motives which prompted the French Government to confer these high distinctions upon General Ionescu and his assistants.

“General Ionescu thanked the French Government and the Minister of France in warm terms, bringing out the valuable assistance given by France to Rumtoian railways, especially by the collaboration of Engineer Leverve and his assistant, Engineer Mange.”

I remarked that the four Rumanian officials who had just received French decorations were the very ones who had been responsible for the awarding of the contract to the French firm Thomson-Houston.

Mr. Gafencu smiled sheepishly. He asked me to have confidence in him. He said that it would probably be at least ten days or two weeks before the Rumanian Government could give any reply to my note of August 6, 1932, since the case must now be reopened and [Page 514] carefully studied by the new Minister of Communications. In the meantime, he expressed the hope that the American Government and the American Legation would be patient in the matter.

In concluding this despatch, I desire to point out that throughout the negotiations both the Prime Minister and Mr. Gafencu freely admitted that the offer of the American company was the most advantageous one received and that neither of them made any attempt to deny that the contract had been awarded to the French company because of political pressure from the French Government.

The increasing tendency of the French and Rumanian Governments to regard concessions and public contracts in Rumania as belonging exclusively to French interests created a situation which made it seem imperative for the Legation to stand up for legitimate American interests and vigorously to protest against the treatment meted out to the General Railway Signal Company. The Legation is convinced that if the present case is not pushed to a satisfactory solution it will be virtually impossible for American companies to obtain public contracts or concessions in Rumania in the future.

The Legation will continue to press the Rumanian Government for a reply and will report any important developments promptly to the Department.

Respectfully yours,

Louis Sussdorff, Jr.

The American Chargé (Sussdorff) to the Rumanian Minister for Foreign Affairs (Voevod)

No. 420

Excellency: I have the honor to draw the attention of the Royal Rumanian Government to the following case in which the Rumanian Ministry of Communications and the Rumanian Railway Administration, under pressure from the French Legation at Bucharest, have discriminated against an American company.

On December 15, 1931, the American Legation received a letter, dated December 1931, from the Rumanian Railway Administration, a copy of which is enclosed for Your Excellency’s information, stating that the Railway Administration intended to install automatic block signal equipment on the section of railway between Fetesti and CernaVoda Pod and that a commission designated by the Railway Administration would receive bids for this installation at 112 Calea Victoriei on January 18, 1932, at 9:30 a.m. Your Excellency will [Page 515] observe that in this letter the Rumanian Railway Administration requested the Legation to furnish it with the names and addresses of all serious firms in the United States which could undertake the work in question.

Acting on the request of the Rumanian Railway Administration, the Legation instructed the American Commercial Attaché to furnish the Railway Administration with a list of American firms which were qualified to carry out the work in question. This list was transmitted to the Railway Administration by the Acting Commercial Attaché in a letter dated December 17, 1931.

The General Railway Signal Company, of Rochester, N. Y., a firm of high standing and wide experience and recognized experts in the field of railway signal installation, responded to this invitation and submitted an exceptionally advantageous offer.

The General Railway Signal Company has made a formal complaint to the Legation that despite the fact that its offer was approximately 3,000,000 lei lower than the offer of the French firm Thomson-Houston and despite the fact that it was informed by members of the Committee appointed by the Railway Administration that its offer was found by the latter to be of a truly remarkable conception and the only one which complied with the specifications laid down by the Commission, the Rumanian Ministry of Communications awarded the contract mentioned above to the French firm on account of pressure exerted by the French Legation. The American Legation understands furthermore that the General Railway Signal Company has for many years installed systems of railway block signals in many parts of the world, whereas the firm Thomson-Houston has had no experience whatsoever in this type of work and would be obliged to purchase materials from other firms which specialize in the manufacture of railway signal equipment.

In this connection, I desire to point out to Your Excellency that the American Minister and I have been informed definitely by four high officials of the Rumanian Government on four separate occasions that the French Legation at Bucharest demanded that the contract for signal installation mentioned above be granted to the French firm Thomson-Houston on the grounds that the French Government had been useful in furnishing loans to Rumania and that French firms expected some compensation in return. The officials in question categorically informed Mr. Wilson and me that the French Legation exerted such strong pressure that the Rumanian Government could not resist.

In the conversations which Mr. Wilson and I have had with Rumanian officials concerning this case, we made it clear that the [Page 516] American Legation was not asking for a promise that the contract for signal installation would be given to an American company, but for an assurance that the American company would receive an equal opportunity to compete for the contract with all other companies on a fair technical basis without any political considerations entering into the matter. We explained carefully that we were asking only for an equality of opportunity for the interested American firm, but that nothing less than complete equality of opportunity would be satisfactory to the United States Government. Mr. Valcovici, former Minister of Communications, gave me a positive assurance on February 11, 1932, that equality of opportunity would in fact be accorded to the American company. Mr. Valcovici had already given a similar assurance to Mr. Wilson when the latter called on him, accompanied by Mr. Fouché, Commercial Attaché of the Legation, in October 1931.

Accepting the formal invitation of the Rumanian Railway Administration as a serious one and relying upon positive assurances given by the Rumanian Minister of Communications to the American Legation that American companies would receive an equality of opportunity in the competition, the General Railway Signal Company, acting in good faith, expended more than $5000 in a study of the technical requirements of the situation and in bringing equipment to Rumania for demonstrations. No complaint would, of course, be made on this score if the American company had failed to obtain the contract under conditions of equality of opportunity.

In view of the fact that a formal invitation was issued to American firms through the American Legation, that an American company made the lowest and most advantageous offer, that Mr. Valcovici, former Minister of Communications, gave the American Legation a definite assurance on two occasions that the American company would receive an equality of opportunity in open competition for the contract with all other companies on a fair basis and that the contract would be awarded on the technical merits of the offers received, the Legation feels that the only equitable solution in this case would be the cancellation of -a contract awarded under political pressure and the awarding of the contract to the General Railway Signal Company on the technical merits of its offer, which have already been recognized by the Technical Committee set up by the Railway Administration.

A formal indication in writing of the intentions of the Rumanian Government in this matter is requested in order that I may communicate immediately with my Government.

I avail myself [etc.]

Louis Sussdorff, Jr.
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