Foreign Relations of the United States Diplomatic Papers, 1934, General, the British Commonwealth, Volume I

800.51 Johnson Act/90a

Memorandum by the Legal Adviser (Hackworth)²⁰

[Washington,] May 15, 1934.

Question Raised by the Act Approved April 13, 1934, To Prohibit Financial Transactions With Any Foreign Government in Default on Its Obligations to the United States²¹

The following question has been raised with respect to the Act approved April 13, 1934:

“If a Government that has made a so-called ‘token’ payment on its obligations to the United States, and is now in the non-defaulting category under the Attorney General’s ruling of May 5, should pay the full amount of the next installment, would it still be regarded as not in default?”

The Attorney General in his opinion of May 5, 1934, has ruled that Great Britain and other countries similarly situated are not in default within the meaning of the term “default” as used in the Act approved April 13, 1934. Apparently the reason the Attorney General did not consider these Governments in default was that, in view of the flexibility of the term “default” and of statements made by the President, and in view also of proceedings in the House of Representatives relating to the bill when it was pending before that body, it was not the intent of the Act that a government which had made a partial payment on an installment when it became due should be considered in default on its obligation to the Government of the United States. Since the British Government and certain other governments had made so-called token payments when the last installments came due, the Attorney General concluded that they were not in default.

It is not conceived that the maturing of another installment should change the position of a government with respect to a previous installment on which a so-called token payment had been made. The maturing of an additional installment can scarcely be regarded as changing the status of a government in the matter of default or non-default on an installment previously due. If the British Government, for example, should pay in full the next installment when due, it most certainly would not be in default as to that installment. Its status under a previous installment on which a partial payment was made ought not to be any less favorable by reason of payment in full of a new installment when due than it was before the new installment became due and was paid.

Green H. Hackworth

20. Copy of this memorandum was enclosed with letter of May 16, 1934, from the Secretary of State to the Attorney General (not printed). In his reply dated May 18, the Attorney General stated:

    “It follows from these considerations that if a government which made a token payment under the circumstances stated in my opinion of May 5 should pay the full amount of the installment next due on its indebtedness, it would not be in default, within the meaning of that term as used in the Act of April 13, 1934.” (38 Op. Atty. Gen, 581.)

21. An attached note dated May 16, 1934, by the Under Secretary of State to the Secretary of State, reads as follows: “This is based on an inquiry (oral) from the British Ambassador.”