In response to those indications, we have the honor to send to Your
Excellency a draft of a protocol containing the ideas of the Dominican
Government.
We do not believe it necessary to reiterate our Government’s opinion that
the 1924 Convention must be replaced by another instrument more in
harmony with the needs of the present time and with the present trend of
Pan-American international life. Applying an identical opinion, and
taking as a basis the broad and shining “good neighbor” policy, the
United States has already modified other treaties of past epochs, such
as those which it had made with Haiti,11 Cuba12 and Panama.13
In proposing the modification of the 1924 Convention (which has been in
existence for thirty years, strictly speaking, since it was a
reproduction, with slight variations, of the 1907 Convention14), the Dominican Government does not
propose any stipulation tending to diminish even in the slightest
[degree]15 the guarantees of payment offered previously to
the holders of bonds of the Dominican public debt. The mechanism
established for the payment of the debt differs, undoubtedly, in
external details, in order to render it compatible with the idea of
Dominican sovereignty, but the guarantees are exactly the same, and
provision is still made for reestablishing the procedure provided in the
Convention which it is intended to replace, at any period of justified
uneasiness, while the causes for such uneasiness last. We believe that
such a contingency is outside any probability, not only because
conditions in the country are very different from those which prevailed
thirty years ago, but also because one of the defects of the two
Conventions, the one of 1907 and the one of 1924, was that of
establishing terms and conditions for amortization that were beyond the
economic capacity of the Republic, and those terms and conditions have
been expressly modified by means of an agreement with the bondholders,
in such a way that the Dominican Republic will be able to accomplish the
service on the debt at all times without difficulties, until its final
payment. But although such a contingency may be improbable, we have
wished to provide for it expressly, in order to make it impossible for
any creditor to think that he does not count on the same guarantees of
payment.
Other points, the modification of which we consider essential, are those
referring to the concept of excessive limitation of the sovereign power
of the Dominican Republic to change its tariffs and the concept, also
too restricted, of what may be considered an increase in its public
debt. It is necessary to formulate explanations of both points to avoid
difficulties in interpretation in the future.
Our intention of presenting the concrete bases of revision proposed by
the Dominican Government with regard to the Convention of 1924 being
fulfilled, it remains for us only to mention the second point of Your
Excellency’s note: that which refers to the conclusion of a commercial
treaty between the United States of America and the Dominican Republic.
Your Excellency lays down as a preliminary question the necessity for
the Dominican Government to apply the most-favored nation clause to the
United States, in connection with the commercial treaty which it has
concluded with France. Reserving the right to discuss this point more
fully, we take pleasure in advising Your Excellency that the Dominican
Government has expressed its juridical opinion on the matter, as a
question of doctrine, but has the greatest desire to arrive at an
understanding with the Government of the United States as to the
application of that principle.
We believe it possible, in conversations on the subject to be held in the
near future, to arrive at a satisfactory and harmonious formula, in
order to initiate, immediately thereafter, the negotiations for the
commercial treaty between the two countries.
[Enclosure—Translation]
Dominican Draft of a Protocol To Replace the
Convention of December 27, 1924, Between the United States and
the Dominican Republic
Whereas a convention between the Dominican
Republic and the United States of America, containing provisions
‘for the aid of the United States in the collection and application
of the customs revenues of the Dominican Republic, was concluded and
signed by their respective plenipotentiaries in the City of
Washington on the twenty-seventh of December, 1924;
Whereas this convention was concluded for
the purpose of facilitating the system of payments of the public
debt of the Dominican Republic, and subsequently the said debt has
been considerably reduced;
[Page 445]
Whereas the Dominican Republic has arrived
at an agreement16 with the holders of the bonds
of said public debt, who have consented to an extension of the
amortization periods, subjecting moreover the capacity of the
Republic, to make amortization payments, to a sliding scale in
proportion to the increase of the customs revenues, and thus there
is no doubt that the Dominican Republic will be in a position to
satisfy without difficulty the debt service until its final payment,
and all this is set forth in the certificates legally annexed to
said bonds under date of January 2 and February 2, 1937;
Whereas experience has demonstrated that
certain provisions in the convention of 1924 may hinder the action
of the Dominican State intended to develop the natural resources of
the country and the progressive extension of its industry and
commerce;
Whereas the Dominican Republic has
requested the cooperation of the United States of America to put
into execution a new protocol which shall take into account these
circumstances and the new provisions agreed upon with the
bondholders with regard to manner of payment of the public debt; and
the United States is disposed to give such cooperation;
The Government of the United States of America, represented by . . .
. . . . . . . .; and the Government of the Dominican Republic,
represented by . . . . . . . . . . . have agreed upon the
following:
Article I
The Dominican Republic shall maintain, as guarantee of the punctual
performance of the service of its public debt, its revenues in the
form of customs duties, in conformity with the provisions in force
with the holders of bonds of the debt; and such guarantee shall be
maintained until payment has been made of each and every one of the
bonds issued by the Dominican Government, based on the loans
referred to by the Convention concluded by the Government of the
United States of America on December 27, 1924, and subject to the
conditions and limitations accepted by the bondholders in conformity
with the agreement made in 1936, which are set forth in the bonds
renewed under date of January 2, and February 2, 1937.
Article II
The Dominican Republic undertakes to apply in the order indicated
below the proceeds of the customs duties collected in the various
customs houses of the Republic;
First, to the payment of the expenses of the office of the Fiscal
Representative of the debt; second, to the payment of the interest
[Page 446]
on pending bonds;
third, to the payment of the annual amounts stipulated for the
amortization of said bonds, in conformity with the agreements now in
force, including the interest on all bonds retained as a sinking
fund; fourth, to the purchase and cancellation or retirement and
cancellation of any of said bonds, in accordance with the terms
thereof, as may be decided by the Dominican Government; fifth, the
remainder shall be applied to the general expenses of the nation, in
accordance with decisions made by the public authorities of the
Dominican Republic.
Article III
The Executive Committee of Dominican Bondholders shall designate,
with the previous approval of the President of the United States of
America, a Fiscal Representative for the collection of the Dominican
public debt, and the Dominican Government shall deliver to said
Fiscal Representative, on the 20th of each calendar month, a sum
equal to the twelfth part of the annual interest on all bonds issued
and of the annual amounts indicated for the amortization of said
bonds in accordance with the provisions in force with the
bondholders. In his turn, the Fiscal Representative shall deliver
said sum to the Fiscal Agent of the loan, on the first day of the
calendar month next succeeding.
In the same way, the Dominican Government shall deliver to the Fiscal
Representative, against a receipt, signed on the 20th of each
calendar month, the amount necessary to pay the expenses of the
office of said Fiscal Representative, and of the subordinate
officials that he needs for executing the duties of his office. The
said amount cannot in any case exceed three percent of the
collections of the customs revenues.
Article IV
The Fiscal Representative shall supervise the functioning of the
customhouses of the Republic, and shall report to the Secretary of
the Treasury of the Dominican Republic any error or deficiency that
he notices in the service; he shall, moreover, keep an account of
the statistical data of the customs activities and the trade of the
Republic with other countries; and shall make an annual report,
which shall be submitted to both governments, in the Spanish and
English languages.
The employees under the Fiscal Representative shall be appointed by
said Fiscal Representative on approval of the President of the
Dominican Republic.
Article V
If by reason of a disturbance of public order or because of any other
unforeseen force other than a force apart from human will, or a
public
[Page 447]
calamity such as
hurricanes, earthquakes, floods, fires or epidemics, the Dominican
Government should find it impossible to meet the service on the
public debt on the date fixed for payment thereof, the Dominican
Government will consent that the Fiscal Representative take charge,
before the first day of the following month, of those customhouses
the collections from which he considers sufficient to guarantee
punctual service on the public debt, and he shall directly collect
the customs duties the revenue from which he shall assign, firstly,
for meeting the expenses of his office; secondly, for the payment of
the interest on all bonds outstanding; thirdly, for the payment of
the amounts fixed for the amortization of said bonds; and fourthly,
he shall place the remainder at the disposal of the Dominican
Government. The payment of the amortization and the interest on the
bonds shall be calculated every month by twelfths, and shall be made
to the Fiscal Agent for the loan on the first day of each calendar
month.
When the causes that brought about the direct intervention of the
Fiscal Representative in the customs service have ceased and the
situation of the country is considered normalized, the Fiscal
Representative shall again turn over the custom houses in which he
has intervened to the competent officials of the Dominican
Government, and his duties shall again be adjusted to the rules laid
down in Articles III and IV. During the whole period that his
intervention lasts, the office expenses of the Fiscal Representative
may not amount to a sum greater than five percent of the customs
revenue.
Article VI
The Dominican Government shall render to the Fiscal Representative
and his assistants all the aid and support that may be necessary, as
well as the broadest protection in the discharge of their duties and
the exercise of the powers granted to them in the foregoing
articles, adopting for that purpose such laws and regulations as may
be necessary.
Article VII
Until the Dominican Republic has paid off all the bonds of the Joan,
its contractual public debt may not be increased, by the contracting
of new loans and new bond issues, except by prior agreement between
the Dominican Government and the Fiscal Representative and the
Fiscal Agent of the loan, the latter representing the bondholders.
Notice of this agreement must be given to the United States
Government in advance. It is understood that there shall not be
considered as contrary to this rule the contracts and financial
arrangements made by the Dominican Government for the execution of
public works and other services of national interest, provided they
be adjusted to the following conditions: firstly, as a guarantee of
those contracts or
[Page 448]
financial arrangements there shall be set aside the revenue from a
given impost of the internal revenue service, which therefore does
not affect the customs revenue, and the contracting parties must
stipulate that they accept that as the sole guarantee for the
performance of such obligation; and secondly, the maximum period for
the liquidation of any of those contracts may not be greater than
four years counting from the date on which the contract goes into
effect. The Dominican Government expressly renounces the right that
it has to issue new bonds up to the limit of twenty million dollars
provided in the 1924 Convention. The Dominican Government may at any
time sovereignly dispose of the internal revenues and imposts not
set aside for guarantee and payment of the public debt and shall
freely dispose of those receipts.
Article VIII
The Dominican Government may change its customs tariffs in accordance
with the needs and advantage of its commerce, but pledges itself
expressly not to reduce import duties at any time to such a point
that, taking as a basis exports and imports of the same extent and
the same kind for the two years preceding the year in which it is
desired to make such modification, the net total of customs receipts
under the tariff so modified would not have amounted, for each of
the said two years, to at least one and a half times the sum needed
to insure the service of interest and amortization of the public
debt.
Nevertheless, there shall not be considered contrary to this rule the
advantages and reductions in duties which the Dominican Republic may
offer to other nations through commercial treaties or agreements and
which do not signify an integral lowering of the import tariff,
since they relate only to a given country; provided that such
reductions may not mean the risk that customs imports may be reduced
more than twenty percent, the computation being made from the
imports which took place in the two years previous and the numerical
proportion having been established by which the total customs
revenue could be diminished, if imports were maintained at the same
rate.
Article IX
The Fiscal Representative shall render accounts monthly to the
Department of State for Treasury of the Dominican Republic, the
Fiscal Agent and the Department of State of the United States, and
the said accounts shall be subject to examination and auditing by
the competent officials of the Dominican Government.
Article X
Every controversy which may arise between the Contracting Parties in
the execution of the stipulations of this Convention shall be
settled
[Page 449]
by arbitration, if
the two Governments cannot reach an agreement through diplomatic
channels. For the execution of this provision in each special case,
the Contracting Parties may, when the necessity for arbitration has
once been determined, conclude a special agreement defining clearly
the extent of the disagreement, the extent of the powers of the
arbitrators and the periods that are to be fixed for the
organization of the arbitral tribunal and the various stages in the
proceedings. The special agreement providing for arbitration must be
signed in all cases within a period of three months from the date on
which either of the Contracting Parties notifies the other
Contracting Party of its desire to have recourse to arbitration. It
is understood that such special agreements shall be made, on the
part of the United States, by the President of the United States, by
and with the consent of the Senate, and that, on the part of the
Dominican Republic, they shall be subject to the procedure required
by its Constitution and laws.
Article XI
This agreement shall go into force after being approved by the
Contracting Parties in accordance with their respective
constitutional methods, but the principles and rules established in
its Articles VII and VIII shall take effect immediately, as
interpretation of stipulations III and IV of the convention of
December twenty-seventh, nineteen hundred twenty-four, now in
effect.
When the ratifications of this Protocol have been exchanged, which
shall be done as soon as possible, the convention between the United
States of America and the Dominican Republic which contains
provisions on the aid of the United States in the collection and
application of the Dominican customs revenues, signed in the city of
Washington on December twenty-seventh, nineteen hundred twenty-four,
shall be considered as abrogated.
Done in duplicate, in the English and Spanish languages, in the city
of Washington, on . . . . . . . . . . . . . .
