839.51/4804

Draft “X” of the Proposed Convention Between the United States and the Dominican Republic

Whereas a Convention between the United States of America and the Dominican Republic, providing for the assistance of the United States of America in the collection and application of the customs revenues of the Dominican Republic, was concluded and signed at Washington on December 27, 1924, and

Whereas, pursuant to a provision of the said Convention the President of the United States of America appointed a General Receiver of Dominican Customs to collect all customs duties accruing at the several customhouses of the Dominican Republic, and

Whereas, under the Receivership constituted and existing under the Convention signed December 27, 1924, as well as under the Convention signed February 8, 1907,2 which was superseded by the Convention of 1924, the Dominican Republic has discharged its obligations to the holders of External Bonds and the service of its External Debt has been maintained in a commendable and satisfactory manner, and

Whereas the Dominican Republic has reached an agreement with the Foreign Bondholders Protective Council, Incorporated, which has been approved by a majority of the holders of the bonds of Dominican external loans issued in 1922 and 1926, and registered with the Securities and Exchange Commission of the United States of America in connection with the listing of the bonds on the New York Stock Exchange, whereby it has been agreed that the amortization periods for these bonds of the Dominican Republic’s debt may be extended.

Whereas the Dominican Republic has proposed to organize a National Bank in accordance with its own laws, and to that end has proposed to recommend the enactment of an Organic Law of the [Page 793] National Bank of the Dominican Republic and, when enacted, to promulgate the same;

Whereas the Government of the Dominican Republic desires that the above-mentioned National Bank of the Dominican Republic shall be charged through its Customs Division with the collection and application of the revenues pledged to the service of the External Debt of the Dominican Republic in the form hereafter to be established, and

Whereas the Government of the United States of America is disposed, in a spirit of friendship and cooperation, to recognize the Bank established in conformity with the provisions of the said Organic Law as the agency charged through its Customs Division with the collection and application of the revenues specifically pledged to the service of the External Debt of the Dominican Republic, in such form as shall fully protect the interest of the holders of the bonds of the said External Debt, and

Whereas the Government of the United States of America and the Government of the Dominican Republic desire for the time being to substitute for the provisions of the Convention of 1924, a procedure which recognizes the aspirations of the Dominican Republic while safeguarding the rights of the holders of the bonds of the External Debt of the Republic;

The President of the United States of America, represented by . . . . . . . . . . . . Secretary of State of the United States of America, and

The President of the Dominican Republic, represented by . . . . . . . . . . . . Envoy Extraordinary and Minister Plenipotentiary of the Dominican Republic to the United States of America,

Who, having communicated to each other their respective full powers, found to be in good and due form, have agreed upon the following Articles:

Article I

The Government of the Dominican Republic declares its intention to recommend the enactment into law in the manner prescribed by its Constitution of an “Organic Law of the National Bank of the Dominican Republic”, the provisions of which shall be mutually agreeable to the High Contracting Parties. The Government of the Dominican Republic likewise declares its intention to establish a National Bank of the Dominican Republic using as its organic law, the “Organic Law of the National Bank of the Dominican Republic” above referred to.

The “Organic Law of the National Bank of the Dominican Republic” shall provide for the establishment in the National Bank of the Dominican Republic of a Customs Division which shall be under [Page 794] the sole jurisdiction, supervision and management of a Committee of the Customs Division. The said Committee of the Customs Division shall consist of three members, one of whom shall be a member of the Board of Directors designated annually for the purpose by the Board of Directors, and the others, the Manager and the Assistant Manager of the Customs Division.

Beginning one month after such time as the Government of the Dominican Republic shall have informed the Government of the United States of America of the establishment of the National Bank of the Dominican Republic and of its Customs Division using as its organic act the “Organic Law of the National Bank of the Dominican Republic”, the Government of the United States of America will not invoke the provisions of the Convention between the United States of America and the Dominican Republic signed at Washington December 27, 1924 so long as the National Bank of the Dominican Republic and its Customs Division shall continue to function as contemplated by the Organic Law of the National Bank of the Dominican Republic and that Law shall not have been altered or amended in a manner prejudicial to the interests of the holders of the bonds issued in 1922 and 1926.

Whenever the National Bank of the Dominican Republic or its Customs Division or both shall have ceased so to function, or whenever the Organic Law of the National Bank of the Dominican Republic shall have been altered or amended in a manner which, in the opinion of either of the High Contracting Parties, expressed to the other in a formal official communication, prejudices the interests of the holders of the bonds issued in 1922 and 1926, the Government of the United States may again and at once invoke the provisions of the Convention between the United States and the Dominican Republic signed at Washington December 27, 1924; provided, however, that whenever all of the bonds issued in 1922 and 1926 shall have been redeemed and paid, both the Convention signed December 27, 1924 and the present Convention shall automatically cease to have force and effect.

It is further agreed that the said National Bank of the Dominican Republic through its Customs Division shall, in representation of the Government of the Dominican Republic, be irrevocably charged with the collection of all revenues derived from levies on imports into and exports from the Dominican Republic. Such revenues shall include those derived from duties on imports provided for in the customs tariff in force on this day plus those arising from taxes which may be derived from the application of the laws enumerated in the notes exchanged on this day between the two Governments, and such revenues shall be considered from this day as having been pledged [Page 795] specifically to the service of the Dominican external loans of 1922 and 1926. The duties and taxes indicated above shall be merged, by a law of the Congress of the Dominican Republic, in a single schedule of customs duties, as soon as it has been possible to effect the necessary studies, but in any case not later than nine months after the entry into force of the present Convention. Until they have been so merged, the Customs Division of the National Bank of the Dominican Republic shall collect the revenues derived from such duties and taxes in conformity with the provisions of the laws now governing them.

The revenues thus collected shall be deposited to the credit of the Customs Division of the said National Bank of the Dominican Republic for the benefit of the bondholders of the 1922 and 1926 loans and the Bank shall apply them as follows:

1.
To the payment of the expenses of collection, plus the percentage of such expenses due to the Bank as compensation.
2.
To the payment of interest upon all the said bonds outstanding.
3.
To the payment of the annual sums provided for the amortization of the said bonds and to the payment of interest on all bonds which may be held in the sinking fund.
4.
To the purchase and cancellation, or the retirement and cancellation, of any of the said bonds pursuant to the terms thereof, when the Government of the Dominican Republic shall so order.
5.
The balance shall be paid to the Government of the Dominican Republic. This balance shall not constitute the guarantee of any other loan or financial arrangement of the Government of the Dominican Republic without the previous agreement of the Committee of the Customs Division.

The manner of distributing the funds collected by reason of the revenues specified above shall be as follows:

The Bank will deduct from the total collections the sum necessary to cover expenses of collection, which shall be paid as they are incurred. The Bank will also deduct an amount equal to ten percent (10%) of the total of said collection expenses as compensation for its services in the collection and application of the revenues mentioned above; provided, that in no case may the total of the expenses of collection, plus the ten percent (10%) indicated as the Bank’s compensation, exceed five percent (5%) of the total of the collections.

The Customs Division of the National Bank of the Dominican Republic shall, not later than the first day of each month, deliver to the Fiscal Agents of the 1922 and 1926 loans proportionate amounts, calculated as prescribed by an exchange of notes accompanying this Convention, of the annual interest on all the said bonds outstanding or held in the sinking fund, and of the annual amounts provided for the amortization of the said bonds. Thereafter the balance of the collections of the last preceding month shall be paid to the Government of the Dominican Republic.

[Page 796]

In case the total collections from the revenues specified above should in any year exceed five million three hundred thousand pesos ($5,300,000) there shall be applied to the sinking fund (notwithstanding the provisions of paragraph 4, Article I) for the redemption of external bonds of the 1922 and 1926 loans which may be outstanding ten percent (10%) of the excess above five million three hundred thousand pesos ($5,300,000) but less than six million three hundred thousand pesos ($6,300,000) and in addition five percent (5%) of all sums exceeding six million three hundred thousand pesos ($6,300,000).

Article II

The Government of the Dominican Republic shall recommend to the Congress the enactment of such laws and shall promulgate such decrees and regulations as the Government, the Board of Directors of the Bank, and the Committee of the Customs Division, by common consent, may consider necessary or useful to accomplish the aims of this Convention. In the event that common consent cannot be obtained, either or both of the High Contracting Parties may be notified in writing by any of the said entities.

The Government of the Dominican Republic hereby guarantees to the aforesaid Bank, for the same period, all needful aid and assistance for the proper accomplishment and execution of the powers conferred upon the above-mentioned Bank by the said Organic Law and by this Convention, and likewise agrees to give full protection to the personnel of this Bank in connection with the fulfilment of its task.

Article III

The existing pledge of the customs revenues under the terms of the contracts of the Dominican External Loans of 1922 and 1926 and subject to the agreement concluded between the Foreign Bondholders Protective Council, Incorporated, and the Government of the Dominican Republic on August 10, 1934, set forth in the bonds and the certificates attached thereto which were re-issued on January 2 and February 1, 1937, and subject to this Convention, shall continue in full force and effect until all bonds issued by the Dominican Republic and now outstanding are paid or retired in accordance with the plans and the limits as to time and amount stated on the said bonds, as modified in 1937.

Article IV

The Dominican Government undertakes at no time to lower the customs levies mentioned in Article I including those which are the subject of an exchange of notes, hereto annexed, to such a point that, on the basis of imports and exports of the same amount and of the [Page 797] same type for the two years preceding that in which it is desired to make such modifications, the total net customs revenues derived from duties under the tariffs so modified would not have reached, in each of those two years, at least one and one-half times the amount necessary to assure the service of interest and amortization on the external debt represented by the bonds issued in 1922 and 1926.

Article V

The National Bank of the Dominican Republic through its Customs Division shall render monthly reports to the Department of State for Treasury and Commerce of the Dominican Republic and to the Fiscal Agents of the Dominican External Loans of 1922 and 1926 on all operations relating to the collection and application of the revenues pledged to the service of the Dominican External Debt pursuant to Articles I and III of the Convention. Such reports are to be subject to examination and verification by competent officials of the Government of the Dominican Republic and by competent representatives of the Fiscal Agents referred to above.

Article VI

Controversies arising between the High Contracting Parties as a result of the execution of the provisions of the present Convention shall, if possible, be settled through diplomatic channels. Upon notification by either of the High Contracting Parties that, in its opinion, the possibilities of settlement by this means shall have been exhausted, such controversies shall be settled in accordance with the procedure stipulated in the Inter-American Arbitration Convention signed at Washington January 5, 1929, notwithstanding the provisions of Article 2 (a) thereof.

Article VII

The present Convention shall be ratified by the High Contracting Parties in accordance with their respective constitutional methods, and shall become effective on the first day of the month following the exchange of ratifications. The exchange of ratifications shall take place at . . . . . as soon as possible.

In witness whereof the respective Plenipotentiaries have signed the present Convention in Duplicate, in the English and Spanish Languages, both texts being equally authoritative, and have hereunto affixed their seals.

Done at the city of Washington, this . . . . . day of . . . . . . ., 1940.