740.00113 European War 1939/938: Telegram

The Secretary of State to the Consul General at Algiers ( Wiley )

1289. For Murphy. Department’s 1275 of July 9. The following suggestions may be helpful to you in carrying out the President’s instructions contained in the telegram under reference:

1.
The French should be requested, as an immediate step, to declare a moratorium on the collection of all principal and interest due on obligations incurred by persons under the condition described in BOC Airgram 60.
2.
In discussing the problems with the French, it should be borne in mind that invalidation and moratorium provisions will probably be insufficient to meet the problem. The French are likely to be concerned about the loss that would have to be borne by the banks if obligations of the type described in section 7 of BOC Airgram 60 were invalidated. The following measures might be suggested to meet this type of objection: (a) that if the banks are innocent of collaboration, they be paid as indemnity to make up the loss resulting from the cancellation of obligations; (b) that in lieu of cancelling obligations and transfers, the administration make reparation payments to persons fined by the Germans or whose property was confiscated to permit such persons to discharge the obligations or to compensate them for loss of property. This approach is discussed further in a separate telegram being sent by CCNA to NAEB.
3.
In connection with the foregoing suggestions, it might be well to emphasize to the French the desirability and fairness of having the losses in question borne by the French administration., As a practical matter, it should be pointed out that the administration would be in a position to recoup losses resulting from indemnity or reparation payments suggested in paragraph 2 in the following ways: (a) by vesting enemy properties; (b) by recapturing commissions and other profits paid to banks and other intermediaries of the Germans; (c) by recovering amounts traced to beneficiaries of the Axis exactions as suggested in section 11 of BOC Airgram 60; and (d) by imposing [Page 286] taxes aimed at windfall profits as proposed in COB 428.72 Another possibility is to have the administration substitute sequestered enemy property as security for the bank loan in place of the property mortgaged by persons to secure funds necessary to satisfy enemy levies.
4.
If necessary, the French might be reminded that there are specific provisions of French law which invalidate contracts and obligations entered into for unlawful purposes or under conditions of duress violence, or fraud. See in particular Article 1131 and 1109 of the Civil Code. You may wish to suggest the applicability of these general contract principles to the transactions described in BOC Airgram 60.

Further study is being given by the Department to the problems raised and you will be advised of additional suggestions and recommendations. In the meanwhile, you are requested to proceed along whatever lines appear to promise relief from the unjust exactions imposed by the enemy in Tunisia.

Hull
  1. Dated May 15, not printed.