463.00 R 29/159: Telegram

The Ambassador in France (Herrick) to the Secretary of State

[Paraphrase]

102. L–102. Department’s L–54.

1. I have noted instructions about liberation bonds and when question comes up before Commission shall take position directed.

2. In answer to question last paragraph your telegram regarding applicability of ultimate cash payments on bonds to Army Costs Agreement, the date of maturity is not yet clearly fixed, but it is possible that this will be so remote as to fall beyond period of operation of Army Costs Agreement. Amortization beginning in 1931 and running to 1956 is now being considered.

3. I am inclined to the view that proceeds of liberation bonds may not on a proper construction of the Army Costs Agreement be claimed as subject to it. Our proper charges are: (1) against all payments made by German Government or for Germany’s account where they are deliveries or transfers made by her except for items excluded in section 4 of article 2; and (2) for payments credited to reparation account of Germany which are made as or for accounts of another country from which a similar payment may be exacted. It is my opinion that true intent of that proviso was to cover payments made by former enemy countries like Austria-Hungary and Bulgaria.

[Page 157]

This construction is in words “similar” and “exacted”. The liberation bonds are not cash payments and are made by Allied countries instead of former enemy powers; and they are made as part of cost of liberation of certain territory to them. It is true that there is canceled on the reparation claim against Austria and on the German C bonds an amount equivalent to the bonds, but I do not think that this cancelation constitutes a payment of reparations by a country from whom a reparation payment may be exacted as required by Army Costs Agreement.

4. If we have any claim to cash which may flow ultimately from these bonds, there would be probability that we may have claim against the bonds by and by, for they are a mode of payment which does not fall within the excluded classes; i. e., deliveries in kind, British Recovery Act,34 etc., which are not applicable to the Army Costs Agreement. Claim could only be based on cancelation of C bonds provided for in annex to Finance Ministers’ Agreement of March 11, 1922. I shall not put forward any such claim, however, for reasons above stated, unless I am instructed to contrary. Logan.

Herrick
  1. Telegram in two sections.
  2. British and Foreign State Papers, 1921, vol. cxiv, p. 26.