HL Deb 21 July 1874 vol 221 cc385-9

said, that as Chairman of the Committee of Spanish Bondholders, he rose to make an appeal to his noble Friend the Secretary for Foreign Affairs on behalf of a very large number of persons who were deeply interested in the Spanish debt. Their Lordships were aware that an immense amount of British capital was invested in various foreign funds in different parts of the world, Spain included. Spain had creditors in France, Belgium, Holland, and Germany, as well as in England. He had the misfortune to be one of a Committee of English creditors holding Spanish Bonds, and for some time he had acted as Chairman of the Committee which carried on negotiations with the Spanish Government, not only in the interest of the English bond-holders, but also in that of other foreign holders of Spanish Bonds. No interest had been paid on any part of the Spanish debt during the year 1873—of the coupons that matured in that year not one had been paid. This, of course, called forth remonstrances from the Committee, and the result was that at the commencement of the present year the Spanish Government sent over a proposal for the payment of the coupons of 1873. They proposed the discharge of these coupons by two modes, one of which was this— That the Government should deliver to the Corporation of Foreign Bondholders nine pagarés of purchasers of Rio Tinto Mines, which they agreed to supplement by pagarés of the purchasers of Bienes Nacionales sufficient to produce 234,000,000 of reales in cash—this calculation being made under the same rate of discount as results with the pagarés of Rio Tinto, in the latter being valued at 240,000 of reales. There was reason to believe that this proposal was made in good faith, and a large meeting of creditors of various countries interested in Spanish Bonds was held at the Cannon Street Hotel to consider it. At that meeting there were some 600 or 700 of these creditors present, and the result was a unanimous resolution in favour of accepting the proposal. Its acceptance was communicated to the Spanish Government; and on the 4th of April a contract was entered into between the Spanish Government on the one hand and the Corporation of Foreign Bondholders on the other. Article 5 of the contract contained this undertaking— To carry into effect the foregoing clauses the Government shall deposit in the Bank of England the guarantees offered, and which were accepted by the holders of the External Debt at the general meeting on the 6th of March. He need not state more to show their Lordships that there was a binding contract, and that it was such as he had described. That contract was immediately acted on. Rio Tinto pagarés to the amount of between £2,000,000 and £3,000,000 sterling were at once sent to England; the contract bore the signature of the Spanish Finance Minister in office on the 4th of last April, and it received the formal adoption of the Council of State, and was signed by the Secretary of State on the 6th of the same month. Attached to the contract was a condition that the deposit in the Bank of England of the pagarés of the Bienes Nacionales and of Rio Tinto should be simultaneous. The Rio Tinto pagarés were lodged and were kept waiting for the others. About the time that payment was made the late Spanish Minister of Finance went out of office, and the present Finance Minister succeeded him; and from that period difficulties in respect of the fulfilment of the contract had been experienced. About a fortnight ago a rumour obtained in London that the Spanish Government were about to withdraw from this country those securities which had been distinctly pledged to the bondholders. The rumour was not credited at first; but on its appearing to be confirmed, immediate action was taken; the Court of Chancery was appealed to, and an injunction was issued to restrain the parties accountable from sending those securities out of the country. But this was a case of shutting the stable door after the steed had been stolen—the securities were gone—and to this moment the bondholders were unable to obtain possession of what had been pledged to them. He would not characterize this transaction in words such as he would be warranted in applying towards it. He was not insensible to the distracted and miserable state of Spain—it was impossible not to see that the Spanish Government were in great difficulty. But in bringing this matter under the attention of their Lordships, and of his noble Friend the Secretary for Foreign Affairs, he was acting in the interests of Spain herself, as well as in that of her creditors; because it must be for her interest that she should discharge her obligations when she had the power to do so. If Spain became a party to such a transaction as he had described, it was quite clear that, should she again require assistance from foreign capitalists, she would find that the Bourses of Europe would be closed against her. It was the desire—and the natural desire—of the present Spanish Government to be recognized by the Powers of Europe; but the Spanish Government could hardly adopt a worse road towards obtaining that recognition than by pursuing a course which must diminish her credit in the money markets of the world. The noble Lord concluded by putting to the Secretary of State for Foreign Affairs the Question of which he had given Notice—Whether he is aware that the Spanish Government having entered into a contract suggested by themselves with the holders of Spanish External Bonds in this and other countries of Europe for the payment of the overdue coupons of 1873, and having sent to England certain Pagarés or Bonds towards fulfilment of such contract, have caused those securities to be removed from London without the knowledge or consent of the Bondholders, and have since proposed to deal with them in another manner; and, whether the noble Earl will, under such circumstances, exert the influence of Her Majesty's Government to obtain the return of those securities and the fulfilment of the contract?


I have no official knowledge of the details of the transaction to which my noble Friend has referred, although, of course, like most people, I am aware that there are very considerable unpaid arrears of debt due to British subjects who are Spanish bondholders. With regard to this particular matter, I have heard the statement made by my noble Friend—namely, that the pagarés in question were sent over here, and have since been sent back to Spain—or at least sent out of this country—in consequence of certain proceedings either taken or threatened to be taken in the Court of Chancery on the part of the bondholders. That transaction—if the matter has so passed—I do not know from any official authority. I have seen it in print, but I do not know of it officially. If my noble Friend has described that transaction accurately it was undoubtedly one of an extraordinary nature. Still we have it only on the strength of an ex parte statement, and I do not know what defence the Spanish Government may set up; and that being the case my noble Friend will hardly expect from me any decided expression of opinion in regard to it at present. As to the second part of his Question, my noble Friend is aware that the action of the Government in this matter has been from the first—and indeed always—of an unofficial nature. Our object has been, by friendly representations, to induce the Spanish Government to make the best arrangements in their power for the payment of the interest due to the whole body of the bondholders. Further than that we cannot go, and further than that, so far as I am aware, we have not been asked to go by any of the parties concerned. Whatever we can do, within the limits I have laid down, we will continue to do. Since my noble Friend gave Notice of his Questions I understand that a new Scheme has been put forward by the Spanish Government for an arrangement with the bondholders, with which, I presume, they or their representatives have been made acquainted; though as yet they may hardly have had time to form any judgment upon it. I can only say to my noble Friend, in reference to one part of his speech, that he has indicated what is the real check upon such acts as he has described—namely, that they are injurious to the credit of the country that commits them. Every foreign State is from time to time in the money market, and assuredly those Governments which are guilty of bad faith, or which, under whatever circumstances, find themselves unable to keep their engagements, will very soon discover that the failure to do their duty will bring its own punishment, for they will be excluded from the money markets, or only be admitted upon very unfavourable terms. [Earl GRANVILLE: "Hear, hear!"] To that more than to any direct action of one Government upon another we must look for the observance of good faith in these transactions. House adjourned at a quarter past Six o'clock, to Thurday next, a quarter before Five o'clock.