HL Deb 21 May 1924 vol 57 cc545-56

LORD BANBURY OF SOUTHAM had the following Notice on the Paper:—

To ask His Majesty's Government—

  1. 1.Whether His Majesty's Government, when they occupied Palestine and Iraq, seized the sums in the hands of the agencies of the Council of Administration of the Ottoman Public Debt; that they subsequently suppressed these agencies, and that between 1918 and 1920 they collected and appropriated the revenues assigned to the bondholders in these territories?
  2. 2. Have His Majesty's Government declined to refund to the bondholders the sums so collected or to recognise the bondholders' rights thereto?
  3. 3. Have not His Majesty's Government in the past consistently opposed any interference with the revenues assigned as security to the bondholders, for instance, in the case of the occupation of Turkish territory by Balkan States in the war of 1912–13, and of the occupation of Eastern Anatolia by Russia in 1914?
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  5. 4. Have not the French Government respected the rights of the bondholders since their occupation of Syria, and abstained from appropriating the assigned revenues?
  6. 5. Whether the action of His Majesty's Government is not directly contrary to Article 46 of the Ruling of the Hague Convention of 1907, and the principles of International Law?
  7. 6.Are not the Turkish Government, in spite of the statement made in another place by Mr. Graham on 5th May last, at present violating practically all the conditions of the Decrees of 1881 and 1903 governing the contracts with the bondholders which were officially communicated to the Signatory Powers of the Treaty of Berlin?

The noble Lord said: My Lords, the facts relating to the Question are as follow. Some years ago, the Turkish Government then being in default, the Turkish bondholders accepted in lieu of their just rights a very diminished sum in consideration of the Turkish Government handing over to them the proceeds of certain revenues and on the understanding that a Council of Administration, administered by certain gentlemen appointed by various sections of the bondholders, should have these revenues paid over to them. The revenues were always assigned to the Council of Administration of the Ottoman Debt until the war, and among those revenues in Iraq assigned were certain revenues in Iraq and Palestine. When His Majesty's forces took possession of those countries they collected the revenue which had been assigned to the bondholders and held it in suspense. Finally, instead of handing it over to the bondholders to whom it belonged, they handed it over to the Governments of Palestine and Iraq. In addition to that, the Turkish Government are at the present moment refusing to recognise the Council of Administration of the Ottoman Public Debt and are directing that the revenues in Turkey itself, which should go to the Council of Administration—a right which, as I understand, was preserved by the Treaty of Lausanne—should not be paid in the future to that Council.

The Council of Foreign Bondholders, of which I am a member, are acting on behalf of the English holders of this Debt, and I think I should be able to put the matter before your Lordships in a very short way if I were to read the correspondence which has taken place between the Council of Foreign Bondholders and His Majesty's Government. On December 19 last the Council of Foreign Bondholders wrote to the Government as follows:— In virtue of the Decree of the Turkish Government of December 20, 1881, known as the Decree of Muharrem and of the Decree-Annex dated September 14, 1903, both of which were officially communicated to the Signatory Powers of the Treaty of Berlin, the holders of the obligations of the Turkish Unified Debt have been absolutely and irrevocably constituted the owners, up to the extinction of the Debt, of certain Turkish revenues called 'the conceded revenues' and collected in the whole of the territory subject to Ottoman sovereignty at the time of the promulgation of the first of the above-named Decrees. By these same Decrees which lay down the terms of the agreements made with the bondholders, the Ottoman Government made over to an International Council composed of representatives of the bondholders, the management, administration and collection of the conceded revenues and also the application of the product of such revenues to the service of the said obligations. Into this situation the Treaty of Peace signed at Lausanne on July 24, 1923, has introduced certain modifications necessitated by the partial dismemberment of Turkey and which also apply to the territories detached from her. Article 46 of the Treaty provides that the Ottoman Public Debt shall be partitioned between Turkey and the States which hare acquired Turkish territories since 1912. Article 48 imposes on these last-named States the obligation to give to the Council of the Ottoman Public Debt in replacement of the cessions or assignments of revenues as stipulated in the Decrees or Loan Contracts, guarantees sufficient to secure the payment of the annuities appertaining to them respectively. Article 53 determines the dates from which these annuities shall be reckoned to be due. As regards the States newly formed out of the territories of the Ottoman Empire, paragraph 2 of Article 53 specially provides that the annuities payable by them shall be due from March 1, 1920. In these territories therefore it is this last-named date which marks the starting point of the new régime, of the Ottoman Public Debt. That is elaborated, but I do not think I need read what follows. The rest of the letter points out what I have already told your Lordships—that in Palestine and Iraq the Government, when the English forces entered those countries, took the money belonging to the bondholders, held it in suspense and then handed it over to people to whom it did not belong.

I am leaving out a good deal of this correspondence because it is rather long, but if necessary I could complete the letter. On February 2, 1924, the Foreign Office replied as follows: SIR, With reference to your letter of December 19 last relative to the revenues assigned by the Decree of Muharrem, etc. to the Council of the Ottoman Debt, which were collected prior to March 1, 1920 in territories detached from Turkey by the Treaty of Lausanne, I am directed by Mr. Secretary Ramsay MacDonald to inform you that the various questions raised therein have been carefully considered in consultation with the other Departments of His Majesty's Government concerned. 2. I am to point out that, in accordance with Article 46 of the Treaty of Lausanne, Turkey is not to be held responsible, at; from March 1, 1920, for the shares of the Ottoman Public Debt for which Syria, Palestine and Iraq are liable …. We have never disputed that. All that we have said is that the sums belonging to the bondholders, which were collected in those countries by the English Government, should be handed over to the people to whom they belong, and not to somebody to whom they do not belong.

The letter continues— 3. If the revenues assigned to the Ottoman Debt Council, which were collected by the authorities administering Iraq and Palestine prior to March 1, 1920, and which have been retained by those administrations, were, as now proposed by your Council, to be paid over to the Council of the Ottoman Debt, the liability of the territories in question would in effect be dated back, not to March 1, 1920, as laid down by the Treaty of Lausanne, but to the dates in 1917 and 1918 when the territories were first occupied, and a heavy additional financial liability will thus be placed upon those territories"— That financial liability has been always on those territories and it was never in any kind of way removed— 4. It should perhaps be understood that the Turkish Delegation at Lausanne originally proposed that the date fixed for the assumption of responsibilities for these revenues by the Governments of the detached territories should be, not March 1, 1920, but October 30, 1918. This proposal was resisted by the Allied Delegates, and was eventually abandoned by General Ismet Pasha in his letter of February 4 last. 5. The settlement finally agreed upon applies to Syria in the same way as to Iraq and Palestine, and the assigned revenues paid over to Syria during the Armistice period prior to March 1, 1920, will be credited to the Syrian Government and will go to reduce future payments. … It would appear therefore that your Council are misinformed, in so far as it is implied in your letter that the French Government (as Mandatory for Syria) propose to deal with the bondholders more favourably than the British Government, as Mandatory for Iraq and Palestine. I think we have already said that we have recognised our liability to America, and I think we ought to continue that and to give an example. The last paragraph of the letter is as follows: 6. The Treaty of Lausanne has now been ratified by the Turkish Government, and there can be no question of reopening the settlement on the subject of the distribution of the pre-war Ottoman Debt in the manner proposed by your Council, nor of imposing further liabilities upon the Exchequers of the Governments of Iraq and Palestine over and above their existing liabilities in respect of their share of the pre-war Ottoman debt.

The Council of Foreign Bondholders acknowledged that letter in a long reply, which I do not propose to read unless I am asked to do so. They disagree with the majority of the statements made in the reply of His Majesty's Government. Then there is a letter from the Treasury signed "O. E. Niemeyer," and dated April 26, 1924, which is as follows:— SIR, I have laid before the Lords Commissioners of His Majesty's Treasury your letter of the 18th ultimo to the Foreign Office on the subject of the assigned revenues collected prior to March 1, 1920, in territories detached from Turkey. In reply I am to request you to inform the Council of Foreign Bondholders that, after the most careful consideration, their Lordships do not feel able to modify the decision conveyed to you in the Foreign Office letter of February 2. The contentions advanced at (a) and (b) of your letter do not represent the intention of the Treaty nor, as they are advised, its legal effect. My Lords regret that they are equally unable to accept the reasoning of the rest of your letter"— would your Lordships kindly mark this?— and in any case there are no funds at their disposal from which a claim of the kind advanced could be met. That is to say, if I take money belonging to somebody else and spend it and the owner of that money says to me: "I want my money," I am to be excused by saying that I am very sorry that I have no funds with which to meet his just claim.

That is not all. I have been given by a member of your Lordships' House a further statement as to what has been done in Baghdad, where the same sort of thing seems to have happened. According to the statement which has been given to me, certain people in England advanced to the Municipality of Baghdad a loan of £30,000 which was to be repaid with interest in seven years. Up to the outbreak of war the interest and sinking fund were duly paid. The capital amount now outstanding, including interest and sinking fund, is £35,000 odd, re-payment of which has been unsuccessfully claimed so far.

In March, 1917, Baghdad was occupied by His Majesty's forces and the administration of the finances of the city came under the control of the British authorities. The same thing happened there as happened in the cases I have mentioned—the, money was taken by His Majesty's representatives and handed by them to the Municipality of Baghdad. After offering the owners £23,000 instead of £35,000, His Majesty's Government now say that they cannot pay anything, that it is entirely in the hands of the Municipality of Baghdad, and that as the offer of £23,000 was not accepted the English people who have advanced this money to the Municipality of Baghdad are to go without anything at all.

It seems to me that we are setting an extremely bad example to the various nations of Europe. We are also preventing the lending of money by private individuals to foreign countries or foreign municipalities. I understand from the newspapers this morning that His Majesty's Government are anxious that we should lend money to Russia. It is surely very unlikely that people here who have money, in view of what took place when money belonging to them was actually in the hands of His Majesty's Government, are going to lend money to foreign countries, and certainly I should have thought not to Russia, when apparently His Majesty's Government do not protect the interests of English people who advance money, but seem to prefer to protect the interests of the debtor, even though that debtor is a foreigner and not an Englishman.


My Lords, I am afraid it will be necessary in replying to the noble Lord for me to speak at some length, but I think your Lordships will recognise that it is impossible within the confines of brevity adequately to deal with all the complicated points which the noble Lord has raised in his Question. In reply to the first part of the Question, the British military authorities, when they occupied Mesopotamia and Palestine, retained so far as possible the machinery and personnel of the Ottoman Debt Administration and kept separate accounts of the proceeds of the assigned revenues. There was, of course, no question of actually paying over these revenues to the Ottoman Debt Council at Constantinople, which then consisted of enemy nationals and which was withholding payment from all Allied bondholders while continuing to pay enemy bondholders. Subsequently it became clear that these territories would not in future form part of the Ottoman Empire, and the continuance of separate agencies for the collection of a part of the revenue of these territories could not have been justified. The receipts in respect of the assigned revenues were treated until 1920 as forming part of the general revenues of the territories in question.

I must next allude to the provisions in regard to the Ottoman Debt contained in the Treaty of Peace with Turkey. It will be remembered that the conditions of peace were first drawn up early in 1920 and the Treaty of Sevres was signed on August 9, 1920, but was never ratified, and after three years of negotiation, during which the political situation in Turkey underwent, not once but several times, the most complete transformation, the Treaty of Lausanne was signed on July 24, 1923, and has been ratified by Turkey and will shortly be ratified by His Majesty's Government and the other Allied Powers. The financial clauses of the Treaty of Lausanne provide for dividing the liability for the pre-war Ottoman Public Debt between Turkey and the territories detached from the Ottoman Empire after the Balkan wars of 1912–13 and after the great war of 1914–1918.

Under these provisions the date from which Palestine and Iraq are to assume responsibility for a portion of the prewar Ottoman Public Debt is fixed, as the noble Lord indicated, at March 1, 1920. In this respect the Treaty of Lausanne does not differ from the Treaty of Sevres. The question of the date from which the liabilities should start under the plan of division of the Ottoman Public Debt was a matter of considerable controversy during the Lausanne Conference. On the one hand, it was argued that Turkey should be responsible for the whole of the Debt until the Treaty, under which. Iraq and Palestine and other territories were formally detached from Turkey, came into force. On the other hand, it was urged that these territories had been actually detached at least as early as the Armistice of October 30, 1918, and that the division should start from this date. Your Lordships will note that in the result the solution agreed to was a compromise between these two views. The question at issue was not whether or no the bondholders should be deprived of part of their rights but whether they should be entitled for the period in question to look to Turkey alone on the one hand or to Turkey and the other States concerned on the other hand.

In reply to the second part of the noble Lord's Question, the Council of Foreign Bondholders, in December last, applied to the Foreign Office for the restitution of the revenues formerly assigned to the Ottoman Public Debt, which were collected in the occupied territories of Turkey up to March 1, 1920. Correspondence on the matter has subsequently passed between the Council of Foreign Bondholders and the Treasury and Foreign Office. The reply returned to the Council of Foreign Bondholders was that there could be no question of re-opening the settlement on the subject of the division of the pre-war Debt in the manner proposed by them nor of imposing further liabilities upon the Exchequers of the Governments of Iraq and Palestine, over and above their existing liabilities, in respect of the share of the pre-war Ottoman Debt assigned to them. From this position the Government are unable to depart; the Treaty of Lausanne was finally drawn up after three years of most difficult negotiations and the Government cannot for a moment contemplate the possibility of re-opening the settlement reached on this particular point.

The liabilities to be undertaken by Iraq and Palestine in respect of their share of the pre-war Ottoman Public Debt will impose a heavy burden on those countries, and I think the noble Lord who asks these Questions scarcely gives sufficient recognition to the fact that these liabilities imposed by the Treaty of Lausanne should be of material benefit to the bondholders. I would observe that the Treaty provisions in regard to the Ottoman Public Debt are in certain respects very favourable to the bondholders. For the first time in the history of Turkey, practical effect is given to the principle that States to which Turkish territory is ceded should assume responsibility for a share of the Ottoman Public Debt. This is a principle that has been constantly advocated by the Ottoman Debt Council and the bondholders for over forty years, but hitherto in vain. The attitude of the present Turkish Government in regard to the Ottoman Debt, to which I shall refer later, reveals clearly how important an advantage it is to the bondholders that Turkey is no longer their only debtor, but that responsibility for the Debt is now shared by other Governments.


Is it not a fact that the Council of Administration of the Ottoman Public Debt has now been dissolved by the Turkish Government?


I am going to deal with the position with regard to the Turkish Government later. It comes under the sixth part of the noble Lord's Question. But the noble Lord is not content with the Treaty. He wishes us, I presume, to assume a further liability which the Treaty does not place upon us, and to invite the British Parliament to vote money to the bondholders to make good revenues which the Debt Council might have expected to receive if there had been no war. His Majesty's Government certainly do not feel justified in asking the British taxpayers, who have already made such serious sacrifies in connection with the Turkish settlement and the military occupation of Constantinople for a number of years, to provide funds for the satisfaction of the present claim of the Council of Foreign Bondholders. I need scarcely remind your Lordships that all these various promises were given before the present Government came into power. The position of the present Government is that it sees no reason to depart from what was done and arranged by their predecessors in regard to these matters. I may add that the Allied Delegates on the Council of Foreign Bondholders have been fully aware of the provisions of the Treaty in question ever since they were first drafted, and no protest was received from the Council of Foreign Bondholders or from the Ottoman Debt Council on the matter until five months after the end of the Lausanne Conference, or some three and a half years after the proposal to make these provisions was first known.

In reply to the third part of the Question, it is the case that the British Government in the past has consistently upheld the rights of the British holders of Ottoman Public Debt, and in December, 1912, informed the belligerent Balkan States that the revenues assigned to the Ottoman Public Debt were under the protection of the great Powers. It must be observed, however, that the case of the Balkan war of 1912–13 referred to in the Question was in one respect essentially different from the case of the great war. During 1912–13, the bondholders were not of the nationality of any of the belligerent parties and there was no good reason why the assigned revenues should not continue to be paid to the Ottoman Debt Council. During the great war, as I have already explained, it was out of the question to pay over assigned revenues collected by British authorities to the Ottoman Debt Council, as those revenues would have passed at once into the hands of the enemy. It is the case that in 1916—not in 1914 as stated in the Question—the British Government authorised the British Ambassador at Petrograd to associate himself with the French Ambassador in representing to the Government of Russia the desirability of respecting the rights of holders of the pre-War Ottoman Public Debt under the Decree of Muharrem; but, of course, it was not the intention of the French and British Governments that the assigned revenues should be paid over to enemy hands.

In reply to the fourth part of the Question, the Government have received no information from the French Government as to the method in which assigned revenues collected in Syria have been dealt with and it is not therefore possible for me to give the noble Lord any information on this point.

In reply to the sixth part of the Question. I regret to say that according to information recently received from the British representative at Constantinople, it is the case that the action taken by the Turkish Government towards the Ottoman Debt Council violates the conditions laid down by the Decree of Muharrem in spite of the fact that, as stated by the Financial Secretary to the Treasury in another place on May 5, there is nothing in the Treaty of Lausanne which justified such action on the part of the Turkish Government. Under the Decree of Muharrem of 1881 and the Decree-Annex of 1903, certain revenues were assigned to the Ottoman Debt Council. In March, 1920, the Angora Government set up a public Department under which the agencies of the Ottoman Debt Administration in Anatolia and in Thrace (while under Turkish authority) were placed. These agencies ceased to pay any revenues to the Ottoman Debt Council or to receive any instructions from them. Numerous protests were made by the Ottoman Debt Council and certain promises were received from the Turkish Government, but nevertheless a week or two ago the Turkish Government removed from the control of the Debt Council those agencies which were still responsible to the Council (namely, those in Constantinople and its neighbourhood), and accordingly no part of the assigned revenues is now received by the Ottoman Debt Council. I understand that the Ottoman Debt Council have themselves in the first instance taken up the matter with the Turkish Government, and I think it would be premature to make any statement at this moment as to what action His Majesty's Government, in concert with the other Governments concerned, may deem it desirable to take in the matter hereafter should the intervention of those Governments become necessary.

As regards the fifth part of the Question, I may say that having regard to the advice which His Majesty's Government have received on that point the answer is in the negative.


May I ask the noble Lord this question? Am I to understand that in certain events His Majesty's Government will, in conjunction with other Powers, take some steps to protect the rights of the bondholders?


The noble Lord is now dealing with the sixth part of his Question. I have said that in the first instance I understand that the Ottoman Debt Council have themselves made representations, and I think it would be premature to make any further statement at the moment as to what steps may be considered desirable. The matter is one for consideration.


May I remind the noble Lord that he has not answered my question with regard to Baghdad? Can he give me any information on the matter?


There is nothing in the Question about Baghdad, and if the noble Lord wants precise information as to what has happened there perhaps he will put down another Question.