Lords Sitting of 12 March 1930

Preamble
The House met at a quarter before four of the clock, The LORD CHANCELLOR on the Woolsack.
The Lord Monck (V. Monck)—Sat first in Parliament after the death of his grandfather.
SUTTON COLDFIELD CORPORATION BILL. [H.L.]
WALSALL CORPORATION BILL. [H.L.]
FAVERSHAM OYSTER FISHERY COMPANY BILL. [H.L.]
THE CHAIRMAN OF COMMITTEES (THE EARL OF DONOUGHMORE): My Lords, with reference to the first three Bills on your Lordships' Order Paper I move that Standing Order No. 91 be dispensed with.
Moved, That Standing Order No. 91 be considered in order to its being dispensed with in respect of the said Bills, and that the Bills be now read 2a.—(The Earl of Donoughmore.)
On Question, Motion agreed to: Bills read 2a accordingly.

SHAKESPEARE BIRTHPLACE, ETC., TRUST (AMENDMENT) BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.
BROMBOROUGH DOCK BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.

AMERICAN STATE DEBTS.
LORD REDESDALE LORD REDESDALE had the following Notice on the Paper—To ask whether His Majesty's Government is aware that very large sums of money are owing to British bondholders by certain States of the Federal Union of the United States of America; and whether, having regard to the heavy annual payments now being

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made by His Majesty's Government to the United States Government, His Majesty's Government will consider the advisability of representing this matter to the United States Government with a view to its early adjustment; and to move for Papers.
The noble Lord said: My Lords, in rising to ask the Question standing in my name on the Order Paper and to move for Papers, I can begin by assuring your Lordships that I am going to be very brief, and I am not going to burden the House with a lot of figures and statistics. I am less concerned, for the moment, with such detail than with the principle involved. I will only mention the total sum owing on various debt issues by the eight defaulting Southern States. It amounts in all to £78,000,000—that is to say, about one-twelfth of the sum we owe in War Debt to the United States, which we are at present paying off with mechanical regularity, principal and interest, at the rate of £33,000,000 a year, a payment which increases after 1933 to £38,000,000.
Many of your Lordships are probably better acquainted with the story of the debts referred to in my Question than I am, but it may be convenient to relate quite shortly the circumstances surrounding it. For this purpose and in order to avoid complicating the issue, I will take one State only of the eight as an example. Between the years 1831 and 1838 Mississippi required money for the purpose of developing banks, docks, railways, canals and so on. To this end two loans were floated. The two totalled $7,000,000 and they were secured on bonds made payable in sterling in London. Of this sum by far the greatest part was found in this country from all kinds of sources, and while many humble homes in this country have suffered very severe loss the repudiators became immensely prosperous. In the year 1841 Mississippi defaulted on both loans and the debt incurred by the issue of the 1838 loan was repudiated by that State in the following year and that of 1831 in the year 1852. That is to say, both these debts were repudiated before 1853 anyhow.
It is of the utmost importance to bear in mind the fact that the flotation of these loans and the subsequent repudiation of the debts thus incurred both took place many years before the outbreak of the Civil War and cannot, therefore, be
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in any way attributed to that event. This cannot be too strongly emphasised because it has been believed by certain sections of the public both in the United States and in this country that the loan was for the specific purpose of the prosecution of the Civil War, which, if it were true, would naturally place the whole matter on an entirely different footing. The only reason ever advanced for the repudiation of the debt by Mississippi was the fact that the investments had proved unremunerative. Now the validity of these bonds has been placed beyond the bounds of dispute by judgments actually delivered by the highest State Court. Yet Mississippi refused to meet these judgments and the bondholders are prevented by the Eleventh Amendment of the Federal Constitution from even applying to the Supreme Court of the United States for redress in the shape of an enforceable judgment. The United States Treasury has, however, found and effectively employed means of obtaining settlement of their own claims against individual States of the Union arising out of these defaulted bonds. It would, therefore, appear that if the Federal Government chose to do so they could themselves honour these bonds and recover on their own account from the defaulting States.
There is in the United States of America a very great deal of feeling about these defaulting Southern States. It may well be that the Federal Government would welcome an invitation from His Majesty's Government to reopen the whole question. There is a very large and powerful body of opinion in the United States in favour of a just and speedy settlement. Indeed, if you consider all the circumstances, it would be very odd if this were not so. In a matter of this sort, I can see no difference between a State and an individual. It is, after all, not an uncommon thing to find a man who, owing to circumstances possibly wholly beyond his control, is unable to meet his liabilities and is forced into bankruptcy, and at a later date, when he has recovered himself, repaying voluntarily in full all that he owed, principal and interest. If this can be done by an individual, what is to prevent a State from doing the same thing and thus earning public respect and incidentally credit in the same proportion as the individual? It is not to be forgotten

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that such action on the part of these States would raise them from the level of Russia in the matter of defalcation, Russia being the only other State at the present time who is a defaulter by repudiation and is, as your Lordships perfectly well know, regarded by the United States as a sort, of financial leper. It would further give the United States an opportunity of erasing from their history a painful and shameful page. Those are strong words, but they are not my words. They are the words of their own President, President Roosevelt, and they represent a view shared and at various times expressed by many eminent statesmen in both Parties in the United States of America. I beg to move.
THE EARL OF LIMERICK: My Lords, in rising for the first time to address your Lordships I find it difficult to follow the noble Lord, Lord Redesdale, without repetition of certain basic facts unless I also omit strong links in the chain of argument. I therefore ask your Lordships to forgive me if in certain points I duplicate the sentiments already expressed. I also ask indulgence for the rather copious use of notes which so intricate a problem makes desirable. I wish first to stress the magnitude of the sum involved. The total bonded indebtedness of the eight defaulting and repudiating Southern States of America—namely, Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and North and South Carolina—reckoned at compound interest at the due rates to the end of 1929 must now amount to around $1,000,000,000. I do not suggest that all this is due to British subjects, for Dutch, Spanish, United States and other citizens are all concerned, but I shall hope to show your Lordships that Great Britain's interest alone is sufficiently large to constitute a matter of grave concern and inquiry.
First, however, I must go back to the beginnings of things and must define the circumstances of the issue of the loans in question, and I must follow the noble Lord, Lord Redesdale, in stating with all possible force that the liability involved in the issue of the bonds in question was in no way connected, directly or indirectly, with the American Civil War. Confederate debts were payable in Confederate dollars, and they disappeared with that currency into the limbo of un-
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successful gambles. These bonds, which in some cases represent the pre-Civil War period of construction and in others the past-Civil War period of reconstruction, result solely from the free contractual relations of State borrowers and private lenders, at rates of interest proper for such times and risks; and such obligations were incurred for the purpose of providing funds for developing the natural resources of those States, and were, in fact, so applied. They helped to build the immense wealth which, thanks partly to this British capital, they now admit enjoying and, I think, enjoy admitting.
Here, in parenthesis, let me quote from an American quarterly called Foreign Affairs some figures published in 1928 regarding the modern wealth of these repudiating States. The wealth of Mississippi is given as nearly $2,500,000,000, and the combined wealth of the eight defaulters as about $27,500,000,000, which is roughly six times the total War Debt on which we pay interest and capital instalments to the United States. I may observe here that the ratio of taxation to national wealth in this country is more than double that in the United States of America. I quote this last statement from the Congressional Record of December 12, 1929—a modern quotation. There is no evidence to show that these borrowing States were displeased to obtain our gold on the terms of issue. In fact, United States history books relate the delirious scenes of public joy with which was acclaimed the arrival of British gold, subscribed now some ninety years ago, to take up bonds based on the good faith of Mississippi. A general survey of the debt position of each State is impossible, and therefore the noble Lord, Lord Redesdale, has concentrated on the thoroughly documented case of the State of Mississippi, in which the liability of the State for the bonds in question has been admitted both by the State Legislature and by the Supreme Court, so that it is not in dispute. Nevertheless, though it is not disputed, that State saw fit, as I shall show, to repudiate these bonds.
Here I must stress very strongly the temporary in character and may arise inherent difference between default and repudiation. Many defaults are known in our financial history. They may be from Government mismanagement, from

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war, from that regrettable post-war method of currency inflation which ranks almost on the low basis of repudiation, from trade changes or business immorality, and thereafter the stigma of default may be removed when trade conditions allow the resumption of the due payments. If "default" is an ugly word, what shall be said of "repudiation"? It is in an utterly different category. It is a definite act of a Sovereign State denying one of the bases of civilised life—the sanctity of contracts—and it is not a condition which is tolerable to the citizens of any self-respecting State which has the legal means of restitution and the financial means for repayment. In short, the defaulter says "I cannot," but the repudiator says "I will not."
In order to make clear the course of this lamentable story, perhaps your Lordships will allow me to revert for a moment to details. The State of Mississippi raised two loans; one was of $2,000,000, in portions issued at various times between 1831 and 1833, and, against the sums subscribed, bonds of the Planters' Bank were issued at a premium of 13½ per cent., bearing interest at 6 per cent., until the dates of repayment of the principal sum, which, according to the bond series, had currencies up to 1871 as a last date. The other loan was one of $5,000,000, issued by that State at par in 1838 in order to provide funds for the Mississippi Union Bank. These bonds bore interest at 5 per cent. until repayment of the principal moneys, and the various series of bonds were repayable at various dates up to 1856. I apologise for intruding these figures, but they are very material to the argument when we come to the length of time during which repudiation has been current. The State received the full proceeds of these bonds, of which a very high proportion is held in Great Britain. The principal and interest on the Union Bank bonds were payable by the agents of the Bank of the United States in London.
At first this interest was paid, but in 1841—eighty-nine years ago—the State defaulted and has never made any attempt at restitution or reinstatement. What, in fact, did that State do? Did it plead poverty? Did it offer a composition on the basis of the utmost payment which its citizens, who had profited
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by the gold raised on those loans, could afford? It did not. This was the sequence of events. I now refer to the Mississippi Union Bank. The Government of Mississippi appointed managers of this bank, who selected their president and utilised the proceeds of their bond issue as the capital of their bank. The Governor of Mississippi at that time was Mr. A. G. McNutt. In that capacity he had signed the bank's charter and the supplemental Act authorising the sale of these bonds. He had also signed the bonds themselves as issued. His attitude at that time was most correct, as is shown by his speech to his Senate in which he said:—
"The faith of the State is pledged for the redemption of two millions of dollars of bonds sold to take stock in the Planters' Bank and for the whole capital of the Union Bank. A just regard for the honour of the State demands that those institutions should be managed with great prudence in order that ample provision be made for the punctual payment of interest and of the bonds at maturity."
It was, however, only three years after this model speech—namely, in 1841—that his State defaulted on those bonds.
What now did Governor McNutt do? In his annual address to his Congress in 1841 he, the Governor of that State and the signatory of those bonds, recommended repudiation of the $5,000,000 of the bonds of that bank "on account of fraud and illegality." Comment from me is needless, for many years ago an American historian referred in the "Cyclopedia of American Biography" to Governor McNutt as a man of "slovenly appearance and intemperate habits." I hope that I may flatter his memory by presuming that his action on that occasion could be explained by the last part of that phrase. At this juncture two practical points arise—namely, the sum at stake and the charge of fraud and illegality brought by Governor McNutt concerning these bonds. Now debts left in default for eighty-nine years bearing interest under these terms of issue grow surprisingly and a calculation of the present total now due by the State of Mississippi on holdings in Great Britain alone in respect of such bonds as have been traced to these two defaults give an approximate total at compound interest to date of just on $300,000,000, or if taken at simple interest and to the due dates

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of repayment by 1856, to about $6,000,000. A word must be here introduced to say that the bonds have not changed hands substantially nor become the sport of speculators. There are no dealings in these bonds on the Stock Exchange, and in fact they are held in the main by the descendants at law of the original holders, who bought them as safe investments. So much for the sum at issue and for the bona fide nature of such holdings.
As to the charges of fraud and illegality brought by Governor McNutt, it is surely curious that despite his grave charge no question whatever was raised in the State of Mississippi with regard to prosecuting the alleged perpetrators of any such fraud. On the contrary, his suggestions were subsequently confuted in the Supreme Court of the State, and both Houses of the State Legislature passed Resolutions acknowledging its proper indebtedness in respect of these bonds, and rebutting Governor McNutt's suggestion of repudiation. The Governor, however, was not yet defeated; for shortly afterwards he obtained a political majority, and he deluded the State into giving him a proud verdict for repudiation. His own words were a model for the illogical immorality of his modern imitators in Russia. He said:—
"This result has gloriously sustained the sacred truth that the toiling millions never should be burthened with taxes to support the idle few."
A fine piece of logic and morality is this which puts up a fictitious case of the postulated wealth of some unknown lender as a reason for eluding payment of the whole loan. The rich were indeed robbed, but the poor were not paid.
This monstrous sentence which I have just quoted shows us a State controlled in those days by men deficient in the elements of good faith; men who, as Sydney Smith once said:—
"preferred any load of infamy, however great, to any pressure of taxation, however light."
I would also recall that Dr. Johnson said:—
"You must compute what you give for money."
The State of Mississippi gave its faith for its loans. It then thought it desirable to lose that faith for money; but I think that it must now redress that bargain in order to redeem its faith.
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It is now necessary to examine the machinery of law by which this wrong might be righted. In those days a bondholder might sue the State, and in fact one, Hezron Johnson, did so. He claimed payment of principal and interest on the bond of which I have a facsimile here in this House—a bond of the Mississippi Union Bank. He won his case in the Superior Court of Chancery, and on appeal in the Supreme Court of the State. That was in 1853. What tangible result has this successful action brought from that day to this? None whatever, for a plebiscite (couched in misleading terms) was taken on the question of levying taxes to pay the prior but analogous claims made in respect of the Mississippi Planters' Bank, then sub judice, and the result of that plebiscite was adverse to the payment of such taxes. This decision was final, and therefore the Executive no longer commanded the only possible means of raising money from the State to meet the State's admitted indebtedness. At that time plenty of documentary evidence shows that Mississippi was openly boasting of the wealth of its products and its industries, to develop which the necessary currency had been provided by these bondholders.
This act of repudiation of the State of Mississippi is a direct violation of Article 1, Section 10, of the Constitution of the United States, which I will ask noble Lords to forgive me for reading. It is as follows:—
"No State shall pass any Bill of Attainder, ex post facto law, or law impairing the obligation of contracts."
Consequently, the law of repudiation of Mississippi should be null and void; but to make it so a declaration to that effect by the Supreme Court of the United States is required. No such declaration has ever been made, nor can it be obtained by any citizen or subject, but only by a Sovereign or Sovereign State holding these defaulted bonds. Moreover, the State of Mississippi was freed from all practical risk of action by the Eleventh Amendment of the Constitution of the United States, which runs thus:—
"The judicial power of the United States, shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another State or by citizens or subjects of any foreign State."
Here was a complete deadlock—a State breaking Article 1, Section 10, of the

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United States Constitution, and yet protected against effective action by the Eleventh Amendment to that very Constitution.
Luckily, however, there are at least two solutions, and one of these has already been adopted by the United States Government, as mentioned by Lord Redesdale. The first solution is that the United States Government, or a Sovereign State holding such bonds, should take legal action against the State of Mississippi. This is difficult and undesirable for a variety of reasons; but it is possible. The second solution is more simple, and is this, that a principle which is already established by United States Government usage should be extended, as indeed equity demands and convenience suggests. To explain this it is necessary to revert to the time at which the United States Government bought certain lands belonging to eight tribes of Indians. The purchase moneys were to be invested by the Government in trust on behalf of those tribes in safe investments, and the Government guaranteed interest at the rate of 5 per cent. thereon. Some of this money was in fact invested in the bonds of Southern States which subsequently defaulted and repudiated their debts, and inasmuch as the Government had guaranteed these trust funds it was directly concerned to find a method of recovering the debt from the defaulters. Its method took the form of an Act of Congress, passed in 1870, as Section 3481 of the Revised Statutes, and this Act empowered the Secretary of the Treasury to deduct any moneys owing by any State to the United States Treasury in respect of any United States Government trust from moneys due by the United States Treasury to such State. Thus they achieved practical debt collection internally from the defaulters on behalf of the Indian Trust in 1870.
But this Act of Congress helped private bondholders not one jot. Now, debt collection is notoriously a slow process. But, although nearly ninety years have passed, we need not despair; for a settlement with North Carolina was made by the United States Government as late as 1928 in respect of this same Indian Trust Fund, and of the total of seven States whose defaulted bonds were held by that Trust Fund only Louisiana and Tennessee remain to be dealt with. Surely this 1870 Act is a feasible alternative
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solution of our difficulty. It provides the medium, and it shows the will to right this wrong. For acquisition by the United States Treasury of repudiated bonds in such form as to bring the matter within the scope of the same Act would involve no loss of dignity and no new principle, and by this method justice could be done to bondholders by the United States Government, and financial rehabilitation could be thrust upon the defaulting and repudiating State of Mississippi and upon the other seven defaulting States.
One more instance of delay in debt settlement is provided by the United States purchase of Louisiana from the French in 1800. Payments arising out of this purchase still lack fulfilment by the United States Government to some of its own subjects. The price does not now seem large—80,000,000 francs less 20,000,000 francs of counterclaims for shipping losses; and yet over 100 years are gone, and part of those counterclaims remains unpaid by the United States Treasury. Surely your Lordships will agree that our wait of eighty-nine years for an act of primary international courtesy and justice seems paltry by comparison. But success in this quest demands both persistence and publicity. For the former, the admirable work of the Council of Foreign Bondholders over the last sixty years has made very good provision, and for the latter I hope that this debate to-day will provide a far wider publicity than that of your Lordships' House alone.
Finally, I believe in the fundamental honesty of citizens and Governments of the United States as I do in our own. Statesmen of the defaulting States and of many United States Governments have frequently admitted these acts of repudiation with shame, and the words of the President of the United States to Congress on February 7, 1923, on the subject of the British War Debts to the United States show sufficiently the standard which he expects of the rest of the civilised world, and would no doubt like to achieve in his own country. He said:
"The call of the world to-day is for the integrity of agreements, the sanctity of covenants, the validity of contracts."
Our case could not be put better. I believe, too, that before long reconsideration of the whole question of inter-

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national indebtedness will be forced upon the civilised world by economic pressure, let alone by humane considerations, and that even if no prior opportunity be made for doing justice in this case, then such a time will provide an excellent opportunity for repayment of their just debts by the repudiating Southern States of the United States of America.
I only regret greatly that such an opportunity was not taken by the United States or our own Government at the time of our Debt Settlement with the United States. I do not suggest that these, which are essentially debts to private bondholders, are a true analogy to our national obligations of War indebtedness to the United States of America, but I do suggest that such debt payment by the United States of America to our nationals would balance a very considerable portion of the annual payments which we make to that Government—a Government which, despite many honourable protestations, has so far failed to impose financial honesty on eight of its prosperous States. I am aware that at this present moment, particularly when the dove of peace is finding a somewhat precarious footing over the chamber in which eminent men of all nations are discussing naval disarmament, the Government may think it inopportune to raise this question; but I submit that patience has its limit. I submit that the United States Government have had full measure of our patience in which to do that which is right and just, and in eighty years the circumstances or the world have changed greatly. Many new things have been thought of and introduced. I take leave to doubt even whether the noble and learned Lord the Leader of the House had been thought of at the time of this repudiation. I think that our patience is running out, and I therefore urge that His Majesty's Government shall take the first opportunity of making the proper representations to the United States Government on this subject so that justice may now at long last be done.
LORD BANBURY OF SOUTHAM: My Lords, I should like to take this opportunity of congratulating the noble Earl who has just sat down upon the very excellent maiden speech which he has made, and to express the hope that we shall before long hear him again in this
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Chamber. I desire to support the Motion of my noble friend Lord Redesdale. There has been, and is, a general belief that these States are in default on account of the Civil War between the Southern and Northern States of North America. As the two noble Lords have shown, that is utterly unfounded. These debts were incurred long before the Civil War, and were incurred in order to confer upon the States which borrowed the money means to promote the industry and prosperity of the States in question.
I will for the moment deal only with the State of Mississippi. When Mississippi borrowed this money she was in a very prosperous condition. I have here a letter written by the hon. John Henderson, Senator of the United States, in 1841, in which he says:
"Mississippi now surpasses four of her sister States of the old thirteen, and three of the new States, in representative population. We grow the largest agricultural export of any State in the Union, and the largest, for its population, of any State in the world—besides growing as much corn for home consumption as all the New England States together. If therefore we had our bonds to pay without assistance from the banks that owe them, and this payment were assessed equally upon a full cotton crop of a single year, it would only diminish the year's product, as left for the enjoyment of our citizens, to an ordinary short crop."
Since that date the population of this State has increased five-fold, and between 1893 and 1925 its assessed valuation for taxation increased to a similar extent. Therefore, I think there is no doubt that when the repudiation was made it was not made by a debtor who could not pay but by a debtor who, having obtained somebody else's money, thought it a smart thing to refuse to pay. I do not want to weary your Lordships by repeating arguments, but, as the two noble Lords who preceded me said, the United States by their law and Constitution have prevented any individual from suing a State which has repudiated its just obligations, but the United States themselves can sue, and have done so, in cases where money was owing to them.
In addition, as recently as 1915 the United States made a Treaty with Haiti. Article I of that Treaty contains these words:
"The Government of the United States will, by its good offices, aid the Haitian Government in the proper and efficient development

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of its agricultural, mineral and commercial resources and in the establishment of the finances of Haiti on a firm and solid basis."
And Article XII provides:
"The Haitian Government agrees to execute with the United States a protocol for the settlement, by arbitration or otherwise, of all pending pecuniary claims of foreign corporations, companies, citizens or subjects against Haiti."
In those circumstances, what is there to prevent the United States doing exactly the same thing with regard to the claims of foreign individuals against the State of Mississippi and other defaulting States?
I should like to point out that America, quite justly I think, has always insisted upon the payment of debts owing to herself. America was, I think quite rightly, most insistent that we should pay the interest on and eventually the principal of the money we borrowed from her for the purposes of the Great War. That we did great services to the United States during that War cannot be denied. In the first place, the War enabled the citizens of the United States to make a great deal of money. In the second place, the United States were enabled, when they came into the War, to do comparatively little as compared with France and England to ensure the success of the War. Notwithstanding all that, the United States (I think quite rightly) insisted upon this country fulfilling its obligations. I think that Mr. Baldwin did us a great service when he went over to America and made the arrangements he was able to make. Here in England we have always prided ourselves upon paying our just debts and not endeavouring to repudiate bargains. We have always believed in the sanctity of contracts and that the prosperity of a country cannot be maintained if the sanctity of contracts is not also maintained.
In those circumstances, I fail to see why when the United States are creditors they should claim that their debtors should fulfil their bargain, and yet when they are debtors they should take no steps, as they could do, to make their subsidiary States pay their debts. In business if a man owes another man money he looks to see, before he pays the debt, whether he has any counterclaim against his creditor. If he has such a counter-claim he deducts the amount of it from what he has to pay to his
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creditor. We are paying the United States a very large sum of money at present—as I have said, quite rightly—but the United States, or rather their subsidiary States, owe us money. Why should we not say to the United States: "We owe you so much; you owe us so much. We will strike a balance and pay the difference." That seems to me to be a reasonable proposition and one which the United States could hardly oppose.
The United States do not belong to the League of Nations, quite rightly I think, and therefore it is no use my mentioning that I had thought for a moment of saying that we might appeal to the League of Nations. But we can appeal to the justice of the Americans. America is a great nation. The Americans are great men of business. I have here many speeches made by Americans, some of which have been quoted by noble Lords who have spoken, in which the action of these particular States has been repudiated with indignation. Therefore, if His Majesty's Government would make some such representation as I have outlined to the United States Government something might ensue. I support most heartily the Motion made by my noble friend.
LORD SOMERLEYTON: My Lords, I desire to support the Motion made by my noble friend Lord Redesdale and seconded so ably by the noble Earl. Whatever may be the result, we must consider that the Motion has been brought forward at the right time and, perhaps, at a better time than when it was brought forward earlier. I hope that we may have from his Majesty's Government a more promising assurance than those that have been received of late in another place. May I emphasise the fact that these bonds are in the hands of a very considerable number of people, many of whom are not at all well off? It is not at all true to say that they are held by the rich class. After the manner in which this Motion has been put forward it is unnecessary for me to add anything. I only rise to show that there are many people in your Lordships' House and outside who desire to see a just solution of these matters.
VISCOUNT BERTIE OF THAME: My Lords, if His Majesty's Government approach the Government of the United States I commend to them an article in

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Foreign Affairs which has been alluded to by my noble friend Lord Limerick. There are two passages in that article to which I should like your Lordships to listen. This is the first:
"The United States can offer to Great Britain to receive on account of the principal of its debt such bonds of the eight States mentioned as might be found valid, at their face and unpaid interest, under a stipulation that we should receive only such bonds as were owned by British citizens prior to the British Debt settlement; it would be open to the British Government to acquire them from its own citizens, after such inquiry as would justify it in giving certification as to ownership."
The second quotation reads thus:
"The British Debt has been settled at $4,600,000,000, payable in instalments running over 62 years; if the amounts allowed British holders on these bond issues should be credited against the last payments (discounted) on the British Debt schedule, no American taxpayer living would know any difference."
There is an article also in the North American Review of December, 1884, to which I should like to draw the attention of His Majesty's Government. In that article it is said that the United States have not been slow in enforcing their claims against Central and South American States and, as my noble friend Lord Banbury said, they have not been slow to enforce their claims against us. There is a passage in the North American Review that I should like to read to your Lordships to show that this is not without precedent:
"It is idle to claim, as has been claimed, that the settlement of the States' liabilities, as proposed, would compel the general Government to pay the Confederate debt and many other demands. For that conclusion there is no earthly reason. The case is one to be decided on its own circumstances and merits. When the Government has heretofore assumed debts of the States, as it has twice done"—
I ask your Lordships to mark that it has been done twice already—
"and distributed surplus revenue and lands among them—which is the same thing in principle—it has not found itself compelled to take care of everybody's obligations. In doing what is now proposed, it would not be making precedent, it would be following precedent."
If His Majesty's Government cannot by private treaty come to terms with the American Government I suggest that they should propose to the American Government to go to the World Court, and I found my argument for this on the
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very interesting address which was delivered by the well known jurist, Charles E. Hughes, before the Association of the Bar of the City of New York on the subject of the organisation and methods of the Permanent Court of International Justice. This is what he said:
"What is the function of the World Court? It is to pass upon questions which arise between States. It does not take cognisance of controversies between individuals, or controversies between individuals and a State. A State may make the cause of its nationals its own, and thus present a controversy with another State, of which the Court has jurisdiction. This was illustrated in the cases decided at the last term of the Court between France and Brazil and France and Yugo-Slavia, in each of which the French Government had espoused the cause of the holders of bonds issued by the other Governments."
That is on all fours with this. Mr. Hughes continued:
"Unless the States which support the Court have otherwise agreed, resort to the Court is not compulsory; they retain the right to refuse to submit their cases to the Court. In the proposal that the United States should adhere to the Protocol of the Court, it has not been suggested that the United States should accept a compulsory jurisdiction. If the United States adheres, it can still refuse to submit to the Court any particular controversy."
But if they were challenged to submit a controversy of this sort, on which they say they have a very good case, and refused, I do not think the World Court would think very much of them.
He went on:
"The Court will not decide a dispute between States unless the parties to the dispute have consented to its submission to the Court. Now, there is a class of controversies which Governments ought always to be willing to submit to judicial settlement. These are controversies over what are essentially questions of law as distinguished from questions of mere policy. They are disputes concerning questions of International Law, as to the interpretation of Treaties, as to the existence of facts out of which international obligation arises, or as to the reparation that should be made when there has been a breach of an international obligation. Questions of this sort in all civilised countries are normally disposed of by judicial tribunals."
They are not in this case, because in America you cannot bring action against the Government without leave and that they always refused to give. Mr. Hughes continued:
"It has been the declared policy of the United States that such questions should be submitted to arbitration, which is a form

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of judicial settlement. We have not taken the unreasonable position before the world that we would take the law into our own hands and that where we had a legal dispute with another country we should insist on deciding it for ourselves."
Therefore I suggest that as an alternative to agreement by negotiation they should be challenged to submit the question to the World Court.
THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF TRANSPORT (LORD PONSONBY OF SHULBREDE): My Lords, this Motion was introduced by the noble Lord, Lord Redesdale, in a speech of such eloquence and freshness that one might suppose that it was an entirely new subject, whereas your Lordships know that it is one of those questions that have been brought up from time to time over a number of years, and, although continuity of policy is not adopted in all matters, in this respect I think successive Governments have always taken precisely the same line. I will imitate the noble Lord in being as brief as he was. The case has been put largely in detail from the point of view of one of the States. The noble Earl, Lord Limerick, in a most interesting speech, gave us a very full account of the default in the case of that State, but the Motion on the Paper, and the question we have to deal with, is not one of a particular State but of all the States who have repudiated in the way that has been described. The noble Lord, Lord Somerleyton, said that he considered that this was the right time. I do not quite understand why this particular time has been selected for a demonstration—a mild demonstration, but nevertheless a demonstration—of criticisms against the United States. If I may respectfully say so, I think the time is most unfortunate in which speeches should be made of this very critical character and epithets used of rather a grave kind. Some noble Lords have even gone to the length of a comparison of the United States with Russia.
LORD REDESDALE: I beg the noble Lord's pardon. I carefully did not do that. I compared Russia with the defaulting States, not with the United States of America at all.
LORD PONSONBY OF SHULBREDE: I quite agree, but Russia was brought in as an example of a defaulting State, and we are accustomed from time to time
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to have that reference made. But I am very anxious that a full answer should be given to the noble Lord, because in another place Questions have been put, one, I think, as lately as this afternoon. The reply has been necessarily very brief. His Majesty's Government have had these repudiated debts under consideration at different times ever since 1841, and consequently there has been ample time for a very thorough investigation into all aspects of the problem. As the noble Lord admits, this is not a new subject. It has been considered time after time. It has never, however, been found possible to take up the matter with the United States Government, and no representations to Washington on the subject have ever been made.
In arriving at this decision His Majesty's Government have been influenced by the knowledge that the United States Government have no concern with the financial obligations assumed by the individual States which form the American Union whose independence in such matters is safeguarded by the Constitution; that the money advanced to the defaulting States by the British subjects concerned was freely offered by the latter, His Majesty's Government being in no way responsible for their action, particularly as the Eleventh Amendment of the United States Constitution—quoted by the noble Earl in his speech, which perhaps your Lordships will allow me to refer to again—which provides that the judicial power of the United States shall not be construed to extend to any suit in law or equity commenced or prosecuted against one of the United States by citizens of another State or by citizens or subjects of any foreign State, was approved in 1798, long before the debts were contracted; and that it has never been possible to compile an accurate list of the holders of the scrip or to ascertain with any accuracy the amount of the sums owing.
This is really rather an important point because in 1911–12 the question of debts came under discussion here in this country when negotiations were taking place between His Majesty's Government and the United States Government in reference to the Pecuniary Claims Convention. Efforts were made to obtain particulars of the claims, but owing to the lapse of time since the debts had been

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contracted and the impossibility of tracing the holders of the securities, the Council of Foreign Bondholders were unable to furnish the Foreign Office with a list of holders which could be regarded as in any way complete or accurate. His Majesty's Government consider that even if representations were addressed to the Government of the United States the latter would have no power to compel the defaulting States to pay, and there is no reason to suppose that the Federal Government would be disposed to assume any liability in the matter, particularly when it is not possible to furnish them with any definite or reliable information on the damages suffered by British subjects.
With regard to the latter part of the noble Lord's Motion, His Majesty's Government are unable to see any connection between the repudiated debts of certain Southern States of the American Union and the British War Debt to the United States. The former were loans made by foreign individuals to State Governments in which the Federal Government was in no way concerned, while the latter was a loan granted by the United States Government for certain specific purposes direct to His Majesty's Government. I may add that there is no indication as the noble Lord suggested that the United States Government would welcome an invitation from His Majesty's Government to reopen this question. I do not think I can add anything further to explain to the noble Lord why his request that representations should now be made to the United States Government cannot be acceded to.
LORD CUSHENDUN: My Lords, I do not rise to express any dissent from what has been said by the noble Lord opposite, but there is one point which I should like to be allowed to emphasise. I have listened very carefully to the speeches that have been ma de from this side of the House and I think I am right in saying that none of my noble friends has suggested that there is any definite claim that can be made against the Government of the United States. But one or two things have been said which possibly might give rise to a misunderstanding if we did not make it quite clear that we do not suggest—at all events speaking for myself and I think I may say for
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those on this Bench, we do not suggest for a moment—that there is anything in the nature of a claim which we could advance against the United States Government in this respect. I agree with what the noble Lord opposite said just now with regard to the distinction between these debts owed by these defaulting States, as they have been called, on the one hand and the British War Debts to America on the other hand. I do not think that we can make out any strong case—although some of my noble friends have apparently attempted to make out a case—far anything in the nature of a set-off against the War Debt to America on account of these debts owed to private citizens by these defaulting States.
In one respect I thought that my noble friend who introduced this Motion made a suggestion that went beyond what the facts justified, but I am not quite certain that I understand what he means because he made an interposition just now. I am referring to what was said with regard to Russia. I certainly understood my noble friend to suggest some sort of parallel or analogy between the liability of these States and even of the United States and the liability of Russia. I want to make it quite clear that in our opinion there is no such analogy whatever. We regard Russia as not only a defaulting but a repudiating State, and the present Government of Russia is merely a successor to the former Government that incurred these liabilities. It governs the same community and there is merely a change in the form of government. Therefore, the repudiation of the pre-War debts by the present Government of Russia is as distinctly a repudiation of national liability as any case in history. On the other hand, in the ease that we are considering this afternoon there is no sort of obligation on the United States, as far as I understand the position, to bring any pressure to bear upon these States. My noble friend Lord Banbury brought forward an instance in which the United States have in another case brought pressure to bear upon a defaulting debtor. I think he asked why should not the United States do as much in this case as they did in that. Of course, the answer is that there is nothing to prevent the United States doing so if they choose. On the other hand, there is no justification for any

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attempt on our part to bring definite pressure to bear upon the United States to take any such action.
My noble friend Lord Redesdale, and I think the Earl of Limerick also, suggested that His Majesty's Government ought to make representations of some sort to the United States Government. I think he said that the United States Government would probably welcome the re-opening of the subject by His Majesty's Government. All I can say with regard to that is that I do not express any strong opinion one way or the other as to whether the Government should do that. But having had the privilege and honour of holding office both in the Treasury and in the Foreign Office, I know how delicate a matter it is, and while I do not express any opinion upon the advisability of doing it, I should be very sorry to join in urging His Majesty's Government to take any action of that sort. I am quite content to leave the matter entirely in their hands knowing how delicate a matter it is and agreeing with what the noble Lord said just now that it has been a matter of debate in previous times and under previous Governments. I do not think that there is any strong case that can be made out at the present moment for taking action which would be out of agreement with the usual policy that has been pursued in this matter.
LORD JESSEL: My Lords, I rise for one moment only to say that it may not be within the knowledge of your Lordships that a great deal of interest all over the country is being taken in this question and in this debate in your Lordships' House at the present moment. The noble Lord who has spoken for the Government said that a great many of the holders of these bonds could not be found, but I am informed that the Council of Foreign Bondholders have in their possession nearly two-thirds of the original bonds which were raised for the State of Mississippi. If the remaining one-third cannot be found, surely then it is much easier to make a settlement. But there is one point on which, if I may venture to do so, I entirely join issue with the noble Lord who spoke from the Government Benches. He attacked my noble friend Lord Somerleyton for saying that this was a very opportune moment for bringing forward this matter.
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I think Lord Somerleyton is perfectly justified in making that statement and if I may be allowed I will explain my reason. We have, and we are honoured by having, at the present moment here in London some of the most important statesmen of the United States, and it may be hoped that they will read the Press and notice the debate in this House. For that reason I think that the argument advanced by my noble friend Lord Somerleyton was a good one.
There is no doubt that there is a great deal of feeling on the part of those who have inherited these bonds that their claims, whether rightly or wrongly, have not been properly met. I agree that it would perhaps be difficult for this Government or for any Government officially to bring this matter to the notice of the Government of the United States, but there is no doubt that, if the United States Government were so moved, it could make representations and bring people together to make some arrangement which would assuage the feeling on this matter which is bitter in some quarters, and lead to a settlement. I merely rose to explain my view that Lord Somerleyton was justified in his argument. I hope that this debate, though it may not have been productive of immediate benefit to those concerned, may yet induce the Government of the United States to take some notice of this very important matter.
LORD BANBURY OF SOUTHAM: My Lords, may I say, with the leave of the House, as a member of the Council of Foreign Bondholders, that, though I cannot say exactly how many bonds we have, yet we have a considerable number in our possession.
LORD REDESDALE: My Lords, in view of what the noble Lord, Lord Cushendun, has said, I shall ask your Lordships' leave to withdraw my Motion, but before doing so I should like to say one word about the attack, if it was an attack, that was made upon Lord Somerleyton on the ground that this is not an opportune moment for raising this subject, on account, if I understood the point rightly, of the Naval Conference. If the Naval Conference is to be used as a sort of smoke screen to prevent free speech in your Lordships' House, I think it is a great pity. At the time

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when I put this Notice upon the Paper I do not suppose that a single member of your Lordships' House could possibly have conceived that the Conference would still have been sitting now. Besides, I am not in any case rebuking the United States Government. I have made no effort to rebuke them. If I am rebuking
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anybody, I am rebuking those who will not stand up for the rights of their own people. I beg leave to withdraw my Motion.
Motion, by leave, withdrawn.
House adjourned at a quarter past five o'clock.