871.0443/8
The Minister in Rumania (Jay) to the Secretary of State
[Received December 14.]
Sir: Referring to the Department’s Instruction No. 215 of August 22, 1923, and to the Legation’s Despatch No. 453 of September 20th, concerning the Rumanian Law for the Regulation of Commercial Indebtedness, I have the honor to transmit herewith to the Department a copy of an Aide-Memoire which I left on November 21st with the Rumanian Minister for Foreign Affairs.
The subject of this latter communication was a rumored project of law modifying that of June 3rd, 1923, against which I protested on September 20th, in accordance with the Department’s Instructions. As the terms of the new draft of a law had not been made public at the time of making the protest, the Legation’s only information thereupon was derived from the local newspapers and current rumors. All reports, however, agreed that a new law was to be passed embodying provisions for an absolute moratorium of six months against all foreign creditors, who had not entered into special arrangements with their Rumanian debtors similar to the one made by the British.
In view of these reports a meeting was called on November 16th of the Commercial Attaches of the following countries: the United States, France, Italy, Belgium, Holland, Czechoslovakia and Switzerland to discuss the moratorium law and to decide upon a suitable form of protest.
The Legation was represented at this meeting by the Commercial Attaché and Mr. Dennis. Great Britain was the only large creditor nation not represented, due, probably, to the existence of the so-called [Page 654] “Manchester agreement” between British creditors and Rumanian debtors, which will not be adversely affected by the provisions of the new law.
At this meeting it was the opinion of all present, except the Swiss representative, whose countrymen have reached a similar agreement to that referred to in the preceding paragraph, that the enactment of the law in question should be anticipated by the presentation of vigorous protests from the respective Legations represented. It was felt that a series of protests lodged while some such law was under consideration by the Rumanian Government might possibly effect its abandonment or, at least, its modification. En passant it is to be noted that the opinion of my Colleagues, in which I concur, is that objectionable anti-foreign laws are often prepared by a Minister in secrecy and are rushed by the Government through a docile Parliament without discussion in the almost complete absence of an articulate opposition. A legislative fait accompli then confronts the representatives of foreign countries against which protests are almost useless, being met with the statement from the Rumanian Government that the work of Parliament cannot be undone.
No set form of protest was adopted at the meeting, but it was considered desirable that each foreign Minister call personally within the coming week on the Minister for Foreign Affairs to set forth the objections of his Government to the application of an absolute moratorium of six months to all foreign claims against Rumanians, and to leave an Aide-Memoire of the conversation. A similar demarche before Mr. Vintila Bratiano, the Minister of Finance, and author of this and all financial legislation of the present Government, was recommended as even more useful than the official and routine protest made to the Foreign Office.
Although at this meeting Mr. Dennis made it clear that the American Legation was not associating itself with any joint demarche in respect to this matter, I deemed it appropriate to present on November 21st personally to the Minister for Foreign Affairs, the precautionary protest above mentioned. It will be noted therefrom that I merely reiterated the points outlined in the Department’s Instruction No. 215 of August 22, 1923, protesting against the law of June 3, 1923.
Mr. Duca informed me on November 23rd that he had already received similar communications from my Colleagues of the countries which I have already named as intending to take such action. He then called my attention to the project of a law published for the first time that very day, a translation of which is herewith enclosed.60
[Page 655]According to this draft, the “term of grace” of the law of June 3rd is prolonged for another three months from the date of the promulgation of the new law. Mr. Duca attempted to explain away the force of the new law by saying that it did not mention a general moratorium, but merely prolonged the three months term of grace of the law of June 3rd for a like period.
As a matter of fact, the new law does establish a moratorium for three months, since, during this period, foreign creditors will not be able to obtain the execution of judgments from the courts against delinquent debtors. Foreign creditors are left no legal remedy other than recourse to the “Rumanian Office for Payments” which will, to judge by the experience of the past three months, not sanction any arrangement that might reasonably be considered satisfactory by the creditors.
In this connection the information obtained by Mr. Dennis from the Commercial Attachés of France, Italy and Czechoslovakia and the Secretary of the Belgian Legation shows that the representatives of the creditors of these countries who have, as national delegations, treated separately with Mr. Vintila Bratiano’s special commission for the settlement of their claims, have failed in every instance to reach any understanding with the Rumanians and consequently broken off negotiations. The principal reason for the failure of the conference was the refusal of the Rumanian Commission to consent to the issue to foreign creditors of obligations secured by the Rumanian Government for the amounts of the postponed claims. All the foreign delegations maintained the point of view that whereas the Rumanian Government was denying to foreign creditors the conventional legal remedies for the collection of private debts without allowing any lien on the property of delinquent debtors, and whereas the debtors were to be given every facility and advantage, furnishing an insignificant cash guarantee and paying on their debts the low rate of interest of 4% plus 3 or 4% for amortizement, the Rumanian Government should deliver to foreign creditors so dealt with some form of state guaranteed commercial paper for the sum of the unpaid debts which could be negotiated abroad.
As the Rumanian Foreign Office has constantly urged the Legation to arrange for similar negotiations between American creditors and the Rumanian Commission, it is especially interesting to note that these conferences have been fruitless of satisfactory results. The present phase of the situation seems to be that the Rumanian Government intends to extend the so-called terms of grace until all foreign creditors shall have been coerced to accept arrangements along the lines laid down in the “Manchester Agreement.”
Lest it might be thought that the Manchester Agreement is not as unfair to creditors as it appears, it should be stated that a great [Page 656] many British creditors are highly dissatisfied with it. Moreover the agreement was concluded at a time when British exporters were enjoying special credit facilities from the British Government, granted for the alleviation of the unemployment situation in Great Britain. Hence merchants, British and others, whose credit operations with Rumanians were not based on favorable national appropriations cannot accept the terms of this agreement without grave financial loss.
I have [etc.]