as expressing the theocratical grade of the penalty in its effect on the convict's civil status, rather than practically as a means of discipline or prison revenue. The matter would seem to rest in the discretion of the marshal there.

I am, &c.,

WM. M. EVARTS.

No. 371.

No. 636.

Mr. Farman to Mr. Evarts.

AGENCY AND CONSULATE-GENERAL

OF THE UNITED STATES IN EGYPT,

Cairo, February 14, 1880. (Received March 15.) SIR: I have the honor to transmit herewith a copy and a translation of a dispatch dated February 8, 1880, which I have received from His Excellency Mustapha Pasha Fehmi, minister of foreign affairs.

His excellency asks my intervention in obtaining the assent of the Government of the United States for the immediate and full payment, from the balance of the funds remaining from the Rothschild loan, of the arrears of the tribute and the arrears of pension and pay of the government employés in such cases as the annual amount of such pensions or pay does not exceed the sum of £1,000.

On referring to article 3 of the decree relating to the domanial loan, a copy of which I inclosed with my dispatch No. 351 of November 27, 1879, you will notice that it was therein decreed that the balance of the money remaining from this loan be devoted entirely and exclusively to the payment of the non-consolidated debt (floating debt) and intrusted to the special commissioners of the public debt, with the proviso that it should not be disposed of by them except according to the instructions that should be given by the commission of liquidation that should be established by virtue of an international understanding, or, in default of this commission, according to the instructions that should be given them by the Khedive with the concurrence of the powers.

These provisions were inserted in the decree on the demand of certain European governments.

No commission of liquidation has as yet been constituted, and the Egyptian Government, expecting soon to receive the balance of the Rothschild loan, ask the assent of the powers to apply a portion of these funds in the manner above stated.

There has been paid since the making of said decree from the proceeds of this loan £1,150,000 upon judgments which had become liens upon the mortgaged lands prior to the record of the Rothschild mortgage, but there still remains in the hands of these bankers about £2,200,000 ($11,000,000).

The amount of arrears of tribute is £280,000, and the arrears of pension and pay of the classes named £500,000. If these amounts are paid in full from the £2,200,000 it will leave only £1,400,000 to be paid to the ordinary creditors, or about 25 cents on a dollar of their claims.

Several of the European powers have already signified their assent to the payment from this fund of the sums due on account of arrears of pension and pay. Some have also given their assent to the payment of the arrears of the tribute from the same source. One or two powers

who are opposed to thus paying their arrears of the tribute have given their agents and consul-general instructions to act with the majority, and it may be that all the European powers will finally give their consent to the payment of all these sums as asked by the Egyptian Government.

Knowing as I do the position taken by our government in relation to this country, and its reluctance to interest itself in, or have anything to do with, the details of its internal affairs, I should consider myself authorized to state that the Government of the United States have no objection to the application of the funds in the manner mentioned, if it did not seem to me entirely unjust to pay in full from the source named the arrears of tribute. The object of this is to keep intact the funds that are pledged to the payment of the interest on the bonded debt. The two controllers general, one English and the other French, who now virtually govern Egypt, so far as relates to its finances, are only or principally interested in the payment of this class of indebtedness.

The proper manner to dispose of the whole question would be by a commission of liquidation, but as yet no definite arrangement has beet made in relation to such a commission, for the reason that the English and French do not wish to share in any manner the financial control, now exercised by them, with the other powers. It however now looks, from the complications that have arisen, as if they would be compelled to do so. It is evident that the commissioners of the public debt will have no right on its receipt to dispose of the money mentioned without the assent of the powers, including the United States.

I was asked by the minister of foreign affairs, as you will notice in his dispatch, to obtain an answer from my government by telegraph, but I did not think it expedient or necessary to telegraph you on this subject, as it may yet be some time before moneys are obtained from the Rothschilds on account of the difficulties mentioned in the commercia report which I have just sent to the Department.

I would, however, thank you to send me, on the receipt of this dispatch, a telegram stating whether or not you have any objection to the applica tion of the funds by the Egyptian Government in the manner specified. I see no objection to this, so far as relates to the back pay and pensions.

His excellency the minister of foreign affairs in transmitting to me the domanial decree, stated in his letter, a copy of which I also sent you, that he believed it to be his duty to call my attention to the fact that it remained well understood that the employés and the pensioners of the govern ment to whom were due arrears of pay formed a part of the creditors of the non-consolidated debt and would be treated in conformity with the principle established by the commissioners of inquiry. This principle was that this class of creditors was to be considered as privileged and to be paid first and in full.

Hoping to receive an immediate answer by telegraph, so that I may not be embarrassed in case all the other powers give their assent as requested, I have, &c.,

E. E. FARMAN.

No. 104.]

Inclosure in No. 371.-Translation.]

Mustapha Fehmi to Mr. Farman.

MINISTRY OF FOREIGN AFFAIRS,
Cairo, February 8,180,

SIR: Article 3 of the decree relating to the Rothschild loan, signed on the 15th N vember of last year, prescribes that the special treasury of the public debt, which is

intrusted with receiving the sums paid by the contractors of the said loan, shall not dispose of these funds, in case there be no commission of liquidation, except in accordance with the instructions that shall be given it by His Highness the Khedive with the concurrence of the powers.

It is in conformity with this last clause, and pending the general settlement relating to the payment of the whole of the floating debt, that I apply to your obliging intervention, Mr. agent and consul-general, for obtaining the assent of the Government of the United States in favor of the full and immediate payment of the arrears of the tribute, which constitutes one of the first charges upon the Egyptian Government, and also in favor of the payment of those salaries and pensions of which the annual amount does not exceed £1,000 each.

The complete settlement of this part of the floating debt being in conformity with the views expressed by the commission of investigation, and having been confirmed, so far as relates to salaries, by the sentences of the mixed tribunals, I have the hope that you will, in view of these circumstances, obtain a telegraphic reply from your government.

I offer you in advance the expression of my thanks, and reiterate, Mr. agent and consul-general, &c.,

MUSTAPHA FEHMI,
Minister of Foreign Affairs.

No. 637.

Mr. Farman to Mr. Evarts.

No. 372.]

AGENCY AND CONSULATE-GENERAL OF THE

UNITED STATES IN EGYPT, Cairo, March 8, 1880. (Received April 3.) SIR: Since my return to Egypt I have not sent to the Department any dispatch on the subject of the proposed commission of liquidation, for the reason that until the last few days nothing of importance relating to such commission has taken place.

The contents of your telegram of the 28th of August, 1879, to Mr. Comanos were communicated by him to the Khedive, as reported in his dispatch No. 332 of September 1. As this communication was verbal, I thought it best on my arrival to confirm it in writing, and I did so in a dispatch that I addressed to the minister of foreign affairs on the 19th of November last, in which I also asked his excellency to inform me whether it was then the intention of His Highness the Khedive to establish such commission.

No official reply has ever been given to this dispatch, though the minister has often talked with me concerning it and the proposed commission of liquidation. In these conversations he has always stated that his government desired such a commission, but that the matter was in the hands of the European governments, and that the Khedive could do nothing until these governments agreed upon some plan. He said he knew nothing officially about the negotiations that were being carried on in Europe in relation to the commission, but that he had learned from unofficial sources that the matter was under consideration at Paris and London.

The Franco-English control was established about the 1st of December, and since then the government has been virtually in the hands of the controllers. For a long time it was evidently not their intention to have a commission of liquidation, especially so on the part of France; but various complications have arisen that now make such a commission an imperative necessity. Without it the decrees which the controllers have exacted cannot be executed, and their plans will be in a great measure defeated. It has, therefore, been decided to establish a commission, but care has been taken that it be of such a character as to be simply an

instrument to carry out the projects that have already been decided upon.

A week ago the French Government, through its consul-general, communicated to the Egyptian Government, for its approval, a draft of a decree drawn up in Paris establishing the proposed commission, and defining its duties and powers and fixing the time of its duration. According to this project, which has been accepted by the council of ministers, the commission is to consist of eight persons, of whom two are to be French, two English, one German, one Austrian, one Italian, and one Egyptian; four of these commissioners are to be the four commissioners "de la caisse," who receive certain specified revenues, being the taxes of certain provinces and the railway receipts, &c., and hold them for the payment of the interest of the bonded indebtedness. Though nominally recommended by their governments, they are in fact the mere agents of the bondholders. Mr. Rivers Wilson is to be a fifth commissioner; and a private secretary of M. de Blignières, the French controller-general, is to be a sixth. So that six of the eight commissioners can be counted upon to act as a unit in carrying out the plan already agreed upon by the controllers. It is said that this plan has been reduced to writing and approved in Europe. While I have no proof of this statement. I have no doubt of its truth. The only important matters left undeter mined are those relating to the Rothschilds and the Daïras Sanieh bondholders. These are open questions between the English and French themselves.

Up to to-day no official communication has been made to the Egyptian Government except the one I have mentioned as made by France, though it is understood that Austria and Germany have given their assent to the proposed commission. The German consul-general had had no communication from his government up to this morning, and knew nothing about the negotiations. It is probable that Italy, though much dissat isfied, will also give her consent. Russia, the United States, and all the small powers are to be left out, though France promises, in submitting the plan, to ask the other governments to consent to the decisions of the commission. There are some of the smaller powers that have a larger interest in Egyptian claims and bonds than either Germany, Austria. or Italy, so that the question of representation has not wholly been determined by the amount of interest.

At the time our government asked to be represented in the commission the Egyptian Government was in the hands of the Khedive and the ministers of his choice, and I had been given to understand that such a request would not only be favorably received, but that Egypt was desirous that the United States should be represented. I am in formed by the Russian consul-general that it was in pursuance of a similar understanding that his government asked a representation in the

commission.

The situation has now wholly changed. Egypt is virtually in the hands of representatives of France and England, and the negotiations in relation to the commission have been carried on in Europe instead of Egypt.

The commission is to take into consideration the resources of the country, and determine what amounts it can pay, and fix the amounts to be paid and the time of payment in accordance with such determination, and is to finish its work in three months. Its official functions and powers are to cease at the end of that period.

It is evident that no examination of the resources of the country is intended, for it could not be made either in three months or in six months. The object of the commission is simply to help the controllers out of the difficulties in which they have already become involved by giving legal effect and an international sanction to the plans they have elaborated and in part attempted to execute, including the system of taxation described in my commercial report for 1879.

The commission will undoubtedly reduce the interest on the unified debt to 4 or 44 per cent., for this is an absolute necessity. To continue it at a higher rate would only be to increase from year to year the amount that would remain unpaid. But this is not simply four per cent. on the amount of money actually loaned, but four per cent. on the nominal amount of the bonds, on which Egypt has not received over sixty per cent., and a large proportion of this has already been paid in usurious interest. The interest on the privileged debt will be continued at five per cent.

It is the holders of the floating debt who will suffer most. France has taken care through her controller, before consenting to the commission, to have, so far as possible, her claims of this class paid. On the 15th of February, only three weeks ago, there was still owing, as a part of the floating debt of Egypt, to the grand syndicate at Paris about $17,000,000. This sum was then paid in full, including interest at the rate of eight per cent. This was done by the sale of Egypt's right of 15 per cent. in the net profits of the Suez Canal at £700,000 and the sale of £4,583,920 of unified bonds held in pledge by the syndicate, and also £1,000,000 other unified bonds. It is true that in the purchase of these bonds the syndicate paid something over two per cent. more than their market value, but, considering the interest at the rate of eight per cent. that it had received for a number of years, this was no sacri fice on its part.

A large sum was also lately paid on the principal English floatingdebt claim, that of Messrs. Greenfield & Co.

Last fall the German and Austrian Governments refused to consent to the commission of liquidation on account of the judgment liens in which they were principally interested. These, amounting to nearly $6,000,000, having now been paid, they have little further interest in this class of debts.

The remaining portion of the floating debt, amounting probably to something over $40,000,000, is largely owing to citizens of the smaller powers, particularly that of Greece, and to Egyptians. Many of these Egyptians are, however, under the protection of some foreign power. As near as I can estimate, there are belonging to citizens of the United States and other persons under the protection of our government, who are here in precisely the same position as its citizens, Egyptian bonds and claims, most of which are undisputed, amounting to not less than $1,000,000.

I have, &c.,

E. E. FARMAN.