as plainly enjoined by the process itself, are deemed therefore illegal and void, and ought upon the application of the party injured thereby to have been set aside and annulled by the court."

In Willard v. Taylor (8 Wall. 557; 75 U. S. 557), there was a continuing covenant in a lease giving the right to purchase the premises at a fixed price. At that date the currency consisted only of gold and silver as a legal tender. The court held that payment could be made in gold or silver only notwithstanding the act of Congress making United States notes a legal tender for debts. Justice Fields in delivering the opinion of the court said:

"The parties, at the time of the proposition to sell, embodied in the covenant of the lease, was made, had reference to the currency then recognized by law as a legal tender, which consisted only of gold and silver coin. It was for a specific number of dollars of that character that the offer to sell was made, and it strikes one at once as inequitable to compel a transfer of the property for notes, worth when tendered in the market only a little more than one-half of the stipulated price. Such a substitution of notes for coin would not have been in the possible expectation of the parties. Nor is it reasonable to suppose, if it had been, that the covenant would ever have been inserted in the lease without some provision against the substitution."

In the case of Guinness v. Miller (D. C., June, 1923), the court held with respect to the exchange rate regarding an indebtedness of a German subject to an American citizen that the rate measured in American money is the value of the mark at time account stated and not when judgment recovered. This case is quoted in 291 F. 768.

Upon appeal the United States Supreme Court decided in the case of Guinness v. Miller during the month of November, 1925, that the interest which fell due, which was payable in mark currency, would have to be paid on the basis of 171⁄2 cents per mark and not in worthless mark currency.

During the early part of June, 1925-I believe it was June 5-the mixed appelate court at Cairo, Egypt, handed down a decision regarding the Suez Canal Co.'s bonds, payable in French francs. The court found in favor of the bondholders against the company, ruling that interest be paid on a gold basis and the bonds also redeemed on the same basis.

According to the New York Times on Sunday, June 14, it stated as follows: "The courts of Budapest, Hungary, have decided that a bank deposit of 25,000 Hungarian crowns made in 1920 must be repaid to the depositor at 50 per cent of its original value. The decision is based on the principle that the losses incurred through depreciation of the crown during the intervening period should be borne in equal proportions by the bank and the depositor." It has come to my attention that about the latter part of July the Diet, at Warsaw, Poland, enacted a law providing that deposits made in Polish banks shall be revalued on the basis of 30 per cent of the nominal value of their deposits at the time they were made. The depositors are to be given government 5 per cent bonds redeemable in 20 years.

President Harding, in a prepared speech intended for delivery in San Francisco at the time of his unfortunate death, declared the policy of the United States to be:

“We do, however, maintain one clear principle, which lies at the foundation of all international intercourse. When a nation has invited intercourse with other nations and has enacted laws under which investments have been legitimately made, contracts entered into, and property rights acquired by citizens of other jurisdictions, it is an essential condition of international intercourse that lawful obligations shall be met and that there shall be no resort to confiscation and repudiation."

Vations American Secretaries of State have taken action to protect American investors in foreign bonds which have become valueless through a change n the medium of payment.

Mr. Marshall, Secretary of State, September 23, 1800, in the matter of the repudiation of debts, through a change in the specie payments by Spain and by the use of depreciated paper money, said:

"In contracts entered into by individuals with a sovereign power there exists no tribunal to enforce their performance. For this the good faith of the sovereign is alone relied on. This is held sacred and is always pledged to exempt from the operation and that paramount power over all transactions within its dominions the engagements of the sovereign itself."

Mr. Frelinghuysen, Secretary of State, favoring diplomatic adjustment where bonds of one government were held largely by the citizens of another, in case

of default, informed Mr. Wright, January 12, 1884, and Mr. Hunt, minister to Russia, January 17, 1884, that

"There are also cases, but not common enough to form a rule of action, where the bonds of one Government being wholly or largely held by the citizens of another, upon default thereof, the government of which the creditors are citizens may endeavor by diplomatic remonstrance or negotiation to effect an international agreement between the two countries prescribing the time and manner of adjustment."

Mr. Sherman, Secretary of State, 1899, protested against the Haitien Government enacting a law providing for the conversion of its bonds at a rate depreciatory of their value, said:

"As the defaulting State generally is ready to aver that for reasons be yond its control it has become insolvent, or at least unable to pay its indebtedness, any yielding to the plea that even the policy of the State of the obligee should depend upon the good faith of the obligor, offers opportunity and tempetation to the dishonest debtor to escape the reasonable burden of its contract through false representations, the true nature of which it may become impossible to establish."

Mr. John Hay, Secretary of State, 1904, remonstrated to Mr. Combes, minister to Guatemala, according to Moore's Digest of International Law, volume 6, page 754:

"December 22, 1903, the President of Guatemala issued a decree legalizing the payment in silver or bank notes of gold, debts judicially demanded. The subject was brought to the attention of the Department of State by American merchants doing business in Guatemala, as well as by the American Legation there. The legation was instructed to make earnest remonstrance against the application of the decree to debts due to American citizens. Remonstrances were made by other powers. The decree was subsequently revoked."

Eminent writers of international law have consistently defined the essential principles of international financial intercourse as being opposed to confiscation and repudiation of debts.

Alphonse Rivier, an authority on international law, maintains diplomatic intervention to enforce payment of public debts of a nation which administers its finances badly and betrays the confidence of individuals placed in it when they subscribe to loans, and says:

"The fortunes of individuals, subjects of the State, forms an element of the riches and prosperity of the State itself. It has an interest in the maintenance and increase of that fortune. If it is compromised by the act of a foreign State which administers its finances badly, which betrays the confidence of individuals placed in it when they subscribe to loans on conditions that are not observed, and which violates its engagements in regard to them, the State to which the injured individuals belong is evidently authorized to take their interest in hand in any manner which it shall deem suitable; it may proceed either by diplomacy or by reprisals. It may see to it, perchance, according to the circumstances, that their subjects are better treated than those of other States, or other than those of the insolvent State." (Principes du droit des gans, Paris, 1896, I, 272.)

Martens has stated, as a general proposition of international law, that diplomatic interposition was justified, if

"The debtor State adopts measures of domestic finance so fraudulent and iniquitous, so evidently repugnant to the first principles of justice, with so manifest an intention of defeating the claims of its creditors.

"When a State has recourse to violent financial operations to do away with inherent obligations to satisfy its indebtedness, the violation of property rights which results is sufficient to authorize other nations to take up in this respect the cause of their subjects and employ for their protection every means authorized by the law of nations."

Vattel. the noted international authority, has stated in his treatise: "Loans made for the services of a State, debts created in the administration of the public affairs, are contracts of strict right, obligatory upon the State and the entire people. Nothing can dispense with the payment of such debts. Since they were contracted by a legitimate power, the right of the creditor is sacred. Whether the money borrowed has turned out for the profit of the State, or whether it has been dissipated in follies, is not the affair of the one who lends. He has confided his property to the nation; it is bound to restore.

Money borrowed by foreign nations is secured, necessarily, on the entire property of that State, private as well as public."

By the authority of Vattel, a nation is bound to give a sound and legitimate financial administration or it must suffer the consequences:

"The state is surety for the goodness of the money and its currency, the public authority alone has the right to coin it; that every person without distinction ought not to be permitted to coin it, as it would soon lose public confidence and frauds would become common."

At the time most of our contracts were entered into between American nationals and German subjects clause 17 of the Reichsbank law of 1875 provided that one-third of the outstanding note circulation shall be covered by good, and the rest of the circulation is to be backed by good three months' bills, with proper indorsements. However, in May, 1921, the Federal Council (Reichsrat) sanctioned an amendment to this clause, so as to allow the Imperial Bank of Germany to suspend the requirement that one-third of the outstanding note circulation shall be covered by gold. On June 5, 1925, the currency in which the contracts are payable ceased to exist as legal tender, which results in an absolute confiscation of American property, rights, and interests.

Over 25,000 residents in the United States are owners of German securities bought prior to the outbreak of the war between the United States and Germany. The attorney general of the State of New York is in possession of the names and addresses of such persons. There are at least 100,000 residents in the United States who have debts owing to them by the Government of Germany as of October 14, 1925. A vast number of these people possessed German securities prior to the commencement of the recent World War. Many American citizens acquired some of these bonds prior to the enactment by Germany, in August, 1914, of a law which suspended the payment of debts through the use of gold or silver. Many of such investments were made at a time when Germany's laws provided for the payment of such debts. in gold or silver. The property rights of American citizens were thus impaired without due process of law and without the payment of just compensation.

In November, 1917, the Government of Germany absolutely forbid the payment of any debt owing by the Government of Germany or by any one of its nationals to any American citizen. This law was not suspended until January, 1920, five months prior to the time that Germany now says, which is June 30, 1920, is the time for discriminating in the matter of property rights of holders of its bonds. During a period of time that the United States was engaged at warfare with Germany the latter Government sequestered American property, including bank deposits, debts, securities, and mortgages, and prohibited their removal out of Germany until January, 1920.

One of the cases arising from the fantastic experience of Germany with its acrobatic post-war currency came up in an English court last November. In the case of Anderson v. The Equitable Life Assurance Society of the United States before the high court of justice, King's bench division, decided November 23, 1925, there was involved the payment of a life-insurance policy in marks. The assured died in 1922 and the company tendered payment in marks. The beneficiary, a widow, insisted on receiving gold marks, and the court sustained her claim of right to them. A contract to pay in gold did not figure in this litigation, although gold was in the mind both of the insuring company and of the insured when the policy was taken out in 1887.

It is undoubtedly within the power of Congress to take the same measure of action in protecting the rights of American citizens, holders of German financial obligations, as that which was taken by the present administration in favor of those holding Russian financial obligations. In the case of Germany the sum total of monetary obligations owing to American interests effected by the German policy of repudiation is far in excess of that in the matter of Russia. The difference is only one of method in reaching the same result-the investor gets nothing. The same rule of justice applies with equal force in the case of Germany as well as Russia, and the American investor should be protected.

Most certainly American creditors of Germany should receive the same measure of protection as that which the Department of States holds out in favor of American creditors of Russia.

When France became our important ally during the War of the Revolution, it loaned Congress a large sum of money; but, this being insufficient to procure us the necessary supply of military stores, additional loans were made from

the Royal Treasury. This being inadequate, we endeavored to obtain further loans from foreigners, which the French King guaranteed. American independence was established through the expenditure of $176,000,000, and $12,000,000 of that amount was borrowed abroad. The French Government, after the close of the war, protested against the use of the depreciated paper money of America in payment of debts owing to French subjects by debtors in the United States. Diplomatic correspondence between Monsieur De Marbois, chargé d'affaires of France, New York, May 16, 1785, and John Hay, Secretary Foreign Affairs, contained, in part:

orders have been received by me to press Congress, in the name of the King, to take effectual measures to satisfy the French creditors of the United States and to give an account of the arrangements which shall be made by that body.

"One of the most important subjects is that of loan-office certificates. The underwritten can not enter into the detail of the deplorable state to which many French subjects, holders of the certificates, are reduced.

The interest accumulates yearly, and the complaints of these foreign creditors are the more urgent, as they see by the payments made to the citizens that it is not through the want of resources and means that they are not paid, but through reasons very distressing to the friends of the United States.

Further diplomatic correspondence revealed that Monsieur Otto, chargé d'affairs of France, New York, in a communication protesting against payment of debts in depreciated paper money, dated November 30, 1875, addressed to John Hay, Secretary Foreign Affairs, said, in part:

"These loans represented the labor, the watchings, and the fortunes of a great number of individuals who had come to the assistance of the United States in most tempestuous times. Ancient commercial houses in France find themselves reduced to beggary from having placed too much confidence in paper money and loan-office certificates. His Majesty can not see with indifference the losses sustained by his subjects."

As indicative of the view of the United States commissioner to France, John Adams, who supported the contention that the use of depreciated paper money to wipe out debts was inequitable, under date of July 11, 1789, to Robert Morris, said:

"Every hesitation, every uncertainty about paying or receiving a just debt diminishes that sense of moral obligation of public justice, which ought to be kept pure and carefully cultivated in every American mind. Creditors have an unalienable right to be satisfied, and that by the fundamental principles of society. Can there ever be industry or decency without it? To talk of a sponge to wipe out a debt or reducing or diminishing it below its real value in a country would betray a total ignorance of the first principles of national duty and interest."

Applying Alexander Hamilton's conception of financial integrity and the sanctity of public obligations of a monetary nature to the conditions in Germany, it was from his pen that came the following statement, in his report as Secretary of the Treasury, in 1789:

"Every breach of the public engagements, whether from choice or necessity, is in different degrees, hurtful to public credit. When such a necessity does truly exist, the evils of it are only to be palliated by a scrupulous attention, on the part of the Government, to carry the violation no further than the necessity absolutely requires, and to manifest, if the nature of the case admits of it, a sincere disposition to make reparation whenever circumstances permit."

Our own Congress, on September 13, 1789, enunciated the doctrine in the form of a resolution disapproving of the redemption of public bonds with depreciated currency that-

"A bankrupt, faithless republic would be a novelty in the political world, and *. The pride of America revolts from the idea. Let it never be said that America had no sooner become independent that she became insolvent, or that her infant glories and growing fame were obscured and tarnished by broken contracts and violated faith in the very hour when all the nations of the earth were admiring, and almost adoring, the splendor of her rising." George Washington, President of the United States, in his address to Congress, January 8, 1790, said in part:

"I saw with peculiar pleasure, at the close of the last session, the resolu tion entered into by you, expressive of your opinion, that an adequate pro

vision for the support of the public credit is a matter of high importance to the national honor and prosperity. In this sentiment, I concur."

In the matter of precedents it may be of interest to relate the fact that in the case of Canada, when it was a French possession, during its revolutionary war of 1763, bonds were issued by it and were bought in a large measure by British subjects. The sum invested and the depreciation of the bonds was so considerable as to become a subject of negotiation between Great Britain and France. The diplomatic negotiations produced a particular article, by which it was agreed to by France the bonds ought to be redeemed at a liquidated value. In the year 1786 this article was accordingly carried into effect by ministers from those two countries. In another case, which may be greater weight, as it had no relation to war or treaty and took place in a nation which has been held up as a model with respect to public credit, Great Britain, in the year 1713, had fallen in arrears in the payment of some of its debts to the amount of $25,000,000. The creditors of that Government were in the possession of debentures which had greatly depreciated in value. Parliament made provision for the redemption of those indentures according to their nominal value when issued and the satisfaction of the interest payments in arrears. The United States Congress, in a circular addressed to the States of the Union, on April 26, 1783, contained, in part:

"A wise nation will never permit those who relieve the wants of their country, or who rely most on its faith, its firmness, and its resources, when either of them is distrusted, to suffer by the event."

Nations have frequently, through treaties, given expression to the principle that pecuniary obligations were to be strictly performed, which was confirmed by the treaty concluded at Frankfort, May 10, 1871; the treaty ratified by Austria and France at Campo Formic, October 17, 1797; the treaty of Paris, May 30, 1814; the treaty agreed to by Austria, France, and Sardinia, signed at Zurich, November 10, 1859; the convention between France and Sardinia, 1860; the treaty of London, consummated on the part of Great Britain, France, Russia, and Greece, in 1864; the agreement of Austria, Russia, and Denmark at Vienna, October 30, 1864; and the treaty between Austria and Italy, concluded at Vienna, October 3, 1866. The principle promulgated and affirmed in all of these treaties declared that no sovereign should be permitted to repudiate its debts.

Knowing the full value of national character and impressed with a due sense of the immutable laws of justice and honor, it is, therefore, urged that your wise and judicious discretion will prompt you to support these contentions and commend them to the favorable attention of Congress upon the broad principles of law and equity.

Mr. HAWLEY. The next witness will be the gentleman representing the American claimants from New York.

STATEMENT OF WILLIAM P. SIDLEY, ATTORNEY AT LAW, REPRESENTING AMERICAN WAR CLAIMANTS' ASSOCIATION AND OTHERS

Mr. HAWLEY. Mr. Sidley, we have agreed that the witnesses shall be allowed 10 minutes, tentatively. If necessary, that can be extended.

Mr. SIDLEY. I heard that arrangement made this morning, Mr. Chairman, and shall endeavor to live up to it.

I will say, in the first place, that I appear here primarily as a member of a committee which represents a large group of American nationals who suffered loss by death, personal injury, and loss of property at the hands of Germany during the war. I say "primarily" because I also have another relationship in the fact that I personally represent two of the death cases which occurred by the sinking of the Laconia, and also a manufacturing company which had a large plant in Belgium which was taken over by the German