Full text: Responsibility of states for damage caused in their territory to the person or property of foreigners

ing franchises for public utility services or monopolies, or for the con- 
struction of public works, there are others relating to domestic and foreign 
loans, in other words, the public debt. It is proposed to apply special prin- 
ciples to this latter question. It is deemed that a national loan is not, properly 
speaking, a civil contract; and that, in any event, it is only a special kind of 
obligation: a debt of honor which the debtor State should meet if it would 
avoid its financial ruin and the impairment of its national credit. Such a 
contract, therefore, has no other binding force than the fear of the conse- 
quent impairment of the national credit and dishonor of the State that fails 
to meet its obligations. There is another doctrine, which considers govern- 
ment loans identical to any other form of civil contract. When the State 
negotiates a loan, it is not acting as the sovereign, but as any other person 
subject to the municipal law. Government loans, therefore, are not com- 
prised within the scope of State sovereignty. The obligations arising there- 
from should be discharged like those provided by other contracts. 
(d) The Calvo clause, the so-called Drago Doctrine and the Porter 
Convention of the Second Peace Conference at The Hague deal with this 
subject. The purpose of the first one is to eliminate international responsi- 
bility from contractual matters between the State and private individuals, 
leaving same to the exclusive jurisdiction of the local laws for proper redress. 
The second one purports to eliminate the use of coercive measures to secure 
payment of the principal or interest due on a loan. The third sets forth 
this latter provision with certain limitations, sanctioning the use of coercive 
measures to secure payment of contractual obligations only when the debtor 
State should refuse to submit the matter to arbitration, or to abide by the 
arbitral award. The replies of the governments lodged with the Preparatory 
Committee have specifically referred to the Calvo clause. All the govern- 
ments, with the exception of that of the Netherlands, have considered it in- 
appropriate. Great Britain has adopted in regard to this clause the views set 
forth in the recent ruling of the General Claims Commission in the case of the 
North American Dredging Company vs. The United Mexican States. None 
of the replies to the inquiry have made special reference to the Drago Doc- 
trine or the Porter Convention. They may be considered, however, implicitly 
contemplated in the replies concerning the use of reprisals. But the Govern- 
ment of Switzerland states that reprisals should be subject to the condition 
that the States should have no other peaceful means of reaction to violations 
against them. This condition would specifically cover the due regard for 
outstanding obligations which the Porter Convention provides. Basis of 
Discussion No. 25 of the inquiry should be amended along these lines. 
(e) In our estimation, however, all of these chapters covering responsi- 
bility in respect of contracts of every kind (including government loans) 
and reprisals. should be governed by other principles than those set forth in

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