The first intimations that no part of the so-called Cuban debt would either be assumed by the United States or transferred with the territory to the Cubans, were met with an outcry from every bourse in Europe. Bankers, investors, and the financial world in general had taken it for granted that bonds which had been regularly issued by the Power exercising sovereignty over the territory, and which specifically pledged the revenues of custom-houses in that territory for the payment of the interest and ultimately of the principal, must be recognized. Not to do it, they said, would be bald, unblushing repudiation—a thing least to be looked for or tolerated in a nation of spotless credit and great wealth, which in past times of trial had made many sacrifices to preserve its financial honor untarnished.
It must be admitted that modern precedents were not altogether in favor of the American position. Treaties ceding territory not infrequently provide for the assumption by the new sovereign of a proportional part of the general obligations of the ceding state. This is usually true when the territory ceded is so considerable as to form an important portion of the dismembered country. Even "the great conqueror of this century," as the Spanish Commissioners exclaimed in one of their arguments, "never dared to violate this rule of eternal justice in any of the treaties he concluded with those sovereigns whose territories he appropriated, in whole or in part, as a reward for his victories." They cited his first treaty of August 24, 1801, with Bavaria providing that the debts of the duchy of Deux-Ponts, and of that part of the Palatinate acquired by France, should follow the countries, and challenged the production of any treaty of Napoleon's or of any modern treaty where the principle of such transfer was violated.
They were able to base a stronger claim on the precedents of the New World. They were, indeed, betrayed into some curious errors. One was that the thirteen original States, at the close of the Revolutionary War, paid over to Great Britain fifteen million pounds as their share of the public debt. Another was that the payment of the Texas debt by the United States must be a precedent now for its payment of the Cuban debt—whereas the Texas debt was incurred by the Texas insurgents in their successful war for independence, while the Cuban debt was incurred by the mother country in her unsuccessful effort to put down the Cuban insurgents. But as to the Spanish-American republics, they were more nearly on solid ground. It was true, and was more to the point than most of their other citations, that every one of these Spanish-American republics assumed its debt, that most of them did it before their independence was recognized, and that they gave these debts contracted by Spain the preference over later debts contracted by themselves. The language in the treaty with Bolivia was particularly sweeping. It assumed as its own these debts of every kind whatsoever, "including all incurred for pensions, salaries, supplies, advances, transportation, forced loans, deposits, contracts, and any other debts incurred during war-times or prior thereto, chargeable to said treasuries; provided they were contracted by direct orders of the Spanish government or its constituted authorities in said territories." The Argentine Republic and Uruguay, in negotiating their treaties, expressed the same idea more tersely: "Just as it acquires the rights and privileges belonging to the crown of Spain, so it also assumes all the duties and obligations of the crown."
The argument was certainly obvious, and at first sight seemed fair, that what every other revolted American colony of Spain had done, on gaining its independence, the last of the long line should also do. But an examination shows that in no case were the circumstances such as to make it a fair precedent for Cuba. In the other colonies the debts were largely due to their own people. To a considerable extent they had been incurred for the prosecution of improvements of a pacific character, generally for the public good and often at the public desire. Another part had been spent in the legitimate work of preserving public order and extending the advantages of government over wild regions and native tribes.[3 ] The rich, compact, populous island of Cuba had called for no such loans up to the time when Spain had already lost all of her American colonies on the continent, and had consequently no other dependency on which to fasten her exacting governor-generals and hosts of other official leeches. There was no Cuban debt. Any honest administration had ample revenues for all legitimate expenses, and a surplus; and this surplus seems not to have been used for the benefit of the island, but sent home. Between 1856 and 1861 over $20,000,000 of Cuban surplus were thus remitted to Madrid. Next began a plan for using Cuban credit as a means of raising money to re-conquer the lost dominions; and so "Cuban bonds" (with the guaranty of the Spanish nation) were issued, first for the effort to regain Santo Domingo, and then for the expedition to Mexico. By 1864 $3,000,000 had been so issued; by 1868 $18,000,000—not at the request or with the consent of the Cubans, and not for their benefit. Then commenced the Cuban insurrection; and from that time on, all Spain could wring from Cuba or borrow in European markets on the pledge of Cuban revenues and her own guaranty went in the effort to subdue a colony in revolt against her injustice and bad government. The lenders knew the facts and took the risk. Two years after this first insurrection was temporarily put down, these so-called Cuban debts had amounted to over $170,000,000. They were subsequently consolidated into other and later issues; but whatever change of form or date they underwent, they continued to represent practically just three things: the effort to conquer Santo Domingo, the expedition to Mexico, and the efforts to subdue Cuba. A movement to refund at a lower rate of interest was begun in 1890, and for this purpose an issue of $175,000,000 of Spanish bonds was authorized, to be paid out of the revenues of Cuba, but with the guaranty of the Spanish nation. Before many had been placed the insurrection had again broken out. Thenceforward they were used not to refund old bonds, but to raise money for the prosecution of the new war. Before its close this indebtedness had been swollen to over double the figure named above, and a part of the money must have been used directly in the war against the United States.
In the negotiations Spain took high moral ground with reference to these debts. She utterly denied any right to inquire how the proceeds had been expended. She did not insist for her own benefit on their recognition and transfer with the territory. She was concerned, not for herself, but for international morality and for the innocent holders. Some, no doubt, were Spanish citizens, but many others were French, or Austrian, or of other foreign nationalities. The bonds were freely dealt in on the Continental bourses. A failure to provide for them would be a public scandal throughout civilization; it would cause a wide-spread and profound shock to the sense of security in national obligations the world over, besides incalculable injustice and individual distress.
But the fact was that these were the bonds of the Spanish nation, issued by the Spanish nation for its own purposes, guaranteed in terms "by the faith of the Spanish nation," and with another guaranty pledging Spanish sovereignty and control over certain colonial revenues. Spain failed to maintain her title to the security she had pledged, but the lenders knew the instability of that security when they risked their money on it. All the later lenders and many of the early ones knew, also, that it was pledged for money to continue Spain's efforts to subdue a people struggling to free themselves from Spanish rule. They may have said the morality or justice of the use made of the money was no concern of theirs. They may have thought the security doubtful, and still relied on the broad guaranty of the Spanish nation. At any rate, caveat emptor! The one thing they ought not to have relied upon was that the island they were furnishing money to subdue, if it gained its freedom, would turn around and insist on reimbursing them!
The Spanish contention that it was in their power, as absolute sovereign of the struggling island, to fasten ineradicably upon it, for their own hostile purposes, unlimited claims to its future revenues, would lead to extraordinary results. Under that doctrine, any hard-pushed oppressor would have a certain means of subduing the most righteous revolt and condemning a colony to perpetual subjugation. He would only have to load it with bonds, issued for his own purposes, beyond any possible capacity it could ever have for payment. Under that load it could neither sustain itself independently, even if successful in war, nor persuade any other Power to accept responsibility for and control over it. It would be rendered impotent either for freedom or for any change of sovereignty. To ask the Nation sprung from the successful revolt of the thirteen colonies to acknowledge and act on an immoral doctrine like that, was, indeed, ingenuous—or audacious. The American Commissioners pronounced it alike repugnant to common sense and menacing to liberty and civilization. The Spanish Commissioners resented the characterization, but it is believed that the considerate judgment of the world will yet approve it. International practice will certainly hesitate hereafter, in transfers of sovereignty over territory after its successful revolt, at any recognition of loans negotiated by the ceding Power in its unsuccessful effort to subdue the revolt—no matter what pledges it had assumed to give about the future territorial revenues. Loans for the prosecution of unjust wars will be more sharply scrutinized in the money markets of the world, and will find less ready takers, however extravagant the rates. It may even happen that oppressing nations, in the increasing difficulty of floating such loans, will find it easier to relax the rigors of their rule and promote the orderly development of more liberal institutions among their subjects.
Far from being an encouragement, therefore, to repudiation, the American rejection of the so-called Cuban debt was a distinct contribution to international morality, and will probably furnish an important addition to International Law.
Ready to Pay Legitimate Colonial Debts.
At the same time the American Commissioners made clear in another case their sense of the duty to recognize any debt legitimately attaching to ceded territory. There was not the remotest thought of buying the Philippines, when a money payment was proposed, in that branch of the negotiations. When the Spanish fleet was sunk and the Spanish army captured at Manila, Spanish control over the Philippines was gone, and the Power that had destroyed it was compelled to assume its responsibilities to the civilized world at that commercial center and on that oceanic highway.[4 ] If that was not enough reason for the retention of the Philippines, then, at any rate, the right of the United States to them as indemnity for the war could not be contested by the generation which had witnessed the exaction of Alsace and Lorraine plus $1,000,000,000 indemnity for the Franco-Prussian War. The war with Spain had already cost the United States far above $300,000,000. When trying to buy Cuba from Spain, in the days of that island's greatest prosperity, the highest valuation the United States was ever willing to attach to it was $125,000,000. As an original proposition, nobody dreams that the American people would have consented to buy the remote Philippines at that figure or at the half of it. Who could think the Government exacting if it accepted them in lieu of a cash indemnity (which Spain was wholly incapable of paying) for a great deal more than double the value it had put upon Cuba, at its very doors?