LIBRARY 
 
 OF THE 
 
 University of California. 
 
 Class 
 
THE CONFEDERATE DEBT 
 
 A N D 
 
 PRIVATE SOUTHERN DEBTS 
 
 BY 
 
 J. BARR ROBERTSON. 
 
 LONDON : 
 
 WATERLOW AND SONS Limited, 95 & 96, LONDON WALL. 
 
 1884. 
 
 PRICE OXI SHILLING. 
 
THE CONFEDERATE DEBT 
 
 AND 
 
 x 
 
 PRIVATE SOUTHERN DEBTS. 
 
 I'.Y 
 
 J. BARR ROBERTSON. 
 
 LONDON : 
 
 WATERLOW AXD SONS Limited, 05 & 96, LONDON WALL 
 
 1884. 
 
 PRICE ONE SHILLING. 
 

 • v : I.-: 
 
 * $ 
 
CONTENTS. 
 
 I. Introduction ..... 
 II. The Confederate States in relation to Foreign States 
 
 III. The Confederate Stales in relation to the United States 
 
 IV. The Dollar Bonds .... 
 V. The Sterling Cotton Bonds 
 
 VI. The Fourteenth Amendment 
 
 VII. The Opinions of six Continental Jurists . 
 
 VIII. Cases quoted in favour of the Claims of the Bondholders 
 
 IX. The Equities in the Original Controversy between North 
 South reserved ..... 
 
 X. An Omitted Claim against the United States 
 
 and 
 
 PAGE 
 
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 228227 
 
NOTE. 
 
 Although the following observations were not written for tin pubiis, it has 
 
 theless been //t<>//<//it that the subject is ow< of sufficient importance, both 
 
 in the United > - d Europe, to warrant publication* These views are 
 
 . in the liope that public <iu<l unprejudiced discussion on both sides 
 
 of tin- Atlantic may enable a element I iced at by the United States 
 
 oj the just and legitimate claims that are setjoith in the following pages. 
 
 ./. II. It 
 
THE CONFEDERATE DEBT 
 
 AND 
 
 PRIVATE SOUTHERN DEBTS 
 
 L— INTEODUCTION 
 
 I have been asked by several large holders of Confederate Bonds both 
 Americans and Englishmen, to give an opinion on the practical aspects of 
 the Confederate Debt, and for this purpose copies have been placed in my 
 hands of " the Case " of the Bondholders, the opinions of six C ontinental 
 Jurists, and several pamphlets bearing on the subject and on the proceedings 
 that have been taken by the Bondholders. I have no pretensions whatever 
 to be a lawyer, and therefore the following observations must be regarded 
 as simply and solely those of a financier and a man of business. 
 
 The conclusions arrived at in the following pages are, — that the Con- 
 federate States had only belligerent and not international rights ; that the 
 Confederacy being an illegal corporation according to United States law 
 could not issue Bonds which would be valid against either the United States 
 or the legal State Government? of the South ; that therefore neither the Cotton 
 Bonds nor the Dollar Bonds have any validity whatever as Confederate 
 Debt in the absence of the Confederacy; that there is nothing in the 
 opinions and cases adduced in support of the Bonds which really conflicts 
 with this view of their illegality in the United States ; that the equities 
 arising out of the original controversy between North and South, not being 
 cognizable by any Court, are reserved as subject matter for consideration by 
 the United States, and are therefore outside the scope of the present discussion ; 
 
 [20201] 
 
2 
 
 and that there is in the Dollar Bonds an omitted international claim 
 against the United States for payment of private debts owed by Southern 
 citizens to Europeans at the beginning of the war, and which are now re- 
 presented by Dollar Bonds that were sent to them as the only means of 
 remittance from the Southern States, and that these debts, and the claims of 
 Southern citizens not engaged in the war, and of Europeans, for property 
 taken by force and for which Confederate Bonds were compulsorily tendered, 
 are not in any way affected by the Fourteenth Amendment, and therefore 
 ought to be paid by the United States. 
 
 II.— THE CONFEDERATE STATES IN RELATION TO FOREIGN STATES. 
 
 In consequence of the hostile action taken by the Confederate States 
 against the United States, the blockade of the Southern ports was instituted 
 on 19th April, 1861, and on 13th May the British Government issued a 
 Proclamation of Neutrality in which the Confederate States were recognised 
 as belligerents. This recognition as belligerents was inevitable as soon as the 
 United States declared their intention of establishing a blockade, not with 
 the view of Foreign Powers deciding anything as between the belligerents 
 themselves, but as declaring that a state of hostilities had arisen of which 
 it was essential that the citizens of neutral nations should be informed, and 
 that the conduct to be observed by them and the risks to which they would 
 be liable, might be duly made known on the authority of their respective 
 Governments. The Confederate States, it must be observed, were simply 
 provinces in rebellion against the lawfully constituted authority of the United 
 States, and had none of the international status of an independent nation. 
 If they had been an independent power at war with another independent 
 power, their status would have been totally different from what it could 
 possibly be as belligerents without the previous condition of independence. 
 So far, therefore, as the British and other Foreign Governments had a posi- 
 tive duty to perform, it was to protect the interests of their own citizens by 
 recognising the Confederates as belligerents and by giving warning that trade 
 with the ports of the Confederate States was suspended, and that vessels 
 attempting to enter or leave these ports were liable to seizure and the ships and 
 
3 
 
 cargoes to confiscation. The recognition as belligerents was an act of imme- 
 diate necessity in consequence of the declaration of blockade, but the 
 strenuous attempts of the Confederate States to obtain from the European 
 Powers their recognition as an independent state, entirely failed. If the 
 European Powers had recognised their independence while war was still 
 going on, and the ultimate issue still undecided, this recognition would not 
 have been of any benefit to the Bondholders, as the fact that the Confederate 
 States had never been independent of the United States, and did not become 
 so, would have justified the United States in complaining that the European 
 Powers had done them a grievous wrong in recognising as existing in the 
 Confederate States an independent status which, at the time of recognition, 
 did not exist, and as a matter of fact did not afterwards come into existence. 
 
 In the absence therefore in the Confederate States of the previous status 
 of an independent nation, the Foreign Powers, by taking the necessary steps 
 to recognise them as belligerents, assumed an attitude solely of expectancy. 
 War had arisen not between two independent members of the family of 
 nations, but in the bosom of a single nation, and although it was imperative 
 to issue proclamations of neutrality to define rights and obligations as affect- 
 ing neutrals and belligerents, yet it was the duty of the powers in friendly 
 relations with the United States to wait for the issue of the hostilities, and not to 
 recognise the Confederate States as an independent member of the family of 
 nations until they should have established their independence. As a matter 
 of fact, they failed to establish their independence, and with that failure their 
 position as belligerents and their hopes of becoming a separate Eepublic came to 
 an end. Thus they never reached that position of independence in which they 
 would have acquired an international status, and therefore in their defeat they 
 had no international claim to consideration, nor had the United States or 
 Foreign Powers any international duty to perform towards them, nor could their 
 treatment become an international question, seeing that the United States 
 alone, and not the Confederate States, were represented in the family of 
 nations. The British Government had therefore no grounds for offering even 
 friendly advice to the United States as to the treatment of the Confederates 
 when the civil war came to an end, and the authority of the United States 
 was re-established over the territory temporarily held by the Confederate 
 Government. 
 
 [202011 
 
III.— THE CONFEDERATE STATES IN RELATION TO THE UNITED 
 
 STATES. 
 
 The States that composed the Confederacy had been States of the United 
 States with certain rights, duties and disabilities denned in the Constitution 
 and laws of the United States. The Constitution provided no means by which 
 a State could legally withdraw from the Union, nor any method by which a 
 State could supersede the tribunals and authority of the United States, enter 
 into a confederacy with other States, and maintain a government independent 
 of and in hostility to the United States, except by a policy of violence to the 
 law and the Constitution. When, therefore, the Southern States seceded 
 and entered into a Confederacy with a view to establishing themselves as an 
 independent republic, they deliberately and intentionally violated the Con- 
 stitution of the United States. It is not intended to discuss here the question 
 whether they were justified on grounds of equity in acting as they did, or 
 what were the" merits of the sectional controversy between North and South, 
 as these grounds of equity are political and not international. The 
 question before the Bondholders is, what are the practical issues involved 
 in the case of the Bondholders on which they may found a valid claim to 
 complete or partial payment ? 
 
 The Southern States had the most complete liberty to appeal to the " sacred 
 right of insurrection," and they did so ; but the Northern States had also the 
 fullest claim to appeal to the " sacred right of suppressing insurrection," and 
 they did so. It was open to the United States to have permitted this 
 violation of the Constitution, and to have allowed the Confederate States to 
 establish their separate republic in peace. They did not, however, elect to adopt 
 this course, and in their determination to vindicate the law and the Consti- 
 tution, there is but little cause for surprise, because independent nations 
 cannot permit bodies of their own citizens to separate themselves and to setup 
 as independent nations without making a resolute effort to maintain the national 
 territory in its integrity. The United States, following what is regarded as the 
 universal duty of nations in such circumstances, determined to attempt the 
 suppression of the rebellion as the only means of national self-preservation. 
 
This determination, it must be observed, was not to attempt the conquest 
 of the whole or of any portion of an independent country with which some 
 difficulty might have arisen. The United States had been deprived of their 
 lawful jurisdiction over the Southern States by the forcible suppression of 
 their courts and of their authority, and illegal and usurping State Govern- 
 ments had displaced the legal State Governments, and had formed them 7 ! 
 selves into an illegal confederacy for the purpose of preventing the United 
 States from exercising their lawful and constitutional authority within the 
 so-called Confederate States. Thus the duty which the United States under- 
 took was to re-establish their lawful authority, and as the Confederate States 
 resisted by force all attempts to reimpose this authority, the United States 
 were compelled to resort to hostilities for the purpose of re-establishing their 
 lawful jurisdiction. The Confederate States had therefore no warrant in the 
 Constitution of the United States for their secession and compact, and thus 
 the act of secession was practically an appeal by them to the arbitrament of 
 the sword, in the expectation that the tribunal of war would decide in favour 
 of their claim to separate national independence, and against the claim of 
 the United States to have their legal authority re-established. 
 
 There the question rested from February, 1861, till April, 1865, when- 
 the tribunal of war gave its decision in favour of the re-establishment of the 
 jurisdiction of the United States. The appeal by the Southern States to the 
 " sacred right of insurrection " had failed, while the appeal by the United 
 States to the " sacred right of suppressing insurrection " was successful. 
 Now it must be particularly observed that the United States added not a 
 square mile of territory nor a single new citizen as the result of the four 
 years' war. They simply re-established at tremendous cost that jurisdiction 
 over certain States of the Union which had been for a time suspended in con- 
 sequence of the unlawful acts of usurping State Governments and a usurping 
 Confederacy. By once more coming under the jurisdiction of the Courts of the 
 United States, the acts of the State Governments and of the Confederacy had 
 to be dealt with by the Constitution and laws of the United States ; and 
 therefore it was inevitable that all acts performed directly or indirectly in 
 pursuance of the war should be declared to be illegal acts. 
 
Had the Confederate States established their independence, they would 
 not have been amenable to any tribunals except those that they had them- 
 selves set up, and they would have shaped their legislation and their institu- 
 tions to suit themselves. But as they failed in this, the United States not 
 only re-established their former jurisdiction, but by virtue of their success in 
 war, and the unconditional surrender of the enemy, they had the right of a 
 conqueror to dictate the conditions on which they would treat the conquered, 
 grant or refuse amnesty, impose political or other disabilities, confiscate 
 property, imprison the leaders, or do any other act that might seem to them 
 fit in the circumstances. As guardians of the Eepublic they had also imposed 
 on them the duty of taking such precautions in the methods by which they 
 permitted political reconstruction of the States, as to provide in the amplest 
 manner for the security and integrity of the Union ; while they were bound to 
 provide by new legislation, or by additions to the Constitution, such stipulations 
 as would as far as possible hinder and discourage all attempts at rebellion in 
 the future. 
 
 IV.— THE DOLLAK BONDS. 
 
 Some observations may now be offered regarding the origin of the 
 Dollar Bonds, that is, those Bonds which were issued by the Confederacy within 
 the Confederate States, and the grounds on which it is alleged that they 
 ought to be paid either by the United States or by the individual States that 
 formerly composed the Confederacy. The first Dollar Bonds were issued on 
 the 28th February, 1861, in exchange for cash, before the war broke out, and 
 therefore before belligerent rights were conceded to the Confederate States. 
 It is argued that this loan has an inferior claim to payment to those issued 
 after war began, owing to the fact that the Confederate States were not then 
 recognised as belligerents, because it is assumed that the recognition as bellige- 
 rents conferred the power of raising loans. The subsequent Dollar Bonds 
 were almost entirely issued in payment for property, services, &c, and as 
 they were issued during the period when belligerent rights were recognised, 
 it is alleged that they form a perfectly valid claim against the United States, 
 and a stronger claim still against the individual States formerly in the 
 Confederacy. 
 
There does not seem, however, to be any difference between the 
 Dollar Bonds of 28th February, 1861, and those subsequently issued, 
 so far as the authority of the issuer or the legality of the issues 
 is concerned. A very wide distinction might be drawn between Bonds 
 accepted voluntarily for cash, and those issued practically by com- 
 pulsion for property taken for the purposes of the Confederacy, because 
 the former must rest entirely on the legal validity of the Bond, whereas 
 holders of the latter may fairly claim an equitable consideration of the 
 circumstances in which they were forcibly deprived of their property 
 even if it was used for the purposes of the war. But the allegation which 
 is so frequently put forward, that the recognition of the Confederate States 
 as belligerents gave them a power of issuing loans which the United States, 
 if ultimately the conquerors, would be, according to international law, 
 bound to acknowledge and pay, seems to be entirely without foundation ;. 
 though equitable claims may justly be made, arising, not out of the possession 
 of Confederate Bonds, but out of the fact of numbers of individuals having 
 been deprived of property by force, it being immaterial, except as evidence^ 
 whether Bonds were or were not given or taken for such property. 
 
 The distinction drawn between the Bonds issued for cash and those issued 
 for property is of no importance so far as the right of the Confederacy to 
 issue Bonds is concerned, seeing that both classes of Bonds were voluntarily 
 issued by the same authority, namely, the Government of the Confederate 
 States. When the British Government recognised the Confederates as 
 belligerents, it did not expressly or impliedly confer any power of raising loans, 
 which had a legal or international claim to be paid, whether the Confederacy 
 succeeded or failed. At the outset of the struggle very large interests of British 
 citizens were involved in the hostilities, and Great Britain recognised the con- 
 dition of belligerency so as to be able to regulate those incidents in which its 
 citizens were necessarily concerned. But the reason why the Dollar Bonds have 
 no legal validity as Confederate Debt against either the United States or the 
 present Southern States is, that under the Constitution of the United States there 
 is no right in a State to secede, to enter into a compact with other States, or to 
 carry on war against the United States; and, therefore, when in April, 1865, 
 United States authority was re-establised, and United States tribunals restored 
 in the territory formerly held by the Confederates, all those acts of the State 
 
Governments and of the Confederacy which they performed as seceded States, 
 or as a Confederacy of such, were, as was inevitable, declared illegal. 
 In particular, the Confederacy as a new power, and one altogether unknown 
 to the Constitution, could not possibly be regarded as having done one single 
 legal act, although naturally much that it did in the four years had to be 
 accepted by the United States on grounds of equity. Thus, when all the 
 statutes and acts of the Confederacy were swept away, it came to pass that 
 the acts authorising the issue of Bonds and their redemption, were of no 
 avail whatever, and it became impossible to obtain before any United States 
 Court a hearing in regard to the Bonds or the acts by which they were 
 authorised. Not only according to the United States law were the Bonds 
 issued for an illegal and improper purpose, but in view of the law by which 
 they must be judged, the usurping State Governments and the Confederacy 
 were illegal corporations. If, therefore, the Confederacy was illegal, all its 
 acts were illegal ; and as an illegal corporation, it could have no legal 
 successor. It would seem, therefore, that all the Dollar Bonds, were, accord- 
 ing to United States law, that is, according to the only law that can take 
 cognisance of them, illegally issued by an illegal corporation unknown to the 
 law and unauthorised by it, and as such have no legal validity whatever, as 
 Confederate Debt, against the United States or the present State Govern- 
 ments of the South. 
 
 Neither the usurping State Governments nor the Confederacy ever had 
 any independent international position which would have entitled them, in 
 the eyes of other nations, to rights and to consideration as the defenders 
 of their national existence. So that international law is dumb as to rights 
 of defeated rebel States to have the debts incurred in trying to achieve their 
 independence paid by the conqueror, or paid by levying taxes upon those 
 States when once the conqueror's former jurisdiction is re-established. 
 
 V.— THE STEELING COTTON BONDS. 
 
 In the case of the Sterling Cotton Loan, it is alleged that that was a 
 purely commercial transaction for value, and that, not being contraband it 
 could not, according to the law of nations, be declared invalid by the 
 
9 
 
 conqueror of the State that issued it, as he must take over the just obligations 
 of the conquered State. Moreover, as the subscribers to this loan were 
 neutrals, and not belligerents, their loan was not liable to confiscation on 
 the ground of belligerency, as the Dollar Loans might possibly be. As an 
 undoubted proof that the Cotton Loan was only a commercial transaction, it is 
 shown that the bonds were convertible into cotton " at any time not later 
 than six months after a ratification of a treaty of peace between the present 
 belligerents." While it is alleged that this is a valid loan according to 
 international law, it is somewhat strange that, if it be so, it has hitherto been 
 impossible to acquire for it any international standing. And yet this must 
 not be confounded with cases like Greece, Spain, and other defaulting 
 countries, which, for a long time, simply ignored their debt, and made no 
 provision for paying it. Those were valid debts according to international 
 law, although settlement was long delayed. But the case of the Cotton 
 Loan is entirely different. The holders of it claim that it is an international 
 debt, and that payment is unjustly withheld. But it must be recollected 
 that there have been international commissions sitting to examine into the 
 claims arising out of the war with the South, and that the British Govern- 
 ment has presented and urged those that possessed any validity. But the 
 claims of the Cotton Bondholders have never reached any of those tribunals, 
 although Great Britain has paid the Alabama Award, and the United States 
 the Fishery Award. The reason why the Cotton Bondholders have failed in 
 getting their claims brought before any international tribunal is that they 
 are not international claims at all, the Confederate States never having had 
 an international existence. 
 
 In favour of its validity, however, the Opinion of two eminent lawyers 
 is quoted — namely, of the present Lord Cairns and the present Lord Justice 
 Cotton, as it was given on the issue of the Cotton Loan in London, on 
 23rd February, 1863* 
 
 " We are of opinion that it will not be a violation of any law of this 
 country, or of any principle of international law, to advertise the loan in 
 this country as a loan to the Confederate States, upon bonds, the amount of 
 which is payable by those States." 
 
 [20201] 2 
 
10 
 
 " We are of opinion that there is not any legal objection to the con- 
 tractors offering the bonds for sale in England to the public at a price and 
 
 on terms to be stated in a prospectus." 
 
 This opinion is entirely negative, and is merely an assertion that the 
 advertising of the Cotton Loan would not be illegal. There can be no doubt 
 that the question put before them for their opinion was all but practically 
 worthless for the purpose of eliciting an authoritative statement M to 
 the rights and responsibilities of subscribers. Now it is evident ih;it 
 there are at least four conditions of legality or illegality involved in the 
 opinion of these two eminent lawyers that were very important to intending 
 subscribers : — 
 
 (1.) The Cotton Loan might be perfectly legal in this country, and all 
 subscriptions to it and dealings in it might be recognized by the 
 Courts of this country, so far as the validity of contracts was 
 concerned. 
 
 (2.) The Cotton Loan might not be illegal in this country, and vd 
 British Courts might refuse to give effect to contracts in the bonds 
 as contrary to public policy. 
 
 (3.) The Cotton Loan was legal in the Confederate States, as it is to be 
 presumed it was issued under proper authority according to the 
 laws of the Confederate States. 
 
 (4.) The Cotton Loan was entirely illegal in the United States. 
 
 These were the real issues in the Cotton Loan, and, as such, they ought 
 to have been submitted for the opinion of counsel. At the time of the 
 issuing of the loan, the Bondholders' rights were at least those stated in (2) 
 and (3). It is all but perfectly certain that the loan had not the Item lit 
 of (1) ; but it is of little importance as to the validity of (1), (2) and (3), as 
 tire entire question now centres in (4), and the hope of the Bondholders is 
 that this loan, which must have been declared by counsel to be illegal in the 
 United States at the time it was issued, if an opinion had been asked for 
 
11 
 
 on that point, will nevertheless be paid by the United States, or by the 
 Southern States acting with the permission of the United States. 
 
 The loan was perfectly legal in this country, in so far that no one 
 subscribing to it was in any danger of personal consequences as the result of 
 such subscription. The fact that the British Government did not prohibit it 
 only showed that they did not regard it as an infringement of neutrality ; 
 but from this it cannot be inferred that the contracts of subscription would 
 have been enforced by British Courts. It is in the highest degree probable 
 that such contracts would not have been enforced by British Courts, although 
 it might be no infringement of neutrality in the British Government to permit 
 their citizens to take the loan if they were so minded. There was no 
 illegality, according to British law, in paying money for the Bonds of the 
 Confederate States, and this is the practical meaning of the opinion of Lord 
 Cairns and Lord Justice Cotton quoted above. The Bonds, as issued, carried 
 no disability with them, so there was no objection to their being held ; and, 
 as they were Bonds of the Confederate States, the opinion of these two 
 lawyers was that they were valid Bonds as against those States. But the}- 
 expressed no opinion whatever as to the recourse of the Bondholders against 
 the United States if the Confederate States were defeated ; and it is difficult 
 to believe that they could have given any countenance to the idea that, 
 failing the Confederate States, the United States would be liable for the 
 repayment of the Cotton Bonds. 
 
 The stipulation that the Bonds could be converted into cotton " at any 
 time not later than six months after a ratification of a peace between the pre- 
 sent belligerents," shows that the promoters and subscribers of the loan 
 regarded the issue of the conflict as certain to be in favour of the Confederates, 
 and therefore never contemplated the possibility of what really happened, 
 namely, that there would be no ratification of peace, but an unconditional 
 surrender to the United States. There cannot be the slightest doubt that the 
 terms of the loan would have been fulfilled to the letter, if, as the subscribers 
 to the loan confidently expected, the Confederate States had been successful 
 in establishing their independence. But as they failed in their efforts at 
 independence, and never had any international recognition as an independent 
 
12 
 
 State, the Cotton Loan has no international character whatever, and, therefore, 
 its validity is a question for the United States Courts. 
 
 It is also asserted by some of the authorities in this case that the sub- 
 scribers to the loan had no knowledge of the purpose to which the money 
 was to be applied, and that therefore the Bonds were not liable to confisca- 
 tion. When we consider the fact already referred to, that the Bonds were 
 exchangeable for cotton at any time within six months after the ratification 
 of peace, it can hardly be asserted that the subscribers to the loans were 
 ignorant of the purpose to which it was to be applied. They subscribed 
 for an option which depended on the contingency that a ratification of peace 
 would take place. But, whatever importance might be attached, if it were 
 an international question, to ignorance as to the objects t<> which the loan was 
 to be applied, and to six months after the termination of the war as being 
 equivalent to six months after the ratification of peace, seeing thai six months 
 would have been ample time to claim and take possession of the cotton, these 
 considerations are of no avail whatever where the loan has no international 
 status. But while it may be urged by those who take the by no means 
 universally accepted view that neutrals may, with perfect legality, 
 lend money to a belligerent independent Stale without being subsequently 
 held liable by a conqueror to have their claims to repayment confiscated on 
 the ground that they must have known their money was to be used in carry- 
 ing on the war, the case is totally different where the loan is to rebels or to 
 persons engaged in civil war against a State witli international rights. The 
 question may well be asked, Can private individuals lend money to popula- 
 tions in rebellion or engaged in civil war, and then claim that they did not 
 know that the money was to be applied to purposes of rebellion ? Can 
 rebels, so long as the issue of the rebellion is still undecided, borrow for any 
 other recognised purpose than that of rebellion ? 
 
 It may be remarked also that there is a very wide difference between 
 sales of war materials by a neutral to a belligerent independent State for cash 
 or for some other property, the immediate delivery of which terminates the 
 transaction, and similar sales made in exchange for bonds for future pay- 
 ment which must more or less depend for their value on the vicissitudes of 
 war. So long as both belligerents are permitted to purchase war materials in 
 
13 
 
 any country for cash or other completed consideration, no assistance is really 
 given, because an equivalent in value, and not merely the promise of an 
 equivalent, is exchanged, and the seller may in fact have no knowledge 
 whatever of the destination of the war materials. Having received full value 
 he has no further concern in the matter. But it is doubtful if the giving of 
 money to a belligerent independent State in exchange for bonds for future 
 payment is not a material and deliberate assistance at a time when that State 
 has no equivalent to give in cash or property, and whether, if one country 
 was conquered by another, it would not be within the international right of 
 the conqueror, in the case of loans contracted during the course of the 
 war, to throw upon the holders of the bonds of such loans the onus of 
 showing that the money advanced was not used in carrying on the war. The 
 individual who deals for cash is free from all future consequences, because 
 his transaction is completely closed ; but is the individual who lends to a 
 nation engaged in war, money on bonds for future payment, also free from 
 future consequences ? Is he not bound to look to the borrower and the 
 borrower's probable future position, and when his borrower is defeated is he 
 entitled to claim from the conqueror payment that the borrower himself 
 could not claim if he had made the loans out of his private means ? The case 
 is totally different with debts contracted before Avar had begun, as the suc- 
 cessful ruler - de facto becomes a trustee for such debts ; but does he also 
 become a trustee for the repayment of money given by neutrals at a time 
 when the borrower was carrying on a war in which he might be unsuccessful? 
 Has the lender no responsibility, as a neutral lending to a belligerent, to 
 assure himself that the money he expects to be repaid if the borrower be 
 defeated is legitimately used for some peaceful purpose which in no way 
 conflicts with his position as a neutral ? 
 
 In the Confederate war due warning had been given that hostilities 
 were being carried on between the United States and a large body of 
 their own citizens, and the former had given the fullest notice that they 
 were carrying on war, not for the conquest of an independent State, but for 
 the recovery of a violated jurisdiction. Any assistance to the Confederates 
 from neutrals was an international wrong to the United States, as helping to 
 depriye them unjustly of their lawful jurisdiction. Having re-established 
 their authority over the Southern States by the sacrifice of several 
 
14 
 
 hundreds of thousands of lives and several thousands of millions of dollars, it 
 could hardly be expected that the United States would agree to repay to aliens 
 the loans they subscribed to support this violation of United States jurisdiction ; 
 and, although doubtless many Southern people had to take the Dollar Bonds 
 on compulsion, and therefore had, and still have an equitable claim to payment 
 from the United States as having been innocent sufferers by the war, this is a 
 ground of claim which cannot be ursred on behalf of the holders of the Cotton 
 Bonds. 
 
 The Cotton Bondholders assert a claim to the cotton which was hypothe- 
 cated to them, of the greater part of which they allege they have been, and 
 are, wrongfully deprived by the United States. They maintain that the 
 loan was a purely commercial transaction, with the cotton lying within the 
 Confederate States hypothecated to them as security ; but it can hardly be 
 claimed that the security was not dependent on the success of the Confederacy. 
 For what are the facts ? A usurping (as events proved) Confederacy by 
 illegally (as events proved) exercising the powers of taxation and seizure within 
 the lawful (as events proved) jurisdiction of the United States, acquires pos- 
 session of large quantities of cotton, and being unable to export and sell it, 
 owing to the blockade of the Southern ports, hypothecates in return for 
 money this illegally acquired cotton to neutral aliens in foreign countries. It 
 is important to observe that in consequence of the cotton being in the Con- 
 federate Slates and not in the independent custody of the lenders, the price 
 at which it was hypothecated with the option to the lender of possessing 
 himself of it, was 6d. per lb., at a time when it was worth in the open 
 markets of the world, Is. Gd. or 2s. per lb. ; so that if this was a 
 purely commercial transaction, it must be regarded as one with enormous 
 prospective profit if it could have been fulfilled, and as showing beyond 
 doubt that it was made under highly speculative conditions. After a 
 time this cotton falls into the hands of the United States, and they seize and 
 appropriate it as the property of the citizens of the United States from whom 
 it had been illegally obtained by taxation or seizure, the United States being 
 the lawful custodians of all property which the Confederate States had 
 illegally acquired at the expense of the citizens of the United States. 
 
 It may be suggested further, that if it were possible to have all the cir- 
 

 15 
 
 cumstances of the acquisition and hypothecation of the cotton enquired into, 
 it would not be surprising if holders of Dollar Bonds in the Southern 
 States and Europe, came forward and claimed that the cotton was taken under 
 physical and moral compulsion and Dollar Bonds given in return, and that the 
 Dollar Bondholders had therefore a prior right to compensation for the cotton 
 over the Sterling Cotton Bondholders. 
 
 It is hardly necessary to consider the allegation that the United States 
 as conquerors were bound to take over the just obligations of the conquered 
 Confederate States, because, as we have already shown, the United States only 
 gained their former jurisdiction, while the Confederate States, having failed to 
 assert their independence, and thus having been an illegal corporation, pos- 
 sessed nothing that could be conquered except what belonged to the United 
 States themselves and to the legal State Governments of the South, of which 
 the United States were the paramount guardians. The Confederate States 
 had no just obligations except those that the United States might choose to 
 respect, and when the latter refused to acknowledge the Cotton Bonds and 
 the Dollar Bonds, and showed unmistakably that they would not permit any 
 special legislation for the purpose of giving validity to these illegal Bonds, 
 the latter were left without any authority legally responsible for them. 
 
 VI.— THE FOUETEENTII AMENDMENT. 
 
 The Fourteenth Amendment to the United States Constitution contains 
 the following stipulation : — 
 
 " Neither the United States, nor any State, shall assume or pay any debt 
 or obligation incurred in aid of insurrection or rebellion against the United 
 States .... but all such debts shall be held illegal and void." 
 
 This is regarded by every authority quoted in the documents of the case 
 of the Bondholders as the one great obstacle to the payment of the Con- 
 federate Debt. It is alleged by eminent jurists that this Amendment is uncon- 
 stitutional, for the reason that it impairs the obligation of contracts which the 
 Constitution as originally formulated expressly declares to be inviolable, and 
 that it is void as being retrospective legislation in regard to contracts of which 
 cognizance could be taken only by the Courts and not by the legislative power. 
 To this the evident reply is, that the payments which this Amendment 
 
1G 
 
 forbids are payments claimed on contracts which the United Stales 
 Courts, or even the Courts of the reconstituted States of the South, 
 could not fail to pronounce illegal on the ground of the illegality of the 
 Confederacy and the objects of its existence. It is thus in no way retrospec- 
 tive legislation in restraint of any previously existing right or obligation ; 
 and from the time of the secession every act of the United States to recover 
 their jurisdiction was a notice to all concerned, that every act in defiance <>r 
 in deprivation of their authority was then in their eyes illegal, and would, if 
 United States authority were re-established, be declared illegal by ©very 
 tribunal in the United States. 
 
 The Fourteenth Amendment is in reality merely an emphatic record in 
 few words of the actual bearing of then existing law, and except as authori- 
 tatively re-stating the law which might by many have been regarded as 
 doubtful, it is altogether unnecessary, and is not the insurmountable obstacle 
 to the Bondholders obtaining justice. The really insurmountable obstacle is 
 that the payment of debts incurred by a rebellious people in endeavouring 
 to set up within the national territory an independent State to the injury of 
 the nation itself, is against public policy, because it would be an encourage- 
 ment to rebellion and thus a danger to the security and integrity of every 
 nation. So that the Fourteenth x\mendment has not created any new disability, 
 but the United States being a somewhat loosely organised Democracy with 
 Aery extensive powers vested in the individual States, it was tin night 
 of the utmost importance at the close of the war to record in the most 
 authoritative form known to the United States, namely, in the Constitu- 
 tion, the immemorial principle of public policy, that nations are bound to 
 oppose and to discourage all attempts at rebellion against their own law- 
 fully constituted authority, and that, therefore, the United States were bound 
 to prohibit payment of all debts incurred in aid of the rebellion. This 
 Amendment rendered it impossible for any State Legislature or State Court 
 to attempt to deal illegally in any way with the Confederate Debt. And if 
 public policy required the United States to refuse to pay debts incurred by the 
 Confederate States, to the citizens of those States, much more does it require 
 the United States to refuse payment of debts arising out of loans by neutral 
 aliens to States in rebellion against the lawful authority of a Government in 
 friendly relations with these neutrals. 
 
17 
 
 It is always difficult in complicated cases to find suitable illus- 
 trations, and in all the cases cited in the documents referred to in 
 illustration of the question of the Confederate Debt, not one seems 
 to be a parallel case. But let us assume a case which will show, 
 perhaps, more clearly than has been done, how little actual necessity there 
 was for the Fourteenth Amendment or for ex post facto legislation, in 
 order to render the payment of the Confederate Debt illegal. Let it be supposed 
 that the inhabitants of the four provinces of Ireland were to withdraw from 
 British jurisdiction, and to set up an independent Government ; and if for 
 the purpose of defending themselves against the blockade of their ports and 
 other Avarlike operations to restore British jurisdiction, this usurping 
 Government were to raise loans in the United States, they would be doing 
 exactly what the Southern States and the Confederacy did in raising loans 
 in Europe. All the municipalities of Ireland, and the local authorities in 
 / the counties would secede and form themselves into an Irish Eepublic just 
 as the States seceded and formed a Confederacy. It will probably be rejoined 
 that the States of the Union have much greater powers than are possessed 
 by Irish provinces or municipalities, and it is true that they have greater 
 legal powers ; but they have no greater power to commit illegal acts against 
 their supreme Government than the Irish municipalities have against the 
 Government of the United Kingdom, and both of them having appealed to 
 the " sacred right of insurrection," the illegal and unauthorised loans of 
 the Irish Republic which, let it be assumed were made by Americans, 
 could not be more illegal or more unauthorised than the illegal and 
 unauthorised loans of the Confederate States. The defeat of the Con- 
 federate States decided that their debt was illegal, because United States 
 jurisdiction was restored, and when the Irish Republic was once overthrown 
 and British authority re-established, would Englishmen listen for a moment" to 
 the demands of American neutrals for the payment of the debt of the Irish 
 Republic on the ground that Great Britain was the conqueror of the Irish 
 Republic, and, as its successor, was bound to recognise and to pay all its 
 just obligations ? Yet Ireland has as valid a right to attempt to become a 
 separate nation as the Confederate States had, if it desire to try to do such a 
 thing. Would it be necessary for Great Britain to have ex post facto legislation 
 in order to declare the debt of the Irish Republic to be illegal? It can hardly 
 be thought that it would. The bonds of the Irish Republic would not be 
 
 [20201] 3 
 
18 
 
 regarded as a legal claim for payment in any court of the British [slandsS any 
 more than the Confederate Bonds are accepted before United Stated tribunals. 
 
 It is, therefore, public law and not the Fourteenth Amendment in iNelf. that 
 stands in the way of the payment of the Confederate Debt. 
 
 But even if there had been retrospective legislation in regard to con- 
 tracts which the fortune of war had rendered of doubtful validity, it must 
 be admitted that at the close of a four years' conflict for their rights, and 
 even for their existence, it was the duty of the United States to reconstruct 
 the populations, lately in rebellion, into States, in such a manner and under 
 such precautions as to ensure the completeness of their own jurisdiction, and 
 as far as possible to discourage rebellion by every legitimate stipulation that 
 might seem necessary to that end. 
 
 VII.— THE OITXIOXS OF SIX COXTINKNTAL JURISTS. 
 
 Dr. J. M. C. Asser, Professor Juris and Advocate in Amsterdam, and 
 Dr. M. Th. Goudsmit, Doctor Jims and Advocate in Rotterdam, have given 
 the following opinion : — 
 
 " So long, therefore, as the Confederation of the Southern States 
 existed, the Loans constituted a legal debt, for which, after the dissolu- 
 tion of the Confederation, the States that had belonged to ii must be 
 deemed liable. The success of the Northern Armies and the re-establish- 
 ment of the United States on their former basis, could not annihilate 
 any liability legally contracted by or in the name of the Southern 
 States. The United States Constitution of 1787 having respected the 
 sovereignty of each State, and left to the States all the power not 
 expressly delegated to the Confederation, their right of contracting 
 loans cannot be contested, and loans authorised by a Congress to which 
 the States had delegated that right are as valid as loans contracted by 
 the States themselves, "quod quip $ev nlium fecit id ipsefecisse videtur" 
 
 "The Fourteenth Amendment to the Constitution of the United States 
 quoted above, could not deprive the creditors of the Southern States of 
 their claims upon these States. As far as this amendment concerns 
 the special debts of any State, it must be considered as being of no 
 legal force, because according to general principles of public law a 
 
19 
 
 confederation has not the right of annulling liabilities legally contracted 
 by its members." 
 
 * * * . . * * * i 
 
 "It need not, however, be said that if the liability existed it could 
 not be annulled by the debtor alone, so that Articles like those we refer 
 to cannot be of any influence on the legal position of the creditors." 
 
 The above opinion does not sufficiently distinguish between the powers 
 of the States so long as they are in the Union, and the powers of States or 
 populations in rebellion against the Union. The authors of the opinion take 
 no notice of the illegality, according to United States law, of secession, of 
 forming State Governments and then a Confederacy, in defiance of the 
 United States, with a view to becoming independent of the Union. But they 
 say of States which had illegally seceded, that as the United States Constitu- 
 tion of 1787 left to the States all the power not expressly delegated to the 
 United States Government, their right of contracting loans cannot be con- 
 tested, and loans authorised by a Congress to which the States had delegated 
 that right are as valid as loans contracted by the States themselves. It is 
 impossible, however, thus to leap over the facts, as judged by United States 
 law to which the verdict of the war relegated all questions as to the acts of 
 the Confederacy a"d the States composing it, that the State Governments, 
 the Confederacy, and all acts of the rebellion were illegal. If the Con- 
 federacy had succeeded in establishing its independence, then all acts of the 
 Confederacy and the States would have been legal and the Dollar Bonds 
 would have been a valid internal debt, while the Cotton Bonds would have 
 been a valid international debt of the independent Confederate States. But 
 they would have been valid debts, not in consequence of any power conferred 
 upon the Southern States by the United States Constitution' of 1787, but in 
 virtue of the powers conferred by the Constitution of the Confederate States. 
 
 The following extracts are from the opinion of Dr. Achilles Eenaud, 
 Privy Counsel of the Grand Duchy of Baden, and Professor of Laws : — 
 
 " It has been maintained that as the loans in question were raised 
 for an improper purpose, namely, for furthering and supporting the 
 insurrection and rebellion of the Southern States against the Union, 
 [20201] 
 
20 
 
 the Confederate States are not legally bound to pay the debts. Even if 
 this be correct, it cannot in any way affect the legality of the loans, for 
 the obligation of the recipient to return the value in a similar quantity 
 and in like things, speaks for the validity of a loan or a contract, by 
 which one person transfers a quantity of negotiable or valuable things 
 to another, the said validity, it is true, depending upon the nature of 
 the property, the consent of the parties, and the legal qualification of 
 the taker and also the object of the loan." 
 ******* 
 
 " The motives which induced the contracting parties to make the 
 contract is of no importance whatever from a legal point of view. If the 
 Confederate States had raised the loans for the purpose of providing 
 means for continuing the war against the Union, this would not have 
 vitiated the legality of the loans. The same may be said of the asser- 
 tion that the lenders in lending their money supported the said war." 
 
 ******* 
 
 " The assertion that the loans were raised for the improper purpose 
 of supporting the rebellion, or were raised for or in the interest of the 
 same, is the more unjustifiable, because, according to our foregoing 
 observations, such an assertion could, in any case, only !><• available 
 against the borrower, and not against the lenders of the loan ; and if the 
 prohibition of payment of the loans in question was made on the ground 
 of the same having been raised by the usurping Authorities of Rich- 
 mond, it is forgotten that the liabilities were contracted by an Authority 
 which was recognised by the Southern States at the time the loans were 
 contracted. In any case it is not the business of a debtor, if even the 
 latter be a State, to declare that a certain private legal business, in 
 which the said debtor contracts a liability, is null and void; but this 
 must be left to the decision of the Courts of Law in the case of an 
 action being instituted." 
 
 Dr. Eenaud here lays down with considerable emphasis the principle 
 that when loans are made, there is an imperative obligation on the pari of 
 the recipient of the money or property to repay the loans in terms of the 
 contracts. In the case under consideration, the corporation formerly known 
 
21 
 
 as the Confederate States of America, effected certain loans by an authority 
 residing exclusively in this corporation, and to this corporation the lenders 
 undoubtedly looked for repayment. This corporation was and is bound to 
 pay, these legal debts, so that no countenance is given to the view that " the 
 Confederate States are not legally bound to pay the debts." But the usurping 
 State Governments and the usurping Confederacy are totally distinct corpora- 
 tions from the present State Governments of the South, and it will hardly 
 be maintained that the present State Governments are legally bound to pay 
 debts which it would have been entirely beyond their legal power to have 
 created, apart altogether from the consideration that the Coiifederacj- was 
 not only an illegal, but a rebellious corporation. The loans to the Con- 
 federate States were perfectly legal loans, and they would be perfectly legal 
 and valid to-day if the Confederacy were in existence. But the United States 
 were not the debtors to whom the Confederate Bondholders looked for pay- 
 ment, and in suppressing the rebellion and re-establishing their own former 
 authority, they assumed none of the illegal obligations that the Confederacy 
 had contracted in the attempt to form a separate Eepublic in violation of 
 the rights of the United States. 
 
 Dr. Eenaud does not sufficiently distinguish the very marked difference 
 between loans made by neutrals to belligerent independent States and those 
 made to belligerent rebellious Confederations. Even if neutrals might, 
 according to international law, although it is very doubtful, make loans 
 during war to both belligerents, which the conqueror if he annexed the whole 
 country would be bound to respect in the case of the defeated borrower, it 
 would still remain the fact that there is no international status in a loan made 
 to rebels against a friendly Government, and therefore the creditor of the 
 defeated rebellious Power can only appeal for payment to the national 
 courts of the conqueror, and in these there can be no other decision than 
 that the acts of the rebellious Power were illegal. 
 
 Dr. Eenaud states that the allegation of the improper purpose for 
 which the loans were raised could only be available against the borrower ; 
 but the borrower is no longer in existence, and it is manifest that the United 
 States or the present State Governments had no concern either in the loans 
 or their improper purpose. The legality of the loans is complete, but the 
 
22 
 
 borrower has ceased to exist, and has not left behind him any estate against 
 which the holders of the loans can put forward their claims. 
 
 From the opinion of Dr. Jules Levita, Doctor of Law and Advocate of 
 Paris, the following passages are cited: — 
 
 "The Congress of the Confederate States, after having obtained by 
 its political and military organisation for the Southern States recognition 
 as belligerent States, passed decrees authorizing the issue of loans. In 
 decreeing these loans, pursuant to Section 8 of its Constitution, tlie 
 Confederate Congress exercised, in the name of and with the concurrence 
 of the thirteen States represented by it, the right incontestibly assured to 
 each of them by the American Constitution of 1787 to contract public loans. ' ; 
 
 "It results from these clauses, which are not singular to the Constitu- 
 tions of the States of the American Union (as the principle that the 
 judges are independent of the legislative power is recognized by all free 
 nations), that the Legislative Assemblies of the South had not the right 
 to adjudicate upon a question of private property, and that the question 
 of cancellation of a debt validly contracted, could only be decided by 
 competent tribunals. 
 
 "These latter, in applying the principles upon which all righ 
 property and of claim rest, could not decree confiscation to the prejudice 
 of the owner nor of the creditor. The Courts would have allowed, as 
 provided by the Constitutions of the States, fair compensation to the 
 holders of the bonds of the Confederate Debt." 
 
 " Their obligation is independent of the political changes which have 
 bsen brought about. A country or a province conquered during a war. 
 or pursuant to a treaty, is not discharged from its debts consequent 
 upon the non-continuance of the Government which had contracted 
 such debts."' 
 
23 
 
 Dr. Levita maintains that the Congress of the Confederate States in 
 raising loans after their recognition as belligerents "exercised in the name of, 
 and with the concurrence of the thirteen States represented by it, the right 
 incontestibly assured to each of them by the American Constitution of 1787 
 to contract public loans." But the evident difficulty in accepting this view 
 is that the Southern States usurped powers not granted to them by the Con- 
 stitution of the United States, and violated fundamental laws by which they 
 were bound, and having formed an illegal Confederacy hostile to the United 
 States, which was recognised as a belligerent, neither the States nor the Con- 
 federacy could be said to be exercising powers granted by the Constitution 
 of 1787, whilst they were deliberately violating that instrument. It 
 can hardly be contended, when the States of the South had by violence 
 become Confederate States, and had ceased b} T their own acts and 
 declarations to be States of the United States, that they could legally exercise 
 the powers of issuing loans in such a manner as to secure for such loans the 
 authority and legality of loans issued by the States of the United States. 
 The Confederate States had complete power of their own to raise loans for 
 any purpose they might think fit, according, as Dr. Levita states, to 
 Section 8 of the Confederate Constitution ; and it was as a Sovereign Power 
 that they issued their loans, for the legality of which they appealed to their 
 authority under their own Constitution, and not under that of the United States. 
 
 As to the right of the Legislative Assemblies of the South to adjudicate 
 upon private property, it is not necessary to offer any opinion ; but in the 
 similar case which has been supposed, that, namely, of the debts that might 
 be contracted in the attempt to set up an Irish Eepublic, it is perfectly certain 
 that it would be impossible for the bondholders of the Irish Eepublic to 
 obtain a hearing in any Court of Ireland, or of any other part of the United 
 Kingdom, and it is highly probable that the British Legislature would by 
 retrospective legislation, affix pains and penalties to the acts and to the leaders 
 of the Irish Eepublic. 
 
 The opinion of M. Lente, Advocate of the Court of Appeal- in Paris, and 
 that of M. Henri Barboux, Batonnier of the Eoll of Advocates in the Court 
 
24 
 
 of Appeal in Paris, both assume the correctness of the following statement, 
 namely : — 
 
 That the Constitution of the American Union of 1787 concedes to 
 each of the States of the Union power to contract public loans, and tli.it 
 consequently the Southern Confederated States assembled at Eichmond 
 had in principle the right to borrow individually in terms of that Con- 
 stitution. 
 
 It need scarcely be repeated that the Confederate States were not States of 
 the United States, nor were they exercising the powers of States of the Union, 
 so that it is unnecessary to discuss the inferences they draw from premises 
 which it is impossible to admit, as the subject has already been considered 
 at length. 
 
 In a careful examination of the opinions of these six jurists, therefore, 
 although they all take a favourable view as to the legality of the debt against 
 the present States of the South, there do not appeal- to he any reallv valid 
 grounds on which payment of the Confederate Debt could be legally 
 demanded or enforced. 
 
 VIII— CASES QUOTED IN FAVOUR OF THE CLAIMS OF THE 
 
 BONDHOLDERS. 
 
 The case of the United States r. Prioleau and others, which was tried 
 before Yice-Chancellor Fage Wood (afterwards Lord Ilatherley) in Iscii. 
 gives no support whatever to the case of the Bondholders. The cotton which 
 the United States claimed as belonging to the Confederate States, and as 
 having by the termination of the war become their property, had run the 
 blockade and been brought to England, and thus it became subject to 
 English Courts, which were bound to consider the claims of Prioleau," whose 
 right of ownership or of lien for debt was decided to be valid by this neutral 
 tribunal. Vice-Chancellor Wood held that the United States could only 
 recover the cotton subject to the equities and liabilities attaching to it. one 
 of which liabilities was the payment of a debt due from the Confederate 
 States to Prioleau of £40,000. 
 
25 
 
 But the cotton claimed by the Bondholders was not in England, nor 
 under the cognizance of neutral courts, and as at the close of the war it fell 
 into the possession of the United States, and was appropriated by them as 
 property illegally acquired and held by a usurping Government, there were 
 no equities attaching to it in favour of the Cotton Bondholders that could be 
 enforced in any United States Court. The loan had no international 
 character, and therefore had no claim to be considered anywhere but in the 
 Courts of the United States. 
 
 The same objection as in the Prioleau Case exists in the case of the 
 United States v. MeRae, namely, that the equities that may be declared to be 
 valid with regard to property in a neutral country, and before a neutral 
 tribunal, may have no legal existence whatever in a -belligerent country, and 
 before courts which are bound to declare to be illegalities all acts done in 
 aid of rebellion against their lawful authority. The United States declare 
 that the cotton, which was hypothecated by a number of their rebellious 
 citizens, was illegally acquired by the latter, and that the loan made upon the 
 cotton by neutral aliens was without warrant in international law and thus could 
 only be regarded as a gambling transaction. They assert, therefore, that claim 
 to repayment cannot be brought before any court in the United States, nor 
 can any equitable grounds be presented on which payment could reasonably 
 be expected. 
 
 In the case that we have already supposed, of a rebellious attempt to set- 
 up an Irish Republic, the latter might levy taxes, and with the proceeds 
 purchase flax or any other kind of property, and hypothecate this to the 
 bondholders of their loan in the United States. But whether the Irish 
 Republic lasted four months or four years after hostilities commenced, is it 
 supposable, when Britisli authority was finally re-established, that the 
 British Government would hand over the hypothecated property that had 
 fallen into their possession, to the holders of the bonds of the Irish Republic ? 
 This would be an exactly parallel case, and it is unnecessary to say that such 
 a demand of the Irish bondholders would be rejected without much necessity 
 for lengthened consideration. 
 
 [20201] 4 
 
26 
 
 There is a very marked distinction to be drawn between I he legality of 
 a loan raised by a belligerent in a neutral coiintiT. in so far a< ii does not 
 infringe the laws to be observed by neutrals, and the responsibility of the 
 other belligerent to repay the loan when lie has defeated his rebellions 
 citizens who applied the proceeds of the loan in endeavouring to deprive 
 him of his own territory. The legality in a neutral country of the document^ 
 issued, is totally different from the legality of the loan as determined by the 
 courts of the country in which the claim for repayment must be made. 
 
 "In 1842, Mr. Webster, on behalf of the United States Government, 
 
 expressed himself as follows (the question being the 
 
 international validity of loans to Texas, then in revolt from .Mexico) :— ' A- 
 
 to advances and loans made by individuals to the 
 
 Government of Texas, or its citizens, the Mexico Government hardly needs 
 to be informed that there is nothing unlawful in this, so 'Ions; .-is Texas 
 is at peace with the United States, and that these are things which no 
 Government undertakes to restrain.' " — The Bondholders] Qase, p. .'»•!. 
 
 This is simply a question as to the right of neutrals to make Loans 
 to revolting States without infringing the laws of neutrality in their own 
 country. But because Mexico as a belligerent, lighting to recover its own 
 lawful authority, has no international right to call upon the United States 
 to prohibit American citizens from aiding by loans the rebellious citizens 
 of Mexico, can that be assumed to be a valid ground on which Mexico, if it 
 had defeated the Texans, would have been bound to pay debts incurred by 
 Texas in the unsuccessful effort to achieve; independence r In the late 
 draft of a proposed settlement (May, 1882) of the Mexican debt, the loans 
 raised by Maximilian for the support of the Imperial cause were not r< 
 nised at all, and yet the case for their payment is very much stronger than 
 that for the payment of the Cotton Bonds, having regard to the predominant 
 position which Maximilian held for a time in Mexico. 
 
27 
 
 " Mr. Holford's claim against the United States . . . . . . arising 
 
 out of their annexation of Texas . . . . . . is in every respect 
 
 similar to the present case of the Cotton Bondholders, except that no civil 
 war preceded the claim in the case of the Texas loan. But, as regards 
 seizure by the United States of the pledged property, the circumstances are 
 identical Mr. Hornby, the British Commissioner, said in the course of his 
 argument, ''this clear and indisputable obligation of the United States has 
 not only been thus duly acknowledged by the executive of the United 
 
 States, but on three different occasions upon the express 
 
 ground! that the transfer of the right to levy imposts which Texas had, as a 
 sovereign Republic, at the time of her annexation to the United States, and 
 which antecedently she had appropriated expressly to the payment of this 
 debt, bound the United States to do one of two things — either to pay the 
 debt or surrender the pledge ; and not being able constitutionally to do the 
 latter, it follows as a matter of irresistible consequence that she is both 
 morally and legally bound to do the former/ '* — The Bondholders' Case, p. 61. 
 
 The United States ultimately paid this claim. But the circumstances 
 were very different from those of the Cotton Bondholders. It was not a 
 province of the United States that had revolted and been defeated, it was an 
 independent Republic; which became a State of the Union with the consent 
 of its own citizens, and as the United States took possession of the sources of 
 revenue that had been hypothecated for the payment of this debt, the obli- 
 gation became an international one. It was in no way tainted with illegality, 
 and was therefore acknowledged as valid on several occasions by the United 
 States and ultimately paid. 
 
 •' Now it is a received maxim of all warfare — foreign, and still more 
 civil — that one belligerent State or party makes war against the other State 
 or party* not against the individual citizens thereof, except so far as they 
 may actually participate in the war, and so become amenable to its usages, 
 and liable to its risks. The one State or party ought not, therefore, 
 (analogously) to visit with pains and penalties, on the conclusion of the war, 
 
 [20201] 
 
28 
 
 those individual citizens. who have entered into financial relations with the 
 only Government available. for such purposes, and to whom that Government 
 incurred debts. This, however, they would do by confiscating those debts. 
 The Federal Courts have regarded the acts of the Governments of the 
 revolted States as valid so far as those acts were unconnected with the 
 rebellion. 'Texas p. White,' 7 Wallace, 170. 
 
 •'Thus they have recognised the validity of a sale of land by a private 
 citizen to the Confederate Government, see ' United States, Lyon el al, V, 
 Huckabee,' 1G Wallace* 4],4. . 
 
 " Contracts between citizens, payable in Confederate notes, were enforced. 
 and the parties compelled to pay at the real value thereof, and not at the 
 nominal value when payment was due. The notes were treated as a currency 
 imposed by irresistible force."— The Bondholders' Case, pp. GO, 57. 
 
 This only shows that the United States recognised all contracts as valid 
 tjiat w r ere entered into in the Confederate States during the rebellion, except 
 those that were connected with the rebellion itself. Thai is. they recognised 
 all those contracts made under Confederate rule that would have been valid 
 if they had been made under United States rule, and refused to legislate so 
 as to make legal all those acts that would have been illegal under United 
 States rule, and amongst the latter the loans of the Confederacy. 
 
 The case of the Peruvian Bondholders is brought forward as showing 
 that when Chili defeated Peru, it recognised the prior right of the Bond- 
 holders to the guano deposits that came under its political control, on the 
 ground that the conqueror ought to take over and. respect the just obliga- 
 tions of the conquered. It is alleged that in the same way the United States 
 ought to have recognized the prior rights of the Cotton Bondholders in 4 
 the cotton hypothecated by the Confederate States to the Bondholders. 
 However, since the documents were issued in which tin- honourable course 
 pursued by Chili at the outset is pointed out, the Government of that country 
 has unfortunately shown a decided tendency to act towards the Bondholders 
 in a manner utterly at variance with the most settled principles of inter- 
 national law. The cases, it will be seen, nevertheless, are not similar. 
 Chili conquered a part of Peru to which, up till the time of 
 conquest. Chili had no claim whatever; and. therefore, according 
 
29 
 
 to international law it was bound to respect the prior obligations of the 
 independent State of Peru ; and as the guano deposits were hypothecated to 
 the Bondholders, Chili was bound to respect the rights of the latter. It 
 would be difficult, therefore, to find a stronger or more complete claim 
 according to international law than that of the Peruvian Bondholders, seeing 
 that they have a complete legal claim and a special hypothecation. On the 
 other hand, the Confederacy never reached the status of an independent 
 State, nor did the hypothecation of the cotton take place before the war, 
 as in the ease of Peru with the guano deposits. The United States did 
 not conquer a neAV territory, it simply re-established its own former juris- 
 diction. 
 
 Then, again, it is alleged that if the Confederacy has been broken up, the 
 individual States of which it was composed remain, and that as the partners 
 in the Confederacy they are jointly and severally liable for the partnership 
 debt. But as has already been stated, the Confederacy was an illegal cor- 
 poration, and the State Governments that created it were illegal corporations,, 
 and as such the}' could not have legal successors. The present State- 
 Governments are new corporations created by law since the fall of the Con- 
 federacy, and therefore they have no liability for the illegal acts of the 
 Confederacy or the States composing it. The only successors of the Con- 
 federacy and the States to be found, are the individual citizens of the Southern, 
 States who created the illegal State Governments and the illegal Confederacy, 
 and although the Fourteenth Amendment prohibits the States from paying the- 
 Confederate Debt, it does not prohibit the citizens of the Southern States 
 from doing so. They were the partners in the Confederacy, and are its 
 legitimate successors, so far as it can be regarded as having any successors. 
 
 IX.— THE EQUITIES IN THE ORIGINAL CONTROVERSY BETWEEN 
 NORTH AND SOUTH RESERVED. 
 
 In all that has been said regarding the Confederate Bonds as Confederate 
 Debt, the object has been to examine if any legal or international grounds 
 could be found on which a claim could be made either to the United States 
 
30 
 
 or to tin? Southern States for payment. But no such grounds have been found, 
 so far as an examination of the materials under discussion has enabled a 
 judgment to be formed. 
 
 This is far from implying, however, that all grounds for a claim arc 
 exhausted, because the discussion has been confined to the practical bearing 
 of well known facts and of settled principles of international law, and lias not 
 touched upon the merits of certain equities that enter into the case, though 
 they lie beyond the scope of the present examination. Nor is it meant to imply 
 that there are equitable claims arising out of the fact that though the United 
 States or the present State Governments are not the actual legal successors 
 of the Confederacy, yet they are practically its successors, and therefore tiny 
 ought to pay its debts. This is too weak and hopeless a basis on which to 
 raise any expectation of payment on international grounds. 
 
 But there is some held tor consideration by the United States in regard 
 to the claims of the Dollar Bondholders in the "irrepressible conflict" 
 between North and South which, it cannot possibly be doubted, led the 
 Southern States to desire to protect slavery from the dangers to which their 
 property in slaves was being subjected by the Northern Abolitionists, and which 
 led them, in the hope of securing greater protection, to secede from the Union. 
 The present discussion is not in any way concerned with the question as to the 
 sacredness of the cause in which the Abolitionists were engaged, and besides 
 most Europeans were strongly in favour of anti-slavery views. However 
 objectionable the institution of slavery may have been in the eyes of Euro- 
 peans and, of Northern Abolitionists, it was nevertheless an institution under 
 the protection of the law, while the attitude of the Northern Abolitionists — 
 rightly or wrongly, is not in question — was hostile to slavery, and was hostile 
 to the enforcement of the laws in regard to slaves. The British people, had 
 come face to face with the same question in the West Indian Islands, and 
 they regarded the owners of slaves as having such complete legal lights in the 
 ownership of their slaves, that in 1833 they voted out of the British Treasury 
 £20,000,000 as compensation to the slaveholders in order that the slaves 
 might be emancipated. The aim of the Northern Abolitionists was to 
 the slaves without compensation to the owners, on the ground 
 
01 
 
 that no man had a right to hold property in his fellowman, and this 
 roused fierce antagonism in the South against the Abolitionists and 
 Northern people generally. The fact that Northern statesmen 
 should have spoken of the political relations between North and South 
 as an " irrepressible conflict," shows that the nation was divided into two 
 bitterly hostile sections, and it cannot be doubted that the South had very 
 strong reasons for dreading that the power of the North, then in 1801 coming 
 into complete ascendency in the National Government, would be a grave danger 
 to the continuance of slavery, as it could hardly fail to take aggressive 
 political action against that institution. The Fugitive Slave Law was a dead 
 letter in. all, or nearly all, of the Northern States, and finding the North so 
 hostile to their special institution, they seceded in the belief that they would 
 be peacefully allowed to form a Confederacy without interference by the 
 United States ; and doubtless also in the belief that, if interfered with, they 
 would be able to maintain themselves against the power of the North. 
 
 Slavery, the evil legacy from past generations, and the bitter source of 
 sectional hostility and hatred, has been abolished, and this menace to the 
 peace, prosperity and unity of a great people, has ceased to be a national 
 danger. In these circumstances, when the fierce conflict has been solved 
 by a tremendous war, and there exists no longer any cause for dissension 
 except the unfortunate remembrances and survivals of the war itself, the 
 question of political expediency may now justly be held to be of supreme 
 and paramount concern ; and the original controversy between North and 
 South may, with a view to the Northern people re-examining their own 
 acts and their own attitude in the light of equity and political expediency, be 
 summed up by saying, that, the North was not altogether right, and the South 
 iras not altogether wrdtig. 
 
 The war, as events happened, was inevitable, and its results are irre- 
 vocable, so that that is not a question to be considered. But there were 
 misfortunes and injustices before it and incident to it, out of which arise im- 
 portant equities that a powerful and expanding nation, rich beyond the 
 dreams of the generation that sustained the burden of the war, and capable 
 ' of being united as they never have been before in their history, have the 
 deepest interest in examining and satisfying. By so doing, they will not 
 
32 
 
 only perform a magnanimous act, not the least, conspicuous among the great 
 deeds recorded in the annals of the leading Commonwealths of the world, 
 but they will cement together in the closest union the two great divisions 
 of North and South, and in such bonds of strength and amity as, if achieved, 
 would be beyond all price; while out of the mutual co-operation of the two 
 formerly discordant sections, a gigantic inter-State commerce will arise, which 
 will be a universal blessing to the whole American people. The time might 
 then be looked forward to as not very remote, when the Fourteenth Amend- 
 ment would be expunged from the Constitution as a symbol of a condition 
 of strife and dissension which the entire people of the United States were 
 anxious to forget, and which they desired should no longer disfigure the 
 Charter of their Liberties. 
 
 X.— AN OMITTED CLAIM AGAINST TBE UNITED STATES. 
 
 Whatever view may be taken of the legal or equitable claims of the 
 Confederate Bondholders, there is a legitimate claim against the United 
 States and the individual States of the South that lias been omitted to be 
 presented. When the war broke out between the North and the South 
 the trade between Europe, and the Southern States in cotton, sugar, tobacco, 
 &c, on the one hand, and in European goods on the other, was one of very 
 .great dimensions, and there was in the South a very large amount of trade 
 debts and of mortgages on property, owing to Europeans, besides a consider- 
 able quantity of property owned by Europeans which they were compelled 
 to sell. A great part of these obligations, when realised, were remitted 
 to Europe in the form of Dollar Bonds, that being the only available means of 
 remittance from the Confederate States. The holders of these Bonds have 
 always been in hopes that the time would come when they would be paid, 
 and when, therefore, they would receive the value to which they were 
 entitled. They knew that the Southern States were poor, that their Stale 
 Bonds were for the time in default, and they thought that when the State 
 debts were rearranged, the Dollar Bonds would also be provided for. That 
 is the attitude of many Bondholders to-day. Thinking that, as they were* 
 
33 
 
 not concerned in the war they had a valid security, they did not prefer their 
 claims through their respective Governments to be presented at 
 Washington at the same time that other claims arising out of the war were 
 being settled. 
 
 *o 
 
 Thus it comes that a large amount of debt which had no connection 
 whatever with carrying on the war or with the Confederacy, remains unpaid 
 by the Southern States to this day. That debt, it cannot be doubted, is 
 a legal and valid claim against the United States no less than against the 
 Southern States ; and if the evidences of the debt are, under the compulsion 
 of war, and by no choice of those to whom it is due, in their hands in the 
 form of Dollar Bonds, there is no equitable ground on which payment of this 
 debt can be refused. It must be particularly observed that although the Bonds 
 held by those to whom these debts from the South were due, are Confederate 
 Bonds, yet those who hold them, as representing Southern private debts or 
 remittances, can rightfully claim that these Bonds so remitted are simply 
 evidences of private legal debts that remain unpaid, and as such they can 
 legitimately demand payment. The Confederate Debt is, according to United 
 States law, illegal, but while this is so, it in no way affects the complete 
 validity in the hands of neutrals, of a large portion of the certificates issued by 
 the Confederacy in the form of Bonds, as undoubted evidences of private 
 debts which had no connection whatever either with the war or the Con- 
 federacy, and which are simply accidentally connected with the name of 
 the Confederate States in being represented by documents bearing their 
 stamp, and which are illegal so far as the interest of the Confederate States 
 is concerned, while they are perfectty legal so far as the interest of private 
 neutrals is concerned, who received them under compulsion as representing 
 legitimate private debts. These private debts, therefore, which it became 
 impossible to settle in any regular manner on account of the war, and of 
 which, in consequence of the remittance of these illegal Bonds and the 
 general destruction of property and scattering of persons that the war 
 entailed upon the South, it has been impossible to obtain any just settlement 
 since the war, are a perfectly rightful claim as international debts against 
 the United States as the Sovereign Power. Against the individual States of 
 the South, they can only be regarded as private debts. 
 
 Now it is neither forbidden by the Constitution of the United States, nor 
 [20201] 5 
 
34 
 
 by the Constitutions of the Southern Stakes, nor by considerations of public 
 policy, to pay such lawful debts as those to which we have referred as re- 
 maining unpaid. Xot only are those debts unpaid, but the Europeans, to whom 
 the evidences of the amount of these debts were remitted in. Confederate 
 Bonds, had to make large sacrifices in consequence of the diminution in all 
 values resulting from the war, and had to be content with but ;i portion of the 
 amount that they should have received if no hostilities had occurred. The 
 amount to be paid in settlement of these -debts, therefore, is a perfectly legiti- 
 mate question for arbitration between the Governments of Great Britain, 
 France and Holland on the one hand, as these arc the countries chiefly 
 interested, and- the United States on the other hand. 
 
 It will probably be alleged that the Bonds were remitted in lull payment 
 of the debts, but that view cannot for a moment be sustained, because the 
 jurisdiction of the United States was the only legitimate jurisdiction within 
 the territory of the Eepublic in the eyes of neutral aliens, and neither 
 the United States nor the legal State Governments of the South could possibly 
 hold that the Confederate Bonds were a legal payment of private debts to 
 absent neutral aliens, while they declared by provisions in the Constitutions of 
 the United Stales and the Southern States that the Confederate Debt was illegal, 
 and should never be paid by the United States or by any of the States. The 
 Bonds thus remitted were, therefore, not a payment at all, but simply so far 
 AS United States law is concerned, evidences of debt due but not paid, a 
 recognition that citizens of the South owed certain amounts of money to their 
 European creditors, and they are to-day evidences of these unpaid debts. 
 But besides the private debts owing from Southern citizens to Europeans, the 
 evidences of which are to be found among the Confederate Bonds, there are 
 also in these Bonds equally valid debts due to many loyal Southern citizens 
 and to Europeans who had to take Confederate Bonds by compulsion in 
 exchange for property with which they were forced to part to the Confederate 
 authorities, and are thus innocent holders of such Bonds in not having had 
 any part in carrying on the war. And these debts also the United States are 
 entitled to pay, partly on equitable and partly on international grounds. It 
 is highly probable that a large quantity of the cotton hypothecated to the 
 Cotton Bondholders, which fell into the hands of the United States, wai 
 forcibly acquired in exchange for Dollar Bonds, and thus innocent holders 
 
35 
 
 of such Bonds have been unjustly deprived of their property and its value, 
 both by the Confederacy and by the United States. Thus it will be seen 
 that a candid examination of the facts by the United States authorities 
 could hardly fail to lead to a recognition by them of a large amount of genuine 
 claims, partly due to Europeans for private Southern debts and for property 
 taken by force, and partly to innocent Southern citizens, all represented 
 in the Confederate Bonds, but in no way coming in conflict with the Fourteenth 
 Amendment, or with any considerations of public policy. And though the 
 private debts owing to Europeans were debts of Southern citizens, yet the 
 claim to repayment is one which is so clearly valid in international law, that 
 the United States cannot refuse to examine and to pay them. 
 
 The Southern States cannot dispute the fact that in the complete 
 paralysis of trade with Europe during the rebellion, immense losses were 
 sustained by European merchants and capitalists, who had an enormous 
 trade pending when the war broke out, were under large advances to 
 planters and others, and were extensively interested in property in the South, 
 most of the proceeds of the wreck of which, was exported to Europe in the 
 form of Confederate Bonds in the absence of any other form of remittance. 
 It is of the utmost importance to the credit of the Southern States, not to its 
 name merely, but what is of infinitely more importance, to its borrowing 
 power, that these claims, and all the State debts, should be put on some 
 settled footing. The States of the South cannot raise money in Europe for 
 the construction of railways or for other enterprises except at exorbitant 
 rates, and it is most important in their own interest that their credit should 
 approximate more closely to the exceptionally high credit that the Northern 
 States enjoy, and it may not be found to- be outside the duty of the latter to 
 help the South in arriving at a consummation so desirable. 
 
 It is important to remark, that it would be not only an act of wisdom, 
 but that it is an act of duty on the part of the United States to deal 
 in a liberal spirit with the legitimate claims of the loyal citizens of the 
 Southern States. Not to act thus is to encourage rebellion, because 
 it will be to give an impressive warning that as soon as hostilities commence, 
 it will be better for persons who might incline to be loyal or at least passive 
 to throw themselves heart and soul into the rebellion, as loyalty will bring 
 
3G 
 
 loss and ruin if the rebellion be suppressed owing to the conqueror treating 
 loyal and rebel alike, whereas the hearty co-operation of rebels and those 
 inclined to be loyal might cause the rebellion to be successful, in which event 
 those who had lost their property in the cause of the rebellion would obtain 
 compensation. Thus it is the duty of the United States, as a matter of public, 
 policy, to pay the legitimate claims of Southern loyal citizens for property 
 taken by force in exchange for Dollar Bonds, to the amount that such debts 
 may be fairly estimated to be represented in the Dollar Bonds. 
 
 When the United States shall have agreed upon the amount of tin 
 debts that they are prepared to pay, then it might seem that a difficulty 
 
 would arise as to what special Bonds represent these debts, as there is no 
 register by which they can be identified. But there need not be any great 
 amount of trouble in settling matters. It must be remembered that the 
 British Government paid the Alabama Award without any special statement 
 of the exact claims to the payment of which the money was to be devoted. 
 In the Alabama Award the amount of the damage was estimated by arbi- 
 trators and paid, and the British Government left to the United States Govern- 
 ment the responsibility of extinguishing all the claims arising out of the 
 Alabama's acts. In the same way, the British, French and Dutch Govern- 
 ments might take the amount of the Award for the payment of these 
 private debts that are represented by Confederate Bonds, and might 
 undertake to extinguish all the claims arising out of them. Or it 
 might be simpler and more satisfactory for the United States Govern- 
 ment to treat directly with the Bondholders, so as to extinguish all the. 
 lawful claims of the holders of Dollar Bonds. In whatever way, however, 
 the amount of the Award may be distributed, that will not in any 
 manner alter the amount of the debts that may be declared to be due, 
 which is the sole question to be considered by the United States and 
 the States of the South. It will be recollected that a policy similar 
 to this was followed by the United States at the close of their War of 
 Independence, when, owing to the very great difficulties attending the 
 recovery of debts between citizens of the United States and of Great Britain, 
 that had accrued owing to transactions before or unconnected with the war, 
 tin; United States paid to Great Britain a lump sum in licpudation of these 
 
37 
 
 private claims of Englishmen against Americans, and left it to the British 
 Government to extinguish all the claims of their citizens. Much more valid 
 are the claims of neutrals, who, by receiving for debts due and for sales 
 of property mere evidences of indebtedness by Southern citizens, and mere 
 certificates of the value of property forcibly taken by the Confederacj', have 
 thus suffered as much as if they had not merely been belligerents, but as if 
 they had been rebels. 
 
 The amount of the Award beim>- available in the hands of the United 
 States Government, or being paid over to the European Governments 
 the only practicable method of adjustment will be, in the absence of 
 complete proof of the special Bonds on which the whole amount of the 
 Award ought to be paid, to distribute this amount over all the Dollar 
 Bonds that are presented within a certain time, and then all these 
 Dollar Bonds, thus cancelled, can be delivered to the United States 
 Government. If there be anything unsatisfactory in this method of pro- 
 ceeding, it will at least be no injustice to the United States, because 
 they will only pay their lawful debt, though there may be unavoidable 
 injustice to loyal Southern citizens, and to those European creditors of Southern 
 citizens, who, by their own thoughtlessness and carelessness, neglected the 
 opportunity at the proper time of presenting their claims to their respective 
 Governments to be brought before the Commissions that sat at Washington 
 for the settlement of such claims. But there is no other way in which these 
 debts of European and Southern citizens can be extinguished than by can- 
 celling all the Dollar Bonds that may be presented, as when that is done 
 there will be no possible doubt that all the evidences of these private Southern 
 debts and of the legitimate claims of Southern citizens shall have been 
 given up, and the debts and claims thus extinguished ; even if a less sum 
 shall have been paid on some Bonds than might have been if the Bonds had 
 been specially marked, and if payment shall have been made on other Bonds 
 which, if they could have been distinguished, would not have received any 
 payment at all. 
 
 This is a perfectly valid international claim on behalf of Europeans, 
 which the British, French and Dutch Governments, whose citizens are 
 [202011 
 
38 
 
 chiefly interested, can without hesitation present to the Government of the 
 United States, and which the United States, after satisfying themselves by 
 arbitration or otherwise as to the amount, may confidently be expected to 
 pay* The claim on behalf of loyal Southern citizens, to repayment for pro- 
 perty represented also in the Dollar Bonds, is one the validity of which the 
 United States cannot in justice refuse to recognise. 
 
 London, February 1st, 1884. 
 
UNIVERSITY OF CALIFORNIA LIBRARY, 
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