M. Massigli, Secretary-General of the Conference.

M. BOMPARD Conveyed to the conference the apologies of M. Barrère, who was temporarily indisposed, and had asked M. Bompard to take the chair at the present meeting in order not to delay the work of the conference.

Clauses 12, 13 and 14 respecting Communications and Transport.

M. BOMPARD laid before the commission a report from the SubCommission on Communications and Transport (Annex (A)) concerning these clauses.

Clauses 12 and 13 were adopted.

M. Bompard stated that further negotiations were in progress on the subject of clause 14, and that it would be well to await the result of them before taking a decision.

Financial Clauses.

The commission had before it the report presented by M. Bompard on behalf of the Financial Sub-Commission (Annex (B)).

M. BOMPARD thought it unnecessary to have this document read, as all the delegates were acquainted with it. He preferred to invite the Turkish delegation to speak at once on each part of the report. Distribution of the Ottoman Debt.

ISMET PASHA said that the Turkish delegation had examined the report of the president of the First Sub-Commission with the greatest care. They noted with satisfaction the eminently just decision which had been taken unanimously in regard to the apportionment of the Ottoman Debt among all the territories which had formed part of the former Ottoman Empire. Nevertheless, the ideas set forth in the report regarding the method of dividing up the debt did not exactly correspond with the ideas of the Turkish delegation on the matter, and they therefore felt bound to state the following considerations with a view to defining their attitude :—

There was a wide divergence of view between the Turkish and Allied delegations respecting the total of the debt to be divided up. The Turkish delegation held that the total amount of the Ottoman Debt which should be distributed among the succession States of the Ottoman Empire ought to be the total debt which existed on the 30th October, 1918. They were convinced that their request was entirely consonant with justice and equity, for the following reasons:

(a.) The debt to be divided up was not a debt the payment of which was demanded of the Allied Powers; it was, on the contrary, a debt contracted by all the various parts of the Ottoman Empire, at a time when they had a common existence, for the purpose of meeting their financial needs. It was consequently quite natural that each part of the Ottoman Empire should take over its due share of that debt.

(b.) Even if it were argued that part of the debt in question was contracted during the war, the Turkish point of view would still be correct; for the portions of the Ottoman Empire now detached from Turkey had not ceased to take part in the Government of the Empire through constitutional agencies until the armistice of 1918. The principle of peoples being responsible for the actions of their Governments was one which had constantly been brought forward in recent years; and it was therefore quite natural that the populations of all the territories which formerly constituted the Ottoman Empire should take their share of all the expenses of their common existence up to 1918.

(c.) Similarly, if one ought to take into account what was called "responsibility for war" (as was stated in the report), it would be altogether unjust and unfair to maintain that that responsibility should be borne by Turkey alone, which constituted only one of the component parts of the Ottoman Empire.

It followed that all the territories detached from the Ottoman Empire were naturally bound to assume a portion of that Empire's debt. It was likewise clear that the objections of the Allied Powers on the subject were quite unfounded.

For all these reasons the Turkish delegation were compelled to state that the distribution of all the debts included in the table which they had the honour to submit constituted a vital point which they could neither withdraw nor modify.

M. BOMPARD said that the Turkish proposal amounted in practice to adding two items to the table prepared by the Allied delegations: the internal loan (£ T. 18,000,000) and the paper currency issued by the State during the war (£T. 150,000,000 to £T. 170,000,000).

In this connection, M. Bompard wished to observe that, while these two items were expressed in terms of Turkish pounds paper, the Turkish delegation had added them up in their table together with other loans expressed in Turkish pounds gold.

The question before the commission was whether the debt to be distributed should comprise the debt contracted by the Turkish State during the war. The Allied Governments, in drawing up their table, had adhered to the generally established custom, namely, to exclude war debts, which should be borne solely by the State responsible for the war.

The Turkish delegation stated that the detached territories should bear their share of war expenditure, because they had taken part in the war, having been at the time integral parts of the Ottoman Empire. As a matter of fact, these territories had taken part in the war in exactly the same way as Croatia and Slovenia, i.e., countries which had taken part in the war on the side of Austria against their will, and had for that very reason been exempted from any contribution to Austria's war expenditure.

Finally, it seemed difficult to admit that issues of paper currency should constitute a debt of the State, since the latter was not bound to pay interest on it.

ISMET PASHA said that he had taken M. Bompard's arguments into account, as they had already been laid before the Financial. Sub-Commission. In his opinion, justice required that the whole Ottoman Empire, as it existed at the time of the armistice, should take part in the total burdens borne by the Empire at that date.

M. BOMPARD said that the Allied Governments maintained their point of view on this question in its entirety.

LORD CURZON wished to associate himself entirely on behalf of the British delegation with the position taken up by M. Bompard. He had not had the advantage of assisting at the meetings of the sub-commission, and therefore was not as familiar as other delegates present with the arguments which had been employed; but upon the general principle at issue he could not conceive that there could be any doubt. As M. Bompard had remarked, it was entirely in accordance with justice and with all precedents that the date from which the distribution of the debt was to be reckoned should be the beginning of the war. He was astonished that anyone should dispute

that self-evident proposition. The Turkish delegation had actually proposed to throw upon the territories which had voluntarily separated themselves from the Ottoman Empire the burden of all the war—a war in which they had little sympathy and had not taken a notable part. How could such a proposal be sustained consistently with equity? One of the arguments advanced by Ismet Pasha was that there was a difference between the Ottoman Government of 1914 and the present Angora Government, and that, since the war was declared and carried on by the former, the latter were not responsible. That was a very dangerous argument for the Turkish delegation to employ, since it could be used against them quite as often as in their favour. He much regretted to see them take up such an intransigent attitude on this matter, for while in some questions laid before the conference the arguments balanced each other, that was not so in the present instance. The Turkish delegation would never succeed in sustaining their case before before any tribunal of public opinion.

The delegates were now approaching a stage at which it was their duty to finish; he was therefore very sorry when he saw any delegation, whether Turkish or Allied, put an unnecessary stone in the path. This was what had just been done. He must therefore most earnestly ask the Turkish delegation to consider whether the point now at issue was one upon which they could with any chance of justifying their case reject (as they were apparently disposed to do) the most equitable and reasonable proposals put before them by the Allies.

MARQUIS GARRONI associated himself on behalf of the Italian delegation with the remarks of Lord Curzon and M. Bompard. The question had already been discussed at the sub-commission, and the arguments in favour of the Allied case, which had just been summed up, did not admit of any controversy.

ISMET PASHA said that the distribution of the Ottoman Public Debt was one of the most important financial questions requiring settlement. He was astonished that the daily sacrifices made by the Turkish delegation did not convince the other delegations that Turkey had reached the limit of concession. Nevertheless every day fresh sacrifices were being demanded of them. Syria, Mesopotamia and the other detached countries were not willing to assume their share of the debt contracted for the purpose of the common prosecution of a war common to them all. Those countries wished to cause all the war expenditure to be borne by Turkey, who was naturally poor in resources and still further impoverished by the war. The proposal of the Turkish delegation was equitable and would be approved by the public opinion of the world. Ismet Pasha therefore asked the inviting Powers to examine the question in a spirit of equity, and to be so good as to decide that Turkey's whole debt at the time of the armistice of Moudros should be distributed among all the succession States of the Ottoman Empire. He further asked that the Financial Sub-Commission should be requested to examine the matter afresh.

M. BOMPARD said that it would be for the commission to decide whether this proposal should be accepted.

Railway Loans.

M. VENISELOS laid before the commission a note containing the remarks of the Greek delegation in regard to the inclusion of railway loans in the table of the debt to be distributed (Annex (C) ).

He recalled the fact that when he had first raised this question at the Financial Sub-Commission, the inviting Powers had admitted that he was right, and had gone so far as to distribute on the 8th December a proposal in harmony with his view (see Annex (C), § II, concluding portion). Later on the inviting Powers had gone back on their proposal on the pretext that it implied the distribution of debts. contracted by private companies and not by the Turkish State. this statement was incorrect.

But

Referring to the note in which the Greek delegation had set forth their case, M. Veniselos explained that what Greece asked was that the burdens undertaken by the Ottoman Government in the form of kilometric guarantees, with a view to ensuring the building and working of railway lines, should be taken into account. There was no difference between the payment of a kilometric guarantee and the service of a loan, because both were charges assumed by the State for the construction and working of railways. M. Veniselos suggested that one could convince oneself of this by comparing the relevant articles in the Bagdad Railway Convention and the convention regarding the Salonica-Constantinople junction line, which were annexed to the Greek note. Why should distribution of the burden be admitted in the case of the former articles and excluded in the case of the latter, when both were identical? The case of the Salonica junction line deserved special consideration, inasmuch as the Greek Government had in 1919 proceeded to buy the line in response to an urgent request from the French Government. The Greek Government had at that time agreed to reimburse the share capital of the company, and to undertake to pay the interest on the debentures which had been issued. Further, the Greek Government had assumed the responsibility for the payment of the kilometric guarantee which the Ottoman Government had undertaken by the concession contract to place at the disposal of the company. Article 9 of the convention concluded between the Greek Government and the company in 1920 ran as follows:

"In order to replace the security assigned by the Ottoman Government for the (kilometric) guarantee of the line, the Greek Government agrees to assign to the payment of the interest of the debentures issued by the company the surpluses of the revenues administered by the International Commission at Athens. This assignment shall rank immediately after the assignment already agreed to by the Greek Government arising from the said revenues.

"In accordance with the preceding articles the Greek Government shall notify the provisions of this article to the International Commission."

It would not be right that the purchase of this line, which had been undertaken with a view to safeguarding French interests otherwise compromised, should react to the disadvantage of the Greeks.