a definite assurance from President Castro that this interpretation of his language was accepted by him as correct, and that whatever procedure were adopted adequate provision would be made for the prompt satisfaction of the claims specified in paragraph 1 of the conditions, His Majesty's Government would be prepared to authorize His Majesty's Ambassador at Washington to confer on this basis with Mr. Bowen, as the Representative of the Venezuelan Government, and would furnish your Excellency with the necessary instructions for examining the possibility of an immediate settlement, or, failing such a settlement, for arranging a reference of all points left open for arbitration to the Tribunal at the Hague. The reply from the President of Venezuela, received by Mr. Hay on the 8th instant and transmitted to me by Mr. White on the 9th in the form of a telegram from Mr. Bowen, was as follows:-(folgt Nr. 12917.)

Mr. White was instructed to inform me at same time that Mr. Bowen would proceed to Washington immediately, and I have since learned that he is expected to reach New York on the 19th instant. || I have now to give your Excellency the following instructions: - || Mr. Bowen will no doubt on his arrival at Washington ask you either directly or through the United States' Government to receive him, and you should in reply intimate that you are authorized to confer with him, as the Representative of the Venezuelan Government, for the purpose of examining the possibility of an immediate settlement of the claims put forward by His Majesty's Government, or, failing such a settlement, of arranging a reference of all points left open for arbitration to the Tribunal at The Hague. || The course of the negotiations will, in a great measure, depend upon the instructions with which Mr. Bowen has been furnished, and you will, in the first place, ascertain whether the proposals which he is empowered to submit are in strict accordance with the conditions set forth in my Memorandum of the 23rd December and note of the 5th January, to which reference has been already made. || Whether those proposals are made in contemplation of an immediate settlement without reference to arbitration, or whether the discussion is directed to the preliminaries of arbitration. it will be indispensable that Mr. Bowen should at the outset satisfy you that he is authorized to arrive at a prompt and satisfactory settlement of those British claims which are included in the first of the three categories enumerated in the Memorandum of the 23rd December, claims namely which arise out of the seizure and plundering of British vessels and the outrages on their crews, and the maltreatment and false imprisonment of British subjests. These claims amount to about 5 500 l., and His Majesty's Government

require that this liability should be at once satisfied. || Other claims for compensation, including the railway claims and those for injury to, or wrongful seizure of, property are estimated as amounting to about 600 000 7. His Majesty's Government will be ready to accept in satisfaction of these claims either a sufficient cash payment or a guarantee based on security which must be adequate, and which the Venezuelan Government must be bound not to alienate for any other purpose. His Majesty's Government will be ready to renew the proposal which they deemed it equitable to make in the first instance, viz., that, before the amount to be actually handed over to claimants of this class is finally decided, a Commission, upon which Venezuela would be represented, should be appointed to examine and report upon the amount to be awarded in satisfaction of each claim. It would probably be convenient that the Commission, if appointed, should meet at Port of Spain. Should a cash payment have been accepted by His Majesty's Government they will be prepared to refund any surplus which may be available after the examination. | It is desirable that advantage should be taken of this opportunity in order to effect a settlement of the claims of the bondholders. The British creditors are principally interested in the loan of 1881. This loan represents the outcome of various arrangements under which the bondholders have submitted to large reductions in their claims. On the 31st December last there were fifty-six monthly instalments of the debt service in arrear representing a sum of abaut 394 625 7. An arrangement for the settlement of the External Debt of Venezuela has been drawn up by the Council of Foreign Bondholders and the Disconto Gesellschaft of Berlin. The terms of this arrangement seem to be of a liberal character, and should be acceptable to the Venezuelan Government. I understand that in March 1901 the Venezuelan National Assembly passed a Law authorizing the President to make a settlement with the Bondholders on these lines. I inclose copies of Memoranda furnished to me by the Council of Foreign Bondholders, showing the present position of the 1881 and 1896 loans. || If the endeavour to arrive at a direct settlement should prove unavailing, you will proceed to discuss with Mr. Bowen the preliminaries of a reference to the Tribunal of Arbitration at the Hague. || Before the signature of an Agreement for reference to the Tribunal it will be necessary that the claims in the first category should, as in the case of a direct settlement, be disposed of by an immediate payment. The other claims, including those for injury to property and the claims of the bondholders, would be submitted to the Tribunal on the conditions laid down in the Memorandum of the 23rd December. || There is another

point which you should take an early opportunity of mentioning to Mr. Bowen, The establishment of a blockade created ipso facto a state of war between Great Britain and Venezuela, involving, it might possibly be contended, the abrogation of any Treaty existing between the two countries. In these circumstances, you should suggest an exchange of notes between your Excellency, as His Majesty's Representative, and Mr. Bowen, as Representative of the United States of Venezuela, to the effect that it is agreed that the Convention between Great Britain and Venezuela of the 29th October, 1834, which adopted and confirmed (mutatis mutandis) the Treaty of the 18th April, 1825, between Great Britain and the State of Colombia, shall be deemed to be renewed and confirmed, or, if the Venezuelan Government should prefer, provisionally renewed and confirmed pending the conclusion of a fresh Treaty of Amity and Commerce. It may be convenient that I should recapitulate briefly the instructions contained in the preceding paragraphs.

1. If an arrangement is concluded for a direct settlement: || (a.) Claims arising out of the seizure and plundering of British vessels and the outrages on their crews, and the maltreatment and false imprisonment of British subjects, must be at once satisfied. || (b.) Other claims for compensation, including the railway claims and those for injury to, or wrongful seizure of, property, must be met either by an immediate payment to His Majesty's Government or by a guarantee adequate, in your opinion, to secure them. These claims can, if this be desired, examined by a Mixed Commission before they are finally liquidated. || (c.) A fresh arrangement must be entered into by the Venezuelan Government in order to satisfy the claims of the bondholders, and this arrangement must include a definition of the sources from which the necessary payments are to be provided. || 2. If recourse is had to the Tribunal at the Hague: || (a.) Immediate payment must be equally made of the claims in the first category. (b.) The other claims, including those of the bondholders, will be referred to the Tribunal on the conditions laid down in the Memorandum of the 23rd December. || In either case, there must be an exchange of notes renewing the Convention of the 29th October, 1834. || On learning that the negotiations have resulted in an agreement fulfilling the above conditions, His Majesty's Government will at once give orders that the blockade of the Venezuelan ports by His Majesty's ships shall be raised. They will also be prepared to restore the vessels of the Venezuelan navy which have been seized, and, further, to release any other vessels captured under the Venezuelan flag on receipt of a guarantee from the Venezuelan Government that they will hold His Majesty's Government

indemnified in respect of any proceedings which might be taken against them by the owners of such ships or of goods on board them. || All obstacles to the renewal of diplomatic intercourse will then have been removed, and His Majesty's Government will be happy to re-establish those friendly relations between Great Britain and Venezuela which previously existed, and which they sincerely desire to resume.

Anlage.

Lansdowne.

Memoranda on Venezuelan Loans of 1881 and 1896.

Loan of 1881.

In 1834 Venezuela became responsible for 282 per cent. of the original Columbia. Dept which was contracted in this country to carry on the war of independance against Spain. The amount of debt so assumed by Venezuela was 1888 396 7. principal and 906 4301. arrears of interest. Total, 2794 826 7. || Until 1841 no interest was paid on this debt. In that year a settlement was made by which the bondholders submitted to considerable sacrifices. || In 1847 default occurred. In 1859 an arrangement was made, when further concessions were demanded of the bondholders. Default again took place in the following year. || In 1862 the arrears of interest under the 1859 arrangement were funded and a new loan of 1000 0007. was issued. || In 1864 a further Loan for 1 500 0007. was floated. In the same year payments on the 1859 and 1862 Loans were discontinued, and in 1867 default was made on the 1864 Loan. With the exception of a payment of 3s. in the £ on the coupons in 1876-8, the whole of the loans remained in default until 1881. In that year the loans of 1859, 1862, and 1864 were converted into a New Consolidated Debt, the bondholders once more having to submit to large reductions. || Interest on the Consolidated Debt was reduced to 3 per cent. until the unification of the External and Internal Debts could be effected, when it was to be increased to 4 per cent. Venezuela, however, raised various difficulties in the way of the unification being carried out, and has newer paid more than 3 per cent. || In 1897 default again took place; since then a small amount has been remitted at irregular intervals sufficient to pay off the balance of the coupon due February 1898, and half the coupon due August 1898. || At the present time the amount of principal outstanding is 66 614 550 bolivares, or, say, 2 638 200 7., and the amount due for the service of the debt in arrear up to the 31st December, 1902, 56 monthly instalments of 177 933 58 bolivares, equivalent to 9 964 280 bolivares, or, say, 394 6257. || During the 69 years

that have elapsed since Venezuela became an independent State it may be reckoned that the External Debt contracted in this country has been in default for nearly 40 years, and that during the same period the Republic has compelled the bondholders to accept five arrangements, under each of which they have had to submit to large sacrifices of their rightful claims.

Five per Cent. Loan of 1896.

This loan was for 50 000 000 bolivares, or, say, 1980 1981. It was issued through the Disconto Gesellschaft of Berlin for the purpose of settling the railway guarantees in arrear and the redemption of the same guarantees in the future, the acquisition of some of the railways by the Government, and the completion of the Central Railway. The amount of bonds issued to English Companies was 6800 00 bolivares, or, say, 269 3077. These Companies had to submit to large reductions of their claims. || The service of the loan went into default in 1897; between that date and 1901 some small payments were made by the Venezuelan Government which were sufficient to discharge the June 1898 coupon, and 56 per cent. of the December 1898 coupon and sinking fund. || The amount of the principal outstanding is 48 807 440 bolivares, or, say, 1932 9677., and the amount of be interest and sinking fund in arrear to the 31st December, 1902, is 12 660 097 bolivares, or, say, 501 3907. || The loan bears 5 per cent. interest and 1 per cent. accumulative sinking fund, and is secured on a sufficient amount of the customs revenues of the Republic provide 3 000 000 bolivares annually. No other loan enjoying equal or better rights can be issued by Venezuela until the 1896 Loan has been entirely repaid.

Nr. 12930. GROSSBRITANNIEN.

Der Minister des Ausw. an

den Botschafter in Berlin. Unterredung mit dem deutschen Botschafter über die Verhandlungen mit Bowen.

Foreign Office, January 15, 1903.

Sir, I had some conversation yesterday with the German Ambassa dor in regard to the action which might be taken by the British and German Governments in consequence of the communication made to us on the 9th instant by the Government of the United States as to Venezuelan affairs. || His Excellency asked me whether His Majesty's Government had sent any reply to the communication in question, and I informed him that its receipt had been acknowledged, but that we had