But the branch of this question which has now been considered for morethan one hundred years is less general than that which I have putit is,can a citycan a sovereignconfiscate debts due from itself or himselfto enemiesThis is the point raised in the famous case of the Silesian loan.
The history of it is as followsA loan of 80,00lhad been advanced bysubjects of Great Britain to the Emperor Charles VIOn the security of theDuchy of SilesiaSilesiain course of timewas transferred to Prussiaby virtue of the Treaties of Breslau and Dresdenand in consideration ofthis cession Prussia was to discharge the debtThe lying of Prussiahowever,attachedi.etook into his own handsthe debt by way of reprisalsbutthis by the terms of the treaty he had no power to doHe professed himselfto be aggrieved by the decision of certain English prize courts in respectof acts of vessels belonging to his subjectsand refused to pay the Britishsubjects the interest which he had pledged himself to payThe English Secretaryof State at once addressed to himfor Prussia was a friendly Power at thetimea letter dated February 81753in which he dwells upon the unprecedentednature of the proceedingand states that he has the King's orders to sendto the King of Prussia a report made to his Majesty by Sir George LeeJudgeof the Prerogative CourtDrPaulhis Majesty's Advocate-GeneralSir DudleyRyderand MrMurray -the MrMurray who afterwards became Lord Mansfield.
The report in question is one of which British lawyers and the British ForeignOffice have always been exceedingly proudIt is praised by two great foreignauthorities of the time -Vattel and Montesquieuthey both of them speakof it as admirableit isin facta most excellent example of the methodof reasoning of which International Law admitsand in the end the King ofPrussia gave way to its argumentsand the interest on the Silesian loanwas ever afterwards punctually paidThe point which I have been describing,is not strictly raised by the factsas MrWEHall observes in his book;but the opinion of the law officers goes into many questions besides themain question submitted to themand among these the trivial question whethera sovereign can confiscate debts due to himselfand argues against itEversinceit has been held that no sovereign can under these circumstances refuseto pay the interest on a loan which he has contracted because the recipientsof the interest are for the moment his enemiesThe danger introduced bythe Prussian pretension was a great onePerhaps we do not always noticesufficiently the extent to which British financial and economical interestsare bound up with the sanctity of foreign loansFrom the time at which thiscountry began to grow rich till it became the richest in Europethe difficultyof finding investment for British savings was very seriously feltIn Stuarttimes the surplus wealth which was not expended in landor embarked directlyin trade or manufacturewhich were still in their infancywas lent on personalor landed securitiesThere are plenty of allusions in the dramatic literatureof the seventeenth century which might be produced in proof of thisIt wasscarcity of public investments which led to the violent struggle betweenthe two companies formed for trading with India which were afterwards fusedinto the great East India Companyand also to the hot contest about thefoundation of the Bank of EnglandIn another way this scarcity led to theenthusiasm for mere speculative undertakingsoras they were then called,for Bubblessuch as the South Sea and Darien CompaniesDuring the eighteenthcentury British savings were invested in foreign loans wherever they couldbe foundas this case of the Silesian loan showsand probably a good dealof British wealth was embarked in the constant loans raised by the King ofFrancewho howeverwas at all times a very unpunctual debtorBut the favouritefieldsno doubtduring that century for British investment were the tropicalcolonies which were gradually acquired in the West Indies and more southerlyparts of North AmericaAt the end of that century and in the beginning ofthe present the English National Debt grew to such proportions as to swallowup all other fickle of investmentbut at the close of the great war loansto foreign states became commonerand much British wealth was drawn to them.
In early days they had to encounter many dangersThe various American Stateshad borrowed largelybut also repudiated largely their liability on technicalgroundsBut if a sovereign could have got rid of indebtedness by going towar with the country in which he had most creditorsthe risk would havebeen so great that probably few or no foreign loans could have been negotiated,and the economic history of England and Europe would have been quite different.
The method of distributing the surplus capital of the richest countries,to which the civilised world is greatly indebtedowes its existence to thisreport of the English law officers in this deservedly famous case of theSilesian loan.
