A.  The Drago Doctrine

1  The Drago-Porter Convention is a result of the Drago Doctrine, developed in the light of various instances of ‘gun-boat diplomacy’ carried out by European powers, in particular with regard to Latin American States unable or unwilling to honour their financial obligations (Debts). Thus, in reaction to the blockade and bombardment of Venezuelan ports by the warships of Great Britain, Germany, and Italy in 1902–03, the Argentinian Minister of Foreign Affairs, Luís María Drago in 1902 instructed the Argentinian ambassador in Washington to seek United States (‘US’) support for a principle which later became known as the Drago Doctrine: ‘that the public debt can not occasion armed intervention nor even the actual occupation of the territory of American nations by a European power’ (Letter by Drago 4; International Law, Regional Developments: Latin America; Intervention, Prohibition of).

2  His argument was twofold: that the creditors involved in the State debts were aware of the risks involved, which were taken account of by the conditions of the loans, and that the sovereignty of the debtor State prohibited execution of the entitlements manu militari either by forcible intervention or any territorial occupation (cf the Monroe Doctrine of 1823; Doctrines [Monroe, Hallstein, Brezhnev, Stimson]). International law, the role of international courts and tribunals, and diplomatic protection were not to be questioned; however, the debtor State had to determine when and how it would pay back its debts, as repayment in any event was in its own interest.

B.  Contents of the Drago-Porter Convention

3  The Drago Doctrine gave rise to an international debate on the legitimacy of the use of force in the collection of public debts (Use of Force, Prohibition of). This issue was discussed at the Second Pan-American Conference in 1902 and the Pan-American Convention on Arbitration, which addressed conflicts of a pecuniary nature, was signed. It was prolonged at the Third Pan-American Conference in 1906, which found that the question was of more general importance and thus referred it to the second Hague Peace Conference in 1907 (Hague Peace Conferences [1899 and 1907]).

5  The US, through its delegate General Horace Porter, made a more limited proposal for diminishing inter-State conflicts of pecuniary origin. This led to the adoption of the Hague Convention on the Limitation of Employment of Force for Recovery of Contract Debts (‘1907 Hague Convention II’).

7  In Art. 2 1907 Hague Convention II it was further agreed that the arbitration was to be based on the 1907 Hague Convention for the Pacific Settlement of International Disputes (Peaceful Settlement of International Disputes).

8  However, the Drago-Porter Convention did not incorporate the proposals of Argentina and other Latin American States that denial of justice should be included as a precondition for arbitration and that in the case of public debts armed intervention should be excluded altogether. This prompted reservations by Argentina and other States, who only signed the Drago-Porter Convention but never ratified it (Treaties, Multilateral, Reservations to). Switzerland also abstained, holding that by virtue of their private nature, such claims were subject exclusively to domestic jurisdiction (Jurisdiction of States). Altogether, 31 States ratified the Drago-Porter Convention.

C.  Significance at the Time

9  The discussion of State intervention in financial matters and the efforts to restrict the use of force in financial disputes were much in evidence during the first decades of the 20th century. The Drago-Porter Convention was the first international legal instrument to contain the principle of the prohibition of the use of force in the recovery of contract debts. However, the principle is qualified by the condition of full acceptance of arbitration. Still, the Drago-Porter Convention was an important step in restricting the practice of self-help for peaceful settlement of disputes and thus can be considered as an important contribution by Latin America to the development of international law.

10  According to the Drago Doctrine, public debts are acts of State iure imperii, which legally can never be recovered by use of force because this would constitute a violation of the principle of sovereign equality of States (States, Sovereign Equality). However the Drago-Porter Convention did not, as had been suggested by Drago, distinguish between State debts or State loans on the one hand and contract debts which are claimed by a State for its nationals against another State on the other hand.

11  As in the case of the Calvo Doctrine/Calvo Clause Latin American States were concerned with what they considered as ‘abusive diplomatic protection’. Therefore, the Calvo Doctrine proposed the principle of equal treatment of the nationals of a State and aliens, which implicitly contains the idea that in Latin America the legal systems were sufficiently developed to do justice to foreign claims. By accepting the Calvo Clause aliens would even waive diplomatic protection (Waiver).

D.  Practice

12  Although the Drago-Porter Convention was initially introduced as an instrument of obligatory arbitration, according to the International Court of Justice (ICJ) in the Norwegian Loans Case (1957), the Drago-Porter Convention does not require obligatory arbitration, because the only obligation it imposes is that an intervening power must not use force before having tried to settle the question by arbitration.

13  Since then there have been several cases where States were unable to repay their debts, which usually were rescheduled or cancelled by the creditors under the leadership of the International Monetary Fund (IMF). In case of this agreement, because of the absolute prohibition of the use of force in the United Nations Charter, such disputes have to be solved solely by peaceful means. Thus, the second part of the Drago Doctrine, that public debts may never be a ground for armed intervention, corresponds to applicable standards of international law.

E.  Remaining Significance

14  The argument raised by Drago, ie that a State has a basic interest in honouring its financial obligations so as not to lose access to further loans, is still valid today. The Drago-Porter Convention may be considered as a minimum standard in questions of recovery of contract debts (Minimum Standards). Its basic principle of the prohibition of use of force in the recovery of State debts is still referred to. Parallels can be found in the field of investment disputes. In addition, State practice suggests that Drago’s more far-reaching propositions, such as the duty to exhaust all domestic remedies before an obligation of arbitration arises, have also found wide acceptance (Local Remedies, Exhaustion of) and the prohibition of use of force in the recovery of public debts has become part of customary international law.