12.
The Commission shall have all the powers conferred upon it and shall exercise all the functions assigned to it by the present Treaty.
The Commission shall, in general, have wide latitude as to its control and handling of the whole reparation problem as dealt with in this Part, and shall have authority to interpret its provisions. Subject to the provisions of the present Treaty, the Commission is constituted by the several Allied and Associated Governments referred to in paragraphs 2 and 3 above as the exclusive agency of the said Governments respectively for receiving, selling, holding and distributing the reparation payments to be made by Hungary under this Part of the present Treaty. The Commission must comply with the following conditions and provisions:
(a) Whatever part of the full amount of the proved claims is not paid in gold or in ships, securities, commodities or otherwise, Hungary shall be required, under such conditions as the Commission may determine, to cover by way of guarantee by an equivalent issue of bonds, obligations or otherwise, in order to constitute an acknowledgment of the said part of the debt.
(b) In periodically estimating Hungary’s capacity to pay, the Commission shall examine the Hungarian system of taxation, first, to the end that the sums for reparation which Hungary is required to pay shall become a charge upon all her revenues prior to that for the service or discharge of any domestic loan, and, secondly, so as to satisfy itself that in general the Hungarian scheme of taxation is fully as heavy proportionately as that of any of the Powers represented on the Commission.
The Reparation Commission shall receive instructions to take account of: (1) the actual economic and financial position of Hungarian territory as delimited by the present Treaty, and (2) the diminution of its resources and of its capacity for payment resulting from the clauses of the present Treaty. As long as the position of Hungary is not modified the Commission shall take account of these considerations in fixing the final amount of the obligations to be imposed on Hungary, the payments by which these are to be discharged, and any postponement of payment of interest which may be asked for by Hungary.
(c) The Commission shall, as provided in Article 165, take from Hungary, by way of security for and acknowledgment of her debt, gold bearer bonds free of all taxes or charges of every description established or to be established by the Hungarian Government or by any authorities subject to it. These bonds will be delivered at any time that may be judged expedient by the Commission, and in three portions, of which the respective amounts will be also fixed by the Commission (the crowns gold being payable in conformity with Article 197, Part IX (Financial Clauses) of the present Treaty):
(1) A first issue in bearer bonds payable not later than May 1, 1921, without interest. There shall be specially applied to the amortisation of these bonds the payments which Hungary is pledged to make in conformity with Article 165, after deduction of the sums used for the reimbursement of the expenses of the armies of occupation and other payments for foodstuffs and raw materials. Such bonds as may not have been redeemed by May 1, 1921, shall then be exchanged for new bonds of the same type as those provided for below (paragraph 12, (c) 2).
(2) A second issue in bearer bonds bearing interest at 212 per cent. between 1921 and 1926, and thereafter at 5 per cent. with an additional 1 per cent. for amortisation beginning in 1926 on the whole amount of the issue.
(3) An undertaking in writing to issue, when, but not until, the Commission is satisfied that Hungary can meet the interest and sinking fund obligations, a further instalment of bearer bonds bearing interest at 5 per cent., the time and mode of payment of principal and interest to be determined by the Commission.
The dates for the payment of interest, the manner of employing the amortisation fund and all other questions relating to the issue, management and regulation of the bond issue shall be determined by the Commission from time to time.
Further issues by way of acknowledgment and security may be required as the Commission subsequently determines from time to time.
In case the Reparation Commission should proceed to fix definitely and no longer provisionally the sum of the common charges to be borne by Hungary as a result of the claims of the Allied and Associated Powers, the Commission shall immediately annul all bonds which may have been issued in excess of this sum.
