Under P.C. 1561 the Custodian has been vested with property in Canada belonging to persons residing in Bulgaria. The property thereunder vested amounts to $66,950.98. On the other hand, the Custodian's records show registration of property interests located in Bulgaria on the part of Canadian residents amounting to $196,190.30. Under the terms of the Peace Treaty with Bulgaria. each of the Allied and Associated Powers have the right to retain all properties which are within its territory and belonging to Bulgaria or Bulgarian nationals and may dispose of them within the limits of its claims and those of its nationals against Bulgaria or Bulgarian nationals including debts other than claims fully satisfied under other articles of the Treaty.

Canada is not one of the Allied or Associated Powers enumerated in the preamble. However, under Article 37, any member of the United Nations not signatory to the Treaty which was at war with Bulgaria may accede to the Treaty and, upon accession, should be deemed to be an Associated Power for the purposes of the Treaty.

With respect to the future conduct of the Custodian regarding the vested property and the claims, it seems essential to know whether or not Canada was at war with Bulgaria. Declaration of war by any state is not the only means of ascertaining whether a state of war exists between two countries.

On August 28, 1944, we advised the Dominions Office that Canada did not declare war on Bulgaria and our formal position was that of a country which had broken diplomatic relations but had not declared war.

However, if Canada has taken hostile steps against Bulgaria, or if Bulgaria has officially acted as if she considered herself at war with Canada, there is a possibility that a state of war existed between the two countries.

In order to ascertain the position, I have examined the following files: 2983-40C - Commencement of War with Bulgaria 97(s) - Occupation and Control of Bulgaria.

There is no indication in these files that Canada has taken hostile steps against Bulgaria, nor is there any indication that the Bulgarian Government has passed any legislation or regulations which would indicate that it considered itself at war with Canada. In fact, there is no reference to this matter except for a Post Scriptum in a despatch sent by Mr. Wrong on 27th January, 1944, to Mr. Ritchie, which reads as follows:

"One aspect of the problem should not be overlooked. The Bulgarians are unaware of our inaction and are under the mistaken impression that they are at war with us."

There is the possibility that Bulgaria has taken legislative measures showing that she considered herself at war with Canada. If that is the case, although Canada is not mentioned among the Allied and Associated Powers, we could, however, under Article 37 of the Treaty, as a member of the United Nations at war with Bulgaria, accede to the Treaty and thereby benefit from the obligations undertaken by Bulgaria or from the advantages granted by the Treaty, particularly in connection with the property seized by the Custodian and which belonged to persons residing in Bulgaria.

At the Paris Conference on the Peace Treaties Canada had no representatives on the committees but sent an observer. I think we there took the position that we had not declared war on Bulgaria and thus could not be a party to the Treaty.

Political II might think it advisable to ascertain if Bulgaria was at war with Canada. Consideration will have to be given to the expediency, if any facts disclose that Bulgaria was at war with Canada, of Canada acceding now to the Treaty, after having taken the position that we were not at war with Bulgaria. If Political II believes that no enquiries are now necessary and that Canada is satisfied that we should take the position that there was never a state of war between us and Bulgaria, then further consideration shall have to be given to the policy to be adopted with respect to monies held here by the Custodian under P.C. 1561.⁶

E.R. HOPKINS

⁶Note marginale:/Marginal note:
In view of the position we took at Paris I think we would look rather silly if we were now to claim that a state of war has existed between Canada and Bulgaria and were to accede to a treaty in order to lay our hands on $67.000. Mr. Pearson agrees but says we should put the question before the Minister giving him our opinion and asking for his concurrence. Escott Reid Pol[itical Division] II April 25/47