File No. 195.1/12
William H. Libby (for the Standard Oil Company of New Jersey) to the Secretary of State
Sir: In behalf of the Standard Oil Company of New Jersey, I have the honor to lay before you a matter which directly affects the interests, not only of that company, but also of other American owners of vessels under foreign flags, for the registration of which as American vessels provision has just been made.
We understand it to be the English as well as the American rule that the transfer of an enemy merchant vessel to a neutral flag in time of war is internationally valid provided that the sale be made in good faith, in the sense that it is complete, final, and without reservation. The Declaration of London, according to the report of the British delegation in the conference by which the declaration was framed, incorporated this rule except that it placed upon the transferee the burden of proving good faith.
Thus, while the transfer is permitted, it seems that the good faith of the transaction is open to inquiry; but we understand that, subject to this sole contingency, the vessels transferred to the American flag would receive the same protection from the Government of the United States as has been accorded to vessels heretofore flying the American flag (for instance, the six American steamers of the International Mercantile Marine Company). This being so, the question how the inquiry is to be made naturally becomes of vital importance. If the inquiry should be made in the prize courts of belligerent powers, it would impose without regard to the question of the burden of proof a grave inconvenience, for, no matter how clear the transaction might have been, the inquiry would involve the seizure and detention of the vessel, the costs and delay of a judicial examination, perhaps in a distant place, and the loss of time and freight. In this way the transaction would in effect be most seriously penalized. Moreover, one of the objects of the law just passed, that of securing neutral American vessels for the immediate relief of the present congestion of merchandise in this country, would be defeated.
In these circumstances, it has occurred to us that our Government might, without prejudicing in any way any other class of cases, secure the assent of the powers engaged in the present conflict to the exemption from seizure and inquiry of vessels transferred to the [Page 487] American flag which were actually owned in this country before the war began.
It has heretofore been universally admitted that transfers made prior to war are not subject to the imputation of bad faith, and even by the Declaration of London (which has not, we believe, acquired the force of a treaty) this security exists as to transfers effected more than thirty days before the outbreak of hostilities. This would seem in principle directly to apply to transferred vessels heretofore in fact American-owned, the ownership in such cases having long been American, while the transfer would be a mere formality.
The company which I represent has a large number of vessels in the category above mentioned. Most of them fly the German flag and are registered as the property of the Deutsch-Amerikanische Petroleum Gesellschaft (commonly called the D. A. P. G.). Some of them which were in German ports at the outbreak of the war have, as we are informed, been commandeered by the German Government and others may be similarly dealt with. The fleet as a whole is, however, distributed in various parts of the world according to the exigencies of the business in which the vessels are engaged. Many are in ports of the United States. A number of them are in South American waters, where they are required for the transportation of oil in the large and rapidly growing trade between San Francisco and Chilean and Peruvian ports on the west coast; and still others are plying between Gulf and Atlantic ports of the United States and Brazil and the Argentine on the east coast. Many others have also been constantly employed in bringing oil from Mexico to the United States.
In reality these vessels are all American-owned, the entire capital stock of the D. A. P. G. being owned by the Standard Oil Company of New Jersey. The law just passed has for the first time rendered it practicable to register them as American vessels and place them under the American flag, and the transfer, if consummated, will be absolute and unconditional. The facts thus stated are clear and indisputable and constitute all the facts in the case. An inquiry in a prize court could elicit nothing more. Such an inquiry would therefore be useless except to deter the American owners from seeking the benefit of the recent law. And what is true of the vessels of this company is no doubt true of many other vessels long American-owned prior to the war, though under foreign flags.
In such cases it should seem to be entirely practicable for the belligerents on receipt of the names of the vessels and of the appropriate proof of their previous American ownership and of their transfer to the American flag, whether they have been actually registered or have been furnished with a consular certificate with a view to proceed to the United States for such registration, to instruct their cruisers to respect their neutral American character and to refrain from seizing them for the purpose of an inquiry by a prize court into the good faith of the transfer. Without such an assurance, although eventual condemnation of the vessel should not ensue, the transfer would afford to the American owner no immediate prospect of anything beyond the risk of probable capture.
I have [etc.]