File No. 195.1/311

The British Ambassador ( Spring Rice ) to the Secretary of State

Dear Mr. Secretary: I did not fail to inform Sir Edward Grey of what you said to me on the subject of the cargo of cotton on board the Dacia. You said that this cargo was shipped in good faith and in the belief that it could safely be shipped and you pointed out that it was hard that the innocent shipper should suffer by the fact that the ship which he had engaged in good faith was according to our view liable to seizure or confiscation. Sir Edward Grey informs me that the British Government is prepared to meet completely your plea on behalf of the shippers and will undertake that they shall suffer no loss if the cargo as stated is cotton. They are prepared either to purchase this cargo at the price which would have been realized by the shippers if it had proceeded to its foreign destination, or if this course is preferred, to unload and then reload on another vessel and forward to Rotterdam at the cost of the British Government.

But while they are prepared to make these concessions on behalf of the cargo the question of the ship itself must be regarded in a different light. There can be no doubt, whatever may be said, that this voyage of the Dacia is being looked to as a test case. It is quite evident that if the Dacia is allowed to proceed on her voyage and return without interference, and without the question being raised as to the validity of the transfer of flag, there will at once be a wholesale purchase, real or colourable, of the ships now interned as a consequence of our belligerent operations, and a transfer of them to neutral flags in order to escape capture and to carry on German trade. As a collateral result the money paid for the ships now lying unemployed will be a direct and immediate gain to the shipowning companies which are in close connection with belligerent governments. It is quite impossible for the British Government to concede without question a point which entails such important consequences and if the Dacia is captured they must submit the vessel (as apart from her cargo) to the prize court, for its decision.

As I have already pointed out to you the British Government has already waived all objection to the transfer to the United States flag of the ships which were virtually although not technically owned by Americans before the war and which were under the German flag. They have thus shown their readiness to waive their technical rights where they could do so without serious advantage to the enemy and prejudice to themselves. In the case of the Leda which was captured when under the German flag and therefore decided by the prize court to be lawful prize they are ready to give favourable consideration to the plea that her real owners were American with a view to restoring her to those owners.

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Sir Edward Grey hopes that you will realize that the British Government has shown considerable goodwill as regards the question of the transfer of the flag. He trusts however you will see that the Dacia has become a test case involving such far-reaching consequences that it is impossible to compromise as regards the ship, although in deference to your representations my Government is willing to show special consideration (as above promised) for the cargo.

I am [etc.]

Cecil Spring Rice