File No. 854.85/25

The Ambassador in France ( Sharp ) to the Secretary of State

[Telegram]

4407. War Trade Board [from McFadden]:

No. 243. The Swiss mission en route via Paris to Madrid with the object of completing negotiations for Austrian and German ships interned in Spanish or other ports have submitted to us copy of memorandum received by the Swiss Department of Public Economy from the Austrian Government. The following are the most important terms contained therein.

(1)
Austrians make first offer for sale of Emilia interned in Cartagena, Fredericia and Lodovica interned in Huelva, total dead weight tonnage 17,050 tons, on the basis of 1,200 Swiss francs per dead [Page 1634] weight ton, amounting to 21,410,000 Swiss francs for the three ships, cash Swiss banks against delivery of boats. The Austrians will later designate two additional ships interned in Spanish ports which they will sell to Swiss on same basis.
(2)
Ships are to be delivered in Spain to the representatives of the buyers in condition for service and all expenses in connection therewith to be borne by sellers.
(3)
Ships stores, etc., to be paid by buyers at current market value.
(4)
The Swiss must agree to operate ships for length of war exclusively in Swiss service but they may carry merchandise for American Red Cross, and with the exception of contraband of war, may also carry merchandise for account of any country.
(5)
On the termination of [the war] or in case Austro-Hungarian navigation is resumed, all restrictions as to use of ships will cease. The Austrians require that during the first nine months succeeding the conclusion of peace they shall have option in one-half the space in these ships, in which event they will pay current rates of freight to the Swiss.
(6)
The buyers give the sellers the option of repurchasing any one or all of the boats purchased within nine months after conclusion peace or in case of resumption of Austro-Hungarian transatlantic navigation at the purchase price less charter hire during period of operation by buyer and at 209,000 Swiss francs per month for the Emilia and Fredericia and 206,000 Swiss francs for Lodovica with the condition that the sellers must give notice of this option within six months after conclusion of peace, and the boats must be returned to the seller at a safe European port in condition delivered.
(7)
The buyers are at liberty to organize a Holland-Swiss society for the purpose of operating ships.
(8)
The cost and expense in connection with transfer to Dutch register is to be borne by buyers and the cost and expense in connection with retransfer to original register is to be borne by sellers.
(9)
As guarantee of the faithful and exact execution of the agreement the buyers will deposit in favor of the sellers amount equal to (blank) per cent of the price of the boats, which sum will be forfeited if the stipulations of the present agreement are violated by the buyer, in which case the amount due the sellers will be fixed by arbitrators; the sellers, however, will return the money so deposited by buyers nine months after end of the war when the boats are returned to the sellers.
(10)
The Swiss Government must guarantee the contract.
(11)
Any question of buyer will be settled by arbitrators, and in event arbitrators are unable to agree, then same is to be settled by Rotterdam Chamber of Commerce.

You will note from above that tonnage offered firm amounts to about 25,000 dead weight tons but the Swiss are unofficially informed that the Austrians will be willing to increase same to approximately 70,000 tons and that this offer of same, on above basis, will be made by them on the arrival of their mission at Madrid. The Swiss and Doctor Sulzer are of the opinion that basis of purchase and charter hire asked is unreasonably severe, but it is our understanding that [Page 1635] the price asked for purchase about corresponds to price paid by you for Japanese tonnage, and charter-hire price about corresponds with that for tonnage chartered from Sweden. The Swiss raise further objection on account of important financial obligations assumed by them in consequence of this transaction which on the basis of purchase of 100,000 tons at 1,200 francs per dead weight ton would amount to a cash payment by them of 120,000,000 Swiss francs. We have, however, called their attention to the following points:

(1)
Providing transaction is approved by Associated Governments then we thought that question of price should be considered of secondary importance when compared with economic importance to their Government of having 100,000 tons of shipping for transporting their next year’s ration.
(2)
The Swiss-American agreement expires September 30 and in view of the steadily increased demands upon the United States for transport, in consequence of its armies in France, that therefore, under our new agreement it might be impossible for the United States [to furnish] transport for next season’s Swiss ration and that therefore, if they obtain the opportunity of securing independent neutral tonnage for transport of next year’s ration, they had better take advantage of same.

We are forwarding by this mail copies of proposals and are also sending copies to Madrid and London. McFadden.

Sharp