462.00 R 29/45: Telegram

The Acting Secretary of State to the Ambassador in France (Wallace)

453. For Rathbone from Davis. Treasury Rr–253

Your letter of January 23 enclosing copy of Bayne’s opinion regarding Article 235 of the Treaty with Germany.

  • First: I thoroughly agree with fundamental principle of the opinion as to limited scope of Article 235, and consider that opinion is grounded on a construction warranted by language of the Treaty and on sound policy.
  • Second: I note emphasis put upon assurance mentioned in Part 4 of opinion that transfer of interests in foreign countries would not be required. I consider that Bayne is correct in attaching much importance to this point, which it seems might be still further stressed.
  • Third: While a government in the exercise of the right of eminent domain may take all kinds of property, the right can be exercised only within the jurisdictional limits of a state. Majority opinion evidently contemplates that Germany may be compelled to obtain possession of securities that may be on deposit in neutral countries. Notwithstanding the general rule that personal property is subject to the law which governs the owner, Germany apparently could not take such action by the usual methods employed in the exercise of the right of eminent domain. Penal provisions to compel the owner to produce securities and to carry out any necessary formalities to transfer them would be necessary, whether they were without or within German jurisdiction. Construction put upon Article 235 by legal representatives other countries contemplates compelling Germany to take action having the effect of expropriating property outside its domains and of extending its jurisdiction into other countries in some respects, so as to affect matters relating to any formalities that might be required under local laws in connection with transfer of securities in concerns incorporated in such countries. It is hardly to be supposed that the assurance given by the Allied and Associated Powers related to real property outside of Germany and subject to the laws of other countries. Germany cannot expropriate such property. At most it could only compel through penal enactments the execution of instruments of transfer. If the assurance was not a meaningless one carelessly given—and considering the conditions under which it was made this should not be supposed to be the case—it must be construed as relating to transfer of personal property including securities.
  • Fourth: The taking possession of neutral securities involves some disagreeable aspects apart from those briefly indicated above. It appears undesirable to set a precedent relating to acquisition by certain governments of the ownership of securities of concerns incorporated in other countries.
  • Fifth: I am not clear whether in Bayne’s opinion securities he designates as “neutral securities” include securities which may be issued in Germany by German corporations and which represent property situated in other countries. However, arguments outlined above would seem applicable in substance to case of an attempt to obtain control of properties in a neutral country through acquisition of securities of a German corporation owning such properties.
  • Sixth: It is reasonable to assume that Peace Conference in the framing of treaty stipulations and of reply to German delegates should have had in mind considerations such as those above indicated.
Polk