The Acting Secretary of State to the Ambassador in France (Wallace)
9418. For Wallace and Rathbone.22 Refer to Mission’s 3794, August 20, 10 p.m. and 3537 August 6 10 p.m., and Department’s 2917 August 15 1 p.m., and 3092 September 10 7 p.m., both to Mission.23
Brazil has requested the aid of this Government in light of possible difficulties with the French in regard to the disposition of the [Page 508] German ships taken over by Brazil in her ports during the war. Negotiations have been in progress to sell the ships to France. An offer for the ships has recently been received by Brazil from an American company. The French have been so notified and asked whether they wished still to buy. Brazil fears that the French not able to buy will place difficulties in the way of Brazil giving good title to the ships to any other buyer.
In this connection please note Wilson–Lloyd George Agreement.23 Our understanding is that Great Britain, Italy and Japan having adhered to the agreement are bound thereby. France has agreed thereto as far as regards U.S. rights but not as regards the rights of Brazil. In addition Brazil states that she has chosen to settle compensation for the ships taken over directly with Germany and not by payment of compensation to the Reparations Commission. If Brazil by appropriate proceedings has not taken title as well as possession, the ships may come under operation of the Treaty, Annex III, Reparations, and be subject to proportional distribution for replacement of shipping losses by the Reparation Commission, if the action of the Commission is not limited by the provisions of the Lloyd George Agreement. If Brazil has not taken title it would seem that Brazil’s ability to pass an unimpeachable title depends on the adherence of both France and Brazil to the Wilson–Lloyd George Agreement. This must include agreement by Brazil to pay compensation for the ships to the Reparation Commission less the sum which would be due her by way of the proportional amount of compensation for her shipping losses. In any event the United States can at present support Brazil only in so far as such support is consistent with the Lloyd George Agreement signed by the President. If Brazil desires to press these claims under said agreement, accepting the reciprocal obligation thereunder, please give your support with a view to obtaining French acquiescence in such claims if the opportunity presents itself.