The Secretary of State to the Ambassador in France ( Wallace )
85. For Rathbone from Department and Davis. Treasury R–154.
Your 19126 and 196 .27 First: We are in substantial agreement with your views as to Brazilian memorandum.26 While we are anxious to be of any possible assistance to Brazil, State Department has explained orally to Brazilian representatives that they should either (a) accept Wilson–Lloyd George agreement and make compensation for the ships in accordance with that agreement without set-off for other damages claimed by Brazil, in which case we can then press for French approval of that agreement which has never been given in respect to Brazil, or (b) take back the German ships which were chartered to France, if possible to do so in accordance with their charter agreement, and then operate them and obtain such possible advantages as might be inherent in possession.
Second: Apparently the decision of the O.C.R.C. of September 25th, 1919 referred to in paragraph 2 of your 195, precludes any Allied or Associated Power or its subjects from entering into negotiations for purchase of ships from Brazil before decision is received from Commission. Does this refer to decision of Reparation Commission? At any rate this decision, even if allowed to stand, would not preclude Brazil from demanding immediately from France, the return of these ships and we would support Brazil to this extent provided it is not in contravention of their charter agreement with France, which we are investigating and as to which we shall cable you further.[Page 511]
Third: We agree with your interpretations outlined in paragraphs 3 and 4 of your 195, except that, as to paragraph 4, United States may in case Congress fails to ratify Wilson–Lloyd George agreement, desire to take position that part 10 of Treaty in no way applies to ships and that her title being acquired under International law, proceeds may be disposed of as she determines.
Fourth: If France refuses to ratify Wilson–Lloyd George Agreement in respect to Brazil’s right to German ships taken by her, France probably will attack Brazil’s title, but if Brazil accepts agreement France could not do more than force Brazil to cede to her the French proportionate share of her ships. …