The Consul General at London (Skinner) to the Acting Secretary of State

No. 7352

Sir: I have the honor to bring to the attention of the Department the fact that, under the Order in Council of March 11, 1915, considerable quantities of goods of German manufacture, purchased for importation by American firms, were seized and brought to this country during the early days of the war. Inasmuch as this Order in Council was intended to be preventive rather than punitive, and was so stated to be in effect at the time, many American importers, [Page 624]who without the slightest doubt were the legal owners of the goods and in some instances had already paid for them, were permitted to obtain possession of the property by depositing in the Prize Court the invoiced value thereof, these transactions in the Prize Court assuming the form of purchases, the money being detained in court in Lieu of the goods. It was contemplated as a matter of course that, under the terms of the Order in Council in question, these deposits of money would be released eventually, and it seems reasonable to me to consider that that time is now at hand. Accordingly on January 4th, 1919, I approached the Procurator General on this matter, feeling myself strengthened in so doing because of the judgment of the Privy Council, just then announced, in the case of the Swedish steamship Stigstad, a vessel laden with iron ore destined for Germany, which was detained under the Order in Council of March 11, 1915, during the first year of the life of the Order.

In the Stigstad case the cargo was sold in this country, and it was decreed that the proceeds of the sale should be paid out to the representatives of the cargo owners, less the sum to be agreed upon for freight. Having received an intimation from the Procurator General that he would be unwilling to pay over to American owners, or depositors, the amounts held in their names, I mentioned to him that, from my point of view, if it was deemed advisable to make a payment to Swedish cargo owners during the early years of the war, I was at a loss to comprehend why a contrary course should be decided upon in respect to American owners, when the belligerent object which the Order in Council was intended to accomplish had been realized, and when the war itself had come to an end except in a narrow legal sense.

The Procurator General replied to me on January 13, 1919, and I enclose herewith a copy of his reply; whereupon I wrote to him on January 18th in part as follows:

“I have examined the Stigstad decision with care, and I find no statement therein which draws special distinction between property of enemy origin and neutral-owned, and property of neutral origin having an enemy destination. The judgment does set forth in considerable detail that the Order itself is a reprisal order, that it is intended to put a stop to exports to and from Germany, and that Neutrals must not complain if, as part of the burden of war, they are compelled to support some incidental expenses; but, with respect to the property itself, it was held that the owners might be reimbursed as to its value, and in fact they were reimbursed during the early days of the war, while at the same time American owners were either deprived of their property or were required to make deposits equal to the value thereof. This difference of treatment could be explained during the period of active belligerency; but, in view of the very altered circumstances under which we now live, [Page 625]the effect of your present attitude is to penalize one of your co-belligerents”.

On January 22nd, the Procurator General, answering my letter of January 18th, said:

“The fundamental difference between yourself and this Department appears to be due to the fact that two of the premises upon which your letter proceeds are incorrect. It was not the case that deposits were only accepted upon prior proof of non-enemy interest. On the contrary, not only has it always been the view of this Department that, under the decision in the case of the American Bead Company, the property in the goods remained in the German sender, but it was also known as a fact that in many of the cases payment had not been made by the American addressees. The question of legal title was not regarded as a matter of importance, as the transaction was in effect a sale under the Order of the Court, which gave protection to the Authorities by whom it was sanctioned.

“The Procurator General cannot admit that firms who have received their goods by purchase from the Prize Court have any equitable claim for the return of the money which they have paid for them, or that any hardship is imposed on them by requiring strict proof of title at the conclusion of the war, when enemy firms, who may conceive that they are interested in the funds, will have an opportunity of presenting their claims”.

I am today replying to this communication of January 22nd, and I transmit herewith copy of my letter.

Here the matter rests for the present, as it is entirely clear that the Procurator General will not release the deposits referred to, unless pressed to do so by some higher authority, or in consequence of instructions which the Department may be inclined to send to me, setting forth its views in some detail.

I have [etc.]

Robert P. Skinner
[Enclosure 1]

The Secretary to the British Procurator General (Woods) to the American Consul General at London (Skinner)

Sir: I am directed by H.M. Procurator General to acknowledge the receipt of your letter of the 9th instant, relative to sums of money deposited in the Prize Court by the American consignees of goods detained in this country under the Order in Council of 11th March 1915.

These cases are not analogous to the case of the S.S. Stigstad, to which you refer. In that case Messrs. A.F. Klaveness & Co., to whom payment was made, were the unpaid shippers of the cargo. In the cases to which you refer the claimants are not in that position. They [Page 626]are in fact firms who have purchased and obtained delivery from the Prize Court the goods in which they were interested.

It is not known at present whether the enemy firms, by whom the goods were dispatched, have been paid or not. Moreover, according to the decision of the Prize Court in the case of the s.s. United States, the claim of the American Bead Company, the property in and title to the goods and, therefore, the proceeds of sale remains vested in the enemy firms.24

In the circumstances, therefore, the Procurator General is advised that he cannot safely accede to the request for the return to the American firms of the money deposited by them, inasmuch as the enemy firms concerned may after the conclusion of peace present claims in respect of the same deposits.

I am [etc.]

R. W. Woods
[Enclosure 2]

The American Consul General at London (Skinner) to the Secretary to the British Procurator General (Woods)

350. RPS/GG
Naval Prize

Sir: I have the honor to acknowledge the receipt of your letter of January 22, 1919, respecting the above matter, in which you correct my misapprehension as to bonds or indemnities in regard to goods held under the Order in Council of March 11, 1915, and in which you discuss briefly the effect, from your point of view, of the decision in the case of the American Bead Company.

I note your contention that American firms who have received their goods by purchase from the Prize Court have no equitable claim for the return of the money which they have paid for them. Although I feel that it will serve no useful purpose for me to deal further with your observations, I cannot refrain from remarking that, while the operations in the Prize Court now under consideration may be referred to formally as questions of open purchase and sale, I think you will recognize that, for practical purposes, we are dealing with deposits of certain sums of money, the ultimate return of which, without doubt, was contemplated when these transactions took place, and, indeed, it is stated in the Order in Council of March 11, 1915, itself, “that the proceeds of goods sold by the Court shall be dealt with in such manner as the Court may in the circumstances deem to be just”.

[Page 627]

In the case of the American Bead Company to which you draw my attention, the Court was very careful to state that the question for decision was whether or not the goods were “enemy property” for the purposes of the Order for Reprisals, and to explain that legal ownership, if insisted upon, might, in certain circumstances, defeat the objects of the Order in Council of March 11, 1915. The object of the Order was to put an end to German commerce and, at the present stage of affairs, Germany lying helpless at our feet, and the war being over except in a legal sense, the only possible result of your determination to retain possession of the deposits of American concerns is to cause loss and inconvenience to your own co-belligerents, without in any manner whatsoever affecting the interests of German traders.

In conclusion, I can only reiterate my regret that you are unwilling to deal with American firms in the same favorable manner in which the Swedish owners of the Stigstad cargo were dealt with under the same Order in Council to which I am now referring, at the very height of the war itself.25

I am [etc.]

Robert P. Skinner