The Unofficial Representative on the Reparation Commission (Logan) to the Secretary of State

My Dear Mr. Secretary: Reference is made to the letter of Mr. Boyden, dated June 21, 1923, relative to the Standard Oil tanker arbitration and relative to the duties which would fall upon the United States with respect to the return of the vessels if the arbitration was not concluded in favor of the claimants.

I am just in receipt of confidential information from an unofficial but dependable source that the independent tribunal, which has been for some months considering the arguments of the Standard Oil Company and of the Reparation Commission, is about to decide that the transfer of these vessels by the German Government to the Reparation Commission was perfectly valid and that the Standard Oil has not made out its case for restitution of the vessels pursuant to the terms of the arbitral agreement of June 7, 1920.

That agreement provided that if the Standard Oil made good its claim to beneficial ownership of the tankers, then they would be returned. Apparently the tribunal takes the view that a stockholder in a corporation does not own legally, equitably, or beneficially, the actual property of the corporation. The Standard Oil contended that since it owned the stock of the D. A. P. G., a German corporation which in turn owned the tankers, that consequently the Standard Oil was beneficial owner of the vessels. Probably one of the decisive points in the tribunal’s decision in this respect was the circumstance that the Standard Oil sold 30% of its stock to a German just before the United States entered the war, which stock it did not re-acquire until two or three years after the Armistice; hence the question was [Page 213] whether the holder of 70% of the stock of the corporation beneficially owned the corporation’s assets.

Alternatively the arbitration agreement provided that if the Standard Oil did not have beneficial ownership but was shown to be entitled to financial reimbursement, then such reimbursement would be paid in tankers instead of cash. This provision had regard to paragraph 20 of Annex II, Part VIII of the Treaty of Versailles which stipulates that the Reparation Commission, in accepting payments from Germany, shall have due regard to the legal or equitable interests of Allied nationals. The tribunal seems to consider that a stockholder has neither a legal nor an equitable interest in the assets of the corporation. It is the corporation which possesses both the legal and the equitable estates in the corporation’s property. Furthermore, it is doubtful what is meant by the expression “the Reparation Commission shall have due regard”. In no other case has any allowance been made to stockholders in steamship corporations which lost their vessels. Furthermore, Germany adopted a law, uniform in its application, compensating its nationals, as far as possible, for the loss of their vessels. Under this law, at a time when the mark had substantial value, the D. A. P. G., the Standard Oil’s subsidiary, received over 75 million marks for the property for which financial reimbursement is now claimed.

I suggest that it is not prudent or desirable to communicate the foregoing to the Standard Oil Company until the tribunal has reached a formal decision. It is always possible, of course, that some new fact or legal theory might alter the conclusion which, I confidentially understand, has been arrived at. However, there may be some preliminary steps you wish to take in the direction of carrying out the suggestions made in Mr. Boyden’s letter of June 21, 1923 in the event that the final decision from the tribunal conforms to the advance information outlined above.

Faithfully yours,

James A. Logan