Papers Relating to the Foreign Relations of the United States, 1923, Volume II

411.57 N 83/509a

The Secretary of State to President Harding

Washington, January 11, 1923

My Dear Mr. President: By Special Agreement signed at Washington June 30, 1921, and duly ratified, the United States and Norway submitted to arbitration certain claims of Norwegian subjects against the United States arising out of requisitions by the United States Shipping Board Emergency Fleet Corporation. In accordance with the Agreement you appointed one arbitrator, the Honorable Chandler P. Anderson, and the King of Norway selected another arbitrator, His Excellency, Mr. Benjamin Vogt. The two Governments not having agreed on a third arbitrator, the President of Switzerland designated Mr. James Vallotton to act in that capacity. The Tribunal assembled at The Hague on July 22, 1922. The United States was ably represented before the Tribunal by the Honorable William C. Dennis as Agent for the United States, and the Honorable George Sutherland as counsel. An Award was made on October 13, 1922, directing the United States to pay to the Kingdom of Norway in satisfaction of fifteen claims a total of $11,995,000.² This sum included interest. The American Arbitrator, Mr. Anderson, not being permitted to file a dissenting opinion, refused to be present when the Award was announced and wrote a letter to the Agent of the United States which the latter submitted to the Tribunal, at the conclusion of the hearing of the Award, in the following statement:

“I have of course had no opportunity to consult with my Government in regard to the award which has just been pronounced, but I deem it my duty on behalf of the United States to reserve all the rights of the United States arising out of the plain and manifest departure of the award from the terms of submission and from the ‘essential error’ to use the language of the authorities, by which it is invalidated.

“I am in receipt of the following communication:

“‘The Hague, Netherlands,
“‘October 13, 1922.

“‘Sir: In making the award signed today, Friday, October 13, by Mr. James Vallotton and the Secretary General of the Permanent Court of Arbitration, Mr. Vallotton and Mr. Vogt, in my opinion, have disregarded the terms of the submission and exceeded the authority conferred upon the United States-Norway Arbitration Tribunal by the Special Agreement of June 30, 1921, which imposes definite limits upon its jurisdiction.

“‘I have therefore refused to be present when the award is announced.

“‘I send you this notice in order that your Government may be informed of the reasons for my absence and that they may be made a matter of record.

“‘I have addressed a similar communication to the Agent of Norway and to the Secretary General of the Permanent Court of Arbitration.

“‘With great respect, I am,

“‘Sincerely yours,

Chandler P. Anderson

“‘The Honorable William C. Dennis,
“‘Agent of the United States,
“‘United States-Norway Arbitration.’”

Since the receipt of the text of the Award and the papers in the case I have given the most careful consideration to the questions involved. The Special Agreement constituting the Tribunal provided as follows:

“The decision of the majority of the members of the Tribunal shall be the decision of the Tribunal.

. . . . . . . . . . . . . .

“The decision shall be accepted as final and binding upon the two Governments.”

It is at once apparent that in order to justify the United States in refusing to pay the Award it should appear not simply that, in the absence of fraud, the Tribunal disagreed with the views of this Government, or overruled its contentions, but that the Tribunal acted outside the terms of the submission and hence committed a jurisdictional or fundamental error.

First. In this aspect of the case one of the most important questions presented relates to our Treaty with Norway. The provisions of the Treaty with the Governments of Sweden and Norway of July 4, 1827,³ incorporated the following stipulation contained in the Treaty between the United States and Sweden of April 3, 1783,⁴ and it has been recognized by this Government that since its secession from Sweden, Norway is entitled to the benefit of this stipulation:

“Merchants, masters, and owners of ships, seamen, people of all sorts, ships and vessels, and in general all merchandizes and effects of one of the allies or their subjects, shall not be subject to any embargo, nor detained in any of the countries, territories, islands, cities, towns, ports, rivers, or domains whatever, of the other ally, on account of any military expedition, or any public or private purpose whatever by seizure, by force, or by any such manner; much less shall it be lawful for the subjects of one of the parties to seize or take anything by force from the subjects of the other party, without the consent of the owner.”⁵

In arranging for the present arbitration it was agreed between the two Governments that the question of a violation of this treaty provision should not be submitted to the Tribunal. This was provided by an exchange of notes, the Norwegian Minister stating in his note of June 16, 1921:⁶

“During the negotiations which have taken place later between the State Department and the Legation, however, my Government has gone further and agreed to your desire that the court shall not in any way be invited to examine, discuss or decide upon the treaty violation question.

“Since the parties are in agreement upon this point, it will be unnecessary for me to discuss in detail the remarks in Your Excellency’s note in this connection and I therefore give you the formal assurance requested that the question of treaty violation is not to be raised in any way.”

It is insisted, however, that despite this agreement the question of treaty violation was brought into the case. I should go beyond the appropriate limits of this letter if I attempted to review the circumstances or discuss the references which were made to the treaty in the course of the hearings before the Tribunal. In its award the Tribunal made the following explicit statement:

“It is necessary to mention here that, while the Norwegian claimants might have bona fide believed themselves to be entitled to privileged treatment under the treaty between the Parties, it was agreed on June 30th, 1921 between the Parties not to apply such Treaty in the present arbitration. The Tribunal has acted according to this agreement.”

It has been strongly argued that, notwithstanding this statement in the Award, the treaty question did enter into the consideration and decision of the Tribunal. I do not find, however, that such a position can be taken by the Government of the United States. A fraudulent purpose, or an intention to say one thing in the Award and to do quite another, cannot be imputed. An endeavor to spell out of the Award an attempt to deal with the treaty question contrary to the Agreement which accompanied the submission, however earnestly prosecuted, would in my judgment be doomed to failure. The Tribunal has stated that it has “acted according to this agreement,” and in the absence of proof of fraud this statement must be accepted.

Second. The Special Agreement for the Arbitration undoubtedly incorporated by reference the applicable provisions of The Hague Convention for the Pacific Settlement of International Disputes of October 18, 1907,⁷ to which both the United States and Norway are parties. Article 79 of this agreement of that Convention provides in part that—“The Award must give the reasons on which it is based.”

It is urged that the present Award does not comply with this requirement. I must say that the Award appears to me to be confused, poorly reasoned and lacking in an appropriate exposition of grounds. Particularly does it fail to give a satisfactory explanation of the manner in which it has arrived at the amounts awarded. It is so loose and ill-constructed that it is open to strong attack upon the ground that it has failed in a proper sense to give the reasons upon which it is based.

On the other hand, the Award consists of forty-two printed pages and contains a discussion of facts and principles from the standpoint of the Tribunal. It is manifest that the requirement of the Hague Convention does not mean that the statement of reasons must be cast in any artificial form, much less that the reasons given should be those which the defeated party would recognize as adequate. The question is whether the Award, while discursive and purporting to discuss facts and principles, is in truth so destitute of reasoning as to constitute an Award without reasons.

I am unable to reach the conclusion that, however subject to criticism as to form and substance of statement, the Award would be held by an impartial tribunal to be invalid upon the ground that it failed to meet the requirement in question. It is a prolix, unsatisfactory discussion, but I think it is going too far to say that it is void.

Third. Another important reason which is presented for attacking the Award, as being outside the terms of submission and fundamentally erroneous, is that it affords ground for saying that the Tribunal held the United States to have violated the applicable rule of international law in seizing the property in question and that this consideration augmented the amount of damages awarded. It has been urged that, while disclaiming a consideration of the question of treaty violation, a similar result was reached by holding, without right, that there was apart from the Treaty a violation of a rule of international law. It is said in objection to the Award that the Tribunal held that the authority of the United States to take property within its jurisdiction for public use had a limitation under the rules of international law in the case of property owned by friendly aliens which did not exist in the case of citizens, and that the United States could not lawfully take the property of friendly aliens, even upon making compensation, unless the taking was justified by an emergency, a question which the Tribunal apparently felt itself competent to decide. The Award repeatedly states that there was no emergency justifying the retaining of the property in question after June, 1919, when the Treaty of Versailles was signed.

It may be true that if municipal law permits, as it may well permit in the absence of constitutional restriction, the property of citizens to be seized without compensation, such a rule probably could not, under international law, extend to the property of friendly aliens. In the case of the United States, however, the provision of the municipal law is that compensation must be paid and the holding of the Tribunal is criticized as in effect a review of the question whether an emergency existed justifying the continued holding of the property after the time specified. Such a holding might be regarded as an attempt to limit the authority of the United States in the exercise of its power of eminent domain, instead of holding, as it should have been held, that the United States was entitled to take the property and hold it for public use, as it thought fit, provided it made just compensation. The Tribunal concluded that it could hold the United States guilty of a violation of a rule of international law by defining the extent of the emergency and its termination. This point has been discussed from various angles in order to establish the conclusion that in its ruling the Tribunal so far departed from the applicable principles as to justify the treatment of the Award as fundamentally erroneous and invalid.

The Special Agreement provides as follows: “The Tribunal shall examine and decide the aforesaid claims in accordance with the principles of law and equity and determine what sum if any shall be paid in settlement of each claim.” The point is made, in substance, that the Tribunal did not properly decide according to the principles of law and equity but disregarded these principles, applied an erroneous rule of its own making, and proceeded upon the theory that it could in this view award whatever damages it might think suitable “eat aequo et bono.”

I have carefully considered this point, and I recognize that, in view of various statements in the Award, the argument may be urged with great force, but I am constrained to the conclusion that it is not so clearly established that this Government can assume that an impartial tribunal would decide the award to be invalid upon this ground.

Fourth. There is also a question presented with respect to certain of the claims on which a sum of about $1,680,000 was awarded. I understand the point to be that in holding that the contracts were not requisitioned by the United States Shipping Board Emergency Fleet Corporation as of August 3, 1917, but were requisitioned by the Shipping Board on October 6, 1917, the Tribunal exceeded its jurisdiction because that jurisdiction extended only to claims arising “out of requisitions by the Emergency Fleet Corporation.” It is accordingly urged that to this extent the Tribunal assessed damages on claims not submitted to it. This objection goes, as above indicated, only to a small part of the Award and deals with the matter from a standpoint which, although it might be logically taken, might well be regarded as involving only technical considerations and that these, in the absence of other grounds justifying the United States in repudiating the Award, should not alone be deemed to make that course advisable.

For similar reasons other subordinate points need not be presented.

Summary of the situation. I do not disparage the earnestness and ability with which the Award has been criticized and, as I have said, I regard it as open to serious criticism. Nor do I fail to sympathize with the position of the American Arbitrator who, finding it impossible to file a dissenting opinion against an Award which he believed to be unwarranted and unjust, declined to participate in the final action.

The fact, however, remains that the Award has been made; that an Award by a majority of the Tribunal is an award by the Tribunal; and that the United States has agreed to accept this Award as final and binding upon this Government unless it is able to show that the Arbitrators exceeded their jurisdiction.

I deem it to be clear that an objection to the payment of the Award would give rise to diplomatic correspondence in which this Government could find small satisfaction. Undoubtedly the United States would be portrayed as refusing to pay an Award which it had agreed to pay, and this would seriously reflect upon our attitude with regard to arbitration and would prejudice our influence in endeavoring to support in the case of other countries arbitral decisions.

I find no reason to believe that Norway would agree to disregard the Award, and certainly I do not think it advisable that we should endeavor to trade with Norway in order to secure a reduction of the amount. Our position should be either that the Award is valid or void. If it is valid it ought to be paid, however much we dislike it; if we are not prepared to take that course, we should be ready to demonstrate the invalidity of the Award. It is not to our interest to dispute the Award and leave the matter indefinitely in abeyance. This Government certainly owes something for the property taken and whatever it does owe is running at interest. It is essential that there should be a disposition of the controversy.

Our attitude, in case we attack the Award, would probably have to be that the question of its validity should be submitted to arbitration. It is doubtful whether Norway would agree to this, but assuming that our resistance practically compelled her to do so, the question then would be of the chance of our success before an arbitral tribunal dealing with that question. Manifestly it would be highly injurious to the prestige and interests of our Government to insist upon submitting the validity of the Award to arbitration with the result that the Award was sustained and the action of the United States definitely held to be unjustified. In insisting upon an arbitration of such a question I think we should be reasonably sure that a new tribunal would hold the Award to be void whatever they might think of its reasoning.

There is no way, however, of being assured of such a result; indeed, I think it to be quite doubtful. The question then is whether we should refuse to pay the Award and take a doubtful chance of having it set aside as invalid. My regard for the prestige and authority of the United States in Its international relations is such that I cannot recommend such a course.

There is another consideration. It is true that in the present arbitration it was agreed that there was to be no discussion or finding of the violation of our Treaty with Norway. Further, this agreement on the part of Norway was based upon adequate consideration. But, in case we should succeed in having the Award set aside, we should be back again where we started. Norway would then be entitled to insist that the question of treaty violation should be considered. However we may argue as to the course of the Tribunal in making the Award and the impropriety, under the agreement which had been made, of referring to the Treaty at all in the presentation and discussion of the case, still the fact remains that the Treaty exists; that we are under the obligations of that Treaty; and that unless Norway agrees otherwise, we are bound, under our general arbitration treaty, to submit questions of treaty interpretation to an arbitral tribunal. We do not get rid of the Treaty, when we consider repudiating the Award and having a new arbitration, by pointing to an agreement which related to the present arbitration which we overthrow.

Coming back to the Treaty which I have quoted on page four of this letter,⁸ you will note that it relates not only to ships and vessels which might be taken to mean completed ships and vessels but in general to “all merchandizes and effects.” It is provided that they shall not be “subject to any embargo nor detained … on account of any military expedition, or any public or private purpose whatever, by seizure, by force, or by any such manner.”

We have had occasion to deal with a similar provision in our Treaty with Spain of 1795, where it was agreed that “The subjects or citizens of each of the contracting parties, their vessels or effects, shall not be liable to any embargo or detention on the part of the other for any military expedition or other public or private purpose whatever.”⁹ We invoked this provision when the Spanish military authorities seized the property of American citizens in Cuba in 1868. Under instructions from the Department of State our Minister represented to the Spanish Government (July 26, 1870) that this Article “expressly renounced all right to embargo or detain the property of the citizens or subjects of the other;” That this renunciation included “every possible case in which the power could be exercised;” and that “no exigency of war, no requirement of the public service, no civil disorder” was “permitted by the stipulations of the treaty to sanction or excuse these prohibited acts of spoliation” (For. Bel., 1871, p. 702). Again, in a note addressed by Secretary Olney to the Spanish Minister at Washington (February 14, 1896)¹⁰ with regard to the decree of the Spanish Governor General of Cuba requisitioning for military service property belonging to American citizens, it was said that the Article “certainly means that the vessels and effects of citizens of the United States within the Spanish jurisdiction may not be appropriated against the owner’s will to the public use for military or any other purposes, even though compensation be tendered.”

The formal position which has thus been taken by our Government with respect to the effect of such a treaty provision would, to say the least, facilitate the claim of Norway that we had been guilty of a treaty violation and we are bound to consider the possibility that if we should succeed in setting aside the present Award, we might have to consider a claim of treaty violation and submit that question to arbitration if Norway insisted upon it, with the possible result of its being decided that the United States not only owed a certain amount of money but had been guilty of a breach of its Treaty obligation.

I say this because I think that while the power of eminent domain is a sovereign power and its exercise touches the honor and vital interests of the United States, still it is entirely competent for the United States to make a treaty for the purpose of protecting the property of friendly aliens within its jurisdiction and when it does make such a treaty the question of its violation and of the damages that should be paid is an appropriate subject for arbitral decision.

I confess that, unsatisfactory as is the present Award, I see no satisfactory alternative to its payment. Our repudiation of the Award would involve us in a controversy in which we should not have a monopoly of statement. The United States would be put in a most unpleasant position before the world and could only justify itself by final success. In the event that we did succeed in having the Award treated as void, we should in some way have to negotiate a settlement, and we might find ourselves called upon to submit to arbitration not only the question of damages but the question of a violation of a treaty provision, the nature and effect of which we had already made the basis of strong representations to another Power.

My conclusion is that this Award should be paid and accordingly I am sending you a separate and brief letter¹¹ merely reciting the fact of the Award and recommending that the matter should be presented to Congress in order that suitable provision be made for payment.

I may add that the time since the receipt of the Award necessarily has been consumed in consideration of the record and the various questions which it has presented, and that in case it is decided to recommend payment, provision should be made at an early date as the Award carries interest from its date, October 13, 1922.

I am [etc.]

Charles E. Hughes

2. The proceedings of the Tribunal, including the award, are printed in Permanent Court of Arbitration, Proceedings of the Tribunal of Arbitration Convened at The Hague under the Provisions of the Special Agreement between the United States of America and Norway Concluded at Washington, June 30, 1921 (The Hague, 1922).

   The award is also printed in S. Doc. 288, 67th Cong., 4th sess.

3. Miller, Treaties, vol. 3, p. 283.
4. ibid., vol. 2, p. 123.
5. Art. 17 in treaty of April 3, 1783, with Sweden, incorporated into treaty of July 4, 1827, with Norway and Sweden by art. 17 of the latter treaty.
6. Foreign Relations, 1921, vol. ii, p. 593.
7. Malloy, Treaties, 1776–1909, vol. ii, p. 2220.
8. See Ante, p. 618.
9. Miller, Treaties, vol. 2, p. 318 (art. vii).
10. Foreign Relations, 1896, p. 670.
11. Not printed.