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

462.00 R 204/119a

The Secretary of State to the Assistant Secretary of the Treasury ( Wadsworth )⁵⁴

Washington , February 19, 1923 .

[Sir:] In connection with your Mission to Paris to meet with representatives of the Allied Governments in order to discuss questions relating to the reimbursement of the costs of the American Army of Occupation in Europe, I desire to set forth the following points for your information and guidance.

General Position of the United States

The general position of the Government of the United States in the matter, as set forth in notes dated March 22 and 23, 1922,⁵⁵ (exhibits 1 and 2 respectively) which were addressed to the Governments of Great Britain, France, Belgium, Italy and Japan, is indicated by the following extract from the note of March 22:

“The Government of the United States believes that its right to be paid the actual cost of its army of occupation pari passu with the cost of the armies of the Allied Powers is not only a clearly equitable right but is free from any technical objection.”

The French Government replied on March 28, 1922,⁵⁶ in part as follows (exhibit 3):

“I hasten to inform Your Excellency that the Government of the Republic has never had any intention of contesting the right of the United States to be as fully reimbursed for their costs of occupation as the other Governments with troops on the Rhine.”

The British Government replied on April 7, 1922,⁵⁷ in part as follows (exhibit 4):

“I am anxious to lose no time in assuring Your Excellency that the claim put forward by the United States Government that these expenses should be reimbursed to them is one which His Majesty’s Government would not in any circumstances desire to question. It would be impossible to do so without an indifference to manifest considerations of justice and without a failure to recognize the part played by the United States in the war and in the subsequent occupation such as I am confident that your government would not think of imputing to His Majesty’s Government. It is the earnest desire of His Majesty’s Government that means should be found with as little delay as possible to give practical effect to the desires of the United States Government.”

The Department of State was advised in a telegram dated April 8, 1922,⁵⁸ of the Belgian Government’s reply in part as follows (exhibit 5):

“I hasten to inform you that the Belgian Government has never entertained the idea of questioning the right of the United States to reimbursement for its expenses of occupation.”

The reply of the Italian Government under date of May 15, 1922,⁵⁹ contained the following passage (exhibit 6):

“I have the honor to inform you that the Royal Italian Government, not having participated with its own forces in the occupation of the Rhine territory, has never contested the right of the United States to such a reimbursement.”

On May 18, 1922, (exhibit 7) the French Minister of Foreign Affairs addressed a note to the American Embassy at Paris⁶⁰ suggesting that a meeting of the representatives of the Allied Governments should be held to examine the question of reimbursement of the costs of the American Army of Occupation, and to “endeavor to find the measures susceptible of giving satisfaction to the request made by the Embassy of the United States”.

On June 4, 1922,⁶¹ the Department instructed the Embassy at Paris to reply in part as follows (exhibit 8):

“The Government of the United States notes with gratification the action taken by the French Government with a view to arriving at a prompt settlement of the question of the reimbursement of the costs of the American Army of Occupation.”

On November 8, 1922, the diplomatic representatives at Washington of Great Britain, France and Italy handed to the Secretary of State a memorandum⁶² stating in part as follows (exhibit 9):

“These Governments have already indicated their willingness to find a practical means of meeting the desires of the United States Government in this matter, so that it does not seem necessary at present to subject the reasoning contained in the United States notes to a detailed examination.”

The reply to this memorandum under date of November 22, 1922,⁶³ (exhibit 10) stated that the Government of the United States welcomed the suggestion that it nominate a representative to confer in the matter, and advised them of your designation to meet with their delegates in Paris.

In a further communication under date of November 29, 1922, (exhibit 11) the United States Government inquired concerning the date upon which it was proposed that the meeting should take place. In response to this inquiry the American Ambassador at Paris was informed on January 24, 1923, that March 1 had been suggested as the date for the conference (exhibit 12). A telegram from the Ambassador under date of February 10, 1923,⁶⁴ stated that he would notify the Conference of Ambassadors on February 14 that the date of March 1 was agreeable to this Government.

It thus appears from the record that, although the Allied Governments have not necessarily accepted all the considerations on the strength of which this Government has justified its right to receive payment of these costs, they have nevertheless accepted the general contention of this Government. The note from the French Foreign Office, (exhibit 3) which is cited above, admits specifically the right of the United States “to be as fully reimbursed for their costs of occupation as the other governments with troops on the Rhine”. Although the replies from the other governments are less specific than the reply of the French Minister of Foreign Affairs, this Government nevertheless feels warranted in assuming that none of these governments disputes the right of the United States to treatment on an equal footing with them.

In view of the foregoing it does not appear necessary or desirable that you should discuss in any way the question whether the actual costs of the American Army of Occupation shall be met, or should enter into any consideration of any so-called technical questions that may be alleged to exist as to the right of this Government to be paid the actual costs of its Army of Occupation pari passu with the other Governments concerned. If, however, it should be necessary for you to decline to discuss these questions, you should make it clear that your attitude is due to the fact that the Government of the United States is unwilling to enter into any argument as to the legality or equity of a claim which it regards as established and recognized, and not to any fear that its position is weak, or possibly untenable. The object of the forthcoming conference as understood by this Government, is to consider practical means by which the just and admitted claim of the United States may be satisfied.

Amount of Claim

So far as the Department of State is informed, there is no disposition on the part of anyone to question the figure of the claim of the United States. As a matter of fact, as you will observe from the figures contained in the letter of this Department to the Secretary of War dated November 17, 1922, (exhibit 13) and in his reply of November 22, 1922, (exhibit 14) the amount of the claim of the United States as of April 30, 1922, to wit, $254,122,738.98, converted into gold marks at the rate of 23.821 cents per gold mark, gives a total of 1,066,801,305 gold marks, or only 27,305 gold marks in excess of the figure appearing in the records of the Reparation Commission as of the same date. You will also note that the Secretary of War perceives no objection to adopting as a basis of discussion the figure reported by the Reparation Commission.

According to the statement of the War Department, a copy of which is enclosed (exhibit 15), it appears that the net balance due to the United States on this account as of October 31, 1922, is $255,235,825.75. It is understood that you have received informally from the War Department a detailed analysis of the items entering into this figure.

The Department has no information of the amount due to the United States as reported by the Reparation Commission as of October 31, 1922. You are instructed, however, to accept the figures of the Reparation Commission, if the difference between them and those of the War Department is no greater proportionately than the discrepancy above mentioned, as of April 30, 1922.

You should endeavor to obtain from the respective governments formal recognition of the amount of the claim of the United States as of October 31, 1922, or any later date for which definitive figures may be available, and in addition obtain their approval of a procedure for determining upon the balance due to the United States subsequent to October 31, 1922, or such later date as may be agreed upon.

The Department has telegraphed to Mr. Boyden⁶⁵ requesting the latest figures available from the Reparation Commission, and asking for an explanation of the discrepancy between the War Department’s figures and the figures of the Reparation Commission as of April 30, 1922. Mr. Boyden’s report will be communicated to you separately if it is received prior to your departure.

The Question of Allowing Interest on the Claim of the United States

On December 5, 1921, the British delegate on the Reparation Commission submitted a memorandum to the Commission stating that, in connection with the repayment of unpaid balances due to the British Government on account of its Army of Occupation in Germany for the period to May 1, 1921, “His Majesty’s Government is of opinion that it is entitled to be credited with interest for the period from 1 May 1921, until payment, on the amount of the claim outstanding, and that the rate of such interest should be five per cent per annum.”

The memorandum from which the above passage is quoted, together with comments by the members of the Finance Service of the Reparation Commission, is given in Annex 1224ab of the Reparation Commission (exhibit 16). A memorandum by the Finance Service sent to the General Secretary of the Reparation Commission, which is quoted in the above mentioned Annex, points out that:

“In so far …⁶⁶ as the costs of the Armies of Occupation have been met by Germany, no interest can be claimed from her and the question of interest to be credited to Great Britain for the deficit of her Army costs at May 1, becomes an arrangement between all the Powers entitled to reparation since Germany has no debt towards the Allies as a whole for these costs. The deficit with regard to Great Britain is balanced by the surplus of deliveries over Army costs received by other Powers; further, payments and deliveries allotted to countries who have no armies of occupation could, if the Reparation Commission so decided, be employed to meet the deficit.”

So far as the Department is informed, the Reparation Commission has taken no action on the memorandum submitted by the British Government.

In the communication which Mr. Boyden addressed to the Finance Ministers on March 10, 1922,⁶⁷ (exhibit 17) he stated, under instructions, that “the Government of the United States expects to obtain full payment of the costs of its Army of Occupation with interest from May 1, 1921.”

Mr. Boyden was instructed to present this claim for interest, in view of the fact that the British Government had presented a similar claim. However, in case the other Governments should not insist upon their claims for interest, and provided that the United States should receive assurances of a prompt and satisfactory settlement of its claim, this Government would not be disposed to insist upon the payment of interest. In case the right to the receipt of interest should be recognized in favor of any Government, the United States obviously would similarly be entitled to receive interest, and, in such event, the United States could not waive its right to receive interest without specific authorization by the Congress. Suitable reservation on this point, should it arise, should therefore be made.

German War Material Coming Into the Hands of the American Army East of the Armistice Line

As the American Army advanced into Germany following the armistice some material having non-military value came into its possession. This material has not yet been definitely evaluated, and Mr. Boyden has been instructed to study the matter and to submit to this Department his recommendations as to what in his judgment appears to be the fair value of the material in question received by the American Army.

The October Accounting Annex of the Reparation Commission (exhibit 18, form J–1) charges the United States Government with a provisional amount of 59,491,000 gold marks under this head. However, as indicated in the preceding paragraph, no definite valuation has yet been placed upon this material. Besides, this Government has not accepted in principle that the fair value of this material be charged to it on army costs account.

Article 250 of the Treaty of Versailles (exhibit 19, page 112) provides that, “There shall be credited to the German Government, against the sums due from it to the Allied and Associated Powers for reparation, the value, as assessed by the Reparation Commission, …⁶⁸ of the material handed over in accordance with” the armistice agreements, “for which, as having non-military value, credit should in the judgment of the Reparation Commission be allowed to the German Government.”

Inasmuch as this Government has taken the position that receipts from Germany should be applied on the Army cost accounts of the respective powers, with priority over any other application, it appears equitable that the Government of the United States should admit the fair value of the material in question as a charge on its Army cost account on an equal footing with the other powers concerned. Accordingly, you should inform your colleagues at the appropriate time that the Government of the United States is disposed to accept in principle a charge on its Army cost account of the fair value of the material in question as this value may subsequently be determined, such determination to be made in accordance with principles to be agreed upon by and equally applicable to the governments concerned.

Position of the United States With Respect to Payments Made to Date by Germany

The note of March 22, 1922, (exhibit 1) contains the following passage:

“In the Treaty of Versailles, in undertaking to place ‘a first charge upon all the assets and revenues of the German Empire and its constituent States,’ (Article 248) priority was given to the total cost of all Armies of the Allied and Associated Governments in occupied German territory from the date of the signature of the Armistice Agreement.”

As explained fully in this note, the Government of the United States considers that it has a sound legal and equitable claim, on an equal footing with the other Governments concerned, to payment of its actual army costs with priority over other payments by Germany. This Government feels warranted in assuming, as indicated above, that none of these Governments is disposed to question the right of the United States to be as fully reimbursed as they with respect to its army costs.

It appears from Forms K and N of Part 2 of the Monthly Accounting Annex, October, 1922, (exhibit 18) that the Reparation Commission had received up to October 31, 1922, 1,776,474,755.89 gold marks in cash (including 143,445,153 gold marks in Treasury Bills), and 3,352,846,317.47 gold marks in kind, a total of 5,129,321,073.36 gold marks.(^*) The foregoing figures refer to liquid deliveries and do not include the value of state properties in ceded territories, whose total value as indicated on page 3 of the above mentioned accounting annex is 2,553,905,000.00 gold marks. According to figures given in Form H of the same accounting Annex, the total gross cost of armies of occupation from the armistice until October 31, 1922, amounted to 4,098,264,513.02 gold marks; the net cost in this period, deducting receipts in paper marks, amounted to 3,493,100,052.16 gold marks (these figures include costs of the American army only up to July 81, 1922).

It is clear from the foregoing, therefore, that the Government of the United States has a right to look for repayment of American army costs to the countries that have received from Germany total payments in excess of their respective Army costs.

Leaving out of account deliveries in kind received from Germany, and considering receipts in cash, it appears that of the total of approximately 1,776,474,755.89 gold marks, only a portion, namely, 780,655,955.32 gold marks, has been allocated on army cost account as follows: 637,924,570.63 gold marks to the British Empire; 142,562,767.80 gold marks to France; 5,038.70 gold marks to Italy; and 163,618.19 gold marks to Belgium.

It should be added in this connection that the so-called Spa coal advances to facilitate the rehabilitation of Germany whose total amount is understood to be 392,216,256.13 gold marks, have been ranked ahead of army costs by virtue of the Spa Protocol of July 16, 1920⁶⁹ (Exhibit 20). The Government of the United States has not recognized the validity of this arrangement, and in this connection your attention is invited to the reservation made by Mr. Boyden on August 5, 1920, which is quoted below.

With respect to cash payments, however, it is the view of this Government that the United States should have received practically the entire amount of its claim out of the cash payments already made by Germany and strictly applicable to Army costs. It appears from Form J–1 in the above mentioned Accounting Annex that, of the cash receipts aggregating as stated above, 1,776,474,755.89 gold marks, there has been allocated to the payment of army costs only 780,655,995.32 gold marks, leaving 995,818,760.57 gold marks which have been diverted to purposes other than the payment of army costs.

According to Form J–1 the total balances due on Army cost account as of October 31, 1922, (July 31, 1922 in the case of the United States), amounted to 1,237,484,127.08 gold marks, of which amount 1,010,258,960.98 gold marks was due to the United States; 68,061,267.33 to the British Empire; and 159,163,892.77 gold marks to France. This would seem to show that the army costs of the British and French Governments are not fully paid, but in this connection it should be pointed out that the British Government has been charged with cash receipts in respect of the Spa coal advances in the amount of 93,871,074.72 gold marks, and the French Government with 238,771,510.81 gold marks. If the amounts charged to the British Empire and to France on account of the Spa coal advances had not been included, these Governments would clearly have been overpaid on army cost account, instead of having credit balances.

I may say for your further information that the Government of the United States has fully protected its position with respect to the repayment of its army costs by repeated statements and reservations as appropriate occasion arose. Without undertaking to recite these statements and reservations completely, I may outline briefly some of the more important statements made in this connection.

On November 24, 1919, Mr. Henry White made the following statement at a meeting of the Supreme Council:

“The United States, therefore, has always understood that it is entitled to be reimbursed the exact cost of maintaining all its military forces in German territory or in the several plebiscite districts since November 11th, 1918, until finally withdrawn.

“While there have been many conferences on this subject and while the matter has been previously discussed in the Supreme Council, no representative of the United States Government has ever agreed to nor has had any authority whatever to agree to any other position or view.

“If it be considered that the cost of the United States forces in any of the occupied territory or plebiscite districts 3,000 miles from their base, is greater or will be greater than is desirable, nevertheless, it will be recalled that the Associated Powers have repeatedly requested the United States Government to consent to their use for this purpose. If the Associated Powers deem it to their interest to reduce the cost of the Armies of Occupation, it would appear to be preferable to request the United States Government to decrease its military representation rather than to resort to financial expedients the legality of which might well be questioned.”

On August 5, 1920, Mr. Boyden, in connection with the proposal that certain advances to Germany in connection with the Spa Protocol of July 16, 1920, should be conceded priority over other obligations due from Germany, made the following declaration⁷⁰ which was placed in the Minutes of the Reparation Commission (Minutes No. 73, page 5):

“In view of the arrangements between the Powers concerned as to the priority to be afforded to their advances under the terms of the Spa Protocol, the United States Unofficial Delegate makes no protest or reserve, merely pointing out that these decisions, to which the United States is not a party, do not affect the position of the United States. With respect to the costs of the United States Army of Occupation, he adds that the United States obviously understands and expects that it will be reimbursed in cash for the actual cost, and that it will be notified at once if its Army is not wanted on these terms. In this connection, he refers to the letter of the American Delegation to the O. C. R. C. dated November 28th 1919 and its accompanying Memorandum.”

In connection with the distribution of cash payments received by the Reparation Commission, further reservations with respect to the position of this Government were made, in part as follows.

On June 28, 1921, in connection with a discussion before the Reparation Commission of the proposed payment of about 130,000,000 gold marks on account of British Army costs, Mr. Boyden made a statement which is quoted as follows from the Minutes of the Reparation Commission of that date (Minutes No. 202, page 11):

“3. Mr. Boyden had hoped before this to be able to make a definite statement as to the position of his Government, but had not received instructions. Every one understood, however, that the United States expected to receive the full cost of its Army of Occupation, and it was obvious that it would at least expect to share concurrently with other countries in any distribution of cash available.”

On July 8, 1921, the British delegate, Sir John Bradbury, stated (Minutes No. 205, page 9) that he was “quite prepared, on behalf of his Government, to accept payment upon the understanding that the sum paid should be subject to any claim which the United States Government might subsequently establish against it, as fully as if it had remained in the hands of the Commission.” On July 15, the French representative, M. Mauclere, in connection with a discussion as to whether France as well as Great Britain was still entitled to payment on account of her army costs up to May 1, 1921, stated (Minutes No. 208, page 6):

“It was besides quite understood that if these accounts showed France had a right to a certain part of the sum actually available, she gave the same undertaking with regard to the position of United States Government, when the situation of the latter became clear, as that given by Great Britain at the last Meeting.”

On July 30, 1921, in connection with a discussion before the Reparation Commission of the allocation of the billion gold marks received from Germany during the summer of 1921 under the Schedule of Payments, the greater part of which it was proposed to pay to Belgium, Mr. Boyden (Minutes No. 210, page 29) “wished to refer to a reserve he had already made in connection with any possible rights which the United States Government might have in any of the resources to be distributed by the Reparation Commission, and he understood that the Belgian Delegation would be prepared in that connection to accept the same stipulations as those previously accepted by the British and French Delegations.” The Minutes of this meeting state that “M. Delacroix repeated in exactly the same terms and with exactly the same scope the assurance given by Great Britain and France.”

At this same meeting, in connection with a discussion between the British and French representatives, the British representative made a reserve to the effect that the priority of army costs lay against payments from Germany under the Schedule of Payments. The Belgian Delegate stated as follows:

“The Belgian Government formally declared itself responsible for such sums as might be due by it in respect of the cost of the armies of occupation which had been borne by one of its Allies before May 1st, 1921.”

Mr. Boyden also stated that any arrangement for provisional transfer of these funds to Belgium “would have to be subject to the reserve which had already been made by Sir John Bradbury.” Sir John Bradbury stated that he understood that “Belgium would make herself responsible for any payments due to any other powers arising out of the priority in respect of the costs of the armies of occupation”.

The following was the decision of the Reparation Commission:

• “1. That the sums received up to and including July 31st, 1921 by the Reparation Commission in virtue of the Schedule of Payments with the exception of those in pounds sterling, francs and lire:
• “2. That the sums to be paid over by Germany up to and including August 31st, 1921 in virtue of the same Schedule of Payments, would provisionally be allocated and handed over to Belgium; that was to say, that Belgium undertook to hand over any sums which might be in excess of its final allocation to any of the other Allied and Associated Powers which might be entitled thereto either on account of repayment of the costs of the Armies of Occupation before May 1st, 1921 or on any other account.”

Commenting on the foregoing Mr. Boyden wrote to the Department of State as follows on August 1, 1921:⁷¹

“This decision is subject to all possible reserves. Belgium will get the money but if later accounting or decisions show that she is not entitled to keep any part of it, she will have to adjust the account. It is, of course, subject to all rights of the United States as in the case of the payment made to England.”

During August, 1921, the Finance Ministers of Great Britain, France, Belgium, Italy, together with the Japanese representative on the Reparation Commission, met⁷² to consider various questions including the distribution of payments received from Germany. Article I of the chief of the three agreements signed at this meeting contained the following provision:

“The governments signatory to this agreement agree to share as set out below the sums received or to be received from Germany on Reparation account by way of giving effect to priority of payment in respect of the Armies of Occupation and to the Belgian priority.

“(1) Out of the sum of 1 milliard gold marks to be paid by Germany before the 31st August, 1921 under the Schedule of Payments the British Empire will receive the sum necessary to cover the costs of her Army of Occupation up to the 1st May 1921.

“Belgium will receive on account of the priority which has been accorded to her the sum remaining out of the 1 milliard in question after the above allocation in favour of the British Empire.”

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

“(3) Pending the definite determination by the Reparation Commission of the amount due to the British Empire in respect of the costs of its Army of Occupation incurred prior to 1st May, 1921, a sum of 450 million gold marks will be paid on account to the British Empire in virtue of the present decision.”

This agreement, however, never went into formal effect, because of failure of ratification by the French Government, but it is understood that the distribution contemplated was provisionally made, subject to the rights of the United States.

Meanwhile, pursuant to a decision of the Supreme Council of August 13, 1921, a Commission on which Mr. Roland W. Boyden and Major General Henry T. Allen sat unofficially on behalf of the United States, met, and as a result of its deliberations presented a report with regard to the reimbursement of army costs since May 1, 1921. In this report calculations were included with respect to reimbursement of the actual costs of maintaining the American Army of Occupation, pari passu with those of the other Powers concerned. The report of this Commission to the Supreme Council, it had been supposed, would be referred to the Conference of Ambassadors (the Supreme Council not being likely to meet for some time), and it was thought that this report might pave the way for suitable action with respect to reimbursement of American army costs, both current and accumulated. However, the Government of the United States learned with surprise in February, 1922, that it had been proposed, in connection with discussions at and following the meeting at Cannes in January of that year,⁷³ that new arrangements apparently were to be substituted for the recommendations of the above mentioned Commission, which arrangements entirely ignored the army costs of the United States, notwithstanding the fact that at that time calculations were being made, both with respect to army costs and Reparation payments, that would absorb the entire paying capacity of Germany. Therefore, in view of this situation, when the Government of the United States learned that it was proposed at the meeting of the Allied Finance Ministers in March, 1922, to make further arrangements with respect to payments received from Germany without taking account of the rights of this Government, it was deemed advisable that action should be taken, and Mr. Boyden was instructed to inform the Finance Ministers of the claim of the United States. On March 10, 1922, under instructions from the Department, he presented the following memorandum to the Finance Ministers (exhibit 17):

“I have this morning received a cable from Washington instructing me to point out to you that the United States Army costs up to May 1, 1921, amount to approximately $241,000,000. The Allied Governments, with the possible exception of Great Britain, have received army costs in full up to May 1, 1921, and the English army costs are apparently to be met in full in connection with the present arrangements. In view of the foregoing, the Government of the United States expects to obtain full payment of the costs of its Army of Occupation, with interest from May 1, 1921, before any part of German payments is distributed for reparations or other purposes.

“With reference to current costs I am requested to state that the Government of the United States will insist upon full payment, but that, if assurance of payment is received, it anticipates no difficulty in arranging the practical details of making the payment.”

To this communication the Finance Ministers replied⁷⁴ in part as follows (exhibit 22):

“We have given this communication our most careful consideration, and enclose herewith the text of the arrangement signed today⁷⁵ at Paris. A special article has been inserted in this document to meet the considerations set forth in the Memorandum you have sent us.

“While thus safeguarding the rights of the United States of America, however they may be defined later, we consider that, since our decisions are adopted by virtue of the Treaty of Versailles, to which the Government of the United States is not signatory, the question which you refer to us concerns our respective Governments and must be the object of communications directly addressed to the Allied Governments by the Government of the United States of America, through diplomatic channels.”

The Agreement signed by the Finance Ministers in March 1922⁷⁶ (Exhibit 21), which the Department understands has been ratified by the respective Governments, provided (Article 8) for the allocation of 500,000,000 gold marks to Great Britain and 140,000,000 gold marks to France on account of the army costs of those countries prior to May 1, 1921. Article 13 of this Agreement is as follows:

“The present Agreement is made subject to any rights of the United States of America.”

On April 6, 1922, an instruction was telegraphed to the American Ambassador at London, of which the following is a paraphrase:

“The discussion of arrangements for the payment of accumulated army costs should proceed only on the basis of an unequivocal recognition of the right of the United States Government to be paid both accumulated and current army costs on an equal footing with Allied Governments. It should not be difficult to arrange reasonable terms if this right is admitted. This Government desires that suggestions as to settlement should come from the Allied Governments, but in order to aid you in conversation which may lead to such proposals from them, the following points may be noted:

“Germany has made cash payments, since May 1, 1921, of more than 1,400,000,000 gold marks, or almost enough to pay the balances due on that date for army costs, which according to Reparation Commission accounts amounted to about 1,660,000,000 gold marks. Not taking account of the large deliveries in kind made to the Allied Governments, the entire claim of the United States as of May 1, 1921, should have been met out of the cash payments strictly applicable to army costs. While this Government does not desire to be over-exacting, and wishes to take account of all circumstances and especially the payment of interest by Great Britain on her debt, it feels that it should participate to a substantial extent in cash payments already made by Germany. In view of what the other Powers have already received, it would not seem too severe to ask that the United States should have, out of the payments made heretofore, not less than 300,000,000 gold marks; 100,000,000 gold marks of this amount should be paid immediately and the rest during the next two years, as the Allies might arrange. It should then be understood that in whatever cash payments may be made hereafter by Germany, the United States should proportionately share until the army costs of the United States are paid in full. Until army costs are fully liquidated, the Government of the United States feels that not less than one-half of such cash payments should be applied to army costs, preference being given to the Powers whose costs have not been paid in full and in proportion to their unpaid claims. These suggestions are made merely to facilitate discussion, and are tentative and informal.”

This instruction was also communicated subsequently to the American Ambassador at Paris and to Mr. Boyden, who were authorized to discuss the question informally with the representatives of the Allied Governments. The Department has been advised that no definite indication of the attitude of those Governments has been given on the strength of the informal discussions that have taken place.

With reference to the position to be taken by you at the forthcoming conference in respect of the cash payments thus far made by Germany, it is my opinion, as indicated above, that the United States should share in these payments, but in view of the agreement recently reached by the World War Foreign Debt Commission with the British Government with respect to the refunding of the indebtedness of Great Britain to the United States,⁷⁷ and furthermore, in view of the present critical economic and financial conditions in Europe, I am inclined to feel that a modification of the above quoted proposal in a sense somewhat more favorable to the European Governments concerned may be made. For example, an agreement could be reached to the effect that with reference to payments heretofore received by the other Powers (to which I referred in my telegram of April 6, 1922, indicating that it would be fair for the Government of the United States to receive 300,000,000 gold marks out of these payments), the United States should receive not less than 50,000,000 gold marks in the near future, say on June 1, 1923, and further sums to make up the balance of the 300,000,000 gold marks in question in successive annual installments of 50,000,000 gold marks yearly.

It should be clearly understood, however, that in consenting to such an arrangement, the United States does not, in any way, release the other Governments concerned from the obligation to reimburse it for the full cost of its army of occupation out of the payments received from Germany strictly applicable to army cost account that, subject to the reservation of the rights of the United States, have been diverted to other purposes, and that any such arrangement is contingent upon satisfactory settlement of the claim of the United States as a whole.

Position of the United States with Respect to the Discharge of the Balance of Its Claim

As stated above, in view of the rights of the United States and of the over-payment by Germany of [to] other Governments in respect of their army costs, the Government of the United States looks to them to arrange suitably the payment of its claim, and considers that it would be appropriate at the forthcoming conference if the representatives of the other Governments concerned should make suitable provision for the receipt by this Government of further payments on account according to a definite plan to be agreed upon. Under the circumstances, I am not inclined to lay down, in this connection, any hard and fast schedule, but feel that you should invite the representatives of the Governments concerned to make proposals as to means by which in this manner the claim of this Government may suitably be discharged within a reasonable time, perhaps by means of definitely established annuities.

With respect to future cash payments from Germany under the terms of the Treaty, this Government would be willing to participate therein under an agreement to be reached with the other Governments concerned and to accept on account of its claim for army costs such sums as an offset against the amounts due from the Allied Governments. You should make it clear, however, that by consenting to such an arrangement, the United States does not agree to release the other Governments from their obligation, but only to facilitate their payment of that obligation.

In the above quoted telegram of April 6, 1922, it was informally suggested that not less than half of future cash receipts should be applied to army costs, with preference to those Powers whose army costs had not been fully paid and in proportion to the amount of their unpaid claims, until these were fully discharged. Inasmuch as (leaving out of account the alleged priority of the Spa coal advances) the Government of the United States alone has an unpaid balance on army cost account, this suggestion would, in effect, apply only to the army costs of the United States. You will realize from the foregoing that the informal suggestion referred to was merely advanced to facilitate discussion and as a method that might possibly be mutually agreeable for bringing about the allocation of certain payments to the Government of the United States, with the effect of reducing thereby the amount of their own liability. Obviously, as the suggestion in question was very general and informal, and was not accepted at the time by those Governments, it is in no way binding upon the United States.

Dyes

In the fall of 1919, before the Treaty of Versailles came into effect, the Allied Governments made arrangements to avail [themselves] of dyes and dyestuffs obtainable from Germany, in anticipation of the treaty provisions. Under the circumstances and particularly in view of the urgent need in the United States of a share of the dyes in question, it was deemed advisable to make arrangements by virtue of which the Textile Alliance, Incorporated, was enabled to purchase and distribute these dyes in the United States. Under arrangements between the Department of State and the Textile Alliance made in September, 1919, April, 1920, and July, 1920⁷⁸ (the July arrangement is Exhibit 23), the Textile Alliance has procured from the Reparation Commission substantial quantities of dyes. On December 14, 1921, the treaty establishing friendly relations with Germany having been proclaimed on November 14, 1921,⁷⁹ the Department terminated the arrangement with the Textile Alliance, but that organization continued to purchase dyes from the Reparation Commission until recently. By letter dated November 29, 1922, (Exhibit 24), the President of the Textile Alliance advised the Reparation Commission that the Textile Alliance had determined that it could no longer undertake to deal in reparation dyes.

The Textile Alliance paid the Reparation Commission in cash for such dyes as it purchased. However, in June, 1922, the Department determined that it would be advisable if suitable arrangements could be made to receive reparation dyes without payment, the proceeds to be applied to payment of American army costs. On June 24, 1922, (Exhibit 25), the Department instructed the American Ambassador at Paris, in cooperation with Mr. Boyden, to make inquiry on this point of the members of the Reparation Commission. Informal replies from these governments, copies of which are attachéd, (Exhibit 26), indicate that these governments are willing that the United States should receive these dyes in the manner suggested.

Although the Governments concerned have indicated their readiness that the United States shall receive these dyes, this Government, while it can receive them, is not in a position suitably to dispose of them without specific legislative authorization. In June, 1922, Senator Shortridge introduced in the Senate a resolution authorizing the President to take such measures as might be required to secure for the United States or its nationals the dyes in question (Exhibit 27). This resolution, however, has not been acted upon in the Senate.

In view of the informal inquiries which this Government has made with respect to the possibility of obtaining these dyes on Army cost account, it seems probable that the question of the attitude of this Government in the matter will be raised at the forthcoming conference. In case this question is raised by your colleagues, you may discuss an arrangement by which the Allied Governments should assent in principle to the receipt by the United States without payment of the dyes in question, if and when the United States should so elect, the value of any dyes thus received to be applied in reduction of the claim of this Government on the other Governments concerned in respect of its army costs.

It is difficult to estimate the possible yield to the United States Government through the receipt of such dyes. Mr. F. S. Dickson, who has been engaged by this Department as an expert to study the question, is of the opinion that under present conditions the total annual value of the dyes likely to be utilized by the United States could be estimated roughly at $500,000 (taking the prices at which the dyes are credited to Germany under the treaty).

If there were added to the above mentioned amount the possible profit on the sale in the United States, which would represent the difference between the gross selling price in the United States and the amount credited to Germany minus the expenses of carrying out the operations, the total credit obtainable would be perhaps $1,000,000 annually. However, so far as this Department is informed none of the Allied Governments have credited to Germany any profits that they may have made on the sale of dyes, and since the suggestion that this be done in the case of the United States might perhaps not be viewed with favor by the American interests concerned, which might allege that they were being charged relatively high prices for dyes to discharge an obligation of the German Government, it is my opinion that the possibility of crediting to Germany any possible profits on the sale of the dyes in question in the United States need not be considered at the present time. I may add that a suggestion that the accumulated surplus money of the Textile Alliance be applied in reduction of this Government’s claim for army costs, which suggestion was very informally submitted to the Textile Alliance, and was rejected by that organization.

Other Payments in Kind

It appears possible that it may be advisable in the future that arrangements be made by which the Government of the United States should receive from Germany payments in kind other than dyes, on army cost account. The Department does not desire you to initiate any specific suggestions on this point. If this question should be raised by your colleagues, however, you should consult the Department at once by telegraph.

Suggestions That May Be Advanced by the Allied Representatives That Would Not Be Acceptable to This Government

The memorandum presented to the Secretary on November 8, 1922, by the Diplomatic representatives of Great Britain, France and Italy, (Exhibit 9), stated that the presence of a representative of this Government at the forthcoming conference at Paris “would enable the Allied Governments to obtain full information on certain aspects of the question in regard to which they are at present in some doubt.” The Department of State is not aware of the questions with respect to which the Governments concerned may desire to be informed, or of the suggestions which they may advance in the matter. In case however the suggestion should be advanced that the United States should be reimbursed for its army costs (1) out of ex-German property held in the United States, or (2) by applying on the claim of the United States the value of ex-German ships acquired by this Government under the terms of the Joint Resolution of Congress dated May 12, 1917,⁸⁰ or (3) by acceptance of bonds of the German Government, you should state definitely that you have been instructed by your Government to say that none of these suggestions would be acceptable.

For your further guidance in this connection I believe it desirable to set forth the following considerations:

Ex-German Property in the United States

I may say, for your confidential information, that it appears, in view of the terms of the Treaty Establishing Friendly Relations between Germany and the United States, proclaimed November 14, 1921, that the Government of the United States has a technical right to look to Germany for payment of the costs of its army of occupation, and accordingly this Government could, if necessary, apply the value of the ex-German property held by the United States in satisfaction of this as any other claim. However, such a course would clearly be inequitable, in view of the fact, as pointed out above, that the German Government has already paid over sufficient amounts to discharge its entire obligation in respect of costs of the armies of occupation. Therefore, while not disposed to waive the technical right of this Government, which at some time it may conceivably be necessary to assert, I feel that it is inappropriate that the matter of the ex-German property in question should enter into the forthcoming discussions. If, therefore, the suggestion is made to use this property in payment of costs of the American Army of Occupation, you should state definitely that such a solution could not be considered in any way by this Government.

As you know, the Government of the United States has not demanded participation in general reparations being received from Germany. The fact that the United States has refrained from presenting such a demand is obviously of great importance to the Allies, inasmuch as thereby they are enabled to distribute, for themselves, payments received from Germany on reparation account. Specifically, the ex-German property in question is a pledge of the payment of unsettled American claims against the German Government, the claim for army costs being of an entirely different character.

Furthermore, it is repugnant to principles for which this Government has repeatedly contended to consider the confiscation of such private property for the purpose of discharging any obligation whatsoever of the German Government. The matter, as you realize, is specifically reserved to the Congress under existing legislation, and it appears certain that the Congress would not be disposed to resort to confiscation unless it should appear absolutely necessary. In view of the fact that Germany has already paid to the Powers concerned an amount more than sufficient to cover the total amount of costs of armies of occupation, and, further, in view of the fact that this Government has not sought to participate in the distribution of reparations, it is most improbable that the Congress would give favorable consideration to the suggestion in question.

For your further information in this connection, however, I may set forth the position heretofore taken in the matter by this Government.

The Reparation Commission from time to time has requested information concerning the amount of ex-German property taken over by the United States. While the Department on several occasions has authorized Mr. Boyden to inform the Reparation Commission orally of the amount of such property estimated to be held at the time, it instructed him in a telegram of January 11, 1921, (B–192)⁸¹ also to state “that this Government does not recognize any obligation to furnish this statement at this time but does so merely for the Commission’s informal information.” (For your own information it may be stated that according to the Department’s information the amount of ex-German property held by the Custodian as of about December 15, 1922, was estimated by him to be approximately $274,000,000).

Mr. Boyden telegraphed to the Department under date of August 2, 1920, (B–182)⁸² that in his opinion an effort would be made to get the United States to apply on its army costs the value of ex-enemy property and ships. The Department instructed Mr. Boyden under date of September 1, 1920, (B–107)⁸³ as follows:

“Idea should be discarded that balance due on ex-German ships and balances in hands of Alien Property Custodian will be available for army costs. All of this property is subject to control by Congress and no action can be taken until Congress provides legislation.”

In this connection it may be stated that under the Trading with the Enemy Act, the final disposition of enemy property taken over by the Alien Property Custodian is a matter to be determined by Congress. The Treaty of August 25, 1921, between the United States and Germany, restoring the friendly relations existing between the two nations prior to the outbreak of war, accords to the United States and its nationals rights and advantages stipulated for their benefit in the Joint Peace Resolution of Congress of July 2, 1921,⁸⁴ and in the Treaty of Versailles. Under the terms of Section IV of Part X of the latter treaty, the United States would be warranted, if it saw fit, in using the proceeds of German property taken over to pay debts of German nationals to American citizens, and to pay certain classes of claims against Germany, but there is nothing in this treaty, the Joint Resolution of July 2, or the treaty of August 25, 1921, which removes from Congress the final determination of the disposition to be made of enemy property. In fact the Joint Resolution of July 2, provides, among other things, that the property of the German Government or its successor or successors and of all German nationals held by the United States is to be retained until Germany shall have made suitable provisions for the satisfaction of American claims against that Government, it being specifically stated that no disposition of this property shall be made without specific authority of Congress.

Ex-German Ships Seized by the United States

With regard to ex-German vessels, it may be stated that title to these vessels was taken by the United States in pursuance of the Joint Resolution of May 12, 1917, (exhibit 29). This Joint Resolution provided for the appointment by the Secretary of the Navy of a commission to ascertain the actual value of each vessel, its equipment, appurtenances and all property contained therein at the time of its taking, and to make a written report of their findings to the Secretary of the Navy. The resolution further provided that “these findings shall be considered as competent evidence in all proceedings on any claim for compensation.”

This Department is not informed of the valuation placed by the Navy Department on these vessels. While they were not taken over under the Trading with the Enemy legislation and have not come within the jurisdiction of the Alien Property Custodian, it is understood that, nevertheless, that officer carries them on his books at an arbitrary valuation of approximately $34,000,000. No provision has been made by Congress for the payment of claims against these vessels, whether made by Americans or nationals of other states. Although, as already indicated, these vessels were not taken over under the Trading with the Enemy Act, their status so far as the treaty with Germany is concerned is not dissimilar to other German property taken over and the remarks made above, with regard to the payment of costs of armies of occupation from German property taken over in the United States, are therefore applicable.

In this connection attention may be called to a decision adopted by the Reparation Commission on July 12, 1921, to the effect that German ships seized by Peru were not on January 10, 1920 [when the Treaty of Versailles came into force]⁸⁵ German ships, and therefore, were not deliverable to the Allied and Associated Powers under Annex 3, Part VIII, Treaty of Versailles. This decision of the Reparation Commission which was followed in the case of vessels seized by Brazil, is of interest to this Government in that it indicated what the action of the Reparation Commission might be should the question of the title of the United States to enemy vessels seized in this country ever come before it.

The position of the United States in the matter is, in brief, that the title to these vessels was acquired by the United States prior to the negotiation of the Treaty of Versailles by virtue of the action taken pursuant to the Joint Resolution of Congress of May 12, 1917, and, therefore, that Germany had no title to the vessels at date of the signature of the Treaty, and was consequently unable to dispose of them. Therefore, they are not within the classes covered by Annex 3, Part VIII, which sets forth the classes of vessels to be delivered by Germany to the Reparation Commission.

In view of the foregoing, if the subject of applying the value of ex-German ships seized by the United States to army cost account should be raised, you should state definitely that this subject is one which the Government of the United States cannot consider in this connection. If, however, this question should be presented as a mere question of equity apart from legal or technical questions, you should refer again to the considerations set forth above under the head of ex-German property, such as that the Government of the United States is not seeking general reparations from Germany, and that the German Government has already paid to the Powers concerned sums more than sufficient to discharge the entire costs of armies of occupation, and mention the fact that there are still outstanding a large amount of American claims against the German Government.

Suggestion of Possible Delivery to the United States of German Bonds in Settlement of Army Costs Claim

It further appears possible that the suggestion that German bonds of some sort be delivered to the United States in settlement of the Army cost claim may be put forward. In this event, you should state definitely that such a solution of the matter would not be acceptable to this Government.

In addition, it appears possible that other suggestions may be advanced in the course of the Conference that would not be feasible from the point of view of the United States under existing conditions, such, for example, as the suggestion that the United States should adopt legislation along the lines of the so-called British Reparation Recovery Act of March 24, 1921, (Exhibit 28), which provides that persons importing German goods into Great Britain shall pay over to the British Government a portion of the purchase price thereof, this sum being applied toward the discharge of obligations of Germany under the Treaty of Versailles, the equivalent of sums paid over to the British Government being paid to the German exporter by the German Government.

Summary and Conclusions

I may now summarize the foregoing in the following manner:

(1) The Government of the United States considers that the other Governments concerned have no disposition to question its right to receive payment of its army costs on an equal footing with those Governments. Therefore, you should concern yourself primarily with consideration of practicable means for the payment of the claim.

(2) In view of the foregoing, you should, at the opening of the Conference, express to your colleagues, on behalf of this Government, suitable appreciation of their desire, as evidenced by the calling of the Conference, to arrange for the reimbursement of the army costs for the United States. You should, also, state that you have noted with pleasure the statements in the memorandum of November 8, 1922, (exhibit 9) and in the replies of the Allied Governments to the communications of the United States Government on this matter, to the effect that it is not the intention or desire to raise any question with respect to the right of the Government of the United States to be reimbursed on an equal footing with the other Governments concerned, which have already gotten from Germany receipts substantially in excess of the total army costs of all the Powers concerned in the occupation, and add that you will be happy to receive and discuss any suggestions that they may care to make as to practical means by which the claim of the United States should be met.

In the event, however, that the representatives of the Allied Powers should have no suggestions or plan to submit, you may, as a basis for discussion, propose the suggestions previously advanced, in an informal way, by the American Ambassadors at London and Paris and through Mr. Boyden, to which reference has been made above.

(3) So far as the Department of State is informed, there is no disposition on the part of anyone to question the figure of the claim of the United States. You should therefore endeavor to obtain formal recognition by the respective Governments of the amount of this claim as of October 31, 1922, or if practicable as of a later date, and also procure their acceptance of a definite procedure for agreeing upon a definite and final figure at the earliest practicable date.

With respect to the allowance of interest on the claim of the Government of the United States, it is felt that, provided the respective Governments similarly concerned do not insist upon claims for interest, and provided further that the United States receive assurances of a prompt and satisfactory settlement of its claim, this Government would not be disposed to insist upon the payment of interest, subject always, of course, to the considerations set forth in the latter part of the section above dealing with the question of interest charges.

(4) You may state that the Government of the United States is prepared to admit a charge, on army cost account, with respect to the German war material that came into the hands of the American army east of the armistice line, making it clear that this Government reserves for further consideration and discussion the question of the fair value with which it should be charged and making it clear also that any charge to the United States must be on an equal footing with the other Powers concerned.

(5) With reference to payments thus far received from Germany, it is felt that the sum of 300,000,000 gold marks should be paid over to the Government of the United States. It may be arranged that such payments be made in installments, along the lines indicated in a general way above. With respect to the discharge of the balance of the claim of this Government, you will, of course, make clear that the Government of the United States looks to the other Governments concerned that have received from Germany payments in excess of the total amount of their army costs to arrange suitable means of payment, in accordance with a plan to be agreed upon. Without laying down any hard and fast rule, it is believed to be advisable that you should invite the representatives of the other Governments to make proposals as to a practical means by which the claim of this Government may suitably be discharged in a reasonable time.

With respect to dyes, in case this question should be raised by your colleagues, you may discuss an arrangement by which the respective Government would assent in principle to the receipt by the United States of the dyes in question without payment, if and when the United States should so elect, the value of any dyes thus received to be applied in reduction of the claim of the United States against the other Governments in respect of its army costs. You may similarly discuss the possible receipt, should this Government so elect, of other payments in kind.

(6) In the event that the representatives of the Allied Governments should advance the suggestion that the United States should be reimbursed on army cost account out of ex-German property held in the United States, or by applying the value of ex-German ships acquired by this Government, or by acceptance of German bonds, you should state definitely that you have been instructed not to enter into any discussion of these matters, since suggestions of the character indicated would not be acceptable to this Government. The same would apply in the event that it should be suggested that the United States adopt legislation along the lines of the British Reparation Recovery Act.⁸⁶

(7) You are not authorized to make any engagements on behalf of the Government of the United States, but only to discuss matters relating to the payment of the costs of the American army of occupation with the representatives of the Governments concerned. When you have reached with them informal understandings along the lines of the present instruction, or in case differences of opinion should develop on the respective points, you should promptly report the situation by telegraph to the Department of State, which will thereupon instruct you in the premises.

(8) You should keep the Department promptly and fully advised by telegraph of developments, as the conference proceeds, and consult the Department fully before taking any definite position with respect to any matters that may arise not dealt with in the present instruction.

(9) The Department has instructed Mr. Herrick and Mr. Boyden to assist you as fully as possible in the course of the conference.

I am [etc.]

Charles E. Hughes

54. Exhibits mentioned in this document are not printed; as far as possible, reference has been made to previous volumes of Foreign Relations. Also the minutes of the meetings of the Reparation Commission, of which typewritten copies had been transmitted to the Department, are not printed.
55. See telegrams no. 90, Mar. 20, and no. 92, Mar. 22, 1922, to the Ambassador in France, Foreign Relations, 1922, vol. ii, pp. 220 and 224.
56. Not printed; see telegram no. 139, Mar. 29, from the Ambassador in France, ibid., p. 225.
57. See telegram no. 174, Apr. 10, from the Ambassador in Great Britain, ibid., p. 228.
58. ibid., p. 228.
59. ibid., p. 230.
60. ibid., p. 229.
61. ibid., p. 231.
62. Foreign Relations, 1922, vol. ii, p. 232.
63. ibid., p. 233.
64. Not printed.
65. Roland W. Boyden, American unofficial representative on the Reparation Commission.
66. Omission indicated in the Secretary’s letter.
67. See telegram no. 71, Mar. 9, to the Ambassador in France, Foreign Relations, 1922, vol. ii, p. 218.
68. Omission indicated in the Secretary’s letter.
69. The figures given above do not correspond with those appearing on page 3 of the accounting annex, which relate only to sums placed to the credit of Germany. [Footnote in the original.]
69. See telegram no. 1465, July 29, 1920, from the Chargé in France, Foreign Relations, 1920, vol. ii, p. 403.
70. See telegram no. 1507, Aug. 5, 1920, from the Chargé In France, Foreign Relations, 1920, vol. ii, p. 417.
71. Letter not printed.
72. At Paris, Aug. 8–13.
73. See Foreign Relations, 1922, vol. i, pp. 384 ff.
74. See telegram no. 119, Mar. 14, 1922, from the Ambassador in France, Foreign Relations, 1922, vol. ii, p. 219.
75. Mar. 11, 1922.
76. For text of agreement, see Great Britain, Cmd. 1616, Reparation (1922): Financial Agreement between Belgium, France, Great Britain, Italy, and Japan, Signed at Paris, March 11th, 1922.
77. See Combined Annual Reports of the World War Foreign Debt Commission (Washington, Government Printing Office, 1927), p. 106.
78. Foreign Relations, 1920, vol. ii, pp. 454, 495, and 501.
79. ibid., 1921, vol. ii, p. 29.
80. Foreign Relations, 1917, supp. 2, vol. ii, p. 1257.
81. Not printed.
82. Foreign Relations, 1920, vol. ii, p. 415.
83. ibid., p. 430.
84. See telegram no. 1231, July 5, 1921, to the Commissioner in Berlin, Foreign Relations, 1921, vol. ii, p. 3.
85. Brackets appear on the original.
86. Of Mar. 24, 1921; tax levied on German imports which was reimbursable by the German Government to the German exporter.