362.115 St 21/343: Telegram
The Ambassador in France (Herrick) to the Secretary of State
[Paraphrase]
232. L–151, from Logan.
- 1.
- Referring to Standard Oil tanker arbitration, am confidentially advised that Lyon and Bayne81 disagree. Lyon takes the view as to paragraph F of the agreement that a shareholder in a corporation is not the beneficial owner of the corporation’s assets. He supports his view by many precedents, particularly in French jurisprudence, under which the corporation itself was considered the only legal, the only equitable, and the only beneficial owner of its own assets. He emphasizes “beneficial ownership” as distinguished from beneficial interest. Bayne, on the other hand, considering the history of making of the arbitration agreement, holds that the agreement, though expressed obscurely, was endeavoring to convey the idea that if the Standard Oil Company owned all or practically all of the shares in its German subsidiary, then for the purpose of the agreement it was to be considered beneficial owner of the tank steamers. Lyon and Bayne concur that paragraph G of the agreement virtually incorporates by reference the provisions of paragraph 20 of annex 2, part VIII of Treaty of Versailles which states that Separation Commission “shall have due regard for any legal or equitable interests of the Allied or Associated Powers.”82 They [Page 160] consider that the commission has shown due regard for these interests by asking Germany to offer compensation therefor so that the ships could be delivered clear and free; and inasmuch as Germany treated the Standard’s German subsidiary exactly the same way as all other German ship companies without regard to nationality of their shareholders and accorded compensation in no way discriminatory but precisely the same as that accorded corporations in which French and English nationals were stockholders, therefore “due regard” does not necessitate an exception and the rendition of tankers themselves in this particular case.
- 2.
- The situation resulting from the disagreement of Bayne and Lyon may be handled in one of two ways. First, Dr. Sjoeborg, a Swedish lawyer now in Stockholm, the third arbitrator, can be called in. This of course means additional expense and delay. Secondly, the Standard Oil Company might be willing to suggest as a compromise that it retain half of the tonnage but turn over to or buy from the Reparation Commission the other half. If it retains half and delivers the balance, the company might ask to select its own tonnage.
- 3.
- Personally, I strongly believe that a compromise is advisable because I am afraid that if the case goes to the third arbitrator for decision on its merits, the Standard Oil Company, because of obscure and technical wording of the arbitration agreement, will suffer an [adverse] decision which means that it will have no tonnage. Am confidentially advised that Lyon would be willing to join Bayne in recommending to the Reparation Commission a compromise and the division of the tonnage on half and half basis, and also that Bayne thinks that the third arbitrator, if the case goes to him for opinion, will agree with Lyon that the company is not in law the beneficial owner. I have arranged for sufficient delay to enable the Department to consult Standard Oil Company and decide on suggested compromise before the third arbitrator is called upon. Because of his distance from Paris, he may decline the task which would involve the selection of a new arbitrator. Logan.
Herrick