Papers Relating to the Foreign Relations of the United States, 1924, Volume II
362.115 St 21/351
The Unofficial Representative on the Reparation Commission (Logan) to the Secretary of State
[Received July 14.]
My Dear Mr. Secretary: I have the honor to enclose herewith, in triplicate, copies of the official report of the Arbitrators appointed in the matter of the Standard Oil tank steamers. The report was circulated to the Reparation Commission yesterday.
Faithfully yours,
The Members of the Arbitral Tribunal (Bayne, Lyon) to the Secretary General of the Reparation Commission
Sir: By Separation Commission Decision No. 1577 of October 13, 1921 (Annex 1100 a, b), the undersigned were constituted members of an independent Tribunal to adjudicate the questions defined by the Arbitral Agreement between the United States of America and the Reparation Commission, signed June 7th, 1920 (Annex 287) relative to the claim of the Standard Oil Company of New Jersey, an American national, for the transfer to it of certain tank steamers delivered by the German Government under Annex III of Part VIII of the Treaty of Versailles as vessels of upward of 1600 tons burden flying the German flag and registered in the name of the Deutsche Amerikanische Petroleum Gesellschaft, a German national.
[Page 162]The claim of the Standard Oil Company was, substantially, that it owned all, or practically all, of the shares of the Deutsche Ameri-kanische Petroleum Gesellschaft at the material dates and all, or practically all, of the outstanding bonds of that Company at the material dates and that, consequently, it was the “beneficial owner” of the tank steamers of the Deutsche Amerikanische Petroleum Gesellschaft or that, in any event, it was entitled to financial reimbursement because of the cession of the vessels registered in the name of the D. A. P. G.
The essential provisions of the Agreement, which was referred to the
undersigned arbitrators for adjudication, read as follows:—
To aid them in their adjudication of the issues above outlined, the parties to the arbitration have supplied the undersigned with extensive briefs, memoires and counter-memoires. The undersigned also had the advantage of the oral presentation of the opposing views, and arguments thereon, during hearings conducted in Paris at which the Standard Oil Company was represented by Mr. Montagu Piesse, its London Solicitor, and the Reparation Commission by Mr. M. G. Gwyer, a London Barrister. The Tribunal did not [Page 163] prescribe technical rules as to the presentation of proof and arguments but permitted each side fully to introduce all the facts and arguments respectively desired. In addition, opinions of a German lawyer were secured on certain relevant questions of German law.
The Reparation Commission in designating the members to serve upon the independent Tribunal, with the approval of the Unofficial Delegate of the United States, decided in part as follows:—
“3. That Messrs. Lyon and Bayne shall, before commencing their other duties as members of said independent tribunal, name a disinterested person to serve as a member thereof in the event that Messrs. Lyon and Bayne fail to agree upon a decision; and that, in case they fail to agree upon a decision said third person so named shall thereupon become a member of said independent tribunal and the decision of the majority of the members of the independent tribunal so constituted shall be final.” (Decision 1577).
After thorough consideration of the complicated questions of fact and the involved issues of international law raised by the arbitration, the arbitrators regret to report to the Separation Commission that they have failed to agree upon a decision. Pursuant to the literal terms of the action of the Separation Commission just quoted above, it would appear that Dr. S. Sjoeborg, the disinterested person named by the undersigned to serve as a member of the independent Tribunal in the event of such disagreement, who at the time of his designation and acceptance was President of a Section of the Mixed Arbitral Tribunal sitting in Paris, should become a member of the Tribunal and that the decision of the majority of the Tribunal so constituted should be final. Dr. Sjoeborg, however, has terminated his connection with the Mixed Arbitral Tribunal and is now in Stockholm and whether it is still possible for him to serve, or whether another member must be named—with the consequent delay and expense in either event—has not yet been ascertained, and before ascertaining, the present arbitrators desire to present certain observations to the Reparation Commission.
During the course of their deliberations they have been impressed by the fact that the close issues of the present arbitration between the parties were such as eminently lent themselves to compromise and friendly adjustment and that such a step, indeed, would perhaps result in a more equitable solution of the problem than an attempt to apply strict, and often conflicting, rules of law to an involved international situation.
In this spirit, therefore, without proceeding further with the formal arbitration which for various reasons has already been unduly prolonged, the undersigned desire to suggest that the parties arrive if possible at a compromise, and they suggest that this compromise [Page 164] take the form of an equal division of the subject matter of the arbitration. That subject matter consists of:
- (a)
- five tank steamers—the Niobe, Pawnee, Hera, Loki and Wotan, aggregating 41,000 tons D. W.
- (b)
- the proceeds of the sale of three tank steamers—the Helios, the Mannheim and the Sirius. These vessels were originally included in the Arbitral Agreement for disposition in kind but their sale was authorised by Reparation Commission decision No. 946, as amended by decision No. 960 (Annex 653), and the net proceeds are held in trust for disposition in accordance with the ultimate results of the arbitration as to the transfer of the five vessels unsold.
- (c)
- the net proceeds of the operation of the tank steamers since the date of their delivery by Germany. The arbitrators understand that there is a credit balance in the operating fund, but should the final approved accounting indicate a deficit, such deficit would, of course, be a charge against the value of the eight tank steamers.
The division upon an equal basis of the subject matter described in subparagraphs (b) and (c) above presents no difficulties, but the equal division of the five tank steamers presents certain complications because of the varying displacement of the individual steamers and because of the fact that it is understood that the value per ton is not uniform. To avoid this involved adjustment, and to arrive at a result which would appear equitable to both parties, the Tribunal ventures to suggest the following procedure which seems to be in conformity with the spirit of the provisions of paragraph [article] 6 of the Spa Agreement of July 16th, 1920.87
If the United States of America, acting in behalf of its national, is in accord, the Reparation Commission might direct the sale by auction—either upon the British or American market—of the five tankers, it being expressly provided that any of the Allied Governments, or their nationals, or the Reparation Commission might bid for the vessels. It should also be provided that the Deutsche Amerikanische Petroleum Gesellschaft (but no other German national) should be permitted to bid for the tankers.
The net proceeds of the sale, after deduction of a deficit in the operating fund (should there be any), might be divided into two parts, one of which would be allocated to the Deutsche Amerikanische Petroleum Gesellschaft providing the German Government was willing to agree that it would claim credit on reparation account for only one-half of the total value of the tankers. The other half of the proceeds of the sale should be retained by the Reparation Commission for the credit of the Power, or Powers, entitled to the tank steamers themselves were they to be allocated in kind. Germany should be credited as of the date of delivery for the then value of one-half the tankers and the Reparation Commission should decide [Page 165] what value should be debited against the Power, or Powers, receiving one-half of the proceeds above described. The net receipts of the sale of the vessels Mannheim, Helios and Sirius should be handled both as to debit and credit in a manner similar to that already outlined for the proceeds of the proposed auction. The net operating proceeds, if any, of the five tank vessels hitherto unsold should be allocated in the same way as the proceeds of the sale of those vessels, except that in this instance there would be no question of a credit to Germany for any earnings during the period after their transfer.
The undersigned, therefore, before taking further action in the matter of calling upon a third arbitrator, recommend that the Reparation Commission take a decision upon the compromise above outlined, and, should that decision be favourable to the recommendation of the present members of the independent Tribunal, it is further recommended that the decision and this recommendation be communicated to the Unofficial Delegate of the United States of America for transmission to the Standard Oil Company for its acceptance. Should the Standard Oil concur in the recommendation, the details of execution, particularly as regards the adjustment of the operating account, will be a matter for administrative arrangement between the claimant and the Reparation Commission.
The present members of the arbitral tribunal hold themselves ready to assist in arranging such details or endeavouring to reconcile any difficulties which may arise in carrying out the compromise settlement which they jointly and earnestly recommend.
- Hugh A. Bayne
- Jacques Lyon