362.115 St 21/351: Telegram
The Acting Secretary of State to the Ambassador in Great Britain (Kellogg)
360. It is probable that Wellman of the Standard Oil Company of New Jersey will call this week to discuss the D. A. P. G. tanker case. These tankers belonged to German subsidiary of which practically all the securities and stock were owned by the Standard Oil Company. In February 1917, shortly before the United States entered the war, the company, to prevent seizure of tankers by Germany, endeavored to transfer voting shares valued at 9,000,000 marks to Germans. The American Alien Property Custodian held that the transfer was illegal. The Standard Oil Company retained, however, nonvoting shares valued at 21,000,000 marks and 31,000,000 marks of debentures, and even if the transfer of voting stock were legal, Standard’s financial interest in the German company was vastly preponderant. Because of this preponderant interest, the United States, under an agreement of June 7, 1920, with interested Allied Governments and Separation Commission, obtained temporary allocation of tankers pending decision as to their final disposition by a tribunal created under the agreement. Hugh Bayne, American member of the tribunal, and Jacques Lyon, the member appointed by Reparation Commission, have not been able to agree that the stockholders as beneficial owners are entitled to property of a corporation. They have agreed, however, to a compromise which they submitted to the Reparation Commission on June 28, last. The Standard Oil Company has informally accepted this compromise which the members of the tribunal considered 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. Briefly, it envisages a 50–50 division between the company and the Reparation Commission of the proceeds of the sale of the tankers and their earnings. Logan advised that Bradbury was disposed to raise technical objections against approval of the proposed compromise by the Reparation [Page 168] Commission and had consulted his Government. He now reports receipt of a letter of October 9 from the British delegation stating that they have decided not to accept the compromise and that they believe that the referee should be called in as originally arranged. The Department considers that while possibly technically the two members of the tribunal had no authorization to make such a recommendation and the case should have been referred to the umpire for determination in the event of a disagreement between them, nevertheless a settlement of the nature they indicate appears clearly to come within the scope of the Tanker Agreement, and particularly within the spirit of paragraph G, which contemplates that the Standard Oil be paid compensation, even if it did not establish beneficial ownership, and even if, as is the case, Germany had paid some compensation to the German subsidiary. Logan has been instructed to send you a brief statement of the status of the case, also copies of documents mentioned above and Department’s L–20 of December 1288 and L–39 of January 12, last. After consulting these documents and after consultation with Wellman, you may, at his request, urge that the British Government reconsider, with a view to instructing its delegation on the Reparation Commission to approve the proposed compromise. In view of the obvious equities in the case and the undisputed preponderant financial interest of Standard Oil Company in the tankers, Department considers that Reparation Commission would be warranted in accepting the compromise proposed, thereby obviating necessity of referring case to the umpire for decision.