Papers Relating to the Foreign Relations of the United States, 1924, Volume II

[Enclosure]

The American Ambassador (Kellogg) to the British Secretary of State for Foreign Affairs (Chamberlain)⁸³

London, November 15, 1924.

memorandum dealing with the question of american participation in payments to be made by germany under the dawes plan

In Section XI, Part One, of the Dawes Report, it is provided that payments made by Germany shall cover all sums for which Germany may be liable to the Allied and Associated Powers, but the same shall not prejudice the questions of distribution or priority between the various categories of charges. The clauses referred to are as follows:

“Before passing from this part of our report, we desire to make it quite clear that the sums denoted above in our examination of the successive years, comprise all amounts for which Germany may be liable to the Allied and Associated Powers for the costs arising out of the war, including reparation, restitution, all costs of all armies of occupation, clearing house operations to the extent of those balances which the Reparation Commission decide must legitimately remain a definitive charge on the German Government, commissions of control, and supervision, etc.

“Wherever in any part of this report or its annexes we refer to Treaty payments, reparation, amounts payable to the Allies, etc., we use these terms to include all charges payable by Germany to the Allied and Associated Powers for these war costs. They include also special payments such as those due under Articles 58, 124, and 125 of the Treaty of Versailles.

“The funds to be deposited in the special account in the Bank are to be available for the foregoing purposes, notwithstanding anything in this report which may be interpreted to the contrary, though in saying this we are not to be read as prejudicing questions of distribution or questions of priority between the various categories of charges.”

These provisions were most carefully considered by the Dawes Committee. They were intended to make all claims of every name and nature of the Allied and Associated Powers against Germany a charge on the funds in the hands of the Agent General. The Dawes Report was accepted by Germany and by all the Allied Governments by the final Protocol of the London Conference, and has been put in force. The Conference was fully aware of the nature of the American claims for Army costs and reparations. On August second, the French Delegation presented to the Conference a Resolution, calling a meeting of Finance Ministers to meet in Paris immediately after the close of the Conference, for the purpose of allocating the payments made by Germany since January 1, 1923, and also the allocation of German payments as from the date when the Agent General for Reparation Payments takes up his duty and during the first years of the operation of the Dawes Plan. On August fifth, I sent a letter to the Secretary General of the Interallied Conference, setting forth the nature of the American claims and our right as an Associated Power under the Dawes Plan to be represented at said conference and to participate in such distribution. (These documents will be found as follows: French Resolution, Page 103, No. 26, Vol. I, Proceedings of the London Reparations Conference, July and August 1924. Letter from the American Ambassador to London Conference, page 126, No. 29, Vol. I.)⁸⁴

The French Resolution and my letter to the Conference on behalf of the United States came up for consideration on Tuesday, August twelfth, 1924, at which time I explained to the Plenary Conference the nature of the American claims and our right to be represented at such a Conference and to have the American claims paid out of the funds to be paid into the Bank by Germany for the benefit of the Allied and Associated Powers. After discussion, it was agreed that the United States should be represented and that notice should be sent out accordingly. (See Proceedings of the London Reparations Conference, Vol. I, page 49).⁸⁵ Furthermore, the American position is in entire harmony with the Report of the Second Committee approved by the Plenary Conference on July 28, 1924, which provides in Article 4, sub-division c, that “with the resources thus placed at his disposal, the Agent General for Reparation Payments shall provide for the payments of reparations and other Treaty charges during the transition period in accordance with the decisions as to distribution which will be taken by the Allied and Associated Governments.” This was intended by the Conference to include the United States.

The United States has two classes of claims against Germany: Costs for the maintenance of its Army of Occupation and claims for damages to persons and property.

The basis of the claims for Army Costs is America’s participation in the war, the Armistice Agreement, the United States Treaty with Germany, and the Agreement of the Principal Allied and Associated Powers made May 25, 1923, for the payment of these sums. In Article IX of the Armistice Agreement of November 11, 1918, signed by Germany and among others by the United States, this provision appears “The maintenance of the troops of occupation in the Rhine-land shall be defrayed by the German Government.”

In view of the payments made to the Allies by Germany in the global sums handed over to them, of which no part was paid to the United States for its Army costs, and on the theory of our equitable right in view of services rendered to the Allies by the maintenance of our Army on the Rhine, thereby reducing their own expenditures, there was signed at Paris on May 25, 1923, an Agreement with the Principal Allied Powers for the adjustment and payment of these army costs. This agreement has not yet been ratified by France, nor the ratifications exchanged. Roughly, that Agreement provides that our army costs of 255 million dollars (on which there have been some small credits) would be divided into twelve annual instalments, and should be, during the first four of the twelve years, a first charge on cash payments received from Germany, or for Germany’s account, after the expenses of the Reparation Commission and the current expenses of the Allied armies of occupation have been satisfied, but during the last eight years be an absolute prior charge on all cash payments, except for the costs of the Reparation Commission. Furthermore, the Allies agreed that they would apply the value of deliveries in kind to the discharge of their army costs. No sums have been paid to the United States under this Agreement regarding army costs except that Belgium has deposited in a separate account for the benefit of the United States twenty-five per cent of certain reparation payments amounting to about eleven million dollars.⁸⁶

By the agreement executed between the United States and Germany, August 10, 1922,⁸⁷ a Mixed Claims Commission was established to sit in Washington and adjudicate the claims of American citizens for loss and damage to persons or property arising because of the war and subsequent to July 31, 1914, and also for the settlement of prewar and war debts owing to American citizens by German nationals. The Commission has been sitting for some time and is adjudicating these claims, and it is hoped it will have finished its work by the end of 1925. By our separate treaty with Germany of November 14, 1921,⁸⁸ Germany accords to us the same rights in the matter of claims which we would have enjoyed had we ratified the Treaty of Versailles (see Part VIII, Reparation Annex I, Sections 1 to 10 inclusive), namely the satisfaction of all claims similar to those made by the Allies, but the American Government has notified Germany that it will not make claims under sub-divisions 5, 6 and 7, including pensions, assistance to prisoners of war, their families and dependents, and allowances to families and dependents of mobilized persons, etc.; so that the American claims which are for damages to persons and property do not include, as do the claims of the Allies, any sums of the type above indicated.

In the Treaty of Peace between the United States and Germany, proclaimed November 14, 1921, there was embodied a resolution of the Congress of the United States declaring the war at an end. Among other things, the resolution contained the following provision:

“Sec. 2. That in making this declaration, and as a part of it, there are expressly reserved to the United States of America and its nationals any and all rights, privileges, indemnities, reparations or advantages, together with the right to enforce the same, to which it or they have become entitled under the terms of the Armistice signed November 11, 1918, or any extensions or modifications thereof; or which were acquired by or are in the possession of the United States of America by reason of its participation in the war, or to which its nationals have thereby become rightfully entitled; or which, under the treaty of Versailles, have been stipulated for its or their benefit; or to which it is entitled as one of the principal allied and associated powers; or to which it is entitled by virtue of any Act or Acts of Congress; or otherwise.”

The Treaty also contained the following articles:

“Article I

“Germany undertakes to accord to the United States, and the United States shall have and enjoy, all the rights, privileges, indemnities, reparations or advantages specified in the aforesaid Joint Resolution of the Congress of the United States of July 2, 1921, including all the rights and advantages stipulated for the benefit of the United States in the Treaty of Versailles which the United States shall fully enjoy notwithstanding the fact that such Treaty has not been ratified by the United States.

“Article II

“With a view to defining more particularly the obligations of Germany under the foregoing Article with respect to certain provisions in the Treaty of Versailles, it is understood and agreed between the High Contracting Parties:

“(1) That the rights and advantages stipulated in that Treaty for the benefit of the United States, which it is intended the United States shall have and enjoy, are those defined in Section 1, of Part IV, and Parts V, VI, VII [sic], VIII, IX, X, XI, XII, XIV, and XV.

“The United States in availing itself of the rights and advantages stipulated in the provisions of that Treaty mentioned in this paragraph will do so in a manner consistent with the rights accorded to Germany under such provisions.”

Aside from the legal right to participate in the payments by Germany to the Bank under the Dawes Report and the separate Treaty of Peace between the United States and Germany which I will hereafter consider, I believe the United States is entitled to participate on broad equitable grounds. It was the Associated Power in the war. It contributed very materially to the victory. It incurred large expense by the maintenance of its Army of Occupation which has been recognized by the Allied Governments in the Army Cost Agreement. It has just claims of reparation for damages to persons and property of its citizens, recognized and agreed to by the German Government and ranking pari passu with the claims of the Allied countries engaged in the war. I shall not enlarge upon this point, as all the facts and circumstances are well known to His Majesty’s Government. But I submit that on technical legal grounds the right of the United States is incontestable. It is true the United States did not sign the Versailles Treaty. This can make no difference whatever so far as the costs of the Army of Occupation are concerned, as this is provided for by the Armistice Agreement which was signed by the United States. But beyond this, the failure to ratify the Treaty of Versailles did not take from the United States the right to indemnity from Germany for losses and damages suffered by its citizens, the same class of claims as those which are being collected by the Allies. It will be noticed that by the Berlin Treaty between Germany and the United States, Germany undertakes to accord to the United States, and the United States shall have and enjoy all the rights, privileges, indemnities, reparations or advantages specified in the Joint Resolution of Congress, including all rights and advantages stipulated for the benefit of the United States in the Treaty of Versailles, which the United States shall fully enjoy notwithstanding the fact that such Treaty has not been ratified. With a view of more particularly defining the obligations of Germany, it is further provided that the rights and advantages stipulated in the Treaty of Versailles for the benefit of the United States, which it is intended the United States shall have and enjoy, are those defined in certain sections of the Treaty, including the reparations section heretofore referred to.

It has been suggested that technical objections might be raised by some of the Allied Powers. Certainly no suggestion has been made that Germany could object. But it has been said that under the Versailles Treaty the reparations of the Allied and Associated Powers were provided for and made a prior charge on Germany; that these reparations were to be collected by the Reparations Commission; that the Reparations Commission notified Germany of the total amount of claims which did not include those of the United States; and therefore the United States could not by separate treaty claim the right to share in this preference pari passu with the Allies. I submit that these claims for reparations arose on account of the war in which the United States participated, and not by virtue of the Treaty of Versailles. Furthermore, I do not believe it lies in the power of Germany and a part of the Allied countries to enter into a Treaty which would exclude the balance of the Allies in the war from collecting reparations or make the reparations of a part of the countries a first charge against Germany, unless the other countries engaged in the war agreed to such a preference. Could France enter into a separate treaty with Germany, making its reparations claims and army costs a prior charge on German revenues, thereby excluding Great Britain and the other Allies? If not, neither could the Allied Powers make such an agreement which would exclude the “Associated Power.” Nor do I believe there can be any technical objection to the participation of the United States because the reparations were to be collected solely by and through the Reparations Commission. Likewise, a part of the Allied and Associated Powers could not provide an exclusive remedy for the collection of reparations by the balance of the Powers engaged in the war. The Dawes Report recognizes this and provides that the payments made by Germany to the Bank shall include all claims of the Allied and Associated Powers and this agreement has been accepted and put in force by the Protocol signed by Germany and all the Allied Powers.

The amount of the Army claims has been fixed, although there are some small credits to be made. But on the basis of 255 million dollars, to be paid in twelve annual instalments, it would take about 21 million dollars per year. However, by the agreement unpaid annuities accumulate and if not paid before, must all be paid during the last eight years. In fact unpaid annuities have accumulated, and probably will accumulate during the first two years of the Dawes Plan. Assuming therefore the ratification of the Army Cost Agreement, virtually all of the total sum would have to be paid in the last eight years, namely, 32 million dollars per annum. It is the desire of the United States to facilitate in every way the settlement of the reparations question and therefore it is willing to recast the Army Cost Agreement and to make an extension of the time of payments, provided a reasonable percentage of the money paid into the Bank for reparations is also allowed on its general claims. The amount of the American claims cannot now be definitely stated. But we are satisfied that an arrangement can be made whereby the total annual payment to the United States for army costs and claims will not much exceed if at all the annual payments necessary to fulfill the present Army Cost Agreement. We believe the American claims for damages to persons and property should rank pari passu with the reparations claims of other countries. The Army costs are of course a prior charge.

83. Presented Nov. 19, 1924; printed in American War Claims Against Germany, S. Doc. 173, 69th Cong., 2d sess., p. 45.
84. For texts of the French resolution and letter of the American Ambassador, see Great Britain, Cmd. 2270, Miscellaneous No. 17 (1924), pp. 164 and 196, respectively; the citations given are to an earlier confidential print of the British Government.
85. See ibid., p. 80.
86. See pp. 140 ff.
87. Foreign Relations, 1922, vol. ii, p. 262.
88. Treaty signed Aug. 25, 1921, proclaimed Nov. 14, 1921; see ibid., 1921, vol. ii, p. 29.