462.00 R 296/740: Telegram
The Ambassador in Great Britain (Kellogg) to the Secretary of State
509. Received the following memorandum from Mr. Austen Chamberlain this morning.97
“Your Excellency: 1. I have the honor to acknowledge the receipt of the memorandum of the 15th November98 which you handed to me personally at our interview on the 19th November in explanation of the views of the United States Government regarding their participation in the payments to be made by Germany under the Dawes Plan.
2. In that memorandum Your Excellency explains the reasons which, in the opinion of your Government, justify this demand. They divide their claims against Germany into two classes: (1) costs for the maintenance of the American Army of Occupation; (2) claims for damages to persons and property.
3. Your Excellency will recollect that, during our interview, I repeated to you the assurance already given to you verbally on the 27th October by Sir E. Crowe99 that, so far as His Majesty’s Government are concerned, the question regarding the costs of the American Army of Occupation has already been disposed of. An agreement regulating that question was signed on the 25th of May 1923,1 as Your Excellency records in your memorandum under reply, between the United States and the Principal Allied Powers. That agreement has since been ratified, and the principle at stake has thus been finally settled so far as this country is concerned. His Majesty’s Government consequently do not anticipate any difficulties as regards that matter.
4. As to the second claim advanced by Your Excellency—that for damages to persons and property—His Majesty’s Government understand from your memorandum that it is based not only on treaty rights, but also upon a passage in the Dawes report and upon grounds of common equity. It is with sincere regret that, as regards the legal position which Your Excellency seeks to establish, His Majesty’s Government are unable to see eye to eye with the American Government.
5. It is due to the United States Government that I should state the view taken by His Majesty’s Government of the legal position. They are unable to agree that Germany had it in her power by her later treaty with the United States of America to alter or vary the obligations that by the earlier Treaty of Versailles she had already contracted towards the powers which ratified that treaty. The contention, [Page 97] as I understand it, is that Germany, by the separate treaty with the United States of America, has undertaken to accord to the United States all the rights and advantages stipulated for the benefit of the United States in the Treaty of Versailles (including the reparation section of that treaty) notwithstanding the fact that such treaty has not been ratified by the United States.
His Majesty’s Government are, however, advised that this stipulation covers undertakings which Germany had not the power to give in view of previous obligations which she had incurred under the Treaty of Versailles. By article 248 of that treaty Germany constituted the reparation obligations a first charge upon all her assets, and she therefore was not in a legal position to incur any fresh obligations towards another power which had not ratified the treaty, if the effect would be to diminish the resources available for reparation to the Allied Powers which had ratified.
6. His Majesty’s Government are unable to agree that the report of the Dawes committee could alter this legal position. The Dawes committee was appointed by the Reparation Commission (which derives its authority with regard to Germany from the Treaty of Versailles alone) to ‘consider the means of balancing the (German) budget and the measures to be taken to stabilize the currency.’ Any question as to the states which were to share in the reparation payments, or as to the proportions of the share of each, was clearly outside the scope of the committee’s functions.
7. I need not repeat to Your Excellency that I do not for one moment dispute the explanation which you were good enough to give me of the intentions which caused your Government to instruct the American member of the Dawes committee to introduce the words ‘and Associated Powers’ into the committee’s report. Your Excellency must, however, allow me to say on my part that, if the United States Government understood the passage to have been inserted for the express purpose of placing on record a formal recognition of their claim to a share of the Dawes annuities, this was certainly not so understood by the British members of the Dawes committee. Indeed, I am informed that the matter was never discussed in this sense either in the full committee or in the drafting committee when the text of the report was under preparation, nor during the proceedings of the second committee of the recent London Conference, to whose report reference is made on the third page of Your Excellency’s note.
8. I should add that, under the terms of the Treaty of Versailles, the amount of the damage for which compensation was to be made by Germany was left to be determined by the Reparation Commission. For the purpose of carrying out their task in this respect, the commission had to take into account the various claims put forward by the several Allied Governments. At no time, so far as His Majesty’s Government are aware, did the American Government during the discussions that then took place, either within the commission or outside it, make any intimation that they wished to put forward a claim for inclusion in the total to be demanded from Germany. Nor does any reservation appear to have been made by any American representative, official or unofficial, of any possible future right of America to make such claim. The American Government were represented at the conferences held at Spa in 1920 with the object of [Page 98] arriving at an agreement concerning the proportion in which the amount of reparations, when received, should be divided between the states entitled to share in the reparations. There is no record of any attempt having been made on the part of the American representatives, either on that occasion or since, to claim a percentage in the allotment then being laid down amongst themselves by the Allies for the distribution of German reparation payments when received. Nor did this create any surprise among the Allied Governments, since it had become generally understood that the United States Government made a special point of not demanding reparations from the powers defeated in the war. In that belief His Majesty’s Government were strongly confirmed when, in a speech at New Haven on the 29th of December, 1922, of which the American Secretary of State caused the text most courteously, though informally, to be communicated to His Majesty’s Ambassador at Washington, the American Secretary of State used the following words:
‘The crux of the European situation lies in the settlement of reparations. There will be no adjustment of other needs, however pressing, until a definite and accepted basis for the discharge of reparation claims has been fixed. It is futile to attempt to erect any economic structure in Europe until the foundation is laid.
How can the United States help in this matter? We are not seeking reparations. We are, indeed, asking for the reimbursements of the costs of our Army of Occupation; and with good reason, for we have maintained our Army in Europe at the request of the Allies and of Germany, and under an agreement that its costs, with like Army costs, should be a first charge upon the amounts paid by Germany. Others have been paid and we have not been paid.
But we are not seeking general reparations. We are bearing our own burden and, through our loans, a large part of Europe’s burden in addition. No demands of ours stand in the way of a proper settlement of the reparation question.’
It was in these circumstances, as I had the honour verbally to explain to Your Excellency, that, not having hitherto doubted that these words still correctly describe the policy of the American Government, the intimation that they now claimed a share in the Dawes annuities in respect of reparations, and apart from the cost of the Army of Occupation, came upon His Majesty’s Government as a complete surprise.
9. I have felt it to be due to Your Excellency and to the Government of the United States of America that I should explain thus fully the grounds on which His Majesty’s Government are unable to admit the legal arguments brought forward in Your Excellency’s memorandum. There remains the question of equity raised in Your Excellency’s memorandum. His Majesty’s Government understand that the United States Government has under its control very large sums arising from German property in the United States analogous to the property which, under the terms of the Versailles Treaty, has been used in Allied countries to meet private claims arising out of the war. Under the treaty any credit balance in favour of Germany resulting from dealing with German property is reckoned as a credit to Germany in the reparation account. Further, there are certain sums in respect of ships, retained by the United States in excess of their tonnage losses which should be accountable to the pool. His Majesty’s Government have no definite information as to the amount of these sums, but they have always understood that they are likely [Page 99] to be equal or nearly equal, to the amounts awarded by the Mixed Commission.
10. His Majesty’s Government are naturally anxious to give the fullest and most friendly consideration to any claim put forward by the United States Government. Though, therefore, for the reasons given above, they find it difficult to see how the present claim could be sustained, they would be quite willing to examine the whole matter in connection with the forthcoming meeting of Finance Ministers in Paris if the United States Government would supply them with a statement of any further grounds on which it appears to them that the claim can be maintained and would inform them what the amount of the claim actually is, and whether, in the event of the claim being conceded, the United States Government is prepared to agree to set off against it, as other powers have done under the Treaty of Versailles, any credit balance arising from dealing with German assets which have come into their hands, and to have the net claim fixed as under the treaty by the Reparation Commission and made subject to the same reductions, owing to the reductions, past or prospective, of German payments, as applied to countries claiming under the Treaty of Versailles.
11. The United States Government will no doubt recognize the fairness of their undertaking the same obligations under this head as are binding on the Allies. If the matter is to be considered from the general point of view of equity, the propriety of such equality of benefit from, and of corresponding contribution to, the common fund can hardly be questioned. It would accordingly be of real advantage in forming a judgment on the practical issue raised by the American claim, if approximate figures as to the net amount involved could be furnished. If in return Your Excellency desires an exact statement of the obligations of the Allies in this matter, I shall be happy to obtain it for you from the Chancellor of the Exchequer, or it may be explained to the American representatives at the meeting of Finance Ministers at Paris.
12. The actual details of any arrangement that may ultimately prove possible must necessarily stand over until the forthcoming meeting of the Finance Ministers in Paris. This, as Your Excellency is probably aware, can no longer take place at the beginning of December, as His Majesty’s Government had hoped. But, irksome though this delay may be in some respects, it has at least this advantage—that it will give longer time to consider, in all their aspects, the questions Your Excellency has raised. I should mention that the Dominions’ interest in reparations! would, in any case, require us to consult them, through such representatives as they may appoint, before arriving at any new decisions.
13. In closing this communication I feel it is unnecessary to assure Your Excellency that nothing is further from my thoughts, and that nothing would be more distasteful to His Majesty’s Government than to engage in a fruitless controversy over a matter of this kind with the United States Government, of whose services to the common cause, both during and since the war, the British people are, and always will be, fully appreciative. At the same time, His Majesty’s Government would be guilty of a breach of trust were they not also to safeguard to the best of their ability the legitimate [Page 100] interests of the British taxpayers, who are already bearing so large a share of the burdens inherited from the war, burdens which they have loyally shouldered and never by word or deed sought to evade, as Your Excellency will be the first to admit. If, therefore, His Majesty’s Government hesitates so readily to accept the suggestions now put forward by the United States Government as others, less heavily burdened, may already have done, it will not, I feel convinced, be imputed to any ill-will on their part.
I have the honor to be with the highest consideration Your Excellency’s obedient servant. Signed Austen Chamberlain.”
Chamberlain gone to Rome. Will not return until December 14th. From copy of memorandum I left with him and mailed to you2 you will see many of his points were answered in advance, but I think further answer should be made.
Chamberlain’s point 5. The position that Germany had no power to make a treaty with the United States to pay damages to American nationals is trivial. There is no obligation, express or implied, in the Versailles Treaty that incapacitated Germany to pay the United States the separate damages to her nationals accruing on account of the war; and no power in the Allied Governments and Germany to make their reparations a first charge. The damages to nationals of the different powers were not joint but separate and arose out of the war, not out of the Versailles Treaty.
Point 6. While the Dawes committee was appointed by the Reparations Commission, its report went beyond the Versailles Treaty; was not only in aid of that treaty for the purpose of collecting reparations, but in many respects superseded it, notably in the extension of period for the delivery of dyestuffs, activities of the transfer committee, arbitration, stabilization of currency, organization of bank and many other things. It was adopted by a treaty signed by all the Allied Governments and is as binding as the Versailles Treaty.
Point 7. Owen Young states there is no reason for [this statement?]. We might get another letter from him leaving out the statement that if Germany made the payments to the bank, she was discharged from all claims of the Allied and Associated Powers. (See my 467, November 12, 4 p.m.) Furthermore before the Dawes report was approved by the London protocol I notified Great Britain and the other nations individually and also the plenary conference as a whole of the position of the United States. The protocol was signed with full knowledge of this.
Point 8. Manifestly the Allies and Germany had no power to agree that the separate claims for damages by American nationals should be fixed by the Reparations Commission. There is no reason [Page 101] why the American Government should have notified the British Government or the Reparations Commission or the Spa Conference of its claims because it was left free to deal with Germany as it saw fit and not until the Dawes report was adopted with its provisions for all-inclusive payments was there any reason for the United States Government to notify the Allied Governments that we expect to share in the payments to the Agent General. I have already explained to Chamberlain but it would be well to put in writing that in your New Haven speech you referred to general reparations and not damages to persons and property which were then in process of being adjusted with Germany.
Points 9 to 13. In reply to Chamberlain’s statement that we have very large sums arising from German property analogous [to] the property which under the Versailles Treaty has been used in Allied countries to meet private claims arising out of the war it might be suggested that Germany indemnified her nationals but has not done so in our case. Furthermore, Chamberlain’s statement that any credit balance in favor of Germany resulting from dealing with German property is reckoned as a credit to Germany in the reparations account is not accurate. The Treaty of Versailles, article 297, allows each Government perfect freedom in dealing with alien property and ships. Each Government may take the property and may apply the value of the same on German obligations or it may not. In other words each power is left free to dispose of such property in accordance with its laws and regulations. Only in the event that the Allied Government retains the property is the value thereof dealt with under article 243. I think it should be suggested to the British Government again that we are not presenting the same class of claims as the Allied Governments. Logan says that well over 50 percent of the British claims are based on pensions, allowances, etc., and that if our claims were increased accordingly they would run into billions instead of millions. If we should agree to any set-off as suggested by Chamberlain we would be doing more than the Allies have done as we have presented no such claims or participated in the division of the overseas possessions. I have no knowledge of the pool to which Chamberlain refers but I assume he would be willing to furnish us exact data as to this. Our position, however, as to ships and alien property ought perhaps to be restated.
[Paraphrase.] The foregoing are partial suggestions for Department’s consideration in answering British note, which I think should be done both in writing and orally. If Department wishes me to prepare an answer along lines indicated, I suggest that Logan and I confer in order to ensure harmonious action. Chamberlain said to me yesterday before I had any knowledge of contents of his note that he thought matter could be worked out with Churchill [Page 102] (Chancellor of the Exchequer) and I believe note is sent for trading purposes. Chamberlain suggested it might be advisable in future discussions to bring in Chancellor of the Exchequer, so I infer that door is not definitely closed to further discussion. [End paraphrase.]
Copy to Logan.
- Telegram in eight sections.↩
- Memorandum dated Dee. 3; faulty punctuation and verbal errors due to telegraphic transmission have been corrected from the text as printed in American War Claims Against Germany, S. Doc. 173, 69th Cong., 2d sess., p. 50.↩
- Ante, p. 85.↩
- See telegram no. 442, Oct. 28, 5 p.m., from the Ambassador in Great Britain, p. 68.↩
- Foreign Relations, 1923, vol. ii, p. 180.↩
- Ante, p. 85.↩