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

462.00 R 296/803: Telegram

The Ambassador in Great Britain (Kellogg) to the Secretary of State

London, December 31, 1924—4 p.m.
[Received December 31—2:27 p.m.¹³]

546. Following note just received from Austen Chamberlain:¹⁴

“The most careful consideration has been given by His Majesty’s Government to the additional arguments contained in the note which Your Excellency was so good as to address to me on the 10th December, relative to the claim of the United States Government to participate in respect of claims for damages to persons and property in the payments to be made by Germany under the Dawes Plan.

2. The United States Government believe their claim to be well founded in law. His Majesty’s Government to their regret are unable to find in Your Excellency’s note under reference any arguments in support of this contention more convincing to them than those previously advanced, and are unable, with the best will in the world, to modify their previous opinion.

3. As His Majesty’s Government understand it, the United States Government base their claim on the treaty of August 25th, 1921, between the United States and Germany, the wording of section XI of the Dawes report and the acceptance of that report by the London Conference.

4. With regard to the treaty of August 25th, 1921, the view of His Majesty’s Government is expressed in my note of 3rd December. The arguments advanced by Your Excellency seem designed not so much to contest the legal soundness of the view taken by His Majesty’s Government as to demonstrate the inequity of a strict application of that view, having regard to the wording of the Armistice Agreement of November 11th 1918, and of article 231 of the Treaty of Versailles. I venture to think that this part of Your Excellency’s note is based on a misapprehension which I feel it is my duty to correct. The British contention is not ‘that one or more of the Allied and Associated Powers could properly make a separate agreement by which that power or powers would be entitled not simply to recover upon its own claims but to provide for the deprivation of cobelligerent states of satisfaction or remedy,’ nor that it is open to powers who negotiated an earlier treaty lawfully to deprive third parties of their rights. When more powers than one have claims against the same state it would no doubt be contrary, if not to established rules of international law, at any rate to the commonly accepted understanding of international intercourse, for a creditor power to conclude without the assent of other powers similarly situated, or without giving those powers an opportunity of equal advantage, a treaty with a debtor state which would have the effect of depriving the debtor of the capacity of making similar provision for the claims of the other creditors; though on the other hand, it must not be forgotten that it has been recognized that powers which take active steps in accordance with international law for recovery of a debt may obtain a preference over other creditors—‘vigilantibus non dormientibus subvenit aequitas’. But the Treaty of Versailles was not a separate treaty made by one power with the aim or effect of getting an exclusive advantage. That treaty was negotiated on behalf of the United States and 26 other Allied and Associated Powers, all of whom, except China, signed it. The treaty gave to the powers who accepted it certain rights and imposed certain burdens on them. And powers which signed but did not ratify the treaty clearly forewent those rights and escaped those burdens of their own voluntary choice.

5. I readily admit that it would have been inequitable for the European Allies to have concluded a treaty with Germany reserving to themselves an exclusive charge on German assets without giving to their American copartners in victory an opportunity to be a party to that treaty, and to share in the payments to be made by Germany thereunder. But that is the very opposite of the actual position. The European Allies were, as is well-known, exceedingly desirous that the United States Government should be a party to the treaty and not only was the treaty framed in a form which explicitly included the United States, but it was actually signed by their representative, though to the regret of the European Allies, the United States Government did not subsequently proceed to ratification. The standpoint of His Majesty’s Government is then merely this, that all the belligerents who opposed Germany having concluded a treaty with her in common, one of their number cannot, on refusal to ratify the treaty, legally claim its benefits; that they cannot in equity claim to share those benefits without sharing in the obligations imposed by that instrument; and that Germany having by that treaty made certain hypothecations or assignments of her assets to meet the claims of the belligerents with whom she was contracting, had no power except in agreement with the latter subsequently to give to a state which decided not to ratify that treaty, any charge in contradiction with her previous undertaking.

6. The view of His Majesty’s Government regarding the effect of the wording of the Dawes report has already been stated in my note of December 3rd. Without wishing to enter into any controversy concerning the interpretation of section XI of the Dawes report, His Majesty’s Government remain of opinion that the Dawes committee had no power or competence to pronounce on or prejudge the question of the allocation of the annuities prescribed in their report; and that they did not in fact make any such pronouncement. Further, if the Dawes committee intended by their report to express an opinion upon this matter which was totally alien to their terms of reference, the decision of the Allied Powers at the London Conference to adopt the Dawes Plan would not, without further and fuller provision, have involved the indorsement by the Allies of any incidental opinion so expressed. So emphatic a change in international treaty rights could not have been made sub silentio and without a formal and specific provision to that effect.

7. Your Excellency states that your Government did take occasion to cause attention to be drawn to the claims of the United States. His Majesty’s Government assume that this is a reference to Your Excellency’s letter of August 5th, 1924, to the London Conference. They have been unable to trace any earlier communication from your Government on the subject to the Governments concerned, and having regard to the testimony given by General Dawes in the introduction to his report to the complete independence of the members of the Dawes committee, it would seem clear that no formal intimation could have been made to them. As regards the London Conference the allocation of the annuities was in fact a matter with which the conference not only did not concern itself but which it expressly reserved for consideration by a later meeting of Finance Ministers, the British delegation making it perfectly clear at the time that, by so referring the matter, they were not committing themselves to acceptance of the United States claim. I may remind Your Excellency that at the plenary session of the 12th August to which you refer Mr. Snowden, then Chancellor of the Exchequer and a delegate of Great Britain, said on this very matter ‘It must be distinctly understood from the British point of view that we do not accept the interpretation that the United States Ambassador has put upon the report’ and he added that the United States Government had ‘made a treaty of their own with Germany. Therefore the United States cannot be regarded as being in the same position as the Allied Powers in regard to the disposal of the reparation payments under the Dawes agreement’.¹⁵ It would therefore be incorrect to say that the United States claim was admitted at the London Conference or that ‘provision was made’ for it.

8. If I have dwelt for a moment on that part of Your Excellency’s note which deals with the past intentions of the United States Government to make claims against Germany, it is only in order to avoid future misunderstandings and to show that those intentions were unknown to or not understood by His Majesty’s Government. No doubt the Spa Conference of 1920 could not deprive the United States Government of any existing rights. But the inference to be drawn from Mr. Boyden’s declaration to the Reparation Commission on August 5th, 1920, clearly is that the United States intended to claim the reimbursement costs of occupation rather than to make a claim for reparation. This point will be evident if the whole of the declaration made by Mr. Boyden is read, and a copy is therefore attached to this note for convenience of reference.¹⁶

I also enclose a copy of the resolution of the Reparation Commission of September 10th, 1920,¹⁷ the concluding words of which are understood to refer to Germany, Jugoslavia, Roumania and Greece, and not to the United States. It is to be observed that Mr. Boyden’s statement was made, and the Reparation Commission resolution passed, after the United States Senate had refused in March 1920 to ratify the Treaty of Versailles. The declaration on the 5th August in effect was that the United States unofficial delegate made no protest or reservation in view of the arrangement between the powers concerned as to the priority to be afforded to the advances which, under the terms of the Spa protocol, they were to make to Germany in order to facilitate the delivery of coal. Mr. Boyden pointed out ‘that these decisions’ (that is the decisions as to the priority of coal advances) ‘to which the United States is not a party do not affect the position of the United States,’ and he added a statement as to the understanding of the United States that it would be reimbursed for the costs of the United States Army of Occupation—an understanding which the British Government has never sought in any way to put in doubt. In any case ‘these decisions’ had nothing to do with any share in reparation percentages.

The reference to the American note of November 28, 1919,¹⁸ which the United States unofficial delegate added to his reservation emphasized the point that what was then referred to was the question of these Army costs; that note had reference to those costs and nothing but those costs. Similarly, it would appear from the minutes of the Reparation Commission of September 10th, 1920, that the resolution of the commission of that date to which allusion is made in the American note, had reference to the reservation of ‘the rights and interests of other powers signatory to the respective treaties which were not parties’ to the Spa Agreement of July 16th, 1920. The debate in the commission had reference solely to the rights of Germany and those of the minor powers (Greece, Roumania, Jugoslavia) which had not at that time accepted the Spa Agreement. The resolution of the commission, when it speaks of ‘other powers signatory to the respective treaties’ certainly did not refer to the United States. As the United States Senate had at that date rejected the treaty the signature of the President of the United States to that treaty could not be considered to be any longer effective and the United States could no longer properly be termed a ‘signatory’ power.

9. I have felt it necessary to state once more in some detail the legal position as it appears to His Majesty’s Government only because the United States Government have themselves given prominence to the legal aspect of the matter. His Majesty’s Government do not however desire to take their stand merely on legal points, and I therefore turn to the consideration of equity.

10. Your Excellency was good enough in your note of the 10th, December to give an estimate of the United States claims at $350,000,000. It is known that these claims included not merely (1) claims for damages while the United States was actually at war with Germany, but also (2) claims in respect of pre-war debts, and (3) claims in respect of damages suffered by United States citizens before the United States was a belligerent. Your Excellency does not state in what proportion the total of $350,000,000 is divisible between these three heads. It appears however to His Majesty’s Government to be of the first importance to know this proportion. The United States, they understand, desire to be treated pari passu with the Allies enjoying rights under the Treaty of Versailles. Under that treaty, however, claims under heads (2) and (3) are not recoverable as part of the Dawes annuities. Under the specific provisions of part X of the treaty, claims for payment of debts unpaid owing to the war and claims growing out of acts committed by the German Government or any German authority between July 31st, 1914, and the moment when the particular power concerned entered the war against Germany, are chargeable and only chargeable against German property sequestrated in the country of which the claimant is a national. His Majesty’s Government assume that the United States Government do not propose that these claims should not be treated by the United States Government in like manner as all similar claims under the treaty, and that they will be met from German property in the United States hands. Any other method would result in giving the United States a privileged position over other claimants on Germany, a position which His Majesty’s Government are loath to believe that the United States Government desire to claim. That the United States Government themselves recognize the bearing of this consideration upon their contention is shown by the assurance given at the end of the 8th paragraph of Your Excellency’s note, that they of course intend, with respect to such (German) property or proceeds as may be finally retained, to give appropriate credit upon their claims.

11. Reparation claims comprise damage to civilians and their property done by military action in a wide sense. Claims which are permissible under this head are described in detail in annex I to part VIII of the Treaty of Versailles.

12. According to the Treaty of Versailles the assessment of the reparation claims of the Allies is the exclusive business of the Reparation Commission which is not merely an ‘exclusive collecting agency’ as the United States Government appear to suppose, but on the contrary is a general controlling agency set up by the treaty with jurisdiction over all the reparation claims of the powers contracting with Germany so as to ensure fairness and impartiality. If therefore the United States Government are to be admitted to a share in the Dawes annuities, they will doubtless accept the view that such of their claims as may fall within annex I to part VIII of the Treaty of Versailles should, in equity, be fixed by the Reparation Commission in accordance with the rules on which all other reparation claims have been assessed. His Majesty’s Government do not suppose that the United States Government wish to claim the benefit of the Treaty of Versailles without its obligations, or to deprive the Allied Powers of a guarantee that the American reparation claims against Germany possess the same measure of validity and have been adjusted on the same principles as the Allied claims already admitted or to be admitted.

13. The view of the United States Government seems to be that there is no occasion for a reduction in respect to the limited classes of claims for which the United States seeks participation in the Dawes annuities. Even if limited to claims which would in the case of a party to the Versailles Treaty be admissible as reparations this view appears to His Majesty’s Government to be based upon a complete misapprehension, and on the hypothesis that the payments made under the Dawes Plan will suffice to satisfy in full the claims of the Allies for material damage. But this is not the case. The Dawes annuities, added to the sums already paid by Germany, will in fact not suffice to meet one-third of the assessed claims of the Allies, viz. 132 milliard gold marks. The United States Government refer in this connection to the attitude they have taken in not claiming payment for war pensions and separation allowances. It is certainly true that the action of the United States Government in this matter, had they remained parties to the treaty, would have had the effect of increasing the share of the other signatory powers just as the action of the British Government in accepting the French scale of pensions and separation allowances greatly increased the shares of the other Allies. But such decisions when once formally taken are not subject to revocation and His Majesty’s Government cannot conceive that the United States Government, having granted this concession to Germany, now desire to withdraw it as against the Allies.

14. In fact, however, the claim submitted by the United States Government goes considerably beyond a mere request that their claim for damages should be met in like manner as the similar claims of the Allies. Future German payments will be insufficient by a wide margin to meet the Allied claims, so that the United States Government, if their claim were to be met in full, would be obtaining a substantially higher share of German payments than would have been due to them had they ratified the Treaty of Versailles. Even were the American general contention on the score of equity to be admitted, the most that the United States could ask for would be a percentage of the annuities based on a comparison of their total claim for reparations, when assessed, with the claims of the Allies.

15. Further it would be only equitable that the United States should account in the same way as Great Britain has accounted for the German ships detained by her. It will be recalled that the late President Wilson, while reserving the assent of Congress, accepted in May 1919 the agreement under which the excess value of ships so retained would be paid over to the Reparation Commission for the credit of Germany.¹⁹ This agreement expressly stated that the United States did not claim to take over these ships without payment. And yet the actual situation is that whilst Great Britain under the ton-for-ton agreement retained 30 percent of her war losses in tonnage, the United States has received 164 percent of her tonnage losses.

16. His Majesty’s Government in all these circumstances find it difficult to regard the United States Government’s claim as at present formulated as good in equity, any more than they are prepared to recognize it as just in law, and they sincerely regret that no specific proposal has been made by the United States Government for an amicable settlement of the matter in dispute.

17. Although the problem with which this note attempts to deal is difficult and complicated, I feel convinced that with the good will on both sides which I am sure exists, it ought to be possible to come to a fair arrangement satisfactory to both our Governments. It seems hardly possible, however, that the Allied Finance Ministers will be able to deal adequately with the question in Paris in the limited time at their disposal having regard to the urgency of decisions on general questions of distribution necessary for the success of the Dawes Plan. His Majesty’s Government therefore suggest that the best and most expeditious method of reaching a solution would be to submit the whole question to some body of impartial and independent persons mutually acceptable, such as a joint commission of three neutral persons to be nominated by the President of the Permanent Court at The Hague, which could review all the circumstances from the broadest points of view and come to equitable decisions on the various questions of fact and principle involved. If this suggestion were to commend itself to the United States Government His Majesty’s Government would lose no time in seeking the concurrence of their allies so that the actual constitution and terms of reference of such a commission might be determined”.

Annexes mentioned not transmitted since you must have them in the Department.

Kellogg

13. Telegram in seven sections.
14. The British note was dated Dee. 29, 1924; verbal inaccuracies and faulty punctuation due to telegraphic transmission have been corrected from text printed in American War Claims Against Germany, p. 59.
15. Great Britain, Cmd. 2270, Miscellaneous No. 17 (1924), p. 78.
16. The text of Mr. Boyden’s statement as transmitted in telegram no. 1507, Aug. 5, 1920, from the Chargé in France (Foreign Relations, 1920, vol. ii, p. 417) reads as follows: “In view of the arrangements between the Powers concerned as to the priority to be afforded their advances under the terms of the Spa protocol, the United States Unofficial Delegate makes no protest or reserve, merely pointing out that the [these] decisions to which the United States is not a party do not [affect] the position of the United States. With respect to the course [costs] of the United States army of occupation he adds that the United States obviously understands and expects that it will be reimbursed in cash for the actual cost and that it will be notified at once if its army is not wanted on these terms. In this connection he refers to the letter from the American Delegation to the O[rganization] C[ommittee,] Reparation] C[ommission], dated November 28, 1919, with its accompanying memorandum.”

17. The text of the resolution as printed in S. Doc. 173, 69th Cong., 2d sess., p. 65, reads as follows: “The Reparation Commission takes note of the Agreement arrived at between the Governments of Belgium, France, Great Britain, Italy, Japan and Portugal at Spa, on the 16th July, 1920, with regard to the distribution of receipts from Germany, Austria, Hungary and Bulgaria, under the reparation provisions of the Treaties of Versailles, St. Germain, Trianon, and Neuilly, methods of valuation for the purposes of the accounts as between those governments and procedure in connection with the settlement of such accounts and it will cause the necessary steps to be taken to give effect thereto, due regard being paid to the rights and interests of other powers signatory to the respective treaties which are not parties to the above-mentioned agreement.”

    For variant texts of the resolution, see Foreign Relations, 1920, vol. ii, pp. 432, 439.

18. Not printed; the note contained a memorandum regarding costs of the American Army of Occupation submitted to the Supreme Council by Mr. Henry White and placed on record with the Reparation Commission by Mr. Albert Rathbone, American unofficial representative on the Reparation Commission.
19. Foreign Relations, 1920, vol. ii, p. 512.