462.00 R 296/803: Telegram
The Secretary of State to the Ambassador in Great Britain (Kellogg)
9. Please make the following reply to note contained in your No. 546, December 31, 4 p.m.:
“My Government has instructed me to make reply to Your Excellency’s note of December 29, 1924, in relation to the participation of the United States in the payments to be made by Germany under the Dawes Plan.
My Government must express its disappointment at the tenor of Your Excellency’s communication, which is the more surprising in the light of the American contribution to insure the establishment of the Dawes Plan and thus to afford a basis for recoveries from Germany instead of a hopeless strife, and of the readiness of my Government, which I have heretofore stated, to make an arrangement whereby the total annual payments to the United States tor army costs and claims will not much exceed if at all the annual payments necessary to fulfill the present Army Cost Agreement. I may also observe, in relation to the matter of army costs, that while the American Army of Occupation was maintained at the request of the Allied Powers and with the clear right on the part of the United States to reimbursement under the Armistice Agreement, to say nothing of the provisions of the Treaty of Versailles, it was not until May, 1923, and after a prolonged negotiation that the United States was able to obtain an arrangement for its reimbursement. And then, in deference to the exigencies of the Allied Powers, my Government extended the time for the payment of these costs over a period of twelve years, without interest except with respect to arrears after 1927 of the promised annual installments. Notwithstanding the right of the United States to be paid its army costs on the same footing as the Allied Powers, the latter, including His Majesty’s Government, took for themselves the funds available for this purpose. Thus, by the arrangement of 1922 between the Allied Powers, Great [Page 128] Britain received 500 million gold marks in cash to apply on her army costs which had accrued prior to May 1, 1921. And, as I have said, this was taken with definite notice of the claim of my Government which, however, for all practical purposes, was ignored. I have no desire to review the course of the later negotiations which were due to the insistence of the United States that its right and equity should be respected or to the difficulties raised by His Majesty’s Government in the course of the negotiations which finally resulted in the Army Cost Agreement of May 25, 1923, but I think it but fair that the forbearance of the United States in this matter and the fact that its appropriate reimbursement was withheld and finally extended by agreement over a period of years should receive appropriate consideration in determining its general equity.
I find no question raised in Your Excellency’s communication as to the all-embracing character of the payments contemplated by the Dawes Plan, which by its terms are to ‘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’, et cetera. I have not failed to note that Your Excellency insists that the Dawes committee had no power or competence to deal with the allocation of the annuities prescribed. It was not my purpose to contend that this committee had the power of allocation, but they certainly had the authority, and it was appropriate for them, in making the recommendation as to the extent of the payments to be made by Germany, to state that they made their calculations on the basis that these payments would include all the amounts for which Germany may be liable to the Allied and Associated Powers, obviously including the United States. The question raised by Your Excellency as to the allocation of the Dawes annuities would thus appear to mean nothing else than that the United States should be denied a share in the contemplated payments by Germany to apply upon the just claims of the United States, although these payments are all that Germany will be able to make. In the view of my Government, the allocation of the payments is a matter of plain justice when it appears that the determination of the amount of the payments has been thus based.
My Government believes that important progress has been made in reaching a basis of agreement when it is found, as Your Excellency states, that it is not the British contention ‘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 co-belligerent 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’. Yet it could hardly be denied that this would be the effect, if the Allied Powers under the Treaty of Versailles were to obtain a first and exclusive lien in their favor upon all the assets and revenues of Germany and thus leave the United States without any recourse to such assets for the satisfaction of its claims. My Government is unable to perceive the cogency of the reasoning by which it is admitted that it was not open to Powers who negotiate an earlier treaty lawfully to deprive third parties of their rights and yet it is attempted to assert that effect for the Treaty of Versailles. The argument appears to [Page 129] be that the United States was compelled to ratify the Treaty of Versailles in order to retain its rights; or that the Allied Powers could accomplish the result of securing all the assets of Germany for their exclusive benefit by inviting the United States to join in a treaty containing unacceptable terms. The question is not one of assuming obligations under a treaty relative to the benefits it confers. It is safe to assume that the Allied Powers would not have made any treaty which failed to recognize the obligations of Germany for just claims of the classes put forward by the United States. Germany’s responsibility for these claims antedated the Treaty and the Allied Powers were not in a position, as my Government views it, to attempt to secure an exclusive charge upon all the assets of Germany for such claims by insisting that the United States should join in obligations or commitments not necessary to the enforcement of such claims separately considered but assumed for other purposes. If the Allied Powers were not in a position to make a treaty with Germany to deprive the United States of its rights, these Powers could not demand that the United States in order to safeguard these rights should join in a treaty upon terms satisfactory to them but not satisfactory to the United States.
It is unnecessary to consider the fact that the Treaty of Versailles was signed by representatives of the United States, for that Treaty by its terms was subject to ratification, and the Allied Powers were bound, in the case of the United States, to take note of the constitutional conditions of ratification. The Treaty itself contemplated the failure of ratification by the Powers whose representatives had signed it and it provided that it should become effective, as between the ratifying Powers, when it had been ratified by Germany and three of the Principal Allied and Associated Powers.
I must repeat that my Government is unable to reach any other conclusion than that the Allied Powers have no right in law or equity to take for their own benefit all the payments that Germany can make and deny participation to the United States for its proper claims. In this view, it is hardly necessary to consider the question of the effect of the various reservations heretofore made as to the rights of the United States. It cannot be said that the United States has released its rights. The question is not as to payments heretofore made but as to participation in payments to be made in the future under the Dawes Plan. It was my purpose in my previous communication to point out that the Dawes Plan contemplated payments which comprised all the amounts for which Germany may be liable to the United States as well as to the Allied Powers and that the Allied Powers adopted the plan at the London Conference with knowledge of this explicit provision and with full notice of the claims of the United States. I do not find in Your Excellency’s note anything in contravention of that statement.
It is noted that Your Excellency admits that ‘the Spa Conference of 1920 could not deprive the United States Government of any existing rights’. This being so, the question of reservations made in behalf of the United States with respect to the arrangements made at that Conference is not important. But my Government is unable to take the limited view of these reservations that Your Excellency suggests. Mr. Boyden’s statement to the Reparation [Page 130] Commission on August 5, 1920,25 was specifically that the decisions at Spa to which the United States was not a party did ‘not affect the position of the United States.’ This was plainly as much so in one particular as in another. And it is not deemed to be open to argument that if these decisions did not affect the position of the United States as to army costs they would affect it in other respects. The sufficient answer is that they did not affect the rights of the United States at all, and Mr. Boyden so stated. With respect to the resolution of the Reparation Commission of September 10, 1920,26 it appears from the minutes to which Your Excellency directs attention that Sir John Bradbury, in discussing the resolution drafted by him, made the following statement:
‘The intention of the formula was in fact to indicate that the Spa arrangement would be binding on those Powers which had signed it as regarded their relations with each other, but would have no force with regard to those Powers which were not signatories.’
And the Chairman of the Commission stated that
‘it was clearly understood that if the Reparation Commission perceived that the application of one of the clauses of the Spa Arrangement was calculated to injure the rights and interests of the Powers which had not signed the Arrangement, this clause would not be carried out.’
My Government concludes that not only was it beyond the competency of the Powers in their arrangements at Spa to affect the rights of the United States, but it was clearly stated in the meetings of the Commission that this was well understood by the Powers and had not been their intention.
Apart from the question of the legal rights of the United States, my Government does not believe that its equity with respect to all the classes of its claims under consideration can successfully be contested. With respect to the method of adjudication which has been adopted in relation to these claims, it may be said that my Government does not recognize the competency of the Allied Powers to constitute the Reparation Commission as an exclusive adjudicating agency. The comparison in equity, as it appears to my Government, should be with respect to the substantial justice of the method adopted. The claims of the United States are in process of determination by a Mixed Claims Commission constituted by agreement with Germany and in which Germany is represented. These claims have been subjected to a rigorous examination, to which the awards abundantly testify, and the United States does not shrink from a comparison of this method of adjudication with that adopted by the Reparation Commission in fixing the total of 132 milliards of gold marks as the amount to be paid by way of reparation to the Allied Powers.
In relation to particular categories of claims presented by the United States, it may be said that the item of pre-war debts is a relatively small one, embracing, it is believed, not more than 10 percent of the total amount of the claims of the United States in question, that is, irrespective of army costs. In this connection it may be observed that under the Treaty of Versailles an optional [Page 131] provision was made for what are called ‘clearing house’ payments by which balances of debts owing by German nationals to nationals of the Allied Powers have been discharged. It is understood that about 600 million gold marks have been paid through this method to nationals of the Allied Powers of which Great Britain has received for its nationals considerably more than one-half.
This method, however, as I have said, was optional under the Treaty and those Powers who did not avail themselves of it could resort to an arbitral tribunal. A tribunal for this purpose has been set up under agreement between the United States and Germany and in asking appropriate allowance for the debts thus adjudicated my Government is unable to see that it is seeking to take any improper advantage of the Allied Powers.
As to the category of claims for damages to persons and property sustained before the United States was at war with Germany, there can hardly be a question that these constitute claims which the United States is entitled to enforce against Germany and that the Allied Powers by their Treaty with Germany are not entitled to deprive the United States of its rights of recourse. The Treaty of Versailles in permitting the resort to sequestered private property for the payment of such claims did not provide an exclusive remedy and it may be repeated that in the view of my Government it was not competent for the Allied Powers to insist upon recourse by the United States to such property. In its Treaty with Germany the United States has not forgone its claims of this category and it is believed that their justice is not open to dispute. I have pointed out in my previous note that with respect to sequestered private property the Treaty of Versailles gave an option to retain or to release it, as the Allied and Associated Powers might respectively determine, and I may add, by way of example, that I am advised that the Union of South Africa to a very considerable extent did release or otherwise made provision for the reimbursement to the owners of such property. Referring to your Excellency’s observation as to the German ships taken by the United States, I may repeat what I said in my communication of December 10, 1924,27 that my Government will give appropriate credit upon its claims for such property or proceeds as may be finally retained.
I have not failed to observe Your Excellency’s statement that the Dawes annuities added to the sums already paid by Germany would not suffice to meet one-third of the assessed claims of the Allies, that is 132 milliards gold marks. I may say, however, that if the United States had embraced in its claims the categories of pensions, allowances, et cetera, described in paragraphs 5, 6 and 7 of Annex I of Part 8 of the Treaty of Versailles, its claims would have been much more than three times the amount of the American claims in question.
My Government has at all times been ready to consider an arrangement which would be relatively fair and reasonable. I may repeat what I said in my memorandum under date of November 15th, 1924,28 that it is the desire of the United States to facilitate in every way the settlement of the reparation question and therefore [Page 132] that it is willing to recast the Army Cost Agreement and to make an extension of the time of payments provided a reasonable allowance is made upon its other claims. Thus it would appear to my Government to be practicable, and it would be willing, to make an arrangement (For possible insert here see end of [this] message) by which through a recasting of the Army Cost Agreement for an extended period with appropriate provision for priority as to the reduced annual payments the total amount of the annual payment to be made to the United States for army costs and on account of the claims in question would be substantially equivalent to the annual payment likely to be required under the present Army Cost Agreement. My Government is hopeful that, with good will on both sides, as Your Excellency suggests, a satisfactory arrangement can be reached on these lines.
It is not perceived that it would be necessary or appropriate to resort to arbitration. My Government would be unwilling to overlook the equities involved and notwithstanding its confidence in its legal position would be unwilling to limit itself to a discussion of merely legal questions appropriate to arbitral determination. An equitable arrangement mutually satisfactory should be more readily reached as between two Governments enjoying such friendly relations as happily exist between the United States and Great Britain. My Government believes that a resort to arbitral procedure would simply invite unnecessary delay, and my Government sees no reason why the matter cannot be dealt with adequately at the coming conference.”
If Logan’s memorandum has been handed to Leith-Ross, and if you see no objection, please insert at point indicated above the following:
(“as indicated in Mr. Logan’s memorandum recently handed to Mr. Leith-Ross”29.)