362.115 St 21/362½

The Chargé in Great Britain (Sterling) to the Secretary of State

No. 1084

Sir: In accordance with the Embassy’s telegram No. 83 February 26, 5 p.m., 1925,42 I have the honor to enclose a copy, in triplicate, of the note mentioned therein from Mr. Chamberlain, dated February 25, 1925, concerning the Tanker case.

A copy of this note has been forwarded to Mr. Logan, and the solicitor of the Standard Oil Company in London, Mr. Piesse, has been informed of its contents.

I have [etc.]

F. A. Sterling

The British Secretary of State for Foreign Affairs (Chamberlain) to the American Chargé (Sterling)

No. C 2191/651/18

Sir: In conversation on February 2nd, His Excellency the United States Ambassador drew my attention to the interest of the Standard Oil Company in certain tank steamers of the Deutsche Amerikanische Petroleum Gesellschaft, which had been handed over by the German Government to the Reparation Commission in execution of the Treaty of Versailles.

I understand the essential facts of this question to be as follows. The point originally at issue was whether or not the tank steamers in question were properly deliverable by Germany under the provisions of Part VIII of the Treaty of Versailles. It was claimed by the Standard Oil Company that the vessels were in effect their property and not deliverable. The case was one which it was within the power of the Reparation Commission to decide judicially and such a decision would be valid against all parties. Out of consideration for the United States Government the Reparation Commission refrained from proceeding to such a decision but consented to an arrangement, embodied in an agreement with the United States Government signed [Page 167] on June 7th, 1920,43 under which the matter was referred to two arbitrators, one representing the Reparation Commission and the other the United States Government, with the provision that a third disinterested person should be nominated to join the Tribunal in the event of the disagreement between its original members. If the third arbitrator were called in, the decision of the majority of the Tribunal was to be final. On June 28th, 1924, the two arbitrators reported44 that they were unable to reach agreement on the legal questions involved, but without calling in the third arbitrator as provided by the agreement of June 7th, 1920, they suggested to the Reparation Commission a compromise which in outline was that the vessels should be sold and the proceeds divided equally between the Deutsche Amerikanische Petroleum Gesellschaft and the Reparation Commission as representing the Allied and Associated Powers, the German Government obtaining credit for only one half of the total value of the tankers.
The request made to me by Mr. Kellogg on February 2nd was that I should draw the attention of the Chancellor of the Exchequer to the subject in the hope that the Chancellor would be willing to instruct the British representative on the Reparation Commission to accept the compromise suggested by the arbitrators in preference to calling in the third arbitrator as contemplated in the agreement of June 7th, 1920.
I lost no time in conveying Mr. Kellogg’s request to the Chancellor of the Exchequer who had already received a copy of the memorandum on the subject dated January 27th [28th?] which had been communicated to my department by a member of the United States Embassy.45
The question has now been fully considered and I have the honour to inform you that in a matter in which the Reparation Commission acts in a judicial capacity His Majesty’s Government have not the power and would not consider it proper to give any instructions to the British member of the Commission. But apart from this question of principle involved, the view of His Majesty’s Government is that the Reparation Commission would not be justified in now agreeing to the suggested compromise. This could, in fact, only be accepted by an agreement between all the interested parties who comprise not only the Reparation Commission, as generally representing the Powers entitled to reparation, and the Standard [Page 168] Oil Company and its German subsidiary, but also the German Government, whose interests are affected, and the British Government, which under the existing interallied arrangement is entitled to the tankers themselves if they are deliverable.
There is indeed grave objection in principle to departing from the arbitral procedure formally agreed upon which in itself constituted a compromise assented to as an act of courtesy to the United States Government. Procedure by arbitration is likely to prove a matter of great practical importance on numerous occasions arising-out of the Dawes plan and of interallied agreements; and if in such cases agreed procedure is to be modified ex post facto to suit the convenience of one of the parties to the case the whole method may easily be brought into disrepute.
His Majesty’s Government trust that the United States Government will recognise the force of these considerations and will allow the arbitration now to take its course. No excessive delay need be anticipated and, as the case has already occupied several years, no serious inconvenience can reasonably be held to be involved by a further short delay in order to obtain the independent and impartial judicial decision which the parties have engaged themselves to accept.

I have [etc.]

Austen Chamberlain
  1. Not printed.
  2. Foreign Relations, 1920, vol. ii, p. 598.
  3. Ibid., 1924, vol. ii, p. 161.
  4. By telegram No. 44, Jan. 29, 11 a.m., the Ambassador informed the Secretary that he had, on the previous day, delivered a memorandum to the Foreign Office covering the Department’s views and requesting reconsideration of the subject.