Papers Relating to the Foreign Relations of the United States, 1926, Volume I

462.11 W892/819a

The Secretary of State to the Chairman of the Committee on Ways and Means of the House of Representatives (Green)

Washington, December 15, 1926.

My Dear Mr. Green: I received late yesterday afternoon a copy of H. R. 15009 providing “for the settlement of certain claims of American nationals against Germany and of German nationals against the United States, for the ultimate return of all property of German nationals held by the Alien Property Custodian and for the equitable apportionment among all claimants of certain available funds”. While I have had no opportunity to examine it in detail I find that its provisions are not such as to remove the apprehensions which I outlined to you in our conference on November 30, 1926.

The bill appears to provide for the utilization in the first instance for the payment of certain awards of the Mixed Claims Commission, United States and Germany, of the following sums, among others:

(1) $25,000,000 from the unallocated interest fund consisting of interest earned prior to March 4, 1923 on cash deposited in the Treasury by the Alien Property Custodian.

(2) Not more than $50,000,000 representing 50 per cent of the appropriations to be made by Congress to pay the claims of the former owners of the German ships, radio stations and patents seized by the United States.

(3) 20 per cent of the ex-enemy property or its proceeds still held by the United States.

It appears that participation certificates repayable out of future receipts by the United States under the Paris Agreement of January 14, 1925,^32b would be issued in exchange for the sums thus utilized and that interest at 5 per cent, also payable out of such future receipts, would be allowed on awards of the Mixed Claims Commission until paid and on all but $25,000,000 of the participation certificates.

As you are aware the United States is under a present obligation imposed not only by Treaty but also by the specific assurances contained in notes dated December 10, 1924 and January 4, 1925 from the American Ambassador at London to the British Government^32c to give appropriate credit upon its claims against Germany, for any ships or other property or its proceeds which might be finally retained. I have no assurances from any quarter that the utilization of the ex-enemy property contemplated by H. R. 15009 would not be construed by other interested Governments as a final retention within the meaning of the treaty and the above-mentioned assurances.

The present right of the United States to participate in the payments made by Germany pursuant to the Dawes Plan is defined by the Paris Agreement of January 14, 1925. Article 3 of that agreement provides for the payment to the United States “for the purpose of satisfying the awards of the Mixed Claims Commission established in pursuance of the Agreement between the United States and Germany, of August 10th, 1922”,^32d of “Two and one quarter per cent (2¼%) of all receipts from Germany on account of the Dawes Annuities available for distribution as reparations, provided that the annuity resulting from this percentage shall not in any year exceed the sum of forty-five million gold marks.” While it is true that the awards of the Mixed Claims Commission by their terms carry interest at 5 per cent per annum until paid, the question might be raised as to whether, regardless of the provisions of Section 3 (h) of the draft bill, the application of this property as proposed would constitute a payment and therefore that the payment of interest on the participation certificates would not be justified.

Regardless of the merits of any contentions which might be advanced in respect of these questions, it is clear that were any dispute or difference of opinion to arise between the United States and the other interested Governments, the provisions of Article 26 of the Paris Agreement would be applicable. The second paragraph of that Article reads as follows:

“Any difference or dispute that may arise with the United States of America regarding the interpretation of this Agreement affecting American claims or the rights of the United States of America under this Agreement shall be referred to an arbitrator to be agreed upon between the United States of America and the Reparation Commission acting unanimously.”

It is, of course, impossible to forecast the decision of an arbitrator on these points. There can be no doubt, however, that the position of the United States Government would be most embarrassing if after the enactment of legislation such as that contemplated by H. R. 15009 and the carrying into effect of its provisions a decision adverse to the United States should be rendered in any arbitration proceedings under Article 26, particularly in view of the so-called declaration of policy incorporated in Section 2 of the draft bill.

While the above questions may never be raised, nevertheless their importance is so great that I feel it incumbent upon me to place upon the record the fact that they have been called to the attention of your Committee so that no possible future misunderstanding could lead to the allegation that the Department of State had failed in its duty to inform the Congress in the premises.

I have [etc.]

Frank B. Kellogg

1. Foreign Relations, 1925, vol. ii, p. 145.
2. See Department’s telegrams No. 457, Dec. 9, 1924, 10 p.m., and No. 9, Jan. 3, 1925, 7 p.m., to the Ambassador in Great Britain, ibid., 1924, vol. ii, pp. 102 and 127.
3. Foreign Relations, 1924, vol. ii, p. 262.