441.11 W 892/95
Memorandum by Mr. Spencer Phenix, Assistant to Assistant Secretary of State Olds
The Conferences of December 5, 1926
On Sunday, December 5, 1926, a conference was held at Mr. Chilton’s house on the subject of the suggested formula for the settlement of the British claims question which Mr. Olds had informally handed to Mr. Vansittart on November 18.56 There were present at this conference Mr. Chilton, Mr. Vansittart, Mr. Broderick, Mr. G. H. Thompson, Mr. Olds, and Mr. Phenix.
Mr. Vansittart advanced the points which had been made by the Foreign Office and there was a general discussion of the suggested formula. The Foreign Office requested specifically that the agreement be drafted so as to exclude cases in which the Dominions, or India, might be interested, cases involving sequestrated property held by the respective Custodians of Enemy Property, cases involving user of inventions, and damage by, or salvage services rendered to, Government vessels. Mr. Vansittart was informed that the Department had already decided that it would suggest the exclusion of Dominion and Alien Property cases. The British request for the exclusion of the other two categories of case was caused by the belief that British nationals did not enjoy the same rights against the Government of the United States that American nationals enjoyed against the British Government. It was therefore felt that the British Government should not waive diplomatic presentation of claims of this nature. These two suggestions were accepted by Mr. Olds.
[Page 295]The most serious question raised by the Foreign Office was in respect of possible double payment, that is to say, that the “insurance fund”, consisting of sums due to the British Government but waived by it under the proposed agreement, might be used by the United States to pay claims without substantial merit, and that claimants having meritorious claims would be referred to the British courts and might recover therein. The position of the British Government was that the “insurance fund” was intended to cover meritorious claims. The Foreign Office suggested, therefore, that the “insurance fund” be constituted as a suspense account from which would be paid any judgment recovered against the British Government within a certain stipulated period of time in respect of claims within the scope of the agreement. The impracticability of this procedure was demonstrated to the satisfaction of Mr. Vansittart and Mr. Broderick. The suggestion was then made that the United States give, if possible, written, and if not, oral assurances that the “insurance fund” would in fact be used by the United States Government to settle those claims which were regarded as conspicuously meritorious. In response to this suggestion it was pointed out that any such procedure would expose the Department to the criticism of secret diplomacy, that no claim could be paid without action of Congress, and that such assurance from the Department would therefore be utterly valueless. Mr. Olds stated, however, that the Department wished it to be clearly understood that it was not interested in making money at the expense of the British Government, and that it would use its every endeavor to see that the fund in question was equitably apportioned.
No agreement was reached on this question before lunch, but after lunch a further brief conference was held by Mr. Vansittart, Mr. Olds and Mr. Phenix, at which the suggestion was made that as a practical dollar and cents solution of the difficulty the Department would be willing to waive the payment by Great Britain contemplated by the first paragraph of the draft formula, the amount involved therein being approximately the amount by which the total of those claims regarded as possibly meritorious by the British representatives fell short of the total cash payments from the United States waived by the British Government under the proposed formula. Mr. Vansittart stated that this seemed to him a very happy suggestion and that as a matter of fact the Foreign Office had asked him to request the United States to withdraw the first paragraph of the formula, as it seemed unfair to the Foreign Office that the British Government should be called upon to make any cash payment to the United States in the circumstances. It might be noted at this point that in a telegram from the Foreign Office to Mr. Vansittart it was stated further examination of the cases being negotiated for the Navy Department in [Page 296] London by Commander Collins indicated that the British Government had made a premature payment to the Navy, and that the estimated total due from the British Government to the Navy Department on the cases discussed by Captain Hill and Commander Collins should be reduced proportionately. It was then arranged that Mr. Vansittart, Mr. Broderick, and Mr. Phenix would meet again at 7 o’clock and endeavor to agree upon a new formula for communication to the Foreign Office, and that were they successful in this endeavor that it be submitted to Mr. Olds prior to the despatch of the telegram to London.
At the evening conference Mr. Phenix submitted a new draft formula embodying the changes agreed upon during the afternoon conference.57 This was agreed to by the British representatives with slight textual changes, and was submitted in the late evening to Mr. Olds together with the substance of part of Mr. Vansittart’s proposed report to the Foreign Office. In the meantime Mr. Olds had been in conference with the Secretary and had been authorized by the latter to agree to an arrangement along the lines of the settlement reached during the afternoon. Accordingly the new formula and the substance of that portion of Mr. Vansittart’s telegram dealing with the understanding reached earlier in the day were approved by Mr. Olds.
Mr. Vansittart undertook to recommend to the Foreign Office the acceptance of the new formula and agreed to point out the insuperable obstacles to the establishment of the suspense account suggested by the Foreign Office, or to the exchange of assurances beyond those mentioned above which would limit the action of the United States with respect to any claim or group of claims. He undertook to report that the Department had assured him that no question of making money entered into its consideration of the problem and that he had reached a gentleman’s understanding with the Department’s representatives that every effort would be exercised to assure the equitable utilization of the “insurance fund”. He also said that he would advise his Government that he had been informed by the Department that in the event the agreement were signed, the latter contemplated making a re-examination of its files with a view to the submittal of a recommendation to Congress for the appropriation of specified sums in satisfaction of such claims as proved to be meritorious, at which time Congress would be informed of the agreement between the two Governments. Mr. Vansittart expressed complete confidence in the good faith of the Department, and repeated that he would recommend earnestly the approval of the agreement.
[Page 297]The Events of December 7, 1926
In the afternoon of Tuesday, December 7, 1926, Mr. Broderick and Mr. Thompson of the British Embassy called on me to ask certain questions at the instance of the Foreign Office regarding the legal remedies open to British nationals interested in the miscellaneous list of claims of which the Department had record, and brief descriptions of which had been furnished to the British Embassy. It appeared that in many of the more substantial cases the claimant was a citizen of one of the Dominions, and his case therefore excluded from the pending agreement. In other cases it appeared to the satisfaction of Mr. Broderick that there was no discrimination against a British national in favor of an American national. Mr. Hackworth57a came in during part of the conference and explained the legal situation. It appeared as a result of this conference that the British representatives would telegraph a satisfactory assurance to the Foreign Office in respect of these cases and Mr. Vansittart, who called upon Mr. Olds in the late afternoon and subsequently upon me, indicated that he expected a favorable response from London very shortly.
About 11:20 p.m. last evening I received a telephone message from the British Embassy stating that an urgent telegram had been received from London, and asking if I could come to the Embassy to confer with Mr. Vansittart and Mr. Broderick regarding the answer which should be made. I went to the Embassy and we considered for a little more than an hour the situation presented by this telegram and the nature of the reply that should be sent. It appeared that the Foreign Office desired further assurances regarding the question of possible double payment. The request was made that Mr. Vansittart endeavor to suggest an alternative formula which would take this question more specifically into account and safeguard the British position with respect thereto. Neither Mr. Vansittart, Mr. Broderick, nor I was able to suggest any new formula. We canvassed the situation and agreed informally, as Mr. Broderick and I had already informally agreed as a result of our investigations in London, that the conspicuously meritorious cases from the point of view of the United States were only 11 in number and involved only the cases of the Llama, the Luckenbach, the Canadia, the Edna, and the case of the Midland Linseed Products Company. I was asked if the Department could give any assurances that the “insurance fund” would be used to meet these cases, and I replied in the negative, pointing out again that any appropriation for the settlement of any case must be made by Congress, and that it was impossible to restrict that body’s rights to appropriate money [Page 298] from the Treasury as it saw fit. I called attention to the fact that the so-called “insurance fund” did not consist of funds actually supplied by Great Britain, but because of the peculiar nature of the proposed formula consisted of funds saved to the United States. I also pointed out that the Department could not undertake responsibility for the payment of cases where there had been no adjudication before a British court, and where the merits could be determined only after consideration of evidence available solely to the British authorities. I pointed out, for example, that in the cases of the Llama and the Luckenbach there had been no adjudication, that the question was as to the negligence and responsibility of British officers, and that the Department would be hopelessly handicapped were it to try to settle such cases after hearing only the claimant’s side. I stated, however, that the danger to which the British Government would be exposed in respect of the 11 cases should it agree to the proposed agreement was practically negligible. I pointed out that the Midland Linseed Products Company apparently had no legal remedy in Great Britain, and in the case of the Edna the claimant had exhausted his legal remedies by carrying the matter to the Privy Council, so that any compensation awarded to the claimants in those two cases would necessarily have to be appropriated by Congress and find its justification in the existence of the so-called “insurance fund”. I also said that in view of the fact that the Department had no record of any protest by the owners of the Lwkenback since the original complaint in 1920, and of the further fact that the Standard Oil Company had shown no real disposition to prosecute the case of the Llama in the British courts, it seemed unlikely that such actions would ever be brought. This view was concurred in by Mr. Broderick and Mr. Vansittart. I added with respect to the Canadia that the Department could assure them that it would use its best endeavors to obtain a settlement out of court with the claimants. I gave that assurance relying upon the views expressed by Mr. Olds and by the Secretary with respect to the validity of the British position regarding double payment and the readiness which the Secretary expressed to agree to any reasonable formula which would exempt the British from that liability. I pointed out that the Canadia could be distinguished from the Luckenbach and the Llama because in the case of the Canadia the British Government had already made ex gratia payments to certain of the cargo owners, and that such payments could properly be regarded by the Department as a sufficient determination of the merits of the case, thus leaving to the Department only the task of agreeing upon the quantum of damages. Mr. Vansittart and Mr. Broderick both thought that a presentation of these facts to the Foreign [Page 299] Office would go far to tranquilize the latter and I outlined them in writing for incorporation in Mr. Vansittart’s reply to the Foreign Office telegram. When I left the Embassy about half past twelve this morning, I understood from Mr. Vansittart that he expected to receive a definite reply from the Foreign Office today or tomorrow, and that he hoped that it would authorize the acceptance of the proposed formula.
While Mr. Vansittart’s messages to the Foreign Office have expressed in detail the views advanced by Mr. Olds and myself with respect to this matter, there can be no misunderstanding as to the significance of those views. In the conferences on Sunday and again last night it was made clear that the Department could give neither written nor oral binding assurances as to the utilization of the “insurance fund” and the political and legal situations which made such binding assurances impossible were fully expounded. On the other hand both Mr. Olds and I have stated unequivocally that so far as it lay within our power the Department would do its best to assure the equitable apportionment of the “insurance fund” and to prevent exposing the British Government to a double liability. We approached the matter with entire good faith and have no mental reservations of any kind as to the language we used or as to the procedure we outlined. The British representatives realize the impossibility of any collateral agreement restricting the liberty of Congress in the premises, and can point to no commitment on this subject by either Mr. Olds or myself. The substance of our statements to the British is that the Department was not seeking to make money at the expense of the British Government, that everything possible would be done to prevent double payment or double liability, and that the Department would never pursue the policy of selecting weak and unmeritorious claims for settlement out of the “insurance fund”, saving the strong ones for adjudication by the British courts, and that its viewpoint of the primary purpose of the proposed agreement was the same as that of Mr. Vansittart, namely, the amiable and unostentatious settlement of a question presenting potentialities of serious political complications which might disturb the relations between the two Governments, and that financial considerations were purely secondary. The only other undertaking by the Department was that expressed by me last night to the effect that the Department would use its best endeavors to obtain a settlement of the Canadia claims out of court, payment thereof to the extent found justified to be recommended by the Department from the “insurance fund”.
Copies of the suggested formulae of November 18, 1926, and December 5, 1926, are attached hereto, together with the estimated [Page 300] statement of account as of December 4, 1926,58 and as of December 8, 1926,59 after the receipt of the London Embassy’s telegram No. 266, December 8, 11 a.m.60