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

441.11 W 892/95

Memorandum by Mr. Spencer Phenix, Assistant to Assistant Secretary of State Olds

[Washington,] December 14, 1926.

At the request of Mr. Vansittart I again went to the British Embassy during the evening of December 10 to discuss with him the changes in the proposed formula which had been suggested by the British Foreign Office. These changes involved only slight modifications of the text, and I informed him that I had no doubt they would be acceptable to the Department. At this conference reference was also made to the position of the Foreign Office in respect of the Swedish Iron Ore settlement, a matter which did not fall within the scope of the draft agreement. I telephoned Mr. Olds from the Embassy late in the evening and told him that in my opinion none of the suggested changes were objectionable. He then arranged to meet with Mr. Vansittart Saturday morning prior to the latter’s departure for New York.

At the meeting in Mr. Olds’ office Saturday morning, December 11, 1926, attended by Mr. Olds, Mr. Vansittart, Mr. G. H. Thompson and Mr. Phenix, the modified text of the agreement was discussed and agreed upon. The question then came up as to the procedure to be followed in recording the informal understanding between the representatives of the two Governments as to the manner in which the United States would operate under the agreement. Mr. Olds pointed out the difficulty of entering into any binding collateral agreement, and the suggestion was made that there be incorporated in the note, which would be sent by the Department to the British Embassy embodying the text of the agreement, some explanatory paragraphs setting out the agreed interpretation thereof reached by the representatives of the two Governments in their discussions. It was decided that if such paragraphs could be drafted in a satisfactory manner that it would be the best way of handling the situation, since the agreement would then carry with it its own interpretation. Mr. Phenix undertook to attempt to draft the paragraphs in question and discuss them with Mr. Broderick on Monday.

Mr. Vansittart raised again the question of the Llama case, stating that the Foreign Office attached great importance to the procurement, if possible, of some kind of an undertaking by the Government of the United States to endeavor to settle this case out of court in the same way as the Canadia case. Mr. Olds and Mr. Phenix again pointed out the obstacles in the way of any such arrangement, and no agreement was reached on that point. It appeared, however, that the Foreign Office had agreed to the proposed formula, and that regardless of the decision reached in the Llama case the controversy could be regarded as settled.

On the afternoon of December 13 Mr. Broderick and Mr. Thompson called at my office and we discussed the paragraphs of interpretation which I had drafted over the weekend. With one or two minor changes they met with the approval of Mr. Broderick, and these having been approved in turn by Mr. Olds, Mr. Broderick undertook to telegraph the text to London. Mr. Broderick also raised the question of the Llama case, pointing out that the Department of Justice had rendered an opinion to the effect that the owners of the Llama could bring no action for damages in the British Prize Courts. He suggested that in these circumstances the Department might be willing to rely on that opinion and settle the case with the owners as one where no legal remedy existed and, therefore, as one within the terms of the interpretative paragraphs. This ingenious suggestion was discussed later by Mr. Broderick and Mr. Olds, and Mr. Broderick was authorized to inform the Foreign Office that the suggestion had been advanced by him and that, if after further examination into the facts of the case the Department could conscientiously adopt the position indicated, it would do so and endeavor to settle the claim out of court. It was made clear to Mr. Broderick, however, that no formal commitment could be given on this point any more than in the case of the Canadia claims, but that the Department would bear in mind the equities in reaching its final decision. Mr. Broderick stated that the Admiralty attached considerable importance to the Llama case, and that as the Admiralty was making a considerable financial sacrifice through the waiver by it of its claims against the Navy Department it seemed to feel entitled to special consideration.

The net result of the conference of December 13, 1926, was an agreement as to the form of the interpretative paragraphs, the informal understanding that the Department would endeavor to effect a settlement out of court of the Canadia claims, and the payment thereof by Congress, and that in the case of the Llama the same procedure would be followed if, after further examination, the Department could conscientiously predicate its action on the above-mentioned opinion from the Department of Justice.

The agreed upon text of the note to be sent to the British Embassy, together with the text of the formula,. as modified by the Foreign Office and agreed to by the Department, is as follows:⁶³

“I have the honor to incorporate herein the text of an arrangement for the disposal of certain pecuniary claims arising out of the recent war, in which His Majesty’s Government in Great Britain and the Government of the United States are interested, either as principals or on behalf of their respective nationals. This arrangement which, I understand, has been agreed upon by representatives of both Governments, has been approved by the Government of the United States. The terms of the arrangement are as follows:

Article I

With the exceptions stated in Article II hereof His Majesty’s Government in Great Britain and the Government of the United States agree:

(1) That neither will make further claim against the other on account of supplies furnished, services rendered or damages sustained by it in connection with the prosecution of the recent war, all such accounts to be regarded as definitively closed and settled.

(2) That neither will present any diplomatic claim or request international arbitration on behalf of any national alleging loss or damage through the war measures adopted by the other, any such national to be referred for remedy to the appropriate judicial or administrative tribunal of the Government against which the claim is alleged to lie, and the decision of such tribunal or of the appellate tribunal, if any, to be regarded as the final settlement of such claim, it being understood that each Government will use its best endeavours to secure to the nationals of the other the same rights and remedies as may be enjoyed by its own nationals in similar circumstances, and that His Majesty’s Government in Great Britain agrees that fullest access to British Prize Courts shall remain open to claimants subject to the right of the British authorities to plead any defences that may be legally open to them.

(3) That the right of each Government to maintain in the future such position as it may deem appropriate with respect to the legality or illegality under international law of measures such as those giving rise to claims covered by the immediately preceding paragraph is fully reserved, it being specifically understood that the juridical position of neither Government is prejudiced by the present agreement.

Article II

Nothing contained in this agreement shall be construed to annul, alter, modify or in any way affect the rights of nationals of either Government or to prevent the presentation of diplomatic claims based thereon, in respect of:

(1) The user of inventions by the other Government in connection with its prosecution of the war;

(2) Damage caused by or salvage services rendered to a vessel belonging to the other Government.

It is expressly understood that the provisions of this agreement do not apply to (1) Claims by the Government of the United States, or of its nationals, against the Government of any of His Majesty’s self-governing Dominions or of India, or British nationals resident therein, or to claims against the Government of the United States by the Government of any of His Majesty’s self-governing Dominions or of India, or by British nationals resident therein, and (2) Claims on behalf of either Government or its nationals for the release of property held by Custodians of Enemy Property in Great Britain and Northern Ireland and all British Colonies and Protectorates, and by the Alien Property Custodian or the Treasurer of the United States.

If the foregoing arrangement is acceptable to your Government, a note from you to that effect will be considered by this Government as completing the understanding and the arrangement will thereupon be regarded by the Government of the United States as having come into force.

In order to obviate the possibility of future misunderstanding as to the purpose or interpretation of the arrangement, I desire to state that the Government of the United States regards it not as a financial settlement but as the friendly composition of conflicting points of view which seemed to lend themselves to no other form of adjustment. It is my understanding, in these circumstances, that the present agreement will be construed by both Governments with full regard for the equities of all parties concerned. The Government of the United States realizes that by the terms of the agreement His Majesty’s Government waive their right to receive a net cash payment on account of certain claims recognized by the United States as just and proper, and also their right to press certain other claims, liability for which has not been formally admitted by this Government, but which involve considerable amounts. I desire to record the fact that the Government of the United States will regard the net amount saved to it through the above-mentioned waiver by His Majesty’s Government of outstanding claims against the Government of the United States as intended for the satisfaction of those meritorious claims of American nationals falling within the scope of paragraph (2) of Article I of the agreement, where the claimant has exhausted his legal remedies in the British courts, where no legal remedy is open to him, or where for other reasons the equitable construction of this agreement calls for such a settlement. Consequently, I take pleasure in assuring you that the Government of the United States will recommend such action by Congress as will insure the utilization for the purpose just mentioned of the sums saved to the United States under the provisions of the present agreement, and that it will also safeguard His Majesty’s Government against possible double liability by exacting an assignment to the Government of the United States of all of a claimant’s rights and interests in the claim in question as a condition precedent to the allowance of any compensation in respect thereof.

Furthermore since it appears that American citizens with claims against His Majesty’s Government which do not fall within the scope of the present agreement enjoy certain rights of access to the British judicial or administrative tribunals not enjoyed in similar cases by British citizens seeking remedy against the Government of the United States, I take pleasure in extending to the cases of British claimants whose claims are not covered by the present agreement, the assurance contained in paragraph 2 of Article I of the agreement in question, that is that the Government of the United States will use its best endeavors to secure to British nationals the same rights and remedies as may be enjoyed by its own nationals in similar circumstances, and in such cases the Department of State will be happy to give active support to a request to the Congress for appropriate remedial legislation.”

S[pencer] P[henix]

63. The exchange of notes, signed May 19, 1927, is printed as Department of State Treaty Series No. 756.