441.11 St 23/46

The Ambassador in Great Britain ( Houghton ) to the Secretary of State

No. 1340

Sir: Referring to previous correspondence on the claim of the Standard Oil Company of New Jersey for compensation for the destruction of oil properties of its subsidiary in Rumania, the Romano-Americana, against the British Government, I have the honor to enclose copy in triplicate of Sir Austen Chamberlain’s reply, dated April 15, 1926, to my representations of February 16, 1925, when I communicated to him a memorandum based on the memorandum prepared by the then Secretary of State, Mr. Hughes,74 and transmitted by him to the then American Ambassador, Mr. Kellogg, with a personal letter dated January 31, 1925. Greatly to the Embassy’s regret Sir Austen’s reply had been mislaid in the Embassy and is only now forwarded to the Department.

I have [etc.]

For the Ambassador:
F. A. Sterling

Counselor of Embassy
[Enclosure]

The British Secretary of State for Foreign Affairs ( Chamberlain ) to the American Ambassador ( Houghton )

No. C 4421/1310/37

Your Excellency: In a memorandum communicated by Your Excellency’s predecessor on February 16th last year, the United States Government renewed the claim put forward on behalf of the [Page 323] Standard Oil Company of New Jersey in respect of loss and damage done to the property in Roumania of the Romano-Americana Company (a Roumanian corporation in which the Standard Oil Company is a large share-holder) by belligerent operations during the war. The claim is put forward against the Government of this country on the ground of the destruction of the properties of the company caused by or directly resulting from the acts of British authorities, and it is upon this ground maintained that the Government of His Britannic Majesty are burdened with an obligation under international law to make full compensation. It is stated in the earlier part of the memorandum that the claim is framed upon a legal basis and it is there made clear that the Standard Oil Company does not rest its claim upon a moral liability on the part of the Allied Governments to make compensation for the war losses of which the oil properties in Roumania were the victims. At the close of the memorandum a reference of the dispute to arbitration is proposed.

2. As the claim is put forward on a strictly legal basis, it has been necessary for His Majesty’s Government to consider the claim in all its bearings upon that basis and to arrive at their conclusions under the advice of the highest legal authorities of the country. It is to this cause that the delay in returning an answer to the memorandum of February 16th 1925 is due.

3. His Majesty’s Government do not admit that any international responsibility for the destruction of this property rests upon or can be undertaken by this country. The memorandum based the claim on the destruction of property by a belligerent and maintained that the belligerent is under an obligation, imposed by the law of nations, to make reparation. His Majesty’s Government agree that the destruction was an act of war. It arose out of acts of war committed in Roumania when Roumania was an active belligerent. The question of the nationality of the individuals who carried out the acts complained of is immaterial. The acts were carried out on Roumanian soil by individuals acting on behalf of and in co-operation with the military authorities of the country, and by the authority of the Roumanian Government. That Government approved of the steps which were taken and if and so far as there was need for them to do so they have ratified the acts in question in the most unequivocal manner. It follows, ‘therefore, that if the acts complained of give rise to any claim for compensation on the part of those whose property was injured or destroyed, the party responsible is the Roumanian Government and it is against that Government that the claim must be brought.

4. There can be no doubt that this is also the view of the Roumanian Government. Roumania has openly proclaimed her responsibility [Page 324] in this matter. In this connection I venture to quote an extract from a speech of the Roumanian Minister of Finance before the Chamber of Deputies, delivered on February 11th, 1925.

[Translation]

“From the very beginning we laid down the rule that we did the destruction in our territory and that we make compensation. We pledged ourselves to those who suffered damages and hence, the sums that become due under that head you must deliver to us.

“We cannot admit that those compensations be made directly as some States tried to do with their people.

“We have taken a pledge with the whole petroleum industry, and what is due to it must be given to us and it will be distributed by us to the sufferers”.

and a further extract from an official Roumanian Government memorandum published in the Official Press of September 24th, 1925:—

[Translation]

“As a result of the pressure exerted and steps taken by the Allied Powers in November 1916, the Roumanian Government ordered the destruction of all plants for the extraction, transformation and transportation of petroleum, and also the destruction by fire of all the stores of crude oil and derivatives found in the yards, refineries and warehouses throughout the Muntenia and Dobrudja territory.

“The sole purpose of the destruction was to deprive the enemy of one of its best implements of war. It turns out that it was fully accomplished”.

Your Excellency will note from these declarations that not only did the Roumanian Government declare that the work of destruction was undertaken by the orders of the Roumanian Government, but also that Roumania cannot admit the right of Great Britain or France or any other Power to negotiate directly with respect to compensation with the persons or companies whose properties were injured, and that they would regard any such action as a violation of Roumania’s sovereign rights.

5. As such responsibility rests solely with Roumania, it is unnecessary for me to set out at length the other considerations upon which His Majesty’s Government would be in a position to rely if a legal claim could properly be formulated against them. Nevertheless, I would invite Your Excellency’s attention to a brief enumeration of some of the considerations of this character, though in so doing it must not be assumed that I waive any other objections which His Majesty’s Government would be in a position to put forward.

6. In the first place, the destruction of this property, being, as your memorandum admits, an act of war, gives rise to no legal right to compensation. The principle that “war losses” do not give rise to a legal right to compensation is not limited to war losses in the sense [Page 325] of loss or damage inflicted by the enemy, but covers also loss and damage which the commander in the field is himself obliged to inflict upon the owners of property in the area under his authority: see the decision of the Tribunal in the “Hardman” case in the arbitration between the British and United States Governments (American Journal of International Law, Vol. 7, p. 879). Secondly, His Majesty’s Government would, if necessary, maintain that the claim, being in respect of damage to the property of a company incorporated in and still carrying on business in Roumania, must be regarded as a claim on behalf of a company which is a Roumanian national. The ownership of the shares, even if it extended to the totality of the shares, by an American corporation would not in the opinion of this Government justify the diplomatic protection of the Roumanian company by the Government of the United States on the footing that it was an American national.

7. The view of His Majesty’s Government being that it is the Roumanian Government alone which can deal with a claim for compensation for the destruction of the property of the Romano-Americana Company, I would repeat what I think is already known to your government that the British, French and Russian Governments when inviting the Roumanian authorities to destroy the oil properties in Roumania to prevent them from falling into the hands of the enemy, agreed to compensate that Government for any loss which the latter might sustain as the result of their destruction and they have always been and still are willing to reduce their claims in respect of sums due to them by the Roumanian Government on this account. So far as His Majesty’s Government are concerned the above arrangement has been carried out by a reduction of the Roumanian debt to this country. I would add, however, that the question of compensation is one to be arranged between the Roumanian Government and the various owners of the oil properties concerned, and the conclusion of any agreement between the Roumanian and the Allied Governments on the question cannot, in my view, be taken to prejudice the right of the Roumanian Government to maintain that if compensation is claimed on a strictly legal basis, the belligerent acts of destruction were not such as to give rise to any claims for compensation as of right.

8. If for one moment I may depart from the strictly legal considerations applicable to the case, I would ask you also to reflect how impossible it is for His Majesty’s Government to admit that a claim can rightly be brought against them alone in respect of the destruction of these oil properties in Roumania, when their sole interest in the case is the undertaking which they gave jointly with France and Russia, and which is certainly, so far as France is concerned, a subsisting undertaking, to reimburse to the Roumanian Government any compensation which might be given to the owners of the oil properties.

[Page 326]

9. In view of the preceding considerations, I trust that Your Excellency will agree with me that the claim of the Standard Oil Company is not one which lends itself to arbitration between the British and United States Governments.

I have [etc.]

Austen Chamberlain
  1. The reference is to the memorandum drafted by Mr. Charles C. Hyde, Solicitor of the Department of State, supra.