Copies of your despatches and their enclosures were referred to the
United States Shipping Board for any comment the Board desired to make
regarding the editorials mentioned and there are transmitted herewith
for your information copies of a letter dated February 7, 1927, from the
Chairman of the Shipping Board and the enclosures mentioned therein in
reply to this Department’s communication.
It will be observed that the suits in Japan in which counsel was
instructed to plead immunity were against the United States Shipping
Board and were in effect suits against the United States. The Department
did not undertake in Circular No. 178 of March 5, 1923, to waive the
immunity of the Government of the United States from suit to which it is
entitled by the well recognized principles of international law. The
Department merely announced in that circular that it would not claim,
for ships operated by or on behalf of the United States Shipping Board
in commercial pursuits immunity from arrest and other special advantages
generally accorded public vessels.
Furthermore, in addition to an express reservation of the right to claim
immunity “of such vessel or cargo from foreign jurisdiction in a proper
case” the declaration is by reasonable implication conditioned on the
acceptance by foreign governments of the provisions of Section 7 of the
Suits in Admiralty Act of March 9, 1920, which is quoted in the
Circular, and the refusal of the Japanese Government to accept as
applicable to Japan the provisions of the section of law mentioned,
might properly be held to render the declaration of the Circular
inapplicable to Japan.
It would appear to be clear, therefore, that the declaration was not
intended to have, and cannot reasonably be construed as having
application to the suits instituted in Japan against the Shipping Board
in which the immunity of the Board was pleaded. These suits are, in
effect, personal actions against the Government of the United States and
not suits in rem growing out of a case against
ships operated by the Shipping Board in commercial pursuits. The
attachment of two Shipping Board vessels by the plaintiffs was merely an
incident to the actions brought against the Government of the United
States, and in the circumstances mentioned the Government had no
alternative than to plead its immunity.
An additional reason for claiming immunity in the cases under discussion
is found in the fact that the plaintiffs in both suits have instituted
legal proceedings in the United States against the Government of the
United States based on the claims for which the suit in Japan was filed.
Irrespective of the question of the Government’s right to claim immunity
as a sovereign, it is obvious that the [Page 483] United States Government should not be required to
defend in the courts of a foreign country actions based on claims which
are also made the subject of legal proceedings instituted against the
Government of the United States in the courts of this country.24
The Department does not consider it advisable at this time to issue
through the Embassy any statement regarding the editorials for
publication, but you are requested to improve every opportunity
informally to correct the erroneous impressions that may have been made
by the editorials mentioned and upon request therefor to communicate the
substance of this instruction to the Foreign Office.
[Enclosure]
The Chairman of the United States Shipping
Board (O’Connor) to the Secretary of State
Washington, February 7,
1927.
Sir: Acknowledgment is made of your letter
of January 26, 1927 transmitting copies of despatches dated November
19, December 1, and December 14, 1926, from the American Embassy at
Tokyo with the enclosures mentioned therein,24a in regard to editorials
which have appeared in the Japanese press concerning the claim of
immunity made on behalf of the United States Shipping Board by its
attorney in certain legal proceedings brought against the Shipping
Board in the Courts of Yokohama.
The memorandum from the American Ambassador to you of December 1,
1926 correctly states the reasons for claiming immunity in this
particular case, but something may be added so as to explain the
background of this particular case.
You will see that the American Ambassador suggests in his memorandum
of December 1 that the editorials in the Japanese paper were written
by J. E. deBecker, the attorney of the Hong Kong & Shanghai
Banking Corporation, and were instigated by that corporation. No
doubt this is correct, and the habit of trying points in litigation
in the newspapers is not confined to Japan alone, but, as you know,
is frequently resorted to in this country. The result is that the
newspaper [Page 484] which lends
itself to a private interest for the purpose of influencing the
determination of a litigated matter in court is not helping either
the nation of which it happens to be a national or the
administration of justice in the court itself. It should be
expected, therefore, that the statements made in the newspaper are
highly exaggerated and do not represent the truth of the
controversy.
You must understand that the Japanese suit is an effort to get a
judgment against the United States Shipping Board in an action in personam. The Fleet Corporation is not
sued as is usual and the suit is not of a maritime nature. You are
also quite aware of the fact that the United States Shipping Board
is an agency of the Government precisely like the State Department
or the War Department or the Navy Department, and the claim is made
that by virtue of Circular Instruction No. 178, March 5, 1923, the
State Department has announced to the world that the Government of
the United States would not claim immunity in any suit that might be
brought against the Shipping Board. Of course, this is perfectly
absurd and neither the Shipping Board nor Mr. Lasker25 in the circular in
question, nor in any other way, invited nationals of foreign
countries to bring their suits against the United States Shipping
Board in a foreign court in case they were aggrieved on account of
some matter arising from the commercial business of the United
States handled through the Shipping Board. Consequently, the point
taken by Mr. Hirata that the diplomatic note of March 5, 1923 was
not a complete waiver and that the waiver was based on Section 7 of
the Suits in Admiralty Act approved March 9, 1920, is correct.
You will notice that Section 7 presents an alternative. The first is
where the vessel is arrested, attached or otherwise seized, or if
any suit is brought against the Master of any such vessel for a
cause of action arising in connection with the operation or
ownership of such vessel, then the United States Consul may claim
the vessel to be immune from arrest and may execute an agreement on
behalf of the United States or the Shipping Board for the release of
the vessel and for the prosecution of any appeal. This is the first
alternative.
Then follows the second alternative:
“Or may, in the event of such suits against the Master of any
such vessel, direct said United States Consul to enter the
appearance of the United States, or of the United States
Shipping Board, or of such corporation, and to pledge the
credit thereof to the payment of any judgment and cost that
may be entered in such suit.”
The Act further authorizes the Attorney General to
arrange with bank or other surety for the execution of a bond or
stipulation to secure the payment of any such lien.
[Page 485]
The State Department has attempted without success to persuade the
Foreign Office of the Japanese Government to accept the procedure
for the release of the United States vessels under the provisions of
Section 7. As a result of the refusal of the Japanese Government to
accede to this request the United States in the present case was
required to put up security in an amount considerably larger than
the amount of the claim of the plaintiff so as to secure the payment
of any judgment against the United States. Apparently there is now
criticism that the United States should not exercise its full right
to claim immunity which was incorporated in the Circular Instruction
at the end of Section 7 aforesaid, as follows:
“Provided, however, that nothing in this Section shall be
held to prejudice or preclude a claim of the immunity of
such vessel or cargo from foreign jurisdiction in a proper
case.”
Now, in the judgment of the Shipping Board, the present suit is a
proper case for claiming immunity. The Shipping Board takes the view
that the mere fact that a vessel goes into a foreign port should not
subject the United States to claims arising out of commercial
transactions carried on by the United States except so far as those
claims and commercial transactions arise with respect to the vessel
itself which goes into that particular port. In other words, if the
vessel itself has carried the goods which have either been
nondelivered or injured, the person so injured might hold the vessel
in a foreign port in a suit in which the Master of the vessel might
be sued. Our thought is that maritime actions against the vessel
itself should be consented to, but that ordinary common law actions
or equity actions are without the field covered by Section 7 of the
Suits in Admiralty Act.
It must be noted that Section 7 is the only act which authorizes the
Shipping Board to waive a claim of immunity on the part of the
United States and the only act by which the Attorney General or any
other agent of the Government may waive such immunity.
This view may seem to be rather finespun and certainly is difficult
to explain to the general public since they do not realize the
extent to which a general waiver of all claims of immunity would go.
For instance, what is to prevent a national of Great Britain having
an action against the Government of the United States arising out of
transactions in London commencing a suit in Japan by seizing a
Government-owned ship in the manner in which the Hong Kong &
Shanghai Bank have seized this ship. The Government had transactions
with Japanese shipbuilders. Fortunately, these claims have been
settled, but on the theory of the writer of the editorials in the
Japanese newspapers, what would have prevented the Japanese [Page 486] shipbuilders from seizing
Government-owned ships in Japanese ports by attachment and suits
brought to recover on such claims.
The United States Shipping Board has recently settled claims for
large amounts in favor of seamen who were entitled to war bonuses
for working on vessels under charter for the United States
Government. What would have prevented these claims from being
prosecuted in Japanese Courts by the seizure of United States
vessels?
These illustrations show the far-reaching character of the contention
made by the Japanese newspapers, and it is quite apparent that if
there are general waivers to litigation of the character in question
this will be treated as a precedent so that the Government will be
unable in future cases to properly insist upon the immunity to which
a sovereign power is entitled by the law of nations and the law of
the United States.
The writer of the editorials quotes the opinion of a Judge in an
inferior Court of the United States in the Pesaro case, and ridicules the opinion of Justice Van
Devanter in the Supreme Court of the United States, 271, U. S. 562.
This is not an unusual course for newspaper writers to pursue,
especially when they are ignorant of the field of which they are
writing, and certainly an attorney on the other side would wish to
keep from the public the decisions and laws which would be
unfavorable to his view. As a matter of fact, not only is immunity
allowed when claimed in the Courts of the United States, but Courts
of Great Britain, Courts of Germany, and I believe the Courts upon
the continent of Europe allow the same claim. You are referred to
the following decision in the Courts of Great Britain, Compania Mercantil Argentina vs. United States Shipping Board, also, the case
of Gustave Sailing vs. United States Shipping Board shows the German rule, copies
of which decisions are herewith transmitted.26
I am enclosing for your information and for the benefit of the
American Embassy at Tokyo, two copies of a brief of the authorities
on Immunity which have been collected.26
This question has not been raised in the Courts of Europe because as
a rule litigations there are brought for maritime causes in Courts
having maritime jurisdiction and service is made upon the Master and
Agent of the ship so that these actions are entirely within the
declaration of policy maintained in Chairman Lasker’s letter.
It may not be very pertinent to this discussion to go into the facts
of the particular case which the writer of the editorials had in
mind. The action of the Government was precipitated by the refusal
of the Daini Bank to meet bank guarantees to indemnify the Admiral
[Page 487] Oriental Line and the
Government from losses on account of delivering cargo consigned to
Takata & Company to the said Company without the surrender of
the bills of lading. The Hong Kong & Shanghai Bank held many of
these bills of lading and had held them in some instances for over a
year after the goods were delivered to Takata & Company and with
full knowledge of that fact. The failure of Takata brought to the
attention of the Government the fact that the Hong Kong &
Shanghai Bank was a creditor of Takata for the amount for which this
suit is brought. When the Government was forced to put up security
to obtain the release of the vessel, bonds of the Kingdom of Japan
had to be furnished and these bonds had to be deposited with the
very same banking institution, the Daini Bank, who owed the
Government on these bank guarantees.
It must be remembered also that the bills of lading upon which these
shipments were made were through bills of lading, the primary
carriers being railroads of the United States, and by the terms of
the bills of lading the ocean carrier was entitled to the same
protection as the railroad which originally issued them. These bills
of lading have been construed in the Courts of the United States,
and under the decisions of the United States Courts the carrier has
defenses to the claims of the holding banks which not only limit the
amount of the recovery under the bills of lading but also relieve
the carrier from responsibility because of the failure of the holder
of the bill of lading to give notice within the time limit
prescribed by the bill of lading. The action, therefore, is based
upon a contract which was made in the United States, and the rights
of the parties should be regulated by the laws of the United States.
The Courts of the United States are open for the trial and
determination of these causes of action, and as a matter of fact
both the Hong Kong & Shanghai Bank and also the Bank of Chosen,
which is in similar situation to that of the Hong Kong &
Shanghai Bank, have brought suits in the United States for recovery
of the very same claims which are being litigated in the Courts of
Japan. This forms an additional reason why the United States
Shipping Board should endeavor to prevent the Japanese cases from
proceeding to trial.
Should the Japanese Foreign Office make this case the subject of
inquiry we would respectfully suggest that the Japanese Foreign
Office inquire into the question why the Daini Bank does not meet
its guarantee.
Hoping that this memorandum may be helpful, I am [etc.]
