394.1154 T 13/8

The Secretary of State to the Ambassador in Japan (MacVeagh)

No. 203

Sir: Reference is made to your despatches No. 340 of November 19, 1926, No. 354 of December 1, 1926, and No. 367 of December 14, 1926,22 transmitting copies of editorials which appeared in the Japan Chronicle declaring that the plea of immunity filed in behalf of the United States Shipping Board in suits brought against the Board by the Hongkong and Shanghai Banking Corporation and the Bank of Chosen is inconsistent with the declaration communicated in this Department’s circular No. 178 of March 5, 1923.23

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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.

I am [etc.]

For the Secretary of State:
Joseph C. Grew

The Chairman of the United States Shipping Board (O’Connor) to the Secretary of State

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.

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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.]

T. V. O’Connor
  1. None printed.
  2. Foreign Relations, 1923, vol. i, p. 270.
  3. In a letter dated June 26, 1928, regarding these suits, Mr. Chauncey G. Parker, general counsel for the United States Shipping Board Emergency Fleet Corporation, wrote to Mr. Frank X. Ward, assistant solicitor of the Department of State, that: “The question of immunity raised by our pleas has not yet been determined.” (File No. 394.1154T13/20.) In a letter dated Jan. 22, 1929, Mr. T. V. O’Connor, chairman of the United States Shipping Board, wrote to the Secretary of State that: “The United States Shipping Board recently reached a settlement with certain Japanese banks in regard to the ‘Takata Cases.’” (File No. 394.1154T13/28.)
  4. None printed.
  5. Albert Davis Lasker, former chairman of the United States Shipping Board.
  6. Not printed.
  7. Not printed.