493.11/1556: Telegram

The Secretary of State to the Minister in China (Johnson)

173. Referring to telegram of April 13, 3 p.m., from the Minister at Nanking in regard to proposed claims commission.

1. Department suggests that you bring following to attention of appropriate Chinese authorities:

Adoption of draft protocol enclosed with Department’s 1467 of February 3, 1930,12 and setting up of Commission in accordance therewith would not, beyond the expense of the Commission, impose any financial obligation upon the Chinese Government.
The work of the proposed Commission would simply be to run the claims through the mill and to determine what is the net obligation of China in dollars and cents. The question of settlement of the claims would be left for later discussion.
Until the claims can be passed on by a Commission the Chinese Government would appear to be faced with a much larger indefinite obligation than would be shown to exist when the Commission had completed its work.
The Department would be prepared to consider such changes in the terms of the proposed protocol as would meet the wishes of the Chinese Government. Specifically, the Department authorizes you to suggest to the Chinese Government that there be eliminated from the proposed protocol that class of claims comprehended by paragraph 3 of Article I of the protocol, provided that we have sufficient assurance [Page 1039] that the present program of the Chinese Government with regard to the liquidation of this class of indebtedness will be adequate to take care of such claims and that it will be carried through. You are further authorized to indicate to the Chinese Government a willingness, should it prefer, to have the claims passed on by a mixed Commission, composed of one American, one Chinese, and a third and presiding member of neutral nationality, and to include within the jurisdiction of the Commission claims of Chinese nationals against the United States.
The present trend of international thought is in the direction of settling justiciable international disputes by arbitration. During the past few years the United States Government has either completed or initiated arbitrations for the settlement of claims with the following countries: Austria-Hungary, Cuba, Egypt, Germany, Guatemala, Mexico, Norway, Panama and Sweden. The claims included in these completed and pending arbitrations number approximately 27,000 and the total amounts claimed run into hundreds of millions of dollars. Usually the awards amount to a relatively small percentage of the sums claimed. In most of the cases of arbitration just mentioned the Commissions were composed as above suggested.
The work of the proposed Commission would be devoted to bringing about that condition of facts which the Chinese Government is now understood to desire, namely, the clarification of its position with respect to all foreign obligations.