862.852/35
Memorandum of Conversation, by the Political Adviser (Dunn)
The Counselor of the British Embassy6 came in this morning by appointment, and said that as the Ambassador was in New York, he had come to convey instructions which had been received from the Foreign Office.
Mr. Mallet said that the British Government had learned that the Government of Mexico had been giving consideration to the possibility of a transfer of certain German ships, now taking refuge in Mexican ports, to the Mexican flag, and that President Cardenas had had a conversation on the subject with Mr. Daniels. The British Government further learned that on September 24, in the Star and Herald of Panama City, an article had appeared which described plans for a cooperative arrangement under which claims against Germany held by nationals of the American republics were to be pooled in an organization for the holding of these claims and other debts owed to such nations by the German Government or German nationals, and that as a means of obtaining payment of these claims and debts, the German ships now in the ports of the American states, not including the United States, were to be taken over and operated in the Inter-American trade exclusively under the flags of the different South American republics.
Mr. Mallet then stated that on September 17, the British Government had instructed their representatives in all neutral countries, with the exception of the United States, to point out to the Governments to which they were accredited that the British Government would be within their rights in capturing any ship, the flag of which had been transferred from Germany to another country after the outbreak of war. This instruction was not sent to Lord Lothian7 because of the [Page 62] confidence felt by the British Government that the American Government would not lend itself to the carrying out of any such transfers of flag.
The Counselor then went on to say that as a result of the information the British Government had received as to the above suggested plans, to which was added the information that the Government of Argentina was very much interested in a similar arrangement, the British Government felt that some move might be undertaken at Panama during the present conference to provide for the transfer of the flags of the German ships now taking refuge in South American ports. The Ambassador, Mr. Mallet said, had been instructed to explain confidentially to this Government the attitude of the British Government toward their right to capture ships transferred from the German flag after the outbreak of war, and to say that this question was vital to the British Government in the prosecution of the war and that they could not entertain any exceptions from the established principles, as any exception would leave the door open to mass transfers of all German ships now sheltering in neutral ports. The British Government thought it best, before any action towards such transfers of flag were taken, to explain its attitude to this Government and to point out that such transfers would leave the way open for the realization of vast sums of foreign exchange by the German Government, as well as the continued operation of their ships in sea-borne commerce with the many attendant advantages resulting to Germany thereby. The British Government had decided that they would find it necessary to proceed to the capture of such ships wherever they were found to be transferred to a foreign flag.
In view of the foregoing, the Ambassador was asked to request this Government to use a restraining influence at Panama if the question of the transfer of flag of these German ships were to become active.