740.00112 E.W. 1939/10864

The Acting Secretary of State to the British Chargé (Campbell)

Sir: I refer to Lord Halifax’s note no. 286, dated May 23, 1944, and the enclosures thereto, regarding the disposition to be made of [Page 154] vessels recaptured from the enemy, which formerly belonged to one of the United Nations or to its nationals.

The matter has received the attention not only of this Department but also of other interested agencies of this Government, and I am glad now to be able to acquaint you with the conclusions that have been reached.

As stated in this Department’s memorandum of January 20, 1944, this Government in general raises no objection to the proposal that recaptured vessels not needed in the combined war effort be turned over to the governments of the allied countries to which they formerly belonged.
The question whether the vessels are needed by a particular theater commander, as suggested by your Government, is not believed to be a sufficient test of whether they may be needed in the general war effort, i.e., in another theater or in connection with general war transportation problems.
This Government perceives no pressing necessity for entering into a general agreement with respect to a situation which at this time is extremely obscure. It does not now have available information as to the number, nationality, type or condition of the vessels that may be involved. Consequently, a general agreement on the subject, except in principle, appears to this Government to be ill-advised. Instead of a general agreement at the present time, as suggested by the British Government, this Government believes that special agreements in line with the principle stated in paragraph one could be made as vessels are available to be turned over to the Allied Governments and in the light of the special circumstances then obtaining.
This Government agrees with your Government with respect to the requisition of cargoes.
This Government is still troubled regarding the desire of the British Government to make the turning over to the Allied Governments of such vessels subject to an undertaking to reimburse underwriters, particularly in view of the fact that under our law and the law of most of the United Nations the rights of former owners and underwriters are cut off by a judgment of an enemy prize court, and the further fact that such an undertaking might require the Government receiving a vessel to reimburse its own underwriters, a matter in respect to which the recapturing country should have no concern.
Underwriters fix their premiums on the basis of the war risks assumed, and it is not perceived why their interests merit special consideration different from all other interests in the vessels.
In those cases where recaptured vessels had not previously been condemned by enemy prize courts and the former owners may have a right to have the vessels restored to them upon the payment of prize salvage where required, reimbursement of the underwriters may [Page 155] be appropriate under the doctrine of subrogation, but even in this situation it is scarcely perceived why underwriters should be placed in a more favorable position than those having prize salvage rights.
This Government recognizes that where the former owner of a vessel—whether an Allied Government or a national of an Allied Government—has been indemnified by underwriters, the turning over of the ship to that government without compensation by it would be in the nature of a gift, and hence some adjustment as a matter of equity might be desirable, but it is doubted whether it can be determined in advance of an actual situation arising what such adjustments should be or in whose favor they should be made.
It is not clear whether your Government’s proposal that the Government receiving the vessel shall accept responsibility for “all liabilities in respect of the vessel” would cover such items as expenses incurred by the recapturing governments in making repairs or reconditioning recaptured vessels, a factor to be taken into consideration.
Finally this Government is inclined to feel that the time at which and the conditions under which a particular vessel, or a particular group or category of vessels, no longer needed by a theater commander, may be turned over to an Allied Government without prejudice to the general war effort, should be considered in the first instance by the Combined Shipping Adjustment Boards. Final decision with respect to transfers could then be made in the light of the Boards’ recommendations.

Accept [etc.]

Edward R. Stettinius, Jr.