462.11 W 892/306: Telegram
The Secretary of State to the Ambassador in France (Herrick)
205. L–91, for Logan. Your L–177, June 23, 6 p.m. Department’s comments on your points, taken up in order, follow: [Page 36]
- (1)
- Your L–179, June 25, 7 p.m.,30 received; Department would be glad to have your further views at earliest possible moment.
- (2)
- The 2½ percent is to be computed on the net installment after deduction of the prior charges referred to in last part paragraph 3, Department’s telegram L–80, June 14, 1 p.m., and after deduction of American Army cost annuity.
- (3)
- Your interpretation is correct. Naturally Department wishes, however, to reserve its position on this point for whatever it may be worth for purposes of negotiation, and prefers not to indicate its views, therefore, until after its general position in regard to participation in payments shall have been made known to the Allies.
- (4)
- Department’s telegram was garbled; no reference was made to Belgian payments. As you suggest, Department believes that they should be lumped together with other treaty claims.
- (5)
- If the United States were to share in capital sums received from flotation of railway bonds, this Government would not, of course, expect to ask that its percentage should be computed on the interest payments on such a share of capital amounts.
- (6)
- The Department appreciates the reasons for your suggestion that the Allies be given a figure if they ask for it. You will realize how important it is to take no action that might cause them to insist that the United States might be given a smaller percentage. If you deem it absolutely necessary, in connection with the forthcoming negotiations, you may orally and confidentially indicate a figure based on the information given in Department’s telegram L–81, June 14, 2 p.m., paragraph 1, subject to the qualification set forth there, also bearing in mind the points raised in Department’s telegram L–80, June 14, 1 p.m.
- (7)
- In regard to the allocation of bonds to individual powers the Department could not commit itself in advance of knowledge of a particular proposal. For your information, however, and with the expectation of receiving your comment, I may say provisionally that it appears that bonds so allocated would constitute a definite assignment of their income and would, therefore, constitute desirable security.
- (8)
- In regard to vessels Department has failed to locate Reparation Commission’s decision, the number of which you did not give. According to your statement vessels are excepted by it that have been “otherwise legally expropriated,” and as title to German vessels seized in the United States was acquired long before conclusion of a treaty these ships would therefore come within this exception. The Government of the United States would not under any circumstances permit question of validity of this title to be raised. It is clear that German interests in and title to these vessels having been wiped [Page 37] out, they did not come within part 8 of annex 3, Treaty of Versailles, which relates to vessels entitled to fly the German flag or owned or controlled by Germans.
The Reparation Commission took a similar position in regard to German ships seized by Brazil and it would thereby be precluded from taking a different position in the very much stronger case of the ships seized by the United States. According to a statement, July 11, 1921, of the General Secretariat concurring with the Brazilian point of view, the ships constituted private property in an enemy country and were to be dealt with under article 297 of the treaty, and the proceeds of their liquidation might be dealt with by Brazil in the manner provided for under provisions of that article.
This statement is significant notwithstanding the fact that the commission, while it approved the opinion of its Legal Service that ships seized by Brazil did not come within part 8, annex 3, took the position that article 297 was not within the competence of the commission. In this position the commission was entirely correct. No authority has been vested in it to construe that article, the construction of article 297 being a question for the particular Allied State within which the property is. The Department calls your attention to statements, with which it agrees, in Mr. Bayne’s letter of May 20, 1921,31 in regard to application of article 297 to vessels seized by the United States. It seems unnecessary to enter into a detailed discussion on this point with the Allies. It is the position of this Government that while it is free to retain the vessels or return them or their proceeds to the former German owners, due credit will be allowed therefor, if they are retained, on American claims against Germany.
In any negotiations in regard to modification of the Army Costs Agreement, the Department offers the following for your further guidance:
- (a)
- The conditions in light of which the Army Costs Agreement was drawn have obviously been modified by the Dawes Plan. Putting aside question whether, under Army Costs Agreement, this Government would be entitled to receipts under Dawes Plan, the latter contemplates practically no external payments during first 2 years. The plan refers, moreover, to deliveries in kind from a different point of view, as these are to be covered from cash payments made by Germany. Under the circumstances the Department does not believe that after the second year the deliveries in kind should take rank ahead of American Army costs, more especially as there is possibility that deliveries in kind and other payments under headings of restitution and clearing payments, etc., might [Page 38] be expanded to cover all available funds leaving nothing for American Army costs.
- (b)
- In view of the commission of experts’ recommendations in regard to transfers, it should be understood that payments which are due on account of American Army cost priority should not merely constitute a prior charge on deposits accruing in the German Bank, but would be met from sums actually transferred. The priority might be somewhat empty otherwise. This point should not be lost sight of in connection with the drafting of any instrument having to do with American participation.
- (c)
- The Department realizes that Governments concerned had great difficulty in reaching the Spa Percentage Agreement. To avoid reopening the question of percentages in order to take account of participation by the United States, the following procedure might be adopted for distribution of the amounts remaining after making deductions for priorities referred to in the last part of paragraph 3, Department telegram June 14, 1 p.m., and for American Army cost priority. In accord with Allied Governments, the United States might agree with German Government that claims of the United States excepting Army costs be met by series of annual payments parallel with those projected under the Dawes Plan in an amount equal to 2½ percent of the payments available for distribution to the creditor Governments. In this way this percentage of payment would be brought within the “inclusive” payments which are a part of the plan, and the Spa percentages might apply to remainder. This Government is prepared to agree that any percentage payment of this kind to the United States should take rank, as far as payment and transfer of payment is concerned, equally with payment to the other creditor Governments of all obligations to them after the priorities indicated, including of course priority for American Army costs, have been covered.
The Department would be pleased to have your comments on these points as soon as may be possible.