Foreign Relations of the United States Diplomatic Papers, 1939, The Far East; The Near East and Africa, Volume IV

494.11/111: Telegram

The Consul General at Shanghai (Lockhart) to the Secretary of State

Shanghai, December 16, 1939—1 p.m.
[Received December 18—1:30 p.m.]

1111. Reference Department’s 480, December 7, 4 p.m., offers of solatium payments to American claimants by Japanese military authorities.

1. The Japanese consular officer who informed Tenney of the original proposals by the Japanese military has been informally advised in accordance with the views set forth in the second substantive paragraph of the Department’s telegram under reference. He expressed some surprise at the statements made, adding that in the opinion of the Japanese military authorities the method adopted by them for the computation of solatium payments to be offered represented a fair and equitable method for determining American property losses actually sustained. He said he would discuss the question with the military authorities in the hope that some method might be worked out which would be acceptable to the American authorities, and in this connection stated that the military authorities were anxious to receive any suggestions or proposals which this Consulate General might wish to make. He added that he had been requested by the military to inform Tenney that their original offers might be materially increased, perhaps doubled in some cases, while in others full compensation would be paid. However, questioning revealed that the “full compensation” contemplated was still only for the amount of loss as estimated by the Japanese military. Tenney commented that it is the well established American view that in those cases where American nationals have sustained damage as a direct result of acts of the Japanese forces they are entitled to compensation to the extent of the full value of the property lost or destroyed. The generally accepted exemption, under the rules of war, that compensation may not be recoverable where the loss was sustained in the course of military operations, was not referred to as it was not known whether the Department is prepared to recognize, in so far as such recognition would affect the standing of American claims, the existence of a state of war in China such as would warrant the invocation and application of the above-mentioned exemption from liability. The Department’s views in this connection would be helpful.

2. It is noted in the third substantive paragraph of reference telegram that the Department understands that the only classes of cases included in the Japanese proposals are those in which losses resulted directly from acts of the Japanese forces not in the course of military operations. [While] the Japanese military have indicated as a matter of “principle” that no payments will be made for losses sustained in the course of actual combat or where the property damaged had acquired enemy character (see my 1037, November 25, 10 a.m.⁷), they have in fact offered minor compensation in certain cases which fall at least partially within this classification.

3. It is the Consulate General’s understanding that the Department desires this office to disassociate itself entirely from any negotiations between Japanese military authorities and American claimants which have for their purpose the settlement of claims on basis of the method referred to in the first substantive paragraph of the Department’s telegram under reference. This brings up other question whether, despite fact that the Consulate General now has constructive knowledge that the method in question is being applied by the Japanese military authorities in all such negotiations, it may nevertheless be advisable, in the interest of American claimants, to continue the practice of having an American consular representative informally and unofficially present at conference between the parties. In this respect it is believed that such informal attendance by a consular officer assures the American claimants the right and opportunity, which might otherwise be curtailed, to present his case fully and without prejudice. It also insures at least to a certain extent the claimant’s participation in the discussions on a basis of equality. It is further felt that the withholding of assistance of this character may give rise to criticism of American authorities by claimants. As a final consideration in favor of attendance, the Consulate General believes that the Consular officer’s summarized record of the proceedings, as it will [show] the substance of the Japanese contentions and evidence at the time, might well be of material benefit to the American side should the claim eventually be submitted to a claims commission. The Consulate General hopes therefore that the advisability of authorizing such attendance by a representative of this office may receive the Department’s further consideration.

[4?] The Japanese military authorities state that their Government maintains that compensation is payable in Chinese currency, without regard to depreciation or to its present exchange value in terms of United States currency; that a property, whether real or personal, which has been associated in and become a part of the economy of China, should be compensated for in the currency of that country; and that the only exception to such rule is in the case of property originally purchased in foreign currency and carried by the owner in such currency without being identified as a part of the Chinese economy. The Consulate General would appreciate receiving the Department’s views whether compensation may properly be made in depreciated Chinese currency or whether payment should be in United States currency or its present equivalent in Chinese currency.

5. The Consulate General has conveyed the substance of the suggestions contained in the penultimate substantive paragraph of the Department’s telegram under reference to certain American claimants who have agreed to organize a consultative group along the lines contemplated by the Department.

Code text by air mail to Chungking, Peiping, Tokyo and Hankow.

Lockhart

7. Not printed.