confronted the nations with which the United States was associated in the war in effecting settlement of claims against former enemy countries, the Government of the United States was obliged to deal with conditions incident to the conclusion of treaties with Germany, Austria and Hungary to reestablish friendly relations with those nations.

Following the conclusion of such treaties, negotiations were entered into with Germany looking to the adjustment of the claims of our citizens pursuant to the rights of the United States recognized under the Treaty concluded August 25, 1921, with that country. It is contemplated that a mixed commission on which Germany will have representation will be established to determine the amounts of these claims in accordance with the procedure usually governing matters of this kind.

I am glad to say that despite the recent difficulties in Germany which apparently have delayed the completion of the arrangement, gratifying progress has been made and I believe that a satisfactory convention will shortly be signed. The negotiations with the German Government indicate a desire on its part to move as expeditiously as possible with a view to the consummation of the plans under consideration. It is manifest that legislation such as that contemplated by the Bill in question would be embarrassing to the Executive in dealing with the matter of these claims, since the enactment of the Bill into law would make it necessary to abandon present plans.

Apart from this effect of the passage of the Bill, I may say that it seems to me entirely appropriate that the usual practice should be followed in the determination of international claims, and that Germany should have appropriate representation upon a mixed claims commission by which the amount of these claims shall be assessed. The Bill seems to deal with the settlement of claims as if it were purely a domestic affair. But the claims are those of American citizens against Germany, Austria and Hungary and it has hitherto been contemplated, as the Joint Resolution of Congressapproved July 2, 1921, makes clear, that these Governments shall make suitable provision for the satisfaction of these claims. But if these Governments are to make such provision, I should regard it as proper that they should have the opportunity of being represented on the claims commission by which the amount of the claims is to be fixed. I do not see that any different principle should be applied because we hold the private property of former enemies in pledge, but this situation, I should suppose, would rather make the course to which I have referred, if possible, still more important before resort were had to such property for satisfaction. To undertake to

exclude a nation in a case like the present from any participation or voice in matters thus vitally affecting its interests and to deal with such matters by ex-parte action would be, in my judgment, at variance with the principles and practice generally observed by nations in their relations with each other, and I should think it unfortunate if such a course were initiated by this Government.

I do not speak of the situation which would be disclosed if Germany refused to make an arrangement for a commission to act in the assessment of claims in a manner which would be reasonable and satisfactory to our Government. I am, however, speaking of the present situation in which negotiations are pending and where there is every reason to believe that they will shortly be concluded.

I shall not discuss the plan which the Bill sets forth of confiscating the property in the hands of the Alien Property Custodian by providing for its application not only to the payment of the claims of American citizens but also to the claims of this Government for pensions and allowances as described in the Bill. While the latter class of claims is to be postponed in payment to the former, all are to be satisfied under the provisions of the Bill, and it is manifest that the entire private property of former enemy nationals in the hands of the Alien Property Custodian will not be sufficient for the purposes stated.

Up to this time Congress has not committed itself to a confiscatory policy. In the Joint Resolution, of July 2, 1921, Congress provided that the property should be retained by the United States and no disposition thereof should be made except as had been or might be provided by law, until such time as Germany and Austria and Hungary "shall have respectively made suitable provision for the satisfaction of all claims against said Governments respectively " of American citizens who have been damaged through the action of these Governments as stated, and until compliance with the other provisions of the Resolution. In other words, so far as the claims of American citizens are concerned, the properties in the hands of the Alien Property Custodian, or their proceeds if liquidated, are to be held virtually in pledge until Germany, Austria, and Hungary respectively make suitable provision for the satisfaction of these claims.

As I have said, this implies a fair opportunity to make the required provision. When the amount of these claims has been determined, the question of the satisfaction can be taken up at once, Congress of course reserving its authority to deal with the question in the light of the event. I am of the opinion that this course can be followed quite as expeditiously as the course contemplated by the Bill, and I should hope that in any case no measure of confisca

tion would be adopted until there had been a failure, after reasonable opportunity, to provide for the satisfaction of the claims of American citizens, duly ascertained.

I remain [etc.]

CHARLES E. HUGHES

462.11 W 892/42: Telegram

The Secretary of State to the Ambassador in Germany (Houghton)

WASHINGTON, July 29, 1922—2 p.m.

104. Your 141, July 17, 6 p.m. Department before replying to counter proposals of German Government has been awaiting receipt of despatch respecting them which you mention. It has not yet reached Department.

A Bill was recently introduced in the Senate by Senator Underwood which provides for a commission composed of American citizens which is to pass on claims of American citizens against Germany and further provides for the use of sequestered property to make payment of such claims. The pendency of a Bill of this kind makes it very important that the agreement respecting claims which has been submitted to Germany should be promptly consummated. Delay may militate against the successful conclusion of such an agreement. In order to avoid any unfortunate delay, it is desirable that Germany should accept the agreement proposed by the United States.

The German Government's proposal with respect to an alteration in regard to the designation of an umpire is acceptable in the light of the explanation made concerning it.

The proposal with regard to the modification of the provision in Article VI relating to the binding character of arbitral decisions as understood by this Government is entirely unacceptable. While legislative sanction is frequently required in connection with the consummation of international agreements, I consider as unprecedented a provision such as it proposed under which awards would not be binding without legislative sanction. Under this provision the purposes which it is the object of the agreement to accomplish could be nullified by the Reichstag and the agreement in reality would have the effect of an undertaking to determine amounts of claims to be submitted to the Reichstag for its approval or disapproval.

The provisions of Article 1 with respect to the determination of amounts of private debts was inserted with the idea that they would be entirely agreeable to the German Government. The United States and Germany did not establish the clearing office scheme provided for by the Treaty of Versailles, but under the provisions of sub-paragraph (2) paragraph (h) of article 297 of

the Treaty the proceeds of sequestered property may be used for the payment of debts. It was thought that instead of at once proceeding with the adjustment of debts in this manner, their amounts might be determined by the mixed commission and arrangements as to the method of payment deferred pending such determination.

This Government is of the opinion that practicable application might be given to the suggestion of the German Government with regard to a separate declaration more specifically defining the category of claims to be dealt with by the commission.

Communicate with Foreign Office in sense of the foregoing and earnestly express the hope that the German Government may be willing to sign the proposed agreement without the material alterations which it has proposed. It is my opinion that if this is not done promptly, Congress will deal [with] the matter in its own way. HUGHES

462.11 W 892/49: Telegram

The Ambassador in Germany (Houghton) to the Secretary of State

BERLIN, August 2, 1922—6 p. m.

[Received 11:58 p.m.]

153. Your 104, July 29, 2 p. m. Just informed by Foreign Office that German Government accepts form of agreement approved by you in above telegram. Satisfactory draft of note requesting President to name umpire has been submitted. Draft of note has also been submitted to the effect that the German Government believes itself justified in assuming that it is not the intention of the American Government to insist in the proceedings of the committee upon all the claims contemplated in the Versailles Treaty without exception, that it in particular does not intend to raise claims such as those included in the paragraphs 5 to 7 of annex 1 of article number 244 of the Versailles Treaty (claims for reimbursement of military pensions paid by the American Government and of allowances paid to American prisoners of war or their families and to the families of persons mobilized) or indeed claims going beyond the Versailles Treaty.

German Government requests further that Embassy on behalf of the United States confirm the correctness of the assumption. Am I right in assuming that your telegram assents.

I also request instructions as to whether or not your telegram meant to reject German proposal for separate article fixing time. limit for presentation of claims.

For the Department's confidential information I desire to say that chief argument based on need of haste to forestall less favorable

solution by Congress overcame a considerable and not unjustifiable reluctance on the part of the German Government to accept the inclusion of private debts in categories of claims. The administration was very fearful that enemies of the Government would urge that although sequestrated property may be used for the payments of debts the amount of the private debt indetermined [be determined?] only in some way provided in the Versailles Treaty or that between the United States and Germany and that therefore except by a new treaty private debts could not be included.

The Chancellor and the Foreign Office urged upon other members of the Government the greater expediency of accepting your terms over any technical difficulty but have had a difficult and laborious task to convince Ministers of Justice and Interior and members of Foreign Affairs Committee of Reichstag still in Berlin that the advantages outweighed the concession of a possible legal advantage or right of Germany.

Request full powers be cabled immediately followed by written full powers. Request permission to give out news to American newspaper representatives here on execution of the agreement which should take place upon the receipt of your cabled reply.

HOUGHTON

462.11 W 892/49: Telegram

The Secretary of State to the Ambassador in Germany (Houghton)

WASHINGTON, August 5, 1922-noon.

105. Your 153, August 2, 6 P. M.

In view of the last communication received by you from the German Government regarding the proposed claims agreement, it appears that the agreement, with slight modification, can be promptly signed. It is understood that the draft transmitted with Department's instruction No. 3055 of June 23 is acceptable, except that the second sentence in Article II relating to the umpire will be changed to read "The two Governments shall by agreement select an umpire to decide upon any cases concerning which the Commissioners may disagree, or upon any points of difference that may arise in the course of their proceedings ". It is understood that this change does not imply any difference in the actual agreement for the selection by the President and it is further understood that simultaneously with the signing of the agreement the German Government will present a note requesting the President to designate an umpire.