their fair and natural sense, be applied to claims for indirect losses, not resulting from any particular acts committed by any particular ship or ships, but alleged to result (so far as they may be referable at all to naval or maritime causes) from the very existence on the high seas of a naval force belonging to the Confederate States, and recognized by Great Britain and other neutral powers as having a belligerent character and belligerent rights. If the Confederate States had, in fact, procured all their cruisers from British sources, this criticism would still hold good; much more when several (in fact a considerable majority in number) of the cruisers actually employed by them, and by which losses were inflicted on United States citizens, were otherwise procured.

PART III.

On the amount of the claims for indirect losses.

"The claims as stated by the American Commissioners may be classified as follows: "1. The claims for direct losses growing out of the destruction of vessels and their cargoes by the insurgent cruisers.

"2. The national expenditures in the pursuit of those cruisers.

"3. The loss in the transfer of the American commercial marine to the British flag.

"4. The enhanced payments of insurance.

"5. The prolongation of the war and the addition of a large sum to the cost of the war and the suppression of the rebellion.

"So far as these various losses and expenditures grew out of the acts committed by the several cruisers, the United States are entitled to ask compensation and remuneration therefor before this Tribunal."-(United States Case, p. 469.)

Mr. Fish observes that "an extravagant measure of damages" has been supposed, not only by the British press, but also, "most unaccountably," by some of the statesmen of this country, to be sought through the claim for compensation on account of indirect damages. It will, therefore, be well to present, from United States authority, some part of the evidence which, in the absence of explanation or retraction, has led to this conception. Undoubtedly the Case (p. 476) disclaims an accurate estimate; but it supplies materials which cannot fail to suggest the appropriate conclusion. They are as follows:

From the 4th of July, 1863, Great Britain is declared to have been "the real author of the woes" of the American people, (p. 479.) From this time" the war was prolonged for the purpose" of maintaining offensive operations "through the cruisers," (ibid.) And the arbitrators are accordingly called upon "to determine whether Great Britain ought not in equity to re-imburse to the United States the expenses thereby entailed upon them," (ibid.) On all these points, the Case proceeds to state, the evidence "will enable the Tribunal to ascertain and determine the amount." To this amount interest is to be added up to the day when the compensation is payable, within twelve months after the award, (p. 480.) The rate of interest in New York is 7 per cent., (ibid.;) and "the United States make a claim for interest at that rate" from July 1, 1863, as the most equitable day." The interest, therefore, is to be charged at 7 per cent. for a period of from ten to eleven years.

It may be presumed to be incapable of dispute that more than half the expenses of the war were incurred after the first of July, 1863. What was the sum total of those expenses? Upon this point there is, in a form generally if not precisely appropriate, official evidence from America. In the Report of the Special Commissioner of the Revenue for 1869, (p. vi,) they are stated at 9,095,000,000 dollars, including 1,200,000,000 dollars for the suspension of industry. Of this amount 2,700,000,000 are set down to the Confederates.

Thus it appears that the Case does not go beyond the truth (so far as this head of damage is concerned) in stating that the Arbitrators would find the materials sufficiently supplied for estimating the amount which "in equity" Great Britain ought to pay. It may indeed be said that the amount, suggested by the passages and facts to which reference is made, forms an incredible demand. But, in perusing and examining this Case, the business of Her Majesty's Government has been to deal, not with any abstract rule of credibility, but with actual, regular, and formal pleas, stated and lodged against Great Britain on behalf of one of the greatest nations of the earth. Is it, then, most unaccountable," in view of the evidence as it stands, that the press and that statesmen of this country should have formed the idea that "an extravagant measure of damages" was sought by the Government of the United States?

It appears from the dispatch of Mr. Fish that no such idea has ever been entertained by that Government. Having this authentic assurance so supplied, it may be deemed little material to inquire whether on this important matter the language of the Case has been misunderstood by Her Majesty's Government, or whether it is now disavowed. If, however, it has been misconstrued, the misconstruction undoubtedly has not been confined to England, but has been largely shared by writers on the Continent of Europe.

Were this Government indeed prepared to acquiesce in the submission of these claims, it would still remain to ask in what way the Government of the United States proposed to guard against the acceptance by the Arbitrators of those enormous estimates which, taken without authoritative comment, the language of the Case suggests. But it is scarcely necessary to observe that the question of more or less in this matter is entirely distinct from the question of principle on which the statements and arguments of Her Majesty's Government are founded.

[Inclosure 3 in No. 13.]

General Schenck to Earl Granville.

LEGATION OF THE UNITED STATES,
London, 21st March, 1872.

MY LORD: At a very late hour last night I received your Lordship's note of the date of yesterday, informing me that you had laid before your colleagues the copy of Mr. Fish's dispatch to me of the 27th ultimo, of which I furnished you a copy on the 14th instant.

I have also received, at half past four o'clock to-day, a printed copy of a memorandum, which you refer to in the note as being inclosed, and which you request to have read and considered as part of that communication, being intended, as you inform me, to explain to the United States, more fully than can be done in the form of a letter, and as Her Majesty's Government is anxious to do, the considerations which caused them to hold the belief at the time of the ratification of the Treaty that a waiver had been made of the claims for indirect damages.

Having informed me that Her Majesty's Government, recognizing with pleasure the assurance of the President that he sincerely desires to promote a firm and abiding friendship between the two countries, and being animated by the same spirit, gladly avail themselves of the invitation which you say my Government appears to have given, that they should state the reasons which induce them to make the declaration contained in your note of the 3d ultimo, you add that those reasons were purposely omitted at that time in the hope of obtaining, without any controversial discussion, the assent thereto of the Government of the United States.

Your Lordship then proceeds, in reply to Mr. Fish's note, to discuss the whole question of the right of the United States, under the provisions of the Treaty, to put forward in their Case presented at Geneva their claims for indirect losses and damages, and to state the grounds for your denial of such right and the arguments by which that denial is sought to be sustained.

And your Lordship closes this full and long statement of views and arguments by expressing the confident feeling of Her Majesty's Government that they have laid before the President ample proof that the conclusion which was announced in your note of the 3d of February, and by which you think it is hardly necessary to say they adhere, cannot be shaken.

This conclusion I understand to be that "Her Majesty's Government hold that it is not within the province of the Tribunal of Arbitration at Geneva to decide upon the claims for indirect losses and injuries put forward by the United States."

Almost every moment of available time since the receipt of your Lordship's note has been occupied with the copying of it, in order that I may be able to transmit it in time to overtake at Queenstown the mail steamer which leaves Liverpool to-day. I therefore make my acknowledgment of the delivery of your communication brief, and hasten to forward it to my Government at home, that it may have, with the least possible delay, the attention and answer from there which it may be thought to require.

I have the honor to be, very respectfully, your obedient servant,

ROBT. C. SCHENCK.

No. 14.

General Schenck to Mr. Fish.

[Telegram.]

LONDON, 1st April, 1872.

Have you any objection to British Government filing Counter Case, without prejudice to their position in regard to consequential damages? Received at 9.40 a. m.

We understand the British Government is bound to file Counter-Case, and that their so doing will not prejudice any position they have taken, nor affect any position of this Government. The rights of both parties will be the same after filing as before.

Is the inquiry made at their request?

FISH.

No. 16.

Mr. Fish to General Schenck.

No. 181.]

DEPARTMENT OF STATE,
Washington, April 16, 1872.

SIR: I have given very careful attention to the note of the 20th March, addressed to you by Earl Granville, professing to state the reasons which induced Her Majesty's Government to make the declaration contained in his previous note to you of 3d February, that, in the opinion of Her Majesty's Government, it is not within the province of the Tribunal of Arbitration at Geneva to decide upon the claims for indirect losses and injuries put forward in the Case of the United States.

His Lordship declares this statement to be made upon the invitation which this Government appears to have given. I should regret that what was intended only as a courteous avoidance of the naked presentation of a directly opposite opinion to that which had been expressed on behalf of the British Government, unsustained by any reasons, should have subjected His Lordship to the necessity of an elaborate reply. It was not the desire of this Government to invite any controversial discussion, nor have they now any wish to enter upon or continue such discussion.

Some remarks, however, appear in the note of His Lordship which seem to require a reply.

It opens with a seeming denial of the accuracy of my assertion that claims for indirect losses and injuries are not put forward for the first

time in the "Case" presented by this Government to the Tribunal at Geneva-that for years they have been prominently and historically part of the "Alabama claims"--and that incidental or consequential damages were often mentioned as included in the accountability.

It cannot be supposed that His Lordship intends more than to say that the claims for indirect or national losses and injuries were not "formulated" by this Government, and the amount thereof set forth in detail and as a specific demand, for he admits that on the 20th November, 1862, within a few weeks after the "Alabama" had set out on her career of pillage and destruction, Mr. Adams suggested the liability of Great Britain for losses other than those of individual sufferers. In his note of that date to Lord Russell, Mr. Adams stated that he was instructed by his Government to "solicit redress for the national and private injuries already thus sustained."

On the 19th February, 1863, Mr. Seward instructed Mr. Adams that "this Government does not think itself bound in justice to relinquish its claims for redress for the injuries which have resulted from the fitting out and dispatch of the Alabama in a British port.”

As the consequences of this fitting out began to develop themselves, and their effects in encouraging the rebellion became manifest, Mr. Adams, in an interview with Lord Russell, indicated them (as described by the latter in a letter to Lord Lyons under date of 27th March, 1863) as "a manifest conspiracy in this country (Great Britain) to produce a state of exasperation in America, and thus bring on a war with Great Britain, with a view to aid the Confederate cause.”

In a note dated April 7, 1865, addressed to Lord Russell, Mr. Adams, after complaining of the hostile policy, pursuant to which the cruisers were fitted out, says, "That policy I trust I need not point out to your Lordship is substantially the destruction of the whole mercantile navigation belonging to the people of the United States." "It may thus be fairly assumed as true that Great Britain, as a national power, is, in point of fact, fast acquiring the entire maritime commerce of the United States."

That Lord Russell regarded this as the foundation of a claim for damages for the transfer of the commercial marine of the United States to the flag of Great Britain is apparent, in his reply to Mr. Adams, under date of May 4, 1865, when he says: "I can never admit that the duties of Great Britain toward the United States are to be measured by the losses which the trade and commerce of the United States may have sustained."

Again, on the 20th May, 1865, Mr. Adams, writing to Lord Russell, distinctly names indirect or consequential losses. His language is, "that, in addition to this direct injury, the action of these British-built, manned, and armed vessels has had the indirect effect of driving from the sea a large portion of the commercial marine of the United States, and to a corresponding extent enlarging that of Great Britain;" that "injuries thus received are of so grave a nature as in reason and justice to constitute a valid claim for reparation and indemnification." In the same note he says, "The very fact of the admitted rise in the rates of insurance on American ships only brings us once more back to look at the original cause of all the trouble."

It is difficult to imagine a more definite statement of a purpose to require indemnification.

On the 14th February, 1866, after the presentation of the above-recited complaints, Mr. Seward, writing to Mr. Adams, said: "There is not one member of this Government, and, so far as I know, not one citizen of the United States, who expects that this country will waive, in any

case, the demand that we have heretofore made upon the British Government for the redress of wrongs committed in violation of international law."

And again, on the 2d May, 1867, Mr. Seward writes to Mr. Adams: "As the case now stands, the injuries by which the United States are aggrieved are not chiefly the actual losses sustaiaed in the several depredations, but the first unfriendly or wrongful proceeding, of which they are but the consequences."

His Lordship also admits the mention, by Mr. Reverdy Johnson, in March, 1869, of a "claim for national losses," which Lord Clarendon, in a paper published in the British Parliamentary Papers, "North America, No. 1, 1870," page 18, defines "national indirect, or constructive claims."

On 15th May, 1869, I instructed Mr. Motley that this Government, in "rejecting the recent Convention, abandons neither its own claims nor those of its citizens."

Lord Clarendon, in a dispatch of June 10, 1869, to Mr. Thornton, mentioned that Mr. Motley had assigned, among the causes which led to the rejection of the Johnston-Clarendon treaty, that the "Convention was objected to because it embraced only the claims of individuals, and had no reference to those of the two Governments on each other.”

On 25th September, 1869, writing to Mr. Motley, I said: "The number of ships thus directly destroyed amounts to nearly two hundred, and the value of the property destroyed to many millions. Indirectly the effect was to increase the rate of insurance in the United States, and to take away from the United States its immense foreign commerce, and to transfer this to the merchant-vessels of Great Britain." "We complain of the destruction of our merchant marine by British ships." "The President is not yet prepared to speak of the reparation which he thinks due by the British Government for the larger account of the vast national injuries it has inflicted on the United States."

66

In the same instruction I also wrote what seems pertinent to the present phase of the question between the two Governments: "When one power demands of another the redress of alleged wrongs, and the latter entertains the idea of arbitration as the means of settling the question, it seems irrational to insist that the arbitration shall be a qualified or limited one."

Lord Clarendon wrote to Mr. Thornton, on 6th November, 1869, that he was officially imformed by Mr. Motley that while the President at that time abstained from pronouncing on the indemnities due for the destruction of private property, he also abstained from speaking "of the reparation which he thinks due by the British Government for the larger account of the vast national injuries it has inflicted on the United States."

Lord Clarendon, in some "observations" on my note, (Blue Book, North America, No. 1, 1870, page 13 et seq.,) dwelt at length on my allegation of national or indirect injuries, and characterized them as "claims," and resisted them as such. And in an instruction to Mr. Thornton, of 12th January, 1870, he recognizes the paper as relating to the "Alabama claims." (Blue Book, North America, No. 1, 1870, page 20.)

It cannot be denied that these public or national claims (now called "indirect") were prominently before the Senate of the United States when the Convention of 14th January, 1869, was under advisement in that body, nor that they were subsequently actively canvassed before