quest, turn it over to the American buyer's agent or representative, who should then make all arrangements with appropriate licensing office for delivery of the license and payment of export tax to the authorities in occupation.

Department is informed that time for receiving applications from American buyers for contracts made previously to February 1st has been extended for an indefinite period; that authorities in occupation on May 1st restored the German export tariff schedule as of 1921 instead of the uniform 10% tax which has temporarily been collected; that German firms are now authorized by their Government to deliver goods involved in commercial transactions made prior to February 20th, provided they have first obtained a German export license." 42

If you perceive any objection to this statement cable Department immediately; otherwise it will be released to the press on Tuesday afternoon.43

Inform embassies at Brussels and Berlin and Consul at Coblenz of details of plan, asking latter to cable Department if he will require extra assistance temporarily. Department will endeavor to have Department of Commerce instruct its Attachés at Paris and Brussels to render such assistance as may be required.

HUGHES

CONSIDERATION OF THE DISPOSAL TO BE MADE OF THE TANK SHIPS OF THE DEUTSCH-AMERIKANISCHE PETROLEUM GESELLSCHAFT UNDER THE ARRANGEMENT OF JUNE 7, 1920 “

362.115St21/331

The Unofficial Representative on the Reparation Commission (Boyden) to the Secretary of State

PARIS, June 21, 1923.
[Received July 5.]

MY DEAR MR. SECRETARY: I beg to hand you copy of the brief filed in behalf of the Reparation Commission before the independent

"Information telegraphed by the Embassy in Germany on April 27.

43

In accordance with suggestions made by Ambassador Herrick the final paragraph of the statement was reworded as follows: "The Department is informed that the authorities in occupation on May 1st put into force an export tariff based on the German export tariff of 1921 instead of the 10% ad valorem tax which has been temporarily collected and, furthermore, that the time for receiving applications from American buyers for contracts made previously to February 1st has been extended for an indefinite period. However, American buyers are urged to expedite their applications as much as possible. The Department also understands that German firms are now authorized by their Government to deliver goods involved in commercial transactions made prior to February 20th, provided they have first obtained a German export license." The statement was issued to the press on May 16.

"For the text of the agreement, see Foreign Relations, 1920, vol. I, p. 598.

tribunal appointed under the agreement between the United States and the Reparation Commission, dated June 7, 1920.46

This brief, which of course is already in the hands of Standard Oil Counsel, was prepared by Mr. H. L. Gwyer, formerly legal advisor to our Maritime Service, to whom the Commission entrusted the duty. It is a strong presentation of the view unfavorable to the claim of the Standard Oil Company.

The reply to this brief will be prepared and presented by the Standard Oil attorneys, and one need not fear that there will be any inadequacy in their argument, but inasmuch as the argument is nominally made in behalf of the United States and in form presented by the United States, it is probably desirable that counsel for the Department should familiarize themselves with this brief before the reply of the Standard Oil is submitted to the Department. It is also true that the Department, under the previous Administration, committed itself to a certain view regarding this case; that the question was debated very hotly and was prominently before the public. For these reasons, the Department may be more interested than in the ordinary case where it would be concerned merely to give American interests proper standing and reasonable support before an international tribunal, without itself taking any position regarding the claims.

Without intimating any doubt as to the case itself, it occurs to me also to suggest that the Department may wish to consider its position in the contingency of a decision unfavorable to the Standard Oil. Under these circumstances, two obligations will be incumbent upon the United States under the terms of the tanker agreement. First, for the return of the tankers; second, for the accounting contemplated by the agreement. If the obligation to return arises, it is desirable that the Department should be in position to accomplish the return with the promptness which ought to be the characteristic of compliance with such an international arbitration. In the same sense the Department ought to be in position to furnish the accounting promptly and in such shape as to carry conviction of its accuracy and completeness, accompanied by whatever payments it might call for.

46

"Brief not printed. The plan for the formation of this tribunal was approved in the following telegram of June 16, 1921, from the Secretary of State to the Ambassador in France:

"Department agrees to plan proposed for formation of tanker tribunal. This contemplates designation of Colonel Bayne by United States and designation of second member by Reparation Commission and the designation of a third member if it should become necessary, by the first two. It is preferable that an English speaking Dane, Norwegian or Swiss be selected. Standard Oil has also indicated its approval of plan. The company expresses hope however that in view of recent decision of Reparation Commission in the case of Danzig vessels adjudged to belong to Standard Trust Company of Zoppot, it will now be possible to reach a direct settlement without trouble, expense and delays of an arbitration." (File no. 362.115 St 21/280.)

The brief takes strongly the position, in substance, that there is no such legal principle as beneficial ownership by a security holder of property of a corporation. I should be inclined to say that this point was foreclosed by the agreement itself, which has always struck me as a recognition of such a principle. Such a term in such an agreement must mean something, though the agreement does not explain what it does mean.

On the question of ownership I understand the facts to be, in substance, as follows:

The Standard Oil now owns all but about one-half of one per cent of the securities of the D. A. P. G. Company. Prior to our entry into the war the Standard Oil owned all the stock (30,000,000 marks) and all the bonds (30,000,000 marks) except 31,500 marks. Its prewar ownership with respect to all the bonds of the Company and with respect to about seventy per cent of the total stock of the Company has never changed, but just prior to the entry of the United States into the war, the Standard Oil undertook to transfer about thirty per cent of the stock (9,000,000 marks) to a German national, and this thirty per cent of the stock was actually transferred on the books of the Company. It may be important also that this percentage of the stock comprised all the voting shares, although it represented only 3/20 of the capital investment, the Standard retaining the remaining 17/20.

Payment by the German national was to be made six months after the end of the war, and as security for payment the German national delivered to the Standard Oil certain of his own American securities. In February 1919 the United States Alien Property Custodian, after considering the transaction, decided that the transaction constituted an illegal attempt at evasion, and that the American securities of the German national still belonged to him, and must be dealt with by the Alien Property Custodian. Such a decision would obviously involve the conclusion, so far as the Alien Property Custodian is concerned, that the sale of the shares in the D. A. P. G. was invalid.

Since the Treaty went into effect the shares transferred to the German national have been re-transferred to the Standard Oil with the exception of 563,000 marks owned by the Hamburg American Line, and secured by it from the German national to whom the Standard made the supposed sale. How the Standard secured the retransfer and whether it involved compensation by the Standard Oil to German nationals, or vice versa, we do not know. The brief of the Standard Oil mentions the re-acquisition of the shares but does not state. the details.

Assuming the principle of beneficial ownership, and assuming also that beneficial ownership results from any holding of obligations or shares which is not total, the proportion of the Standard Oil's interest in the company would seem to be sufficient, particularly considering the continuous ownership of all the bonds, regardless of the validity of the transfer of thirty per cent of the stock to the German national, but, if, as claimed in Mr. Gwyer's brief, voting control is an important factor, then the validity of the transfer is a serious element in the case.

Yours very truly,

R. W. BOYDEN

362.115St21/337

The Unofficial Representative on the Reparation Commission (Logan) to the Secretary of State

PARIS, November 13, 1923.
[Received November 26 (?).]

MY DEAR MR. SECRETARY: Reference is made to the letter of Mr. Boyden, dated June 21, 1923, relative to the Standard Oil tanker arbitration and relative to the duties which would fall upon the United States with respect to the return of the vessels if the arbitration was not concluded in favor of the claimants.

I am just in receipt of confidential information from an unofficial but dependable source that the independent tribunal, which has been for some months considering the arguments of the Standard Oil Company and of the Reparation Commission, is about to decide that the transfer of these vessels by the German Government to the Reparation Commission was perfectly valid and that the Standard Oil has not made out its case for restitution of the vessels pursuant to the terms of the arbitral agreement of June 7, 1920.

That agreement provided that if the Standard Oil made good its claim to beneficial ownership of the tankers, then they would be returned. Apparently the tribunal takes the view that a stockholder in a corporation does not own legally, equitably, or beneficially, the actual property of the corporation. The Standard Oil contended that since it owned the stock of the D. A. P. G., a German corporation which in turn owned the tankers, that consequently the Standard Oil was beneficial owner of the vessels. Probably one of the decisive points in the tribunal's decision in this respect was the circumstance that the Standard Oil sold 30% of its stock to a German just before the United States entered the war, which stock it did not re-acquire until two or three years after the Armistice; hence the question was

whether the holder of 70% of the stock of the corporation beneficially owned the corporation's assets.

Alternatively the arbitration agreement provided that if the Standard Oil did not have beneficial ownership but was shown to be entitled to financial reimbursement, then such reimbursement would be paid in tankers instead of cash. This provision had regard to paragraph 20 of Annex II, Part VIII of the Treaty of Versailles which stipulates that the Reparation Commission, in accepting payments from Germany, shall have due regard to the legal or equitable interests of Allied nationals. The tribunal seems to consider that a stockholder has neither a legal nor an equitable interest in the assets of the corporation. It is the corporation which possesses both the legal and the equitable estates in the corporation's property. Furthermore, it is doubtful what is meant by the expression "the Reparation Commission shall have due regard". In no other case has any allowance been made to stockholders in steamship corporations which lost their vessels. Furthermore, Germany adopted a law, uniform in its application, compensating its nationals, as far as possible, for the loss of their vessels. Under this law, at a time when the mark had substantial value, the D. A. P. G., the Standard Oil's subsidiary, received over 75 million marks for the property for which financial reimbursement is now claimed.

I suggest that it is not prudent or desirable to communicate the foregoing to the Standard Oil Company until the tribunal has reached a formal decision. It is always possible, of course, that some new fact or legal theory might alter the conclusion which, I confidentially understand, has been arrived at. However, there may be some preliminary steps you wish to take in the direction of carrying out the suggestions made in Mr. Boyden's letter of June 21, 1923 in the event that the final decision from the tribunal conforms to the advance information outlined above.

Faithfully yours,

JAMES A. LOGAN

362.115St21/337: Telegram

The Secretary of State to the Ambassador in France (Herrick) WASHINGTON, December 12 [?], 1923-5 p.m.

457. L-20. For Logan.

Department astonished at proposed decision of Tanker Tribunal indicated in your letter of November 13, which seemingly not only disregards principles underlying tanker agreement but terms of agreement itself.