MEMORANDUM CONCERNING cqucst for Espousal by the United Slates, before the Mixed Claims Commission, of certain Claims enforceable by British and Canadian Assurance Companies, under, the Law of S.ubrogation, for Damages to Property suffered; !by;'A"nierlC£UfNati6pals^^ of the Black Tom Terminal .of the Lehigh Valley Railroad in New York Harbor on 30 July 1916.""- FOR iiBl£/BR ITISH AM BA^Al^QR.'TO *T£TB-UnJ^SP . STATES- Submitted, a* -Washington, oa^ February 15, 1929, by RUMSEV & MGRQAN] CONTENTS. Preliminary Statement......'................... 1 The American Nationality of the Claims, under the Law of Subrogation.................... 5 The Law of Subrogation Applies to International Claims................................... 11 The Claims are Not for Losses Indirectly Suffered by the Assurers, but for Losses Directly Suffered by the Assureds....... ................----- 12 The Claims meet the Test for American Nationality Laid Down by the Commission, for they have Never been Assigned, or otherwise transferred out of American ownership. The Rule against Assignments does Not Apply to Subrogation. 13 The Moral Considerations for Espousal of the Claims................................... 18 No Inhibition Against Espousal is Contained in the Treaty................................ 20 No Precedent Against Allowance of the Claims is to be found in the Decisions of the Com- mission................................... 22 The Policy of the United States in the Past, and the Precedents Established by other Arbitral Tribunals, Call for Espousal and Allowance of these Claims.............................. 25 The Ultimate Situation......................... 30 MEMORANDUM concerning A Request for Espousal by the United States, before the Mixed Claims Commission, of certain Claims enforceable by British and Canadian Assurance Companies, under the Law of Subrogation, for Damages to Property suf- fered by American Nationals through the Destruction of the Black Tom Terminal of the Lehigh Valley Rail- road in New Yorh Harbor on 80 July 1916. For the British Ambassador to thb United States Preliminary Statement. Nineteen British and Canadian assurance companies have filed with the Mixed Claims Commission claims for out-of-pocket losses amounting to $1,156,949.80. These losses were suffered through the destruction, on 30 July 1916, by fire and explosion, of the Black Tom Terminal of the Lehigh Valley Railroad, in New York Harbor, one of the most important points in the United States for the export of munitions to countries at war with Germany. None of'the property for the destruction of which the underwriters have filed claims; however, consisted of munitions. It all consisted of warehouses at Black Tom and of merchandise other.than munitions stored in such warehouses; and it was all owned by American nationals. The destruction of this American owned, non-contraband property resulted incidentally from the destruction of the munitions which, at the time, were being exported from Black Tom to countries at war with Germany. The American owners were largely Insured by British and Canadian companies. At the time of the destruction of Black Tom the United States were at peace with Germany, yet the evi- mission in support of the claims seems to leave no reasonable doubt that the destruction was in fact accomplished by Germany, through agents acting directly or indirectly under general and specific in- structions* issued by the German government in further- ance of the openly avowed German policy of the time to prevent or restrict the export of munitions from the United States to countries at war with Germany. The evidence to establish this fact, including admissions by two men who said that they themselves had set the fire, is discussed at length in the Underwriters' briefs filed with the Commission. • One of thcso instructions, dated 26 January 1915, issued fay the Stellvertrctcnder General Staff of the Army, in Berlin, and transmitted to Washington through the German Foreign Office, after approval by the head of the American Section thereof, specifi- cally provided (according to the translation of the decoded message on file in the Slnto Department) that "In the United States sabotage may be carried out against all . ; kinds of factories which supply war material". . Germany now claims that these instructions wore not complied with, but in his War Speech to Congress on 2 April 1917, the Presi- dent said: "from the very outset of the present war fin Europe] it [the Imperial German Government] has filled our unsuspecting communities, and even our offices of government, with spies and set criminal intrigues everywhere afoot against . .' . our peace within and without, our industries and our commerce. Indeed it is ... a fact proved in our courts of justice that - the intrigues . . . have been carried on at the instigation, with the support, and even under the personal direction of official agents of the Imperial Government accredited to the Government of the United States." g Again, in his Flag Day Address, on 14 Jane 1917, the Presi- ii ' The Military, masters of Germany . . . filled our unsus- pecting communities with vicious spies and conspirators . . . and some of these agents were connected with the official cm- . bassy of the Gorman Government itself hero in our own Capital. "They sought by violence to destroy our industries and arrest our commorce" . . . And it will bo remembered that recently, when negotiations, which were reported to the State Department, were being had for settlement with Germany of the sabotage claims before the Com- mission, including the Black Tom claims, the sum stated and agreed upon as the sum which Germany was willing to pay in the event of settlement was a very large one. The failure of the negotiations was due to considerations of policy and technicality, but not to the magnitude of tho sum involved, or to a question of Germany's legal obligation. To meet this evidence Germany, after long negotia- tions for a settlement, filed an answer, affidavits and a brief. These contain hardly more than general denials, re- tractions by German agents of statements formerly made by them, evasions of some of the material points in the evi- dence, lengthy discussions of minor points, frequent resorts to sarcasm and occasionally even to abusive language in lieu of argument, and ot her of the usual indicia of an effort to cloud rather than to clarify the issues. None of the documents demanded from Germany has been produced, but all are reported to have been destroyed or not found, and no affirmative disproof of claimants' evidence has been offered. An extended discussion of the evidence would here be out of place, but reference to its general nature, suf- ficient to point the belief that the claims are meritorious, and are well founded, is made to emphasize the fact that this memorandum, which concerns the right of the British and Canadian Companies to share In recoveries, is not presented merely as a formal assertion of technical right, but for the protection of a valuable interest. Theevidence has been collected for and presented to the Commission not solely by American underwriters. Of the total amount paid by underwriters for property damages at Black Tom, slightly less than 63%9& was paid by Amer- ican companies, and slightly more than 35% was paid by British and Canadian companies.* The American and the British and Canadian companies, therefore, acted to- gether throughout in the collection and presentation of the evidence. The American Agent before the Commission, however, because of lack of authority from the State Department •The remaining Wa% was paid by six companies, of which two woro German, two French, one Swedish, and ono Dutch. The two Gorman companies woro taken over, during tho war, by the Alien Property Custodian, who has not asserted, on their behalf, claims (amounting to $40,038.20) based on the wrongdoing of their coun- try. The chums of the French, Swedish, and Dutch companies together total only $24,223.52, or about .0073% of the total amount of losses paid. so to do, has not as yet espoused the claims of the British and Canadian companies; and from this it results that the ^dfence presented to the Commission, largely collected by the British and Canadian companies, has not as yet been presented1 to the Commission for the benefit of the British and Canadian companies, or otherwise than for the sole benefit of the American companies. A question having been raised in the State Department as to whether the American Agent might be authorized by it to espouse the claims of the British and Canadian companies, and so to urge upon the Commission a con- sideration of the evidence for their benefit, this memo- randum on that subject has been prepared. It appears that if the American Agent be authorized to espouse the claims, it is probable that no question concerning the jurisdiction of the Commission in the matter will be raised by Germany, for counsel for the companies have discussed the legal questions with the German Agent, and {he latter has said that he, for his part, will not raise a jurisdictional question based on >m nationality of the claims. The reason for this is that though the British and Canadian companies are, of course, foreigners before the Commission, yet the claims which they seek to enforce are not foreign, but American, being subrogation claims*: and it has been held by the Commission that its juris- K~i-':'* '^Subrogation is simply asking something in the right of another" (Goldsmith y. Stewart, 48 Ark. 149, 164); "It is the machinery by which the equity of one man is worked out through the legal rights of another" (Chaffe v. Oliver, 39 Ark. 501, 542). It applies generally in any instance where "one party- is required to pay a debt for which'another is primarily liable, and which, in equity and good conscience, ought to be discharged by the latter" (Johnson v. Barrett, U7 Ind. 531, 534)—as where insurance com- panies have been required to pay losses caused by acts of sabotage 'flirocted by the German government* It is the "mode which equity adopts to compel the ultimate payment of a debt by anyone who in justice, equity, and good conscience, ought to pay it" (Harris on Subrogation §1, quoted with approval again and again in a long line of decisions, as in Cobb v. Crittenden, 161 Fed. 510, 513). It relieves him whom, like a surety or an insurer, "none but the creditor diction depends on the nationality of claims, not on the nationality of the persons who seek to enforce them (Administrative Decision No. V, pp. 175-194). The American Nationality of the Claims, under the Law of Subrogation. The claims are American, not foreign, because they are for the enforcement of the rights of American nationals. The British and Canadian companies do not seek recovery in their own right, but only in the right of their assureds, the American nationals whose property was destroyed. The claims are merely subrogation claims, which means this very thing, and recovery is only under the law of subrogation, the principles which are recognised and applied in German juris* dence (Schvster on Principles of German Civil Law) well as in the jurisprudences Of the United States and er, to enforce t In Sheldon on Subrogation (2nd Ed.) it is said: "it is not an independent right of action in the in: . selves" (p. S36): "subrogation has been denned as that change by which another person is put into the place of a creditor, so that the rights and securities of the creditor pass to the person who, being subrogated to him, enters into his right . | . The party who is subrogated is regarded as entitled to the same rights, and indeed as constituting one and the same person with the creditor whom he succeeds" (p. 3). In Oermania Ins. Co. v. R. R. (72 8". Y. 90,92) it was said: "The plaintiffs [the insurers] claim, not in their own right, but through him [the insured]." In Hall & long v. R. B., 13 Wall. (80 U. S.) 367, it was said: "In respect to the ownership of the goods, and the risk inci- dent thereto, the owner and the insurer are considered but one Serson, having together^ the beneficial right to the indemnity ue from the [person primarily liable] . ! . Standing thus, as the insurer does, practically, in the position of a surety he is entitled to all the means of indemnity which the satisfied owner held against the person primarily liable . . . worked out through the right of Ike creditor or owner" (p. 370). An "underwriter, who has paid a loss, is entitled to recover what he has paid by a suit in the name of the assured" . . . (p. 373). "There is . . . no reason for the subrogation of insurers by marine policies . . . which does not exist in support of 6 England.. At the outset, therefore) it is thought im- portant to emphasize the fact that, the British and Canadian companies do not appear before the Commis- sion for the enforcement of foreign rights. And since it is established by the municipal laws of .both the nations which are parties before the Commission (Germany and the United States), as well as by the municipal law of claimants' nation, that the claims are not for the enforcement of the rights of the assurance companies, but only for the enforcement of the rights of the persons whose property was destroyed, it follows that the action is not subject to personal estoppels existing against the companies, but only to such personal estoppels, if any, as may exist against their assureds. I r'iii.Sheldon on Subrogation it is said (p. 336): "This subrogation of the insurers to the remedy against a wrongdoer who has caused the loss which the insurers have satisfied is only to the remedies and rights of action which were vested in the insured, ... subject to all the liabilities and duties which jfe". rested on the insured . . .; it is not an independent S*? -right of action in the insurers themselves, and will not be subject to any personal estoppel existing JP^yigainst the insurers in their own right." & like subrogation in case of an insurance against fire on land'* ¦ (p. 37i). '$yT&Skt nor any relation- ship in tort. It 3s the assured who has been directly damaged by the tort-feasor, and it is he alone who, at law, has a claim for damages against the tort-feasor. The right of the assurance company is merely a right to en- force, against the tort-feasor, the right of its assured. So definite is this rule that, at common law, the as- surer might not bring the action in his own name, but was required to bring it in the name Of the assured (Mason v. Salisbury, 3 Doug. 61; London A.ss. Co. v. SaAnsbury, i&.j 245; Mayor of Neto York v. Stone, 20 ;Went 139; Rockingham Ins. Co. v. Boshee, 39 Me. 233; Holcombe v. ft: R. Co., 1$ Met. 99). It is only by com- paratively recent statutes governing procedure that the assurer has been permitted to elect, in some jurisdictions, to bring the action in its own name, and in other jnris- dictins has been required to do so (Liverpool Co. v. Phenix Ins. Co., 129, U. S. 397; Conn. Ins. Co. v. Ry,, 73 ,^S.Y:B99; Busting ford Ins. Co. v. Ry., 66 Wis. 58; Ry. v. Fire Assn., 55 Ark. 164; Sheldon on Subrogation, p. 344). B Tinder the practice of the Mixed Claims Commission it was necessary to file the claims in the names of the assurers," but that does not affect the nature of the rights. Whether the action be in the names of the as- sureds or in the names of the assurers, it still remains •Had the practice of the Commission permitted the filing of these olaiins in the names of the assureds, and if this had been done, it :woold have been no defence to show that the claims had previously been paid, in whole or in part, by the underwriters, for, under the law of subrogation, Germany would have been estopped from eatting up that its obligation to the assureds bad been paid by third persons secondarily liable? In Sheldon on Subrogation it is said (p. 334): "Nor can [the tort-feasor] ... in an action brought against him in the name of the insured set up the in payment to the plaintiff as a defence, either x" surers, are the rights to be determined. The whole theory of the equitable doctrine of subro- gation is that a tort-feasor may not escape his primary liability for a wrongful act by showing that his obligation to the injured person has been paid by another who is Ball & Long v. Ry. (13 Wall. 367, 370) it was said, by the Supreme Court of the United States: "it has often been ruled that an insurer, who has paid a loss, may sue in the name of the assured in an action to obtain redress from the carrier whose failure of duty caused the loss." And in Clark v. Wilson (103 Mass. 219; 224-5; 227), citing English cases, it was said: "Mr. Justice Bayley, in 3 D & It 492, treated the law as settled that . . . the owner might recover from the under- writers first, and afterwards sue (he authors of the damage in his own name for the benefit of the underwriters. "In Yates v. Whyte. 4 Bing. N. C. 282; S. C. 5 Scott, 640, the owner of a ship maintained an action in his own name against the owner of another ship, for the full amount of the damages occasioned by a collision, without deducting the amount paid him by the underwriters; and Chief Justice Tindal said: 'II the plaintiff cannot recover, the wrongdoer pays nothing, and takes all the benefit of a policy of insurance, without paying I'^ylheJpremium;' ... "In Dickenson v, Jardine, law Rep, 3 C. P. 644, Mr. Justice Willes said that the underwriters, after paying in the first in- stance the amount claimed for general average, would then be entitled to use the name of the assured, and proceed against the other parties liable . . . "The result is, that . . . payment of a total loss [by the insurers to the owners] . . . did not defeat the right to bring an action at law in the nam© of the plaintiffs [the owners] for the tort previously committed against them. The question whether the damages recovered will belong to thorn or to the 'insurers is a question in which the defendant has no inter- est" .. . Thus an assured, notwithstanding that his claim has already been paid by an assurer, may nevertheless proceed to recover it again from the person primarily liable, who is estopped from setting up that his obligation has been discharged by a third .person—for ho himself is liable, and it is inequitable that he should not pay. But when the assured recovers from the person primarily liable, he re- ceives the money in trust for the assurer by whom ho has previously been paid. "Where an insurance company pays the insured for a loss by fire occasioned by the fault of a railroad company, and the insured afterwards receives from the railroad company the amount in satisfaction of his damages, he holds this in trust for the insurer" (Sheldon, supra, pp. 345-6, citing Monmouth Ins. Co. v. Hutchinson, Ba$?J. Eq. 107). Also see Randal v. Cochran, 1 Vesey Sr., 97. 10 only secondarily liable therefor.* When an assurance company pays, to its assured, either the whole or a part of his damages, the assurance company becomes subro- gated, pro tanto, to the rights of the assured against the person -who caused the damage, df the assured could have recovered against the person who caused the dam- age, then the assurance company can do so—to the ex- tent to which it has satisfied the claim of the assured. Its legal rights are measured by his. It stands in his shoes. It is, in. the eye of the law, as stated by the Supreme Court Of 'the United States, "one person" with the assured {Ball & Long v. Ry., 13 Wall. 367); or, as stated in Sheldon* on Subrogation (p. 3), "one and the '!4ftme person" as the assured (Liverpool Co. v. Phenix Co., 129 U. S. 397; Ti-avelers Ins. Co. v. Engineering Co., 184 Fed. 420; The Livingstone, 130 Fed. 746, 749; $e^ral Co. v. Detroit Co,, 202 Fed. 648, 651; St. Louis Hot Commercial Co., 139 U. S, 222, 235; Palmer v. Navigation Co., 208 Fed. 666, 669; Joyce on Insurance. S&ol. 5, p. 5880; Richards on Insurance, 61-2, 64). Thus, Ijjtje action be not brought by the assured) then the as- surer, who has paid his claim, may bring it ;t for, upon paying the claim, the assurer becomes substituted for the assured, and is permitted to assert the rights of the as- sured against the person primarily liable, not otherwise than as if the assurer were himself the assured (Cobb v. Crittenden, 161 Fed 510, 513; Aetna Life Ins. Co. v. Middleport, t24Xf.S. 534, 549; Svsarts v. Siegel, 117 Fed. 13,15; Conn. Mut. Life Ins. Co. v. Cromwell, 72 Hun 199, Beuser v. Sh above cited). I In Ball & hong v. Ry. (13 Wall. 367) it was said: "It is too well settled by the authorities to admit of question I that . . . the liability to the owner is~ primarily upon the carrier, while the liability of the insurer is only sec- ondary." I"if the railroad company [the person primarily liable] has not paid! the insured . , „ [the insurance company] may maintain a suit at law against the railroad company, in the name Iof the insured, even against his consent, . ! ! and a release ¦ given by the insured to the railroad company would be no defence to this suit" (Sheldon, supra, p. 846, citing Monmouth Ins. Co. v. Hutchinson, supra. And see Ocean A. & S. Corp. v. Hooker Bloc. Co., 240 N. Y. 37). 11 of Subrogation Ap; national Claim: The applicability of this doctrine of subrogate international claims has been determined by the United States Court of Claims, in several opinions rendered with respect to the so-called French Spoliation Claims. In Holbrook, Administrator v. United States (21 Ct. ¦of Claims, 434), an American vessel had been seized by a French privateer and with her cargo was condemned as a prize by a French tribunal, when the United States was "The only interest the Government appears to have in a question of this kind is, that there shall not be a double payment . . ., so that in effect we have but to solve the rights of the owners and insurers |;.i<^between themselves (p. 737). "When . . . the insurance [is] paid the in- surer stands in the place of the insured, and is en- titled to all the advantages resulting from that situ- ation, and this right relates back to the loss . . . •When a loss of any kind, whether total or partial, has been paid the insurer so far stands in the place of the assured that he is entitled to recover whatever compensation fijfc'the loss the assured may be able to recover from any third party' . (p. 438). "The authorities are entirely united on this point, and there can be no doubt of the validity of claims made by insurers who have paid loss by illegal cap- ture" . . . (p. 440). "The insurer stands in the place of the insured to this extent, that ;«e can recover indemnity or satis- faction; that is, what he paid under bis contract. He has the right to be made whole, but nothing further" tp- 441), The case of Haskins, Administrator v. United States (23 Ct. of Claims, 201), also a French Spoliation Claims case decided by the same court, is of great interest to illustrate the point that an insurer may recover only in the right of his assured, not in his own right. In that case also an A French privateer and with its cargo was Condemned by a French tribunal. The cargo, however, though insured iiy American citizens, was owned by a subject of Great Britain, wherefore the American assurers conld not re- cover in :his:right. Had the cargo been American owned, :and the assurers British, the .claim would have been like 'the claimS'Of the British assurers in this case, and reeov- rtry^by the British assurers must have been allowed under $h>; same rule which denied recovery by the American assurers in the case actually presented. The Claims are Not for Losses Indirectly Suffered by the Assurers, but for Losses Directly Suffered by the Assureds. Under section 5 of the Treaty of Berlin, Ger- many is liable not only for losses suffered directly by American nationals, but also for losses suffered in- directly by 'them; or, as stated in a decision by the Com- mission (Ad. Dec. No. I, p. 2): "The financial obligations of Germany embrace . . . .all losses . . . suffered directly or indirectly during the war period." Under this provision American insurance companies have been enabled to en- force, in their own right before the Commission, claims for insurance losses paid by them, for they were indirectly damaged by Germany's destruction of the property of their assureds.* In many instances, therefore, it has not been necessary for American insurance companies to con- fine themselves, under the law of subrogation, to the en- forcement only of the rights of their assureds. On the contrary, American insurance, companies have been en- abled to recover in their own right in instances where , .j* Insurance is a contract for personal indemnity. It is the owner of the property. the third person could recover from the debt * r which the debt had been settled: the pule against assignments and other ttu nstvrs or .-hums cannot he advanced as a reason for a rule against subro- gation. In the case of subrogation both the reason and the rule are lacking. . Under the laws of the United States, for example, an assurer might be subrogated to the rights of a claimant against Government, although "transfers and assign- ments" of claims against Government (prior to the time when the amounts recoverable have been finally fixed) is expressly prohibited by R. S. 3477. R. S. 3477, however, contains no prohibition against the payment of a claim against Government to someone other than the original claimant: the prohibition is merely against "transfers and assignments" of claims while the amounts recover- able are still speculative.* Similarly, the Treaty, of Berlin does not prohibit the payment of a claim against Germany to someone other than the original creditor, or to a foreigner. It merely limits the jurisdiction of the Commission to claims, orig- inally American owned, t which have not been assigned ipv otherwise transferred to foreigners prior to 11 Novem- ber 1921; or, as stated by the Commission (Ad. Dec. No. V, p. 187): "Claims to fall within the Treaty must have possessed the status of American nationality, both in origin and at the time the Treaty became effective . . . A subsequent change in their nationality, through suc- . i >*K. S;8477 reads in pari as follows (italics ours): "All trans- fers and assignments made of any elaim upon the United States H . , shall be absolutely null and void unless they are freely made .,: | , after the allowance of such a claim, the ascertainment of the amount due and-the issuing of a warrant for the payment thereof." And in SoUs v. McLean (117 U.S. 567, 676) it was said: "Section 3477, it is clear . . . simply forbids the assignment of such claims b'efore their allowance," , , , fThe claims must be American in their origin, for otherwise foreigners whose property had been destroyed by Germany, might assign their claims to American nationals, whose rights alone, as fixed on 11 November 1921, can be enforced by the Commission. As stated by the Commission (Ad. Doe. No. V, pp. 176-7): "Any -Other rule would open wide the door for abuses and might result ini converting a strong: nation into a elaim agency in behalf of those who after suffering injuries should assign their claims to its nationals or avail themselves of its naturalization laws for the purpose of procuring the espousal of their claims." 17 cession, assignment, or otherwise, can not operate to dis- charge [Germany's] . . . obligations". In other words, a foreigner may recover, before the Commission, on a claim assigned to him after 11 November 1921, pro- vided the American nationality of the claim was fixed on that date. The question concerning the nationality with which these claims are impressed, therefore, does not concern the nationality of the persons to whom the claims may ultimately be paid, but is merely a question as to whether te payments made by the assurers, prior to 11 November 1921, of the losses occasioned by Germany to American nationals on 30 July 1916, operated as a transfer of the claims themselves. But the law in this regard is very definite. Subrogation means substitution. It is not, as has been pointed out, a transfer of claim or right, but a substitution of persons. The claim must be asserted in the right of the original creditor. Subrogation merely permits a third person who has paid a debt due by an- other, for which he was secondarily liable, to be substi- tuted for and to stand in the shoes of the creditor, for the purpose of enforcing the creditor's claim against the person primarily liable. He can enforce it only to the !|^tgrit to which he has paid the creditor's claim. He can not enforce the claim as his own, or in his own right. To say that there has been a transfer of claim or right in a case where the only rights to be considered are those of the original creditor, would be a contradiction in terms. And inasmuch as the claim itself is American, it is imma- terial that it is enforceable by a foreigner. This is, in- deed, the very intendment of the 5th Administrative Decision. In stating the rule for continuity of the original nationality of claims, from time of origin to some fixed time thereafter, the Commission pointed out that there was no inherent reason for the rule, either in inten- tional law or in justice, nor any fixed practice under the rule, but that the practice of every mixed arbitral tribunal in this regard must be determined by the special pro- 18 visions of the particular treaty establishing the tribunal and limiting its jurisdiction. The Commission said (Ad. Dec. So. V p. 179): "As the rule in its application nec- essarily works injustice, it may well be doubted whether it has or should have a place among the established rules of international law." The Commission, accordingly, refused to require that claims presented to it should have been continuously American up to the time of presentation, and held that, under the Treaty of Berlin, the Commission had jurisdiction of claims continuously American up to 11 November 1921', even if they should subsequently have been transferred to foreigners before presentation. But feeling that even the application of this modified rule for continuous American nationality of claims might work injustice, the Commission said (p. 194)•: "Wienever either Agent is of the opinion that the peculiar facts of any case take it out of the rule here announced, such facts, with the differentiation believed to exist, will be called to the attention of the Commission in the presentation of that case." Under these circum- stances it would be a strange reversal of idea to hold, for the purpose of impressing these claims with a foreign nationality, that the equitable principles of the law of subrogation, common to the jurisprudences both of Ger- many and of the United States, should be disregarded. If these claims were espoused, therefore, there could hardly be a doubt but that they would be allowed by the Commission as claims of American nationality. The Moral Considerations for Espousal of the Cla!mS' The foregoing discussion has been merely of the legal reasons for believing that these claims are meritorious, and would be allowed if presented. But there are other and higher reasons for asking the State Department to authorize its Agent before. tfle3@5 :, nationals of a friendly power, an ally of the United States in the war, were admitted by the United States to do business within the United States under equal protection of the laws of the United States, and under that permission and guaranty paid losses suffered by citizens of the United States through destruction of their property by Germany at a time when the United States was at peace with Germany. The American citizens had, and still have, under principles of municipal law which obtain both in the United States and in Germany, a right, which is enforceable only before EBBESromission. to recover their losses from Germany. Had these Amerieafileitizens been insured by American ompanies, as some of them were, the enforcement of their legal right by their American assurers would, as been done, have been espoused by the United States before the Commission. In a letter dated 8 June, 1927, written by the Honorable Robert E. Olds, formerly As- sistant Secretary of State, to the Honorable Robert W. Bonynge, the Agent of the United States before the Commission, he said: "The Department realizes that under municipal law the doctrine of subrogation may properly be invoked regardless of the nationality of the corporation claiming its benefit, and as a matter of policy it invokes the same doctrine in international arbitrations wH§r§ the result is to benefit American nationals." But the same law operates for the benefit of British and Canadian companies admitted to do business in the United States; and a denial to them of the benefit of this law would deprive them of equal protection under the laws of the United States, and would constitute a dis- crimination against British and Canadian companies. If the United States will invoke its municipal law of sub* rogation for the protection of American companies be- fore international arbitrations, it would seem clear that it should do the same for British and Canadian com- panies doing business in the United States. For the mission, but not to permit British and Canadian com- panies to do the same, the rights to be enforced being in both case* the rights of American nationals, would be a discrimination. Moreover, a refusal by the United States to espouse these claims would be a refusal by the United States to seek redress from Germany for the destruction of Amer- ican property, on American soil, as an act of war in time of peace. It would be tantamount to a determination that a foreign nation may with impunity, short of a re- course by the United States to war, destroy American property on American soil if the owners of the property happen to be insured by foreign assurers—that damages will be demanded only if the owners happen not to be insured, or if they happen to be insured by American assurers. But this would seem to be impossible. Indeed, as will appear from the Alabama Claims cases to be cited below, damages have heretofore been demanded (notwithstand- ing the decision in the Easkins case, supra) for destruc- tions of property protected by the American flag, even when the property under that protection was not within the territory of the United States but on the high seas, and even when the property was not American owned but foreign owned. And in those cases awards were made to foreign owners. It seems clear that the United States should not absolve Germany from liability for her wrongdoing, at the expense of the nationals of a friendly power and former ally, unless compelled thereto by treaty obligation. No Inhibition Against Espousal is Con- tained in the Treaty. Because of all the foregoing considerations, the United States may properly be asked to lend its aid for the espousal of the present claims against Germany, for there appears to be no inhibition in that regard contained in the provisions of the Treaty of Berlin, or in the provisions 21 of those portions of the Treaty of Versailles which were adopted by the Treaty of Berlin, or in the provisions of the Agreement made by the United States with Germany for the establishment of the Mixed Claims Commission. The provisions contained in those documents, applic- able to these claims, are as follows: Treaty of Versailles: Part VIII, Section I, Article 232: ". . . Germany undertakes, that she will make compensation for all damage done to the civilian population of the Allied and Associated Powers and to their property during the period of belligerency." Part VIII, Annex I: "Compensation may be claimed from Germany under Article 232 above in respect of . . . "(9) Damage in respect of all property whereso- ever situate belonging to any of the Allied or Asso- ciated States or their nationals, with the exception of naval and military works or materials, which has been . . . injured or destroyed by the acts of Germany . ¦ . . in consequence of hostilities or of any operations of war." Treaty of Berlin: Section 5 provides for "the satisfaction of all claims . . of all per- sons, wheresoever domiciled, who owe allegiance to the United States of America and who have suffered . . . since July 31,1914, loss, damage, or injury to their persons or property, directly or indirectly, ... In consequence of hostilities or of any op- erations of war*' . Agreement for Mixed Claims Commission: Article I: "The commission shall pass upon the follow- ing . ¦ • ".(1) Claims of American citizens, arising since July 31, 1914, in respect of damage to . . . their property." 22 That the present claims must be deemed to be the claims of American citizens, within the meaning of the Agreement, necessarily follows from the fact* above stated, that they are recognized as such by the municipal laws of both the high contracting parties to the Agree- ment According to (hose laws the claims were American in origin, have never been transferred oat of American ownership, and are still for the enforcement of the rights of American citizens. And It has been determined by the Commission, in its 5th Administrative decision, that under the provisions of the Agreement and of Treaty of Berlin, the jurisdiction of the Commission does not de- pend on the nationality of the persons to whom claims are ultimately payable, but on the nationality of the fflelro* themselves. Ho Precedent Against Allowance of the Claims Is to be found in the Decisions of the Commission. The claims of foreign assurers, as such, have been disallowed by the Commission. Those disallowances, however, do not establish precedents for the present claims. These claims are based on different grounds. It is thought that the enforceability of the rights of American nationals, under the law of subrogation, by foreign assurers who have paid American losses occa- sioned by Germany, being secondarily liable therefor in the conduct of their basin ess within and under the pro- tection of the laws of the United States, is a matter which has not heretofore been specifically or fully argued before or passed upon by the Commission. In V. 8. v. Germany (No. 8), U. 8. on behalf of Bennett Trading Co. et al (No. 94), and U. 8. on behalf of National Fire <£ Marine Insurance Co. (No. 208), rights of this kind existed, but they were not presented by the American agent for the consideration of the Commission, which therefore did not pass upon them. Claims of foreign assurers were pre- 28 sen ted to the Commission in a case espoused by the United States "on behalf of foreign insurance companies that have . . . been lawfully admitted to do business within the United States," but that case was not pre- sented for the enforcement of subrogation rights. The foreign assurers did not seek to have their claims "worked out through the right of the creditor or owner" (Hall & Long v. Ry., supra, p. 370), but sought to enforce the claims in their own right They argued that "American branches of foreign insurance companies by their many acts of allegiance have acquired a commercial domicile in the United States with the result that they should be included in the term 'national' of the United States," wherefore they should be enabled to recover, in their own right, as nationals of the United States. The decision of the Commission was merely a denial of that proposi- tion. In that case the claims for American marine losses, paid by American and by foreign assurers, were pre- sented together. The claims for the losses paid by the foreign assurers, presented on the theory aforesaid, were disallowed as aforesaid. The claims for the losses paid by the American assurers were not tried, but settled. In the agreement of settlement, signed by the two agents as well as by attorneys for the underwriters, it was stated: "As the basis of settlement, the actual net ont of pocket payments of the American underwriters, in- cluding the Veterans Bureau, have been established after deducting all sums, if any, received by such underwriters under policies of re-insurance written by corporations, other than those under the laws of the United States or any State or possession thereof, and partnerships and/or individuals other than such as owe permanent allegiance to the United States." "In arriving at this settlement, as above outlined, it is the understanding of the American Agent and of the German Agent that there is no financial lia- bility on the part of the Government of Germany, under the Treaty aforesaid, to make compensation >24 H for the claims included in the lists heretofore noti- H fied to the Commission on behalf of foreign under- writers duly authorized under the laws of the United States or of the7 several States to write insurance I within the United States of the character involved I' in this agreement, or on behalf of ship owners or cargo owners, so far as the losses have been compen- sated by insurance." And each award handed down 1 those claims reads as follows: "This cause having come before the Commission for decision, the American Agent and the German H Agent having been heard, the cause having been ; 'finally submitted and due consideration having been B had, and the Commission having determined that the •V -United States is not entitled under the Treaty of Berlin of August 25, 1921, to present claims on be- half of foreign corporations, associations, partner- ships, or individuals, and the amount due the claim- ant herein having been established in the amount stated below after deducting all sums, if any, re- Bj eeived by it from foreign corporations, associations, [§:¦; partnerships, or individuals reinsuring risks taken by claimant, the Commission decrees that under the Treaty of Berlin aforesaid, and in accordance with its terms, the Government of Germany is obligated to pay to the Government of the United States on behalf of . - . the sum of I Dollars (5 ), with interest thereon at the rate of five per cent, per annum I 11,1918, to the date of payment," I The nature of that settlement, and the wording of the awards made under it, have here been stated at length because it has been suggested that, in some way, they :;.£s.tablish a precedent. But it seems clear that, in general, •*>a settlement effected in one case, with a stipulation as to the form in which the awards to be made under it should read, cannot foreclose the rights of other parties ,.in other cases; and that, in particular, the basis agreed upon for settlement of the claims of certain American marine assurers, for property destroyed on 25 cannot constitute a precedent precluding f from enforcing the rights of Americans, for property losses suffered by Americans, on American soil. Nor can a decision that foreign assurers admitted to do business within the United States are not American nationals, and so cannot enforce claims before the Commission in their own right, be construed as a decision that foreign assurers may not, under the law of subrogation, enforce the rights of their American assureds. The fact that the Commis- sion has disallowed the claims of foreign assurers as such, does not preclude the allowance of these claims on the ground that the claims themselves are impressed with American nationality. And for these reasons it is said that there is no precedent under the decisions of the Commission which applies to the present clt Policy of the United and the Precedents Established by other Arbitral Tribunals, Call for Espousal and Allowance of these Claims* It has been suggested that it would be contrary to the policy of fi^^Tnited States to espouse claims which would not in any^wM inure, directly or indirectly, to the benefit of American nationals. But the first question which naturally arises in this connection is as to whether or not these claims are of that nature. The American nationals whose property was destroyed were paid their losses by the assurance companies. They obtained their insurance partly because of the protection afforded to their assurers by the law of subrogation. Can it be said that, after payment of their losses, the assureds have no remaining interest of any kind, moral or legal, direct or indirect, in the discharge of the obligation by the person primarily liable? The law says otherwise, for courts of equity have decreed that the assureds, notwithstanding that they have received payment of their losses, may still in their oion right sue the per* enforcement of his obligation (see footnote on pp. 8-9, above); and that, if the assureds do not themselves do this, they may not take any step to prevent their assurers from enforcing their right so to do {Monmouth lm> Co. v. Hutchinson, 21 N. J. Eq. 107; Ocean A. rf S. Corp. v. Hooker, 240 N. T. 37). It is clear, therefore, that these claims are not claims in which American nationals have no interest, legal or equitable, direct or remote. It is true, which is quite a different thing, that they are claims the payment of which would not result in present, or immediately ascer- tainable, pecuniary benefit to American nationals; but it has not been the policy of the United States to refuse espousal of claims on that ground, or because the pay* ments would inure only to the pecuniary benefit of foreigners. The Commission, as stated above, has ruled in effect that it has jurisdiction of claims continuously American up to the time when the Treaty of Berlin became effective on 11 November 1921, even though, under a subsequent change of ownership, the claims should be presented to the Commission by foreigners who would be the sole bene- ficiaries of the awards. The policy of the United States in the past, moreover, has been in accordance with this theory of the imma- teriality of the nationality of the persons who shall pecuniarily benefit by the awards, save when that ques- tion is made material by the provisions of the Treaty under which the awards are made. On page 178 of the 5th Administrative Decision of the Commission there are cited a number of cases in which other inter- national tribunals have made awards to persons not na- tionals of the nations espousing their claims. Referring to WUlet v, VenessuUt (No. 9.1, V. s. and Venezuela Claims Commission, Convention of 1885, III, Moore's Arbitra- tion* and IV id. 37-}3), wherein the United States espoused the claim of the Venezuelan heirs of an Ameri- can decedent, and wherein it was held that the claim being American in its origin, could be presented by the 27 administratrix "whatever may have been her own per- sonal status", the Commission said: "The fact that the beneficial owners of the claim were of Venezuelan na- tionality does not appear to have given . any concern". That case is thought to be peculiarly in point because the administratrix, like the assurers in this case, represented or stood in the shoes of the original creditor and sought enforcement only of his rights, wherefore it was immaterial that she herself and her co-heirs were tho sole persons who would benefit by payment of the claim. Other cases cited by the Commission in this connec- tion (citations given on p. ITS of 5th Ad. Dec.) are the AUop case, wherein, according to the statement of the Commission, the United States espoused the claim of the heirs and creditors of deceased Americans, at least some of whom were Chileans, and obtained an award handed down by King George V of Great Britain as "Amiable Compositeur", in 1911; the Phelps case, wherein Great Britain, under the convention of 1871, espoused the claim of an American assignee in bankruptcy of an English bankrupt, and obtained an award; and the Daniel case, wherein France, under the French-Venezuelan convention of 1902, espoused the claim of the Venezuelan heirs of a deceased Frenchman, and obtained an award. The Alabama Claims cases also are in point to show that, in the past, it has not been the policy of the United States to refuse espousal of claims which could not inure, directly or indirectly, to the pecuniary advantage of American nationals; for in those cases it was held that, under the legislation of Congress itself, reimbursement was due to foreigners whose property had been destroyed while under the protection of the American flag. In 1872, the Geneva Arbitral Tribunal (established under the Treaty of Washington of 1871) determined that Great Britain was responsible,—because of "a want of vigilance, an inadequacy of exertion in particular cases, a mistake of her duties, and not a wanton or wilful act" (as was said later by the American "Court of Com- missioners of Alabama Claims", in Hubbell v. United 28 State*, Case No. 278),—for depredations on American shipping, during the Civil War, hy three confederate cruisers—the Alabama, the Florida, and the Shenandoah. After the award of the Tribunal for such depredations had been paid by Great Britain to the United States on 9 September 1873, in a lump sum, the Congress of the United States, by the Act of June 28, 1874 (18 Stats. 245), set up a Court of Commissioners of Alabama Claims, for the distribution of the money received from Great Britain. In Section 12 of that Act it was provided: "No claim shall be admissible or allowed by said court arising in favor of any person not entitled at the time of his loss to the protection of the United States in the premises." The court held, in many cases, that foreigners did not come within this inhibition, but that, on the con- trary, as persons entitled to the protection of the United States in the premises, foreigners had a right to prose- cute, before the court, claims for property losses. H In Wort* v. United State* (No. 01), where the claim- ant was a Portugese, the Court said: "According to the provisions of the law under I" which this court exists we have no right to discrimi- nate among those who were entitled to our protection in the premises. The public law of Christendom, and the municipal law of the land, declare that for- eigners, whether domiciled or temporarily sojourn- ing on our soil, or whether on the decks of our ships, trusting to the security of our flag upon the high seas, are equally entitled to our protection against a wrong from any foreign power, and equally entitled to sue for their rights in our courts. Therefore, on the ground of abstract justice and propriety, and upon the ground of legal right, we decide that for- eigners, entitled to the protection of our flag in the premises, whether naturalized or not, have a right to share in the distribution of this fund." • In Sehreiber v. United States ( No: 7.jfl) , the cargo of the Mortaban, captured by the Alabama on 24 December, 1888, was owned by a German Arm, This German claim was presented by the United States to the Geneva trib- 1 29 unal, and was not disputed by Great Britain, bnt was provided for in the lump sum award paid by Great Brit- ain (see Hackett's "Geneva Award Acts," p. 80). When the claim was presented to the Claims Court, for an award to the German firm, the Court said: "Foreigners who have never resided in this country, yet who have laden their property on board American vessels, are entitled, as to such property, to protection in the premises, and may recover for its value if destroyed." And Jewell, ./., after referring to the decision in Worth v. United State* (supra) as stating "a great prin- ciple for which our government has contended from its origin," said: "Since that decision, which was pronounced at a very early period in the sittings of the court, a large number of claims have been passed upon in which the claimants were persons of foreign birth, not natural- ized, and in every case the court has entered judg- ment in their favor, . . . except in the cases of native-born subjects of Great Brition . . . H| "An examination of the judgments heretofore en- tered will show a very large number of cases of this sort, in no one of which was the question of the domi- cile of the claimant at the time of the loss made a subject of discussion." The reason for excepting native-born subjects of Great Britain was stated in the opinion of Bayner, J.: "Congress meant to say, . . . yon shall have regard to the power against whom protection is claimed. If a claimant who either in his person or his property might otherwise have been entitled to our protection, was a native-born subject of England, through whose negligence these losses occurred, yon will not grant him redress. We did not engage to protect him as against the acts of his own govern- ment, even though as against all the rest of the world he was entitled to and would receive protection." 30 The Ultimate Situation. The ultimate situation with respect to the present claims, when stripped of technicalities and the refine- ments of argument, is extremely simple. It is alleged that Germany, while at peace with the United States, ordered and violently effected the destruction of American property, on American soil. If this be so, it is impossible that Germany can, or that under the provisions of the Treaty of Berlin it was intended that Germany should, be enabled to avoid liability for this affront to the sov- ereignty of the United States. The offence is not miti- gated, but rather increased, by the circumstance that, in some instances, underwriters of a foreign nation friendly to the United States, doing business at the time within the United States and under its protection, had insured the American nationals whose property was destroyed. Respectfully submitted, Rumsby & Morgan, Attorneys for the Claimants. February 15th, 1929.