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Argunent , . , Before the
Goinmlttee on the Judiciary
by
Edgar P, Brown
k 03IAI3a
fo^
ARGUMENT
OF
EDGAR F. BROWN,
^
BEFORE THE
Committee on the Judiciary
OF THE
House of Representatives, at Washington,
Jaxuaky 28th, 1876,
ON BEHALF OF CERTAIN
Claimants under the Geneva Award.
NEW YORK:
p. F. McBKEEN, Pkintek, 14 & 10 Ann Stkeet.
> » •_ e • •
• • "•
• ••
• •
• m • • • • •
• ••• • .•< ••• •
rx
AKGU3IE^T BY EDGAR F. BROWN
Before the Committee ox the Judiciaky of
THE House of Repeesextatiyes at Wash-
ington, January 28, 1876, on behalf of
Claimants to the Fund paid by Great
Britain to the United States under
the Geneva Award.
Mr. Clmlnnan and Gentlemen of tlie Committee:
(^ I liave listened with interest to the arguments
which liave been made before von on behalf of the
V various claimants to the fund paid by Great Britain
^ to the I'nited States under the Geneva Award.
\ These claimants have arranged themselves under
^ two classes, the one asking to be indemnified for
^ actual losses sustained., and the other to receive
"^ about five millions ofch)llars which is to be added to
"^ Xirofits alread}^ received, growing out of the
^ hazard of insuring owners of vessels and cargoes
^' against loss by the so called "confederate cruisers"
. during our late civil war.
"^ It is apparent that all persons who have received
^ no remnneration for their losses are entitled to be
1 first paid fiom this fund, unless a special trust or
intei-est attaches to it in favor of the underwriters
as insurers, who have been large gainers by the
, business of insuring against these war risks —
Documentary Evidence of the nature of the claims
425768
o
})i'osuiit('cl by tliis Ci()\ fniniciit a^aiiisl JMiii'lniHl
before the Tiibiiiial of tliein-oceediiigs had before it
and of the iiatmc of tlie award made by it has been
so fully set forth and cited in tlic i)rinted arguments
of counsel already before you, that it would seem
needless for me to do more than made reference to
such of them as may bear upon the question of tlie
obligation of the United States in ivlation to tlie
di sirihutiort of tliese ni()ne3-s.
From my reading of these documents, and in
listening to the arguments made befoj-e you by
representatives of all claimants, I find that we all
substantially agree to these facts, viz., that the
arbitration v^^'A^ wJwlly irtternatiorudm its charac-
ter and jurisdiction, that the ])]incipal claims
against Great Britain were based upon national
grounds, consisting of tlie alleged riolafion hij
England of her ohllgat'ions as a nentTal government
towards the United States in the loo //a.^ti/ recogni-
tion of a state of belligereiu-y. whicli was the prin-
cii)al and initial cause of all the losses sustained by
any of the claimants. That no specific claims were
adjusted. That claims of i/z/elmcr iters' Avere e:v-
presslf/ reserved. And, linally, that a sunt in gross
was i)aid as damage to the Ignited States, which
tiiat Government insisted should be ])aid disciicum-
bered of rrr/g Iriisl, and with full ])ow(M- t(» distrib-
ute it amongst its cirizcns who suffered loss as it
should (h'ciii ('Xj)edient and just. aii<l to which
demand England acceded.
Til" gr<'at (lucstion then for Congi-ess to det(M-niine
ill tin- (listril)ution of the n-iiiaining moneys ])aid to
thf I nif<'<l States by (ji-eal l>rilain under the (iciu'va
Award is, wh(.'th«'r it is at liberty to indemnify the
loyal citizens (ff Amci-ica for actual /o.v.sv^v sustained
by the acts of tln' Confederate cini.sers, British
built, or receiving aid in men, armament and pro-
visions in British ports, or whether tliis Government
is obligated in law or in equity to pay these moneys
to corporations that have made large profits in the
business of insuring against war risks. These cor-
porations are the only claimants before you who are
not losers, and their claims are resisted by all others
upon this ground alone. The claims of underwriters
are made u}ion the ground that the Tribunal found
Great Britain liable only for the acts of the Alabama,
Florida, and Shenandoah after leaving Melbourne;
while the records of the proceedings show that
nearly all of the cruisers that caused the damage
for which redress is now sought, received in a
greater or less degree aid in men, armament and
supplies in British ports. The Florida, Alabama,
Georgia, Tallahasse, Chickamauga, and Shenandoah
were Britisli built cruisers, three of which, the Ala-
bama, Georf/ia, and Slienandoali were never in a
port of the Confederates States. All the other
vessels, except the Boston, Jefferson Davis, Sallie
and one or two others, had received aid from Britisli
subjects in British ])orts. The claims for damages
by those vessels only were excluded upon the
"■round that there was no evidence to sustain them.
The damage done by the Alabama and her tenders
reached the enormous sum of 87,050,293.76; by the
Shenandoah, §6,656,838.81; and by the Florida,
$4,293,869.60; by the Chickamauga, $183,070.73;
by the Georgia, $431,160.72; and by the Tallahasse,
$830,841.83. These claims were subject to large
reductions including prospective earnings, double
claims for the same loss, &c. ; but this aggregate of
claims presented before the Tribunal of about
$20,000,000 for losses occurring by the acts of
British built vessels will show how diminutive were
the losses snstnined by n\u-U vessels as luid lun-ei-
reached a British port. It was by rensoii of the
plain Tiohdion of the duties of a iieiitial nation in
furnisliing this aid, that Great Britain was called
to account. It was shown that her too ^9rfc//?//a/(?
recognition of belligerent rights was the initiatory
and real cause of all these losses.
England was not, therefore, exculpated from the
payment of a large portion of these claims for loss
ui)on the ground that her subjects did not furnish
the means of destruction in her own. ^jorts., Init
upon the giound that our government failed to
ojjb-iallii notify her of the acts complained of in
time to liold her responsible ;is ;i nation for ])ermit-
ting the wrong.
If (mr Government was at all in fnult in this
respect how reasonable tliat in accepting a gross
sum, in full satisfaction of all t\w. claims now repi-e-
sented before this Committee and presented before
the Geneva Tribunal, it should insist U])on tlie
right to distribute the money amongst its citizens
according to equity and justice^ thus protecting all
wiio had suffered loss before granting an y indemni-
ty to those who had been so fortunate as to realize
large projlts hy the hazaid of insuranc*' against war
risks.
Mr. Fish, in his letter of iiisl inciioiis, says. "The
''Pi'esident (h-siirs nic to h.-ixc t hesubject discussed
"as one bet wt'cn t he two (iovei-nnicnts * * '^
"to secure W possilih the :iw:ir(l ol" ;i sum in u,ross.
"And in t he t renrnieut of the/v/Z/yr ciise you will be
"caieful 110/ to coniuiit the (TO\'ei-nuieut iistothe
"dis])ositioii of ^\ll:lt in;iy be Mwarded. 'i'JM>
''C^)^■e)•nment wishes to hold il>«lf fn'C to decide as
"to the rig/ds and chiiins t)^ insnrii's. \\ fhe \;due
"of the ])ro])ei'ty ciijit u red (udest royi'd I )e ivcdxci-id
5
"in the name of the Government, the distribution of
"the amount recovered will be made by tliis Govern-
"ment without committal as to the mode of distribu-
tion." It is 7iot denied that these instructions were
received by the counsel, that the case was thus pre-
sented and that England acquiesced\iit\iQ: demand,
Jind a sum loas aicardedm gross iclthout calculation
as to any item, under the Itli article of tlie treaty,
in satisfaction and discliar ge of all the claims
presented, and all that might exist on behalf of the
United States, or its citizens, wiiich grew^ out of the
causes which had to the arbitration. Our Govern-
ment then received the money with the right con-
ceded to distribute it as though it came from its
own Treasury^ disencumbered of any trust or obli-
gation to disburse it amongst any particular class
of claimants and entirely free to do justice to all.
Mr. Cushing, counsel for our Government, in his
book upon Alabama claims, says :
" The awaid is to the United States, in conformity
"with the letter of the treat}', which has for its
" well-delined object to remove and adjust com-
" plaints and claims on the part of the United
"States."
"But the history of the treaty and of the arbi-
" tration, show^s that the United States recover, not
"for the benefit of the American Government as
" such, })ut of such individual citizens of the United
" States as shall appear to have suffered loss by the
"acts or neglects of the British Government. It is
"however, he says, Tioi^ special trust legally af-
^■'■fected. to any particular claim or claimants, but
"a general fund to be administered by the United
" States in good faith, in conformity with theiv oioji
"conceptions of justice and equity, iDithin the range
" of the award. * * Nor does the tribunal
6
"define affiiniatively wliat cluinis sliould be satis-
"fied otlierwise than in tlie e()nii)relienaive terms of
"tlie awai-d, wliicli declares tliat the snm awarded
"is 'the indemnity to be paid b}^ Great Biitain to
" the United States for the satisfaction of all tlie
" claims referred to the consideration of tln^ tribu-
"nal, conformably to the ])rovision8 contained in
" artich^ l'//of the aforesaid ti-cnity/'' He fnrther
says. "The arbitrators, be it observed, do not say
"for the satisfaction of certain specific clainis
"among those referred to the consideration of the
"tril)nnal, Init of ^ all the claims'' so referred con-
"formably to the provisions of the treaty."
This wonld seem to be a fail- statement and view
of the situation of the fund in tpu^stion and the
doctrine of subrogation invoked on behalf of un-
derwriters has no application to the case ju-esented
before you. The ownei- of the propei'tj destroyed
by the Alabama, Florida oi- Shenandoah, has no in-
terest in the fnnd Avhich he could enforce, if unin-
snred, either in the courts or by international law.
it was not })aid as Jiis nioxcy. The Government
refused to receive it as sncli. il'he :i|)])lication for
relief is now made by all t he claimants asa yratuil y.
ir a])])ro])riate(l it must be Aow^^uw gratia and ujion
no otiier ])rinci])le.
The law of subrogation gives Ww insurer who
stands in the ichition of surety hi his princi/xtl
when he pays the toss the right to the ])i'operty in-
sured after abandonment, as also the riyht <f action
against a wrongdoei- who causes the loss. But it is
not claimed that any riiiht of action accru«^(l to the
assured, oi' the assurer for llie destruction of this
projierty, either ayaiiist (,'r< <i/ llrilaiu or an}' one
else. i\7> dictum of any wiitei- on international
law, has been cited to that ell'ect. In fai-t our uiu-
7
nicijycdlaio prolilhits the maMny of such a claim,
and any claim npon this nation through Congress
for indemnification could rest only upon the duty
of the Government to protect its citizens which is
answer«^d in this case by the fact that all reasonable
diligence was used and therefore the application
must be ex gratia for such reparation as the Govern-
ment ma}' deem proper to grant.
The decision in the case of Comegys v. Yasse, (1
Peters. 193). and kindred cases cited in behalf of
the underwriters to substantiate their right by sub-
rogation, was based upon the fact that by the 7th
ssction of the treat}' with Spain, the clawis of tJie
citizen were recognized. The treaty recited that as
the municipal law was inadequate ''a full and com-
" plete compensation will be made by the British
*' Government to the com/plainants^'''' No such
provision is contained in the treaty relating to Ala-
bama Claims, and the case cited is not an authority
establishing any right in the insurance companies
to this fund.
Tlie comi)anies however ask you to apply a doc-
trine which a court could not enforce in order that
you may do a gross injustice, viz. to add to their
eiiormoiis 'profits at the expense of the very persons
through lolioni these profits were derived, and who
have not only lost the money they were compelled
to pay for protection, but other large sums in the
interuption and diversion of their trade.
The question which you are free to determine be-
tween these claimants is, whether those who have
lost nothing but are lai-ge gainers b}^ the misfor-
tunes of others, ought to be paid an additional
profit, to the exclusion of persons who are actual
sufferers and losers, and who have received no re-
muneration for their losses. This is the precise sit-
8
nation and relation of tlie claims of the nnmerous
merchants I represent to those of the nnderwriters.
If it be said that the payment of these war premi-
nms was a measure of fear or coioardice, I answer
that no merchant could have continued his buisness
a month without insuring agjiinst war risks, he
could not obtain a dollar's worth of goods at home
or abroad on credit, without a clean policy against
this risk for the benefit of his creditor, as no mer-
chant was independent of credit.
The courts early decided that the underwriter
was not liable for loss upon a polic-y for maiine
risks, when the loss occui-red by the acts of Con-
federate cruisers. The shipper was then compelled
to insure against war risks, increasing the expense
of insurance three-fold.
It has been said that the merchant x)ay].ng these
excessive rates charged th(Mn in the cost of his
o-oods and lost nothing. This allegation is in no sense
true. A large portion of the American canying trade
was tianslerred to neutral bottoms insuretl at ordin-
ary rates, as these vessels wei-e free from danger of
capture, and coinpetitioH tliiougli this cliannel
refutes the idea that any merchant could control
the market pi'ice of the world \\\ Ji ix Jitic (f iner-
cliandifihir/^ there was no niono])oli/ing jjower to
that extent in the hands of any one who now makes
claim to this fund.
The underwriters expr<»ss their willingness in ask-
ing for tJie balance of this I'mid to conline them-
selves to the acts of the Alabama, Florida, and
IShenandoah after leaving Melbourn(^ because the
Geneva Tribunal found England at fault as regards
these vessels only, although their losses by all the
vessels have been ])i-ovide(l for. They claim that
the money was paid to indenmiry the persons who
9
lost by these vessels, while the other claimants are
losers by all, or nearly all the cruisers, and there-
fore should be first paid, ignoring- the facts that the
great arbitrataion was chiefly constituted for the set-
tlement of international rights. That the subject of
money damage was incidental and as far as possible
avoided bv our Government. That while by the tenth
article of the treaty assessors might have been ap-
pointed to prove specilic claims, the money was
paid as a gross sum under the seventh article, in
satisfaction not of insurance claims or war pre-
niium claims, (for both these claims were rejected
for being doubly presented,) or any particular class
of claims, but of any and all just claims of the
nation and of its citizens, with the right of distribu-
tion ahsolutely and unqualifiedly resting with our
Government to which it was paid, and while actual
sufferers mi (/lit, England could not complain even
though the United States should cover this money
into the treasury for the nation's benefit.
The right oi claimants to this fund does not
depend on the question of the negligence of the
English Government in letting the three vessels
escape, but upon the facts that cdl the vessels that
destroyed the property and created the losses, did
receive aid and sitpport in men, provisions and
armament in British ports; and hut for this and
the too early recognition of belligerent rights by
Great Britain as a neutral ])ower, all these evils
wottld have been averted.
It seems to me that the plain dut}' of Congress is
to apportion the fund amongst these claimants
according to the merits of each case^ withottt
reference to the particular acts of the Alabama,
Florida, or Shenandoah, if his claim arises from the
act or acts of anj^ vessel receiving aid from British
IT)
'ports. It was tlic duty of onr Govei-nmeiit to pro-
tect tlie persons and property of its eitiz(Mis wliile
engaged in lawful commerce upon tlie liigli seas to
the extent of its power. Its inahility to do so was
a source of regret and mortification, and tlie wrongs
tliat its citizens Lave suffered by this inability and
which have thus far gone unnnlressed, may now be
rtpaired by the Just distribution of the money paid
by England as part rei)aration for her wrongs.
The actual sufferers now asking to be paid their
losses, are the persons who were compellinl to pay
large sums for tlie protection of their pro})erty as I
have stated, and those who have suffered iu tin-
class re])resented by Mr. Metcalf, llirough the acts
of vessels otliei than the Alabama, Florida, and
Shenandoah, and while his loss was caused b}' the
actual destruction of his yn-operty which was unin-
sured, he choosing to take a risk, the class of claim-
ants I I'epresent coidd not tal'e ike risJx and were
compelled to pay for protection; both are losers of
amounts clearly ascertainablymid equally entitled
to be paid from this fund.
Section 12 of the act, distributing a portion of the
fund, i)i'Ovides for the payment of all ^/r///<// losses
by undericrilers through the acts of any and all
cruisers icitJioiit limiL and those who have thus
(Read sec. 12,) lost by insui-ing have lyroved theii-
claims before the court constituted by the act, and
we ask to be ])rovided I'oi- in the same nnmue]*, dc-
diu'tin y from our claims all dicideads fiom profits
we may have received fi-oni the underwriters. A
court has been established under the act and now
exists to })ass u])on the merits of all claims coming
before it. AVe wlio have ])aid wai' ])remiunis, ask
to be permitted to go before that court and prove
and collect these claims without the intervention of
11
iniy of tliese companies, or their attorneys, as our
guardians or legal advisers. The luxnr}^ is too expen-
sive to be profitable, and too uneertain to be desira-
ble. A mutual company is comj)osed of its policy-
holders. It lias no capital but that paid in as
premiums. Tiie officers, clerks, rents and other
expenses are paid from tliis fund. It hclongs en-
tirely to the policy-holder, and anything the com-
pany receives as a revenue is payable to the premium
j)a3'ers. You are told by the legal representatives
of these companies that as a company^ they have
nothing to do with the moneys tliey shall recover as
losses, but to pay them to the policj^-holders who
paid the premiums when the losses occurred less
the legal and other indefinite expenses, but
that tlie_y are entitled to receive them so as to
disburse them to the holders of policies of marine
as well as icar risks, and claim the right to collect
these moneys as stake-holders., so as to protect the
rights of the persons having marine risks; and yet
it is conceded that those mutual companies made
more money in profits fi'om the icar premiums re-
ceived than from those paying marine risks.
More than eigM millions of dollars of war pre-
miums have been paid to underwriters, while their
losses under, these risks are but $5,569,497.58, from
which they made a proht of more than ^2,000, (XJO,
a ]3ortion of which was paid back as profits, wliich
accounts for the fact that but $6,146,219.71, of war
premium claims liave been filed, the Atlantic
Mutual of New York, paying forty per cent, divi-
dends from its profits while the war risks continued.
The aggregate profits of marine insurance were
larger during the war than during any like 2^eriod
before or since, proving conclusively that in the
distribution of profits among the policy-holders,
. 425768
12
tlie holders of marine risks have received more tlian
their fair sliare of profits. Oiig'lit tliis unequal
distribntion to be continned ? Tlie lioider of a
policy for ordinary marine risk has no claim before
3^ou. He suffered no loss by the acts of these
cruisers unadjusted, and because he was a sharer in
profits from a common fund to 7ils advantage ex-
tends his right only to a settlement which has taken
])lace upon the basis of moneys re<'eived by the
companies in premiums and disbursed b}' them in
losses paid. They are not losers in any sense which
entitles them to receive any part of the fund in
question.
What rigid of guardianship liare the mutual
com])anies in the collectloit of these war premiums i
Every liability under the policy ceased more than
ten 3'ears ago. The single riglit of the policy-
holder to receive scrip dividends and profits from
the companies made from the receipt of these ])re-
miums has been satisfied b}' such payment, and the
policy has no longer an}- binding force or effect as
between the assui'er and assured. Tliepersons who
are entitled to receive this money from the compa-
nies asking for it are the representatives of the
companies and if the mutual com})anies had a prior
right to the fund the real owners are entitled to
receive it.
The ap])lication to ('ongress to indemnif}' the'
persons who paid these war premiums and its action
in regard to it being ])urely ex gratia growing out
of no legal right. Legishition creating the right
restores no rights or obligations to or against either
party under the policy of insuiance, and the com-
pany is in every legal sense a stranger to tlie rights
and interests of these peVsons which they may
acquire by the legislation asked for, to the ficiid In
question.
13
For the reasons stated I respectfully ask that the
merchants wlio have paid these wai' piciiiiums and
for which they hav(^ received no I'euiiineration
wliatever, and by th(» payment of which t lie insu-
rance companies were enabled to declare large
dividends and largely increase their business, shall
be by 3^ou considered as being with othei' actual
suffei'ers oi loss fir.st oitltled to be })aid from the
Alabama claims fund Avliich may remain after the
payment to the nnderwriters of all their actual
losses as provided for in section 12 of the Act of
1873, relating to the Geneva Award, now in force.
UNIVERSITY OF CALllOKxMA, LOS ANGELES
THE UNIVERSITY LIBRARY
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