^r
i
?■■
^ ,: ..
ta.. J,
\
rt
A
^^
^T"
The Alabama Claims.
i^
#6^ Ury<
J^ SY]>TOPSIS
BY
T. L. CLINGMAN,
attorjXey for
CERTAIN UNDERWRITERS.
vJA.:srXJA-I^Y 18, 1876-
WASrllNi'rrOH, D. C\:
) m'qill a withekow, i'rinteus and SrKBEOryPKUK.
') 1876.
« « •
«
• • • • •
" - • •
•
«•
• • • . .•
* •
• •
• • • • •
• •
♦•
. •• • •• •
• » •
• «
: ••• • •
• •
•••
• «. -•• •
• • !,• • •
• • • •-•
• • • • •
• ••
•
•
• • •
• •
• •
• • •
rx
4 ^'
■> u
THE ALABAMA CLAIMS.
The act of Congress approved June the 23d, 1874, con-
tains a provision in the following words :
" 1^0 claim shall be admissible or allowed by the court
by or in behalf of any insurance company or insurer, either
in its or his own right, or as assignee or otherwise in the
right of a person or party insured, unless such claimant
shall show to the satisfaction of said court that during the
late rebellion the sum of its or his losses in respect to its
or his war risks exceeded the sura of its or his premiums
or other gains upon or in respect to such war risks ; and
in case of any such allowance, the same shall not be greater
■ than such excess of loss."
\j^ Such a provision as the above seems so singular in itself
as to require explanation. If insurance companies or in-
^ surers have a legal or equitable claim to a share of the fund
paid under the award at Geneva, it is difficult to see how
that right would be lost by its profits or losses in its g^w-
^- eral business operations in that class of cases.
No one could successfully contest the claim of a mcr-
^< chant or a hotel-keeper merely on the ground that in his
^'-, general business outside of the transactions with him he
hud realized profits. Still less likely would an attorney,
, who had collected a sum of monev for a banking corpora-
"^ tion, be justified in withholding the money from hia client
. for the reason tiiat it had made profits in its general busi-
J^ ncss within the past four years.
If, on the other hand, the Government of the United
States should be the rightful owner, in every sense, of the
^ sum of money awarded at Geneva, it might undoubtedly
;; bestow such sums as it might think proper on corporations
^-i or individuals. It strikes the mind as singular, however.
425772
V
1
that among the many snfterers in the late civil war it
sliould select insurance companies as the object of its
bounty. It is still more surprising that it should have, as
other provisions of this act declare, selected those who
had sutfered from the acts of three ships especially named,
to the exclusion of all sufferers from the depredations of a
number of other ships equally destructive of the commerce
of the United States. But it is still more remarkable that
it should relieve those who were injured by the Shenandoah
after she left the British port of Melbourne, and rigidly
exclude the many who suffered from the action of the
same ship before she entered that port. The provisions of
the act in this view appear so extraordinary, not to say
whimsical, as to require explanation.
What are the real facts in the case? Was this money
paid to the Government of the United States for its own
use, or was the payment made to satisfy the claims of
others?
The fact is well known that the Government of the
United States did present certain claims for indirect
losses from the action of the Alabama and other Confed-
erate cruisers, "in the transfer of a large part of the Amer-
ican commercial marine to the British flag, in the en-
hanced payment of insurance, in the prolongation of the
war, and in the addition of a large sum to the cost of the
war, and the suppression of the rebellion." But these
"indirect claims" met with such decided opposition on
tlie part of Great Britain that it seemed for a time that
any settlement by arbitration might be defeated, unless
the United States should consent to withdraw those claims.
During the discussion, the Secretary of State, in a letter
to General Schenck, dated April 23, 1872, used this lan-
guage :
"Neither the Government of the United States, nor, so
far as I can hear, any considerable number of the American
people, have ever attached much importance to the indi-
rect claims, or have ever expected or desired any award of
damages on their account. * * lu the correspondence,
I have gone as far as prudence would allow in intimating
that we neither desired nor expected any pecuniary award,
and that we should be content with an award; that a State
is not liable in pecuniary damages for the indirect results
of a failure to observe its neutral obligations."
At a subsequent period, before the Tribunal of Arbi-
tration, on the 15th of June, the United States presented
its Argument, while the British Argument was withheld,
the British Agent asked for an adjournment, in order that
the two Governments might arrive at some understanding
as to the indirect claims.
On June 19th the Arbitrators stated, "That after the
most careful perusal of all that has been urged on the part
of the Government of the United States, in respect to these
claims, they have arrived, individually and collectively, at
the conclusion that these claims do not constitute, upon
the principle of international law, applicable to such cases,
good foundation for an award of compensation or compu-
tation of damages between nations; and should, upon such
principles, be wholly excluded from the consideration of
the Tribunal in making its aw^ard, even if there was no dis-
agreement between the two Governments as to the compe-
tency of the Tribunal to decide thereon." {Correspondence
respeclbif) Geneva Arbitration^ ih 152.)
The same day the counsel of the United States advised
Mr. Davis, the Agent, that the statement of the Trii)unal,
in part quoted al)Ove, "must be received by the United
States as determinative of its judgment upon the questions
of public law involved." They therefore advised that the
United States "should announce to the Tribunal that the
said claims, covered by its opinion, will not be further in-
sisted upon before the Tribunal by the United States, and
may be excluded from all consideration by the Tribunal in
making its award." [Correspondence respecting the Geneva
Arbitration., p. 152.)
At a sui)sequent meeting of the Tribunal, Mr. Davis,
after receiving instructions from his Government, said:
((I
The declaration made by the Tribunal, individually
and collectively, respecting the claims presented by the
United States for the award of the Tribunal, for, first, the
losses in the transfer of the American commercial marine
to the British flag; second, the enhanced payments of
insurance; and, third, the prolongation of the war, and
the addition of a large sum to the cost of the war and the
suppression of the rebellion, is accepted by the President
of the United States as determinative of their judgment
upon the important question of public law involved. The
Agent of the United States is authorized to say, that con-
sequently the above-mentioned claims will not be further
insisted upon before the Tribunal by the United States,
and may be excluded from all consideration in any award
that may be made." {See Correspondence respecting Geneva
Arbilraiion, j^- lo^t-
On the 27tli of June, the representatives of Great Britain,
understanding thus from the Agent of the United States,
"That the several claims particularly mentioned in that
statement will not be further insisted upon before the Tri-
bunal by the United States, and may be excluded from all
consideration in any award that may be made, and assum-
ing that the Arbitrators will, upon such statement, think
fit now to declare that the said several claims are, and
from henceforth will be, wholly excluded from their con-
sideration, and will embody such declaration in their
protocol of this day's proceedings," &c., expressed their
satisfaction, and delivered their printed argument "with
reference to the other claims, to the consideration of
which, by the Tribunal, no exception has been taken on
the part of Iler Majesty's Government."
" Count Sclopis, in behalf of all the arbiti'ators, then de-
clared that the said claims for indirect losses, mentioned in
the statement by the agent of the United States on the 25th
in St., and referred to in the statement just made by the
agent of Her Britannic Majesty, are, and from henceforth,
wholly excluded from the consideration of the Tribunal,
and directed the secretary to embody the declaration in the
protocol of this day's proceedings." (Protocol, vii, of June
27, 1872.)
It is therefore indisputable that the claims of the United
States for indirect losses, including "the enhanced pay-
ments of insurance" {or war premiums) were wholly excluded
from the consideration of the Tribunal. ISTo lansuao-e that
could have been selected would have expressed this fact in
stronger terms.
The Tribunal then proceeded to consider the direct
claims, which included two heads, viz: 1st. The claims for
direct losses growing out of the destruction of vessels and
their cargoes by the insurgent cruisers. 2d. The national
expenditure in the pursuit of these cruisers. As to the sec-
ond class of these claims, the decision of the Tribunal was
as follows:
"Whereas, so far as relates to the particulars of the in-
demnity claimed by the United States, the costs of pursuit
of the Confederate cruisers are not, in the judgment of the
Tribunal, properly distinguishable from the general ex-
penses of the war carried on by the United States ; the Tri-
bunal is, therefore, of opinion, by a majority of three to
two voices, that there is no ground for awarding to the
United States any sum by way of indemnity under this
head."
The Tribunal proceeded to inquire which of the ships
Great Britain should be held responsible for on account of
her alleged negligence, and it was decided that she should
be held accountable for the acts of the Alabama, the Flor-
ida, and their tenders, and for the Shenandoali, from and
after her departure from Melbourne.
The representatives of the United States presented a
carefully prepared statement, embracing the names of the
sliips destroyed, with tlioir values, as well as of tliose of
their cargoes, and the names of their owners, &c. This list
specified the names of insurance companies, as well as of
individual claimants. Indeed, it will be seen from the pub-
lished correspondence of the Secretary of State that the
cases of claims of insurance eompanies were, from the early
6
part of the war, presented and urged just as those of the
private owners were.
Before the arbitrators the commissioners of the United
States referred to the fact that it had been repeatedly set-
tled b}' judicial decisions, both in England and America,
that an insurer who had paid for a vessel as a total loss, was
subrogated to the rights of the original owner. In other
words, he became entitled to the " spes recwperandi" and
might fairly claim all that the insured owner could have
done if there had been no insurance on the property.
The British commissioners admitted that such was the
law of Great Britain, as well as of the United States, and
in their Counter Case the following language is used :
"The American Insurance Companies who have paid the
owners as for a total loss are, in our opinion, entitled to be
subrogated to the rights of the latter, according to the well-
known principle that an underwriter who has paid as for a
total loss, acquires the rights of the assured in respect of
the subject-matter of insurance. This principle was ex-
plained and acted on in the well-known English cases of
Randall v. Cochran, 1 Ves., Sen., 98, and The Quebec Fire
Insurance Company v. St. Louis, 7 Moore, P. C, 286, and
is well recognized by the courts of America. On the other
hand, it is equally clear that underwriters cannot be enti-
tled to anything more than the assured themselves, for the
claim of the former is founded on nothing else than their
title to be subrogated to the rights which the latter pos-
sessed, and which therefore cannot possibly be more ex-
tensive than the claim which the latter would be entitled
t(^ maintain. From these considerations two consequences
follow: In the lirst place, where the claimant is the insur-
ance company, and not the owner, compensation cannot
be due for any sum exceeding the amount of the actual
loss sustained by the owner, however much that sum may
fall short of the amount paid by the company by reason of
the property having been over-insured. In the second
place, wherever the owner puts forward a claim for his loss
at the same time that the insurance company also claims
the money paid by them in respect of the same loss, such a
double claim must at once be absolutely rejected, since to
allow it would be in effect to sanction the payment of the
loss twice over." (British Counter Case, p. 135.)
In reply to the criticisms of the merits of the private
claims by the British Counter Case, the following words are
used in the United States Argument.
The claims now under discussion (excluding those for
increased war premiums) may be divided into two general
classes :
" Ist. Claims for the alleged value of property destroyed
by the several cruisers.
" 2d. Claims arising from damages in the destruction of
property, but over and above its value.
" Under the first class would be included (a) owners' .
claims for the values of vessels destroyed ; [b) merchants'
claims for the values of goods destroyed; (c) whalers and
fishermen's claims for the values of oil or fish destroyed ;
(d) passengers, officers, and sailors' claims for the values of
personal property destroyed ; (e) the claims of Insurance
Companies for the values of property destroyed, for which
they had paid the owners in insurance * * * * The
claims of Insurance Companies for the value of property
destroyed, for which they have paid the owners the insur-
ance, is the last division under the claims of the first class.
We readily admit that whenever the owner put forward a
claim for his loss at the same time that the Insurance Com-
pany also claims the money paid by them in respect of the
same loss, then only one value of the property destroyed
can be allowed, but we insist that in all such cases the
award should be equal to the full value of the property
destroyed.
" It was the intention of the United States, in jireparing
the list of claims to indicate whenever double claims of this
class occurred, when it was evident, upon a simple exam-
ination of the papers, that such double claims were made,
and it will be found that very few, if any, of such claims
exist, except in the case of sonic! of the whaling vossels
8
which were destroj^ed by the Shencmdoah, there being none
of this class of double claims in the case of merchant ships
or property destroyed on merchant ships." [U. S. Argu-
ment^ p. 554.)
When the arbitrators proceeded to consider the detailed
statement of the values of the ships, their cargoes, &c., it
was seen that the estimate of the values as claimed by the
Agent of the United States was much higher than that
made by the experts on the side of Great Britain. The
United States claimed $14,437,143.51, with interest thereon
at seven per cent., as the gross sum that should be awarded.
The Agent of Great Britain claimed that the proper sum
to be awarded was $7,074,715, with such additional sum as
the Tribunal might give as interest.
At the session of the 30th of August, " the Tribunal hav-
ing discussed in general the award of a gross sum, requested
Mr. Steampfli, one of the arbitrators, to present for the
next conference copies of a synoptical table," which he
had prepared on the subject. (See Protocol, xxviii.)
At the session of September 2d, the Tribunal, by a ma-
jority of four to one, decided that interest should be ad-
mitted as an element in the calculation of a sum in gross.
Mr. Staempfii presented to the Tribunal the synoptical ta-
ble which he had prepared as a proposition for the determ-
ination of a sum in gross in the following words and
figures :
Estimate of 3Ir. Staempfii for the determination of a sum in
gross.
After the late British Allowance. Mean.
American Table.
Amount of claims $14,437,000 $7,074,000 $10,905,000
Expenditure in pursuit 6,735,000 940,000 Struck out.
Struck out
as such,
but for
wages 588,000
25 percent.
on the
values of
vessels 400,000
$11,893,000
Prospective profits and interrup-
tion of voyage 4,009,100
9
Round sura $12,000,000
Interest from the 1st January, 1864, to the
15th September, 1872.
1. At 5 per cent, during eight years and eight
and one half months.
8 X $600,000=34,800,000
81 X 50,000= 425,000
5,225,000
17,225,000
Eventually one year's interest more 17,825,000
2. At 6 per cent, during eight years and eight
and one half months.
8 X S720,000=$5,760,000
8ix 60,000= 510,000
6,270,000 18,270,000
Eventually one year's interest more 18,990,000
3. At 7 per cent, during eight years and eight
and one half months.
8 X S840,000=$6,720,000
8ix 70,000= 595,000
7,315,000 19,315,000
Eventually one year's interest more 840,000
20,155,000
Round sum $20,000,000
At the same session, Sir Alexander Cockburn, as one of
the Arbitrators, presented a memorandum criticising the
estimate of Mr. Staempfli, and he also presented his own
estimate or table, as follows :
Table in reference to the estimate of Mr. Stacmpfli.
Total United States claim in the last revised
tables $14,437,143
2
10
Necessary reduction to be made from the above
supposed total :
Double claims $1,682,243
New claims 1,450,000
One half i^ross freidit 503,576
3,635,819
Makins the total reduced claim-- 10,801,324
As against the British estimate of - 7,464,764
The mean of these two sums is-- 9,133,044
Add to this Mr. Staempfli's al-
lowance in lieu of prospec-
tive catch :
One year's wages 588,000
Twenty-live per cent, on the value
of vessels 400,000
988,000
$10,121,044
At the same session, " after a detailed deliberation, a
majority of the Tribunal, of four to one, decided, under
the Vllth article of the Treaty of Washington, to award in
gross the sum of $15,500,000, to be paid in gold, by Great
Britain to the United States, in the time and manner pro-
vided by the said article of the Treaty of Washington."
(See Protocol xxix.)
If, to the estimate of Sir Alexander Cockburn, there be
added interest at the rate of six per cent, for the period of
eight years, eight and one-half months, the sum will be
$15,409,285. It thus appears that the sum in gross actually
awarded was not $100,000 above this amount. An exam-
ination of the whole case shows conclusively that the award
was made to meet the individual losses, the detailed state-
ment of which was presented by the United States to the
Tribunal.
In his statement on the part of the United States as a
reason why all the items of individual losses should be cs-
11
timated in the award, Mr, Davis spoke in the following
words :
"III. The United States make claim for all the undi-
vided shares of a ship, whether the owner of the share,
however small, makes claim or not, because the United
States will be obliged to indemnify all the owners, in case
the Tribunal shall accord a gross sum to the United States.
If this were not done there would be an evident injustice."
After the decision of the Tribunal had been made an-
nouncing the result, Mr. Davis, in his dispatch to Mr. Fish,
dated Paris, 2l8t of September, 1872, giving a report of
his action as agent of the United States, saj^s, (see Report,
as recently published, p. 10 :)
"The neutral Arbitrators and Mr. Adams, from the be*
ginning of the proceedings, were convinced of the policy
of awarding a sum in gross.
" For some weeks before the decision was given I felt
sure that the Arbitrators would not consent to send the
Case to Assessors until they should have exhausted all
efforts to agree themselves upon the sura to be paid.
" We therefore devoted our energies towards securing
such a sum as should be practically an indemnity to the
sufferers. Whether we have or have not been successful,
can be determined only by the final division of the sum."
Why was there an anxietj' felt to secure a sum in gross?
If a sum in gross should not ])e awarded, it was provided
by article 10 of the treaty that the cases should go to a
Board of Assessors, at which both Governments might be
represented by their counsel. As this board might sit for
three years it was felt on both sides desirable to avoid a
second tedious examination of so large a number of claims
to be canvassed and discussed by the agents of both Gov-
ernments. These reasons were assigned by the Secretary
of State and pressed on the attention of the representatives
of the United States, and finally [)revailcd to induce the
Tribunal to award the sum in gross.
Does the form of the award as thus made so chatigo its
character as to relieve the Government of its obligation
12
to indemnify those for whose losses the money was un-
doubtedly paid by Great Britain ? Suppose that an attor-
ney who was claiming damages for the loss of a ship
should say to the court, that, as there were many owners
of the ship whose shares varied greatly ia amount, and
tlierefore the ascertaining the value of their several shares
would be very tedious, and delay the court for a long pe-
riod of timQ, and therefore he would be content if a sum
were awarded for the ship as a whole sufficient, however,, to
cover all the losses, and that he would out of this amount
be able to settle with his clients according to the value of
their several claims, and should the court award at his
request a sum in gross, would such attorney be authorized
to retain this money for his own use or bestow it on some
other clients whose cases he had recently lost? A mere
statement of such a case shows the absurdity of such a pro-
ceeding. Is the situation of the Government of the United
States in respect to the fund awarded really different in
substance and the principles of natural justice from the one
above stated?
But it has been said that the Government of the United
States cannot be an attorney for its citizens. To make it
appear that the Government was not in this transaction,
in substance and in fact, a representative, agent, guardian,
or attorney of its citizens, would require that a construc-
tion should be resorted to far more strict than that de-
manded upon the principles of the resolutions of 1798.
Chief Justice Kent, in the case of Gracie v. The New
York Insurance Companj^, in delivering the opinion of the
court, said: "If France should at any future period agree
to and actually make compensation for the capture and
condemnation in question, the Government of the United
States, to whom the compensation in the first instance
would be payable, would become trustee for the party hav-
ing the equitable title to the reimbursement; and this
would clearly be the defendants, (the underwriters,) if they
should pay the amount."
A number of authorities rnii'ht be found to this effect.
13
With respect to these claims, the Government of the United
States forbade individuals to apply to Great Britain for
redress, and claimed the exclusive right to present thera.
President Grant, too, in his message of Decembers, 1870,
recommended Congress to make a settlement with these
private claimants, " so that the Government shall have the
ownership of the private claims as well as the responsible
control of all the demands against Great Britain."
After the confirmation of the Treaty at Washington, the
State Department called upon all its citizens having claims
known severally as " Alabama claims," to present them to
the Department of State. Its letter bears date September,
1871, and calls on all persons having these claims to pre-
sent, "to do so without delay," because "the time for
presenting the Case of the United States expires on the
16th of December next."
At its previous conference, with reference to this matter,
similar grounds were taken by the Government, and the
like language used. During the proceedings before the
Arbitrators with respect to all those claims, the Government
occupied a similar attitude. It seems difffcult to distin-
guish its case from that of a law firm that should in this
city advertise for business claims of a certain class, except
that the liability of the United States on the principles of
justice is greater, inasmuch as it possessed a power that
no law law firm has of preventing its citizens from pre-
senting their claims through any other agency than its
own.
The Government undoubtedly obtained this money by
presenting the claims of its citizens for injuries done them,
and insisted that insurers, who had paid for the property
destroyed, were entitled to stand in the position of the ori-
ginal owner. It was by including the claims of insurers
that nearly one-half the sum awarded was obtained. Can
it honestly now repudiate its former acts and refuse to pay
to those whose claims were in fact considered, estimated
for, and allowed as fully as any other class of (claimants?
Those op[)Osin'^^ tln' payuu-nt lo iimlriw lilcrs <I( ii.)iiiK-e
14
corporations "that have made money during the war."
Corporations are composed of men, women, and children.
It has not hitherto been settled that men are so odious that
they are not permitted to receive money for which they
have given an equivalent, while women and children are
reo-arded as entitled to favor in the estimation of courts of
justice. How is it that their association in an incorporated
company should render them odious?
If an estimate could be made of the .profits of stockhold-
ers in all the corporations that have existed in the United
States for the last ten or twenty years, it is not probable
that they would exceed the average of all the different
kinds of industrial occupations of the country. It has been
said that a large majority of insurance companies have failed.
This is probably true. But nevertheless corporations are
useful, because they are instrumental in effecting results
that individual enterprise cannot accomplish.
A single one of these insurance companies insured prop-
erty of the value, for the year 1863, of $270,000,000; 1864,
$320,000,000; 1865, $380,000,000.
This large amount of property was in part kept afloat
by a marine insurance company. Without such aid a
large number of ships would probably have remained idle
in port, or been transferred to a foreign flag, because
owners would not have risked their loss, though they
were willing to pay something to a corporation that would
become responsible in case they were captured.
It has been proclaimed in debate, however, as a reason
for excluding insurance companies, that one of them might
receive out of the award more than a million and a half of
dollars. If so, however, it can only obtain a large sum
by showing that it has paid out a similar amount. It
has never been pretended that a banking corporation, or
an individual who advanced a large sura of money, was
not entitled to have it returned, on the same principles as
one who lent a small sum. If this corporation is entitled
to receive a large amount, it must be remembered that it
has a great numljer of shareholders, and that it has done a
15
large business, and paid ont a great sum of money to those
whose ships were destroyed. Is it not therefore to stand,
as to its payments, on the same ground with an individual
who has insured a single ship and paid for its loss?
Why, then, should there be a discrimination against a
corporation, or an attempt to render it odious? In most
of the States of the Union, if not in all of them, it is re-
garded as just as much a crime to rob a bank as a hen
roost, and a conspiracy to defraud an insurance company
is punished just as a conspiracy to defraud an individual.
But, again, a persistent effort is made to divert so much
at least of this fund as was awarded to meet the claims
of insurance companies from that purpose, and bestow it
on those who paid enhanced rates of insurance, or " war
premiums," as they are frequently termed. It is an indis-
putable fact that these latter claims were presented at
Geneva; that they were earnestly urged, and rejected by
the Tribunal of Arbitrators; and it was expressly and in the
the most unequivocal language declared that their claims
were wholly inadmissible, and excluded from any allowance
in money that might be awarded. The fact that a suit
brought by an individual has been rejected by a court is
generally regarded as a sufficient reason why he should
not demand a sum of money that some other plaintiff has
recovered at the same term of the court.
These war premium men, however, are much eulogized
for their patriotism, and it is declared that but for them
the flag of the United States would not have been kept
afloat, and that the money in the hands of the Government
ought to be bestowed on tliem, rather than given over to
greedy and Bouiless corporations. How does the case really
stand between the two classes of claimants?
A patriotic individual resolves that he will keep the flag
of the United States afloat, and with that view secures a
ship and cargo worth twenty thousand dollars, and de-
termines to send them to sea; being, however, like John
Gilpin's wife, possessed ol' a iVugal mind, he determineH
that ho will not ni;ik(! ;ill this patriotic outlay at his own
16
risk. lie thereupon goes to one of these insurance com-
panies, and may be supposed to address it in a straiu some-
thing after this fashion:
"Being a highly patriotic man, I am anxious that the
flag of my country should float on the high seas. I have
therefore provided a ship and cargo worth twenty thousand
dollars, which I propose to send abroad. But though
patriotism should be its own reward, it ought not to be ex-
pected to give money as well as itself to the public. Hence,
though I intend to send out this ship, I do not propose to
do it at my own pecuniary risk. You are a soulless cor-
poration, composed only of men, women, and children,
without a single spark of that patriotism that glows in my
bosom. Nevertheless I know that you comply with your
contracts. I understand that you will, if paid two and a
half per cent, of the value of the property, be responsible
for its value if lost either by negligence, storm, or the pub-
lic enemy. I send out twenty thousand dollars' worth, and
am willing to give you five hundred dollars to insure it
against all loss. It must, however, be understood between
us that the insurance must be large enough to cover not
only the property, but also the five hundred dollars I now
pay you, so that in case of loss of the ship 1 am to have
back my entire patriotic contribution !"
The agent of the insurance company may be supposed
to reply in such words as these: "It is lamentably true
that we are only a soulless corporation, incapable, therefore,
of a patriotic emotion, but we greatly admire your patri-
otism, and as you are willing to risk five hundred dollars,
we will risk twenty thousand dollars ! "
Some months possibly after this bargain has been exe-
cuted, the insurer learns that his ship has been lost, de-
mands payment, and receives twenty thousand five hundred
dollars from the soulless corporation, and is in addition
thereto greatly applauded for his patriotism.
The insurance compan}^, through the representatives of
the United States, presents its claim for the value of the
ship lost and paid for; the sum is computed and allowed in
17
raakiug up the award, and actually paid over, and now it
is proposed to withhold the money from the company, and
give it, instead, to the war 'premium men as a compensation
for their patriotism.
It is argued, however, that in those eases where the ships
were not captured the war premiums have not been re-
turned. It is well known, however, that merchants, in
estimating the cost of their goods, include not only the
amount paid abroad for them, but also the cost of freight,
insurance, and tarifi' duties, and in their sales add a profit
on all these items. While the insurances amounted to 2 or
3 per cent., the tarifl" taxes were often 50 or 75 per cent.
All these amounts have to be repaid by the consumers,
with added profits. Those who paid 1^ per cent, addi-
tional on account of the war risk, probably made the con-
sumers of the country pay two or three times as much, just
as hotels, because currency is t&n or fifteen per cent, below
par, add 100 or 150 per cent, to their former prices.
It has been urged, however, that those men, by paying
this additional per cent,, which did not, on the average,
amount to 1| per cent., were placed at a disadvantage as
against foreign ships. The same thing, however, may be
said by importing merchants with respect to the tarifi:' du-
ties. They are compelled to pay filty or one hundred per
cent, on their goods imported, and then compete with
home manufacturers who pay no duty at all. Mr. A. T.
Stewart or II. B. Claflin might, with a vastly greater show,
boast of their patriotism, and refer to the large sums they
paid into the treasury to support their country. They, as
well as the war premium men, are reimbursed by the con-
sumers of the whole country.
It has already been stated that these war premium claims
were rejected by the tribunal at Geneva. Something oc-
curred there, however, which shows most strikingly the
injustice of the attempt to exclude the insurance comi)anies,
on the ground that they made profits by reason of the war
premiums. After it had been settled that the capital of the
losses should be paid, the question arose whether the tri-
3
18
bunal, in its award of a gross sura, should include interest.
Sir Eouudell Palmer, the British counsel, presented an
earnest argument against the allowance of interest, in
which he made this point:
"With respect to the insurance companies, it must be
remembered that, as against the losses which they paid,
they received the benefit of the enormus war premiums
which ruled at that time ; and that these were the risks
against which they indemnified themselves (and it cannot
be doubted, so as to make their business profitable upon
the whole) by those extraordinary premiums. "Would it
be equitable now to reimburse them not only the amount
of all these losses, but interest thereon, without taking into
account any part of the profits which they so received?"
{Supplt. to the London Gazette of October 4, 1872,;?. 4728.)
How did such a suggestion strike the minds of the coun-
sel of the United States? That it embodied a degree of
assurance that was amusing from its absurdity is evident
from the language used in reply:
"We may also lay aside the suggestions prejudicial to
the allowance of interest on the claims which, by subroga-
tion or assignment, have been presented by the insurers^
who have indemnified the original sufferers. So far as
Great Britain and this Tribunal are concerned, who the
private sufl^erers are,, and who represent them, and whether
they were insured or not, and have been paid for their in-
surance, are questions of no importance. But it is worth
while to look this argument in the face for a moment.
Some of the sufferers by the depredations of the Alabama,
the Florida, and the Shenandoah were insured by American
underwriters. These sufferers have collected their indem-
nity from the underwriters, and have assigned to them
their claims. The enhanced premiums of insurance on
general American commerce have presumptively enriched
the insurance companies. Great Britain should have the
benefits of these profits, and the underwriters, at least,
should lose the interest on their claims. It is difficult to
Ray whether the private or the public considerations which
19
enter into this syllogism are most illogical. Certain!}' we
did not expect that the ' enhanced paijment of insurance,'
which Great Britain could not tolerate, and the Tribunal
has excluded as too indirect, as growing out of the acts of
the cruisers, to be entertained lohen presented by the mer-
chants who had paid them, were to be brought into play by
Great Britain itself as direct enough in the general busi-
ness of underwriting to reduce the indemnity on insured
losses, which, if uninsured, they would have been entitled
to." {Sapplt. to Lon. Gaz., Ocf. 4, 1872, p. 4737.)
If, then, the enhanced p)remiums were, at the instance
of Great Britain, rejected, and absohitely excluded l)y tlic
Tribunal, and then, when afterwards suggested by the
British counsel as a ground for not paying interest merely
to insurance companies, for the reason that they had made
profits out of these premiums, and the counsel of the Uni-
ted States indignantly rejected such a consideration, can
our Government now, r)n the principles of common fair-
ness, refuse to pay over to the insurance companies not
only the interest, but the priiicipal itself? In other words,
when the British counsel suggested that though these in-
surance companies ought to have back their priiicipal, yet,
as they had made money out of war premiums, they should
not be paid also interest thereon, and our Government re-
jected the plea with disdain, can it now refuse upon this
very ground to pay not only the interest, but even the
pi-incipal ?
Among the pretexts assigned for not paying the money
to those for whom it was awarded, it has been suggested
that the United States has never paid oft' the "French
spoliation claims" arising from the acts of the French
cruisers prior to the year 1800. But in that case no
money was jiaid to our Government l)y France. Our au-
thorities admitted that the sufterers on our side ought lo
be reimburscfl for their losses, and promised when able io
do so. Had money tlien been received it would undoubt-
edly have been paid over. This is said because, when in
1831, by reason ot the treaty with France, negotiated by
20
Wrn. C. Rives, 25,000,000 of francs was obtained for spo-
liations since the year 1800, tliat money was paid over to
tlie individual suflerers. If these precedents are referred
to, the last one, which in its features resembles the present
case, clearly ought to be followed. At any rate, the first
one affords no justification for a present refusal. No trus-
tee could excuse himself from paying money received for
others by alleging that on some former occasion he de-
clined to pay on the ground that no assets had in fact been
realized by him.
In a case like the present one between individuals, there
can be no doubt but that the insurers could recover in a court
of justice. The United States cannot be sued as an indivi-
dual might be. Ought this immunity to be regarded as
a justification for refusal? Occasionally an individual is
heard to say that he has so arranged his property that he
does not fear suits and judgments against him. Ought
the United States to place itself in such an attitude?
What Great Britain might think of such a trans tction is
u secondary consideration. If she were an enemy, she
might well be expected to point her finger at us and say to
the world, " See what the Great Republic has done. It
exacted money from us to reimburse such of its citizens as
had paid for ships destroyed by reason of our negligence;
and now, after getting the money from us for that purpose,
it refuses to pay them, and applies the money to its own
uses!" What other nations think of us is undoubtedly a
matter of consequence to us, but it is vastly more import-
ant for us to do justice to our own citizens and thus main-
tain their respect for the Government of their country.
If, in addition to the reasons assigned for obtaining an
award for a sum in gross, the agents of our Government de-
sired to veil their disappointment on account of the rejection
of the claims of the Government, by such a form of award,
at least our own citizens ought not to be made to suflier for
this. As our representatives had the benefit of such a
soothing balm to their wounded feelings, they ought to be
21
only the more willing to do com[)lete justice to those whose
claims enabled them to alleviate their own regrets.
Five per cent, of the sum recovered, equal to $775,000,
ha:^ already been retained by the Government to reimburse
it for its expenses in conducting the arbitration and consti-
tuting a board here to pass on the claims. This sum is
an)ple for the purpose, and in fact more than sufficient to
nieet all the expenses incident to the transaction.
Upon an examination of the entire case, it will be seen
that—
Ist. The claims of the United States, as a Government,
were rejected, except that there was an allowance for two
or three of its own ships (of little value) destroyed, that
came in under the head of direct losses.
2d. Tiiat a sum in gross was awarded to avoid the delay
and trouble of having the individual cases re-examined
before a board of assessors, where each Government would
be contestants as to every single claim. That sum in gross
was made up by estimating the amount of the individual
claims, with interest added mainly, and that the excess
above this amount was less than one hundred thousand
dollars, which would seem, therefore, to be all that the
Government could fairly claim as subject to its disposition
at its own option.
3d. That in making up the amount of individual claims,
those of insurance companies were included just as those
of individuals; and that the suggestion by the British
consul that, as they had made profits out of the war pre-
miums [laid them, at least the interest might be withheld
on that ground, was indignantly and disdainfully rejected
by our represenaativea.
4th. That the ample sum of $775,000, in gold, has been
retained to reimburse the Government lor its exitenses in
prosecuting the claims and distributing the amounts due to
the several losers.
It would seem, therefore!, that an A(;t similar to the
bill offered liy Senator ('onkling ought to be passcil, under
4257?ii
09
which the board now in session mio:ht consider the claima
of insurers as they do those of individuals. Whatever
suras might be awarded to these various companies would
be applied by them as the laws of the several States under
which they have been chartered already provide.
It is now evident that after all the cases, both of indi-
vidual losses and insurers, are allowed, there will be a large
surplus of the fund remaining. It, with accumulated in-
terest, can be little, if any, less than 120,000,000 in currency
value. It is doubtful if all the claims estimated for at
Geneva, as they are likely to be cut dov> n by the present
board, will amount to more than ten millions. Certainly
it is apparent that the surplus will amount to six or eight
millions.
When this has been ascertained, it will be for our Gov-
ernment to decide whether it will return this excess to
Great Britain, as an individual does an overplus of money
paid by mistake, or whether it will retain it in the Treas-
ury for the benefit of the consumers of the country gen-
erally who sustained losses by the vs'ar. If it should re-
gard this last suggestion as inconsistent with its dignity, it
might divide the surplus among such enterprises as the
Centennial celebration, and the Wiishington and Lincoln
monuments, or it may even, if it thinks fit, bestow the
money upon such other classes of its citizens as claim to
have been especially injured during the war, or at least who
have shown the greatest anxiety to possess it.
Note.
Gentlemen who may not have leisure to examine the
different volumes published will, besides other able argu-
ments, find the subject fully treated in the speeches of
Senator Thurman, delivered in the Senate May 11, 1874,
and of the Hon. Lyman Tremaiu, in the House, June 9,
1874. To this last speech is appended a statement era-
bracing the numerous vessels with their cargoes, their val-
ues, and the claimants for indemnity.
3 1158 01288 4192
UC SOUTHERN REGIONAL LIBRARY FACILIT
" lip I llll I! II! Ill I I II ll{ II II I III I I III 11
AA 000 518 946 9
I II
■/^
>>■::. . Vi^
X