Papers Relating to the Foreign Relations of the United States, With the Annual Message of the President Transmitted to Congress December 6, 1904

Mr. Penfield to Mr. Hay.

Washington, May 15, 1904.

final report of the agent of the united states in the venezuelan arbitration of 1903 before the hague tribunal.^a

Sir: I have the honor to submit the following report of the proceedings of The Hague Tribunal in the arbitration between Great Britain, Germany, and Italy on one side, and, on the other, Venezuela, the United States, Mexico, Spain, France, Belgium, the Netherlands, and Sweden and Norway.

The arbitration had its origin in a controversy which arose over certain pecuniary claims of the subjects of Great Britain, Germany, and Italy against the Republic of Venezuela. A solution not having been reached by the diplomatic negotiations, the controversy culminated on December 11, 1902, in the ordering by Great Britain of a blockade of the ports of Venezuela. Two days afterwards Venezuela offered to submit the controversy to arbitration. This offer was ignored, and seven days later the blockade of the Venezuelan ports was declared by the British, German, and Italian Governments. The negotiations between the blockading powers and Venezuela had been prolonged, and the first offer from Venezuela to submit the matter to arbitration was made on December 13, 1902.

The United States, at the same time, had claims of long standing against Venezuela, which had been presented against the latter and had been the subject of much discussion between the two Governments. Mexico, Spain, France, Belgium, the Netherlands, and Sweden and Norway also held claims against Venezuela which had been the subject of more or less diplomatic negotiation, but no forcible measures had been employed by these Governments to secure the adjustment of their claims.

Mr. Herbert W. Bowen, the United States minister to Caracas, was appointed by Venezuela with full powers to negotiate with the representatives of the creditor powers a settlement of the entire matters in controversy. The negotiations took place at Washington during the winter and spring of 1903 between the plenipotentiary of Venezuela and the diplomatic representatives of the several creditor powers.

In the course of his negotiations with the representatives of the blockading powers, Mr. Bowen, on January 23, 1903, placed in the hands of the British ambassador the following offer:

Mr. Bowen proposes that all claims against Venezuela shall be paid out of the customs receipts of the two ports of La Guaira and Puerto Cabello, the percentage to be 30 per cent each month of the receipts. In case of the failure on the part of Venezuela to pay the said 30 per cent the creditor nations will be authorized to put, with the consent and without any opposition on the-part of Venezuela, Belgium customs officials in charge of the said two custom-houses and to administer them until the entire foreign debt is paid.

On the same day, in answer to a request of Mr. Bowen that the blockade be raised, the representatives of the blockading powers stated the terms on which the blockade would be raised. The British Government stipulated, first, for the cash payment of certain claims—styled first-rank claims—in the sum of £5,500; second, other claims for compensation, including railway claims and those for injury or wrongful seizure of property, must be met by immediate payment to His Majesty’s Government or by a guaranty adequate to secure them. These claims to be submitted to a mixed commission.

The terms imposed by the German Government were of similar import to those demanded by the British Government, except that the cash payment was to be over $400,000. The same terms and cash payment were demanded by the Italian Government as those named by Great Britain.

On January 24 Lord Lansdowne inquired whether it was proposed “that the 30 per cent should be paid to the blockading powers only, or are the whole of the creditor powers also to share the benefit?” He took the position that the claims of the blockading powers should not rank on the same line with other claims for compensation. Mr. Bowen answered, on January 27, that it was impossible to give to the blockading powers priority over other creditor powers in the payment of their claims; and on the same day he made an assignment of 30 per cent of the revenues of the two principal Venezuelan ports in the following terms:

I hereby agree that Venezuela will pay 30 per cent of the total income of the ports of La Guaira and Puerto Cabello to the nations that have claims against her, and it is distinctly understood that the said 30 per cent will be given exclusively to meet the claims mentioned in the recent ultimatums of the allied powers and the unsettled claims of other nations that existed when the said ultimatums were presented.

On January 28 Lord Landsdowne declared that—

His Majesty’s Government can not admit that pledges given by Mr. Bowen to the powers which are not engaged in the blockade are binding on this country. His Majesty’s Government can not accept a settlement which would force them to place their claims on the same footing as those of the nonblockading powers.

Mr. Bowen declined to accept this view, and it was agreed by Venezuela and the blockading powers to refer the question to the determination of The Hague Tribunal.

the issues.

The issues to be tried were stated in somewhat varying terms in the different and successive protocols signed between Venezuela and the creditor powers. In the protocols signed on February 13, 1903, between Venezuela and the blockading powers, the issue was stated in substantially the same terms in the German and Italian protocols as it was in the British protocol, which reads as follows:

The Venezuelan Government being willing to provide a sum sufficient for the payment within a reasonable time of the claims specified in article 3, and similar claims preferred by other governments, undertake to assign to the British Government, commencing the 1st day of March, 1903, for this purpose, 30 percent in monthly payments of the customs revenues of La Guaria and Puerto Cabello.* * * Any question as to the distribution of the customs revenues so to be assigned and as to the rights of Great Britain, Germany, and Italy to a separate settlement of their claims shall be determined, in default of arrangement, by the tribunal at The Hague, to which any other power interested may appeal. Pending the decision of The Hague Tribunal the said 30 per cent of the receipts of the customs of the ports of La Guaira and Puerto Cabello are to be paid over to the representatives of the Bank of England at Caracas.

The protocol of February 17, 1903, between the United States and Venezuela, for the creation of a mixed claims commission at Caracas, stated the issue which was to be submitted to The Hague Tribunal as follows:

In order to pay the total amount of the claims to be adjudicated as aforesaid (at Caracas) and other claims of citizens or subjects of other nations, the Government of Venezuela shall set apart for this purpose, and alienate to no other purpose, beginning with the month of March, 1903, 30 per cent in monthly payments of the customs revenues of La Guaira and Puerto Cabello, and the payments thus set aside shall be divided and distributed in conformity with the decision of The Hague Tribunal.

The issues as finally formulated and submitted in the protocols signed on May 7, 1903, between Venezuela and the blockading powers, were stated as follows:

Article I. The question as to whether or not Great Britain, Germany, and Italy are entitled to preferential or separate treatment in the payment of their claims against Venezuela shall be submitted for final decision to the tribunal at The Hague.

Venezuela having agreed to set aside 30 per cent of the customs revenues of La Guaira and Puerto Cabello for the payment of the claims of all nations against Venezuela, the tribunal at The Hague shall decide how the said revenues shall be divided between the blockading powers on the one hand and the other creditor powers on the other hand, and its decision shall be final.

If preferential or separate treatment is not given to the blockading powers, the tribunal shall decide how the said revenues shall be distributed among all the creditor powers, and the parties hereto agree that the tribunal in that case shall consider, in connection with the payment of the claims out of the 30 per cent, any preference or pledges of revenue enjoyed by any of the creditor powers, and shall accordingly decide the questions of distribution so that no power shall obtain preferential treatment, and its decision shall be final.

In accordance with the provision of Article VI of the protocols, the other creditor powers joined as parties to the arbitration. The litigating States consisted of Venezuela, the United States, Mexico, Spain, France, Belgium, the Netherlands, Sweden and Norway, Great Britain, Germany, and Italy—eleven in all.

the award.

The tribunal awarded to the blockading powers the preferential payment of their claims over those of the other creditor States against Venezuela out of the 30 per cent of the customs revenues of the ports of La Guaira and Puerto Cabello.

It was conceded by counsel on both sides that the law of nations afforded no clear rule for the decision of the controversy. No such case had ever before arisen, and in the course of the trial neither the counsel nor the arbitrators were able to cite any authority, either from decisions of arbitral tribunals or from the writings of publicists, which was plainly applicable to the case. The collection of the Chinese indemnity, growing out of the Boxer movement in 1900, was most nearly in point, and was strongly urged by counsel for the United States in support of the principle of equality of treatment of creditor States.

The force and value of the award as a precedent can not yet be justly measured. By some it may be approved as giving to the blockading powers the just reward of their military exertions by securing the prompt payment of their claims, while leaving the other creditor States free to secure in their own way the payment of their claims. By others the award may be regarded as a premium on war, as inconsistent with the spirit of The Hague Convention, and as tending to incite armed conflicts between creditor States having claims against a common debtor. If the latter view, which was urged to the tribunal by the counsel for the United States, is correct, the injurious effects of the award as a precedent will be limited by other and later arbitral decisions and by the action of public opinion.

The arbitrators signed the award on February 22, 1904. The president of the tribunal thereupon called on the secretary-general of the tribunal to read the award in open session. Immediately after the award was read, and before this last session of the tribunal was closed, the president of the tribunal delivered an allocution touching on the war which had broken out in the Far East after the rupture of diplomatic relations between Russia and Japan on February 6, 1904. Not until after the conclusion of his address did the president declare the session closed and the tribunal of arbitration formally dissolved. In giving a faithful report of the arbitration proceedings from the beginning to the end, it is a painful duty to record the fact that this allocution was thus made a part of the proceedings. The speaker declared:

Obviously, it is neither the time nor the place for politics, and we will not treat of politics; but I may be permitted to speak a few words before closing this grand manifestation of the conciliatory spirit of nations and give expression to some personal considerations on the subject of recent events which have also so unfavorably changed the circumstances under which we first met within these hospitable walls. * * * We aspire to peace with all the strength of our soul, and labor for it assiduousty with conviction and fervor and, nevertheless, we are not safe from a hostile challenge—from an unexpected attack. We sincerely desire the maintenance of peace and we are forced to accept courageously a war of legitimate self-defense in the name of the honor and dignity of our country. In this painful conflict of heart and duty there remains one supreme consolation—ardent and absolute faith in the just Providence of peoples and of battles, who will know how to distinguish between valid right and ambitious pretensions, between calm resolution and immovable constancy on the one hand, and warlike zeal and passionate ardor on the other. But when the tempest which throws the two currents, European and Asiatic, into such violent collision shall have passed—and everything passes in this world—then we religiously believe the thick clouds which have darkened our horizon will be scattered.

Considering the character of the tribunal, the exalted position of the speaker, and the occasion on which the address was delivered, it was received with a painful feeling of surprise, not unmixed with apprehension as to its possible effects on the future workings of the tribunal. Inasmuch as it was made a part of the permanent record of the proceedings, it seems proper to annex to this report the formal protest of the Japanese Government, filed with the secretary-general on February 27, 1904, against the use of the high court for the purpose of “attacking the action, motives, or good name of any power signatory of The Hague Convention.”

The award provided that each party to the litigation should pay its own costs and an equal share of the costs of the tribunal, and charged the United States Government with seeing to the payment of all these costs within three months from the date of the award. This portion of the award was calculated to place the United States Government in an embarrassing position. The protocols had conferred upon the tribunal no authority to delegate to the United States Government the duty and the power to require the litigant States to pay their respective shares of the ordinary costs of the litigation and of the compensation of the arbitrators. Accordingly, the Government of the United States had to decline to undertake the delicate task with which it had been honored by the mandate of the tribunal. It is a pleasure to be able to report that all of the interested States have fully acquitted themselves of their respective liabilities for the costs of the litigation and for the honorarium of the arbitrators.

the procedure.

Under the protocols of May 7 the Russian Emperor was to appoint from the members of the permanent court three arbitrators, none of whom should be a citizen or subject of the creditor States, and who were to meet on September 1, 1903, and render their decision within six months thereafter. The protocols declared that the proceedings should be carried on in the English language, but that arguments might, with the permission of the tribunal, be made in any other language also.

Although the United States and Venezuela promptly notified the Russian Government of the making of the protocols and requested the appointment of the arbitrators by the Emperor, His Imperial Majesty did not appear to have been seasonably notified by certain other of the arbitrating States. On September 1 only one arbitrator appeared at The Hague, Mr. N. V. Mouravieff, the minister of justice and attorney-general of the Russian Empire. An adjournment was informally taken. On October 1, 1903, two other arbitrators having been duly appointed, the tribunal assembled and organized. The other arbitrators named were Professor Lammasch, member of the Upper House of the Austrian Parliament, and Mr. de Martens, permanent member of the council of the imperial ministry of foreign affairs at St. Petersburg. Mr. Mouravieff was chosen as president of the tribunal and formally declared its sessions opened.

When the tribunal opened its sessions on October 1, Venezuela submitted its preliminary examination to the tribunal, and on October 5 the tribunal adjourned its sittings to November 4. The interval was given for the preparation and submission by the other States of their preliminary examinations and to their study by the tribunal. The oral arguments occupied twelve days in all. They were made, under the ruling of the tribunal, in the alphabetical order of States, as follows: Belgium, France, Germany, Great Britain, Italy, Mexico, the Netherlands, Spain, Sweden and Norway, the United States, and Venezuela. Opening arguments were permitted to be made in English or French, by all the counsel if they chose to do so, but the replies were limited to one counsel for each of the parties. Notwithstanding the plain provision of the protocol that the proceedings should be conducted in the English language, the preliminary notices of the tribunal were issued in the French language.

The president of the tribunal used the French language exclusively during the entire proceedings. The delegates of the French Government contended for the use of French as the official language. The counsel for Venezuela and the United States, as well as those of Great Britain and Germany, contended that the terms of the protocols had settled the question in advance. The tribunal finally decided to recognize the English as the official language of the proceedings and the French language as subsidiary, and equally authentic, on the ground that it was familiar to the arbitrators and to the majority of the representatives. The oral arguments of counsel were permitted to be made in English or French only, while the record of the proceedings was made up in both languages.

The agent appointed by the French Government to represent it before the tribunal was the legal adviser of its foreign office and happened to be a member of the permanent court. The counsel for Venezuela filed with the International Bureau their objections to the establishment of precedents which might seem to sanction the appearance of members of the permanent court as counsel before The Hague Tribunal, which was made up of members appointed from that court.

In the two cases which have been submitted to The Hague Tribunal members of the permanent court have appeared as counsel. In the Pious fund case the Mexican Government employed a member of the permanent panel as one of its advocates. Thereupon the American claimant employed another member of the panel as one of his counsel. This counsel was not employed by the United States Government, but as an act of favor to the claimant he was permitted to appear.

These incidents recall the efforts made by Lord Pauncefote to disqualify by The Hague Convention members of the permanent court from acting as counsel before the tribunal. Some of the more obvious objections to this practice were stated in a protest which was filed with the tribunal by the counsel for Venezuela in the recent arbitration. The stated grounds of objection were that “such persons, owing to their presumed acquaintance with other members of the tribunal in advance of its meeting and of their presumed fitness to express weighty opinions, might be supposed to possess certain advantages over counsel not so situated, and this conviction might lead litigants to suppose that a proper protection of their interests required them to retain some member of the court as counsel in a given case.” The second objection urged was that suspicion might attach itself to the proceedings before the tribunal and that a decision in favor of a member of the tribunal acting as counsel in one instance might exert more weight when the counsel of yesterday, who received a favorable decision, is himself a judge to-day, and the judge of yesterday is appearing as counsel before him. Finally, the protestants expressed the opinion that the practice, if permitted, would impair the reputation of the permanent court for disinterestedness and impartiality.

Notice of this action of counsel was taken by the British Government, which also entered a protest against the appointment of a member of the permanent court to act as counsel in the Venezuelan arbitration. The protest declared it to be “of the utmost importance that the impartiality of the members of the court, who may be called upon to act as judges, should remain beyond all possibility of suspicion, and the force of the objections to their acting as advocates is greatly increased by the fact that the number of possible litigants is limited, while the questions to be decided will constantly affect the interests of a large number, or even of all, of these litigants. Unless precautions are taken to guard against such a contingency, members of the court will continually find themselves called upon to deal as judges with the interests of those who have been their clients in the not remote past or may become their clients in the not remote future.”

This protest drew from the French Government a formal answer. It declared that it had designated its agent to represent it before the tribunal, and that this designation was conformable to its rights. It referred to article 37 of The Hague Convention, which leaves to the parties entire liberty to choose their own agents and counsel. It referred to a report made by a committee on the subject to The Hague Conference, in which it appeared that certain members considered it important to debar members of the permanent panel from appearing as agents and counsel before the tribunal, with the exception that a member of the panel might represent his own government in cases before the tribunal. Another member of the committee was of opinion that no member of the panel should, during the exercise of his functions as a member of one arbitral tribunal, accept employment as the agent or counsel before another tribunal.

The French Government did not meet the question on its merits, but, after stating certain views of the question expressed at The Hague Conference, truly affirmed that it was within its legal right in designating its agent in the case under consideration. It suggested that the question might be properly raised only in the future and through diplomatic channels.

Experience in the trial of the first two cases before The Hague Court, namely, in the Pious fund case and the Venezuelan case, suggests: First, that in future arbitrations the protocols should name directly the arbitrators selected by the litigating states; or, failing that, that the odd arbitrator should be named by the others thus directly selected. This is entirely practicable, considering the number of members of the permanent court from whom competent and satisfactory arbitrators may be chosen, and that the choice of the arbitrators is not limited to the members of the permanent court. Second, that the protocol should prescribe the language of the proceedings and of the debates, and that the arbitrators selected must have sufficient knowledge of that language to be able to understand and speak it readily. Third, that it should be stipulated that neither of the litigant states should employ as agent or counsel any member of the permanent court. Fourth, that the arbitrators be selected from the permanent court if that should be practicable, but that in no event should a citizen or subject of the litigant states be named as arbitrator, or that at least a majority of the arbitrators be chosen from citizens of states not parties to the litigation. This course was pursued in the Pious fund and Venezuelan cases, and has been adopted in the pending arbitration between France and Great Britain of a dispute between them in regard to Muscat.

In submitting this report I take pleasure in testifying to the official staff of the tribunal our appreciation of the many courtesies received at their hands, as well as to Mr. Charles Ray Dean and Mr. Walter Scott Penfield, secretaries of the American delegation, for their diligent attention and efficient aid in the preparation of the case for Venezuela and the United States. I gladly pay hearty tribute to Mr. Wayne MacVeagh and Mr. Herbert W. Bowen, of counsel in the case for Venezuela and the United States, for their energy, zeal, and devotion in behalf not merely of the particular cause they represented, but of the higher cause of international peace by arbitration. And to you, sir, I beg leave to express my grateful acknowledgments for the cordial cooperation, thoughtful consideration, and unfailing courtesy which cheered and sustained our labors throughout the entire controversy.

Respectfully submitted.

W. L. Penfield,
Agent and of Counsel for Venezuela and the United States.

1. For full report see S. Doc. No. 119, 58th Cong., 3d sess.