"On the other hand, the British authorities in now seeking to condemn the ships of the American Transatlantic Company, which are owned by an American corporation and fly the American flag, on the ground, as they state, that they believe these vessels to be entirely, or to a large extent, enemy owned, apparently attach great importance to beneficial ownership and no importance to the flag or corporate ownership."

Apart, however, from theories of ownership, the facts did not, in Mr. Lansing's opinion, justify a change of treatment. "The owners of the vessels have informed the Department that they have complied strictly with the British Government's conditions, and the Department has no information to the contrary." 1 (White Papers, published by the Government of the United States.)

1

THE DACIA

Conseil des Prises at Paris, August 5, 1915

AN immediate effect of the War of 1914 was the enforced withdrawal of the German merchant marine from international commerce. This led to a scarcity of available shipping and the question was early raised under what circumstances it was permissible in international law to transfer belligerent vessels to a neutral flag. An attempt was made by the Ship Purchase Bill to acquire German ships for the United States for use in the Latin-American trade, but it failed of enactment, in part perhaps through fear of international complications. The difficulty lies in the adverse presumptions and the close scrutiny to which all such transfers are subjected. The Declaration of London lays down the following rule:

"The transfer of an enemy vessel to a neutral flag, effected after the opening of hostilities, is void unless it is proved that such transfer was not made in order to evade the consequences which the enemy character of the vessel would involve.

"There is, however, absolute presumption that a transfer is void:

1 The cases of the Hocking and the Genesee, so far as ascertained, are still pending (October, 1916).

"(1) If the transfer has been made during a voyage or in a blockaded port.

"(2) If there is a right of redemption or of reversion.

"(3) If the requirements upon which the right to fly the flag depends according to the laws of the country of the flag hoisted have not been observed." 1

In a memorandum of August 7, 1914, the Hon. Cone Johnson, Solicitor for the State Department, gave the following official opinion relative to the transfer of merchant ships of a belligerent to a neutral after the outbreak of war, which memorandum he admitted was "hurriedly struck off" without opportunity to revise it.

"The declaration of the London convention on the question of the transfer of merchant vessels from a belligerent to a neutral flag but restates the position long-maintained by the United States, Great Britain, and most of the other maritime nations, except as to the burden of proof of the bona fides [good faith] of such a transfer made during the existence of war. It is the bona fides of the sale which is the essence of a good transfer, and it is not perceived that the ulterior motive actuating the parties to the transfer is to govern, though such motive may have been the natural advantages in having the ship to fly the flag of a neutral rather than that of a country at war. If the transfer was bona-fide, without defeasance or reservation of title or interest, without any understanding that the vessel should be re-transferred at the end of hostilities, and without other indicia of a simulated or fictitious transfer, and not of a ship in a blockaded port or in transitu, the transfer is valid under international law, as it would be under the London convention, though the ulterior motive of the vendor and vendee may have been the natural advantages of flying the flag of a country at peace."

Among a number of citations in support of this opinion the memorandum gave one from the decision in the case of the Benito

1 Though the framers of the Declaration considered its rules as corresponding “in substance with the generally recognized principles of international law," this statement cannot be taken too literally. The British Order in Council of October 20, 1915, which abrogated Article 57 of the Declaration directed its Prize Courts to return to "the rules and principles formerly observed." (The Hocking, pp. 361-62.)

Estenger (176 U. S. 568), in which the Supreme Court of the United States had stated the general principle, as follows: 1

"Transfer of vessels flagrante bello [while war is raging] were originally held invalid, but the rule has been modified and is thus given by Mr. Hall, who, after stating that in France 'their sale is forbidden, and they are declared to be prize in all cases in which they have been transferred to neutrals after the buyers could have knowledge of the outbreak of the war,' says: 'In England and the United States the right to purchase vessels is in principle admitted, they being in themselves legitimate objects of trade as fully as any other kind of merchandise, but the practice of fraud being great, the circumstances attending a sale are severely scrutinized and the transfer is not held to be good if it is subjected to any condition or tacit understanding by which the vendor keeps an interest in the vessel or its profits, control over it, and power of revocation, or a right to its restoration at the conclusion of the war.'" 2

The question of the validity of transfers during war was raised in a direct manner by the announcement on January 4, 1915, that the Dacia, of the Hamburg-American line, had been purchased by one Edward N. Breitung, of Marquette, Michigan. American registry was granted in accordance with the provisions of the amendment to the Panama Canal Act of August 18, 1914, and the ship placed under charter to carry a cargo of cotton from Galveston to Bremen. The transfer at once became a subject of international discussion. The British Government announced that the Dacia would be seized as a test case, and rejected a request of the Government of the United States that the vessel be allowed to proceed with her cargo to Rotterdam under a safe-conduct, though

1 The Benito Estenger was a Spanish vessel transferred to British registry during the Spanish-American War. The Court found that the transfer was colorable and had been effected for the purpose of protecting the vessel from the consequences of enemy ownership. There was no proof that any purchase money had passed. The Spanish captain and crew were retained and the former Spanish owner was on board, as supercargo, it being admitted by his counsel that he "still retained a beneficial interest after this sale and transfer of flag." Sentence of condemnation was affirmed. 2 Compare the decision in the Ariel (Moore, P. C., vol. x1, p. 119): "Their Lordships are of opinion that there is abundant proof that the sale was made imminente bello [when war was imminent] and in contemplation of it. Still, if the sale was absolute and bona fide, there is no rule of international law, as laid down by the courts of this country, which makes it illegal. Such a bona-fide sale, made even flagrante bello, would be legal, much more imminente bello."

it promised to guarantee the owners of the cargo against loss (cotton not having then been declared contraband). In the end, however, it was France, not Great Britain, which took action in the case, it having been recognized by the Allies, it would seem, that French practice regarding such transfers was more uniformly hostile to them than that of Great Britain. Accordingly, on her voyage to Rotterdam, the Dacia was captured in the English Channel on February 27, 1915, by the French cruiser Europe and taken into Brest. After a commission appointed for the purpose had reported to the Minister of Marine that the seizure was valid, the Prize Court took jurisdiction and rendered a decree of condemnation on August 5, 1915.

As regards the facts, the court pointed out that the Dacia had been habitually engaged in the German trade with Gulf ports. The outbreak of war had found her at Port Arthur, Texas, where she had been compelled to remain to escape capture. On December 7, 1914, one Egon von Novelly, "a promoter, without solvency, and with whom no ship-owner could have serious business," signed and sent to Sickel, a director of the Hamburg-American Line, an offer of $165,000 for the Dacia, subject to obtaining American registry, the vessel to be engaged in carrying cotton or other noncontraband to Germany or Austria or neutral countries. Sickel, however, declared that he never received the letter containing this offer. On December 9, an agreement was made between Tom B. Owens of Fort Worth and E. von Novelly & Co., whereby the latter were to place the Dacia at the disposal of Owens for the purpose of carrying a cargo of 11,000 bales of cotton from Galveston to Bremen, freight to be payable on signature of the bills of lading, and Novelly & Co. to have the right to take additional bales on their own account "without prejudice to the cargo of Owens." It was also proven that the cotton had been sold by Owens & Co. to Harold von Linstow, of Bremen, acting for various German interests, the contract calling for delivery, direct or indirect, by the steamer Dacia. The sale had been made and the financial arrange

1 "The French practice dating as far back as the Réglement of 1694, and confirmed by that of 1778, ignores all sales of ships by enemies not made by authentic acts previous to the declaration of war or the commencement of hostilities." (Westlake: International Law, vol. II, p. 171.) For the texts of these ordinances see Lebeau: Nouveau Code des Prises [Paris, an VII], vol. I, p. 189; vol. I, р. 61.

ments guaranteed by the Deutsche Bank and the DiskontoGesellschaft of Germany. On December 16, the Hamburg American Line "confirmed its agreement" to sell the Dacia to Von Novelly for $165,000, the money to be returned in case of failure to obtain American registry. This agreement was followed by the cession by Von Novelly of all his rights to Breitung, the director of the company, however, declaring under oath that he was not aware of the cession until some time afterwards. The alleged bill of sale, as furnished to the authorities of the United States and later found on board the Dacia, represented Breitung as the co-contractant, though it was signed neither by himself nor by his representative. On December 16 and 21 Breitung sent to the Guarantee Trust Company, of New York, two checks in favor of the Hamburg American Line, amounting in all to $165,000. The same banking house advanced to Owens, on behalf of the two German banks aforementioned, seventy-five per cent of the purchase price of the cotton, Owens depositing with the Trust Company his insurance policies and other necessary papers. Thus, in the opinion of the court, the sale implied a property in the cotton on the part of the German purchasers from the time of shipment, subject to a lien of the Trust Company. The freight, payable in advance, amounted to $172,669, being $7,669 in excess of the price paid for the ship. In this way Breitung was reimbursed for his outlay from the first, as was Owens to the extent of seventy-five per cent of the value of his cotton.

Taking up the law involved in the transfer of the Dacia, the court held that it was to be governed by the decree of November 6, 1914, which had put the Declaration of London in force during the war, subject to certain reservations not in point in the present case. Both parties had recognized Article 56 as the only rule to apply, but, as the Declaration had not been ratified, it had merely national validity, and was subject to the interpretation of the court, whose reasoning, in part, was as follows:

"Whereas Breitung claims that the transfer of the Dacia to the American flag has not been made for the purpose of escaping the consequences which its enemy character brought upon it, alleging important and legitimate interests as the motive for acquiring it. . . .