the German banks would in effect be taking the property of a large number of individual customers of the banks and a large number of small depositors. The CHAIRMAN. I do not know what the rest of the committee may think, but I should not be much inclined myself to draw such a distinction. The committee stands adjourned until to-morrow at 10.30 o'clock. (Whereupon, at 5.05 o'clock. p. m., an adjournment was taken until Thursday morning, November 18, 1926, at 10.30 o'clock a. m.) HOUSE OF REPRESENTATIVES, Washington, November 18, 1926. The committee met at 10.30 o'clock a. m., Hon. Willis C. Hawley presiding. Mr. HAWLEY. The first witness to be heard this morning will be the umpire of the Mixed Claims Commission, Judge Parker. He is called here by the committee at the special request of Mr. Garner of Texas, who had some questions he wished to submit. Judge Parker, if you have any statement in general which you wish to make before the committee submits questions, we will be glad to hear your statement. STATEMENT OF HON. EDWIN B. PARKER, UMPIRE, MIXED CLAIMS COMMISSION, UNITED STATES AND GERMANY Mr. PARKER. Mr. Chairman and gentlemen of the committee, I had some hesitancy in appearing before you, and do so only on the invitation of the committee and because I thought perhaps I might be helpful in assisting the committee to reach a sound understanding of the problems before you. I know the committee will appreciate the fact that, occupying the position I do, having, on the nomination of the President of the United States with the concurrence of the German chancellor, undertaken to act as umpire of this international commission, I have, in a sense, denationalized myself, if I may use that term, and it would be highly improper for me to express any opinion with reference to any controversial question of a political nature with which you here have to deal. So you will permit me, I am sure, to confine myself to a naked statement of the facts as I know them to exist, because of my position as umpire. In dealing with any problem, in dealing with a complicated lawsuit, you gentlemen who are lawyers know that the problem is half solved when a clear statement of the facts is made. I have no wish to make a speech. I had come here with the thought that we would have something in the nature of a roundtable discussion to develop the facts, but perhaps it may not be amiss for me, very briefly, to sketch the history of the negotiations, treaties, and proceedings leading up to these awards. I am not going to make a long statment, but at the outset it will be helpful to recall that in the prearmistice negotiations the thing that seemed uppermost in the minds of the allied and associated powers was that the rights of their nationals should be protected. You will recall that in these prearmistice negotiations, which were conducted by the President of the United States with the sanction of the allied powers, it was provided (and this is the only provision in those negotiations with which we are here concerned) that compensation should be made to the nationals of the allied and associated powers for the aggressions of Germany by land, by sea, and by the air. Nothing was said there about the costs of the war. I am referring to these early negotiations and agreements to get the background of and arrive at the intent of the treaty which the Mixed Claims Commis sion had to construe to determine its own jurisdiction in passing upon claims presented to it and in laying down rules for measuring damages in the awards which it has made. When the armistice came to be signed, that was a military document dictated by military convenience for military purposes and to carry out military ends. But when the treaty of Versailles came to be negotiated, the American delegates, having in mind the prearmistice negotiations, objected to placing on Germany any burden in the way of indemnities or reparation which were in the nature of a penalty or which, in effect, represented the costs of the war, and insisted that those reparations should be confined to the payment of compensation for damages suffered by the nationals of the allied and associated powers. Notwithstanding the vigorous protests of the American delegates, there was embodied in the treaty of Versailles, in what is known as Annex I to Section I of Part VIII, dealing with reparations, three paragraphs (Nos. 5, 6, and 7, respectively) placing on Germany the burden of paying all pensions paid by the allied and associated powers to their own nationals and all separation allowances made by these powers to the families of members of their naval and military forces. The items covered by these three paragraphs constituted a very large percentage of the allied reparation claim against Germany. When the treaty of Berlin came to be negotiated and was before the Senate for ratification, a number of the Senators (I remember particularly Senator Walsh, of Montana) objected very vigorously to those items and it was the general consensus of opinion, as evidenced by the debates, that Germany should not be held liable for any of the costs of the war as contradistinguished from compensation to American nationals for damages caused by Germany. Article I of the treaty of Berlin provided, in substance, that the United States should be entitled to all the rights and privileges specified or reserved for its benefit in the treaty of Versailles. When the Senate came to ratify the treaty of Berlin it did so on condition (out of an abundance of caution, although the language probably admitted of that construction) that not only the Government of the United States but the nationals of the United States should be entitled to all of the rights and privileges that they would have been entitled to under the treaty of Versailles. I mention those facts to show how zealously at every step the executive department and the legislative department of the United States has safeguarded the interests of its nationals, although, when the agreement under which this commission was constituted came to be negotiated, the United States expressly stipulated that it would not present to the commission any Government claim arising under those three paragraphs to which the United States had all along objected, representing pensions and separation allowances which the United States had paid its own nationals or might thereafter pay them. And no claim has been presented before this commission in the nature of pensions paid or separation allowances made the families of soldiers. Mr. GARNER. Judge Parker, let me see if I understand just exactly. That is necessary costs of war-injury to a soldier or death of a soldier, or separating him from his family. Mr. PARKER. Yes. Mr. GARNER. Those three. Mr. PARKER. Those three. The United States has at all times maintained the position that the three items mentioned were a part of the cost of the war that should fall on the American Nation as contradistinguished from damages suffered by American nationals which should be paid by Germany. The treaty very frankly recognized the fact that Germany was unable to pay-that her economic resources were such that she could not pay-all of the costs of the war. Now, let me very briefly call your attention to the fact that the financial obligations of Germany, under the treaty of Versailles and under the treaty of Berlin, are divided into two master groups. One of them has to do with reparations; the other arises under the economic clauses of the treaty. They are very different in their scope. Reparations deal with injuries inflicted, almost entirely, outside of German territory-and, with the exception of the occupied territories, very largely on the seas. They have to do with the loss of life, injuries to persons, and destruction of and damage to property in a physical sense. Those are the things with which the Reparation Commission, as constituted under the treaty of Versailles, have to deal. The Reparation Commission has nothing in the world to do with the claims arising under the economic clauses of the treaty. After the treaty of Versailles had come into effect, the Reparation Commission was, under the treaty, empowered and required to compute the aggregate amount of the reparation claim against Germany. In the very nature of things they could not hear every claim. They made a rough estimate. Each country submitted an estimate of the damages done to its nationals under the reparation provisions. A few typical cases were taken and from them, by rule of thumb methods, they made a very rough estimate of the amount of the total claims of that class. Mr. GARNER. That is, the economic claims. Mr. PARKER. No; the reparation claims arising under the reparation provisions of the treaty. And that is the way the amount of the reparation claim of the allied powers against Germany was arrived at by the representatives of the allied powers. Germany had no voice in fixing the amount. I come now to the other major group of claims against Germany arising under the economic provisions of the treaty: The war had disrupted all economic relations, all commercial relations of every character between the belligerents. No German national was permitted to send money to the United States in the payment of a debt due an American national, or a neutral for that matter. Those war measures which prevented the transfer of funds from Germany to a belligerent country were purely territorial in scope. The test was not the nationality of the one to receive the money, but the country to which the fund was to be transferred. And the purpose, obviously, was to prevent funds or property of any kind falling into the hands of the enemy which could be used in the prosecution of the war. But there was another class of economic claims that had to do with property seized in Germany by the German Government or subjected to any exceptional war measures or measures of transfer as those terms are defined in the treaty. These are claims arising out of measures taken by Germany in German territory similar to those taken by the United States through its Alien Property Custodian. In the settlement of claims, of this nature, in order promptly to restore economic relations between the belligerents, the treaty provided for the creation of a clearing-office system (the Treaty of Versailles and the Treaty of Berlin both carry these provisions) the purpose of which was to offset the claims of Allied nationals against the claims of German nationals and "clear" them just as banks make daily clearinghouse settlements. To illustrate, Great Britain created a British clearing office to deal with German claims and Germany created a German clearing office to deal with British claims. The British clearing office collected from British nationals the debts owing by them to German nationals and the German clearing office collected from German nationals the debts owing by them to British nationals. The plan contemplated that the debts should be discharged at the pre-war rate of exchange, and British nationals were required to pay (often under protest) into the British clearing office debts owing by them to German nationals payable in marks at the pre-war rate of exchange when the value of the mark had greatly depreciated. The plan contemplated that Great Britain should also pay into the British clearing office the proceeds of the liquidation of the property of German nationals which it had seized or subjected to exceptional war measures or measures of transfer during the war which should be utilized for the payment of the claims of British nationals whose property had been seized by Germany during the war, giving Germany credit for the amount so paid to British nationals. The plan further contemplated that Germany, through the German clearing office, should pursue the same course and that payments made by one Government to its nationals should be offset against the payments made by the other Government to its nationals, and a balance struck. The American delegates objected in the negotiation of the treaty of Versailles to the clearing-office system. The system contemplated that each government should guarantee the debts of its nationals. Most nations adopted the clearing-office system, but the United States did not. You will note that the plan was reciprocal in its nature. There were also set up mixed arbitral tribunals by the allied powers between Germany and England, between France and Germany, and between Germany and other allied powers, to hear claims which could not be settled through the clearing office, or where there was a controversy with respect to claims where property had been seized by Germany or by an allied power. These mixed arbitral tribunals are still functioning, but they have largely disposed of their work. You will bear in mind, then, that with respect to the claims arising under the economic provisions of the treaty of Versailles very large payments have already been made to British nationals, to French nationals, and to other allied nationals from the funds in the hands of the allied powers or from collections made by the allied powers from their own nationals of debts owing by them to German nationals. Under those provisions debts are to be settled at the pre-war rate of exchange. The reason for that was that on the declaration of war debts could not be paid, and if they were due on the declaration of war the creditor was entitled then to payment at the then rate of exchange. If the debt matured during the war, he was ordinarily entitled to payment at the then rate of exchange. Under those provisions Great Britain has required British nationals to pay into the British clearing office debts owing by the British nationals to German nationals, payable in marks at the pre-war rate of exchange. The British nationals protested, saying their debt was owing in marks, that they had the marks and they wanted to pay them with marks. Great Britain said, "No; under this agreement, which is reciprocal, you can not pay your creditor; you must pay into the British clearing office and at the pre-war rate of exchange." I mention that simply to show that under this clearing-office system, which was entirely reciprocal in its operations, very large amounts have been paid to the nationals of the allied powers. Mr. HAWLEY. Did not that increase the burden on the English debtor? Mr. PARKER. Very materially. But the theory of the treaty was that the English debtor owed the German debtor at the pre-war rate of exchange; in other words, that the English debtor, when the debt was contracted, got value measured by the pre-war standard, and he must account on that standard. So far as I know, only one nation-Japan-has completed its work under the clearing-office system. In Japan all of the claims arising under the economic clauses have been disposed of, and Japan has, I am advised, turned back to the German nationals their properties, or the proceeds thereof, which Japan had seized during the war after satisfying there from the claims of Japanese nationals arising under the economic clauses of the treaty of Versailles. Canada has adopted the clearing-office system and now has a commission dealing with reparation claims. Most of her clearing-office claims. and other claims arising under the economic provisions of the treaty have been disposed of. Now we, the United States-you will pardon me. I said a moment ago that I had denationalized myself, but I keep on saying "we when I speak of the United States. The United States not only did not adopt the treaty of Versailles but it did not adopt the clearingoffice system. It did not adopt any of the methods of payment or methods of ascertaining the financial obligations of Germany which the allied powers did adopt. After the treaty of Berlin became |