[Sailor Steve]

Wednesday, April 23, 1919

PARIS PEACE CONFERENCE

President Wilson’s House, Place des Etats-Unis, Paris 11:00

Meeting of the Council of Four (Italy not in attendance)


The Council has before it a printed Memorandum on the various documents prepared by the Committees in connection with Reparation.

1. Mr Lloyd George doubts the expediency of only having one representative for each nation on the Commission. He thinks the number should be two as it might be desirable to Members on have two types of men, for example, a financial and judicial expert.

Mr Davis points out that substitute members are provided for.

Mr Lamont says the point has been carefully considered and provided for by means of coadjutor delegates. It had been considered that if there are two delegates for each of the five nations the Commission would become unwieldy and it would hamper progress. In any case delegates would require experts and sub-commissions would have to be appointed.

President Wilson points out that it was the difference between the Quai d’Orsay Council of Ten and the recent conversations of the Council of Four. Mr Lloyd George agrees this is a very substantial difference.

M Clemenceau suggests that the coadjutor delegates practically provide what Mr Lloyd George asked for.

Mr Lloyd George says he would not press the matter.


2. Attention is next drawn to a clause prepared by the American Delegation providing for the right of withdrawal upon six months notice by any nation on the Commission.

President Wilson explains that, in his opinion, no nation ought to withdraw from a Commission but his legal advisers have informed him that no Treaty can be withdrawn from, or even renounced, unless there was a provision to that effect. He thought that public opinion in the United States would demand that there should be such a clause, although he hoped it would never be necessary to use it.

Mr Lloyd George asks for the substitution of 12 months notice instead of 6.

President Wilson agrees to accept this substitution.

(It is agreed that the clause providing for the right of withdrawal should be adopted with the substitution of 12 months notice instead of 6.)


3. Mr Davis says that the American Delegation considers that the secrecy provision should be withdrawn. The feeling is that to set up a secret clause in a public Treaty would make a bad public impression. If the delegates on the Commission are honest, they will not give out information; if they are dishonest, they will do so whether the clause is there or not.

Mr Lloyd George points out that the object of the clause is not to exclude Governments from making announcements but to prevent the officials on the Commission from doing so. He points out that it is vital in matters of finance that information which might affect the money markets should not be allowed to leak out.

President Wilson says that their objections are not to the actual secrecy but they wish to protect the Peace Conference against the attacks of those who declare that everything should be public. He agrees with Mr Davis that if discreet people are put on the Commission they will not give information away.

Mr Lamont suggests that every Government will give its own instructions to its own Delegates.

(It was agreed that Article 8 should be deleted.)


4. Arrangements for Determining the Amount and Conditions of Bonds, etc. Mr Davis says that the French and Italian Representatives are in agreement with the American Proposal.

Lord Sumner says that the Italians agree with the British Delegates; the United States and French Delegates are opposed to the British and Italian Delegates.

Mr Lloyd George explains that the British experts apprehend that if one Power is in a position to veto an issue of Bonds, it might be able to use this power to extort special terms. They might refuse to agree to an issue of Bonds, unless some special conditions were agreed to.

M Loucheur says that he agrees with the United States proposal.

Mr Lloyd George says that as he is alone in this matter, he will not press the objection.

(The American proposal for Clause is adopted.)


5. Determination of the Rate of Interest.
M Loucheur says that a point affecting the rate of interest has been overlooked from Article 20. He then reads the following extract from an Article prepared on the subject:

“La Commission déterminera périodiquement, à la majorité, le taux de l’intérêt (au maximum 5 p. 100) dont sera débitée l’Allemagne sur sa dette, telle que l’aura fixée la Commission, et aussi les dates à partir desquelles l’intérêt sera débité sur les montants respectifs de a dite dette.”2

This, M Loucheur says, is an American proposal. He says that originally a different text had been proposed based on the principle that a rate of 5% should be fixed leaving the Commission the right to fix a lower rate. Mr Norman Davis had objected to this. M. Loucheur’s recollection was that Mr. Lloyd George had supported Mr. Norman Davis on the ground that he considered it better from a political point of view to determine the rate of interest on the lines now proposed. The original proposal would appear to make concessions to the Germans and would create a bad impression from a political point of view.

Mr Lloyd George says that if the Germans are given a lower rate than 5% when the Allied and Associated Governments had to pay 5% themselves, public opinion would ask why the Germans should be allowed to pay less. On the other hand, if the general rate of interest should fall, he thought that Germany should have the benefit thereof and that the Commission should have the right to fix a lower rate of interest. So long as we pay 5%, the Germans should pay 5%. The Commission should not have the power to give the Germans any preferential rate of interest. He thought that it was more a question of form than of substance. Do not the American delegates agree that if we paid 5% the Germans should do the same?

President Wilson says that they all do. The only question is as to who should have power to lower the rate.

Mr Lloyd George proposed to leave this to the Commission. He would rather regulate the payment of interest altogether than the rate.

M Clemenceau and M Loucheur say that they agree.

(On Mr Lloyd George’s proposal, the drafting of a revised paragraph is left to the Expert Committee.)


6. Interest on Pensions. M Loucheur reads the following clause, which is a continuance of the clause quoted in the preceding section and which it is proposed should be added to Article 10:

“L’intérêt sera débité:

1) sur le montant des dommages matériels (pour la fraction correspondant à la valeur d’avant guerre), à partir du 11 novembre 1918;
2) pour les pensions, à partir du jour où elles sont payées par chaque pays intéressé.”

Mr Lloyd George considers a proposal as regards interest on material damage to be a mistake. If repairs are made in kind, it will mean interest is being paid on things rebuilt and it would be very difficult to assess the value. He does not, however, press the point. He does object strongly, however, to the arrangement for pensions under Clause (2). He explains that he only wants equal treatment for damage of all kinds. He cannot acknowledge that damage to houses was more important than damage to human life. The latter is irreparable. No fair interest on this could be paid unless the value of the pensions was capitalized. The same thing should be done whether it refers to a house or to a man. Supposing by May 1st, 1921, the Commission had established that the Bill for Housing was five thousand million pounds and for pensions three thousand million pounds. Both ought to be in the same category. He then calls attention to Annex I, Article I, Clause (e) and suggests that a clause based on the following words should be substituted for M Loucheur’s proposal:

“The amount due to the Allied and Associated Governments to be calculated for all of them as being capitalized cost of such payments on the basis of the scales in force in France at the date of the signature of this Treaty”.

This, he points out, will provide that Germany should not be responsible to go on paying for 60 years. The sum would be capitalized as arranged by the Commission.

M Loucheur says that French delegates will agree.

(Mr Lloyd George’s proposal is accepted.)


7. M Loucheur points out that the original date for the calculation of pensions, namely, November, 1918, does not take into account the fact that pensions have been paid by the various Governments long before that date. He suggested that some provision should be made for this.

Mr Lloyd George pointed out that this would be covered if the words “at the date of the signature of this Treaty” were added in the above clause after the words “capitalized cost”.

(The addition of these words is approved.)


8. Participation of Germany in the Proceedings of the Commission - Appendix: Annex 2, Article 13 Mr Lloyd George says he does not like the proposal that the Germans should not have power to challenge any proposal of the Commission. He agrees that they should not be able to prolong the discussion for years. Nevertheless, they ought to be able to make representations on any subject.

(At this moment Mr Lloyd George withdraws to keep another appointment.)

Lord Sumner says that Mr. Lloyd George’s proposal is to leave out the following words: “in the discussion of the general rules as to the measure of damages only”.

President Wilson pointed out that this clause contravenes the original bases laid down in Clause 3 of the Reparation Provisions. He proposes to cut the whole clause out.

(After some discussion, it is agreed that the Clause should read as follows:

“The Commission shall examine into the claims and give to the German Government a just opportunity to be heard but not to take part in any decision of the Commission whatever”.)


9. President Wilson draws attention to the article the American Delegation proposed to substitute.

Basis for Estimating Germany’s Capacity To pay.—Appendix: Annex 2, Article 15 (b) Lord Sumner says that the fact is that at present the burden of taxation is heavier in Allied countries than in Germany. Yet Germany might plead her poverty, and say she could not pay. It was common ground that the actual taxation was a related matter that must be taken into account.

(President Wilson agrees.)

What the British Delegation submitted, and thought it was not too much to ask, was that the Commission should not have the right to relieve Germany until Germany had made an attempt to raise her taxation to the amount borne by the most heavily taxed of the Allied Powers represented on the Commission. They recognized that additional taxation would not necessarily bring in money which could be used to pay outside Germany. They recognized also that such taxation might even depreciate Germany’s capacity to pay. That was the reason why they said that if the taxation was too high the Commission should be permitted to accept the plea of poverty. The British Delegation felt that it was not right that the Commission should be able to remit, unless German taxation was proportionately as high as that of the most heavily taxed Allied country. He agrees it is certainly necessary to trust the Commission, but the whole of these arrangements would be subjected to very close criticism, and it would be difficult to convince public opinion if it thought that Germany could be relieved of taxation on the ground of its poverty, whilst we ourselves were more heavily taxed and had equally heavy engagements to meet. If the Commission exercises great wisdom, he agreex that the difficulty would be avoided.

President Wilson says that under the American scheme the Commission would not be able to admit the plea of poverty unless Germany had taxed herself to an extent at least equal to the taxation of other Powers. He agrees that the Commission must be given some standards of taxation by which to judge of Germany’s ability to pay. It might be, however, that an additional burden would not give a greater yield of power to pay. He feels, however, that it is making a mistake to try to foresee situations too far in advance. If this were done, only second-rate men would be induced to serve on the Commission. He wishes to get the biggest men possible, since the financial arrangements of the world would depend on its operations. Hence, he would deprecate definite and rigid instructions, and his French colleagues agree with him. He thought that the standard of justice was as distinctly laid down in one draft as in the other.

M Loucheur says he agreed with the American draft.

Mr Lloyd George (who has meanwhile returned) says he would withdraw his objections.

(The American proposal with the French additions is adopted.)


10. Issue of Certificates by the Commission Regarding Bonds Held for the Benefit of Different Government. Appendix: Annex 2, Article 16 Mr Lloyd George accepts the French proposal.


11. Sanctions. Appendix: Annex 2, Article 18 President Wilson points out that the United States representatives have accepted the principle of Sanctions, but are not prepared to approve the form of words proposed in the draft. He then reads a simpler and shorter formula.

M Klotz said that he would accept, with the addition of the words “or financial” after “economic”. The following substitute for the second and third sub-paragraphs of this Article is adopted:

“The measures which the Allied and Associated Governments shall have the right to take, and which Germany hereby agrees not to consider as acts of war may include economic or financial prohibition and reprisals, and in general such other measures as the respective Government may determine to be necessary in the premise”.

(Just as the Meeting is breaking up, it is agreed in addition to omit the last paragraph of Article 18.)


12. Form of Payment. Appendix: Annex 2, Article 19 Mr Lloyd George thinks that this Article is too stiff. It would give the Commission power practically to take any property or material to which it took a fancy.

President Wilson agrees with Mr Lloyd George. He is seeing this clause for the first time. What he wants is to avoid even the appearance of a Brest-Litovsk forced Treaty.

Mr Lloyd George suggests that his objections would be surmounted by omitting in line 3 “demanded or”. He has no objection to the Commission accepting payment in the forms proposed, but they should not have power to demand it.

President Wilson agrees.

(It is agreed to omit in line 3 the words “demanded or”, and in addition, to omit the second sub-paragraph of Article 19.)


13. Merchant Shipping. Appendix: Annex 3 German Ships in American Ports President Wilson draws attention to amendments proposed by the United States Delegation.

President Wilson says that the claim for the German ships seized in United States ports was almost the only reparation claim put forward by the United States of America. Other powers, with their full acquiescence, were to be reimbursed for pensions. In the course of the war, the United States of America had taken over the German ships in their ports and had secured their title to them by law. The ships had been so damaged that millions of dollars had had to be spent on their repairs and new methods that had to be devised. Throughout, these ships had been used for the indispensable transport of the American armies to France. It would not be tolerable to public opinion in the United States if their title to these ships was not recognized. This had nothing to do with the payment of owners which the United States contemplated, but only to their title. It would be intolerable if anyone questioned the title which had been legally established under full process of their rights as a belligerent.

Mr Lloyd George says that if he goes into the whole case, he would show there were serious grounds which made it impossible for the British Government to accept. If he accepts it would not be merely a matter affecting the United States of America. This is an easy matter which he would not contest. It would, however, affect neutrals and other belligerents. Neutrals would benefit by this to the extent of 794,000 tons of shipping. Brazil to the extent of 216,000 tons. This means a loss not only of cash but of ships which were even more important. Brazil lost 25,000 tons and had seized 216,000 tons in her ports and would consequently profit enormously by the transaction. France lost 950,000 tons and would only be able to keep 45,000 tons; that is to say, France would only get less than 1/20th of her loss. The United States lost 389,000 tons and would get 628,000 tons. The British Empire lost 7,740,000 tons and would only get 400,000 tons. During the war Great Britain after allowing for shipbuilding had lost a balance of 4,500,000 tons. There is a great difference between the value of ships to Great Britain and the United States. It is like the value of ships to a fisherman compared with ships to a swell yachtsman. Great Britain lives on ships and it is a very serious matter to her. There is first the case of the neutrals who would walk off with 800,000 tons. In reply to President Wilson’s suggestion that this could be avoided he thought it would be difficult. The German ships in American ports had been driven to take refuge there by the action of the Navies of France and Great Britain. They only escaped capture because they took refuge in United States ports. He could not help thinking that the whole of shipping should be put in “hotchpot”. The United States would then certainly get all that she had lost.

President Wilson says they had lost not only ships but thousands of lives. In other countries such lives were being provided for by reparation arrangements, but that America was making no such claim and it would be intolerable to public opinion if it were not agreed that the United States should retain these ships.

Mr Lloyd George says he would be glad to enter into an arrangement but objected to the participation of Brazil, who had no claim for walking off with so many ships. Brazil’s whole trade was protected by our Fleet.

President Wilson says this argument does not apply to the United States, who had made an invaluable contribution to the war. The United States does not mean to take over the ships without payment.

Mr Lloyd George says he does not object to some arrangement whereby the United States would retain all of the enemy ships which they had taken over, but that he did object to the proposed American clauses being put into the Peace Treaty which would permit other countries whose rights were not the same as those of the United States, to retain the enemy ships taken over by them.

Mr Lloyd George proposes, therefore, that Annex III should stand as at present for insertion without alteration in the Peace Treaty, but that an agreement be made by the Allied Governments with the United States, providing for the retention by the United States of enemy ships now in its possession, against payment.

President Wilson states this would be acceptable to him provided a satisfactory agreement in accordance with the American amendment is drawn and executed by the Allies with the United States prior to the execution of the Treaty.

(The following alterations are made during the interval when the Conference had broken up into groups. The Secretary is unable to follow the precise reasons for the decision.)


14. Payment in Kind. Appendix 1, Annex 4. After some discussion it is agreed to omit para 2(c) and (d) and the last para of 6.


15. Legislation by Germany. Main Clauses Para. 10

(It is agreed to omit the following words at the end of para. 10:”and to the decisions and orders of the above named Commission from time to time.” The para. therefore reads as follows: ”Germany undertakes to pass any legislation and to issue any orders and decrees that may be necessary to give complete effect to these clauses”.)

16. Mr Lloyd George asks what would be the position of Czechoslovakia and Poland.

President Wilson considers that these would not be entitled to claim reparation since they had been part of enemy countries.

Mr Lloyd George asked what would be the position of Romania and Serbia, which had annexed very large territories in Transylvania and Yugoslavia respectively. These countries would not only escape the debts of the Austrian Empire to which they had formerly belonged, but would also escape the burdens imposed on the Allies. He thought the best plan was that proposed by S Orlando, that there should be a sort of ledger account in relation to these territories. On one side of the account would be the liability that the annexed territories would have had for a share of the Austrian debt and indemnity and on the other side of the account would be their share in the claim of Romania and Serbia respectively for indemnity. This would be set off one against the other and they would be credited with the balance.

Mr Norman Davis asks what would happen if the balance was a debit instead of a credit.

Mr Lloyd George says in that case there would be no claim.


17. (The above arrangement is agreed to.) M Klotz asks what would be the position of the subjects of Allied and Associated countries established in a country like Poland whose property had been destroyed. They would not claim compensation from Poland; ought it not to be provided that they should claim against Germany?

Mr Lloyd George points out that they are provided for by Annex I, Article I (a).

It is also pointed out that they are provided for by Article 3, where the words used were “wherever situated”.


18. Consultation With the Smaller Powers: After a somewhat prolonged discussion, the following arrangements are agreed to for consultation with the Powers with special interest on the subject of the reparation clauses. The Expert Committee, which had been advising the Supreme Council, should divide itself into groups and each group should see a group of nations of the Powers with special interests. M. Loucheur undertook to organize this arrangement. Those States which have observations to make should subsequently have the right of consulting the Supreme Council.


19. The Return of Animals Taken From Invaded Territories

M Loucheur proposed the following addition to Article 7 of the reparation clauses:

“Si une moitié au moins des animaux pris par l’ennemi dans les territoires envahis ne peut être identifiée et restituée, le reste, jusqu’à concurrence de la moitié du nombre enlevé, sera livré par l’Allemagne à titre de restitution.”

(After considerable discussion, it is agreed that M Loucheur’s proposed addition to Article 7 should not be inserted in the Treaty of Peace; his proposal should, however, form the subject of a separate agreement between the Allies, a draft text of the agreement to be prepared and submitted by M Loucheur.)

20. Categories of Damage: M Klotz proposes the addition of the following new category of damage:

“Dépenses engagées par l’Etat, ou pour son compte et avec son autorisation, pour ravitailler, transporter ou secourir la population civile des territoires occupés et la population civile réfugiée ou évacuée.”5

Mr Lloyd George says that if new categories are put in, the British Government would have a number of new categories which it would wish to introduce.

(It is agreed that the addition proposed by M Klotz related to a question of the interpretation to be given to the categories already accepted and should be referred without delay for consideration to the Commission on Reparations.)


21. Valuation: M Klotz makes a proposal for putting a valuation clause in the Treaty in regard to property for which reparation was to be given. This is necessary owing to the change of value between 1914 and the present time.

(It is agreed that the Expert Committee should meet to prepare a text.)

The Conclusions, as revised by the Expert Drafting Committee, will be forwarded later.



[Appendix I to IC–176A]
Reparation

1. The Allied and Associated Governments affirm and Germany accepts the responsibility of herself and her Allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of the enemy States.

2. The Allied and Associated Governments recognize that the financial resources of Germany are not adequate after taking into account permanent diminutions of such resources which will result from other treaty clauses to make complete reparation for all such loss and damage. The Allied and Associated Governments, however, require, and the German Government undertakes that she will make compensation for all damage done to the civilian population of the Allied or Associated Powers and to their property by such aggression by land, by sea and from the air.

3. The amount of such damage (as set forth under the specific categories attached hereto) for which compensation is to be made by Germany shall be determined by an Inter-Allied Commission, to be constituted in the form and with the powers set forth hereunder and in the Annexes hereto. This Commission shall examine into the claims and give to the German Government a just opportunity to be heard. The findings of the Commission as to the amount of damage defined as above shall be concluded and notified to Germany on or before the 1st May, 1921, as representing the extent of their obligations. The Commission shall concurrently draw up a schedule of payments prescribing the time and manner for securing and discharging the entire obligation within a period of thirty years from the 1st May, 1921. In the event, however, that within the period mentioned, Germany shall have failed to discharge her obligation, then any balance remaining unpaid may, within the discretion of the Commission, be postponed for settlement in subsequent years: or may be handled otherwise in such manner as the Allied and Associated Governments, acting through the Commission, shall determine.

4. The Inter-Allied Commission shall thereafter, from time to time, consider the resources and capacity of Germany and, after giving her representatives a just opportunity to be heard, shall have discretion to extend the date, and to modify the form of payments, such as are to be provided for in Clause 3: but not to cancel any part, except with the specific authority of the several Governments represented upon the Commission.

5. In order to enable the Allied and Associated Powers to proceed at once to the restoration of their industrial and economic life, pending the full determination of their claim, Germany shall pay in such installments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Inter-Allied Commission may fix, before the 1st May, 1921, the equivalent of 20,000,000,000 gold marks and pending payment of this sum she shall deposit bonds as security in the manner prescribed in Clause XV (c) (1) of Annex 2 attached hereto. Out of this sum the expenses of the army of occupation subsequent to the armistice shall first be met, provided that such supplies of food and raw materials as may be judged by the Allied and Associated Governments to be essential to enable Germany to meet her obligations for reparation may also, with the approval of the Allied and Associated Governments, be paid for out of the above sum, and the balance shall be reckoned towards liquidation of the above claims for reparation. She shall further deposit bonds as prescribed in Clause XV (c) of Annex 2 attached Thereto.

Ships shall be handed over by Germany to the Commission at the time and in the manner stated in Annex III and in all respects in compliance therewith.

6. The successive installments including the above sum paid over by the enemy States in satisfaction of the above claims will be divided by the Allied and Associated Governments in proportions which have been determined upon by them in advance, on a basis of general equity, and of the rights of each.

7. In addition to the payments mentioned above Germany shall effect restitution in cash of cash taken away, seized or sequestrated, and also restitution in kind of animals, objects of every nature and securities taken away, seized or sequestrated, in the cases in which it proves possible to identify them in enemy territory.

8. The German Government undertakes to make forthwith the restitution contemplated by Article 7 and to make the payments contemplated by Articles 3, 4 and 5.

9. The German Government recognizes the Commission provided for by Article 3 as the same may be constituted by the Allied and Associated Governments in accordance with Schedule II attached hereto, and agrees irrevocably to the possession and exercise by such Commission of the power and authority given it by Articles 3, 4 and 5. The German Government will supply to the Commission all the information which the Commission may require relative to the financial situation and operations and to the property, productive capacity and stocks and current production of raw materials and manufactured articles of the German Government, its States, Municipalities and other governmental subdivisions and of its nationals and corporations, and accords to the members of the Commission and its authorized agents the same rights and immunities as are enjoyed in Germany by duly accredited diplomatic agents of friendly Powers. The German Government further agrees to provide for the compensation and expenses of the Commission and of such staff as it may employ.

10. Germany undertakes to pass any legislation and to issue any orders and decrees that may be necessary to give complete effect to these clauses and to the decisions and orders of the above-named Commission from time to time.

11. These shall be reckoned as a credit to the German Government in respect of the payments due from it under the above clauses, the following items arising out of other Articles of this Treaty and its Annexes:

i) Any final balance in favour of Germany under Article of Part IV of the Economic Terms.

ii) Any sums due to Germany in respect of property or material delivered under the Armistice Terms or its extensions.

iii) Any sums due to Germany in respect of transfers under Article XIII of the Financial Terms.

iv) Any sums due to Germany in respect of transfers under Articles 19, 37 and 51 of the Ports, Waterways and Railways Terms.




Two more Appendices and six Annexes were attached to the original document. To include them would have taken several times the space and they are all detail lists of what is to be paid for what Items. I would not normally included the one I did but it gives the actual summary of what Germany was expected to pay by the Allies.
-Steve