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The CHAIRMAN. That gives the widest latitude.

Senator KNOX. Mr. Palmer, can you tell us why all the acts of the Alien Property Custodian are validated, thus cutting off access to the courts as to the regularity of the proceedings, or the sufficiency of the amounts realized from the sale of property?

Mr. PALMER. Yes, Mr. Senator. This is a treaty between the United States and Germany, and it never seemed to anybody that the action of the United States in fighting the war against Germany should be open to criticism or upsetting by Germany.

Senator Knox. Suppose it could be demonstrated-I am only using this as an illustration, and I am sure there are no cases that are at all like it, but suppose it could be demonstrated-that property fairly worth $5,000,000 had been disposed of by the Alien Property Custodian in a secret way for $1,000,000. Why should a transaction of that kind be validated?

Mr. PALMER. Mr. Senator, I am sure that such a possibility as that does not exist.

Senator KNOX. I agree to that. I simply am using that as an illustration.

Mr. PALMER. But if that situation did exist, I would say it was something for our Government to handle, and that it should not be open to the enemy.

Senator KNox. In other words, our Government should take the loss?

Mr. PALMER. No; the Alien Property Custodian was an officer of the United States Government engaged in carrying out the provisions of the trading with the ememy act, and for whatever he has done he should be responsible to our Government, but not to Germany. Now, as to the object of putting those clauses in the treaty, in the first place, those particular clauses were not put there by the American delegates, although if they had not been in there the American delegates would have asked to have them put in. There was no possible discussion by anybody as to the propriety of clauses of that character. Senator POMERENE. In other words, the United States as the principal should settle with its own agents?

Mr. PALMER. Surely. The practical effect of those clauses is this. Whatever the Alien Property Custodian has done in the United States under the trading with the enemy act is done. He takes property and he gives receipts, and any claims that may arise from his actions are either relegated to the proceeds or the claims are cut off. Congress has said in the trading with the enemy act that any enemy whose property has been taken, if he has any complaint, shall come to Congress after the war; and Congress by that provision in our judgment has retained the power, the jurisdiction, the discretion to arrange matters with the former enemy. These clauses here amount to nothing, except that they do cut off possible litigation by the enemy respecting, we will say, the constitutionality of the trading with the enemy act, and things of that kind which might involve us in expensive, useless litigation for years. Aside from that I do not consider that the clauses have much effect.

Senator KNOX. Tell us what the owner of that $5,000,000 property would do under the circumstances indicated in my question. What are his rights?

Mr. PALMER. If he is an enemy, it is pretty hard to think that he has any right, except to apply through diplomatic channels.

Senator KNOx. Of course, he has rights. If he is an alien enemy he has his rights. Private property is to be protected. That is a rule of international law that there has not been any doubt about for a hundred years.

Senator FALL. This whole treaty is providing for the regulation of those very rights.

Senator SWANSON. I understand your contention is that Congress took charge of this property and Congress will settle the rights. If the property was sacrificed improperly or improvidently, then Congress will determine how it shall be settled.

Mr. PALMER. I think so.

Senator KNOX. Then, have you no other answer to the question I propounded except that the alien enemy claimant has no rights under the circumstances indicated in the question I asked a moment ago, which I am sure you have in your mind?

Senator WILLIAMS. He has his rights under the treaty, whatever they are.

Mr. PALMER. The rights of the alien enemy whose property has been taken-is that what you want to know?

Senator KNOX. I want to know what rights the man in Germany has who owned $5,000,000 of property in the United States, that was either secretly or fraudulently or otherwise disposed of for $1,000,000. What rights has he, if any?

Mr. PALMER. He has the right to come to Congress for his claim, as the trading with the enemy act provides. Mr. Senator, let me answer your question in this way, in order that you can see how the legal process has shaped itself in our minds. The trading with the enemy act authorized the Alien Property Custodian to take enemy property in this country. Through the original act and the amendment thereto the title to the property was vested in the custodian, so that he was given all the rights of the absolute owner, to quote the language of the amendment.

Senator FALL. He was a common-law trustee, was he not?

Mr. PALMER. Yes, under the original act; but the subsequent amendment went further than that and vested in him the rights of an absolute owner. Further than that, he was given the authority to dispose of the property in certain ways. Now, I have always thought, and I think it is perfectly correct, that the title of the alien enemy had passed out of him, had become vested in the United States or in the Alien Property Custodian, an officer of the Government. The title has passed froin the enemy.

Senator KNOX. That is undoubtedly true. I am not questioning that at all.

Mr. PALMER. Now, suppose that the custodian had kept the property or turned it over to the United States Treasury as he was entitled to do under the act. Then, the entire property is gone and the alien enemy would come to Congress under the trading with the enemy act and make his clain, Congress reserving the right to take it up for consideration.

Senator KNOX. As to the regularity of the disposition or the adequacy of the compensation?

Mr. PALMER. The trading-with-the-enemy act does not say anything at all about that. It simply reserves to Congress the right to receive claims by the enemy after the war.

The CHAIRMAN. Did not the trading-with-the-enemy act give any right to go into the courts on questions arising out of the dissolution of companies, etc.?

Mr. PALMER. Not to the enemy.

The CHAIRMAN. It gave no right of any kind?

Mr. PALMER. I think not, except what I have stated.

The CHAIRMAN. I have sent for the act. I would like to look at it. Mr. PALMER. I have a copy of it here.

Senator HITCHCOCK. Senator Knox makes the point that under international law the alien enemy has certain rights. If he has any such right it can only be prosecuted through his own government. Is that the fact under international law?

Mr. PALMER. So I understand.

Senator HITCHCOCK. Now, if his own Government agrees in this treaty not to assert that right, as you have said it does, does not that end the question? If he can prosecute any right at all, it is through his own Government, and his own Government agrees not to prosecute it. Does not that end the matter as far as we are concerned?

Mr. PALMER. I consider that more a matter of words than of substance, because under our law of the United States the United States Government had the war power to take and confiscate the private property of the enemy if it so desired to do.

Now, what did Congress do? They took possession of the enemy property, and they vested the title of it in their officer, the Alien Property Custodian. That was the act that put the enemy out of the ownership of the property. It did not make any difference what you put in the treaty about that. It does not make that situation any different. The United States had taken the title to the property. Now, the alien enemy could not get that property back without coming to Congress, and Congress said in the trading with the enemy act: If any alien enemy makes a claim, he can come to us after the war.

I do not understand that the provisions of the treaty have changed that at all. Germany and its nationals, as far as the title to that property is concerned, have given up something that they did not have. The title had already passed to the United States Government, and they could not get it back without an act of Congress.

Mr. HITCHCOCK. That is not the question Senator Knox is putting to you. He put a hypothetical case, an impossible case, supposing that property worth $5,000,000 had been in some way sacrificed for $1,000,000.

Mr. PALMER. Yes.

Senator HITCHCOCK. And he asked you then, whether under international law the owner of that property did not have a claim that might be prosecuted against the United States?

Senator KNOX. Oh, no.

Senator HITCHCOCK. What was it?

Senator KNOX. I asked what his rights were. I did not allege what his rights were.

Senator HITCHCOCK. You asserted by inference that he had a right.

Senator KNOX. In response to Mr. Palmer's statement that the alien enemy had no rights I replied that under international law private property of the alien was always protected until after the

hostilities ceased, and then an accounting was made for it. That is a rule of international law and has been for a hundred years. What I want to get at, if you will permit me, is whether it would not have been entirely feasible to have inserted in this treaty a provision that the courts of justice of the United States should be open to the alien enemy after the war is over in order to challenge, not the title that passed to the Alien Property Custodian but the methods by which he disposed of it, if the claimant could make out a case of fraud or such gross negligence as to involve him in a serious loss, instead of passing him over to the ranks of the Revolutionary and Mexican War claims, with a technical claim against the United States, which he could only work out through Congress and the Committees on Claims. I asked the question whether it would not have been entirely feasible to open the courts of justice to him.

Mr. PALMER. The feasibility of such a system as that, with many other considerations, came up to me, and I decided it, and I am glad to explain the reasons why I decided against a clause of that sort. I should have thought and I do think that a clause of that kind would be contrary to the act of Congress under which we were acting.

Senator KNOX. We can change an act of Congress by a treaty. Mr. PALMER. We can change an act of Congress by a treaty, surely, but it did not seem to be necessary to do that, because of the United States desires to offer that opportunity to the former enemy, it can do so, and I think it would be very much more appropriate for relief of that character to come from Congress than from the treaty. At any rate, that was the view of the representatives of the United States.

Senator SWANSON. I understand your negotiations have obtained the acquiescence of the German Government in Congress disposing of this alien enemy property as it sees proper?

Mr. PALMER. Yes.

Senator SWANSON. Is that the result of your negotiations?

Mr. PALMER. The treaty.

Senator SWANSON. I mean, is that the result of the treaty, that they will acquiesce in the disposition of alien property as Congress may see proper?

Mr. PALMER. Yes.

Senator POMERENE. Is not this the situation as to alien claims? I understand the rule to be with regard to alien property, in international law, as stated by Senator Knox; but those who were framing this treaty saw fit to insert in the treaty a provision ratifying the acts of the Custodian of Alien Property. Whatever his rights may have been under the general principle of international law, they are more. clearly defined by the treaty itself, so that it rests with Congress under this treaty and under the alien property act.

Mr. PALMER. That is correct.

Senator POMERENE. They can not only reimburse any alien but they can give him a premium if they should desire.

Mr. PALMER. They can give him any process by the courts.
Senator POMERENE. Or create courts for him?

Mr. PALMER. There is one thing that we ought

Senator WILLIAMS. Before you go further, I want to ask you this, in order to get it clear in my mind: I understand that this in no wise binds our people to what all of the other nationals of the allied and

associated powers are bound by, to wit, this clearing-house system,
but that our nationals are left free with German nationals to make
any private settlement that they wish of their mutual claims.
Mr. PALMER. Yes, sir.

Senator WILLIAMS. For example, if a man had been buying cotton from Hamburg, Germany, and had been shipping it, and the ship was on the high seas at the time we declared a state of war existing between us and Germany, if those people did not want to wait for Congress to settle it, if, say, the British Government had taken it and sold it at Liverpool prices and paid the American shipper, these people being old customers, they could settle the whole transaction according to the ethics of it as they saw fit?

Mr. PALMER. Yes; exactly.

Senator WILLIAMS. Moreover, if they chose, they could have a trial case set to determine the amount, if there was a dispute about that. There is nothing in the treaty to prevent that?

Mr. PALMER. No.

Senator FALL. Mr. Palmer, may I ask a question or two? Is there anything in the treaty which gives any additional rights along the line of guaranties of any right such as Senator Williams has just asked about? They would have these rights without any treaty whatsoever, would they not? Is there anything in the treaty giving them those rights?

Mr. PALMER. Their rights are unaffected, but they have an additional recourse to a new tribunal instead of going to the German courts, and the United States Government has the additional new power to look out for their interests under the provisions in the treaty.

Senator FALL. That new tribunal, however, gives them no new security-in other words, does not enable them to collect the debt. The tribunal fixes the amount in dispute.

Mr. PALMER. Security is given to the United States Government.
Senator FALL. Where?

Mr. PALMER. In those provisions that were just read under the operation of article 297, clause (h).

Senator HITCHCOCK. There is not any "h."

Senator POMERENE. Page 371.

Mr. PALMER. Clause (h), page 371, second paragraph, bottom of the page.

Senator FALL. Clause (h), to which you have just referred, says: The net proceeds of sales of enemy property, rights, or interests wherever situated carried out either by virtue of war legislation, or by application of this article, and in general all cash assets of enemies, shall be dealt with as follows:

(1) As regards powers adopting Section III and the annex thereto

We do not adopt that?

Mr. PALMER. No.

Senator FALL (continuing reading):

The said proceeds and cash assets shall be credited to the power

Not adopting Section III. That will be ourselves?

Mr. PALMER. Yes, sir.

Senator FALL (continuing reading):

Any credit balance in favor of Germany resulting therefrom shall be dealt with a provided in article 243.

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