Majesty's prize courts, and all governors, officers, and authorities whom it may concern are to give the necessary directions herein as to them may respectively appertain. [Inclosure 2.] MEMORANDUM. ALMERIC FITZROY. At the beginning of the present war the allied Governments, in their anxiety to regulate their conduct by the principles of the law of nations, believed that in the declaration of London they would find a suitable digest of principles and compendium of working rules. They accordingly decided to adopt the provisions of the declaration not as in itself possessing for them the force of law but because it seemed to present in its main lines a statement of the rights and the duties of belligerents based on the experience of previous naval wars. As the present struggle developed, acquiring a range and character beyond all previous conceptions, it became clear that the attempt made at London in time of peace to determine not only the principles of law but even the forms under which they were to be applied had not produced a wholly satisfactory result. As a matter of fact, these rules, while not in all respects improving the safeguards afforded to neutrals, do not provide belligerents with the most effective means of exercising their admitted rights. As events progressed, the Germanic powers put forth all their ingenuity to relax the pressure tightening about them and to reopen a channel for supplies; their devices compromised innocent neutral commerce and involved it in suspicions of enemy agency. Moreover, the manifold developments of naval and military science, the invention of new engines of war, the concentration by the Germanic powers of the whole body of their resources on military ends, produced conditions altogether different from those prevailing in previ ous naval wars. The rules laid down in the declaration of London could not stand the strain imposed by the test of rapidly changing conditions and tendencies which could not have been foreseen. The allied Governments were forced to recognize the situation thus created, and to adapt the rules of the declaration from time to time to meet these changing conditions. These successive modifications may perhaps have exposed the purpose of the allies to misconstruction; they have therefore come to the conclusion that they must confine themselves simply to applying the historic and admitted rules of the law of nations. The allies solemnly and unreservedly declare that the action of their warships, no less than the judgments of their prize courts, will continue to conform to these principles; that they will faithfully fulfil their engagements, and in particular will observe the terms of all international conventions regarding the laws of war; that mindful of the dictates of humanity, they repudiate utterly all thought of threatening the lives of noncombatants; that they will not without cause interfere with neutral property; and that if they should, by the action of their fleets, cause damage to the interests of any merchant acting in good faith, they will always be ready to consider his claims and to grant him such redress as may be due. FOREIGN OFFICE, July 7, 1916. Our Government's first communication on the proposed "blacklist" policy was made on July 19. After, several communications on the subject the Government dispatched the following note, giving our position on the matter in controversy: THE ACTING SECRETARY OF STATE TO AMBASSADOR W. H. PAGE. [Telegram.] DEPARTMENT OF STATE, You are instructed to deliver to Sir Edward Grey a formal note on the subject of the enemy-trading act, textually as follows: "The announcement that His Britannic Majesty's Government has placed the names of certain persons, firms, and corporations in the United States upon a proscriptive 'blacklist' and has forbidden all financial or commercial dealings between them and citizens of Great Britain, has been received with the most painful surprise by the people and Government of the United States, and seems to the Government of the United States to embody a policy of arbitrary interference with neutral trade against which it is its duty to protest in the most decided terms. "The scope and effect of the policy are extraordinary. British steamship companies will not accept cargoes from the proscribed firms or persons or transport their goods to any port, and steamship lines under neutral ownership understand that if they accept freight from them they are likely to be denied coal at British ports and excluded from other privileges which they have usually enjoyed, and may themselves be put upon the blacklist. Neutral bankers refuse loans to those on the list and neutral merchants decline to contract for their goods, fearing a like proscription. It appears that British officials regard the prohibitions of the blacklist as applicable to domestic commercial transactions in foreign countries as well as in Great Britain and her dependencies, for Americans doing business in foreign countries have been put on notice that their dealings with blacklisted firms are to be regarded as subject to veto by the British Government. By the same principle Americans in the United States might be made subject to similar punitive action if they were found dealing with any of their own countryinen whose names had thus been listed. "The harsh and even disastrous effects of this policy upon the trade of the United States and upon the neutral rights upon which it will not fail to insist are obvious. Upon the list of those proscribed and in effect shut out from the general commerce of the world may be found American concerns which are engaged in large commercial operations as importers of foreign products and materials and as distributors of American products and manufacturers to foreign countries and which constitute important channels through which American trade reaches the outside world. Their foreign affiliations may have been fostered for many years, and when once broken can not easily or promptly be reestablished. Other concerns may be put upon the list at any time and without notice. It is understood that additions to the proscription may be made whenever on account of enemy nationality or enemy association of such persons or bodies of persons it appears to His Majesty expedient to do so.' The possibilities of undeserved injury to American citizens from such measures, arbitrarily taken, and of serious and incalculable interruptions of American trade are without limit. "It has been stated on behalf of His Majesty's Government that these measures were aimed only at the enemies of Great Britain and would be adopted and enforced with strict regard to the rights of neutrals and with the least possible detriment to neutral trade, but it is evident that they are inevitably and essentially inconsistent with the rights of the citizens of all nations not involved in war. The Government of the United States begs to remind the Government of His Britannic Majesty that citizens of the United States are entirely within' their rights in attempting to trade with the people of the Governments of any of the nations now at war, subject only to well-defined international practices and understandings which the Government of the United States deems the Government of Great Britain to have too lightly and too frequently disregarded. There are well-known remedies and penalties for breaches of blockade, where the blockade is real and in fact effective, for trade in contraband, for every unneutral act by whomsoever attempted. The Government of the United States can not consent to see those remedies and penalties altered or extended at the will of a single power or group of powers to the injury of its own citizens or in derogation of its own rights. Conspicuous among the principles which the civilized nations of the world have accepted for the safeguarding of the rights of neutrals is the just and honorable principle that neutrals may not be condemned nor their goods confiscated except upon fair adjudication and after an opportunity to be heard in prize courts or elsewhere. Such safeguards the blacklist brushes aside. It condemns without hearing, without notice, and in advance. It is manifestly out of the question that the Government of the United States should acquiesce in such methods of applications of punishment to its citizens. "Whatever may be said with regard to the legality, in the view of international obligation, of the act of Parliament upon which the practice of the blacklist as now employed by His Majesty's Government is understood to be based, the Government of the United States is constrained to regard that practice as inconsistent with that true justice, sincere amity, and impartial fairness which should characterize the dealings of friendly governments with one another. The spirit of reciprocal trade between the United States and Great Britain, the privilege long accorded to the nationals of each to come and go with their ships and cargoes, to use each the other's shipping, and be served each by the other's merchants is very seriously impaired by arbitrary and sweeping practices such as this. There is no purpose or inclination on the part of the Government of the United States to shield American citizens or business houses in any way from the legitimate consequences of unneutral acts or practices; it is quite willing that they should suffer the appropriate penalties which international law and the usage of nations have sanctioned; but His Britannic Majesty's Government can not expect the Government of the United States to consent to see its citizens put upon an ex parte blacklist without calling the attention of His Majesty's Government, in the gravest terms, to the many serious consequences to neutral rights and neutral relations which such an act must necessarily involve. It hopes and believes that His Majesty's Government, in its natural absorption in a single pressing object of policy, has acted without a full realization of the many undesired and undesirable results that might ensue." POLK. The clear indications of a purpose to ignore neutral rights by the controlling powers in the war in Europe induced the Congress at the close of the first session of the Sixty-fourth Congress to enact legislation to protect American rights. After many suggestions, some of which were very drastic, the revenue law of September 8, 1916, containing the following provisions, was adopted: That whenever during the existence of a war in which the United States is not engaged the President shall be satisfied that there is reasonable ground to believe that under the laws, regulations, or practices of any country, colony, or dependency contrary to the law and practice of nations, the importations into their own or any other country, dependency, or colony of any article the product of the soil or industry of the United States and not injurious to health or morals is prevented or restricted, the President is authorized and empowered to prohibit or restrict during the period such prohibition or restriction is in force the importation into the United States of similar or other articles, products of such country, dependency, or colony as in his opinion the public interest may require; and in such case he shall make proclamation stating the article or articles which are prohibited from importation into the United States; and any person or persons who shall import, or attempt or conspire to import, or be concerned in importing, such article or articles into the United States contrary to the prohibition in such proclamation, shall be liable to a fine of not less than $2,000 nor more than $50,000, or to imprisonment not to exceed two years, or both, in the discretion of the court. The President may change, modify, revoke, or renew such proclamation in his discretion. That whenever during the existence of a war in which the United States is not engaged the President shall be satisfied that there is reasonable ground to believe that any vessel, American or foreign, is, on account of the laws, regulations, or practices of a belligerent Government, making or giving any undue or unreasonable preference or advantage in any respect whatsoever to any particular person, company, firm, or corporation, or any particular description of traffic in the United States or its possessions, or to any citizen of the United States residing in neutral countries abroad, or is subjecting any particular person, company, firm, or corporation or any particular description of traffic in the United States or its possessions, or any citizens of the United States residing in neutral countries abroad to any undue or unreasonable prejudice, disadvantage, injury, or discrimination in regard to accepting, receiving, transporting, or delivering, or refusing to accept, receive, transfer, or deliver any cargo, freight, or passengers, or in any other respect whatsoever, he is hereby authorized and empowered, in his discretion, to direct the detention of such vessels by withholding clearance or by formal notice forbidding departure, and to revoke, modify, or renew any such direction as in his opinion the public interest may require. That whenever during the existence of a war in which the United States is not engaged the President shall be satisfied that there is reasonable ground to believe that under the laws, regulations, or practices of any belligerent country or Government American ships or American citizens are not accorded any of the facilities of commerce which the vessels or citizens of that belligerent country enjoy in the United States or its possessions, or are not accorded by such belligerent equal privileges or facilities of trade with vessels or citizens of any nationality other than that of such belligerent, the President is hereby authorized and empowered, in his discretion, to withhold clearance from one or more vessels of such belligerent country until such belligerent shall restore to such American vessels and American citizens reciprocal liberty of commerce and equal facilities of trade; or the President may, in his discretion, direct that similar privileges and facilities, if any, enjoyed by vessels or citizens of such belligerents in the United States or its possessions be refused to vessels or citizens of such belligerent; and in such case he shall make proclamation of his direction, stating the facilities and privileges which shall be refused, and the belligerent to whose vessels or citizens they are to be refused, and thereafter the furnishing of such prohibited privileges and facilities to any vessel or citizen of the belligerent named in such proclamation shall be unlawful; and he may change, modify, revoke, or renew such proclamation as in his opinion the public good may require; and any person or persons who shall furnish or attempt or conspire to furnish or be concerned in furnishing or in the concealment of furnishing facilities or privileges to ships or persons contrary to the prohibition in such proclamation shall be liable to a fine of not less than $2,000 nor more than $50,000, or to imprisonment not to exceed two years, or both, in the discretion of the court. In case any vessel which is detained by virtue of this act shall depart or attempt to depart from the jurisdiction of the United States without clearance or other lawful authority, the owner or master or person or persons having charge or command of such vessel shall be severally liable to a fine of not less than $2,000 nor more than $10,000 or to imprisonment not to exceed two years, or both, and, in addition, such vessel shall be forfeited to the United States. That the President of the United States is hereby authorized and empowered to employ such part of the land or naval forces of the United States as shall be necessary to carry out the purposes of this act. Three months later, October 12, the British Government made formal reply. This reply clearly indicates the purpose of the mistress of the seas to prove her primacy. No. 307.] THE BRITISH AMBASSADOR TO THE SECRETARY OF STATE. BRITISH EMBASSY, Washington, October 12, 1916. SIR: In conformity with instructions received from Viscount Grey, of Fallodon, His Majesty's Principal Secretary of State for Foreign |