pecuniary damages for consequential results of failure to observe neutral obligations, I see no chance of getting this Government to agree in terms to a submission so as to obtain such decision; they will not consent to unite in asking the Tribunal for an opinion on the question, although we assure them that we expect, and they have every reason to feel confident, that that opinion would be against affirming such national responsibility. The above portion of this telegram I have read to Lord Granville, and have his admission that it is a correct statement. May I hope that if you do not mean to decide that no other way can be found out of the controversy, and therefore the arbitration and Treaty must fail, you will conclude to instruct me explicitly on their proposals communicated to 'you in my telegrams of the 5th and 6th? * SCHENCK. [From British Blue Book "North America," No. 9, (1872,) p. 8.] No. 35. Earl Granville to Sir E. Thornton. [Extract.] FOREIGN OFFICE, May 7, 1872. General Schenck called on me to-day, and read to me a telegraphic message from Mr. Fish, of which he did not give me a copy, but the substance of which was to the following effect: An agreement to bind for the future would seem to require the assent of the Senate, but if the Arbitrators were to give a decision on the case which is now before them it would be settling the question for the future. If, under these circumstances, the British Government want to opea negotiations for defining the extent of liability for consequential damages resulting from a failure of observance of neutral obligations, the President would consider carefully any proposal in that direction. I told General Schenck that the only meaning I could attribute to the message was, that Mr. Fish maintained the position to which General Schenck was aware Her Majesty's Government could not assent. General Schenck then proceeded to read me a draught of a message which he had sent. The message described what had passed in the House of Lords on the 6th instant correctly up to a certain point, but made some statements as to the assurances of the Government which were not accurate. He stated that the motion of Lord Russell had only been deferred on the assurance of the Government that we would not appear before the Tribunal of Arbitration unless some settlement was previously made. It went on to declare his conviction that we should adhere to this resolve; that Lord Russell's motion would be carried nearly unanimously. And he further declared, while recapitulating the reasons why the matter should be referred to arbitration, viz, in order to have the matter finally settled, and that it was certain that the Arbitrators would decide against the indirect claims, yet the English Government would never allow the indirect claims to be submitted to Arbitration. He stated he believed his message was correct. I said that I had no objection to tell him that the statement of what had passed in the House of Lords was not historically accurate, as I had only given the assurance that I had nothing to withdraw or retract from what I had said last year or this in Parliament. As to his view of the course which Her Majesty's Government were likely to take, he was aware that while I had avoided anything which might be quoted as an official menace, he had himself frequently told me that he was perfectly aware, from the tone of my language, of the resolution of Her Majesty's Government to refuse to submit the indirect claims to Arbitration, and that I had therefore no wish to object to his giving his own opinion to his Government. No. 36. Mr. Fish to General Schenck. [Telegram.] WASHINGTON, May 8, 1872. All the propositions made by the British Government involve covertly, probably without design, what this Government cannot agree to, namely, the withdrawal from the province of the Tribunal what we believe to be entirely within their competence. I need not repeat our conviction that the Arbitrators have the right to decide whether the claims to which Great Britain objects are or are not admissible, and that the United States will be content to abide their decision, whether favorable or adverse to that class of claims. The proposition of the British Government is upon the basis that the view which they have heretofore presented shall be a principle of future action and conduct. The view which they have presented is not a principle, but an opinion as to the construction of a specific treaty, and is applicable only to one pending difference on an incidental and temporary question, and cannot be a principle of future action. This Government holds a directly opposite view with regard to the competence of the Tribunal to consider the validity of the claims, and, although sincerely desirous of coming to an honorable understanding, cannot adopt the British view, or make it the basis of a reciprocal engage ment. In my telegram of yesterday I explained that the President cannot, and will not, withdraw any part of what has been submitted within his construction of the intent and spirit of the Treaty. If the British Government persists in their demand, the responsibility of whatever failure of the Treaty may ensue must rest with them, as you will have advised them of the impossibility, resulting as well from the constitutional inability of the President to withdraw what this Government is of opinion has been submitted within the intent and meaning of the Treaty, as from his unwillingness to compromise the rights and the dignity of the Government by yielding to a demand not founded on right or sustained by any valid construction of the Treaty. He hopes, however, that the British Government may see the way to maintain the Treaty in the suggestion of a new article, as mentioned in my telegram of yesterday. Should they not adopt this suggestion, the inference will be almost unavoidable that they have deliberately deter mined to abrogate the Treaty. If, however, they adopt the suggestion, you may say that the probability is that Congress will adjourn about the latter part of this month. Time may be saved, therefore, if negotiations on this point should be conducted here rather than in London. If they desire such negotiations, it may be advisable to save time that they give instructions to their Minister here. You will keep me advised as to the probable action of the British Government, so that the President may communicate the correspondence to Congress on Monday, in case the British Government intends to break the Treaty. FISH. [From British Blue Book "North America," No. 9, (1872,) p. 9.] No. 37. Earl Granville to Sir E. Thornton. FOREIGN OFFICE, May 8, 1872. SIR: With reference to my dispatch of yesterday, I have to state to you that I received a note from General Schenck this morning, asking me to postpone the Cabinet, as he had just received a long telegraphic message in cipher from his Government, of the substance of which he would inform me at the Foreign Office at half-past 3 o'clock. General Schenck accordingly called upon me in the afternoon, and informed me that the United States Government claim, and insist upon their claim, that under the Treaty the claims for indirect losses which have been put forward are admissible to be considered by the Arbitrators, although they do not expect, and never have expected, a pecuniary award of damages for such claims. Great Britain denies that such claims come within the scope or province of the Arbitrators to consider or decide upon. The argumentative discussion has ended, leaving each party adhering to their position. The United States Government in this condition of things have been willing to accept a proposal from Great Britain, that, in consideration of not pressing for a pecuniary award on these indirect claims, Great Britain would, on her part, agree to engage not to advance in the future in any case when she should be a belligerent, and the United States neutral, such claims for indirect damages as are put forward by the United States Government in the Case presented on their behalf to the Tribunal of Arbitration at Geneva, and to make that reciprocally the rule for the future. Great Britain is understood to object to this, on the ground that an agreement not to press for compensation for these indirect claims is not sufficient, because the Arbitrators in that case might themselves proceed to take them into consideration, and make them the subject of an award, and therefore Great Britain has only been willing to establish the rule in regard to indirect damages on condition that the American part of the Case at Geneva, which puts forward these particular claims, should be entirely withdrawn from the consid eration of the Arbitrators. The President holds that he has power to give instructions in regard to the management of the case before the Arbitrators, and therefore could direct that these claims should not be pressed for an award. But, inasmuch as the Government of the United States hold that the claims are admissible to be considered by the Arbitrators under the Treaty, he cannot withdraw the claims as not being rightfully put forward without its being such an alteration of the terms and principles of the Treaty as is inconsistent with his understanding of it, and the interpretation which has been put upon it by his Government. The treaty itself, however, may be amended in such a manner as to accomplish the object, and remove all differences between the two Governments arising out of their different interpretations of its provisions. General Schenck is, therefore, authorized to state that the President will be willing to consider, and, if possible, will present for the consideration of the Senate any new article for the Treaty which may be proposed by the British Government, which, while it settles the principle involved in the presentation of what are called the indirect claims, will remove the differences which have arisen between the two Governments in the consideration of the Treaty. The President is earnestly desirous to do everything consistent with his duty and with the great interest for the future of both countries, and to preserve principles so important to civilization as he thinks are involved in the Treaty of which he is anxious to prevent the failure, and to this end he is willing to exhaust all proper efforts as far as can be done without abandoning any principle, and consistently with the honor and dignity of both Governments. General Shenck said he had no instruction to suggest anything in relation to the form of words in which such an offer by Great Britain might be embodied. But it seems to him there might be three modes of framing such an amendment to the Treaty, either of which would accomplish the object. 1st. It might be recited that whereas differences of opinion have arisen between the two countries in relation to the interpretation of the Treaty of Washington as it relates to the right of the United States to put forward before the Tribunal of Arbitration at Geneva a claim for certain damages which, in their Case, are denominated indirect damages, in consideration of the withdrawal of those claims from the Case and from the consideration of the Arbitrators, Great Britain engages with the United States that she will not at any time hereafter, in the event of the United States being a neutral when Great Britain is a belligerent, advance any complaint or claims for such indirect, remote, or consequential damages arising from any failure on the part of the United States in the discharge of her neutral obligations. 2d. Let the Article to be agreed upon leave out any reference to the Case which has been presented at Geneva, establish the rule as above, and the United States give instructions to its Agent to withdraw those indirect claims, reciting them particularly whenever an exchange of ratifications of the amendment to the Treaty shall be made; and a copy of these instructions to be communicated to Great Britain. 3d. Establish by agreement in the same manner a rule against indirect damages, and provide that such rule shall relate back to and be held and taken as a part of the Treaty of Washington, the same as if this Article had been executed at the date of that Treaty. I am, &c., GRANVILLE. [From British Blue Book "North America," No. 9, (1872,) p. 10.] No. 38. Earl Granville to Sir E. Thornton. [Extract.] FOREIGN OFFICE, May 8, 1872. With reference to my other dispatch of this day's date, I have to inform you that I saw General Schenck again after the meeting of the Cabinet, and told him that the Cabinet had considered the report which I made to them of our conversation of this morning, the message from Mr. Fish, and the three personal suggestions of General Schenck as to the mode of executing Mr. Fish's proposals. I stated that they saw objections to the three modes proposed, and were not themselves prepared to frame an Article. They thought it would be better to return to the proposal of an interchange of notes. They understood that the proposal of an Article was intended by Mr. Fish to obviate a difficulty occasioned by the form of words as to the agreement which the United States was to make. They were willing to substitute for the words "having regard," &c., the words, "will not bring the indirect claims before the Tribunal" for consideration. If required to do so, I could give some explanation of the principle "founded on the heretofore presented," &c. No. 39. General Schenck to Mr. Fish. [Telegram.] LONDON, May 9, 1872. Had interviews with Granville yesterday and last evening. Cabinet long in session. Instead of proposing new Article to Treaty, they prefer interchange of notes, and are willing to further modify their note. I shall tell Lord Granville this morning that in your telegram of April 27 you went as far as is possible to go without concurrence of Senate. Just received your long telegram of yesterday, which is being deciphered. Will receive and forward no offer until I know what it contains. No. 40. General Schenck to Mr. Fish. [Telegram.] SCHENCK. LONDON, May 9, 1872. In a long interview with Lord Granville, this evening, I fully presented and urged the reviews and positions contained in your telegram of yesterday. I find this Government makes a great and |