The Defence No. XIV1
[New York, September 9, 1795]
The sixth article2 stipulates compensation to British Creditors for losses and damages which may have been sustained by them, in consequence of certain legal impediments, which since the Treaty of Peace with Great Britain,3 are alleged to have obstructed the recovery of debts bona fide contracted with them before the peace.
To a man who has a due sense of the sacred obligation of a just debt, a proper conception of the pernicious influence of laws, which infringe the rights of creditors, upon morals upon the general security of property, upon public as well as private credit, upon the spirit and principles of good government—who has an adequate idea of the sanctity of the national faith explicitly pledged, of the ignominy attendant upon a violation of it in so delicate a particular as that of private pecuniary contracts—of the evil tendency of a precedent of this kind to the political and commercial interests of the Nation generally—every law which has existed in this Country interfering with the recovery of the debts in question must have afforded matter of serious regret and real affliction. To such a man, it must be among the most welcome features of the present Treaty, that it stipulates reparation for the injuries which laws of that description may have occasionned to individuals, and that as far as is now practicable, it wipes away from the national Reputation the stain which they have cast upon it. He will regard it as a precious tribute to Justice, and as a valuable pledge for the more strict future observance of our public engagements: and he would deplore as an ill omened symptom of the depravation of public opinion the success of the attempts which are making to render the article unacceptable to the People of the U States. But of this there can be no danger. The spontaneous sentiments of Equity of a moral and intelligent people, will not fail to sanction with their approbation a measure which could not have been resisted without inflicting a new wound upon the honor and character of the Country.
Let those men who have manifested by their actions a willing disregard of their own obligations as Debtors—those who secretly hoard or openly and unblushingly riot on the spoils of plundered creditors—let such men enjoy the exclusive and undivided satisfaction of arraigning and condemning an act of National Justice, in which they may read the severest reproach of their iniquitous principles and guilty acquisitions. But let not the People of America tarnish their honor by participating in that condennation or by shielding with their favourable opinion the meretricious apologies which are offered for the measures that produced the necessity of reparation.
The recapitulation of some facts will contribute to a right judgment of this part of the Treaty.
It is an established principle of the laws of nations that on the return of peace between Nations which have been at War, a free and undisturbed course shall be given to the recovery of private debts on both sides.4 In conformity with this principle, the 4th article of the Treaty of Peace between the US and G Britain expressly stipulates “that Creditors on either side shall meet with no lawful impediment to the recovery of the full value in Sterling money of all bonafide Debts theretofore contracted.”
Two instances of the violation of this article have been already noticed with a view to another point one relating to certain laws of the State of Virginia passed prior to the peace which for several years after it appear to have operated to prevent the legal pursuit of their claims by British Creditors5—another relating to a law of the state of South Carolina which suspended the recovery of their debts for Nine months, and after that period permitted the recovery only in four yearly installments.6
But these were not all the instances. There were other laws of South Carolina prolonging the installments and obliging the Creditors to receive in payment the property of debtors at appraised values; and there were laws of Rhode Island, New Jersey, North Carolina and Georgia making paper money a legal tender for the debts of those Creditors;7 which it is known sustained a very great depreciation in every one of those States. These very serious and compulsory interferences with the rights of the Creditors have received from Decius the soft appellation of a modification of the recovery of British Debts.8 Does he expect to make us believe by this smooth phraze that the right to recover the full value of a debt in sterling money, is satisfied by the obligation to take, as a substitute, one half one third or one fourth of the real value in paper?
It must necessarily have happened that British Creditors have sustained from the operation of the different acts alluded to, losses more or less extensive, which the mere removal of the legal impediments that occasionned them could not repair. In many instances, the losses must have actually accrued and taken their full effect. In others, where no proceedings may have been had, the lapse of so many years must have created inabities to pay in debtors, who were originally competent and who might have been compelled to pay, had there been a free course to justice.
The removal of the impediments therefore, by opening of the Courts of Justice, was not an adequate satisfaction. It could not supersede the obligation of compensating for losses which had irretrievably accrued by the operation of the legal impediments, while they continued in force. The claim for this was still open on the part of Great Britain, and still to be adjusted between the two Nations.
The excuse that these laws were retaliations for prior infractions of Treaty by Great Britain was in no view an answer to the claim.*
In the first place, as has already been proved,9 the fact of such prior infractions was too doubtful to be finally insisted upon, and was, after a fruitless effort to obtain the acquiescence of the other party, properly and necessarily waved, so that it not serve as a plea against reparation.
In the second place, if that fact had been indubitable, the species of retaliation was unwarrantable. It will be shewn when we come to discuss the tenth article10 that the debts of private individuals are in no case a proper object of reprisals, that independent of Treaty the meddling with them was a violation of the public faith and integrity, and that consequently it was due as much to our own public faith and integrity as to the individuals who had suffered to make reparation. It was an act demanded by the justice probity and magnanimity of the Nation.
In the third place, it was essential to reciprocity in the adjustment of the disputes which had existed concerning the Treaty of Peace. When we claimed the reinstatement and execution of the article with regard to the Posts,11 it was just that we should consent to the reinstatement and execution of the article with regard to Debts.12 If the obstruction of the Recovery of Debts was the equivalent by way of retaliation for the detention of the posts, we could not expect to have restitution of the thing withheld and to retain the equivalent for it likewise. The dilemma was to be content with the equivalent and abandon the thing, or to recover the thing and abandon the equivalent. To have both was more than we could rightly pretend. The reinstatement of the article with regard to the debts necessarily included two things, the removal of legal impediments as to future recovery, compensation for past losses by reason of those impediments. The first had been effected by the new constitution of the U States, the last is promised by the Treaty.
Did our Envoy reply that the reinstatement of the article with regard to the posts included likewise compensation for their detention? Was it an answer to this destitute of reason, that our loss by the detention of the posts which resolved itself essentially into the uncertain profits of a Trade that might have been carried on admitted of no satisfactory rule of computation, while the principal and interest of private debts afforded a standard for the computation of losses upon them, that nevertheless while this was the usual and must be the admitted standard it is an inadequate one in cases where payment is protracted beyond the allowed term of credit; since the mere interest of money does not countervail among merchants the profits of its employment in Trade and still less the derangements of credit and fortune which frequently result to Creditors from procrastinations of payment: and that the final damage to Great Britain in these two particulars, for which no provision could be made, might well exceed any losses to us by the detention of the posts?
In the last place, the compensation stipulated was a sine qua non with Great Britain of the surrender of the posts and the adjustment of the controversy which had subsisted between the two Countries. The making it such may be conceived to have been dictated more by the importance of the precedent than by the quantum of the sum in question. We shall easily understand this, if we consider how much the Commercial Capital of Great Britain is spread over the world. The vast credits she is in the habit of extending to foreign Countries render it to her an essential point to protect those Credits by all the sanctions in her power. She cannot forbear to contend at every hazard against precedents of the invasion of the rights of her Merchants, and for retribution where any happen. Hence, it is always to be expected that she will be peculiarly inflexible on this point, and that nothing short of extreme necessity can bring her to relax in an article of policy which perhaps not less than any other is a necessary prop of the whole system of her political Oeconomy.
It was therefore to have been foreseen that whenever our controversy with Great Britain was adjusted compensation for obstructions to the Recovery of Debts would make a part of the adjustment. The option lay between compensation, relinquishment of the Posts or war. Our Envoy is intitled to the applause of all good men for preferring the first. The extent of the compensation can on no possible scale, compare with the immense permanent value of the posts, or with the expences of War. The sphere of the interferences has been too partial to make the sum of the compensation in any event a very serious object; and as to War a conscientious or virtuous mind could never endure the thought of seeing the country involved in its calamities to get rid of an Act of Justice to individuals, whose rights in contempt of public faith, had been violated.
Having reviewed the general considerations which justify the stipulation of compensation, it will be proper to examine if the plan upon which it is to be made is unexceptionable.
This plan contains the following features. 1 The cases provided for are those “where losses and damages occasionned by the operation of lawful impediments (which since the peace have delayed the full recovery of British Debts bona fide contracted before the peace and still owing to the Creditors and have impaired and lessenned the value and security thereof) cannot now for whatever reason be actually obtained in the ordinary course of Justice.” 2 There is an express exception out of this provision of all the cases in which losses and damages have been occasionned by such insolvency of the Debtors, or other causes, as would equally have operated to produce them, if no legal impediments had existed, or by the manifest delay or negligence or wilful omission of the claimants. 3 The amount of the losses and damages for which compensation is to be made is to be ascertained by five Commissioners to be appointed as follows—two by his Britannic Majesty two by the President with the advice & consent of the Senate—the fifth by the unanimous voice of these four, if they can agree—if they cannot agree, then to be taken by lot out of two persons one of whom to be named by the two British Commissioners, the other by the two American Commissioners. 4 The five Commissioners thus appointed are before they proceed to the execution of their trust to take an oath for its faithful discharge. Three of them to constitute a Board but there must be present one of the two Commissioners named on each side and the fifth Commissioner. Decisions to be made by majority of voices of those present. They are first to meet at Philadelphia but may adjourn from place to place as they see cause. 5 Eighteen months after the Commissioners make a Board are assigned for receiving applications, but the Commissioners in particular cases may extend the term for any further term not exceeding six months. 6 The Commissioners are empowered to take into consideration all claims, whether of principal or interest or ballances of principal and interest, and to determine them according to the merits and circumstances thereof and as justice and Equity shall appear to them to require; to examine persons on oath or affirmation and to receive in evidence depositions books papers or copies or extracts thereof either according to the legal forms existing in the two countries, or according to a mode to be devised by them. 7 Their award is to be conclusive and the U States are to cause the sum awarded in each case to be paid in specie to the Creditor without deduction and at such time and place as shall have been awarded; but no payment to be required sooner than twelve months from the day of the exchange of the Ratifications of the Treaty.
This provision for ascertaining the compensation to be made, while it is ample, is also well guarded.13
It is confined to debts contracted before the peace, and still owing to the creditors. It embraces only the cases of loss or damage in consequence of legal impediments to the recovery of those debts which will exclude all cases of voluntary compromise, and can include none where the laws have allowed a free course to justice. It can operate in no instance where, at present, the ordinary course of justice is competent to full relief, and the debtor is solvent, nor in any, where insolvency or other cause would have operated to produce the loss or damage, if no legal impediment had existed, or where it has been occasioned by the wilfull delay, negligence or omission of the creditor.
If it be said that the Commissioners have nevertheless much latitude of discretion, and that in the exercise of it they may transgress the limits intended, the answer is, that the United States, though bound to perform what they have stipulated with good faith, would not be bound to submit to a manifest abuse of authority by the Commissioners. Should they palpably exceed their commission, or abuse their trust, the United States may justifiably, though at their peril, refuse compliance. For example, if they should undertake to award upon a debt contracted since the peace, there could be no doubt that their award would be a nullity. So likewise there may be other plain cases of misconduct, which in honor and conscience would exonerate the United States from performance. It is only incumbent upon them to act bona fide, and as they act at their peril to examine well the soundness of the ground on which they proceed.
With regard to the reference to Commissioners to settle the quantum of the compensation to be made, this course was dictated by the nature of the case. The tribunals of neither country were competent to a retrospective adjustment of losses and damages, in many cases which might require it. It is for this very reason of the incompetency of the ordinary tribunals to do complete justice, that a special stipulation of compensation, and a special mode of obtaining it became necessary. In constituting a tribunal to liquidate the quantum of reparation in the case of a breach of treaty, it was natural and just to devise one likely to be more certainly impartial than the established Courts of either party. Without impeaching the integrity of those Courts, it was morally impossible that they should not feel a byas towards the nation to which they belonged, and for that very reason they were unfit arbitrations. In the case of the spoliations of our property, we should undoubtedly have been unwilling to leave the adjustment in the last resort to the British Courts; and by parity of reason, they could not be expected to refer the liquidation of compensation in the case of the debts to our Courts. To have pressed this would have been to weaken our argument for a different course in regard to the spoliations. We should have been puzzled to find a substantial principle of discrimination.
If a special and extraordinary tribunal was to be constituted, it was impracticable to contrive a more fair and equitable plan for it, than that which has been adopted. The remarks on the mode of determining the question respecting the river St. Croix,14 apply in full force here, and would render a particular comment superfluous.
To the objection of the Charleston committee, that the article erects a tribunal unknown to our constitution, and transfers to commissioners the cognizance of matters appertaining to American courts and juries,15 the answer is simple and conclusive. The tribunals established by the constitution do not contemplate a case between nation and nation arising upon a breach of treaty, and are inadequate to the cognizance of it. Could either of them hold plea of a suit of Great Britain plaintiff against the United States defendant? The case therefore required the erection or constitution of a new tribunal, and it was most likely to promote equity to pass by the Courts of both the parties.
The same principle contradicts the position that there has been any transfer of jurisdiction from American courts and juries to commissioners. It is a question not between individual and individual, or between our government and individuals, but between our government and the British government. Of course, one in which our courts and juries have no jurisdiction. There was a necessity for an extraordinary tribunal to supply the defect of ordinary jurisdiction, and so far is the article from making the transfer imputed to it, that it expressly excepts the cases in which effectual relief can be obtained in the ordinary course of justice.
Nations acknowledging no common judge on earth, when they are willing to submit the questions between them to a judicial decision, must of necessity constitute a special tribunal for the purpose. The mode by Commissioners, as being the most unexceptionable, has been repeatedly adopted.
I proceed to reply to some other objections which have been made against the provision contained in this article.
It is charged with fixing a stigma on the national character, by providing reparation for an infraction, which, if it ever did exist, has been done away, there being now a free course to the recovery of British debts in the courts of the United States.16
An answer to this objection has been anticipated by some observations heretofore made. The giving a free course to justice in favour of British creditors, which has been effected by the new constitution of the United States, though it obviates the future operation of legal impediments does not retrospectively repair the losses and damages which may have resulted from their past operation. In this respect the effects continued and reparation was due. To promise it, could fix no stigma on our national character. That was done by the acts which created the cause to reparation. To make it, was as far as possible to remove the stigma.
It has been said, that the promise of compensation produces injustice to those states which interposed no legal impediments to the recovery of debts, by saddling them with a part of the burden arising from the delinquencies of the transgressing States.17 But the burden was before assumed by the treaty of peace. The article of that treaty which engaged that there should be no lawful impediments to the recovery of debts, was a guarantee by the United States of justice to the British creditors. It charged them with the duty of taking care that there was no legal obstacle to the recovery of the debts of those creditors, and consequently with a responsibility for any such obstacle which should happen, and with the obligation of making reparation for it. We must therefore refer to the treaty of peace, not to the last treaty, the common charge which has been incurred by interference in the recovery of British debts. The latter only carries into execution the promise made by the former. It may be added that it is a condition of the social compact that the nation at large shall make retribution to foreign nations for injuries done to them by its members.
It has been observed, that Mr. Jefferson has clearly shewn, that interest in cases like that of the British debts, is liable, during the period of the war, to equitable abatements and deductions; and that, therefore, the discretion given to the commissioners on this head, ought not to have been as large as it appears in the article.18
Mr. Jefferson has, no doubt, offered arguments of real weight to establish the position that judges and juries have, and exercise a degree of discretion in an article of interest, and that the circumstances of our war with Britain, afford strong reasons for abatements of interest. But it was foreign to his purpose, and accordingly he has not attempted to particularise the rules which ought to govern in the application of this principle to the variety of cases in which the question may arise—and he has himself, noted that the practice in different states and in different courts, has been attended with great diversity. Indeed, admitting the right to abate interest under special circumstances, in cases in which it is the general rule to allow it, the circumstances of each case, are, perhaps, the only true criterion of the propriety of an exception. The particular nature of the contract, the circumstances under which it was entered into, the relative situation of parties, the possibility or not of mutual access; these and other things would guide and vary the exercise of the discretion to abate. It was, therefore, right to leave the commissioners, as they are left, in the same situation with judges and juries; to act according to the true equity of the several cases, or of the several classes of cases.
Let it be remembered, that the government of Great Britain has to consult the interests and opinions of its citizens, as well as the government of the United States those of their citizens. The only satisfactory course which the former could pursue, in reference to its merchants, was to turn over the whole question of interest as well as principal, to the commissioners. And as this was truly equitable, the government of the United States could make no well founded opposition to it.
ADf, Hamilton Papers, Library of Congress; The [New York] Argus, or Greenleaf’s New Daily Advertiser, September 9, 1795.
1. For background to this document, see the introductory note to “The Defence No. I,” July 22, 1795.
2. For the text of Article 6 of the Jay Treaty, see “Remarks on the Treaty … between the United States and Great Britain,” July 9–11, 1795, note 13.
3. Article 4 of the definitive treaty of peace between the United States and Great Britain, September 3, 1783, reads: “It is agreed that Creditors on either Side shall meet with no lawful Impediment to the Recovery of the full Value in Sterling Money of all bona fide Debts heretofore contracted” (Miller, Treaties, II description begins Hunter Miller, ed., Treaties and Other International Acts of the United States of America (Washington, 1931), II. description ends , 154).
4. In the newspaper the following footnote was supplied for this sentence: “Grotius, b. iii, c. xx, s. xvi.” The reference is to the following statement by Grotius: “It is well established that things which have been captured after the conclusion of a treaty of peace must be restored. The right of war had, in fact, already expired” (On the Law of War and Peace description begins Hugo Grotius, De Jure Belli Ac Pacis Libri Tres. The Translation, Book I, by Francis W. Kelsey (Oxford and London, 1925). description ends ).
5. For the acts of the Virginia legislature, see Enclosure No. 6 in Thomas Jefferson to George Hammond, May 29, 1792 (ADf, Thomas Jefferson Papers, Library of Congress; ASP description begins American State Papers, Documents, Legislative and Executive, of the Congress of the United States (Washington 1832–1861). description ends , Foreign Relations, I, 201–37).
7. See Jefferson to Hammond, May 29, 1792, sections 32–34 (ADf, Thomas Jefferson Papers, Library of Congress; ASP description begins American State Papers, Documents, Legislative and Executive, of the Congress of the United States (Washington 1832–1861). description ends , Foreign Relations, I, 201–37).
8. This is a reference to an article by “Decius” (Brockholst Livingston) in The [New York] Argus, or Greenleaf’s New Daily Advertiser, July 10, 1795. In this article “Decius,” referring to Jefferson’s letter to Hammond, May 29, 1792, wrote that Jefferson in this letter demonstrated that “… Great Britain having broken the treaty by a refusal to evacuate the upper posts, and carrying away more than three thousand negroes, some of the States, urged by dire necessity, and the calamities of a long war only modified the recovery of debts.” For the authorship of the “Decius” articles, see the introductory note to “The Defence No. I,” July 22, 1795.
11. This is a reference to Article 7 of the definitive treaty of peace. See Miller, Treaties, II description begins Hunter Miller, ed., Treaties and Other International Acts of the United States of America (Washington, 1931), II. description ends , 155.
12. This is a reference to Article 6 of the Jay Treaty. For the text of this article, see “Remarks on the Treaty … between the United States and Great Britain,” July 9–11, 1795, note 13.
13. The draft ends at this point. The remainder of this essay has been taken from the newspaper.
15. This is a reference to the Report of the Select Committee, Chosen by Ballot of the Citizens of the United States, in Charleston, South-Carolina, in pursuance of a Resolution of a general Meeting of the Citizens, in St. Michael’s Church, on Thursday, the sixteenth of July, 1795 (Charleston: Printed by W. P. Young, Broad-Street, n.d. [George Washington Papers, Library of Congress]). The report stated: “This [the sixth] article, moreover, erects a tribunal, new and unknown to our constitution, inasmuch as it transfers the right of deciding on the claims of British creditors, from the courts and juries of America, to commissioners; a majority of whom may be British subjects, and by their decisions, tax the revenue of these states at pleasure.”
16. This is a reference to a statement by “Decius,” who wrote: “that … it was at all times perfectly understood, that treaties controuled the laws of the State. That the federal and state judiciaries have so decided, that upon this principle the courts are every where open to British creditors, who have been for some time in the habit of recovering their debts at law” (The [New York] Argus, or Greenleaf’s New Daily Advertiser, July 10, 1795).
17. This is a reference to a statement by “Decius,” who wrote: “The mode of adjusting the sum due to British creditors, agreeably to the sixth article, will be unjust towards those States which have interposed no lawful impediments in the way of recovering such debts, as they must also bear part of the burden, and thus suffer for the delinquency of others” (The [New York] Argus, or Greenleaf’s New Daily Advertiser, July 10, 1795).
18. This is a reference to a statement by “Decius,” who wrote: “Mr. Jefferson has shewn in a letter already alluded to, that interest being no part of the debt, may be disallowed in many cases, and has cited a great variety of instances from English law-books, in which it is not given; some of which apply with too much force to the situation of the parties in question, not to be mentioned. He observes, that a great national calamity has been adjudged a sufficient cause to suspend the payment of interest. That in the present case, the law of the party creditor, had cut off the personal access of his debtor; that the transportation of his produce or money to the country of his creditor was interdicted; that where the creditor prevents payment of both principle and interest, the latter at least is justly extinguished; that the departure of the creditor, leaving no agent in the country, would have stopped interest of itself—that debtor not being obliged to go abroad to seek for him.
“That the declarations of congress and our plenipotentiaries, previous to the definitive treaty, and the silence of that instrument, afford proof, that interest was not intended on our part, nor insisted upon by the other. And that upon the whole, it was the proper province of the judiciary to determine in what cases interest ought or ought not to be allowed.” (The [New York] Argus, or Greenleaf’s New Daily Advertiser, July 10, 1795.)