Article 6 of the Jay Treaty provided for a bilateral commission to settle Americans’ pre-Revolutionary War debts to British creditors, but disagreements between the two sides brought the panel’s work to a halt in 1799. John Adams hoped that procedural changes might allow the commission to continue its work. However, when Rufus King suggested that the British might accept a lump-sum settlement from the United States in lieu of reviving the commission and Adams’s cabinet endorsed the idea, Adams responded: “I embrace with pleasure the Recommendation of Mr King.” On 23 Aug. 1800, Secretary of State John Marshall authorized King to discuss the matter with Lord Grenville. The administration’s advisers estimated that the claims would not exceed $2,500,000, but in order to promote good relations between the two countries and resolve the issue, Marshall advised King that a sum as high as $4,000,000 might be acceptable. King was not to agree to any amount greater than £1,000,000 sterling (when the two sides reached agreement in 1802, one pound sterling was deemed equal to 4.44 U.S. dollars). Adams still hoped for some “adjustment” of the treaty through explanatory articles to alter or supplant Article 6 (Marshall, Papers description begins Herbert A. Johnson, Charles T. Cullen, Charles F. Hobson, and others, eds., The Papers of John Marshall, Chapel Hill, 1974–2006, 12 vols. description ends , 4:132–7, 191, 197, 212, 230–1, 233–9, 284–5; 6:32–3; Madison, Papers, Sec. of State Ser. description begins J. C. A. Stagg, ed., The Papers of James Madison, Secretary of State Series, Charlottesville, 1986–, 8 vols. description ends , 1:8n; Moore, International Adjudications description begins John Bassett Moore, ed., International Adjudications, Modern Series, Volume III: Arbitration of Claims for Compensation for Losses and Damages Resulting from Lawful Impediments to the Recovery of Pre-War Debts, New York, 1931 description ends , 356).

In a memorandum for Grenville on 23 Nov. 1800, King addressed the problem of calculating a reasonable settlement based on estimates. Because the debts all had their basis in the purchase of British goods by Americans before the Revolution, King began with an estimate of a year’s worth of British exports to America in the period before the Revolutionary War, then applied adjustments to allow for debts already paid and for other factors. In his paper for Grenville, King used two sources for the value of British exports: George Chalmers’s An Estimate of the Comparative Strength of Britain during the Present and Four Preceding Reigns; and of the Losses of her Trade from Every War since the Revolution, first published in 1782 and in revised editions thereafter, and a figure from Lord Sheffield. From those sources, King estimated an annual export of £2,311,498 to the colonies that became the United States. He reduced that sum by half to show the loss from debtors who became insolvent during the war. He then reduced the resulting figure (£1,155,749) by half, as an allowance for debts that creditors had already recovered on their own. That left the figure at £577,874. King then added that same amount back in to allow for accrued interest. This brought the total back to £1,155,749. Finally, he argued that creditors should still be able to recover two-thirds of the amount on their own, “with the care and diligence which it is their duty to employ.” That final subtraction would put the sum for the settlement at about £385,000, but King rounded the figure up in his memorandum, stating that “the claim against the U. States would not exceed £400,000.” As he drew up his proposal and during the first negotiations that grew out of it, King had available for consultation Samuel Sitgreaves, an American member of the Article 6 commission who was in England to help resolve the claims issue (King, Life description begins Charles R. King, ed., The Life and Correspondence of Rufus King: Comprising His Letters, Private and Official, His Public Documents and His Speeches, New York, 1894–1900, 6 vols. description ends , 3:345–50; ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States, Washington, D.C., 1832–61, 38 vols. description ends , Foreign Relations, 2:400; Marshall, Papers description begins Herbert A. Johnson, Charles T. Cullen, Charles F. Hobson, and others, eds., The Papers of John Marshall, Chapel Hill, 1974–2006, 12 vols. description ends , 6:30–1; King to Lord Hawkesbury, 15 Apr. 1801, enclosed in King to secretary of state, 21 Apr., in DNA: RG 59, DD; Moore, International Adjudications description begins John Bassett Moore, ed., International Adjudications, Modern Series, Volume III: Arbitration of Claims for Compensation for Losses and Damages Resulting from Lawful Impediments to the Recovery of Pre-War Debts, New York, 1931 description ends , 353–4).

Grenville turned his side of the negotiations over to John Anstey, a barrister and poet who was one of the British members of a commission dealing with Loyalists’ claims under Article 7 of the Jay Treaty. Anstey and King exchanged a series of papers from January to March 1801. By April, King thought that the change of government in Britain might have stalled the negotiation, and he asked Grenville to speak to Grenville’s successor, Lord Hawkesbury. On 20 Apr., King also took advantage of Sitgreaves’s return to the United States to send a dispatch to the State Department, enclosing copies of his exchanges with Anstey during the negotiation. Those papers were in Washington by 13 June, when James Madison mentioned King’s dispatch in a letter to Levi Lincoln and Jefferson consulted the cabinet on the debt claims. In his dispatch, King expressed the opinion that it would still be possible to “bring the discussion to a close.” Madison, characterizing King’s attitude as “not sanguine, but hopeful of an advantageous issue,” was less optimistic (King to secretary of state, 20 Apr. and 21 Apr. 1801, with enclosures, in DNA: RG 59, DD; ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States, Washington, D.C., 1832–61, 38 vols. description ends , Foreign Relations, 2:401–18; King, Life description begins Charles R. King, ed., The Life and Correspondence of Rufus King: Comprising His Letters, Private and Official, His Public Documents and His Speeches, New York, 1894–1900, 6 vols. description ends , 3:432–3; Madison, Papers, Sec. of State Ser. description begins J. C. A. Stagg, ed., The Papers of James Madison, Secretary of State Series, Charlottesville, 1986–, 8 vols. description ends , 1:105–6, 109, 311; DNB description begins H. C. G. Matthew and Brian Harrison, eds., Oxford Dictionary of National Biography, In Association with The British Academy, From the Earliest Times to the Year 2000, Oxford, 2004, 60 vols. description ends ).

Probably sometime prior to his meeting with the cabinet, Jefferson extracted from the enclosures to King’s dispatch the figures of a detailed proposal from King to the British, dated 29 Jan. 1801, and a counteroffer from Anstey on 14 Feb. (see Document 1). Both propositions used King’s formula from November to make adjustments to an initial figure—that is, reducing the gross estimate by 50 percent for insolvencies, reducing the result by 50 percent for supposed recoveries by creditors, doubling the result to allow for interest, and then finally subtracting two-thirds to reach a final amount. King’s proposal on 29 Jan. began with a higher initial estimate than he had used in November, yielding a final result of £506,694 to settle the claims. Anstey started with a considerably higher calculation for the unadjusted debt—more than £7,500,000—using two years of exports from figures developed by the British government, adding a portion of the debts claimed by Loyalist creditors, and including a partial recovery of freight, insurance, and profit on the exports. By Anstey’s calculation, the amount owed by the United States exceeded £1,200,000 (enclosures 22 and 27, King to secretary of state, 20 Apr. 1801, DNA: RG 59, DD; ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States, Washington, D.C., 1832–61, 38 vols. description ends , Foreign Relations, 2:409–18).

According to Jefferson’s notes of the 13 June cabinet meeting (Document ii), he and the department heads agreed to support King’s proposed “sum in gross” of £506,694. It then came to their notice that King, as he mentioned in a ciphered passage in a dispatch of 7 Mch., had “caused it to be understood” to the British that the United States would offer up to £600,000 sterling. The cabinet agreed to that figure, and Madison wrote to King on 15 June, instructing him to continue negotiating for a lump-sum settlement not to exceed £600,000. According to Madison, Jefferson thought the British were unlikely to consent to the procedural changes desired by the United States, whereas agreement on a sum to settle the claims would provide “an amicable and final adjustment of the controversy.” In July, after receiving a dispatch from King reporting more favorable prospects for resolution of the matter, Madison hoped that it “may be brought to a speedy as well as a final issue.” That month also, the State Department received a statement showing that claims in excess of £5,600,000 (or $24,800,000) had been filed with the commission under Article 6 (see Summary of British Debt Claims, [July 1801 or after]). King continued the negotiation directly with Hawkesbury, and on 8 Jan. 1802 they signed a convention to annul Article 6 and provide for payment of £600,000 ($2,664,000) by the United States to resolve the claims (Madison, Papers, Sec. of State Ser. description begins J. C. A. Stagg, ed., The Papers of James Madison, Secretary of State Series, Charlottesville, 1986–, 8 vols. description ends , 1:7, 317, 464; Parry, Consolidated Treaty Series description begins Clive Parry, ed., The Consolidated Treaty Series, Dobbs Ferry, N.Y., 1969–81, 231 vols. description ends , 56:267–71; ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States, Washington, D.C., 1832–61, 38 vols. description ends , Foreign Relations, 2:382–3, 419–28; Marshall, Papers description begins Herbert A. Johnson, Charles T. Cullen, Charles F. Hobson, and others, eds., The Papers of John Marshall, Chapel Hill, 1974–2006, 12 vols. description ends , 6:102–4, 121–2).