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1914. The commissioner of navigation, who is charged with issuing certificates of registry, after an investigation was satisfied that their ownership was largely German, and he ruled that they were not entitled to American registry under the terms of the above-mentioned act, which provides only for the registration of "American-owned" ships; but the law officers of the department took a different view and held that since the owners were a firm incorporated under the laws of Delaware, it mattered not who owned the stock or where the company obtained the funds, and the vessels were therefore entitled to American registers. Under these circumstances they were admitted to American registry in September and October, 1915, although it was stated in the press despatches that the bureau of navigation warned Wagner that if his vessels engaged in European trade, they would probably find their way sooner or later into a prize court.

Despite the fact that he heeded the warning of the bureau, his ships did not escape, for shortly afterwards several of them, notably the Hocking, the Genesee, and the Kankakee, were seized by British cruisers and taken into British ports, while another one, the Solveig, was seized by a French cruiser and taken into a French port. The Solveig was condemned by the council of prizes on the ground that, although flying a neutral flag, it was German-owned.1 In February, 1917, the British prize court reached a similar conclusion in the cases of the Kankakee, Hocking, and Genesee. At the trial counsel for Wagner admitted that he had borrowed heavily of German capital, but denied that the ships were German-owned. The prize court, however, held that his company was merely a "covering" for the German Woermann shipping company.2

1 Text of the decision in 23 Rev. Gén. de Droit Int. Pub. (1916), Jurisprudence, pp. 16 ff. Compare also the case of the Willkommen (24 Rev. Gén., Jurispr. 15) where the French prize council held enemy ownership rather than the nationality of the flag to be the test of liability to condemnation.

2 Compare the case of the Proton in which the superior prize court of Egypt held that it is the duty of prize courts to ascertain what the character of a vessel really is, and if it appears to be only nominally owned by a neutral and is really owned by an enemy, it is not protected from condemnation although it may be entitled to fly a neutral flag. Trehern's Cases, III, 125. Compare also the case of the Hamborn (ibid., 80) in which Sir Samuel Evans held that a ship registered in Holland and flying the Dutch flag and owned by a company registered in Holland but the business of which was managed by a German company under German

A somewhat similar case was the seizure in November, 1915, by a British cruiser of the Presidente Mitre, a steamer flying the Argentine flag but owned by the Hamburg South American Line, a German company. The ground upon which the seizure was made was that the ship was German-owned, and in accordance with the British rule which was substituted for article 57 of the Declaration of London the status of the vessel was determinable by the nationality of the owners and not by the nationality of its flag. The Argentine government protested against the seizure on the ground that the vessel had navigated under the Argentine flag for fifteen years and for the preceding ten years had plied exclusively between ports of Argentina. Moreover, the Argentine government called attention to the fact that the people of Argentina were largely dependent on German-owned vessels for the carriage of their commerce and especially for the transportation of coal for the use of the navy.1 Subsequently the British government restored the vessel and agreed not to make further seizures of similar ships sailing under the Argentine flag, provided they were engaged only in trade between the ports of Argentina.

§ 136. German Law and Practice. Although the purchase and transfer to the American flag of German ships laid up in the ports of the United States would apparently have inured to the benefit of Germany, such a policy does not seem to have been encouraged by the German government, and, in fact, it appears to have been forbidden by an act of the German parliament of October 21, 1915.2

Nevertheless, as stated above, the German government agreed

directors resident in Germany was liable to condemnation. It is a settled rule of prize law, said Sir Samuel, that prize courts will "penetrate through and beyond terms and technicalities to the facts and realities "; it is their duty to "pull off the mask and exhibit the vessel in her true character." The flag which a vessel is flying at the time of capture or which it is entitled to fly is not conclusive as to its character, the true test being ownership and control.

1 Cf. the speech of Dr. Zeballos, member of the Argentine national congress, reproduced in the Cong. Record of the United States for February 21, 1916, p. 3366.

* English text by Huberich in Solicitors' Journal and Weekly Reporter, November 21, 1914, p. 70. Subsequently, however, some German vessels appear to have been transferred to neutral flags, especially Dutch. The treaty of peace (Annex III, par. 7) required Germany to take any measures that might be indicated to her by the Reparations Commission for obtaining the full title to the property in all ships which were transferred during the war to neutral flags without the consent of the allied governments.

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to recognize the transfer of ships from an enemy to American registry, provided they were employed in the transportation of goods to German ports. Otherwise the transfers would be treated as unlawful.1

In accordance with this policy the German prize courts refused to recognize the validity of transfers from enemy to American registers except under the condition mentioned. A case involving this question was that of the Pass of Balmaha, which was originally a Canadian vessel, but which was sold to an American steamship company after the outbreak of the war and was admitted to American registry. While on her way to Archangel, Russia, with a cargo of cotton she was seized by a British cruiser and a British prize crew placed on board. While being taken to Falmouth, she was captured by a German submarine, taken to Cuxhaven and placed in the custody of a German prize court by which she was condemned in January, 1915, on the ground that the transfer from British to American registry was illegal. The American ambassador was instructed to protest against the seizure of the vessel on the ground that she was virtually owned in the United States before the change of registry took place and was wholly owned after the transfer.

$137. Question Raised by the American Ship-purchase Bill of 1915. The question of the legality of transfers of merchant vessels of belligerent nationality to a company in which a neutral government owns a majority of the capital stock was raised by the ship-purchase bill which was before the American Congress in 1915 and the passage of which was strongly urged by President Wilson as a necessary measure for increasing the American merchant marine with a view to meeting the situation caused by the lack of adequate shipping facilities for American commerce. This bill authorized the government of the United States to subscribe for fifty-one per cent of the capital stock of

1 In 1917, after the United States entered the war, eight Austrian steamships then lying in the ports of the United States, Argentina, and Cuba were purchased by the Kerr Navigation Company of New York City and transferred to the American registry. Since the United States was at the time a belligerent and an ally of Great Britain and France, naturally they made no objection to the transfers. During the preceding year, when the United States was neutral, the German steamship Georgia was purchased by an American and registered under the American flag; but since she was employed in transporting grain to England and supplies for the Belgian relief commission, neither France nor Great Britain raised any objection.

any corporation organized under the laws of the United States or any state, for the purchase, maintenance, and operation of merchant vessels; it also provided that the secretary of the treasury, the postmaster general, and the secretary of commerce should constitute a board with full power to vote the stock of the United States and to carry out the purposes of the act, and that the President should be authorized to charter, lease, or transfer vessels purchased or constructed under the provisions of the act.

It was clearly the intention of the authors and advocates of the bill that the fleet contemplated should be acquired mainly by the purchase and transfer to American registry of German vessels then lying in American ports. This intention may be inferred from the refusal of the senate to adopt an amendment proposed by senator Lodge that no vessels should be purchased under the act which were the property of any citizen or subject of a belligerent State.

Assuming, therefore, that if the bill had become law and the company organized thereunder should have proceeded to purchase any such vessels, would the transactions have been inconsistent with the duties of neutrality? The question is certainly debatable. The purchase in such a case would have been a very different transaction from that involved in the case of the Dacia, where the parties were private citizens. In the former case the purchaser would have been a company directed by a board composed of three members of the cabinet, and a majority of the shares of stock of which was owned by a neutral government. In effect, therefore, the purchaser would have been the government of the United States. The fact that a portion of the stock was held by private citizens would hardly have altered the situation. While both England and the United States had always upheld the right of neutral individuals to purchase belligerent merchant vessels and to have them registered under a neutral flag whenever the transaction was a bona fide, fully perfected, and unconditional sale, neither had ever admitted that governments, either directly or indirectly through corporations which they control, might make such purchases and transfers. That it would have been an unneutral act was the opinion of Mr. Lansing, then counsellor of the department of state, and it was the view expressed by senators

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Lodge, Root, McCumber, Burton, and Norris during the debates on the proposed bill. The bill failed to pass either house of Congress. A somewhat similar bill, however, became law in 1916, but it contained a provision forbidding the purchase, lease, or chartering of any vessel under the registry or flag of a foreign country then engaged in war. Happily, in this form the bill removed the possibility of foreign complications, which would probably have arisen, had it been passed without this proviso and had purchases and transfers to American registry been made of German and Austrian vessels then lying in American ports.

138. Controversy between Chili and Great Britain. The people of Chili, like those of the United States, found themselves at the outbreak of the war largely deprived of ships for the carriage of their commerce.1 The Chilian government thereupon entered into negotiations with the Kosmos Steamship Company of Germany with a view to purchasing some of its numerous ships then laid up in the ports and territorial waters of Chili. While the Chilian government did not consider that under the circumstances the purchase of ships of belligerent nationality lying in its ports, and their transfer to Chilian registry with a view to assuring the continuance of commerce with Europe and between its own ports, would be contrary to the spirit of article 56 of the Declaration of London, but at the same time, desiring to avoid any difficulties with Great Britain or her allies in regard to the status of vessels purchased from the German company and transferred to the Chilian flag, it made inquiries of the British government in a note of August 7, 1914, as to whether it would raise objection to the proposed transfers. In a reply of August 21 the British government acquiesced in the Chilian proposals, but at the same time indicated certain conditions under which the purchase of German ships should be effected. The conditions were that the transfers should be bona fide, entire, and permanent; that the vendor should not reserve the right of repurchase at the close of the war, and that the German crews should be displaced. The British government added that it would bring to the attention of its allies these conditions and at the same time expressed the hope that they would be acceptable

1 Cf. the speech of Dr. Zeballos referred to above, Congressional Record, February 21, 1916, p. 3366.