TRADE WITH ENEMY IN NEUTRAL TERRITORY 229

As compared with British merchants, French merchants were thus placed at a disadvantage, and there was some complaint that the allied governments were not pursuing a common policy in respect to trade with the subjects of a common enemy resident in neutral territory.

§ 156. British "Black List" Legislation. The British government thereupon decided to adopt the policy of France, and by an Act of Parliament of December 23, 1915, the government was authorized to prohibit by proclamation all persons residing in the United Kingdom from trading with " any persons or bodies of persons not resident or carrying on business in enemy territory or in territory in the occupation of the enemy . . . whenever by reason of the enemy nationality or enemy association of such persons . . . it appears expedient to His Majesty so to do." The act further provided that any list of persons or bodies of persons with whom such trading was prohibited might be varied or added to by an order made by the Lords of the Council on the recommendation of a secretary of state. The provisions of the various trading with the enemy acts were extended to apply to all such persons or bodies of persons. Thus the ancient Anglo-American test for determining the status of enemy persons was abandoned, and the continental test of nationality was substituted. Enemy persons" henceforth were to include not only those residing in enemy territory, but also persons of "enemy nationality and association" residing in neutral countries, and the same penalties were prescribed for trading with the latter as with the former. In pursuance of the authority thus granted, the government proceeded to issue a list of persons and firms in neutral countries, with which trade was forbidden. The total number of such persons and firms is said to have exceeded fifteen hundred.2 As originally published, the "black list" contained the names 1 Text in Diplomatic Correspondence with Belligerent Countries, European War, No. 3, p. 54.

* The lists were published from time to time in the London Gazette. According to Syren and Shipping, an English marine journal, the number of black-listed" persons and firms in the various countries was as follows: Spain, 167; Brazil, 140; Netherlands, 120; Argentina and Uruguay, 95; Morocco, 88; Portuguese East and West Africa, Guinea, and Rio Muni, 87; Japan, 86; United States, 85; Norway, 83; Portugal, 79; Sweden, 72; Netherlands and East Indies, 70; Ecuador, 69; Persia, 56; Greece, 59; Philippines, 44; Peru, 41; Chili, 35; Bolivia, 22; Cuba, 10; Central America, 5; Paraguay, 3; Colombia, 1. It will be noted that Japan, an ally of Great Britain, is included in the list, while Switzerland is omitted.

of eighty-five persons and firms in the United States.1 The publication of the "black list" caused the persons and firms affected to address protests to their governments, and in the United States, in particular, it provoked widespread criticism. $157. The American Representation and the British Reply. On January 25, 1916, the secretary of state of the United States in a communication 2 to the American ambassador at London stated that the new Trading with the Enemy Act was "pregnant with possibilities of undue interference with American trade." The act had been formed, he said, without "a proper regard for the right of persons domiciled in the United States, whether they be American citizens or subjects of countries at war with Great Britain, to carry on trade with persons in belligerent countries." The ambassador was requested to call the attention of Sir Edward Grey to the "grave apprehensions" entertained by the American government and to present to him a formal reservation of the right of the government to protest against the application of the act in so far as it affected the trade of the United States. In a communication dated February 16, 1916,3 the British foreign office explained the purpose and scope of the act and gave assurances that the powers which it conferred on the government would be exercised with every possible regard for neutral commerce. The act was framed, it was said, with the object of bringing British trading with the enemy regulations into greater harmony with those adopted by the French government since the commencement of the war,

1 The list is published in the New York Times of July 19, 1916. The information on the basis of which the American firms were "black-listed" appears to have been furnished by their agents in Great Britain. The board of trade requested all such agents to furnish information concerning the nationality of the persons composing their firms, together with lists of their stockholders and their addresses, the number of shares held by each, etc. The requests for this information called forth strong protests from the American firms to which they were addressed. Cf. the Cong. Record of January, 1916, p. 106.

2 The text of this communication and the other correspondence between the American and British governments regarding the so-called "black list measure, down to May 10, 1915, may be found in a white paper issued by the department of state, entitled Diplomatic Correspondence with Belligerent Countries relating to Neutral Rights and Duties, European War, No. 3, printed and distributed August 12, 1916, pp. 54-84. See also two British white papers entitled Trading with the Enemy (Extension of Powers) Act, 1915, Misc., No. 11 (1916), Cd. 8225, and No. 36 (1916), Cd. 8353.

Text, ibid., pp. 56-57.

THE AMERICAN PROTEST

231 by applying in some degree the test of nationality in the determination of enemy character in addition to the old test of domicile, which, experience had shown, could not provide a sufficient basis under modern commercial conditions for measures intended to deprive the enemy of all assistance, direct or indirect, from national resources. Although the application in its fullest extent of the principle of nationality was entirely legitimate, it was added, Parliament had not gone to the full length of its power, but had extended the principle only to purely commercial relations.

"His Majesty's government readily admit the right of persons of any nationality resident in the United States to engage in legitimate commercial transactions with any other persons. They cannot admit, however, that this right can in any way limit the right of other governments to restrict the commercial activities of their nationals in any manner which may seem desirable to them by the imposition of prohibitions and penalties which are operative solely upon persons under their jurisdiction."

§ 158. The American Protest. Meantime the "black list" had been published, and the persons and firms affected were pressing the American government to take more vigorous action against the policy of the British government. On July 26, 1916, the department of state addressed a formal protest to the British government in which the "scope and effect" of the British policy were described as "extraordinary" and "arbitrary" and had caused the "most painful surprise" in the United States. British steamship companies would not, it was alleged, accept cargoes from the proscribed firms or persons or transport their goods to any port, and steamship lines under neutral ownership understood that if they accepted freight from them, they were likely to be denied coal at British ports and excluded from other privileges which they had usually enjoyed, and might themselves be put upon the "black list." Neutral bankers refused loans to those on the list, and neutral merchants declined to contract for their goods, fearing a like proscription. It was evident that this measure was

"inevitably and essentially inconsistent with the rights of the citizens of all nations not involved in the war. . . . 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 or applications of punishment of its citizens." 1

1 Text in British white paper referred to above (Misc., No. 36, 1916, Cd. 8353).

Whatever may be said of the legality of the Act of Parliament, the note concluded, it was inconsistent with that "true justice, sincere amity and impartial fairness which should characterize the dealings of friendly governments with one another," and the American government could not be expected to consent to see its citizens put upon an ex parte black list without calling attention in the gravest terms, to the many serious consequences to neutral rights which such an act must necessarily involve."

$159. The British Answer. To this communication Sir Edward Grey replied in a note dated October 10, in which he referred to the Act of Parliament as a "piece of purely municipal legislation "intended to prohibit persons in the United Kingdom from trading with persons of enemy nationality or association in neutral countries. It was simply a measure to enjoin those who owed allegiance to Great Britain from having trade relations with persons who were found to be assisting or rendering service to the enemy.

"I can scarcely believe," he said, "that the United States government intend to challenge the right of Great Britain as a sovereign State to pass legislation prohibiting all those who owe her allegiance from trading with any specified persons when such prohibition is found necessary in the public interest. The right to do so is so obvious that I feel sure that the protest which your Excellency handed to me has been founded on a misconception of the scope and intent of the measures which have been taken."

Turning to the question whether domicile alone was a sufficient test for determining enemy character for purposes of trade, Sir Edward observed that

"As the United States government are well aware, the Anglo-American practice has in times past been to treat domicile as the test of enemy character, in contradistinction to the continental practice, which has always regarded nationality as the test. The Anglo-American rule crystallized at a time when means of transport and communication were less developed than now, and when in consequence the actions of a person established in a distant country could have but little influence upon a struggle. Today the position is very different. The activities of enemy subjects are ubiquitous, and under modern conditions it is easy for them, wherever resident, to remit money to any place where it may be required for the use of their own government, or to act in other ways calculated to assist its purposes and to damage the interest of the powers with whom it is at war. No elaborate exposition of the situation is required to show

MERITS OF AMERICAN CONTENTION

233

that full use has been and is being made of these opportunities. . . . In the face of enemy activities of this nature, it was essential for His Majesty's government to take steps that should at least deprive interests so strongly hostile of the facilities and advantages of unrestricted trading with British subjects. The public opinion of this country would not have tolerated the prolongation of the war by the continued liberty of British subjects to trade with and so to enrich the firms in foreign countries whose wealth and influence were alike at the service of the enemy."

In conclusion Sir Edward repeated the assurances already given that the measures adopted would not be carried any further than was absolutely necessary to weaken the resources of the enemy.

§ 160. Merits of the American Contention. As to the legal right of a belligerent to prohibit persons domiciled in its own territory from trading with persons of enemy nationality, or from having hostile connections in neutral countries, there would seem to be little reason for doubt, and in fact the American government does not appear to have contested this right. It is a right inherent in the sovereignty of every country and if exercised without arbitrariness in time of war with a view to preventing an enemy from profiting by such trade, neutrals have no just ground for complaint.1 The American protest was based mainly on the alleged arbitrariness with which the British "black list" had been prepared, the unnecessary interferences with legitimate trade to which the enforcement of such a policy would inevitably lead, and its inconsistency with the rules of amity and comity which should characterize the relations of friendly powers. Other features of the measure were objectionable, but as stated above, the general principle of law on which the measure was based was not and could hardly be contested. Public opinion in neutral countries generally condemned the British measure not so much on grounds of illegality as upon considerations of expediency, tact, and good neighborliness.2 The irritation which it occasioned and the injury to legitimate neutral trade, it was said, greatly outweighed any possible advantage which Great Britain could derive from cutting off a relatively insignificant volume of trade between the "blacklisted" persons or houses and the enemy.

1 Cf. the London weekly Times, of November 17, 1916.

2 Cf. an editorial in the New York Times of July 20, 1916, where the British "black-list" measure is characterized as "quite the most tactless, foolish and unnecessary act of the British government during the war."