Government is prepared to proceed to the exchange of ratifications of this Convention.

Your telegram raises again the questions which were the subject of the Embassy's telegram No. 516 of December 11 and the Department's reply No. 473 of December 17, 1924,16 i. e.

(1) The status of certain cases, involving American citizens or interests, adjudicated by the Palestine Courts in contravention of the capitulatory rights of the United States and in disregard of the provisional arrangement, made in 1922 and 1923 between the American Consul at Jerusalem and the Legal Secretary of the Palestine Government,17 as to the procedure to be followed in civil and criminal cases arising in Palestine in which American citizens or interests should be defendants, and

(2) The necessity of this Government's assent to the imposition upon American citizens or interests of any dues or taxes not contemplated by the capitulatory regime or to the collection from its nationals or interests of any increase in such dues or taxes.

19

Since the receipt of your above-mentioned telegram of March 7, 1925, the Department has communicated by telegram with the Consu! at Jerusalem 18 with a view to obtaining a recapitulation of all matters in which the Palestine authorities would appear to have taken action prejudicial to the rights of American citizens or interests as outlined above. In reply, the Consul reports 10 that, in disregard of the agreement between the Consulate and the Legal Secretary, eight judgments against American citizens or interests have been rendered by the Palestine Courts, that two of such judgments have been executed without the assistance of the Consulate and that there is now pending in a Palestine Court one case wherein an American citizen is named as defendant. The Consul adds that, in each of the cases referred to, he has lodged a written protest against the action of the Palestine authorities.

In making such protests the Consul has based his action on the following considerations: Article 8 of the Convention of December 3, 1924, provides that it shall enter into effect only upon the exchange of ratifications by the contracting parties; Article 8 of the Mandate for Palestine (incorporated in the preamble to the Convention) provides that, during the period of the Mandate, "the privileges and immunities of foreigners, including the benefits of consular jurisdiction and protection as formerly enjoyed by capitulation or usage in the Ottoman Empire, shall not be applicable in Palestine"; and the United States Government has consistently maintained the position that the privileges and immunities in question could be relinquished

only by treaty agreement. The conclusion logically to be drawn from the foregoing considerations was that, pending the exchange of ratifications of the Convention of December 3, 1924, the Consul at Jerusalem should continue to exercise extraterritorial jurisdiction in cases, involving American citizens, which, under the capitulatory regime, were properly within the jurisdiction of the American Consular Court. That this conclusion was accepted in principle is shown by the above-mentioned agreement concluded in 1922 and 1923 between the Consulate and the Legal Secretary of the Palestine Government. The detailed scope of this provisional agreement is set forth in the enclosures to the Department's instruction No. 977 of October 4, 1923,20 which enclosures the Department desires you to study carefully in connection with its present instruction.

You will also find in the Department's instruction No. 977 of October 4, 1923, a discussion of the circumstances which, in certain cases, led to the non-application of the terms of this provisional agreement. In this connection reference is also made to the Department's instruction No. 1004 of October 30, 1923,21 transmitting a copy of a judgment, rendered by the Palestine Court of Appeals, in which the Court set forth its reasons for not following the procedure provided for in the provisional agreement. It is presumably under the provisions of this judgment that the Palestine Courts have taken cognizance of the nine cases involving American citizens to which reference has been made above. For the reasons already stated, however, the conclusions of the Palestine Court of Appeals were inacceptable to this Government, and in each of the nine cases in question, a formal written protest was made by the Consul at Jerusalem to the proper authorities of the Palestine Government.

These reasons persist today, and before proceeding to the exchange of ratifications of the Convention of December 3, 1924, the Department desires you to ascertain whether the British Government is prepared to give assurances in the following sense:

(1) That the pending case will be dropped,

(2) That the two judgments, already rendered by the Palestine Courts and executed in disregard of the provisional agreement, will be cancelled and that sums collected from American citizens without the assistance of the Consulate will be refunded, and

(3) That the six judgments, already rendered but not as yet executed, will not be executed after the exchange of ratifications.

The Department desires that you discuss this question informally with the proper official of the Foreign Office and report the results your representations. In such conversations you may add that,

of

after the entering into effect of the Convention of December 3, 1924, this Government would, of course, have no objection to the retrial of the nine cases in question. You may suggest also that a further reason for desiring these assurances is that, in some, if not all, of the cases in question, judgment was rendered in absentia, the American defendant having absented himself from the court of trial upon the advice of the American Consulate and as a protest against the assumption of jurisdiction by the Palestine Court.

You will be careful, in your conversations at the Foreign Office, to reserve for further discussion the question of the imposition upon American nationals of the increased Palestine import duties which have not received the assent of this Government. That question will be made the subject of a separate instruction which will be sent to you at an early date.

I am [etc.]

867n.01/428

FRANK B. KELLOGG

The Secretary of State to the Ambassador in Great Britain

No. 68

(Houghton)

WASHINGTON, June 23, 1925. SIR: The Department refers to its written instructions Nos. 631 and 34 of April 21 and May 29, 1925, respectively,23 in the matter of the assurances desired by this Government from the British Government in connection with the ratification of the convention between the United States and Great Britain, signed at London on December 3, 1924, with respect to the rights of the two governments and their nationals in Palestine.

The Embassy's memorandum of May 4, 1925, based on the Department's instruction No. 631 of April 21, 1925, above mentioned, sets forth the assurances desired by this Government with regard to certain judicial questions arising out of the projected suspension of the extraterritorial privileges enjoyed by the United States in Palestine. In concluding this memorandum the Embassy states:

"The question of the imposition upon American nationals of the increased Palestine import duties which have not received the assent of the United States Government is reserved for further discussion."

The imposition of the increased import duties referred to in this reservation was the subject of a general protest made by the American Consul at Jerusalem upon the occasion of the announcement of the increased duties. The only specific case in which a formal protest

23 Latter not printed.

has been made to the Palestine Government is, however, that of Elimelech Sachs, which was the subject of the Department's telegram No. 323 of September 15 and its written instruction No. 387 of October 20, 1924.24 It is reported by the American Consul at Jerusalem that apparently no objection has been raised by other American importers in Palestine to the payment of the increased duties affecting their importations. The duties affecting such importations are understood to have been increased by only three per cent. ad valorem, whereas the increase affecting the importation of matches by Mr. Sachs was approximately two thousand per cent. The pertinent facts in the case of Mr. Sachs are as follows:

On August 15, 1924, there was published in the Official Gazette of the Palestine Government the text of an ordinance, entitled "The Customs Duties Amendment Ordinance 1924", providing for certain changes in the Palestine tariff. One of the changes thus set forth increased the duty on matches from 11 per cent. ad valorem to P. T. 20 per gross boxes, not exceeding 10,000 matches, an increase approximately from P. T. 75 to P. T. 1,000 per shipping case of matches. The collection of duties under this ordinance was begun on August 16. Sometime previous to the promulgation of this ordinance (it is stated "in July") Mr. Elimelech Sachs, an American citizen, had ordered a quantity (350 shipping cases or 17,500 gross boxes) of matches. His shipment arrived in Palestine on August 18, and duty was assessed thereon in the amount of L. E. 3,500 under the new tariff instead of L. E. 180 under the old tariff. The difference L. E. 3,320 was equivalent to slightly over $15,000 at the then prevailing rate of exchange. Mr. Sachs declined to pay the increased duty and protested to the Consul at Jerusalem. The Consul addressed a formal protest to the Palestine Government and informed the Department, which, through the Embassy at London, brought the matter to the attention of the British Foreign Office. On December 3 the Foreign Office inquired through the Embassy 25 whether, in view of the signature of the Palestine Mandate Convention, it was desired to pursue further, amongst others, this matter. In replying under date of December 17,20 the Department stated, in part:

"This Government's position regarding the indispensability of its assent to any dues or taxes to be imposed upon Americans in Palestine prior to the coming into effect of the Mandate Convention has not been changed by the signature of that convention. Meanwhile the Department would, however, be disposed to give favorable consideration to any reasonable request of the Mandatory Power that the

"Neither printed.

See telegram No. 516, Dec. 11, 1924, 4 p. m., from the Ambassador in Great Britain, Foreign Relations, 1924, vol. ш, p. 202.

"Ibid., p. 202.

United States assent to the collection of increased dues or taxes from Americans in Palestine as from the date of the communication of its assent to the British Government. A similar procedure was followed with respect to a contemplated increase of customs dues in Syria 27 shortly after signature of the Syrian mandate convention between the United States and France." 28"

Apparently no further action has been taken in this matter by the British Foreign Office, other than in its informal inquiry of March. 7, 1925, through the Embassy, whether this Government was prepared to proceed to an exchange of ratifications of the Palestine Mandate Convention.

From a report dated March 4, 1925, from the American Consul at Jerusalem 20 it would appear that, pending a decision as to the admissibility of this consignment under the previously prevailing duty, it has been refused entry except upon payment of the increased duty and has been held in the customs bonded warehouse at the port of Jaffa, where it has become subject to considerable storage charges. It appears to be clearly established that this shipment was such as might reasonably have been made to Mr. Sachs in the normal course of his dealings in matches and that his order therefor was not placed with any knowledge of or in anticipation of the subsequent increase in the Palestine import duty as affecting this commodity. Nor does there appear to be any doubt that, should he now be required to enter this shipment at the new rate of duty, he would sustain a considerable actual pecuniary loss. From a further report from the Consul at Jerusalem, dated June 17, 1925,29 it appears that such actual loss "would be 1400 Egyptian pounds besides accrued interest and storage charges". The principal item included in this loss, that of 1400 Egyptian pounds, is attributed to the circumstance that "owing to active smuggling from Syria and Trans-Jordan matches are now sold here (Jerusalem) at a price that scarcely pays new duty, not to mention original costs".

It will be obvious to the British Government that under the circumstances Mr. Sachs was entitled to have his shipment of matches enter at the former rate of duty which would have amounted to L. E. 180, instead of at the new rate which amounted to L. E. 3500. It is realized, however, that this would have allowed him a considerable advantage over competitors paying the new rate of duty by permitting him to undersell his competitors and still obtain a very large percentage of profit. While this Government does not desire to take advantage of the situation by insisting, as it might well do, that the