I will not now attempt to explain or comment on the situation. The development and the events of the last few days you will have gathered from my telegraphic communications, and from the reports of proceedings in Parliament, and articles from the London journals, which I continue to send you.

If there is to be a disastrous termination of all our work, from which we had hoped so much of good for the two countries and for the world, the obstinate refusal of the British Government and people to go on with a solemn and high engagement that, without any sacrifice of their dignity and interests, might have been conducted to a conclusion which would have blotted away all serious causes of disagreement between them and us, will be not a little owing to the course of some of our own citizens.

The difficulties have been wonderfully increased of late, and Great Britain encouraged in her position by the tone of some of the American journals, by inconsiderate declarations of some public men, and by much writing, telegraphing, and conversation, not wise and thoughtful, though generally, perhaps, not mischievously intended. This has led at last to a common conviction here that the best and most influential men of the United States desire to have our Government recede from its position.

I await still your communication in reply to Lord Granville's note of the 20th ultimo. I hope, also, with that, or sooner by telegraph, to receive instructions from you, which may direct and help me in any contingency likely to occur. I shall doubtless have much to report and bring to your consideration now very soon. In the mean time, I will not fail to keep my mind anxiously directed to any and every expedient by which the Treaty may possibly be preserved, although our interest in maintaining and executing its provisions is certainly not greater than the need of this nation, which does not seem to me to fully weigh and appreciate the unhappy consequences to flow from its repudiation. I have, &c.,

No. 20.

ROBT. C. SCHENCK.

Mr. Fish to General Schenck.

[Telegram.]

WASHINGTON, April 27, 1872.

You are aware that neither in the Case presented in behalf of this Government at Geneva nor in the instructions to you have the United States asked for pecuniary damages on account of that part of the Alabama claims called the indirect losses, which the British Government think are not within the province of the Tribunal. We think it essential, however, that the question be decided whether claims of that nature can in the future be advanced against the United States as a neutral by Great Britain when the latter is a belligerent; for if Great Britain is to be at liberty when a belligerent to advance claims for indirect losses or injuries against this country, then our claims must be maintained and we must press for compensation.

A conversation with Sir Edward Thornton induces the belief that the

British Government may make a proposal to you to the effect that Her Majesty's Government engages and stipulates that in the future, should Great Britain be a belligerent and this country neutral, and should there be any failure on the part of the United States to observe their neutral obligations, Great Britain will make or advance no complaints or claims against the United States by reason or on account of any indirect, remote, or consequential results of such failure; and that, in consideration of such stipulation, the United States shall not press for a pecuniary award of damages before the Geneva Tribunal on account of the claims respecting which Great Britain has expressed the opinion that they are not included in the submission, namely, the transfer of the American shipping, increased insurance, and the prolongation of the war.

Should a proposal to this effect be made by the British Government, the President will assent to it, it being understood that there is no withdrawal of any part of the American Case, but an agreement not to demand damages on account of the claims referred to, leaving the Tribunal to make such expression of opinion as it may think proper on that question.

It is presumed that such an agreement may be carried into effect by an exchange of notes.

FISH.

[From British Blue Book, "North America," No. 9, (1872,) p. 2.]

No. 21.

Earl Granville to Sir E. Thornton.

FOREIGN OFFICE, April 29, 1872.

SIR: General Schenck told me this day, in a conversation, that he had not yet received the answer from Mr. Fish to my letter of the 20th ultimo, but that he had received a telegraphic message, the substance of which he could not officially communicate until after the delivery of Mr. Fish's answer.

He then read to me as follows:

You are aware that neither in the Case presented in behalf of this Government nor in the instructions to you, have the United States asked for pecuniary damages on account of that part of the "Alabama claims" called the indirect losses, which the British Government think are not within the province of the Tribunal.

We think it essential, however, that the question be decided whether claims of that nature can in the future be admitted against the United States as a neutral by Great Britain when the latter is a belligerent; for if Great Britain is to be at liberty while a belligerent to advance claims for indirect losses or injuries against this country, then our claims must be maintained, and we must press for compensation.

A conversation with Sir E. Thornton induces the belief that the British Government may make a proposal to you to the effect that Her Majesty's Government engages and stipulates, that in future should Great Britain be a belligerent, and this country a neutral, and should there be any failure on the part of the United States to observe their neutral obligations, Great Britain will make or advance no complaints or claims against the United States, by reason or on account of any indirect, remote, or consequential results of such failure; and that, in consideration of such stipulation, the United States shall not press for a pecuniary award of damages before the Geneva Tribunal on account of the claims respecting which Great Britain has expressed the opinion that they are not included in the submission, namely, the transfer of the American shipping, increased insurance, and the prolongation of the war Should a proposal to this effect be made by the British Government, the President will assent to it; it being understood that there is no withdrawal of any part of the American Case, but an agreement not to demand damages on account of the claims referred to,

leaving the Tribunal to make such expression of opinion as it may think proper on that question. It is presumed that such an agreement may be carried into effect by an exchange of notes.

I observed to General Schenck that Sir E. Thornton, in whom I had the fullest confidence, had no instructions, and no authority to give an opinion on any proposal for the solution of the difficulty.

I had purposely desired to confine the negotiations to one channel, in order to avoid confusion.

The United States Minister remarked that the words of the telegram did not go so far as to say that Sir E. Thornton had done so.

I then stated that the proposal in its present shape could not be adopted by Her Majesty's Government. It was only proposed that the American Government, who had presented the claims for indirect losses, shall no further press them. But the Arbitrators had them before them; we certainly should not consent to plead against them; and the mere absence of further pressing them by the United States Government would leave the matter, as regarded the Arbitrators, in the position it

now was.

As to the Arbitrators being left to make such expression of opinion as they may think proper on that question, it appeared to be unintelligible.

If the United States Government agreed substantially to withdraw the indirect claims, it was not only with a feeling, which I cordially appreciated, of maintaining the most friendly feelings between the twocountries, but also because they believed it was in the interest of both that there should be no future liability on the part of either Government for such claims. If we both came to an agreement, no strength would be given to that agreement by a favorable expression of opinion from a body who were not appointed in order to lay down principles of international law; and if they gave a contrary opinion, it would be an unseemly result, and against the interest of both countries.

I then read to him the following statement of the views which the Cabinet were disposed to entertain as to the course which might be pursued:

We are ready to join with the United States in a statement to the Arbitrators that, in any award they may make, they are not to have regard to the indirect claims. We are also ready to state that the language we have hitherto used respecting these indirect claims involves a declaration of intention, which is to guide our conduct in future. Any such intention, and its binding force on future conduct, would of course be reciprocal. We do not know what is meant by the submission of the abstract question to the Arbitrators, nor do we see how it could be admissible, inasmuch as that question would already have been virtually decided by mutual consent.

General Schenck then asked me why I should not write to him such a note as he would suggest, in which it should be said that "while Her Majesty's Government still adhere to their view that it is not within the province of the Arbitrators to consider or decide upon the claims for indirect losses, and that therefore the Government of the United States ought not to press for a consideration of such claims, yet they are free to state that, in the event of the Government of the United States agreeing to refrain from pressing for compensation, or for any pecuniary award for that portion of their claims as set out in their Case to the Geneva Arbitrators, Her Majesty's Government will, on their part, agree that the view of the inadmissibility of such claims which they have heretofore presented, will still continue to be their principle of action and conduct in all like cases, and in similar circumstances, and particularly, are ready to give assurance, in pursuance of the recognition of such principles, to the Government of the United States, that if Great Britain

should at any time hereafter be a belligerent while the United States are neutral, claims of that nature will never be advanced against the United States."

I stated to the United States Minister that the Cabinet, in discussing the scheme sent by Sir E. Thornton, had treated it as Mr. Fish's proposal, and had not entertained the thought of its being a proposal to be made by themselves.

General Schenck said that it was of great importance that we should make the proposal.

I said that I had been writing at his dictation and did not wish to put words in his mouth, but that I thought the words which I had used, "not to have regard" to claims for indirect losses, were better in every way than those which he had adopted from Mr. Fish's telegram, "not to press," &c.

I had no doubt of the good faith of the United States Government, but it was desirable, after the past misunderstanding, to make everything as clear as possible. General Schenck declined to deviate from the telegram in this particular.

I then suggested the addition of the words "and such agreement being made known to the Arbitrators before the 15th of June," which he adopted. I also pointed out the omission of any declaration of reciprocity for the future, which was a matter of course, and he authorized me to write down "such understanding between the parties of course to be reciprocal for the future."

General Schenck repeated a strong appeal to me to be contented with substantially getting what we wanted.

I promised to submit what he had written, and for which I could undertake no responsibility, to my colleagues, and we agreed to continue confidential communication in order to save time.

After consultation with my colleagues, I forwarded to General Schenck the note and inclosure, of which I transmit copies herewith. I am, &c.,

[Inclosure 1 in No. 21.]

Earl Granville to General Schenck.

[Confidential.]

GRANVILLE.

16 BRUTON STREET, April 29, 1872.

MY DEAR GENERAL: I send you in a rough state a paraphrase of your proposed draught. Please return it to me when you have taken a copy.

The Cabinet were of opinion that it was for the United States to make the proposal officially as well as confidentially, but they are prepared to concede on this point in the spirit which you recommend.

They insist upon the words in the first half of the third page' as preferable to those you have taken from the message of Mr. Fish.2

The other alterations are for the purpose of clearness, and in the hope that some of them will be more acceptable to your Government.

Yours, &c.,

[For Inclosure 2 in No. 21, see p. 481.]

GRANVILLE.

1"That the Arbitrators are not to have regard, in any award that they may make, to the above-mentioned claims." (See Inclosure 2.)

"The United States shall not press for a pecuniary award of damages before the Geneva Tribunal on account of the claims respecting which," &c. (See page 478.)

No. 22.

General Schenck to Mr. Fish.

[Telegram.]

LONDON, April 30, 1872.

Your 181, received last night, has been by some accident wet and blurred, but I hope to make it all out to-day. Meantime your telegram, which came Sunday night, was the occasion of a strictly confidential interview with Granville yesterday. He objected to this Government making first movement, but that point is now conceded. They object to having Arbitrators express opinion on indirect claims, when the two Governments agree that they are not to be the subject of award.

After consideration by Cabinet the following paper was given me last night confidentially as the draught of a possible communication to be made to me, if the United States have promised to assent to it and will previously put Her Majesty's Government in possession of the terms of the assent:

Her Majesty's Government adhere to their view that it is not within the province of the Arbitrators to consider or to decide upon the claims for indirect losses, viz, the transfer of the American shipping, the increased premiums of insurance, and the prolongation of the war, and that consequently the Government of the United States ought not to press for a consideration of such claims. They are, however, ready to state that, in the event of the Government of the United States agreeing that the Arbitrators are not to have regard, in any award that they may make, to the above-mentioned claims, Her Majesty's Government will, on their part, agree that the view which they have heretofore presented of the inadmissibility of such claims shall still continue to be their principle of action and conduct in all like cases and in similar circumstances; and that they are ready, in pursuance of the recognition of such principle, to give assurance to the United States that, if Great Britain should, at any time hereafter, be a belligerent, while the United States is a neutral, claims of that nature, in similar cases and similar circumstances, will never be advanced against the United States, such an assurance for the future being reciprocally given by both parties. An arrangement such as is here sketched out might be carried into effect by an exchange of notes, which shall be communicated to and recorded by the Arbitrators.

In submitting this draught of their proposal, I should inform you that I have insisted on this language, "the United States agreeing to refrain from pressing for compensation or for any pecuniary award for the above-mentioned claims."

SCHENCK,

[From British Blue Book North America, No. 9, (1872,) p. 1.]

No. 23.

Sir E. Thornton to Earl Granville.

[Extract.]

WASHINGTON, April 30, 1872. (Received May 12.) I called upon Mr. Fish at the State Department on the 25th instant, Thursday, the day of the week on which he requests that members of

The substance of this dispatch was received by telegraph on the 27th of April. 31 A-II