3. When attention is directed to the nature of the process by which only the Arbitrators can arrive at any gross sum to be awarded against Great Britain, and to the materials or "elements" available to them for the purposes of such an award, it will be clearly seen that they cannot, without disregarding every principle on which the doctrine of interest ordinarily rests, make any such allowance. Instead of being "conformable to public law," and "required by permanent considerations of equity and justice," this demand can be demonstrated without difficulty to be just the reverse. The proofs, however, of this proposi tion will be better understood if, in the first instance, we ascertain the rules of civil jurisprudence, applicable to the subject of interest.

4. Putting aside those cases in which the liability of an individual. to pay interest rests upon an express or implied contract, or upon positive legislation, it may be stated generally, that interest, in the proper sense of that word, can only be allowed where there is a principal debt, of liquidated and ascertained amount, detained and withheld by the debtor from the creditor after the time when it was absolutely due, and ought to have been paid, the fault of the delay in payment resting with the debtor; or where the debtor has wrongfully taken possession of, and exercised dominion over, the property of the creditor.

In the former case, from the time when the debt ought to have been paid, the debtor has had the use of the creditor's money, and may justly be presumed to have employed it for his own profit and advantage. He has thus made a gain, corresponding with the loss which the creditor has sustained by being deprived during the same period of time of the use of his money; and it is evidently just that he should account to the creditor for the interest, which the law takes as the measure of this reciprocal gain and loss. In the latter case the principle is exactly the same; it is, ordinarily, to be presumed that the person who has wrongfully taken possession of the property of another has enjoyed the fruits of it; and if, instead of this, he has destroyed it, or kept it unproductive, it is still just to hold him responsible for interest on its value, because his own acts, after the time when he assumed control over it, are the causes why it has remained unfruitful.

In all these cases it is the actual or virtual possession of the money or property belonging to another, which is the foundation of the liability to interest. The person liable is either lucratus by the detention of what is not his own, or is justly accountable, as if he were so.

5. The rules of the Roman law, as to interest for non-payment of a debt due upon contract, are in strict accordance with the above statement: "In bonæ fidei contractibus, usuræ ex morâ debentur." (Digest, lib. 32, § 2; lib. 17, § 3.) "Interest," says Domat, (lib. 3, tit. 5, § 1,)" is the name applied to the compensation which the law gives to the creditor, who is entitled to recover a sum of money from his debtor in default." (Cited in Sedgwick on Damages, page 234.)

The Code Civil of France in like manner (lib. 3, tit. 3, "Contrats et Obligations," Art. 1146) provides that "les dommages et intérêts," (which, in the absence of a stipulated amount between the parties, are limited, by Art. 1153, to the rate of interest fixed by law,) "ne sont dûs que lorsque le débiteur est en demeure de remplir une obligation ;" and Art. 1139 defines the meaning of this expression: "Le débiteur est constitué en demeure, soit par une sommation, ou par autre acte équivalent, soit par l'effet de la convention, lorsqu'elle porte que, sans qu'il soit besoin d'acte, et par la seule échéance du terme, le débiteur sera en demeure." The laws of Great Britain and America recognize the same principles.

6. Mr. Sedgwick, an American author, whose work "On the Measure

of Damages" is highly esteemed, and of frequent reference in the courts of Great Britain, as well as in those of the United States, has a chapter (XV) on "Interest with reference to Damages." At page 373 he says:

The allowance or infliction of interest often presents itself entirely disconnected from any question of contract; and, in this aspect, the subject cannot be omitted in any work which treats of compensation, for it is to be observed generally, to use the language of Lord Kenyon, that where interest is intended to be given, it forms part of the damages assessed by the jury, or by those who are substituted in their place by the parties.

The subject of interest is susceptible of very clearly defined division: first, where it can be claimed as a right, either because there is an express contract to pay it, or because it is recoverable as damages which the party is legally bound to pay for the detention of money or property improperly withheld; second, where it is imposed to punish negligence, tortious, or fraudulent conduct. In the first case it is recoverable as matter of law. In the second case it rests entirely in the pleasure of the jury.

He then states the rules of the English law, that "all contracts to pay undoubtedly give a right to interest from the time when the principal ought to be paid ;" and that "where money is due, without any definite time of payment, and there is no contract, express or implied, that interest shall be paid, the English rule, independent of statute, is, that it cannot be claimed."1

This latter rule does not appear to be adopted in the greater number of the United States.

"There is," says Mr. Sedgwick, "considerable conflict and contradiction between the English and American cases on this subject. But, as a general thing, it may be said that while the tribunals of the former country restrict themselves generally to those cases where an agreement to pay interest can be proved or inferred, the courts of the United States, on the other hand, have shown themselves more liberally disposed, making the allowance of interest more nearly to depend upon the equity of the case, and not requiring an express or implied promise to sustain the claim. The leading difference seems to grow out of a different consideration of the nature of the money. The American cases look upon the interest as the necessary incident, the natural growth, of the money, and, therefore, incline to give it with the principal; while the English treat it as something distinct and independent, and only to be had by virtue of some positive agreement."'

2

The American rules for the application of the principles recognized in their courts were thus stated by the Chief Justice of New York, in a case in which the whole subject was carefully examined:

From an examination of the cases, it seems that interest is allowed: (1) Upon a special agreement; (2) Upon an implied promise to pay it; and this may arise from usage between the parties or usage of a particular trade; (3) When money is withheld against the will of the owner; (4) By way of punishment, for any illegal conversion or use of another's property; (5) Úpon advances of money.3

In Connecticut, similar propositions were laid down:

(1) Interest will be allowed, when there is an express contract to pay it; (2) Such contract may be inferred from usage, special or general; (3) Where there is a contract to pay money on a day certain, and the agreement is broken, interest will be allowed by way of damages, as on notes, &c.; (4) When goods are sold, to be paid for on a day certain, interest, in like manner, follows; (5) Where money is received for the use of another, and there is neglect in not paying it, interest follows; (6) Where money is obtained by fraud, interest is allowed; (7) Where an account is liquidated and balance ascertained, interest begins to run; (8) Where goods are delivered to be paid for, not at a day certain, but in a reasonable time, and there is unreasonable delay, interest is allowed; (9) But where there are current accounts, founded on mutual dealings, and no promise to pay interest, interest will not be allowed.*

With respect to the fraudulent detention of money, the rule acted upon as to interest by the courts of America generally is the same with that which now prevails in the English courts of equity. "Where money

"On the Measure of Damages,' p. 376.

3 Page 380.
'Page 380.

is received by a party who improperly detains it, or converts it to his own use, he must pay interest." (P. 378.)

In all these cases, the money must be actually due, and the amount liquidated, that is, ascertained and fixed, or capable of being ascertained by a mere process of computation resulting from known facts, of which actual indebtedness is the legal consequence. With respect to claims for interest on unliquidated demands, the law of Great Britain and of the United States is the same.

"It is a general rule," says Mr. Sedgwick, p. 377, "that interest is not recoverable on unliquidated demands. In an action for not delivering teas according to agreement, Judge Washington, at Nisi Prius, said, 'It is not agreeable to legal principles to allow interest on unliquidated or contested claims in damages. "The rule is well-established,' says Judge Parker, in the Supreme Court of New York, 'that interest is not recoverable on running or unliquidated accounts, unless there is an agreement, either express or implied, to pay interest.' So in Massachusetts, it is said, that 'interest cannot be recovered upon an open and running account for work and labor, goods sold, and the like, unless there is some contract to pay interest, or some usage, as in the case of the custom of merchants, from which a contract may be inferred.' And so also, in Texas, interest is denied on an open account. So, in an action on a policy of insurance, if the preliminary proofs are so vague that the claim cannot be computed, interest is not allowable."

At pages 385-387, Mr. Sedgwick considers another class of cases, under the head of "interest, when given as damages," i. e., those in which it is not given properly "as interest," under the control of the Court, and "allowed or disallowed upon certain rules of law;" but "where it is to be settled by the verdict of a jury," and "given more strictly as damages."

The cases in which this rule is applied are generally those in which the property of the plaintiff has been wrongfully taken possession of by the defendant:

This is generally so in actions of tort, as trover or trespass for taking goods, where interest is allowed at the discretion of the jury. So in an action of trespass, the Supreme Court of New York said: "The plaintiff ought not to be deprived of his property for years without compensation for the loss of the use of it; and the jury had a discretion to allow interest in this case as damages. It has been allowed in actions of trover, and the same rule applies to trespass when brought for the recovery of property." So in Kentucky, in case of a fraudulent refusal to convey land; and so declared also in North Carolina in cases of trover and trespass.'

It is to be observed that the action of "trover" here mentioned is a form of remedy under American and English law for the conversion by a defendant to his own use of the plaintiff's property; and the action of "trespass" is another form of remedy, under the same laws, when a defendant has intruded, without right, upon the property of the plaintiff. In all the cases here contemplated the liability to be mulcted in interest as damages arises out of the exclusion of the owner from the enjoyment of his own property, by the direct act of the person from whom the damages are recovered, and who, by reason thereof, has himself enjoyed (or, but for his own willful default, might have enjoyed) that benefit of the property from which the owner has been so excluded. The principle on which a jury ought to proceed in giving or not giving interest by way of damages was thus explained by the Court of New York: "In two actions against a master of a ship for non-delivery of goods, it was held in New York that the jury might give damages if the conduct of the defendant was improper; i. e., where fraud or gross misconduct could be imputed to him; but it appearing that such was not the fact, it was not allowed." 1

The principle thus thus laid down is in strict conformity with that

'Page 386.

stated in another American treatise of reputation upon the "Law of Negligence," by Messrs. Shearman and Redfield:

-*

*

§ 600. Exemplary, vindictive, or punitive damages can never be recovered in actions upon anything less than gross negligence. Of this there can be no doubt. It is often said that exemplary damages may be awarded for gross negligence. But it should be distinctly understood that gross negligence means such entire want of care as to raise a presumption that the person in fault is conscious of the probable consequences of his carelessness, and is indifferent, or worse, to the danger of injury to the persons or property of others; and such appears to us to be the construction put upon these words by the Courts, in the cases referred to. It is only in cases of such recklessness that, in our opinion, exemplary damages should be allowed.

7. Let us now, with these principles of general jurisprudence in view, examine the circumstances of the present case, in order to see whether they present any just and equitable grounds or any sufficient materials on which interest by way of damages can be included by the Tribunal in any gross sum which they may think proper to award against Great Britain.

8. In the first place, this is not the case of a detention or delay in the payment of a liquidated debt or ascertained liability payable at a period which has elapsed; there was, in fact, no liability at all independently of the exercise of the judgment of Arbitrators upon a very novel, entangled, and difficult state of facts and public law. The claims made by the United States extended to many matters for which the Arbitrators have found Great Britain not responsible. The decisions of the Arbitrators against Great Britain have been mainly founded upon the conventional rules of judgment first introduced as between the two nations by the Treaty of 1871, though agreed by that Treaty to be retrospectively applied; and there are, down to this moment, no means of ascertaining, by any method of computation whatever, the actual amount of the liability properly resulting from those decisions.

9. The observations of Professor Bluntschli, in his paper on these claims, ("Revue de Droit International," 1870, p. 474,) are material in this respect:

"A en croire," he says, "plusieurs orateurs et écrivains américains, il irait de soi que le gouvernement de la Grande-Bretagne serait obligé de dédommager au moins les particuliers, dont la propriété aurait été détruite par l'Alabama, (ainsi que par la Florida, ou d'autres corsaires susdits.) A mon avis, ce point est loin d'être entièrement évident, et l'on pourrait singulièrement se tromper, en se fiant trop au succès réservé à ces réclamations privées devant un tribunal arbitral. Si l'union ne prend pas, comme état, ces réclamations privées sous sa protection, et si elle ne fait pas consister dans leur équitable apaisement la satisfaction que les Etats-Unis ont droit de réclamer de la Grande-Bretagne, dans ce cas, les particuliers intéressés n'ont absolument aucune perspective de dédommagement. D'après les règles du droit privé ordinaire, leurs prétentions seraient tout-à-fait vaines. Nulle part ils ne trouveraient un juge qui condamnerait le gouvernement anglais à payer une indemnité. D'après les observations qui précédent, tout le débat se résume, non pas en un litige entre des particuliers auxquels la guerre a causé des pertes, et l'état de la Grande-Bretagne que l'on veut rendre responsable de celles-ci, mais en un litige entre la fédération des Etats-Unis d'un côté et la Grande-Bretagne. Et ce qui fait l'objet du litige, ce n'est pas un dommage matériel, mais la non-observation des devoirs internationaux de la part d'un état ami et neutre.

*

As there was no liability which could properly be called a debt, or in respect of which any interest could be due upon juridical principles, so (on the other hand) there was no property belonging to the United States or their citizens, of which possession was at any time taken, or any enjoyment whatever had, by Great Britain, her officers, or her citi zens, or by any persons under British protection, availing themselves of that protection to maintain such possession or enjoyment. The words of Professor Blüntschli, already quoted in a former argument, are here again material:

Il ne faut, d'ailleurs, pas perdre de vue que tous ces effets désastreux sont en premier lieu imputables, non pas au gouvernement anglais, mais aux croiseurs eux-mêmes. Personne n'accusera le gouvernement anglais d'avoir donné mission de détruire les navires de commerce américains, ou d'avoir, par ses agissements, entravé ou endommagé la marine américaine. Ce que l'on peut lui reprocher à bon droit, (en supposant que les faits cités plus haut doivent être considérs comme avoués ou prouvés,) ce n'est pas un fait, mais une omission contre le droit. Sa faute ne consiste pas à avoir équipé et appareillé les corsaires, mais à n'avoir pas empêché leur armement et leur sortie de son territoire neutre. Mais cette faute n'a qu'un rapport indirect, et nullement un rapport direct, avec les déprédations réellement commises par les croiseurs. 1

Great Britain did not make or authorize the captures by which the citizens of the United States lost their property; they were never brought within her territory, so as to make her answerable for them on the principle of reception; nor had she, or her citizens, at any time, any profit or benefit whatever, or any possibility of deriving profit or benefit from any of them. Nor is it supposed to be possible that the Tribunal can be led to attribute any want of diligence, with which, in certain cases, Great Britain may in their view be chargeable, to any such motives or causes as, according to the analogy of private jurisprudence, would justify a jury or an Arbitrator in giving vindictive or penal damages. Every ground, therefore, on which. (according to juridical principles) interest could be awarded as an element of damages, is wanting here.

11. Furthermore, independently of the facts affecting the nature and amount of the claims themselves, which will be hereafter referred to, there are other special considerations which, in the present case, appear to make it the duty of the Arbitrators, if they find Great Britain responsible at all in damages to the United States, to mitigate, in the exercise of a reasonable discretion, the amount of those damages; and certainly not to inflame or aggravate them by the addition of penal interest.

If the following arguments in the British Counter Case (p. 132) are held insufficient to exonerate Great Britain from all liability, they must at least be admitted to be of great weight and pertinence, as against any attempt to push the doctrine of compensation and indemnity, in this case, to an extreme length:

The whole responsibility of the acts which caused these losses, belonged, primarily, to the Confederate States; they were all done by them, beyond the jurisdiction and control of Great Britain; wrong was done by them to Great Britain, in the very infraction of her laws, which constitutes the foundation of the present claims. But from them, no pecuniary reparation whatever for these losses has been, or is now, exacted by the conquerors; what has been condoned to the principals, is sought to be exacted from those who were, at the most, passively accessory to those losses, through a wrong done to them, and against their will. The very States which did the wrong are part of the United States, who now seek to throw the pecuniary liability for that wrong solely and exclusively upon Great Britain, herself (as far, at least, as they are concerned) the injured party. They have been re-admitted to their former full participation in the rights and privileges of the Federal Constitution; they send their members to the Senate and the House of Representatives; they take part in the election of the President; they would share in any benefit which the public revenue of the United States might derive from whatever might be awarded by the Arbitrators to be paid by Great Britain. On what principle of international equity can a Federal Commonwealth, so composed, seek to throw upon a neutral, assumed at the most to have been guilty of some degree of negligence, liabilities which belonged in the first degree to its own citizens, with whom it has now re-entered into relations of political unity, and from which it has wholly absolved those citizens?

The American Union is not a single Republic, but is a Federation of States. The eleven States which joined the Southern Confederacy are also now joining in the present claims. Upon ordinary principles of

1 Page 473. The italics in this passage are in the original text.