And whereas, after the escape of that vessel, the measures taken for its pursuit and arrest were so imperfect as to lead to no result, and therefore cannot be considered sufficient to release Great Britain from the responsibility already incurred;

And whereas, in despite of the violations of the neutrality of Great Britain committed by the '290,' this same vessel, later known as the Confederate cruiser Alabama,' was on several occasions freely admitted into the ports of Colonies of Great Britain, instead of being proceeded against as it ought to have been in any and every port within British jurisdiction in which it might have been found;

And whereas the Government of Her Britannic Majesty cannot justify itself for a failure in due diligence on the plea of the insufficiency of the legal means of action which it possessed :

Four of the Arbitrators for the reasons above assigned, and the fifth for reasons separately assigned by him,

Are of opinion

That Great Britain has in this case failed, by omission, to fulfil the duties prescribed in the first and the third of the Rules established by the 6th Article of the Treaty of Washington.

And whereas, with respect to the vessel called the 'Florida,' it results from all the facts relative to the construction of the 'Oreto' in the port of Liverpool, and to its issue therefrom, which facts failed to induce the authorities in Great Britain to resort to measures adequate to prevent the violation of the neutrality of that nation, notwithstanding the warnings and repeated representations of the Agents of the United States, that Her Majesty's Government has failed to use due diligence to fulfil the duties of neutrality;

And whereas it likewise results from all the facts relative to the stay of the 'Oreto' at Nassau, to her issue from that port, to her enlistment of men, to her supplies, and to her armament, with the co-operation of the British vessel 'Prince Alfred,' at Green Cay, that there was negligence on the part of the British Colonial Authorities;

And whereas, notwithstanding the violation of the neutrality of Great Britain committed by the Oreto,' this same vessel, later known as the Confederate cruiser Florida,' was nevertheless on several occasions freely admitted into the ports of British Colonies;

And whereas the judicial acquittal of the Oreto' at Nassau cannot relieve Great Britain from the responsibility incurred by her under the principles of international law; nor can the fact of the entry of the Florida' into the Confederate port of Mobile, and of its stay there during four months, extinguish the responsibility previously to that time incurred by Great Britain :

For these reasons,

The Tribunal, by a majority of four voices to one, is of opinionThat Great Britain has in this case failed, by omission, to fulfil the duties prescribed in the first, in the second, and in the third of the Rules established by Article VI. of the Treaty of Washington.

And whereas, with respect to the vessel called the 'Shenandoah,' it results from all the facts relative to the departure from London of the merchant-vessel the 'Sea King,' and to the transformation of that ship into a Confederate cruiser under the name of the 'Shenandoah,' near the Island of Madeira, that the Government of Her Britannic

Majesty is not chargeable with any failure, down to that date, in the use of due diligence to fulfil the duties of neutrality;

But whereas it results from all the facts connected with the stay of the 'Shenandoah' at Melbourne, and especially with the augmentation which the British Government itself admits to have been clandestinely effected of her force, by the enlistment of men within that port, that there was negligence on the part of the authorities at that place :

For these reasons,

The Tribunal is unanimously of opinion

That Great Britain has not failed, by any act or omission, to fulfil any of the duties prescribed by the three Rules of Article VI. in the Treaty of Washington, or by the principles of international law not inconsistent therewith, in respect to the vessel called the 'Shenandoah,' during the period of time anterior to her entry into the port of Melbourne;

And, by a majority of three to two voices, the Tribunal decides that Great Britain has failed, by omission, to fulfil the duties prescribed by the second and third of the Rules aforesaid, in the case of this same vessel, from and after her entry into Hobson's Bay, and is therefore responsible for all acts committed by that vessel after her departure from Melbourne, on the 18th day of February 1865. And so far as relates to the vessels calledThe Tuscaloosa'

The 'Tacony,' and (Tender to the 'Alabama') The Archer'

The Clarence,'

(Tenders to the Florida'),

The Tribunal is unanimously of opinionThat such tenders or auxiliary vessels being properly regarded as accessories must necessarily follow the lot of their principals, and be submitted to the same decision which applies to them respectively. And so far as relates to the vessel called Retribution,'

The Tribunal, by a majority of three to two voices, is of opinionThat Great Britain has not failed by any act or omission to fulfil any of the duties prescribed by the three Rules of Article VI. in the Treaty of Washington, or by the principles of international law not inconsistent therewith.

And so far as relates to the vessels called

་

The Georgia,'

TheSumter,'

The Nashville,'

The Tallahassee,' and

The Tribunal is unanimously of opinion

That Great Britain has not failed, by any act or omission, to fulfil any of the duties prescribed by the three Rules of Article VI, in the Treaty of Washington, or by the principles of international law not inconsistent therewith.

And so far as relates to the vessels called

The Sallie,'

The Jefferson Davis,'

The Music,'

The Tribunal is unanimously of opinion

That they ought to be excluded from consideration for want of evidence.

And whereas, so far as relates to the particulars of the indemnity claimed by the United States, the costs of pursuit of the Confederate cruisers are not, in the judgment of the Tribunal, properly distinguishable from the general expenses of the war carried on by the United States:

The Tribunal is, therefore, of opinion, by a majority of three to two voices

That there is no ground for awarding to the United States any sum by way of indemnity under this head.

And whereas prospective earnings cannot properly be made the subject of compensation, inasmuch as they depend in their nature upon future and uncertain contingencies:

The Tribunal is unanimously of opinion

That there is no ground for awarding to the United States any sum by way of indemnity under this head.

And whereas, in order to arrive at an equitable compensation for the damages which have been sustained, it is necessary to set aside all double claims for the same losses, and all claims for gross freights,' so far as they exceed 'net freights;

And whereas it is just and reasonable to allow interest at a reasonable rate;

And whereas, in accordance with the spirit and letter of the Treaty of Washington, it is preferable to adopt the form of adjudication of a sum in gross, rather than to refer the subject of compensation for further discussion and deliberation to a Board of Assessors, as provided by Article X. of the said Treaty:

The Tribunal, making use of the authority conferred upon it by Article VII. of the said Treaty, by a majority of four voices to one awards to the United States a sum of 15,500,000 dollars in gold as the indemnity to be paid by Great Britain to the United States for the satisfaction of all the claims referred to the consideration of the Tribunal, conformably to the provisions contained in Article VII. of the aforesaid Treaty.

And, in accordance with the terms of Article XI. of the said Treaty, the Tribunal declares that all the claims referred to in the Treaty as submitted to the Tribunal are hereby fully, perfectly, and finally settled.'

Furthermore it declares, that each and every one of the said claims, whether the same may or may not have been presented to the notice of, or made, preferred, or laid before the Tribunal, shall henceforth be considered and treated as finally settled, barred, and inad missible.

In testimony whereof this present decision and award has been made in duplicate, and signed by the Arbitrators who have given their assent thereto, the whole being in exact conformity with the provisions of Article VII. of the said Treaty of Washington.

Made and concluded at the Hôtel de Ville of Geneva, in Switzerland, the 14th day of the month of September, in the year of our Lord 1872.

(Signed)

C. F. ADAMS.
FREDERIC SCLOPIS.
STAEMPFLI.

VICOMTE D'ITAJUBA.

CHAPTER V.

THE COMMERCIAL CRISIS OF 1866.

The Société de Crédit Mobilier.-Limited Liability Companies.-Finance Companies.-Finance Securities.-Large Companies and their Results.Overend, Gurney & Co. Limited.-Great Expansion of Trade.-Drain of Bullion to the East.-Fall of Money in London and other Places.-Component Parts of the Rate of Interest.-The Supply of Capital in England.The Demand for Capital in England.-A Uniform Rate of Interest-Policy of the Bank of England.-The Crisis of 1866.-Suspension of the Bank Charter Act.-Comparison of the Crisis of 1866 with former Crises.— Effect of the Government Letter on Credit at Home and Abroad. - Mr. Watkins' Motion for a Royal Commission negatived.

ONE of the first objects which the Emperor Napoleon had at heart, after he strengthened his position, by the restoration of the empire, in 1852, was the revival of industry and commerce in France, which had long been languid and depressed, and for that purpose he greatly encouraged the formation of railways, and the incorporation of trading companies. Many were consequently the enterprises thereafter started, and great was the activity thereby introduced. Prominent, however, among the companies then formed was the Société de Crédit Mobilier,' the objects of which were to subscribe and acquire stock and shares in industrial enterprises, especially railways, canals, &c.; to issue obligations of the society to the extent at least of the amount invested by the companies formed for such purposes; to sell or give on security for advances the shares acquired by the society; to undertake loans, to lend on public securities, to open credits; to pay interest and dividends; in short, to do itself all that is usually done by a number of companies, and thereby to become immediately interested in and almost responsible for the success of enterprises undertaken by all the companies whose shares they acquired. The capital of the Société de Crédit Mobilier was fixed at 2,400,000l. and its issue of circulating paper at ten times that amount. The Société went vigorously to work. Many companies which would never otherwise have seen the light came into existence under its auspices. And for several years its profits were so very large, its deposits so considerable and its annual reports so enticing that it did seem as if France had discovered a new branch of business in the shape of finance companies well worthy of imitation in this country.'

See an able article On the Recent History of the Crédit Mobilier,' by Mr. Newmarch, F.R.S., Journal of the Statistical Society, vol. xxi. p. 444.

As we have seen, the principle of limited liability, advocated as a means for encouraging the investment of capital in commercial adventures, was for the first time admitted by the English law in 1855; and certainly if we can test the success of legislation by the readiness with which it is adopted and acted upon by the community here is a case where the reform seemed to meet a decided want. Before 1856 almost every company formed was on the principle of unlimited liability. From that date and especially after the Acts of 1857, 1858, and 1862, which removed all obstacles to the adoption of limited liability in insurance banking, and any purpose, scarcely any company was constituted but with limited liability. An immense stimulus was given to joint-stock enterprises by the very fact that the losses could never exceed the amount which the investors at the time intended to risk. Holders of small means were glad to enter into commercial operations represented as most profitable. Many a private partnership was formed into a limited company, and many companies with unlimited liability were converted into companies with limited liability. Prominent among these were the Finance Companies.

Many of these companies, styled as the International Financial,' the London Financial,' the 'Imperial Mercantile Credit,' the Crédit Foncier et Mobilier,' the Joint-Stock Discount,' and others, were founded for purposes similar to those of the Société de Crédit Mobilier' of Paris, and adopted not a few of its objectionable features. Before this new agency came into existence no public works could be undertaken until shares were actually sold and sufficient capital was obtained for the purpose. But by the intervention of the finance companies the projectors of public works no longer needed to wait until the savings of the people were gathered. No sooner was a project started involving investments of millions, at home or abroad, than the finance companies agreed to indorse the bills of such companies, and debentures, bonds, stock, and preference shares were created and circulated as if the company had been actually in operation and the works were already in progress. The understanding of course was that the bills would be renewed from time to time; but what if by a sudden collapse of credit such bills could not be discounted? And on what were such bills founded? They represented no real value. As the Economist' stated: Such securities were a pure speculation on the future, and a speculation subject to one principal and many smaller casualties. Take the case of a railway the line must be finished and placed in actual working before the obligations representing its cost can have any ascertained value at all. An unfinished railway or dock has no value whatever. In the second place the line must not only be finished and actually worked, but in order to impart value to the bonds nd shares there must be a positive profit surplus. The difference

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