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her Majesty's government to entertain in a friendly spirit any proposal which might be made to them by the government of the United States, to refer to arbitration other questions which might,be at issue betw< en the two governments in reference to the late war, and I desired you to invite Mr. Seward to state what were the precise points which, in his opinion, might be and ought to be so dealt with. I

Mr. Seward, in his despatch of the 12th of January, while suggesting that it would be “ not only easier but more desirable that Great. Britain should acknowledge and satisfy the claims for indemnity which we have submitted. than it would be to find an equal and wise arbitrator who would consent to adjudicate them," goes on to say that if her Majesty's government should prefer the remedy of arbitration the United States would not object, but in that case “ would expect to refer the whole controversy, just as it is found in the correspondence which has taken place between the two governments, with such further evidence and arguments as either party may desire, without imposing restrictions, conditions, or limitations upon the empire, and without waiving any principle or argument on either side.” '

To such an extensive and unlimited reference her Majesty’s government cannot consent, for this reason among others, that it would admit of. and indeed compel, the submission to the arbiter of the very question which I have already said they cannot agree to submit- ,

The real matter at issue between the two governments, when kept apart from collateral considerations, is whether, in the matters connected with the vessels out of whose depredations the claims of American citizens have arisen, the course pursued by the British government, and by those who acted under its authority, was such as would involve a moral responsibility on the part of the British government to make good, either in whole or in part, the losses of American citizens.

This is a plain and simple question, easily to be considered by an arbiter. and admitting of solution without raising other and wider issues; and on this question her Majesty's government are fully prepared to go to arbitration; with the further provision, that if the decision of the arbiter is unfavorable to the British view,,“,the examination of the several claims of citizens of the United States shall be referred to a mixed commission, with a. view to the settlement of the sums to be paid on them.

But as they consider it of great importance, for the maintenance of good understanding between the two countries, that the adjudication of this question in tavor of one or other of the parties should not leave other questions of claims, in which their respective subjects or citizens may be interested, to be matter of further disagreement between the two countries, her Majesty’s government, with a view to the common interest of both, think it necessary, as you have already apprised Mr. Seward in your letter of the 7th of January, “in the event of an understanding being come to between the two governments, as to the manner in which the special American claims" which have formed the subject of the correspondence of which my present despatch is the sequel “ should be dealt with, that under a convention, to be separately but simultaneously concluded, the general claims of the subjects and citizens of the two countries, arising out of the events of the late war, should be submitted to a mixed commission, with a view to their eventual payment by the government that may be judged responsible for them.”

Such, then, is the proposal which her Maje-.sty’s government desire to submit to the government of the United States; limited reference to arbitration, in regard to the so-called Alabama claims, and adjudication by means of a mixed commission of general claims.

You will read this despatch to Mr. Seward and furnish him with a copy of it, as the deliberate reply of her Majesty's government_ to his despatch of the

12th of January, and, in doing so, you will express to him the earnest hope of her Majesty's government that their present proposal will be accepted by the cabinet of Washington in the spirit in which it is made. I am. &c., STANLEY. Hon. Sir F. W. A. BRUCE, G. C. B., 8;-0., J;c.,

Mr. Seward to Sir F. Bruce.

Washington, May 13, 1867.

MY DEAR SIR FREDERICK: You are aware that in the apprehension of many considerate persons there has lingered a doubt -whether Robert Lynch and the Rev. John McMahon, two of the persons who were convicted last year of participation in the aggression upon the Canadian border, are indeed morally culpable, although the judgment of the court is deemed unimpcachable.

On representation made by many intelligent and judicious persons, I have taken some pains to inquire concerning the cases specially named, and have submitted the same for review to the legal examining officer of this department, Mr. E. Peshine Smith. ’

Will you allow me to place a copy of Mr. Smit-h’s report in your hands unoflicially, with the hope that if it shall, in any degree, impress you with the sentiment of favor towards those unfortunate persons you will communicate that sentiment to her Britannic Majesty’s government.

Believe me to be, very faithfully, yours,

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Mr. Smith M Mr. Seward.

Bureau of Claims, May 9, 1867.

In the matter of Robert Lynch and Rev. John McMahon, confined in Canada under con- ' viction of being participants in the Fenian invasion, the joint resolution of the legislature of the State of Wisconsin recites that there is good reason to believe that, had the prisoners been permitted, on their trials, to have produced to the court such evidence of their innocence of the charges preferred against them as is contained in some afiidavits now on file in the oifice of the Secretary of State of the United States, that said prisoners would have been able to have established be ond any doubt their non-complicity in the Fenian invasion of Canada.

This is a misappre ension. I know of no affidavits containing evidence which, if presented at the trial, and believed by the jury, would have necessarily led to their acquittal. The most they would establish is this, viz., that neither of the parties had been connected with, or sympathized with, the Fenian organization in Canada, this country, or elsewhere, nor did either of them visit Canada with the intent of aiding the purposes of the invaders otherwise than as hereinafter stated. The charge of the judge who presided at their trials was substantially to the effect that, if they accompanied the invaders, the one, John McMahon, heing a Roman Catholic priest, for the purpose of administering the consolations of his reli ion to such of the parties as might require them, the other, Ribert Lynch, as a corrcspon out of a newspaper in the United States, for the purpose of recording their achieve ments and the incidents of the march, then they guilty of aiding and assisting in the levying war on her Majesty as other persons of the party who bore arms and participated in military operations. As a legal proposition, this charge is unobjectionable. I do not know that there is any evidence in the possession of this department which would have taken them out of its operation, unless it be some slight evidence that the Rev. John McMahon did not voluntarily connect himself with the expedition; but, coming into Canada for an innocent purpose, accompanied it under duress.

The affidavits on file in this department show that Robert B. Lynch served creditably as a private soldier in a Wisconsin regiment during the late rebellion ; but, so far as appears, he

was detailed upon clerical duty, in relation to musters, discharges, and similar operations of the stall‘ department. and is not shown to have been under fire. Jeremiah Quinn, of Milwaukee, testifies that he has been State centre of the Fenian Brotherhood of Wisconsin since 1858; that he was well acquainted with Lynch, who, during most of the time, resided in Milwaukee, and was never a member of that organization.

-Edmund D. Burke testifies that he has been the head centre of the Sweeny-Roberts branch of the Fenian organization for the State of Wisconsin since November, 1865, and was a member of it for a year and a half prior to his becoming head centre, and knows that Lynch never was a member of that organization.

Peter Lynch, a brother of the prisoner, testifies that the Fenian organization and projects have frequently been the subject of conversation between himself an the prisoner, and that the latter has always opposed and denounced it as a wild and impracticable scheme for the redemption of Ireland, and uniformly advised and counselled against it.

Edward M. Hunter, commissioner of the United States courts, fully corroborates the statement of Peter Lynch in respect to the opinion and declaration of Robert B. Lynch in regard to the Fenian orgafiization and plans.

John Hay, of Bufi'alo, and Rodolphe Fitzpatrick. of New York, testify that they were, respectively, a colonel in the Fenian invasion of June. I866, and the second in command to General O’Neill; that he was adjutant to General O‘Neill. They both state that Robert B. Lynch was not connected with the expedition as an officer or soldier, and that he took no part in any engagement with her Majesty’s troops, but preserved a peaceable deportment throughout, and remained carefully aloof durin the interchange of blows. Both also testify that his presence with the expedition Was, to 516 best of their knowledge and belief, in no other capacity than as the correspondent of a newspaper for the purpose of reporting events.

In addition to this evidence there are the unsworn statements of many respectable citizens, testifying to the peaceable and orderly character of Lynch.

Inregard to the Rev. Mr. McMahon we have less evidence. I think we may treat the notorious fact that the hierarchy and parochial clergy of the Roman Catholic church have uniformly denounced Fenianism, as affording a presumption in his favor that he did not sympathize with the organization. On the 21st of July, I866, after his conviction, he wrote to Mr. W. D. Frazee, of Winchester, Randolph county, Indiana, a letter, the original of which is on file in this department, in which he says: "Thanks be to God that I am innocent of being a Fenian; for no_ priest can be a Fenian.” He states, in that letter, that his object in visiting Canada was to see a widowed sister-in-law in Montreal, with a view to assisting in case she should get into any trouble from a Fenian attack upon Montreal ; and also to look aft some real estate devised to him b the husband of such widow; that he left his home (Vedincbester, Indiana) on the 30th of ay, arrived in Buffalo on the 31st, and crossed over to Fort Erie on the 1st of June, to take his passage to Montreal. “ I was just going.” he says, “ to the ofiice to get a ticket, when there came a large number of Fenians, and took me by force. As there was not any train going out that day to any place and the steamboat that brought me over had stopped, I had to stay there. The next day the fighting began, and no chance to get away; so I had to stay until I was taken." The person to whom this letter was addressed is a magistrate, and he has annexed to it the depositions of

_ four persons, certified to be of good character for truth and veracity, testifying that they had

‘known Mr. McMahon intimately for several years; that they had never heard him speak favorably of the Fenians, nor heard him say anything on politics. They also state that Mr. _McMahon told them before he left Winchester, (in May,) that he was going to see his sisterin-law, and look after his real estate in Montreal. They aflirm their beliefin the truth of the statements in his letter. '

Two citizens of Anderson, Madison county, Indiana, where Mr. McMahon had formerly been settled as. a priest, make afiidavits of their having been repeatedly informed by him, at

> 'difi‘erent times during the year_ previous, of his intention to visit Montreal.

1 think the proof hereinheforc stated makes it clear, with regard to Lynch, that his only connection with the party invading Canada was, that he attended as a reporter, and was guiltless of further participation in its objects.

In respect to Mr. McMahcn. it is equally clear that his attendance was only in the character of a priest. There is not direct evidence, as in the case of Lynch, that he had denounced the Fenian organization; but the negative evidence in support of the presumption from his clerical office, and the declared views of his church, I think may be regarded as sufiiciently proving that he did not belong to it. His presence was, in the first instance, accidental; its

continuance, if we believe him, was constrained. Of course, if this could be fully proven, it .

would have required his acquittal upon the trial, and should secure him a pardon. But if we suppose that the physical constraint was so slight that he might have evaded it, it would be very natural for'a Roman Catholic priest to suppose that it was his imperative duty not to withhold from those exposed to sudden death the only means of obtaining the last sacrament, upon which, in his belief, the salvation of their souls might de end. For this error, it seems to me, the British government, having vindicated the law by his conviction, can well afford to make a charitable allowance. That a body of soldiers, nearly all Roman Catholics, findmg a priest—the only one—in their power, should constrain him to stay with them, seems to me extremely probable.

We cannot suppose that Lynch acted under any such notion of duty as is above attributed to Mr. McMahon. But we may well suppose him to have been ignorant that his accompanying the expedition as a reporter was a criminal act. In fact, as from the evidence we are authorized to conclude that he did not expect the invasion to result in success, it is extremely probable that he relied upon his erroneous idea of the law for his protection. If he supposed that his presence, and the reports he expected to make, would give aid to the

_ invaders, his moral guilt would be the same, even if he had been correct in believing that he

- humble servant,

could escape criminal punishment. It is hardly possible to suppose him ignorant that, in the judgment of military men, the presence of reporters is prejudicial to success in the field, and he certainly could not suppose that a chronicle of disasters—which we have a right to believe he antici ated—cou1d encourage recruiting in the United States. If so, his guilt is reduced to a tee nical one, which the British government may conceive to have been sufficiently punished. I have made no reference to the evidence given upon the trials of either of the prisoners, because that is in the possession of, and has been considered by, the British government; and I suppose it to be only such fresh evidence as has been transmitted to this department that it is desired to bring to their notice. E. PESHINE SMITH,

Examiner of Claims. Hon. W1u.I.\zu H. SEWARD, Secretary of State.

Sir F. Bruce to Mr. Seward.

' WASHINGTON, May 21, I867.

SIR : In obedience to instructions which I have received from her Majesty's secretary of state for foreign affairs, I have the honor to submit herewith for your information copies of papers, as marked in the margin, respecting the new regulations for the French settlement at Shanghai, and the modifications which her Maje-sty’s government are desirous should be made in them.

I have further the honor to state, in regard to this matter, that the British minister in China will be apprised that the new regulations for the 'management of the British and American settlements which have been in discussion at Shanghai, between the consular authorities of the United States, England, and Prussian are considered by her Majesty’s Secretary of State to be well adapted for the purpose in view, and that when they are brought before his lordship, in the manner prescribed by the order in council, ‘they will receive the formal sanction of her Majesty’s government. '

I have the honor to be, with the highest consideration, sir, your most obedient,

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Lord Stanley to Earl Cowley.

No. 156.] Fonnmn Orrrcn, April 22, 1867.

MY.LORD 1 Since the receipt of M. Drouyn de Lhuys’s letter to your excellency of the 6th of June, 1866, of which a copy was enclosed in Mr. Fane’s despatch No. 8, of the 7th of that month, her Maiesty’s government have consulted the British authorities in China and the law oflicers of the Crown in this country on the subject of the regulations proposed to be established for the government of the French settlement at Shanghai, and I have now to state to your excellency that with the exception of the 16th article of those regulations her Majesty’s government are not disposed to offer any objection to their enforcement.

Her Majesty‘s government agree "with Sir Edmund Hornby, the judge of the British supreme court in China and J apau, a copy of whose remarks I enclose, that a fusion of the French settiement with the English one is now impracticable ; and that, with one exception, if the,French regulations are acted upon in accordance with the views ex ressed in M. Drouyn de Lhuys’s letter, neither those foreigners who may have established t emselves within the French limits, nor their authorities residing without those limits will have any cause to complain of them.

_ ' 0

It may be convenient, however, before I proceed further, to make some general observations on the facts as they present themselves.

B the treaties of Nanking, Hoo Nan Chol and Tientsin, the Emperor of China has ceded to her ilujesty absolutejurisdiction over her subjects commorant or being wheresoever in the imperial dominions.

Whatever be the character of the grants made by the Emperor of China to France with respect to their occupation of territory south of the Yong Tzee (Kiong.) it is subse uent in date to the concession made in England by one at least of the treaties above referre to. It was not, therefore, competent to the Emperor of China to make any concession to France which would intrench upon this previously granted privilege, whatever authority over his own subjects the Emperor might think fit to concede to France.

Certain territory on the north and south sides of creeks called Yon Kin Tong and Lorchow formed by afiluents of the great arteries of China the Yong Tzee ( 1ong,) were permitted by the Emperor of China to be rented by Europeans for the purposes of a commercial establishment, the Emperor retaining as lord of the soil the dominium aminens and receiving rent from the European occupiers. 3/

It soon became necessary that some authority should control the European renters. The English led the way in formin a committee to be elected by the majority of renters, but intended to be composed of all Europeans who were to institute and pay a police force for

' keeping order within these districts. The subjects of the United States of North America, of Prussia, and of Holland, appear to have heartily co-operated in this scheme, though the American consul always maintained that at present no binding legal validity could be given to the resolutions of this committee.

It appears, however, that a general sense of the usefulness of their resolutions has at present supplied the place of positive law.

The French, however, insisted on placing the executive authority in the hands of their consul general, who claimed a right to nominate on behalf of the French occupation or site, the members of the committee. '

Two-thirds of the French occupation ‘or site were inhabited by English and other foreigners, and the object of the French consul was to confine to French hands the exercise of authority over French subjects, an object which a free election would obviously have defeated. Eventually the French consul referred the matter to his government, which issued a certain “ Réglement d’organisation niunicipale de la concession Fran<;aise en Shanghae,” which put an end to all notion of a fusion between the English, American, and French settlements and a common municipal government elected by land renters. It was quite competent to the French to adopt this system of separate municipal government under the control of their consul so far as the French subjects were concerned, but it was not competent to the French government to assume or exercise thereby any personal jurisdiction over the subjects of other states resident or commorant on the French occupation or site or on any other part of the Chinese territory, inasmuch as those sub'ects had obtained by treaty with the lord of the soil the right of exemption from all juris iction but that of their own state. '

The 16th article of the réglement was so expressed as to lead to the conclusion that the French government claimed such jurisdiction within the limits of their "con<:ession.” M. Drouyn de Lhuys has however distinctly disclaiined any such intention on the part of the French government, which, however, claims the right of keeping order within their limits and maintaining that the Chinese government has assigned exclusively to them as sole lessees the land inclosed in those limits and all authority over it. w

The import of this l6th article and the manner in which it should be modified were treated of by M. Drouyn de Lhuys in his letter to which I have alluded, and have formed the sub

- ject of much discussion in China. where strong objections have been pressed against it by the British. American, and Prussian authorities.

Mr. Drouyn de Lhuys, speaking of the modification, introduced at Paris into the draught of regulations as originally sent from China, says: “ Les étrangers habitaut la concession Francaise no cessent pas d’étre justiciables do leurs juges nationaux meme pour les simples

"contreventions de police et de —, et continuent ainsi de jouir de la plenitude des droits qui leur sont assurés par les traités ;” and the French consul general at Shanghae, in a letter to his English and American colleagues of the 17th of Se tember last, of which I enclose a copy, says that he was prepared, subject to the approval of‘ is government to agree “ que le constable, porteur du warrant, au lieu d’étre oblige d’aller le faire viser an consulat de France, se refndit simplement aupres du chef de la police uiunicipale Francaise pour le finir, de lui donner un agent charge do Paccompagner, et an besoin de lui préter assistance pour assurer l’execution dn warrant dont il serait portcur ;” and further " que les consuls eussent l’option ou d‘envoyer contresigner leurs warrants an consulat general de France, on de Paddresser simplement an chef de la police Francaise pour qu’un agent accompagnat leur constable ;" and lastly “ que les agents Anglais on Americains ne fussent pas estreints .-:1 ces obligations du moment on un détenu s’échappant de leurs mains tout pres des limites de la concession Fraucaise se réfugierait sur cette derniere, et que l‘agent put prendre sans coup son prisonicr sans recourir auparavant a des fermalités qui pourraient non seulement it l‘arrestation, mais peutétre Pempécher totalement.” _

The French consul general, as the result of these admissions, proposed another form of

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